Item
1. Business
Overview
Citius
Pharmaceuticals, Inc., headquartered in Cranford, New Jersey, is a specialty pharmaceutical company dedicated to the development
and commercialization of critical care products targeting important medical needs with a focus on anti-infective products in adjunct
cancer care, unique prescription products and, recently, mesenchymal stem cell therapy. Our goal generally is to achieve leading
market positions by providing therapeutic products that address unmet medical needs yet have a lower development risk than usually
is associated with new chemical entities. New formulations of previously approved drugs with substantial existing safety and efficacy
data are a core focus. We seek to reduce development and clinical risks associated with drug development, yet still focus on innovative
applications. Our strategy centers on products that have intellectual property and regulatory exclusivity protection, while providing
competitive advantages over other existing therapeutic approaches.
The
Company was founded as Citius Pharmaceuticals, LLC, a Massachusetts limited liability company, on January 23, 2007. On September
12, 2014, Citius Pharmaceuticals, LLC entered into a Share Exchange and Reorganization Agreement, with Citius Pharmaceuticals,
Inc. (formerly Trail One, Inc.), a publicly traded company incorporated under the laws of the State of Nevada. Citius Pharmaceuticals,
LLC became a wholly-owned subsidiary of Citius Pharmaceuticals, Inc. (“Citius”). On March 30, 2016, Citius acquired
Leonard-Meron Biosciences, Inc. (“LMB”) as a wholly-owned subsidiary. LMB was a pharmaceutical company focused on
the development and commercialization of critical care products with a concentration on anti-infectives. On September 11, 2020,
we formed NoveCite, Inc. (“NoveCite”), a Delaware corporation, of which we own 75% of the issued and outstanding capital
stock. NoveCite is focused on the development and commercialization of its proprietary mesenchymal stem cells for the treatment
of acute respiratory disease syndrome (“ARDS”).
Since
its inception, the Company has devoted substantially all of its efforts to business planning, acquiring our proprietary
technology, research and development, recruiting management and technical staff, and raising capital. We are developing four
proprietary products: Mino-Lok, an antibiotic lock solution used to treat patients with catheter-related bloodstream
infections by salvaging the infected catheter; Mino-Wrap, a liquifying gel-based wrap for reduction of tissue expander
infections following breast reconstructive surgeries; Halo-Lido, a corticosteroid-lidocaine topical formulation that is
intended to provide anti-inflammatory and anesthetic relief to persons suffering from hemorrhoids; and NoveCite, in-licensed
in October 2020, a mesenchymal stem cell therapy for the treatment of ARDS. We believe these unique markets for our products
are large, growing, and underserved by the current prescription products or procedures.
Citius
is subject to a number of risks common to companies in the pharmaceutical industry including, but not limited to, risks related
to the development by Citius or its competitors of research and development stage products, market acceptance of its products
that receive regulatory approval, competition from larger companies, dependence on key personnel, dependence on key suppliers
and strategic partners, the Company’s ability to obtain additional financing and the Company’s compliance with governmental
and other regulations.
Mino-Lok®
Overview
Mino-Lok
is a patented solution containing minocycline, disodium ethylenediaminetetraacetic acid (edetate), and ethyl alcohol, all of which
act synergistically to treat and salvage infected central venous catheters (“CVCs”) in patients with catheter related
bloodstream infections (“CRBSIs”). Mino-Lok breaks down biofilm barriers formed by bacterial colonies, eradicates
the bacteria, and provides anti-clotting properties to maintain patency in CVCs.
The
administration of Mino-Lok consists of filling the lumen of the catheter with 0.8 ml to 2.0 ml of Mino-Lok solution. The catheter
is then “locked”, meaning that the solution remains in the catheter without flowing into the vein. The lock is maintained
for a dwell-time of two hours while the catheter is not in use. If the catheter has multiple lumens, all lumens may be locked
with the Mino-Lok solution either simultaneously or sequentially. If patients are receiving continuous infusion therapy, the catheters
alternate between being locked with the Mino-Lok solution and delivering therapy. The Mino-Lok therapy is two hours per day for
at least five days, usually with two additional locks in the subsequent two weeks. After locking the catheter for two hours, the
Mino-Lok solution is aspirated, and the catheter is flushed with normal saline. At that time, either the infusion will be continued,
or will be locked with the standard-of-care lock solution until further use of the catheter is required. In a clinical study conducted
by MD Anderson Cancer Center (“MDACC”), there were no serum levels of either minocycline or edetate detected in the
sera of several patients who underwent daily catheter lock solution with minocycline and edetate (“M-EDTA”) at the
concentration level proposed in Mino-Lok treatment. Thus, it has been demonstrated that the amount of either minocycline or edetate
that leaks into the serum is very low or none at all.
Phase
2b Results
From
April 2013 to July 2014, 30 patients with CVC-related bloodstream infection were enrolled at MDACC in a prospective Phase 2b study.
Patients received Mino-Lok therapy for two hours once daily for a minimum of five days within the first week, followed by two
additional locks within the next two weeks. Patients were followed for one month post-lock therapy. Demographic information, clinical
characteristics, laboratory data, therapy, as well as adverse events and outcome were collected for each patient. Median age at
diagnosis was 56 years (range: 21-73 years). In all patients, prior to the use of lock therapy, systemic treatment with a culture-directed,
first-line intravenous antibiotic was started. Microbiological eradication was achieved at the end of therapy in all cases. None
of the patients experienced any serious adverse event related to the lock therapy.
The
active arm, which is the Mino-Lok treated group of patients, was then compared to 60 patients in a matched cohort that experienced
removal and replacement of their CVCs within the same contemporaneous timeframe. The patients were matched for cancer type, infecting
organism, and level of neutropenia. All patients were cancer patients and treated at MDACC. The efficacy of Mino-Lok therapy was
100% in salvaging CVCs, demonstrating equal effectiveness to removing the infected CVC and replacing it with a new catheter.
The
main purpose of the study was to show that Mino-Lok therapy was at least as effective as the removal and replacement of CVCs when
CRBSIs are present, and that the safety was better, that is, the complications of removing an infected catheter and replacing
with a new one could be avoided. In addition to having a 100% efficacy rate with all CVCs being salvaged, Mino-Lok therapy had
no significant adverse events (“SAEs”), compared to an 18% SAE rate in the matched cohort where patients had the infected
CVCs removed and replaced with a fresh catheter. There were no overall complication rates in the Mino-Lok arm group compared to
11 patients with events (18%) in the control group. These events included bacterial relapse (5%) at four weeks post-intervention,
and a number of complications associated with mechanical manipulation in the removal or replacement procedure for the catheter
(10%) or development of deep-seated infections such as septic thrombophlebitis and osteomyelitis (8%). As footnoted, six patients
had more than one complication in the control arm group.
|
|
Mino-Lok® Arm
|
|
|
Control Arm
|
|
Parameter
|
|
N
|
|
|
(%)
|
|
|
N
|
|
|
(%)%
|
|
Patients
|
|
|
30
|
|
|
|
(100
|
)%
|
|
|
60
|
|
|
|
(100
|
)%
|
Cancer type
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Hematologic
|
|
|
20
|
|
|
|
(67
|
)
|
|
|
48
|
|
|
|
(80
|
)
|
- Solid tumor
|
|
|
10
|
|
|
|
(33
|
)
|
|
|
12
|
|
|
|
(20
|
)
|
ICU Admission
|
|
|
4
|
|
|
|
(13
|
)
|
|
|
4
|
|
|
|
(7
|
)
|
Mech.Ventilator
|
|
|
3
|
|
|
|
(10
|
)
|
|
|
0
|
|
|
|
(0
|
)
|
Bacteremia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Gram+
|
|
|
17
|
|
|
|
(57
|
)*
|
|
|
32
|
|
|
|
(53
|
)
|
- Gram-
|
|
|
14
|
|
|
|
(47
|
)*
|
|
|
28
|
|
|
|
(47
|
)
|
Neutropenia (<500)
|
|
|
19
|
|
|
|
(63
|
)
|
|
|
36
|
|
|
|
(60
|
)
|
Microbiologic Eradication
|
|
|
30
|
|
|
|
(100
|
)
|
|
|
60
|
|
|
|
(100
|
)
|
- Relapse
|
|
|
0
|
|
|
|
(0
|
)
|
|
|
3
|
|
|
|
(5
|
)
|
Complications
|
|
|
0
|
|
|
|
(0
|
)
|
|
|
8
|
|
|
|
(13
|
)
|
SAEs related R&R
|
|
|
0
|
|
|
|
(0
|
)
|
|
|
6
|
|
|
|
(10
|
)
|
Overall Complication Rate
|
|
|
0
|
|
|
|
(0
|
)%
|
|
|
11
|
**
|
|
|
(18
|
)%
|
|
*
|
1
Polymicrobial patient had a Gram+ and a Gram- organism cultured
|
|
**
|
6
Patients had > 1 complication
|
Source:
Dr. Issam Raad, Antimicrobial Agents and Chemotherapy, June 2016, Vol. 60 No. 6, Page 3429
Phase
3 Trial
In
November 2016, the Company initiated site recruitment for Phase 3 clinical trials. From initiation through the first quarter of
2017, the Company received input from several sites related to the control arm as being less than standard-of-care for some of
the respective institutions. The Company worked closely with the U.S. Food and Drug Administration (“FDA”) with respect
to the design of the Phase 3 trial and received feedback on August 17, 2017. The FDA stated that they recognized that there is
an unmet medical need in salvaging infected catheters and agreed that an open label, superiority design would address the Company’s
concerns and would be acceptable to meet the requirements of a new drug application. The Company amended the Phase 3 study design
to remove the saline and heparin placebo control arm and to use an active control arm that conforms with today’s current
standard-of-care. Patient enrollment commenced in February 2018.
The
Mino-Lok Phase 3 Trial was originally planned to enroll 700 patients in 50 participating institutions, all located in the U.S.
There will be interim analyses at both the 50% and 75% points of the trial as measured by the number of patients treated. As of
November 15, 2020, there are 29 active sites currently enrolling patients including such academic centers as MDACC, Henry Ford
Health Center, Georgetown University Medical Center, and others. There are two additional medical centers in startup mode. There
are no other remaining sites in feasibility.
In
September 2019, the Company announced that the FDA agreed to a new primary efficacy endpoint of “time to catheter failure”
in comparing Mino-Lok to the antibiotic lock control arm. This change in the trial design reduced the required patient sample
size of the trial from 700 subjects to approximately 144 available subjects to achieve the pre-specified 92 catheter failure events
needed to conclude the trial. Additionally, the Company submitted a response to the FDA that it will implement this change in
the primary endpoint and expected it to result in less than 150 subjects needed in its Phase 3 trial. The new primary endpoints
require that the time to catheter failure be at least 38 days for Mino-Lok versus 21 days for the standard of care antibiotic
locks.
In
October 2019, the FDA agreed that the patient sample size of approximately 144 patients was acceptable.
In
October 2019, the Company announced that the Phase 3 trial had reached the 40% completion triggering an interim futility analysis
by the data monitoring committee (the “DMC”). The DMC is an independent panel of experts that review progress regarding
the safety and efficacy of drugs in clinical trials, and to determine if the trial may be futile in achieving its endpoints or
if the trial should be modified in any way.
In
December 2019, the DMC convened and recommended that the trial continue with no changes because the analysis showed a positive outcome,
as it met the prespecified interim futility analysis criteria.
In
May 2020, we announced that we are providing free access to Mino-Lok for healthcare providers under an Expanded Access protocol
to ease the burden associated with the COVID-19 pandemic. Through the Expanded Access protocol, an infected central venous catheter
can now be treated with Mino-Lok, potentially avoiding the need for the removal and replacement procedure.
In
June 2020, we announced that we had received positive feedback from the FDA on our proposed catheter compatibility studies for
Mino-Lok. The studies, if and when successfully completed, should allow Mino-Lok to be labeled for use with all commercially available
CVCs and peripherally inserted central catheters (PICCs) on the U.S. market. It is further assumed that these studies will meet
European and world standards. The ability to be labeled without restrictions with respect to catheter type would allow Mino-Lok
unrestricted access to the full U.S. and world markets for an effective antibiotic lock therapy for central line associated blood
stream infections (“CLABSIs”).
In
September 2020, we announced that another DMC meeting was held to review the data being generated and analyzed in the Mino-Lok
Phase 3 trial based on progress to date, and to make recommendations to us as to any action that may be necessary regarding the
study. After reviewing these data, the DMC members stated that they did not find any safety signals; and they also recommended
continuing the trial without any modifications. The DMC further conducted an ad hoc meeting and agreed with the Company
that a 75% interim analysis be conducted as planned in which superior efficacy is evaluated. The 75% interim analysis is expected
to be completed by March 2021.
In
September 2020 the Company announced that the three registration batches for all components of Mino Lok were manufactured and
that clinical sites were resupplied with registration product.
In
November 2020, the Company announced that the three components of Mino-Lok, minocycline, disodium edetate (“EDTA”),
and ethanol, were superior to EDTA and ethanol in their ability to eradicate resistant staphylococcal biofilms.
Fast
Track Designation
In
October 2017, the Company received official notice from FDA that the investigational program for Mino-Lok was granted “Fast
Track” status. Fast Track is a designation that expedites FDA review to facilitate development of drugs which treat a serious
or life-threatening condition and fill an unmet medical need. A drug that receives Fast Track designation is eligible for the
following:
|
●
|
More frequent meetings with FDA to discuss the
drug’s development plan and ensure collection of appropriate data needed to support drug approval;
|
|
●
|
More frequent written correspondence from FDA
about the design of the clinical trials;
|
|
●
|
Priority review to shorten the FDA review process
for a new drug from ten months to six months; and,
|
|
●
|
Rolling review, which means Citius can submit
completed sections of its New Drug Application (“NDA”) for review by FDA, rather than waiting until every section
of the application is completed before the entire application can be reviewed.
|
Mino-Lok
International Study
In
October 2017, data from an international study on Mino-Lok was presented at the Infectious Disease Conference, (“ID Week”),
in San Diego, California. The 44-patient study was conducted in Brazil, Lebanon, and Japan and showed Mino-Lok therapy was an
effective intervention to salvage long-term, infected CVCs in CRBSIs in patients who had cancer with limited vascular access.
This study showed 95% effectiveness for Mino-Lok therapy in achieving microbiological eradication of the CVCs as compared to 83%
for the control. The single failure in the Mino-Lok arm was due to a patient with Burkholderia cepacia that was resistant
to all antibiotics tested.
Stability
Patent Application for Mino-Lok
In
October 2018, the U.S. Patent and Trademark Office (“USPTO”) issued U.S. Patent No. 10,086,114, entitled “Antimicrobial
Solutions with Enhanced Stability.” This invention overcomes limitations in mixing antimicrobial solutions in which components
have precipitated because of physical and/or chemical factors, thus limiting the stability of the post-mix solutions. The scientists
and technologists at MDACC have been able to improve the stability of the post-mixed solutions through adjustments of the post-mixed
pH of the solution. This may allow for longer storage time of the ready-to-use solution. Citius holds the exclusive worldwide
license which provides access to this patented technology for development and commercialization of Mino-Lok.
On
October 9, 2019, the European Patent Office (“EPO”) granted European Patent No. 3370794, entitled “Antimicrobial
Solutions with Enhanced Stability.” The grant of this European patent strengthens the intellectual property protection for
Mino-Lok through November of 2036. This invention overcomes limitations in mixing antimicrobial solutions, in which components
have precipitated because of physical and/or chemical factors, thus limiting the stability of the post-mix solutions. The scientists
and technologists at MDACC have been able to improve the stability of the post-mixed solutions through adjustments of the post-mixed
pH of the solution. This may allow for longer storage time of the ready-to-use solution.
Market
Opportunity
In
spite of best clinical practice, catheters contribute to approximately 70% of blood stream infections that occur in the intensive
care unit or are associated with hemodialysis or cancer patients (approximately 470,000 per year). Bacteria enter the catheter
either from the skin or intraluminally through the catheter hub. Once in the catheter, bacteria tend to form a protective biofilm
on the interior surface of the catheter that is resistant to most antimicrobial solutions. The most frequently used maintenance
flush, heparin, actually stimulates biofilm formation. Heparin is widely used as a prophylactic lock solution, in spite of the
evidence that it contributes to the promotion of biofilm formation. The formation of bacterial biofilm usually precedes CRBSIs.
The
standard of care in the management of CRBSI patients consists of removing the infected CVC and replacing it with a new catheter
at a different vascular access site. However, in cancer and hemodialysis patients with long-term surgically implantable silicone
catheters, removal of the CVC and reinsertion of a new one at a different site might be difficult, or even impossible, because
of the unavailability of other accessible vascular sites and the need to maintain infusion therapy. Furthermore, critically ill
patients with short-term catheters often have underlying coagulopathy, which makes reinsertion of a new CVC at a different site,
in the setting of CRBSIs, risky in terms of mechanical complications, such as pneumothorax, misplacement, or arterial puncture.
Studies have also revealed that CRBSI patients may be associated with serious complications, including septic thrombosis, endocarditis
and disseminated infection, particularly if caused by Staphylococcus aureus or Candida species. Furthermore, catheter
retention in patients with CRBSIs is associated with a higher risk of relapse and poor response to antimicrobial therapy.
According
to Maki et al., published in the Mayo Clinic Proceedings in 2006, there are approximately 250,000 CRBSIs annually in the
U.S. Subsequent to this study, our estimates have ranged upwards to over 450,000 CLABSIs annually (see analysis in the table below).
CRBSIs are associated with a 12% to 35% mortality rate and an attributable cost of $35,000 to $56,000 per episode.
We
estimate that the potential market for Mino-Lok in the U.S. to be approximately $500 million to $1 billion as shown in the table
below based on a target price of up to $300 per dose of each salvage flush treatment.
|
|
Short-Term
CVC
|
|
|
Long-Term
CVC
|
|
|
Total
|
|
No. of Catheters
|
|
3 million
|
|
|
4 million
|
|
|
7 million
|
|
Avg. Duration (Days)
|
|
12
|
|
|
100
|
|
|
N/A
|
|
Catheter Days
|
|
36 million
|
|
|
400 million
|
|
|
436 million
|
|
Infection Rate
|
|
2/1,000 days
|
|
|
1/1,000 days
|
|
|
N/A
|
|
Catheters Infected
|
|
72,000
|
|
|
400,000
|
|
|
472,000
|
|
Flushes/Catheter
|
|
5
|
|
|
7
|
|
|
6.7
|
|
Total Salvage Flushes
|
|
360,000
|
|
|
2,800,000
|
|
|
3,160,000
|
|
Sources:
Ann Intern Med 2000; 132:391-402, Clev Clin J Med 2011; 78(1):10-17, JAVA 2007; 12(1):17-27, J Inf Nurs 2004;27(4):245-250, Joint
Commission website Monograph, CLABSI and Internal Estimates.
Under
various plausible pricing scenarios, we believe that Mino-Lok would be cost-saving to the healthcare system given that the removal
of an infected CVC and replacement of a new catheter in a different venous access site is estimated by us to cost between $8,000
and $10,000. Furthermore, there are potential additional medical benefits, a reduction in patient discomfort and avoidance of
serious adverse events with the Mino-Lok approach since the catheter remains in place and is not subject to manipulation. We believe
there will be an economic argument to enhance the adoption of Mino-Lok by infection control committees at acute care institutions.
In
January of 2017, we commissioned a primary market research study with MEDACore, a subsidiary of Leerink, a healthcare focused
network with more than 35,000 healthcare professionals, including key opinion leaders, experienced practitioners and other healthcare
professionals throughout North America, Europe, Asia and other locations around the world. This network includes approximately
55 clinical specialties, 21 basic sciences and 20 business specialties. As part of this market research project, we commissioned
a third party survey of 31 physicians to qualify the need for catheter salvage in patients with infected, indwelling central venous
lines, especially when the catheter is a tunneled or an implanted port. There were 19 infectious disease experts and 12 intensivists
surveyed who all agreed that salvage would be preferable to catheter exchange to avoid catheter misplacements, blood clots, or
vessel punctures that can potentially occur during reinsertion. Most were also concerned that viable venous access may not be
available in patients who were vitally dependent on a central line.
Mino-Wrap
Overview
On
January 2, 2019, we entered into a patent and technology license agreement with the Board of Regents of the University of Texas
System on behalf of MDACC, whereby we in-licensed exclusive worldwide rights to the patented technology for any and all uses relating
to breast implants, specifically the Mino-Wrap technology. This includes rights to U.S. Patent No. 9,849,217, which was issued
on December 16, 2017. We intend to develop Mino-Wrap as a liquefying, gel-based wrap containing minocycline and rifampin for the
reduction of infections associated with breast implants following breast reconstructive surgeries. We are required to use commercially
reasonable efforts to commercialize Mino-Wrap under several regulatory scenarios and achieve milestones associated with these
regulatory options leading to an approval from the FDA. Mino-Wrap will require pre-clinical development prior to any regulatory
pathway. In July 2019, we announced that we intend to pursue the FDA’s Investigational New Drug (“IND”) regulatory
pathway for the development of Mino-Wrap. On August 4, 2020, we announced that we had submitted a briefing package to the FDA
for a pre-IND consultation on Mino-Wrap. In December 2020, we reported the FDA response to the briefing package and commented
that the FDA was in general agreement with our planned pre-clinical program and gave further guidance on our clinical plans.
Market
Opportunity
Breast
cancer is the most frequent cancer in women worldwide representing 25% of all cancer diagnoses with the exception of non-melanoma
skin cancer. In the United States, the overall rate of mastectomies, combining single and double mastectomies, has increased 36%
from 2005 to 2013. Additionally, the incidence of post-mastectomy breast reconstruction, following breast cancer treatment, has
been increasing on an annual basis.
In
2017, the American Society of Plastic Surgeons reported that over 105,000 women in the United States underwent a post-mastectomy
breast reconstructive procedure. Approximately 30% of these breast reconstruction occurs simultaneously with mastectomy, with
most reconstructions occurring weeks later.
The
current standard of care in post-mastectomy breast reconstruction is the use of a Tissue Expander (“TE”), which is
a temporary implant that is placed below the pectoralis muscle within the mastectomy space. Once a sufficiently large soft tissue
envelope has been created, the TE is then replaced by a permanent breast implant. Approximately 80% of the time, a TE is used
in breast reconstructions.
The
rate of infection following a mastectomy with a TE is 2.4 to 24% with an estimated mean of 12-14%. Once the implant becomes infected,
the patient is usually hospitalized requiring approximate two weeks of IV and/or oral antimicrobials. In addition, the TE is removed,
leading to a delay of lifesaving chemo-radiation therapy, and a more complex reconstruction in the future.
Currently,
preventive measures are used to decrease the rate of TE infections with include a systemic perioperative antimicrobial agent with
the perioperative immersion of the implant or irrigation of the surgical pocket with an antimicrobial solution prior to insertion
of the device. This is also administered with immediate postoperative oral antimicrobials.
Based
on the in vitro preclinical laboratory work, Mino-Wrap appears to have the characteristics necessary for advancement in the protection
of human implants from subsequent infection.
Halo-Lido
Overview
Halo-Lido
is a topical formulation of halobetasol propionate, a corticosteroid and lidocaine that is intended for the treatment of hemorrhoids.
To our knowledge, there are currently no FDA-approved prescription drug products for the treatment of hemorrhoids. Some physicians
are known to prescribe topical steroids for the treatment of hemorrhoids. In addition, there are various topical combination prescription
products containing halobetasol propionate along with lidocaine or pramoxine, each a topical anesthetic, that are prescribed by
physicians for the treatment of hemorrhoids. These products contain drugs that were in use prior to the start of the Drug Efficacy
Study Implementation (“DESI”) program and are commonly referred to as DESI drugs. However, none of these single-agent
or combination prescription products have been clinically evaluated for safety and efficacy and approved by the FDA for the treatment
of hemorrhoids. Further, many hemorrhoid patients use over the counter (“OTC”) products as their first line therapy.
OTC products contain any one of several active ingredients including glycerin, phenylephrine, pramoxine, white petrolatum, shark
liver oil and/or witch hazel, for symptomatic relief.
Development
of Hemorrhoids Drugs
Hemorrhoids
are a common gastrointestinal disorder, characterized by anal itching, pain, swelling, tenderness, bleeding and difficulty defecating.
In the U.S., hemorrhoids affect nearly 5% of the population, with approximately 10 million persons annually admitting to having
symptoms of hemorrhoidal disease. Of these persons, approximately one third visit a physician for evaluation and treatment of
their hemorrhoids. The data also indicate that for both sexes a peak of prevalence occurs from age 45 to 65 years with a subsequent
decrease after age 65 years. Caucasian populations are affected significantly more frequently than African Americans, and increased
prevalence rates are associated with higher socioeconomic status in men but not women. Development of hemorrhoids before age 20
is unusual. In addition, between 50% and 90% of the general U.S., Canadian and European population will experience hemorrhoidal
disease at least once in life. Although hemorrhoids and other anorectal diseases are not life-threatening, individual patients
can suffer from agonizing symptoms which can limit social activities and have a negative impact on the quality of life.
Hemorrhoids
are defined as internal or external according to their position relative to the dentate line. Classification is important for
selecting the optimal treatment for an individual patient. Accordingly, physicians use the following grading system referred to
as the Goligher’s classification of internal hemorrhoids:
Grade I
|
Hemorrhoids not prolapsed
but bleeding.
|
|
|
Grade II
|
Hemorrhoids prolapse and reduce spontaneously
with or without bleeding.
|
|
|
Grade III
|
Prolapsed hemorrhoids that require reduction
manually.
|
|
|
Grade IV
|
Prolapsed and cannot be reduced including both
internal and external hemorrhoids that are confluent from skin tag to inner anal canal.
|
Development
Activities to Date
In
the fall of 2015, we completed dosing patients in a double-blind dose ranging placebo controlled Phase 2a study where six different
formulations containing hydrocortisone and lidocaine in various strengths were tested against the vehicle control. The objectives
of this study were to: (1) demonstrate the safety and efficacy of the formulations when applied twice daily for two weeks in subjects
with Grade I or II hemorrhoids, and (2) assess the potential contribution of lidocaine hydrochloride and hydrocortisone acetate,
alone or in combination for the treatment of symptoms of Goligher’s Classification Grade I or II hemorrhoids.
Symptom
improvement was observed based on a global score of disease severity (“GSDS”) and based on some of the individual
signs and symptoms of hemorrhoids, specifically itching and overall pain and discomfort. Within the first few days of treatment,
the combination products (containing both hydrocortisone and lidocaine) were directionally favorable versus the placebo and their
respective individual active treatment groups (e.g., hydrocortisone or lidocaine alone) in achieving ‘almost symptom free’
or ‘symptom free’ status according to the GSDS scale. These differences suggest the possibility of a benefit for the
combination product formulation.
Overall,
results from adverse event reporting support the safety profile of all test articles evaluated in this study and demonstrate similar
safety profiles as compared to the vehicle. The safety findings were unremarkable. There was a low occurrence of adverse events
and a similar rate of treatment related adverse events across all treatment groups. The majority of adverse events were mild and
only one was severe. None of the adverse events were an SAE and the majority of adverse events were recovered/resolved at the
end of the study. There were only two subjects who were discontinued from the study due to adverse events.
In
addition to the safety and dose-ranging information, information was obtained relating to the use of the GSDS as an assessment
tool for measuring the effectiveness of the test articles. Individual signs and symptoms were also assessed but can vary from
patient to patient. Therefore, the goal of the GSDS was to provide an assessment tool that could be used for all patients regardless
of which signs and symptoms they are experiencing. The GSDS proved to be a more effective tool for assessing the severity of the
disease and the effectiveness of the drug when compared to the assessment of the individual signs and symptoms. Citius believes
that we can continue to develop this assessment tool as well as other patient reported outcome endpoints for use in the next trials
and in the pivotal trial.
Information
was also obtained about the formulation of the drug and the vehicle. As a result of this study, we believe that the performance
of the active arms of the study relative to the vehicle could be improved by re-formulating our topical preparation. Therefore,
we initiated work on vehicle formulation and evaluation of higher potency steroids.
In
June and July 2016, we engaged the Dominion Group, a leading provider of healthcare and pharmaceutical marketing research services.
The primary market research was conducted to understand the symptoms that are most bothersome to patients better in order to develop
meaningful endpoints for the clinical trials. We also learned about the factors that drive patients to seek medical attention
for hemorrhoids in an effort to understand the disease impact on quality of life. The results of this survey are able to help
us develop patient reported outcome evaluation tools. These tools can be used in clinical trials to evaluate the patients’
conditions and to assess the performance of the test articles.
In
March 2018, we announced that we had selected a higher potency corticosteroid in our steroid/anesthetic topical formulation program
for the treatment of hemorrhoids. The original topical preparation, which we referred to as Hydro-Lido or CITI-001, which was
used in the Phase 2a study, was a combination of hydrocortisone acetate and lidocaine hydrochloride. The new formulation, CITI-002,
which we refer to as Halo-Lido, combine slidocaine with the higher potency corticosteroid halobetasol propionate for symptomatic
relief of the pain and discomfort of hemorrhoids.
We
held a Type C meeting with the FDA in December 2017 to discuss the results of the Phase 2a study and to obtain the FDA’s
view on development plans to support the potential formulation change for the planned Phase 2b study. We also requested the FDA’s
feedback on our Phase 2b study design, including target patient population, inclusion/exclusion criteria, and efficacy endpoints.
The pre-clinical and clinical development programs for CITI-002 are planned to be similar to those conducted for the development
of CITI-001 to support the design for a planned Phase 3 clinical trial. We anticipate beginning a Phase 2b clinical study in the
first quarter of 2021.
Market
Opportunity
The
current market for OTC and topical prescription (“Rx”) products for the symptomatic treatment of hemorrhoids is highly
fragmented, and includes approximately 20 million units of OTC and over 4 million prescriptions. None of the Rx products have
received FDA approval and are only available due to the DESI program, which started decades ago after enactment of the 1962 Kefauver-Harris
Drug Amendments. These DESI products have no FDA reviewed evidence of efficacy or safety, and may be subject to withdrawal if
an approved product were to be introduced. Several topical combination prescription products for the treatment of hemorrhoids
are available containing hydrocortisone in strengths ranging from 0.5% to 3.0%, combined with lidocaine in strengths ranging from
1.0% to 3.0%. The various topical formulations include creams, ointments, gels, lotions, enemas, pads, and suppositories. The
most commonly prescribed topical combination gel is sold as a branded generic product and contains 2.5% hydrocortisone and 3.0%
lidocaine.
We
believe there are currently no FDA-approved prescription drug products for the treatment of hemorrhoids. Although there are numerous
Rx and OTC products commonly used to treat hemorrhoids, none possess proven safety and efficacy data generated from rigorously
conducted clinical trials. We believe that a novel topical formulation of halobetasol propionate and lidocaine designed to provide
anti-inflammatory and anesthetic relief and which has an FDA-approved label specifically claiming the treatment of hemorrhoids
will become an important treatment option for physicians who want to provide their patients with a therapy that has demonstrated
safety and efficacy in treating this uncomfortable and often recurring disease. We believe that our Halo-Lido product represents
an attractive, low-risk product opportunity with meaningful upside potential.
Market
Exclusivity
We
believe that we will be the first company to conduct rigorous clinical trials and receive FDA approval of a topical corticosteroid-lidocaine
combination product for the treatment of hemorrhoids. If we receive FDA approval, we will qualify for three years of market exclusivity
for our dosage strength and formulation. In addition, we will also be the only product on the market specifically proven to be
safe and effective for the treatment of hemorrhoids. Generally, if a company conducts clinical trials and receives FDA approval
of a product for which there are similar, but non FDA-approved, prescription products on the market, the manufacturers of the
unapproved but marketed products are required to withdraw them from the market. However, the FDA has significant latitude in determining
how to enforce its regulatory powers in these circumstances. We have not had any communication with the FDA regarding this matter
and cannot predict what action, if any, the FDA will take with respect to the unapproved products.
We
believe that should Halo-Lido receive FDA approval and demonstrate, proven safety and efficacy data, and if Halo-Lido obtains
three years of market exclusivity based on our dosage strength and formulation, we are likely to have a meaningful advantage in
our pursuit of achieving a significant position in the market for topical combination prescription products for the treatment
of hemorrhoids.
NoveCite
Overview
In
October 2020, we, through our recently formed subsidiary, NoveCite, signed an exclusive agreement with Novellus Therapeutics Limited
(“Novellus”) to license iPSC-derived mesenchymal stem cells (iMSCs). Under this worldwide exclusive license, we will
be focused on developing cellular therapies. Specifically, we will seek to develop and commercialize the NoveCite mesenchymal
stem cells (“NC-iMSCs”) to treat acute respiratory conditions with a near term focus on ARDS associated with
COVID-19.
NC-iMSCs
are the next generation mesenchymal stem cell therapy. They are believed to be differentiated and superior to donor-derived MSCs.
Human donor-derived MSCs are sourced from human bone marrow, adipose tissue, placenta, umbilical tissue, etc. and have significant
challenges (e.g., variable donor and tissue sources, limited supply, low potency, inefficient and expensive manufacturing). iMSCs
overcome these challenges because they:
|
●
|
Are
more potent and secrete exponentially higher levels of immunomodulatory proteins;
|
|
●
|
Have
practically unlimited supply for high doses and repeat doses;
|
|
●
|
Are
from a single donor and clonal so they are economically produced at scale with consistent
quality and potency, as well as being footprint free (compared to viral reprogramming
methods); and
|
|
●
|
Have
a significantly higher expansion capability.
|
Several
cell therapy companies using donor-derived MSC therapies in treating ARDS have demonstrated that MSCs reduce inflammation, enhance
clearance of pathogens and stimulate tissue repair in the lungs. Almost all these positive results are from early clinical trials
or under the emergency authorization program.
Market
Opportunity
Globally,
there are 3 million cases of ARDS every year, out of which approximately 200,000 cases are in the United States. The COVID-19
pandemic has added significantly to the number of ARDS cases. Once the COVID patients advance to ARDS, they are put on mechanical
ventilators. Death rate among patients on ventilators can be as high as 50% depending on associated co-morbidities. There are
no approved treatments for ARDS, and the current standard of care only attempts to provide symptomatic relief.
Sales
and Marketing
We
are primarily focused on identifying opportunities within the critical care and cancer care market segments. In our product acquisition
criteria, we concentrate on markets that are highly influenced by key opinion leaders, commonly referred to as KOLs, and in which
products are prescribed by a relatively small number of physicians, yet provide opportunities for growth and market share. This
strategy allows for a manageable commercialization effort for our Company in terms of resources and capital. We also seek to provide
cost-effective therapies that would be endorsed by payers, patients, and providers. We believe that we will be able to commercialize
products within the scope of these criteria ourselves, and that we can create marketing synergies by having a common narrow audience
for our marketing efforts (“several products in the bag for the same customer”).
For
our product candidates that fall out of the narrow scope criteria, we have identified pharmaceutical companies with large sales
forces, experienced sales and marketing management teams, direct-to-consumer capabilities, significantly larger resources than
ours, and non-competing product portfolios that we believe would make excellent sales and marketing partners. We intend to license
our mass audience, non-specialty product candidates to such companies for sales and marketing.
Intellectual
Property
We
rely on a combination of patent, trade secret, copyright, and trademark laws, as well as confidentiality, licensing and other
agreements, to establish and protect our proprietary rights. Our policy is to actively seek to obtain, where appropriate, the
broadest intellectual property protection possible for our current product candidates and any future product candidates both in
the U.S. and abroad. However, patent protection may not provide us with complete protection against competitors who seek to circumvent
our patents. To help protect our proprietary know-how that is not patentable, and for inventions for which patents may be difficult
to enforce, we currently rely and will in the future rely on trade secret protection and confidentiality agreements to protect
our interests.
Mino-Lok
Intellectual Property
In
May 2014, our subsidiary LMB entered into a patent and technology license agreement with Novel Anti-Infective Therapeutics, Inc.
(“NAT”), who licensed the intellectual property from MDACC, to develop and commercialize Mino-Lok on an exclusive,
worldwide (except for South America), sub-licensable basis. LMB incurred a one-time license fee in May 2014. On March 20, 2017,
LMB entered into an amendment to the license agreement that expanded the licensed territory to include South America, providing
LMB with worldwide rights. We are obligated to pay annual maintenance fees that increase annually until reaching a designated
amount, which we must pay until the first sale of product. We also must pay up to an aggregate of approximately $1.1 million in
milestone payments, depending on the achievement of various regulatory and commercial milestones. Under the terms of the license
agreement, we also must pay a royalty equal to mid-single digit percentages to low-double digit percentages of net sales, depending
on the level of sales in that year, and subject to downward adjustment to lower- to mid-single digit percentages in the event
there is no valid patent for the product in the country of sale at the time of sale. After the first sale of product, we will
owe an annual minimum royalty payment that will increase annually until reaching a designated amount, which we must pay for the
duration of the term. We will be responsible for all patent expenses for the term of the agreement although MDACC is responsible
for filing, prosecution and maintenance of all patents.
Unless
earlier terminated by NAT based on the failure to achieve certain development or commercial milestones, the license agreement
remains in effect until the date that all patents licensed under the agreement have expired and all patent applications within
the licensed patent rights have been cancelled, withdrawn or expressly abandoned. The license agreement will terminate in the
event we breach any of our payment or reporting obligations or NAT breaches any of its obligations under the agreement. NAT will
have the right to terminate the agreement if we bring or participate in an action to challenge NAT’s ownership of any of
the licensed patent rights. We may terminate the license agreement upon 180 days’ notice. The license agreement may also
be terminated upon our and NAT’s mutual consent.
Mino-Lok
is covered in relation to the composition by issued U.S. patent No. 7,601,731, entitled “Antimicrobial Flush Solutions,”
which was issued on October 13, 2009. Mino-Lok is further covered in relation to its method of use by issued U.S. Patent No. 9,078,441,
which was issued on July 14, 2015. The patents provide intellectual property protection until June 7, 2024. There are corresponding
patents granted in Europe and Canada (European Patent No. EP 1644024, and Canadian Patent No. 2528522).
Stability
Patent Application for Mino-Lok
In
October 2018, the U.S. Patent and Trademark Office (“USPTO”) issued U.S. Patent No. 10,086,114 (the “114 patent”),
entitled “Antimicrobial Solutions with Enhanced Stability.” On October 9, 2019, the European Patent Office (“EPO”)
granted European Patent No. 3370794, which corresponds to the ‘114 patent. The grant of these patents strengthens the intellectual
property protection for Mino-Lok through November 2036. While the original patents for Mino-Lok (discussed above) cover the basic
composition, this invention overcomes limitations in mixing antimicrobial solutions in which components have precipitated because
of physical and/or chemical factors, thus limiting the stability of the post-mix solutions. The scientists and technologists at
MDACC have been able to improve the stability of the post-mixed solutions through adjustments of the post-mixed pH of the solution.
This may allow for longer storage time of the ready-to-use solution. As such, the patents claiming the enhanced stability may
effectively extend patent protection for Mino-Lok beyond the 2024 expiration of the original patents since it is expected that
the compositions providing enhanced stability would be preferred over any non-stabilized versions that a competitor may introduce
after June 7, 2024. Citius holds the exclusive worldwide license which provides access to this patented technology for development
and commercialization of Mino-Lok.
Mino-Lok
has received a Qualified Infectious Disease Product (“QIDP”) designation. The QIDP designation provides New Drug Applications
an additional five years of market exclusivity, which together with the potential three years of exclusivity for the new strength
and formulation of Mino-Lok, would result in a combined total of eight years of market exclusivity regardless of patent protection.
Mino-Wrap
Intellectual Property
In
January 2019, we entered into a patent and technology license agreement with MDACC to develop and commercialize Mino-Wrap on an
exclusive worldwide basis, with no rights to sub-license. We paid a one-time upfront licensing fee upon execution of the agreement.
Under the agreement, we are required to use commercially reasonable efforts to commercialize Mino-Wrap under several regulatory
scenarios and achieve milestones that are associated with these regulatory options leading to an approval from the FDA. We are
obligated to pay annual maintenance fees that increase annually until reaching a designated amount, which we must pay until the
first sale of product. We also must pay up to an aggregate of $2.1 million in milestone payments, depending on the achievement
of various regulatory and commercial milestones. Under the terms of the license agreement, we also must pay a royalty equal to
mid- to upper-single digit percentages of net sales, depending on the level of sales in that year, and subject to downward adjustment
to lower- to mid-single digit percentages in the event there is no valid patent for the product in the United States at the time
of sale. After the first sale of product, we will owe an annual minimum royalty payment that will increase annually for the duration
of the term. We will be responsible for all patent expenses incurred by MDACC for the term of the agreement although MDACC is
responsible for filing, prosecution and maintenance of all patents.
The
term of the license agreement will end on the later of the expiration of all licensed patents, or the fifteenth anniversary of
the agreement. MDACC may terminate the license agreement at any time after four years in any country if we have not commercialized
or are not actively attempting to commercialize a product in such country. The license agreement will terminate in the event we
breach any of our payment or reporting obligations or MDACC breaches any of its obligations under the agreement. MDACC will have
the right to terminate the agreement if we bring or participate in an action to challenge MDACC’s ownership of any of the
licensed patent rights. We may terminate the license agreement upon 180 days’ notice. The license agreement may also be
terminated upon our and MDACC’s mutual consent.
In
December 2017, the USPTO issued U.S. Patent No. 9,849,217, entitled “Antimicrobial Wraps for Medical Implants.” This
invention overcomes limitations in breast reconstruction utilizing tissue expanders and implants following mastectomies by providing,
in certain aspects, biodegradable antimicrobial film that may be wrapped around a medical implant such as a breast implant prior
to the insertion into a subject such as a human patient. The scientists and technologists at MDACC have developed a biodegradable
covering for a medical implant comprising a highly plasticized gelatin and at least one drug to reduce infection. Citius holds
the exclusive worldwide license, which provides access to this patented technology for development and commercialization of Mino-Wrap.
Halo-Lido
Intellectual Property
We
are developing Halo-Lido to have a unique combination of excipients as well as unique concentrations of the active ingredients.
The goal is to have a product that is optimized for stability and activity. Once the formulation development is completed and
data is obtained, we intend to apply for a patent on this new topical formulation.
We
seek to achieve approval for Halo-Lido by utilizing the FDA’s 505(b)(2) pathway. This pathway allows an applicant to file
an NDA that contains full reports of investigations of safety and effectiveness, but where at least some of the information required
for approval comes from prior studies not conducted by or for the applicant and for which the applicant has not obtained a right
of reference to such prior third-party studies. This pathway would provide three years of market exclusivity.
NoveCite
Intellectual Property
In
October 2020, we, through our subsidiary NoveCite, Inc., entered into a license agreement with Novellus Therapeutics Limited (“Licensor”),
whereby NoveCite acquired an exclusive, worldwide license, with the right to sublicense, to develop and commercialize a stem cell
therapy based on the Licensor’s patented technology for the treatment of acute pneumonitis of any etiology in which inflammation
is a major agent in humans. The patented technology consists of mesenchymal stem cells (“MSCs”) derived from an induced
pluripotent stem cell line that is made by Licensor using the mRNA cell reprogramming methods in the patents covering the licensed
technology.
Upon
execution of the license agreement, NoveCite paid an upfront payment of $5,000,000 and issued to Licensor shares of Novecite’s
common stock representing 25% of Novecite’s currently outstanding equity. We own the other 75% of NoveCite’s currently
outstanding equity. Pursuant to the terms of the stock subscription agreement between Novellus and NoveCite, if NoveCite issues
additional equity, subject to certain exceptions, prior to its initial public offering or a change of control (as defined in the
license agreement), NoveCite must maintain Novellus’s ownership at 25% by issuing to Novellus additional shares.
NoveCite
is obligated to pay Licensor up to an aggregate of $51,000,000 in milestone payments upon the achievement of various regulatory
and developmental milestones. NoveCite also must pay on a fiscal quarter basis a royalty equal to low double-digit percentages
of net sales, commencing upon the first commercial sale of a licensed product. This royalty is subject to downward adjustment
on a product-by-product and country-by-country basis to an upper-single digit percentage of net sales in any country in the event
of the expiration of the last valid patent claim or if no valid patent claim exists in that country. The royalty will end on the
earlier of (i) date on which a biosimilar product is first marketed, sold, or distributed by Licensor or any third party in the
applicable country or (ii) the 10 year anniversary of the date of expiration of the last-to-expire valid patent claim in that
country. In the case of a country where no licensed patent ever exists, the royalty will end on the later of (i) the date of expiry
of such licensed product’s regulatory exclusivity and (ii) the 10 year anniversary of the date of the first commercial sale
of the licensed product in the applicable country. In addition, NoveCite will pay to Licensor an amount equal to a mid-twenties
percentage of any sublicensee fees it receives.
During
the term of the license agreement, NoveCite is required to use commercially reasonable efforts to make commercially available
at least one product in at least two markets: the United States and either the United Kingdom, France, Germany, China or Japan.
Additionally, NoveCite shall (i) on or before the five year anniversary of the date of the license agreement, file an IND for
a licensed product in the field of acute pneumonitis treatment and (ii) receive regulatory approval for a licensed product in
the field of acute pneumonitis treatment in the United States or in a major market country on or before the ten year anniversary
of the date of the license agreement.
Pursuant
to the terms of the license agreement, NoveCite has been granted a right of first negotiation to exclusively license the rights
to any new products developed or acquired by Licensor which cannot include MSC’s, that may be used within the field of acute
pneumonitis treatment. After receiving notice from the Licensor of the new product opportunity, NoveCite has 30 days to notify
Licensor of its desire to negotiate a license agreement for the new product. If such notice is given by NoveCite, the parties
shall then have a period of 150 days from the date of Licensor’s notice to NoveCite to negotiate, exclusively and in good
faith, the terms and conditions for the new product license agreement.
The
term of the license agreement will continue on a country-by-country and licensed product-by-licensed product basis until the expiration
of the last-to-expire royalty term for any and all licensed products unless earlier terminated in accordance with its terms. Either
party may terminate the license agreement upon written notice if the other party is in material default or breach of the agreement,
subject to cure within the designated time periods. Either party also may terminate the license agreement if the other party files
for bankruptcy or takes related actions or is unable to pay its debts as they become due, subject to cure within the designated
time period. Additionally, Licensor will have the right to terminate the agreement if NoveCite directly or indirectly challenges
the patentability, enforceability or validity of any licensed patent. NoveCite may terminate the license agreement at any time
without cause upon 90 days prior written notice.
Licensor
will be responsible for preparing, filing, prosecuting and maintaining all patent applications and patents included in the licensed
patents in the territory. Provided however, that if Licensor decides that it is not interested in maintaining a particular licensed
patent or in preparing, filing, or prosecuting a licensed patent, it will promptly advise NoveCite in writing and NoveCite will
have the right, but not the obligation, to assume such responsibilities in the territory at NoveCite’s sole cost and expense.
During
the term of the license agreement, Licensor is prohibited from commercializing or exploiting (directly or indirectly) any product
that includes mesenchymal stem cells for any purpose in acute pneumonitis treatment (subject to certain sponsored research exceptions),
or exploiting (directly or indirectly) or enabling a third party to exploit, for any purpose in acute pneumonitis treatment or
otherwise, the original licensed cell banks line or any GMP-grade cell banks of a cell line derived therefrom and that can be
used as starting material for the manufacture of products derived from the licensed technology. During the term of the license
agreement, each party is prohibited from soliciting any employee of the other party, subject to certain exceptions.
Competition
We
operate in a highly competitive and regulated industry which is subject to rapid and frequent changes. We face significant competition
from organizations that are pursuing drugs that would compete with the drug candidates that we are developing and the same or
similar products that target the same conditions we intend to treat. Due to our limited resources, we may not be able to compete
successfully against these organizations, which include many large, well-financed and experienced pharmaceutical and biotechnology
companies, as well as academic and research institutions and government agencies.
Mino-Lok
Competition
Currently,
the only alternative to Mino-Lok in the treatment of infected CVCs in CRBSI/CLABSI patients of which we are aware, is the standard
of care of removing the culprit CVC and replacing a new CVC at a different vascular site. Citius is not aware of any INDs for
a salvage antibiotic lock solution and does not expect any to be forthcoming due to the difficulty of meeting the necessary criteria
to be effective and practical.
At
this time, there are no pharmacologic agents approved in the U.S. for the prevention or treatment of CRBSIs or CLABSIs in central
venous catheters. Citius is aware that there are several agents in development for prevention but none for salvage. The most prominent
of these appear to be Defencath from CorMedix Inc. and B-Lock from Great Lakes Pharmaceuticals, Inc. (“GLP”).
DefencathTM
(CorMedix Inc.)
Defencath
is a formulation of Taurolidine 1.35%, Citrate 3.5%, and Heparin 1000 units/mL. Neutrolin is an anti-microbial catheter lock solution
being developed by CorMedix to prevent CRBSIs and to prevent clotting. In January 2015, the FDA granted Fast Track and QIDP designations
for Defencath. In December 2015, CorMedix initiated its Phase 3 clinical trial in hemodialysis patients in the United States.
On June 20, 2018, CorMedix announced that it had completed its review and source-verification of the data required for the interim
analysis of the Phase 3 LOCK-IT-100 study for Neutrolin. The data was then locked and transferred to the independent biostatistician
for un-blinding and analysis, who then provided the results to the Data and Safety Monitoring Board (“DSMB”) for its
review.
On
July 25, 2018 CorMedix announced that the DSMB had completed its review of the interim analysis of the data from the currently
ongoing Phase 3 LOCK-IT-100 study for Neutrolin. Because the pre-specified level of statistical significance was reached and efficacy
had been demonstrated, the DSMB recommended the study be terminated early. No safety concerns were reported by the DSMB based
on the interim analysis.
CorMedix
has submitted its NDA for Defencath to the FDA, which accepted the NDA in August 2020. The FDA set a target review date of February
28, 2021.
B-Lock™
(Great Lakes Pharmaceuticals, Inc.)
B-Lock
is a triple combination of trimethoprim, EDTA and ethanol from Great Lakes Pharmaceuticals, Inc. (“GLP”). On July
24, 2012, GLP announced the initiation of a clinical study of B-Lock. We are unaware as to the progress or results of these studies.
In addition, we are not aware of any IND being filed in the U.S. for B-Lock, nor are we aware of any clinical studies to support
salvage of infected catheters in bacteremic patients.
Neither
of these lock solutions have been shown to be effective in salvaging catheters in bacteremic patients as Mino-Lok is intended
to do, and Citius does not expect that either would be pursued for this indication.
There
has been no further public information available on GLP. GLP’s web site and phone number are no longer active and the Company
believes that they have ceased operations.
Mino-Wrap
Competition
The
primary competition for Mino-Wrap would be the existing standard of care treatment, which includes a systemic perioperative antimicrobial
agent with the perioperative immersion of the implant or irrigation of the surgical pocket with an antimicrobial solution prior
to insertion of the tissue expander device. This is also administered with immediate postoperative oral antimicrobials.
Halo-Lido
Competition
The
primary competition in the hemorrhoid market is non-prescription OTC products. If approved by the FDA, Halo-Lido will be the only
prescription product for the treatment of hemorrhoids.
NoveCite
Competition
There
are multiple participants in the cell therapy field both in the United States and abroad. We believe that the following companies
most directly compete with NoveCite in our licensed field of acute pneumonitis treatment.
Cynata
Therapeutics Limited develops and commercializes a proprietary mesenchymal stem cell technology under the Cymerus brand for human
therapeutic use in Australia. The company’s lead therapeutic product candidate is CYP-001, which has completed a Phase 1
clinical trial for the treatment of graft versus host disease. Cynata also develops products for the treatment of asthma, heart
attack, diabetic wounds, coronary artery disease, acute respiratory distress syndrome, brain cancer, melanoma, sepsis, osteoarthritis,
and critical limb ischemia, which are in a preclinical model.
Athersys,
Inc. is a biotechnology company that focuses on the research and development activities in the field of regenerative medicine.
Its clinical development programs are focused on treating neurological conditions, cardiovascular diseases, inflammatory and immune
disorders, and pulmonary and other conditions. The company’s lead platform product includes MultiStem cell therapy, an allogeneic
stem cell product, which is in a Phase 3 clinical study for the treatment of patients suffering from neurological damage from
an ischemic stroke, as well as in a Phase 2 clinical study for the treatment of patients with acute myocardial infarction, and
has completed a Phase 1 clinical study for the treatment of patients suffering from leukemia or various other blood-borne cancers.
The company has license and collaboration agreements with Healios K.K. to develop and commercialize MultiStem cell therapy for
ischemic stroke, acute respiratory distress syndrome, and ophthalmological indications, as well as for the treatment of liver,
kidney, pancreas, and intestinal tissue diseases; and the University of Minnesota to develop MultiStem cell therapy platform.
Pluristem
Therapeutics Inc. operates as a bio-therapeutics company in Israel. It focuses on the research, development, clinical trial, and
manufacture of placental expanded (PLX) based cell therapeutic products and related technologies for the treatment of various
ischemic, inflammatory, and hematologic conditions, as well as autoimmune disorders. A Phase2 study of PLX cells as a treatment
for severe COVID-19 cases complicated by acute respiratory distress syndrome has been initiated in the U.S.
Mesoblast
Limited is a biopharmaceutical company that develops and commercializes allogeneic cellular medicines. The company offers products
in the areas of cardiovascular, spine orthopedic disorder, oncology, hematology, and immune-mediated and inflammatory diseases.
Its proprietary regenerative medicine technology platform is based on specialized cells known as mesenchymal lineage adult stem
cells. In April 2020, Mesoblast initiated a Phase 3 trial using mesenchymal stromal cells for the treatment of moderate to severe
COVID-19 acute respiratory distress syndrome.
Supply
and Manufacturing
We
do not currently have and we do not intend to set up our own manufacturing facilities. We expect to use approved contract manufacturers
for manufacturing our product candidates in all stages of development after we file for FDA approval. Each of our domestic and
foreign contract manufacturing establishments, including any contract manufacturers we may decide to use, must be listed in the
NDA and must be registered with the FDA. Also, the FDA imposes substantial annual fees on manufacturers of branded products.
In
general, our suppliers purchase raw materials and supplies on the open market. Substantially all such materials are obtainable
from a number of sources so that the loss of any one source of supply would not have a material adverse effect on us.
If
we elect to conduct product development and manufacturing, we will be subject to regulation under various federal and state laws,
including the Occupational Safety and Health Act, the Environmental Protection Act, the Toxic Substances Control Act, the Resource
Conservation and Recovery Act, the Controlled Substances Act and other present and potential future federal, state or local regulations.
We
have contracted with proven suppliers and manufacturers for active pharmaceutical ingredient, development and packaging. We are
confident that all materials meet or will meet specifications discussed at the chemistry, manufacturing and controls meeting with
the FDA.
Regulation
United
States Government Regulation
The
research, development, testing, manufacture, labeling, promotion, advertising, distribution and marketing, among other things,
of our product candidates are extensively regulated by governmental authorities in the United States and other countries. All
of our current product candidates are considered drugs rather than medical devices. Consequently, we intend to submit an NDA to
the FDA for each of Mino-Lok, Halo-Lido, Mino-Wrap and NoveCite.
In
the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act and the agency’s implementing
regulations. If we fail to comply with the applicable United States requirements at any time during the product development process,
including clinical testing, as well as at any time before and after the approval process, we may become subject to administrative
or judicial sanctions. These sanctions could include the FDA’s refusal to approve pending applications, license suspension
or revocation, withdrawal of an approval, warning letters, adverse publicity, product recalls, product seizures, total or partial
suspension of production or distribution, injunctions, fines, civil penalties or criminal prosecution. Any agency enforcement
action could have a material adverse effect on our company and its operations.
Before
any of our drug product candidates may be marketed in the United States, it must be approved by the FDA. The steps required before
a drug may be approved for marketing in the United States generally include:
|
●
|
preclinical laboratory and animal tests, and
formulation studies;
|
|
●
|
the submission to the FDA of an IND application
for human clinical testing that must become effective before human clinical trials may begin;
|
|
●
|
adequate and well-controlled human clinical
trials to establish the safety and efficacy of the product candidate for each indication for which approval is sought;
|
|
●
|
the submission to the FDA of an NDA and the
FDA’s acceptance of the NDA for filing;
|
|
●
|
satisfactory completion of an FDA inspection
of the manufacturing facilities at which the product is to be produced to assess compliance with the FDA’s current Good
Manufacturing Practices (“cGMP”); and
|
|
●
|
FDA review and approval of the NDA.
|
Foreign
Regulation
We
and any of our collaborative partners may be subject to widely varying foreign regulations, which may be different from those
of the FDA, governing clinical trials, manufacture, product registration and approval and pharmaceutical sales. Whether or not
FDA approval has been obtained, we or our collaboration partners must obtain a separate approval for a product by the comparable
regulatory authorities of foreign countries prior to the commencement of product marketing in such countries. In certain countries,
regulatory authorities also establish pricing and reimbursement criteria. The approval process varies from country to country,
and the time may be longer or shorter than that required for FDA approval. In addition, under current United States law, there
are restrictions on the export of products not approved by the FDA, depending on the country involved and the status of the product
in that country.
International
sales of medical devices manufactured in the U.S. that are not approved by the FDA for use in the U.S., or are banned or deviate
from lawful performance standards, are subject to FDA export requirements. Exported devices are subject to the regulatory requirements
of each country to which the device is exported. Some countries do not have medical device regulations, but in most foreign countries,
medical devices are regulated. Frequently, regulatory approval may first be obtained in a foreign country prior to application
in the U.S. to take advantage of differing regulatory requirements. Most countries outside of the U.S. require that product approvals
be recertified on a regular basis, generally every five years. The recertification process requires that we evaluate any device
changes and any new regulations or standards relevant to the device and conduct appropriate testing to document continued compliance.
Where recertification applications are required, they must be approved in order to continue selling those products in those countries.
In
the European Union, in order for a product to be marketed and sold, it is required to comply with the Medical Devices Directive
and obtain CE Mark certification. The CE Mark certification encompasses an extensive review of the applicant’s quality management
system which is inspected by a notified body’s auditor as part of a stage 1 and 2 International Organization for Standardization
(“ISO”) 13485:2016 audit, in accordance with worldwide recognized ISO standards and applicable European Medical Devices
Directives for quality management systems for medical device manufacturers. Once the quality management system and design dossier
has been successfully audited by a notified body and reviewed and approved by a competent authority, a CE certificate for the
medical device will be issued. Applicants are also required to comply with other foreign regulations such as the requirement to
obtain Ministry of Health, Labor and Welfare approval before a new product can be launched in Japan. The time required to obtain
these foreign approvals to market our products may vary from U.S. approvals, and requirements for these approvals may differ from
those required by the FDA.
Medical
device laws and regulations are in effect in many of the countries in which we may do business outside the United States. These
laws and regulations range from comprehensive device approval requirements for our medical device product to requests for product
data or certifications. The number and scope of these requirements are increasing. We may not be able to obtain regulatory approvals
in such countries and may be required to incur significant costs in obtaining or maintaining its foreign regulatory approvals.
In addition, the export of certain of our products which have not yet been cleared for domestic commercial distribution may be
subject to FDA export restrictions. Any failure to obtain product approvals in a timely fashion or to comply with state or foreign
medical device laws and regulations may have a serious adverse effect on our business, financial condition or results of operations.
Employees
As
of September 30, 2020, we had ten employees and various consultants providing support. Through our consulting and collaboration
arrangements, and including our Scientific Advisory Board, we have access to more than 30 additional professionals, who possess
significant expertise in business development, legal, accounting, regulatory affairs, clinical operations and manufacturing. We
also rely upon a network of consultants to support our clinical studies and manufacturing efforts.
Executive
Officers of Citius
Myron
Holubiak, President, Chief Executive Officer and Director – Mr. Holubiak, 73, was appointed President, Chief Executive
Officer and Director in March 2016. He previously served as a Director of Citius since October 2015 and was the founder and Chief
Executive Officer and President of Leonard-Meron Biosciences, Inc., an acquired subsidiary of Citius, from March 2013 until March
2016.
Leonard
Mazur, Executive Chairman and Secretary – Mr. Mazur, 75, has been a member of the Board since September 2014. Mr.
Mazur previously served as Chief Executive Officer, President, and Chief Operating Officer from September 2014 until March 2016.
Jaime
Bartushak, Chief Financial Officer and Principal Financial Officer – Mr. Bartushak, 53, was appointed as Chief Financial
Officer in November 2017. Previously, he was one of the founders and Chief Financial Officer of Leonard-Meron Biosciences, Inc.,
an acquired subsidiary of Citius.
Myron
Czuczman, Chief Medical Officer and Executive Vice President – Dr. Czuczman, 61 was appointed as Chief Medical Officer
and Executive Vice President in July 2020. Dr. Czuczman previously served as Vice President, Global Clinical Research and Development,
Therapeutic Head of Lymphoma/CLL at Celgene Corporation.
Other
Information
We
make available, free of charge through our website, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports
on Form 8-K and all amendments to those reports as soon as is reasonably practicable after such material is electronically filed
with or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”). The SEC maintains an Internet site that contains these reports at www.sec.gov.
Our
website address is http://www.citiuspharma.com. The information contained in, or that can be accessed through, our website
is not part of this report.
Item
1A. Risk Factors
This
report contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from
those discussed in this report. Factors that could cause or contribute to these differences include, but are not limited to, those
discussed below and elsewhere in this report.
If
any of the following risks, or other risks not presently known to us or that we currently believe to not be significant, develop
into actual events, then our business, financial condition, results of operations or prospects could be materially adversely affected.
If that happens, the market price of our securities could decline, and stockholders may lose all or part of their investment.
Risks
Related to Our Business and our Industry
We
have a history of net losses and expect to incur losses for the foreseeable future. We may never generate revenues or, if we are
able to generate revenues, achieve profitability.
We
were formed in 2007 and since our inception have incurred a net loss in each of our previous operating years. Our ability to become
profitable depends upon our ability to obtain marketing approval for and generate revenues from sales of our product candidates.
We have been focused on product development, have not received approval for any of our product candidates, and have not generated
any revenues to date. We have incurred losses in each period of our operations, and we expect to continue to incur losses for
the foreseeable future. These losses are likely to continue to adversely affect our working capital, total assets and stockholders’
equity. The process of developing our product candidates requires significant clinical development, laboratory testing and clinical
trials. In addition, commercialization of our product candidates will require that we obtain necessary regulatory approvals and
establish sales, marketing and manufacturing capabilities, either through internal hiring or through contractual relationships
with others. We expect to incur substantial losses for the foreseeable future as a result of anticipated increases in our research
and development costs, including costs associated with conducting preclinical testing and clinical trials, and regulatory compliance
activities. We incurred net losses of $17,548,085 and $15,562,144 for the years ended September 30, 2020 and 2019, respectively.
At September 30, 2020, we had stockholders’ equity of $33,670,668 and an accumulated deficit of $70,593,867. Our net cash
used in operating activities was $16,930,658 and $12,437,751 for the years ended September 30, 2020 and 2019, respectively.
Our
ability to generate revenues and achieve profitability will depend on numerous factors, including success in:
|
●
|
developing and testing product candidates;
|
|
|
|
|
●
|
receiving regulatory approvals for our product
candidates;
|
|
|
|
|
●
|
commercializing our product candidates;
|
|
|
|
|
●
|
manufacturing commercial quantities of our product
candidates at acceptable cost levels;
|
|
|
|
|
●
|
obtaining medical insurance coverage for any
approved product candidate; and
|
|
|
|
|
●
|
establishing a favorable competitive position
for our product candidates.
|
Many
of these factors will depend on circumstances beyond our control. We cannot assure you that any of our product candidates will
be approved by the FDA or any foreign regulatory body or obtain medical insurance coverage, that we will successfully bring any
approved product to market or, if so, that we will ever become profitable.
There
is substantial doubt about our ability to continue as a going concern.
At
September 30, 2020, we estimated that we have sufficient capital to continue our operations through March 2021. You should not
rely on our consolidated balance sheet as an indication of the amount of proceeds that would be available to satisfy claims of
creditors, and potentially be available for distribution to stockholders, in the event of liquidation.
Our
audited consolidated financial statements included in this report have been prepared assuming that we will continue as a going
concern and do not include any adjustments to reflect the possible future effects on the recoverability and classification of
assets, or the amounts and classification of liabilities that may result if we do not continue as a going concern. We have concluded
that substantial doubt about our ability to continue as a going concern exists and our auditors have made reference to this in
their audit report on our audited consolidated financial statements for the year ended September 30, 2020.
We
need to secure additional financing in the near future to complete the development of our current product candidates and support
our operations.
We
anticipate that we will incur operating losses for the foreseeable future. We have received gross proceeds of approximately $70.5
million from our public and private placement offerings through September 30, 2020. Additionally, in connection with the acquisition
of LMB our Executive Chairman, Leonard Mazur, made an equity investment of $3.0 million in March 2016. Mr. Mazur has also loaned
us $4,710,000 pursuant to convertible promissory notes. On August 8, 2017, these notes and accrued interest of $76,240 were converted
into 1,547,067 shares of common stock at a price of $3.09 per share as part of an underwritten public offering which closed on
the same date.
The
amount and timing of our future funding requirements will depend on many factors, including, but not limited to:
|
●
|
the rate of progress and cost of our trials
and other product development programs for our current product candidates;
|
|
|
|
|
●
|
the costs and timing of obtaining licenses for
additional product candidates or acquiring other complementary technologies;
|
|
|
|
|
●
|
the timing of any regulatory approvals of any
of our product candidates;
|
|
|
|
|
●
|
the costs of establishing or contracting for
sales, marketing and distribution capabilities for our product candidates; and
|
|
|
|
|
●
|
the status, terms and timing of any collaborative,
licensing, co-promotion or other arrangements.
|
We
will need to access the capital markets in the future for additional capital for research and development and for operations.
Traditionally, pharmaceutical companies have funded their research and development expenditures through raising capital in the
equity markets. Declines and uncertainties in these markets over the past several years have severely restricted raising new capital
and have affected companies’ abilities to continue to expand or fund existing research and development efforts. The turmoil
in the financial markets due to the COVID-19 pandemic could also adversely impact future fundraising activities. If the COVID-19
pandemic and related and/or other economic conditions continue or become worse, our future cost of equity or debt capital and
access to the capital markets could be adversely affected. If we are not successful in securing additional financing, we may be
required to significantly delay, reduce the scope of or eliminate one or more of our research or development programs, downsize
our general and administrative infrastructure, or seek alternative measures to avoid insolvency, including arrangements with collaborative
partners or others that may require us to relinquish rights to certain of our technologies or product candidates.
We
are primarily a late-stage development company with an unproven business strategy and may never achieve commercialization of our
therapeutic product candidates or profitability.
We
have no approved products. All of our current product candidates are in the pre-clinical or clinical stage. We rely on third parties
to conduct the research and development activities for our product candidates. Further, we have no sales or marketing capability
at this time. Even if we decide to use collaborative partners to assist us in the commercialization of our product candidates,
our product commercialization capabilities are unproven. Our success will depend upon our ability to develop such capabilities
on our own or to enter into collaboration agreements on favorable terms and to select an appropriate commercialization strategy
for each product candidate that we choose to pursue, whether on our own or in collaboration. If we are not successful in implementing
our strategy to commercialize our product candidates, we may never achieve, maintain or increase profitability. Our ability to
successfully commercialize any of our product candidates will depend, among other things, on our ability to:
|
●
|
successfully complete pre-clinical and clinical
trials for our product candidates;
|
|
|
|
|
●
|
receive marketing approvals from the FDA and
similar foreign regulatory authorities for our product candidates;
|
|
|
|
|
●
|
establish commercial manufacturing arrangements
with third-party manufacturers for our product candidates;
|
|
|
|
|
●
|
produce, through a validated process, sufficiently
large quantities of our drug compound(s) to permit successful commercialization of our product candidates;
|
|
|
|
|
●
|
build and maintain strong sales, distribution
and marketing capabilities sufficient to launch commercial sales of any approved products or establish collaborations with
third parties for such commercialization;
|
|
|
|
|
●
|
secure acceptance of any approved products from
physicians, health care payers, patients and the medical community; and
|
|
|
|
|
●
|
manage our spending as costs and expenses increase
due to clinical trials, regulatory applications and development and commercialization activities.
|
There
are no guarantees that we will be successful in completing these tasks. If we are unable to successfully complete these tasks,
we may not be able to commercialize any of our product candidates in a timely manner, or at all, in which case we may be unable
to generate sufficient revenues to sustain and grow our business. If we experience unanticipated delays or problems, our development
costs could substantially increase and our business, financial condition and results of operations will be adversely affected.
We
have a limited operating history upon which to evaluate our ability to successfully commercialize our product candidates.
We
are a clinical stage company and our success is dependent upon our ability to obtain regulatory approval for and commercialize
our product candidates and we, as a company, have not demonstrated an ability to perform the functions necessary for the approval
or successful commercialization of any product candidates. While various members of our executive management and key employees
have significant prior experience in pharmaceutical development, as a company we have to date not successfully completed any late
stage clinical trials nor undertaken any commercialization activities. Our operations have been limited primarily to business
planning, acquiring our proprietary technology, research and development, recruiting management and technical staff, and raising
capital. These operations provide a limited basis for you to assess our ability to successfully commercialize our product candidates
and the advisability of investing in our securities.
The
COVID-19 pandemic may materially and adversely affect our clinical trial operations and our financial results.
The
COVID-19 pandemic has adversely impacted hospitals and medical facilities where we are currently conducting our Mino-Lok phase
3 trial. The full extent to which COVID-19 may impact this trial is not known at this time, but it has slowed the estimated completion
date for the trial, which we now expect to be in the second half of 2021. This same risk applies to planned clinical trials for
our other product candidates. The exact duration of the delay and any other impact will depend on future developments, which are
highly uncertain and cannot be predicted with confidence, such as the duration of the outbreak, the severity of COVID-19, or the
effectiveness of actions to contain and treat for COVID-19. The continued spread of COVID-19 also could adversely impact our ability
to recruit and retain patients and principal investigators and site staff who, as healthcare providers, may have heightened exposure
to COVID-19, which could further negatively impact the Mino-Lok trial. In addition, if the FDA elects to delay face-to-face meetings
for an extended period of time due to COVID-19, it could have a material adverse effect on our Mino-Lok trial and our other product
candidates. Any or all of these events could increase our operating expenses and the length of time to complete the trial and
have a material adverse effect on our financial results.
We
may choose not to continue developing any of our product candidates at any time during development, which would reduce or eliminate
our potential return on investment for those product candidates.
At
any time, we may decide to discontinue the development of any of our product candidates for a variety of reasons, including inadequate
financial resources, the appearance of new technologies that render our product candidates obsolete, competition from a competing
product or changes in or failure to comply with applicable regulatory requirements. If we terminate a program in which we have
invested significant resources, we will not receive any return on our investment and we will have missed the opportunity to allocate
those resources to potentially more productive uses.
As
an example, on July 1, 2016, we announced that we were discontinuing the development of Suprenza, which was our first commercial
product candidate, for strategic reasons and not due to safety or regulatory concerns, in order to focus our management and cash
resources on the Phase 3 development of Mino-Lok and the Phase 2b development of Halo-Lido. The resources expended on Suprenza
therefore did not provide us any benefit.
We
face significant risks in our product candidate development efforts.
Our
business depends on the successful development and commercialization of our product candidates. We are not permitted to market
any of our product candidates in the United States until we receive approval from the FDA, or in any foreign jurisdiction until
we receive the requisite approvals from such jurisdiction. The process of developing new drugs and/or therapeutic products is
inherently complex, unpredictable, time-consuming, expensive and uncertain. We must make long-term investments and commit significant
resources before knowing whether our development programs will result in products that will receive regulatory approval and achieve
market acceptance. Product candidates that appear to be promising at some or all stages of development may not reach the market
for a number of reasons that may not be predictable based on results and data of the clinical program. Product candidates may
be found ineffective or may cause harmful side effects during clinical trials, may take longer to progress through clinical trials
than had been anticipated, may not be able to achieve the pre-defined clinical endpoints due to statistical anomalies even though
clinical benefit may have been achieved, may fail to receive necessary regulatory approvals, may prove impracticable to manufacture
in commercial quantities at reasonable cost and with acceptable quality, or may fail to achieve market acceptance.
We
cannot predict whether or when we will obtain regulatory approval to commercialize our product candidates that are under development
and we cannot, therefore, predict the timing of any future revenues from these product candidates, if any. 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:
|
●
|
could determine that we cannot rely on Section
505(b)(2) for Mino-Lok or Halo-Lido or any future product candidates;
|
|
|
|
|
●
|
could determine that the information provided
by us was inadequate, contained clinical deficiencies or otherwise failed to demonstrate the safety and effectiveness of any
of our product candidates for any indication;
|
|
|
|
|
●
|
may not find the data from clinical trials sufficient
to support the submission of an NDA or to obtain marketing approval in the United States, including any findings that the
clinical and other benefits of our product candidates outweigh their safety risks;
|
|
|
|
|
●
|
may disagree with our trial design or our interpretation
of data from preclinical studies or clinical trials, or may change the requirements for approval even after it has reviewed
and commented on the design for our trials;
|
|
|
|
|
●
|
may determine that we have identified the wrong
reference listed drug or drugs or that approval of a Section 505(b)(2) application for any of our product candidates is blocked
by patent or non-patent exclusivity of the reference listed drug or drugs;
|
|
|
|
|
●
|
may identify deficiencies in the manufacturing
processes or facilities of third-party manufacturers with which we enter into agreements for the manufacture of our product
candidates;
|
|
|
|
|
●
|
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;
|
|
●
|
may change its approval policies or adopt new
regulations that could adversely impact our product candidate development programs; or
|
|
|
|
|
●
|
may not approve the labeling claims that we
believe are necessary or desirable for the successful commercialization of our product candidates, or may require labeling
claims that impair the potential market acceptance of our product candidates.
|
These
same risks are generally applicable to the regulatory process in foreign countries. 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.
While
our business strategy generally is to focus on the development of late stage product candidates to lessen the development risk,
there is still significant risk to successfully developing a product candidate.
Our
goal in pursuing late stage therapeutic product candidates with what we believe is a promising pre-clinical and early clinical
stage track record is to avoid the risk of failure at the pre-clinical and early clinical stages. However, there is still significant
risk to obtaining regulatory approval and successfully commercializing any late stage product candidate that we pursue. All of
the risks inherent in drug development of initial stage product candidates also apply to late stage candidates. We cannot assure
you that our business strategy will be successful.
The
results of pre-clinical studies and completed clinical trials are not necessarily predictive of future results, and our current
product candidates may not have favorable results in later studies or trials.
Pre-clinical
studies and Phase 1 and Phase 2 clinical trials are not primarily designed to test the efficacy of a product candidate in the
general population, but rather to test initial safety, to study pharmacokinetics and pharmacodynamics, to study limited efficacy
in a small number of study patients in a selected disease population, and to identify and attempt to understand the product candidate’s
side effects at various doses and dosing schedules. Success in pre-clinical studies or completed clinical trials does not ensure
that later studies or trials, including continuing pre-clinical studies and large-scale clinical trials, will be successful nor
does it predict future results. Favorable results in early studies or trials may not be repeated in later studies or trials, and
product candidates in later stage trials may fail to show acceptable safety and efficacy despite having progressed through earlier
trials. In addition, the placebo rate in larger studies may be higher than expected.
We
may be required to demonstrate through large, long-term outcome trials that our product candidates are safe and effective for
use in a broad population prior to obtaining regulatory approval. This would increase the duration and cost of any such trial.
There
is typically a high rate of attrition from the failure of product candidates proceeding through clinical trials. In addition,
certain subjects in our clinical trials may respond positively to placebo treatment - these subjects are commonly known as “placebo
responders” - making it more difficult to demonstrate efficacy of the trial drug compared to placebo. This effect is likely
to be observed in the treatment of hemorrhoids, which could negatively impact the development program for Halo-Lido.
If
any of our product candidates fail to demonstrate sufficient safety and efficacy in any clinical trial, we will experience potentially
significant delays and cost increases in, or may decide to abandon development of, that product candidate. If we abandon or are
delayed, or experience increased costs, in our development efforts related to any of our product candidates, we may not have sufficient
resources to continue or complete development of that product candidate or any other product candidates. We may not be able to
generate any revenues, continue our operations and clinical studies, or become profitable. Our reputation in the industry and
in the investment community would likely be significantly damaged. Further, it might not be possible for us to raise funds in
the public or private markets, and our stock price would likely decrease significantly.
If
we are unable to file for approval of Mino-Lok or Halo-Lido under Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act,
or if we are required to generate additional data related to safety and efficacy in order to obtain approval of Mino-Lok or Halo-Lido
under Section 505(b)(2), we may be unable to meet our anticipated development and commercialization timelines.
Our
current plans for filing NDAs for our product candidates include efforts to minimize the data we will be required to generate
in order to obtain marketing approval for certain of our product candidates and therefore possibly reduce the time and cost of
development of a product candidate and obtain a shortened review period for the application. The timeline for filing and review
of our planned NDA for each of Mino-Lok and Halo-Lido is based upon our plan to submit each such NDA under Section 505(b)(2) of
the Federal Food, Drug and Cosmetic Act, wherein we will rely in part on data generated by third parties and that is in the public
domain or elsewhere. Depending on the data that may be required by the FDA for approval, some of the data may be related to products
already approved by the FDA. If the data relied upon is related to products already approved by the FDA and covered by third-party
patents, we would be required to certify that we do not infringe the listed patents or that such patents are invalid or unenforceable.
As a result of the certification, the third party would have 45 days from notification of our certification to initiate an action
against us. In the event that an action is brought in response to such a certification, the approval of our NDA could be subject
to a stay of up to 30 months or more while we defend against such a suit. Approval of any product candidate under Section 505(b)(2)
may therefore be delayed until patent exclusivity expires or until we successfully challenge the applicability of those patents
applicable to our product candidates. Alternatively, we may elect to generate sufficient additional clinical data so that we no
longer rely on data which triggers a potential stay of the approval of any product candidate. Even if no exclusivity periods apply
to an application under Section 505(b)(2), the FDA has broad discretion to require us to generate additional data on the safety
and efficacy of our product candidates to supplement third-party data on which we may be permitted to rely. In either event, we
could be required, before obtaining marketing approval for such product candidate, to conduct substantial new research and development
activities beyond those in which we currently plan to engage in order to obtain approval of that product candidate. Such additional
new research and development activities would be costly and time consuming.
We
may not be able to obtain shortened review of our applications where available, and in any event the FDA may not agree that any
of our product candidates qualify for marketing approval. If we are required to generate additional data to support approval,
we may be unable to meet our anticipated development and commercialization timelines, may be unable to generate the additional
data at a reasonable cost, or at all, and may be unable to obtain marketing approval of that product candidate. In addition, notwithstanding
the approval of many products by the FDA pursuant to Section 505(b)(2), over the last few years, some pharmaceutical companies
and others have objected to the FDA’s interpretation of Section 505(b)(2). If the FDA changes its interpretation of Section
505(b)(2), or if the FDA’s interpretation is successfully challenged in court, this could delay or even prevent the FDA
from approving any Section 505(b)(2) application that we submit.
Two
of our product candidates, Mino-Lok and Halo-Lido, are combination products consisting of components that have each been separately
approved by the FDA for other indications and which are commercially available and marketed by other companies. Our approval under
Section 505(b)(2), if received, would not preclude physicians, pharmacists and patients from obtaining individual drug products
and titrating the dosage of these drug products as close to our approved dose as possible.
Our
Mino-Lok solution contains minocycline, disodium ethylenediaminetetraacetic acid (edetate), and ethyl alcohol, all of which have
been separately approved by the FDA for other indications, or are used as excipients in other parenteral products. Assuming FDA
approval as a branded pharmaceutical product, we would need to obtain hospital formulary acceptance to generate sales of Mino-Lok.
Additionally, we may encounter reluctance by the infectious disease physician community to vary from the existing standard of
care to remove and replace an infected catheter. Currently, hospitals are reimbursed for the treatment of CRBSIs by the Center
for Medicare and Medicare Services (“CMS”) through a Diagnosis Related Group (“DRG”) classification or
code. Commercial insurance plans reimburse for CRBSIs in a similar manner. With Mino-Lok being priced as a branded FDA-approved
pharmaceutical product, this could result in the participating hospital retaining a lower share of CMS or commercial reimbursement
which may impact the acceptance and use of Mino-Lok by these institutions.
Our
Halo-Lido product candidate for the treatment of hemorrhoids is a combination product consisting of two drugs, halobetasol propionate,
a corticosteroid, and lidocaine, that have each been separately approved by the FDA for other indications and which are commercially
available and marketed by other companies. Halobetasol propionate cream is available in a 0.05% strength, and lidocaine creams
are also available in strengths up to 5%. From our market analysis and discussions with a limited number of physicians, we know
that patients sometimes obtain two separate cream products and co-administer them as prescribed, giving them a combination treatment
which could be very similar to what we intend to study and seek approval for. As a branded, FDA-approved product with safety and
efficacy data, we intend to price our product substantially higher than the generically available individual creams. We will then
have to convince third-party payers and pharmacy benefit managers of the advantages of our product and justify our premium pricing.
We may encounter resistance from these entities and will then be dependent on patients’ willingness to pay the premium and
not seek alternatives. In addition, pharmacists often suggest lower cost prescription treatment alternatives to both physicians
and patients. If approved, our Section 505(b)(2) approval and the market exclusivity we may receive will not guarantee that such
alternatives will not exist, that substitution will not occur, or that there will be immediate or any acceptance to our pricing
by payer formularies.
Any
fast track designation or grant of priority review status by the FDA may not actually lead to a faster development or regulatory
review or approval process, nor will it assure FDA approval of our product candidates. Additionally, our product candidates may
treat indications that do not qualify for priority review vouchers.
We
have received fast track designation for Mino-Lok to treat and salvage infected central venous catheters in patients with CRBSIs.
We may seek fast track designation for some of our other product candidates or priority review of applications for approval of
our product candidates for certain indications. If a drug is intended for the treatment of a serious or life-threatening condition
and the drug demonstrates the potential to address unmet medical needs for this condition, the drug sponsor may apply for the
FDA fast track designation. If a product candidate offers major advances in treatment, the FDA may designate it eligible for priority
review. The FDA has broad discretion whether or not to grant these designations, so even if we believe a particular product candidate
is eligible for these designations, we cannot assure you that the FDA would decide to grant them. Even with the fast track designation
for Mino-Lok and if we do receive fast track designation or priority review for any other product candidate, we may not experience
a faster development process, review or approval compared to conventional FDA procedures. The FDA may withdraw fast track designation
from Mino-Lok or any other product candidate to be so designated if it believes that the designation is no longer supported by
data from our clinical development program.
We
do not own NoveCite, Inc. outright and will share any benefits from the development of its NoveCite product candidate with the
other stockholder.
As
of November 30, 2020, we owned 75% of the outstanding common stock of NoveCite. As a result, we will only be entitled to a portion
of any benefits that flow from the development by NoveCite of its NoveCite product candidate or any other product candidates that
it might develop. In the event that NoveCite issues additional equity securities in the future this would likely reduce our percentage
ownership, unless we were to increase our investment, which would further reduce the portion of any benefit that might be derived
from the NoveCite drug candidate’s successful development.
Any
FDA programs related to the development and approval of treatments for COVID-19 and its symptoms may not be available to us or
actually lead to a faster development or regulatory review or approval process for NoveCite, our proposed treatment for ARDS,
nor will it assure FDA approval of such a treatment.
We
intend to develop NoveCite under the FDA’s recently created Coronavirus Treatment Acceleration Program, or CTAP. The CTAP
program was designed to accelerate the development of COVID-19 treatments via faster communications and regulatory review protocols.
In late April 2020, we made a pre-IND submission to the FDA for this treatment and requested the FDA’s feedback to support
the most expeditious pathway for clinical development of the therapy. The CTAP program has only recently begun and the FDA has
broad discretion in administering the CTAP program and therefore we cannot assure you what the FDA might decide. Even though we
believe that the response from the FDA was favorable, we did not specifically request guidance on the CTAP program; we may encounter
problems at a later date under the CTAP program, or with the therapy itself, and we may not experience a faster development process,
review or approval compared to conventional FDA procedures.
Because
our NoveCite product candidate is based on novel technologies, it is difficult to predict the regulatory approval process and
the time, the cost and our ability to successfully initiate, conduct and complete clinical development, and obtain the necessary
regulatory and reimbursement approvals, required for commercialization of our NoveCite product candidate.
NoveCite’s
cell programming technology and platform for generating cell therapy products using allogenic mesenchymal stem cells derived from
iPSCs represent novel therapeutic approaches, and to our knowledge there are currently no iPSC-derived cell products approved
anywhere in the world for commercial sale. As such, it is difficult to accurately predict the type and scope of challenges that
NoveCite may incur during development of its NoveCite product candidate, and it faces uncertainties associated with the preclinical
and clinical development, manufacture and regulatory requirements for the initiation and conduct of clinical trials, regulatory
approval, and reimbursement required for successful commercialization of its NoveCite product candidate. In addition, because
NoveCite’s iPSC-derived cell product candidate is in the pre-clinical stage, NoveCite is currently assessing safety in humans
and have not yet been able to assess the long-term effects of treatment. Animal models and assays may not accurately predict the
safety and efficacy of our product candidate in our target patient populations, and appropriate models and assays may not exist
for demonstrating the safety and purity of the NoveCite product candidate, as required by the FDA and other regulatory authorities
for ongoing clinical development and regulatory approval.
The
pre-clinical and clinical development, manufacture, and regulatory requirements for approval of the NoveCite product candidate
may be more expensive and take longer than for other more well-known or extensively studied pharmaceutical or biopharmaceutical
product candidates due to a lack of prior experiences on the side of both developers and regulatory agencies. Additionally, due
to the uncertainties associated with the pre-clinical and clinical development, manufacture, and regulatory requirements for approval
of the NoveCite product candidate, NoveCite may be required to modify or change its pre-clinical and clinical development plans
or its manufacturing activities and plans, or be required to meet stricter regulatory requirements for approval. Any such modifications
or changes could delay or prevent NoveCite’s ability to develop, manufacture, obtain regulatory approval or commercialize
its NoveCite product candidate, which would adversely affect NoveCite’s and our business, financial condition and results
of operations.
Cellular
immunotherapies, and stem cell therapies and iPSC-derived cell therapies in particular, represent relatively new therapeutic areas,
and the FDA has cautioned consumers about potential safety risks associated with cell therapies. To date, there are relatively
few approved cell therapies. As a result, the regulatory approval process for a product candidate such as NoveCite is uncertain
and may be more expensive and take longer than the approval process for product candidates based on other, better known or more
extensively studied technologies and therapeutic approaches. For example, there are currently no FDA approved products with a
label designation that supports the use of a product to treat and reduce the severity of ARDS in patients with COVID-19, which
makes it difficult to determine the clinical endpoints and data required to support an application or regulatory approval, and
the time and cost required to obtain regulatory approval in the United States for our product candidate.
Regulatory
requirements in the United States governing cell therapy products have changed frequently and the FDA or other regulatory bodies
may change the requirements, or identify different regulatory pathways, for approval of the NoveCite product candidate. For example,
within the FDA, the Center for Biologics Evaluation and Research, or CBER, restructured and created a new Office of Tissues and
Advanced Therapies to better align its oversight activities with FDA Centers for Drugs and Medical Devices. It is possible that
over time new or different divisions may be established or be granted the responsibility for regulating cell and/or gene therapy
products, including iPSC-derived cell products, such as the NoveCite product candidate. As a result, NoveCite may be required
to change its regulatory strategy or to modify its applications for regulatory approval, which could delay and impair its ability
to complete the pre-clinical and clinical development and manufacture of, and obtain regulatory approval for, its NoveCite product
candidate. Changes in regulatory authorities and advisory groups, or any new requirements or guidelines they promulgate, may lengthen
the regulatory review process, require NoveCite to perform additional studies, increase its development and manufacturing costs,
lead to changes in regulatory pathways, positions and interpretations, delay or prevent approval and commercialization of the
NoveCite product candidate or lead to significant post-approval limitations or restrictions. As NoveCite advances its NoveCite
product candidate, NoveCite will be required to consult with the FDA and other regulatory authorities, and its NoveCite product
candidate will likely be reviewed by an FDA advisory committee. NoveCite also must comply with applicable requirements, and if
it fails to do so, it may be required to delay or discontinue development of its NoveCite product candidate. Delays or unexpected
costs in obtaining, or the failure to obtain, the regulatory approval necessary to bring the NoveCite product candidate to market
could impair NoveCite’s and our ability to generate sufficient product revenues to maintain our respective businesses.
NoveCite
has assumed that the biological capabilities of iPSCs and adult-donor derived cells are likely to be comparable. If it is discovered
that this assumption is incorrect, the NoveCite product candidate research and development activities could be harmed.
NoveCite
anticipates that its research and development for its NoveCite product candidate will involve iPSCs, rather than adult-donor derived
cells. With respect to iPSCs, NoveCite believes that scientists are still somewhat uncertain about the clinical utility, life
span, and safety of such cells, and whether such cells differ in any clinically significant ways from adult-donor derived cells.
If NoveCite discovers that iPSCs will not be useful for whatever reason for its NoveCite product candidate program, this would
negatively affect NoveCite’s ability to develop a marketable product and it and we may never become profitable, which would
have an adverse effect on our respective businesses, prospects, financial condition and results of operations.
Even
if we receive regulatory approval to commercialize a product candidate, our ability to generate revenues from any resulting product
will be subject to a variety of risks, many of which are out of our control.
Even
if one of our product candidates obtains regulatory approval, that product may not gain market acceptance among physicians, patients,
healthcare payers or the medical community. The indication may be limited to a subset of the population or we may implement a
distribution system and patient access program that is limited. Coverage and reimbursement of our product candidates by third-party
payers, including government payers, generally is also necessary for commercial success. We believe that the degree of market
acceptance and our ability to generate revenues from any approved product candidate or acquired approved product will depend on
a number of factors, including:
|
●
|
prevalence and severity of any side effects;
|
|
|
|
|
●
|
results of any post-approval studies of the
product;
|
|
|
|
|
●
|
potential or perceived advantages or disadvantages
over alternative treatments;
|
|
|
|
|
●
|
availability of coverage and reimbursement from
government and other third-party payers;
|
|
|
|
|
●
|
the willingness of patients to pay out of pocket
in the absence of government or third-party coverage;
|
|
|
|
|
●
|
the relative convenience and ease of administration
and dosing schedule;
|
|
|
|
|
●
|
product labeling or product insert requirements
of the FDA or other regulatory authorities;
|
|
|
|
|
●
|
strength of sales, marketing and distribution
support;
|
|
|
|
|
●
|
price of any future products, if approved, both
in absolute terms and relative to alternative treatments;
|
|
|
|
|
●
|
the effectiveness of our or any future collaborators’
sales and marketing strategies;
|
|
|
|
|
●
|
the effect of current and future healthcare
laws on any approved products;
|
|
●
|
patient access programs that require patients
to provide certain information prior to receiving new and refill prescriptions; and
|
|
|
|
|
●
|
requirements for prescribing physicians to complete
certain educational programs for prescribing drugs.
|
If
approved, any product candidate may fail to achieve market acceptance or generate significant revenue to achieve or sustain profitability.
In addition, our efforts to educate the medical community and third-party payers on the benefits of any product candidate may
require significant resources and may never be successful.
Even
if approved for marketing by applicable regulatory bodies, we will not be able to create a market for any of our product candidates
if we fail to establish marketing, sales and distribution capabilities, either on our own or through arrangements with third parties.
Our
strategy with our product candidates is to outsource to third parties all or most aspects of the product development process,
and possibly marketing, sales and distribution activities. Currently, we do not have any sales, marketing or distribution capabilities.
In order to generate sales of any product candidate that receives regulatory approval, we must either acquire or develop an internal
marketing and sales force with technical expertise and with supporting distribution capabilities or make arrangements with third
parties to perform these services for us. The acquisition or development of a sales and distribution infrastructure would require
substantial resources, which may divert the attention of our management and key personnel and defer our product development efforts.
To the extent that we enter into marketing and sales arrangements with other companies, our revenues will depend on the efforts
of others. These efforts may not be successful. If we fail to develop sales, marketing and distribution channels, or enter into
arrangements for such with third parties, we will experience delays in product launch and sales and incur increased costs.
The
markets in which we operate are highly competitive and we may be unable to compete successfully against new entrants or established
companies.
Competition
in the pharmaceutical and medical products industries is intense and is characterized by costly and extensive research efforts
and rapid technological progress. We are aware of several pharmaceutical companies also actively engaged in the development of
therapies or products for at least some of the same conditions we are targeting. Many of these companies have substantially greater
research and development capabilities as well as substantially greater marketing, financial and human resources than we do. In
addition, many of these companies have significantly greater experience than us in undertaking pre-clinical testing, clinical
trials and other regulatory approval procedures. Our competitors may develop technologies and products that are more effective
than those we are researching and developing. Such developments could render our product candidates, if approved, less competitive
or possibly obsolete. We are also competing with respect to marketing capabilities and manufacturing efficiency, areas in which
we have no current capabilities and in which we have no experience as a company, although our executive officers do have commercialization
experience. However, that experience might not translate into the successful development and launch of any of our product candidates.
Mergers, acquisitions, joint ventures and similar events may also significantly increase the competition we face. In addition,
new developments, including the development of other drug technologies and methods of preventing the incidence of disease, occur
in the pharmaceutical and medical technology industries at a rapid pace. These developments may render our product candidates
obsolete or noncompetitive. Compared to us, many of our potential competitors have substantially greater:
|
●
|
research and development
resources, including personnel and technology;
|
|
|
|
|
●
|
regulatory resources,
experience and expertise;
|
|
|
|
|
●
|
product candidate
development and clinical trial resources and experience;
|
|
|
|
|
●
|
product sourcing,
sales and marketing resources and experience;
|
|
|
|
|
●
|
experience and expertise
in exploitation of intellectual property rights; and
|
|
|
|
|
●
|
access to strategic
partners and capital resources.
|
As
a result of these factors, our competitors may obtain regulatory approval of their products more rapidly than we can or may obtain
patent protection or other intellectual property rights that limit our ability to develop or commercialize our product candidates.
Our competitors may also develop products that are more effective, more useful and less costly than ours and may also be more
successful in manufacturing and marketing their products. In addition, our competitors may be more effective than us in commercializing
their products and as a result, our business and prospects might be materially harmed.
Physicians
and patients might not accept and use any of our product candidates for which regulatory approval is obtained.
Even
if the FDA approves one of our product candidates, physicians and patients might not accept and use it. Acceptance and use of
our approved product candidates will depend upon a number of factors, including:
|
●
|
perceptions by members of the health care community,
including physicians, about the safety and effectiveness of any of our product candidates;
|
|
|
|
|
●
|
perceptions by members of the health care community,
including physicians, about the use of our product candidates versus the then respective standards of care for the disease
or problem that we seek to address with our product candidates;
|
|
|
|
|
●
|
cost-effectiveness of our product candidates
relative to competing products or therapies;
|
|
●
|
availability of reimbursement for our product
candidates from government or other healthcare payers; and
|
|
|
|
|
●
|
effective marketing and distribution efforts
by us and/or our licensees and distributors, if any.
|
If
any of our current product candidates are approved, we expect their sales to generate substantially all of our revenues for the
foreseeable future, and as a result, the failure of any of these product candidates to find market acceptance would harm our business
and would require us to seek additional financing.
Our
ability to generate product revenues will be diminished if any of our product candidates that may be approved sell for inadequate
prices or patients are unable to obtain adequate levels of reimbursement.
Our
ability to commercialize our product candidates, alone or with collaborators, will depend in part on the extent to which reimbursement
will be available from:
|
●
|
government and health
administration authorities;
|
|
|
|
|
●
|
private health maintenance
organizations and health insurers; and
|
|
|
|
|
●
|
other healthcare
payers.
|
Significant
uncertainty exists as to the reimbursement status of newly approved healthcare products. Healthcare payers, including Medicare,
are challenging the prices charged for medical products and services. Government and other healthcare payers increasingly attempt
to contain healthcare costs by limiting both coverage and the level of reimbursement for drugs. Even if our product candidates
are approved by the FDA, insurance coverage might not be available, and reimbursement levels might be inadequate, to cover our
products. If government and other healthcare payers do not provide adequate coverage and reimbursement levels for our products,
once approved, market acceptance of such products could be reduced. Proposals to modify the current health care system in the
U.S. to improve access to health care and control its costs are continually being considered by the federal and state governments.
In March 2010, the U.S. Congress passed landmark healthcare legislation. Portions of this legislation have been repealed in recent
years and members of the U.S. Congress and some state legislatures continue to seek to overturn at least some remaining portions
of the legislation and we expect they will continue to review and assess this legislation and possibly alternative health care
reform proposals. We cannot predict what impact on federal reimbursement policies this legislation will have in general or on
our business specifically. We cannot predict whether new proposals will be made or adopted, when they may be adopted or what impact
they may have on us if they are adopted.
Health
administration authorities in countries other than the U.S. may not provide reimbursement for our products at rates sufficient
for us to achieve profitability, or at all. Like the U.S., these countries have considered health care reform proposals and could
materially alter their government-sponsored health care programs by reducing reimbursement rates. Any reduction in reimbursement
rates under Medicare or foreign health care programs could negatively affect the pricing of our product candidates. If we are
not able to charge a sufficient amount for our product candidates, then our margins and our profitability will be adversely affected.
We
are and will be dependent on third-party contract research organizations to conduct all of our clinical trials.
We
are and will be dependent on third-party research organizations to conduct all of our clinical trials with respect to our product
candidates, including any candidates that we may develop in the future. If we are unable to obtain any necessary testing services
on acceptable terms, we may not complete our product development efforts in a timely or cost-effective manner or at all. If we
rely on third parties for human trials, we may lose some control over these activities and become too dependent upon these parties.
These third parties may not complete testing activities on schedule or when we so request. We may not be able to secure and maintain
suitable research organizations to conduct our human trials. We are responsible for confirming that each of our clinical trials
is conducted in accordance with the trial’s general plan and protocol. Moreover, the FDA and foreign regulatory agencies
require us to comply with regulations and standards, commonly referred to as good clinical practices, for conducting, recording
and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the trial
participants are adequately protected. Our reliance on third parties does not relieve us of these responsibilities and requirements.
If these third parties do not successfully carry out their contractual duties or regulatory obligations or meet expected deadlines,
if the third parties need to be replaced or if the quality or accuracy of the data they obtain is compromised due to the failure
to adhere to our clinical protocols or regulatory requirements or for other reasons, our preclinical development activities or
clinical trials may be extended, delayed, suspended or terminated, and we may not be able to obtain regulatory approval for any
of our product candidates.
We
rely exclusively on third parties to formulate and manufacture our product candidates.
We
do not have and do not intend to establish our own manufacturing facilities. Consequently, we lack the physical plant to formulate
and manufacture our product candidates, which are currently being manufactured entirely by commercial third-party manufacturers.
If any product candidate we might develop or acquire in the future receives FDA approval, we will rely on one or more third-party
contractors to manufacture our products. If, for any reason, we become unable to rely on our current source or any future source
or sources to manufacture our product candidates, either for pre-clinical or clinical trials or for commercial quantities, then
we would need to identify and contract with additional or replacement third-party manufacturers to manufacture compounds for preclinical,
clinical and commercial purposes. We might not be successful in identifying additional or replacement third-party manufacturers,
or in negotiating acceptable terms with any that we do identify. If we are unable to secure and maintain third-party manufacturing
capacity, the development and sales of our product candidates and our financial performance might be materially affected.
In
addition, before any of our collaborators can begin to commercially manufacture our product candidates, each must obtain regulatory
approval of the manufacturing facility and process. Manufacturing of drugs for clinical and commercial purposes must comply with
the FDA’s cGMP and applicable non-U.S. regulatory requirements. The cGMP requirements govern quality control and documentation
policies and procedures. Complying with cGMP and non-U.S. regulatory requirements will require that we expend time, money, and
effort in production, recordkeeping, and quality control to assure that the product meets applicable specifications and other
requirements. Our contracted manufacturing facilities must also pass a pre-approval inspection prior to FDA approval. Failure
to pass a pre-approval inspection might significantly delay FDA approval of our product candidates. If any of our collaborators
fails to comply with these requirements, we would be subject to possible regulatory action which could limit the jurisdictions
in which we are permitted to sell our product candidates. As a result, our business, financial condition, and results of operations
might be materially harmed.
Our
reliance on a limited number of third-party manufacturers exposes us to the following risks:
|
●
|
We might be unable to identify manufacturers
for commercial supply on acceptable terms or at all because the number of potential manufacturers is limited and the FDA must
approve any replacement contractor. This approval would generally require compliance inspections. In addition, a new manufacturer
would have to be educated in, or develop substantially equivalent processes for, production of our product candidates after
receipt of FDA approval, if any;
|
|
|
|
|
●
|
Our third-party manufacturers might be unable
to formulate and manufacture our product candidates in the volume and of the quality required to meet our clinical and commercial
needs, if any;
|
|
|
|
|
●
|
Our contract manufacturers might not perform
as agreed or might not remain in the contract manufacturing business for the time required to supply our clinical trials or
to successfully produce, store and distribute our product candidates for commercialization;
|
|
|
|
|
●
|
Currently, our contract manufacturer for our
clinical supplies is foreign, which increases the risk of shipping delays, adds the risk of import restrictions and adds the
risk of political and environmental uncertainties that might effect those countries;
|
|
|
|
|
●
|
Drug manufacturers are subject to ongoing periodic
unannounced inspection by the FDA and corresponding state agencies to ensure strict compliance with cGMP and other government
regulations and corresponding foreign standards. We do not have complete control over third-party manufacturers’ compliance
with these regulations and standards;
|
|
|
|
|
●
|
If any third-party manufacturer makes improvements
in the manufacturing process for our product candidates, we might not own, or might have to share, the intellectual property
rights to the innovation with our licensors;
|
|
●
|
Operations of our third-party manufacturers
or suppliers could be disrupted by conditions unrelated to our business or operations, including a bankruptcy of the manufacturer
or supplier or a natural disaster or a pandemic such as COVID-19; and
|
|
|
|
|
●
|
We might compete with other companies for access
to these manufacturers’ facilities and might be subject to manufacturing delays if the manufacturers give other clients
higher priority than us.
|
Each
of these risks could delay our clinical trials or the approval, if any, of our product candidates by the FDA or any foreign regulatory
agency or the commercialization of our product candidates and could result in higher costs or deprive us of potential product
revenues. As a result, our business, financial condition, and results of operations might be materially harmed.
If
we materially breach or default under any of our license agreements, the licensor party to such agreement will have the right
to terminate the license agreement, which termination may materially harm our business.
Our
commercial success will depend in part on the maintenance of our license agreements. Currently, we are a party to two in-license
agreements with MDACC, one for Mino-Lok (sub-licensed from the entity holding the license from MDACC) and one for Mino-Wrap. We
recently entered into an in-license agreement with Novellus through our subsidiary NoveCite. Additionally, we expect to enter
into additional license agreements in the future. Our license agreements impose, and we expect that future license agreements
will impose, various diligence, milestone payment, royalty and other obligations on us. For example, under our current license
agreements, we are required to use commercially reasonable diligence to develop and commercialize a product and to satisfy specified
payment obligations. If we fail to comply with our obligations under our current license agreements or any future license agreements
with any party, or we are subject to a bankruptcy, the licensor may have the right to terminate the license, in which event we
would not be able to market products covered by the license. Each of our license agreements provides the licensor with a right
to terminate the license agreement for our material breach or default under the agreement, including the failure to make any required
milestone or other payments. Should the licensor under any of our license agreements exercise such a termination right, we would
lose our right to the intellectual property under the respective license agreement, which loss may materially harm our business.
Any
termination, or breach by, or conflict with our strategic partners or licensees could harm our business.
If
we or any of our current or future collaborators or licensees fail to renew or terminate any of our collaborations or licensing
arrangements or if either party fails to satisfy its obligations under any of our collaboration or license agreements or complete
them in a timely manner, we could have difficulty completing the development of any of our product candidates and potentially
lose significant sources of revenue, which could result in an adverse impact on our operations and financial condition as well
as volatility in any future revenue. In addition, our agreements with our collaborators and licensees may have provisions that
give rise to disputes regarding the rights and obligations of the parties. These and other possible disagreements could lead to
termination of the agreement or delays in collaborative research, development, supply or commercialization of our product candidates,
or could require or result in litigation or arbitration. Any such conflicts with our collaborators could reduce our ability to
obtain future collaboration agreements and could have a negative impact on our relationship with existing collaborators, adversely
affecting our business and revenues. Finally, any of our collaborations or license agreements may prove to be unsuccessful.
We
plan to grow and develop our business through acquisitions of or investment in new or complementary businesses, products or technologies,
and the failure to manage these acquisitions or investments, or the failure to integrate them with our existing business, could
have a material adverse effect on us.
Our
business strategy is based on the acquisition of additional product candidates. This is evidenced by our in-licensing of NoveCite
in October 2020. We might consider opportunities to acquire or invest in other technologies, products and businesses that might
enhance our capabilities or complement our current product candidates. Potential and completed acquisitions and strategic investments
involve numerous risks, including potential problems or issues associated with the following:
|
●
|
assimilating the
acquired technologies, products or business operations, as we are currently engaged in for NoveCite;
|
|
●
|
maintaining uniform
standards, procedures, controls and policies;
|
|
|
|
|
●
|
unanticipated costs
associated with the acquisition or investment;
|
|
|
|
|
●
|
diversion of our
management’s attention from our preexisting business;
|
|
|
|
|
●
|
maintaining or obtaining
the necessary regulatory approvals or complying with regulatory standards; and
|
|
|
|
|
●
|
adverse effects
on existing business operations.
|
We
have no current commitments with respect to any acquisition or investment in other technologies or businesses. We do not know
if we will identify other suitable acquisitions, whether we will be able to successfully complete any acquisitions, or whether
we will be able to successfully integrate any acquired product, technology or business into our business operations or retain
key personnel, suppliers or collaborators.
Our
ability to successfully develop our business through acquisitions including the recent in-licensing of NoveCite, will depend on
our ability to identify, negotiate, complete and integrate suitable target businesses or technologies and obtain any necessary
financing. These efforts could be expensive and time consuming and might disrupt our ongoing operations. If we are unable to efficiently
integrate any acquired business, technology or product into our business operations, our business and financial condition might
be adversely affected.
We
rely on the significant experience and specialized expertise of our executive management and other key personnel and the loss
of any of our executive management or key personnel or our inability to successfully hire their successors could harm our business.
Our
performance is substantially dependent on the continued services and on the performance of our executive management and other
key personnel, who have extensive experience and specialized expertise in our business. Our President and Chief Executive Officer,
Myron Holubiak, our Executive Chairman, Leonard Mazur, and our Chief Medical Officer and Executive Vice President, Myron Czuczman,
in particular have significant experience in the running of pharmaceutical companies and/or drug development itself. In addition,
Matt Angel, a director of NoveCite, is serving as a technical consultant to that company and was instrumental in the discovery
and development to date of NoveCite. This depth of experience is of significant benefit to us, especially given the small size
of our management team and our company, including our subsidiaries. The loss of the services of any of Mr. Holubiak, Mr. Mazur,
Dr. Czuczman or Dr. Angel, as well as any other member of our executive management or any key employees, including those at NoveCite,
could harm our ability to attract capital and develop and commercialize our product candidates. Neither we nor NoveCite has key
man life insurance policies.
If
we are unable to retain or hire additional qualified personnel, our ability to grow our business might be harmed.
We
utilize the services of a clinical management team on a part-time basis to assist us in managing our ongoing Phase 2 and Phase
3 trials and intend to do so for future preclinical and clinical trials. While we believe this will provide us with sufficient
staffing for our current and future development efforts, we will need to hire or contract with additional qualified personnel
with expertise in preclinical testing, clinical research and testing, government regulation, formulation and manufacturing and
sales and marketing in connection with the continued development, regulatory approval and commercialization of our product candidates.
We compete for qualified individuals with numerous pharmaceutical and biopharmaceutical companies, universities and other research
institutions.
Competition
for these individuals is intense, and we cannot be certain that our search for such personnel will be successful. Attracting and
retaining qualified personnel will be critical to our success. In addition, we may be unable to attract and retain those qualified
officers, directors and members of board committees required to provide for effective management. If we are unable to attract
and retain qualified employees, officers and directors, the management and operation of our business could be adversely affected.
We
expect to need to increase the size of our organization to further develop our product candidates, and we may experience difficulties
in managing growth.
We
will need to manage our anticipated growth and increased operational activity, including as a result of the in-licensing of NoveCite
in October 2020. Our personnel, systems and facilities currently in place may not be adequate to support this future growth. Our
need to effectively execute our growth strategy will require that we:
|
●
|
manage our research and development activities
and our regulatory trials effectively;
|
|
|
|
|
●
|
attract and motivate sufficient numbers of talented
employees or consultants;
|
|
|
|
|
●
|
manage our internal development efforts effectively
while complying with our contractual obligations to licensors, licensees, contractors, collaborators and other third parties;
|
|
|
|
|
●
|
develop internal sales and marketing capabilities
or establish collaborations with third parties with such capabilities;
|
|
|
|
|
●
|
commercialize our product candidates; and
|
|
|
|
|
●
|
improve our operational, financial and management
controls, reporting systems and procedures.
|
This
planned future growth could place a strain on our administrative and operational infrastructure and may require our management
to divert a disproportionate amount of its attention away from our day-to-day activities. We may not be able to effectively manage
the expansion of our operations or recruit and train additional qualified personnel, which may result in weaknesses in our infrastructure,
and give rise to operational mistakes, loss of business opportunities, loss of employees and consultants and reduced productivity
among remaining employees and consultants. We may not be able to make improvements to our management information and control systems
in an efficient or timely manner and may discover deficiencies in existing systems and controls. If our management is unable to
effectively manage our expected growth, our expenses may increase more than expected, our ability to generate or increase our
revenues could be reduced and we may not be able to implement our business strategy. Our future financial performance and our
ability to compete effectively will depend, in part, on our ability to effectively manage any future growth.
Conflicts
of interest may arise from our relationship with NoveCite.
As
of November 30, 2020, we beneficially owned 75% of the voting power of NoveCite’s outstanding common stock; Novellus owns
the other 25%. Our Board Chairman Leonard Mazur, who is also our largest stockholder, is a director and significant shareholder
of Novellus. As a result of our partial ownership and Mr. Mazur’s relationship to Novellus, our relationship with NoveCite
could give rise to certain conflicts of interest that could have an impact on our and NoveCite’s respective research and
development programs, business opportunities, and operations generally.
|
●
|
Even
though we utilize different technologies than NoveCite, we could find ourselves in competition
with it for research scientists, financing and other resources, licensing, manufacturing,
and distribution arrangements.
|
|
●
|
NoveCite
will engage for its own business in research and product development programs, investments,
and business ventures, and we will not be entitled to participate or to receive an interest
in those programs, investments, or business ventures other than to the extent as a stockholder
in NoveCite. NoveCite will not be obligated to present any particular research and development,
investment, or business opportunity to us, even if the opportunity would be within the
scope of our research and development plans or programs, business objectives, or investment
policies. These opportunities may include, for example, opportunities to acquire businesses
or assets, including but not limited to patents and other intellectual property that
could be used by us or by NoveCite.
|
|
●
|
Each
conflict of interest will be resolved by our respective boards of directors in keeping
with their fiduciary duties and such policies as they may implement from time to time.
|
|
●
|
There
is overlap among our board of directors and senior management and that of NoveCite. Two
of our directors, Myron Holubiak and Leonard Mazur, also serve as directors of NoveCite.
In addition, Myron Holubiak serves as Chief Executive Officer and Jaime Bartushak serves
as Chief Financial Officer of both Citius and NoveCite. These overlapping positions could
interfere with the duties owed by such individuals to Citius.
|
The
dual roles of our officers and directors who also serve in similar roles with NoveCite could create a conflict of interest and
will require careful monitoring.
We
share some directors and officers with NoveCite. This could create conflicts of interest between the two companies in the future.
In the future, situations may arise under the operation of both companies that may create a conflict of interest. We will have
to be diligent to ensure that any such situation is resolved by independent parties. In particular, NoveCite is free to pursue
opportunities which could potentially be of interest to us, and they are not required to notify us prior to pursuing such opportunities.
Any such conflict of interest or pursuit by NoveCite of a corporate opportunity independent of us could expose us to claims by
our investors and creditors and could harm our results of operations.
Risks
Related to Our Regulatory and Legal Environment
We
are subject to extensive and costly government regulation.
Our
product candidates are and any approved products will be subject to extensive and rigorous domestic government regulation including
regulation by the FDA, the Centers for Medicare and Medicaid Services, other divisions of the U.S. Department of Health and Human
Services, the U.S. Department of Justice, state and local governments, and their respective foreign equivalents. The FDA regulates
the research, development, preclinical and clinical testing, manufacture, safety, effectiveness, record keeping, reporting, labeling,
storage, approval, advertising, promotion, sale, distribution, import, and export of pharmaceutical products. If our product candidates
are to be marketed abroad, they will also be subject to extensive regulation by foreign governments, whether or not they have
obtained FDA approval. Such foreign regulation might be equally or more demanding than corresponding U.S. regulation. Government
regulation substantially increases the cost and risk of researching, developing, manufacturing, and selling our product candidates.
The regulatory review and approval process, which includes preclinical testing and clinical trials of each product candidate,
is lengthy, expensive, and uncertain. We or our collaborators must obtain and maintain regulatory authorization to conduct clinical
trials and approval for each product candidate we intend to market, and the manufacturing facilities used for the product candidates
must be inspected and meet legal requirements. Securing regulatory approval requires submitting extensive preclinical and clinical
data and other supporting information for each proposed product candidate in order to establish the product’s safety and
efficacy for each intended use. The development and approval process might take many years, requires substantial resources, and
might never lead to the approval of a product candidate. Further, the FDA or any foreign regulatory authority could change its
established regulations that govern the drug development and approval process, which could negatively impact the ongoing or future
regulatory review of our product candidates, including the anticipated timeline and cost of development and approval. Even if
we are able to obtain regulatory approval for a particular product candidate, the approval might limit the indicated medical uses
for the product, limit our ability to promote, sell, and distribute the product, require that we conduct costly post-marketing
surveillance, and/or require that we conduct ongoing post-marketing studies. Material changes to an approved product, such as,
for example, manufacturing changes or revised labeling, might require further regulatory review and approval. Once obtained, any
approvals might be withdrawn, including, for example, if there is a later discovery of previously unknown problems with the product,
such as a previously unknown safety issue.
If
we, our collaborators or our contract manufacturers fail to comply with applicable regulatory requirements at any stage during
the regulatory process, such noncompliance could result in, among other things: suspension or cessation of clinical trials; delays
in the approval of applications or supplements to approved applications; refusal of a regulatory authority, including the FDA,
to review pending market approval applications or supplements to approved applications; warning letters; fines; import and export
restrictions; product recalls or seizures; injunctions; total or partial suspension of production; civil penalties; withdrawals
of previously approved marketing applications or licenses; recommendations by the FDA or other regulatory authorities against
governmental contracts; and/or criminal prosecutions.
We
might not obtain the necessary U.S. or foreign regulatory approvals to commercialize any product candidates.
We
cannot assure you that we will receive the approvals necessary to commercialize for sale any product candidates we are currently
developing or that we may acquire or seek to develop in the future. We will need FDA approval to commercialize our product candidates
in the U.S. In order to obtain FDA approval of any product candidate, we must submit to the FDA an NDA demonstrating that the
product candidate is safe for humans and effective for its intended use. This demonstration requires significant research, pre-clinical
studies, and clinical trials. Satisfaction of the FDA’s regulatory requirements typically takes many years, depends upon
the type, complexity and novelty of the product candidate and requires substantial resources for research, development and testing.
We cannot predict whether our research and clinical approaches will result in products that the FDA considers safe for humans
and effective for their indicated uses. The FDA has substantial discretion in the product approval process and might require us
to conduct additional pre-clinical and clinical testing, perform post-marketing studies or otherwise limit or impose conditions
on any additional approvals we obtain. The approval process might also be delayed by changes in government regulation, future
legislation or administrative action or changes in FDA policy that occur prior to or during our product candidate’s regulatory
review. Delays in obtaining regulatory approvals might:
|
●
|
delay commercialization
of, and our ability to derive product revenues from, our product candidates;
|
|
|
|
|
●
|
impose costly procedures
on us; and
|
|
|
|
|
●
|
diminish any competitive
advantages that we might otherwise enjoy.
|
Even
if we comply with all FDA requests, the FDA might ultimately reject one or more of our NDAs. We cannot be sure that we will ever
obtain regulatory clearance for any of our product candidates. Failure to obtain FDA approval of one or more of our product candidates
could severely undermine our business by leaving us without saleable products, and therefore without any potential sources of
revenues, until another product candidate could be developed or obtained and successfully developed, approved and commercialized.
Foreign jurisdictions impose similar regulatory approval processes and we will face the same risks if we seek foreign approval
for any of our product candidates. There is no guarantee that we will ever be able to successfully develop or acquire any product
candidate.
Following
any regulatory approval of any product candidate, we will be subject to ongoing regulatory obligations and restrictions, which
may result in significant expense and limit our ability to commercialize our other product candidates.
If
one of our product candidates is approved by the FDA or by a foreign regulatory authority, we will be required to comply with
extensive regulations for product manufacturing, labeling, packaging, adverse event reporting, storage, distribution, advertising,
promotion and record keeping. Regulatory approvals may also be subject to significant limitations on the indicated uses or marketing
of the products or to whom and how we may distribute an approved product. Even if U.S. regulatory approval is obtained, the FDA
may still impose significant restrictions on a product’s indicated uses or marketing or impose ongoing requirements for
potentially costly post-approval studies. For example, the label ultimately approved for any of our product candidates, if any,
may include restrictions on use. If so, we may be subject to ongoing regulatory obligations and restrictions, which may result
in significant expense and limit our ability to commercialize that product candidate. The FDA could also require a registry to
track the patients utilizing the product or implement a Risk Evaluation and Mitigation Strategy, or REMS, that could restrict
access to the product, which would reduce our revenues and/or increase our costs. Potentially costly post-marketing clinical studies
may be required as a condition of approval to further substantiate safety or efficacy, or to investigate specific issues of interest
to the regulatory authority. Similar risks apply in foreign jurisdictions.
Manufacturers
of pharmaceutical products and their facilities are subject to continual review and periodic inspections by the FDA and other
regulatory authorities for compliance with cGMP regulations, which include requirements relating to quality control and quality
assurance as well as the corresponding maintenance of records and documentation. Similar regulatory programs exist in foreign
jurisdictions. Further, regulatory agencies must approve these manufacturing facilities before they can be used to manufacture
our future approved products, if any, and these facilities are subject to ongoing regulatory inspections. In addition, regulatory
agencies subject a pharmaceutical product, its manufacturer and the manufacturer’s facilities to continual review and inspections.
The subsequent discovery of previously unknown problems with a product, including adverse events of unanticipated severity or
frequency, or problems with the facility where the product is manufactured, may result in restrictions on the marketing of that
product, up to and including, withdrawal of the product from the market. If the manufacturing facilities of our suppliers fail
to comply with applicable regulatory requirements, it could result in regulatory action and additional costs to us. Failure to
comply with applicable FDA and other regulatory requirements may, either before or after product approval, if any, subject our
company to administrative or judicially imposed sanctions, including:
|
●
|
issuance of Form 483 notices, warning letters
and adverse publicity by the FDA or other regulatory agencies;
|
|
|
|
|
●
|
imposition of fines and other civil penalties
due to product liability or other issues;
|
|
|
|
|
●
|
injunctions, suspensions or revocations of regulatory
approvals;
|
|
|
|
|
●
|
suspension of any ongoing pre-clinical and clinical
trials;
|
|
|
|
|
●
|
total or partial suspension of manufacturing;
|
|
|
|
|
●
|
delays in commercialization;
|
|
|
|
|
●
|
refusal by the FDA to approve pending applications
or supplements to approved applications filed by us or our collaborators;
|
|
|
|
|
●
|
refusals to permit medical products to be imported
into or exported from the U.S.;
|
|
|
|
|
●
|
restrictions on operations, including costly
new manufacturing requirements;
|
|
|
|
|
●
|
product recalls or seizures; and
|
|
|
|
|
●
|
criminal prosecutions.
|
In
addition, the law or regulatory policies governing pharmaceutical products may change. New statutory requirements may be enacted
or additional regulations may be enacted that could prevent or delay regulatory approval of our product candidates. Contract manufacturing
organizations, or CMOs, and their vendors or suppliers may also face changes in regulatory requirements from governmental agencies
in the U.S. and other countries. We cannot predict the likelihood, nature, extent or effects of government regulation that may
arise from future legislation or administrative action, either in the U.S. or elsewhere. If we are not able to maintain regulatory
compliance, we might not be permitted to market any future approved products and our business could suffer.
Even
if we receive regulatory approval to commercialize our product candidates, post-approval marketing and promotion of products is
highly regulated by the FDA, and marketing campaigns which violate FDA standards may result in adverse consequences including
regulatory enforcement action by the FDA as well as follow-on actions filed by consumers and other end-payers, which could result
in substantial fines, sanctions and damage awards against us, any of which could harm our business.
Post-approval
marketing and promotion of products, standards and regulations for direct-to-consumer advertising, dissemination of off-label
product information, industry-sponsored scientific and educational activities and promotional activities are heavily scrutinized
and regulated by the FDA. Products may only be marketed for approved indications and in accordance with provisions of the FDA
approved labels. Failure to comply with such requirements may result in adverse publicity, warning letters issued by the FDA,
and civil or criminal penalties.
In
the event the FDA discovers post-approval violations, we could face penalties in the future including the FDA’s issuance
of a cease and desist order, impounding of our products, and civil or criminal penalties. As a follow-on to such governmental
enforcement activities, consumers and other end-payers of the product may initiate action against us claiming, among other things,
fraudulent misrepresentation, unfair competition, violation of various state consumer protection statues and unjust enrichment.
If the plaintiffs in such follow-on actions are successful, we could be subject to various damages, including compensatory damages,
treble damages, punitive damages, restitution, disgorgement, prejudgment and post-judgment interest on any monetary award, and
the reimbursement of the plaintiff’s legal fees and costs, any of which could have an adverse effect on our revenue, business,
financial condition and prospects.
We
could be forced to pay substantial damage awards if product liability claims that may be brought against us are successful.
The
use of any of our product candidates in pre-clinical and clinical trials, and the sale of any approved products, may expose us
to liability claims and financial losses resulting from the use or sale of our product candidates. We have obtained limited product
liability insurance coverage for our pre-clinical and clinical trials of $5.0 million per occurrence and in the aggregate, subject
to a deductible of $25,000 per bodily injury and property damage occurrence, and a medical expense per person limit of $25,000.
There can be no assurance that our existing insurance coverage will extend to any other product candidates in the future. Any
product liability insurance coverage may not be sufficient to satisfy all liabilities resulting from product liability claims.
A successful claim may prevent us from obtaining adequate product liability insurance in the future on commercially desirable
terms, if at all. Even if a claim is not successful, defending such a claim would be time consuming and expensive, may damage
that product’s and our reputations in the marketplace, and would likely divert management’s attention, any of which
could have a material adverse effect on our Company.
Risks
Related to Our Intellectual Property
Our
business depends on protecting our intellectual property.
Without
the intellectual property rights we have already obtained, as well as the further rights we are also pursuing, our competitors
would have opportunity to take advantage of our research and development efforts to develop competing products. Our success, competitive
position and future revenues, if any, depend in part on our ability and the abilities of our licensors to obtain and maintain
patent protection for our product candidates, methods, processes and other technologies, to preserve our trade secrets, to prevent
third parties from infringing on our proprietary rights and to operate without infringing the proprietary rights of third parties.
We anticipate filing additional patent applications both in the U.S. and in other countries, as appropriate. However, the patent
process is subject to numerous risks and uncertainties, and there can be no assurance that we will be successful in protecting
our product candidates by obtaining and defending patents. These risks and uncertainties include the following:
|
●
|
Our patent rights might be challenged, invalidated,
or circumvented, or otherwise might not provide any competitive advantage;
|
|
|
|
|
●
|
Our competitors, many of which have substantially
greater resources than we do and many of which might make significant investments in competing technologies, might seek, or
might already have obtained, patents that will limit, interfere with, or eliminate our ability to make, use, and sell our
product candidates either in the U.S. or in international markets;
|
|
|
|
|
●
|
Countries other than the U.S. might have less
restrictive patent laws than those upheld by U.S. courts, allowing foreign competitors the ability to exploit these laws to
create, develop, and market competing products; and
|
|
|
|
|
●
|
As a matter of public policy regarding worldwide
health concerns, there might be significant pressure on the U.S. government and other international governmental bodies to
limit the scope of patent protection both inside and outside the U.S. for product candidates that prove successful.
|
In
addition, the U.S. Patent and Trademark Office and patent offices in other jurisdictions have often required that patent applications
concerning pharmaceutical and/or biotechnology-related inventions be limited or narrowed substantially to cover only the specific
innovations exemplified in the patent application, thereby limiting the scope of protection against competitive challenges. Thus,
even if we or our licensors are able to obtain patents, the patents might be substantially narrower than anticipated.
Because
the time period from filing a patent application to the issuance, if ever, of the patent is often more than three years and because
any regulatory approval and marketing for a pharmaceutical product often occurs several years after the related patent application
is filed, the resulting market exclusivity afforded by any patent on our drug candidates and technologies will likely be substantially
less than 20 years. For example, the U.S. patent on the original Mino-Lok composition expires in June 2024, and the U.S. patent
on the stabilized Mino-Lok composition expires in November 2036. Since we anticipate significant additional time before FDA approval
could be obtained, the maximum market exclusivity afforded by the statutory term of the currently issued patents would be less
than 17 years. In the United States, the European Union and some other jurisdictions, patent term extensions are available for
certain delays in either patent office proceedings or marketing and regulatory approval processes. However, due to the specific
requirements for obtaining these extensions, there is no assurance that our patents will be granted extensions even if we encounter
significant delays in patent office proceedings or marketing and regulatory approval.
Patent
and other intellectual property protection is crucial to the success of our business and prospects, and there is a substantial
risk that such protections will prove inadequate. Our business and prospects will be harmed if these protections prove insufficient.
We
rely on trade secret protections through confidentiality agreements with our employees and other parties, and the breach of these
agreements could adversely affect our business and prospects.
We
rely on trade secrets, which we seek to protect, in part, through confidentiality and non-disclosure agreements with our employees,
collaborators, suppliers, and other parties. There can be no assurance that these agreements will not be breached, that we would
have adequate remedies for any such breach or that our trade secrets will not otherwise become known to or independently developed
by our competitors. We might be involved from time to time in litigation to determine the enforceability, scope and validity of
our proprietary rights. Any such litigation could result in substantial cost and divert management’s attention from our
operations.
If
we infringe the rights of third parties we might have to forego developing and/or selling any approved products, pay damages,
or defend against litigation.
If
our product candidates, methods, processes and other technologies infringe the proprietary rights of other parties, we could incur
substantial costs and we might have to:
|
●
|
obtain licenses, which might not be available
on commercially reasonable terms, if at all;
|
|
|
|
|
●
|
abandon an infringing product candidate;
|
|
|
|
|
●
|
redesign our product candidates or processes
to avoid infringement;
|
|
|
|
|
●
|
stop using the subject matter claimed in the
patents held by others;
|
|
|
|
|
●
|
pay damages; and/or
|
|
|
|
|
●
|
defend litigation or administrative proceedings
which might be costly whether we win or lose, and which could result in a substantial diversion of our financial and management
resources.
|
Any
of these events could substantially harm our earnings, financial condition and operations.
The
U.S. government could have “march-in rights” to certain of our intellectual property.
If
at any time federal monies are used in support of the research and development activities at MDACC that resulted or in the future
result in certain of our issued pending U.S. patent applications, the federal government retains what are referred to as “march-in
rights” to patents that are granted on these applications. Our license agreements for Mino-Lok and Mino-Wrap each provide
that in the event of such governmental funding, our rights are subject to the government’s prior rights, if any. In addition,
the license agreements provide that we will comply with the requirements of any agreement between MDACC and the governmental funding
entity. If applicable, this could require us to grant the U.S. government either a nonexclusive, partially exclusive or exclusive
license to the patented invention in any field of use, upon terms that are reasonable for a particular situation. Circumstances
that could trigger march-in rights generally would be set out in the agreement between MDACC and the funding governmental entity
and could include, for example, failure to take, within a reasonable time, effective steps to achieve practical application of
the invention in a field of use, failure to satisfy the health and safety needs of the public and failure to meet requirements
of public use specified by federal regulations. A funding governmental entity could elect to exercise these march-in rights on
their own initiative or at the request of a third party; however, the exercise of such march-in rights has been historically rare
when the patent holder (or its licensee) is practicing the patent invention although there can be no assurance that such rights
would not be exercised. This same risk would apply to any other license into which we enter if the licensor receives government
funding for the product candidate that is the subject of the license.
Changes
in patent law or patent jurisprudence could diminish the value of patents in general, thereby impairing our ability to protect
our product candidates.
The
United States has enacted and is expected to continue to implement wide-ranging patent reform legislation. Further, United States
Supreme Court rulings have either narrowed the scope of patent protection available in certain circumstances or weakened the rights
of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in
the future, this combination of events has created uncertainty with respect to the scope and value of patents, once obtained.
In
September 2011, the Leahy-Smith America Invents Act, also known as the America Invents Act, or AIA, was signed into law. The AIA
includes a number of significant changes to U.S. patent law, including provisions that affect the way patent applications will
be prosecuted and may also affect patent litigation. The USPTO is currently developing regulations and procedures to govern administration
of the AIA, and many of the substantive changes to patent law associated with the AIA. It is not clear what other, if any, impact(s)
the AIA will have on the operation of our business. Moreover, the AIA and its implementation could increase the uncertainties
and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of
which could have an adverse effect on our business. One important change introduced by the AIA is that, as of March 16, 2013,
the United States transitioned to a “first-to-file” system for deciding which party should be granted a patent when
two or more patent applications are filed by different parties claiming the same invention. A third party who files a patent application
with the USPTO after such date but prior to our filing may therefore be awarded a patent covering an invention of ours even if
we were the first to invent. All of our U.S. patent applications were filed after March 16, 2013. This “first-inventor-to-file”
system will require us both to remain cognizant, going forward, of the timing between invention and filing of a patent application.
Among
some of the other changes introduced by the AIA are those that (i) limit where a patentee may file a patent infringement suit
and (ii) provide opportunities for third parties to challenge any issued patent in the USPTO. Such changes apply to all of our
U.S. patents. Because of a lower evidentiary standard in USPTO proceedings, as compared to the evidentiary standard applied in
U.S. federal courts, necessary to invalidate a patent claim, a third party could potentially present evidence in a USPTO proceeding
sufficient for the USPTO to find a claim invalid, notwithstanding that the same evidence would be insufficient to invalidate a
claim first presented in a district court action. Accordingly, a third party may attempt opportunistically to use USPTO procedures
to invalidate our patent claims.
Depending
on decisions by the United States Congress, the U.S. federal courts, the USPTO or similar authorities in foreign jurisdictions,
the laws and regulations governing patents could change in unpredictable ways that may weaken our and our licensors’ abilities
to obtain new patents or to enforce existing patents we and our licensors or partners may obtain in the future.
Risks
Related to Our Securities
If
we fail to meet the continued listing requirements of Nasdaq it could result in a delisting of our common stock and certain warrants.
Our
common stock and certain outstanding warrants are currently listed for trading on The Nasdaq Capital Market, and the continued
listing of our common stock on The Nasdaq Capital Market is subject to our compliance with a number of listing standards. These
listing standards include the requirement for avoiding sustained losses, maintaining a minimum level of stockholders’ equity
and maintaining a minimum stock price. The failure to meet any listing standard would subject us to potential loss of listing.
If
our common stock were no longer listed on The Nasdaq Capital Market, investors might only be able to trade on one of the over-the-counter
markets, including the OTC Bulletin Board ® or in the Pink Sheets ® (a quotation medium operated by Pink Sheets LLC).
This would impair the liquidity of our common stock not only in the number of shares that could be bought and sold at a given
price, which might be depressed by the relative illiquidity, but also through delays in the timing of transactions and reduction
in media coverage. In addition, we could face significant material adverse consequences, including:
|
●
|
a limited availability
of market quotations for our securities;
|
|
|
|
|
●
|
a limited amount
of news and analyst coverage for us; and
|
|
|
|
|
●
|
a decreased ability
to issue additional securities or obtain additional financing in the future.
|
We
have twice failed to meet the listing standards, most recently between April 2020 and July 2020. In October 2019, we received
a notice from Nasdaq that we failed to comply with the $1.00 minimum bid price requirement. We regained compliance on January
31, 2020. On April 1, 2020, we received written notice from The Nasdaq Stock Market indicating that, because the closing bid price
for the Company’s common stock has fallen below $1.00 per share for 30 consecutive business days, we no longer complied
with the $1.00 minimum bid price requirement for continued listing on The Nasdaq Capital Market under Rule 5550(a)(2) of the Nasdaq
Listing Rules. Pursuant to Nasdaq Marketplace Rule 5810(c)(3)(A), we had been provided a compliance period of 180 calendar days,
which ran until September 28, 2020, to regain compliance with the minimum bid price requirement. The date to regain compliance
was extended by Nasdaq in response to the COVID-19 pandemic and its impact on the capital markets and listed companies’
stock prices. As a result of the extension, to regain compliance, the closing bid price of our common stock had to meet or exceed
$1.00 per share for a minimum of 10 consecutive business days prior to December 14, 2020. On July 10, 2020, we regained compliance.
In
the event of a future delisting, we would take actions to restore our compliance with Nasdaq’s listing requirements, but
we can provide no assurance that any such action taken by us would allow our common stock to become listed again, stabilize the
market price or improve the liquidity of our common stock, prevent our common stock from dropping below the Nasdaq minimum bid
price requirement or prevent future non-compliance with Nasdaq’s listing requirements.
If
our common stock were delisted and determined to be a “penny stock,” a broker-dealer may find it more difficult to
trade our common stock and an investor may find it more difficult to acquire or dispose of our common stock in the secondary market.
If
our common stock were removed from listing with The Nasdaq Capital Market, it may be subject to the so-called “penny stock”
rules. The SEC has adopted regulations that define a “penny stock” to be any equity security that has a market price
per share of less than $5.00, subject to certain exceptions, such as any securities listed on a national securities exchange,
which is the exception on which we currently rely. For any transaction involving a “penny stock,” unless exempt, the
rules impose additional sales practice requirements on broker-dealers, subject to certain exceptions. If our common stock were
delisted and determined to be a “penny stock,” a broker-dealer may find it more difficult to trade our common stock
and an investor may find it more difficult to acquire or dispose of our common stock on the secondary market.
If
we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or
detect fraud. Consequently, stockholders could lose confidence in our financial reporting and this may decrease the trading price
of our common stock.
We
are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the Sarbanes-Oxley
Act of 2002, or SOX, and Nasdaq rules and regulations. SOX requires, among other things, that we maintain effective disclosure
controls and procedures and internal control over financial reporting. We perform system and process evaluation and testing of
our internal controls over financial reporting to allow management to report on the effectiveness of our internal controls over
financial reporting in our Annual Report on Form 10-K filing for each year, as required by Section 404 of SOX. We previously had
identified material weaknesses in our internal control over financial reporting related to ineffective separation of duties due
to our limited finance staff, our reliance on consultants to assist with the financial reporting function and a lack of documented
policies and procedures, which weaknesses were reported in fiscal 2016 and 2017 (and prior to that by our predecessor company).
We remediated these material weaknesses as of September 30, 2018 and management determined that our internal controls over financial
reporting were effective as of that date. While we are committed to continuing to improve our internal control processes, and
although we will continue to diligently and vigorously review our internal controls over financial reporting, we cannot be certain
that, in the future, a material weakness or significant deficiency will not exist or otherwise be discovered. If that were to
happen, it could harm our operating results and cause stockholders to lose confidence in our reported financial information. Any
such loss of confidence would have a negative effect on the trading price of our securities.
A
control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control
system’s objectives will be satisfied. Internal control over financial reporting and disclosure controls and procedures
are designed to give a reasonable assurance that they are effective to achieve their objectives. We cannot provide absolute assurance
that all of our possible future control issues will be detected. These inherent limitations include the possibility that judgments
in our decision making can be faulty, and that isolated breakdowns can occur because of simple human error or mistake. The design
of our system of controls is based in part upon assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed absolutely in achieving our stated goals under all potential future or unforeseeable conditions.
Because of the inherent limitations in a cost-effective control system, misstatements due to error could occur and not be detected.
This and any future failures could cause investors to lose confidence in our reported financial information, which could have
a negative impact on our financial condition and stock price.
The
price of our securities may become volatile, which could lead to losses by stockholders and costly securities litigation.
The
trading price of our securities is likely to be highly volatile and could fluctuate in response to factors such as:
|
●
|
the cost, timing, completion
and/or results of our clinical trials;
|
|
|
|
|
●
|
our common stock being delisted
from The Nasdaq Capital Market;
|
|
|
|
|
●
|
sales of our common stock or other
securities in the open market or in public offerings or in private placements;
|
|
|
|
|
●
|
regulatory actions regarding our
product candidates or any approved products;
|
|
|
|
|
●
|
additions or departures of key personnel;
|
|
|
|
|
●
|
announcements of developments by
us or our competitors;
|
|
|
|
|
●
|
announcements by us or our competitors
of significant acquisitions, strategic partnerships, joint ventures or capital commitments;
|
|
|
|
|
●
|
actual or anticipated variations
in our operating results;
|
|
|
|
|
●
|
adoption of new accounting standards
affecting our industry; and
|
|
|
|
|
●
|
other events or factors, many of
which are beyond our control.
|
The
stock market is subject to significant price and volume fluctuations. In the past, following periods of volatility in the market
price of a company’s securities, securities class action litigation has often been initiated against such a company. Any
such litigation initiated against us, whether or not successful, could result in substantial costs and diversion of our management’s
attention and resources, which could harm our business and financial condition.
You
may experience dilution of your ownership interests because of the future issuance of additional shares of our common stock or
securities convertible into common stock.
For
the foreseeable future, to finance our operations, including possible acquisitions or strategic transactions, we expect to issue
equity securities, resulting in the dilution of the ownership interests of our present stockholders. We are currently authorized
to issue an aggregate of 200,000,000 shares of common stock and 10,000,000 shares of preferred stock. As of September 30, 2020,
there were 55,576,996 shares of common stock outstanding, 26,831,989 shares underlying warrants with a weighted average exercise
price of $1.546 per share and 3,390,171 shares underlying options with a weighted average exercise price of $2.513 per share.
We may also issue additional shares of our common stock or other securities that are convertible into or exercisable for common
stock in connection with hiring or retaining employees, or for other business purposes. The future issuance of any such additional
shares of common stock or common stock equivalents may create downward pressure on the trading price of our common stock or publicly
traded warrants.
The
common stock is controlled by insiders.
As
of November 30, 2020, our executive officers and directors beneficially owned approximately 34.0% of our outstanding shares of
common stock. Such concentrated control of our company may adversely affect the price of our common stock. If you acquire common
stock, you may have no effective voice in the management of our company. Sales by our directors and executive officers or their
affiliates, along with any other market transactions, could adversely affect the market price of our common stock.
We
do not intend to pay dividends for the foreseeable future.
We
have paid no dividends on our common stock to date and we do not anticipate that any dividends will be paid to holders of our
common stock in the foreseeable future. While our future dividend policy will be based on the operating results and capital needs
of our business, we currently anticipate that any future earnings will be retained to finance our future expansion and for the
implementation of our business plan. The lack of a dividend can further affect the market value of our stock and could significantly
affect the value of any investment in our company.
Our
Certificate of Incorporation allows for our Board of Directors to create new series of preferred stock without further approval
by our stockholders, which could adversely affect the rights of the holders of the common stock.
Our
Board of Directors has the authority to issue up to 10,000,000 shares of preferred stock and to fix and determine the relative
rights and preferences of any such preferred stock without further stockholder approval. As a result, our Board of Directors could
authorize the issuance of one or more series of preferred stock that would grant preferential rights to our assets upon liquidation,
the right to receive dividend payments before dividends are distributed to the holders of common stock and the right to the redemption
of the preferred shares, together with a premium, prior to the redemption of the common stock. In addition, our Board of Directors
could authorize the issuance of a series of preferred stock that has greater voting power than the common stock or that is convertible
into our common stock, which could decrease the relative voting power of the common stock or result in dilution to our existing
stockholders.