Item
1. Business
We
are a clinical stage pharmaceutical company leveraging our proprietary technology to develop novel therapies designed to cure cancers.
Our goal is to extend the benefits of cancer treatments with surgery, radiation therapy, chemotherapy and immunotherapy. Radiation therapy
(RT) is one of the most effective modalities for treating cancers. We are developing a pipeline of products designed to address limitations
of the current cancer therapies as well as to extend to the new applications of radiation therapy. We believe that our product candidates
will enable us to deliver cancer treatments that are safer, more reliable and at a greater scale than that of the current standard of
care.
Our product candidates include Ropidoxuridine, Extended Bio-availability Ropidoxuridine
(IPdR/TPI), and a platform of HDAC inhibitors (SP-1-161, SP-2-225 and SP-1-303). We have advanced Ropidoxuridine through a Phase I clinical
trial using non-dilutive National Institutes of Health (NIH) The Small Business Innovation Research (SBIR) contracts and are currently
preparing a Phase II study that we intend to commence in 2023. We also plan to perform the IND-enabling studies in 2023 in order
to submit an investigational new drug application (IND) for the selective HDAC6 inhibitor (SP-2-225) with the goal of initiating a Phase
I clinical trial in 2024. We have applied for and received FDA approval of Orphan designation for Ropidoxuridine and RT for treating brain
cancer (glioblastoma). We believe our management team’s expertise in radiation therapy, combined modality cancer treatment and immuno-oncology
will help drive the development and, if approved, the commercialization of these potentially curative therapies for patients with aggressive cancers.
Radiation
Oncology has gone through transformative technological innovation over the last several years to better define tumors, allow improved
shaping of radiation delivery and support dose escalation with shorter courses of treatment. Furthermore, achieving higher dose distributions
within tumor volumes has reached a practical plateau, since cancers are frequently integrated with or surrounded by more sensitive normal
tissues and further dose increases risk of tissue necrosis. To increase cancer cures at maximally tolerated radiation doses, pharmacological
and biological modifications of cells are needed to sensitize cancers, protect normal tissues, and stimulate the immune system to react
against antigens produced by irradiated, damaged cancer cells. Drugs that show sensitizing properties, or the ability to make cancer
cells more sensitive to radiation, offer a solution to this problem. Currently, such drugs are used off-label, and many have inherent
toxicities since they were designed for direct cancer treatments and not for sensitization.
We
are developing our products with the goal of addressing the unmet need in cancer treatment for a commercially marketable radiation response
modifier solution that leads to greater sensitivity of cancer cells to ionizing radiation therapy. The goal of our products is to increase
the therapeutic index for patients receiving radiation and to decrease radiation-related toxicities in patients with solid tumors. Our
products operate across three areas related to the treatment of cancer with RT:
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1. |
Sensitization
of growing cancer cells, rendering them more susceptible to the effects of radiation therapy. |
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2. |
Activation
of the DNA damage response pathway to kill cancer cells and protect adjacent normal cells. |
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3. |
Activation
of the immune system to kill any remaining cells after RT. |
Our
platform technology allows for the creation of an inventory of products for radiation sensitizing, immune modulation, and protection
of healthy tissue.
Our
Pipeline
We
are currently developing a pipeline of small molecule radiation sensitizers and immune response regulating drugs. Our most advanced product
candidate is Ropidoxuridine, an orally available halogenated pyrimidine with strong cancer radiation sensitizing properties in preclinical
studies. In addition to our clinical study-ready candidate, we have a pipeline of complimentary product candidates that we are developing
to address a host of solid tumor cancer indications. Our pipeline is represented in the diagram below:
![](https://content.edgar-online.com/edgar_conv_img/2023/03/15/0001493152-23-007686_form10-k_001.jpg)
Timeline
for clinical phase (Ropidoxuridine) and pre-clinical phase (HDAC inhibitors) pipeline.
Our
lead product candidates include:
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Ropidoxuridine
(IPdR) is our lead candidate radiation sensitizer for use in combination with RT
to treat brain tumors (glioblastoma) and sarcomas. Phase I clinical trial results supported by Shuttle Pharma and the NCI (CTEP) were
reported in the medical journal, Clinical Cancer Research, in July 2019, by our SBIR subcontractor. Eighteen patients completed dose escalations
to 1,800 mg/day for 30 days, establishing the maximum tolerated dose (MTD) of 1,200 mg/day in combination with RT. Four partial responses,
nine stable disease and one progressive disease in target lesions were reported. Four patients did not have measurable disease and, as
a result, were not evaluable. These Phase I trial results demonstrate oral bioavailability and an MTD of 1,200 mg per day for 28 days
for use in combination with radiation for Phase II clinical trials that we propose to perform in brain tumors and in sarcomas. The brain
tumor, glioblastoma multiforme (GB) is eligible for orphan disease designations. Shuttle Pharma has advanced drug manufacture and formulation
and prepared a draft clinical protocol of a “Phase 2 Single-Arm Study of IPdR as a Radiation Sensitizing Agent During Radiotherapy
in Patients with Newly Diagnosed IDH-Wildtype MGMT Unmethlyated and Glioblastoma Multiforme.” We anticipate submitting an Investigational
New Drug (IND) application for FDA review in the second quarter of 2023.
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Ropidoxuridine
and Tipracil (IPdR/TPI) is a new combination formulation demonstrating extended bioavailability after
oral administration in an animal model system. The IPdR/TPI formulation will be developed for use as a radiation sensitizer of rectal
cancers after the Phase II brain tumor clinical trial has been initiated. |
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SP-1-161
is Shuttle Pharma’s pre-clinical candidate lead HDAC inhibitor, radiation
sensitizing candidate product. This pan HDAC inhibitor initiates the mutated in ataxia-telangiectasia (ATM) response pathway. Using rational
drug design, we discovered HDAC inhibitors and ATM activators capable of radiation sensitizing cancer cells and protecting normal cells.
The candidate drug may serve as direct chemotherapeutic agents or as radiation sensitizers for treating cancers. |
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SP-2-225
is Shuttle Pharma’s pre-clinical class IIb selective HDAC inhibitor
that affects histone deacetylase HDAC6. SP-2-225 has effects on the regulation of the immune system. The interactions of RT with the immune
response to cancers are of great current interest, offering insight into potential mechanisms for primary site and metastatic cancer treatment.
For this reason, Shuttle Pharma has selected SP-2-225 as the candidate lead HDAC inhibitor for preclinical development. We are advancing
drug manufacture and IND-enabling studies to enable a Phase I clinical trial in 2024. With the introduction of check-point inhibitors,
CAR-T therapies and personalized medicine in cancer, regulation of the immune response following RT is of significant clinical and commercial interest. |
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SP-1-303
is Shuttle Pharma’s pre-clinical selective Class I HDAC inhibitor that preferentially affects histone deacetylases
HDAC1 and HDAC3 and is a member of the class I HDAC family. SP-1-303 data show direct cellular toxicity in ER positive breast cancer
cells. Furthermore, SP-1-303 increases PD-L1 expression. |
Our
Approach
We
believe that we have established a leadership position in radiation sensitizer discovery and development. Over approximately six years
of research, we have identified two clinical phase product candidates and discovered new pre-clinical molecules using our proprietary
platform technologies to increase the therapeutic index for patients receiving radiation for treatment of solid tumors. Our development
strategy has four key pillars: (1) to improve the efficacy of RT by demonstrating improved disease-free survival rates in patients who
undergo radiation therapy, (2) reduce the amount of radiation needed for a favorable tumor response, thereby limiting the potential for
radiation related toxicities to healthy cells, (3) decrease the extent of surgery needed to remove cancers and improve quality of life,
and (4) leverage our next generation technologies to create drugs that regulate the immune response assisting immune checkpoint and CAR-T
therapies and other personalized medicines targeting cancers.
We
propose to perform Phase I and Phase II clinical trials to advance our clinical product candidates. In addition, candidate HDAC inhibitor
molecules will be tested, and IND-enabling studies will be performed to prepare for Phase I clinical trials.
To
date, we have been awarded three SBIR contracts from the NIH to:
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Develop
IPdR as a radiation sensitizer for the treatment of gastro-intestinal cancers, in combination with radiation therapy. This funding
provided partial support for the Phase I clinical trial of Ropidoxuridine and RT. |
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Develop
prostate cancer cell cultures from African-American men, with donor matched normal prostate cells, with the goal of establishing
50 pairs for accelerating research to reduce prostate cancer health disparities in African-American men. This project was funded
under “Moonshot” designation and Shuttle Pharma is eligible to submit an application for additional SBIR (Phase IIb)
funding to establish the infrastructure required to expand and distribute cells for research purposes. Cells from African-American
patients are distributed to investigators who are conducting health disparities research. |
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Develop
predictive biomarkers for determining outcomes for prostate cancer patients following treatment with SBRT. This SBIR-funded project
was completed on March 15, 2022 and Shuttle Pharma is eligible to apply for additional funding through the SBIR (Phase IIb) mechanism
to de-risk clinical validation to develop the predictive biomarkers. |
All
three SBIR funded projects have been completed. The Company is eligible to apply for SBIR Phase IIb funding to “bridge” the
funding gap should Shuttle Pharma elect to advance the “Moonshot” health disparities or the predictive biomarker project.
The NIH SBIR program is designed to encourage small businesses to engage in Federal Research/Research and Development (“R/R&D”)
that has the potential for commercialization.
Our
Strategy
Our
goal is to maintain and build upon our leadership position in radiation sensitization. We plan to develop Ropidoxuridine and the HDAC6
inhibitor (SP-2-225) and, if approved by the FDA, commercialize our product candidates for the treatment of cancers. While this process
may require years to complete, we believe achieving this goal could result in new radiation sensitizer and immunotherapy products. Key
elements of our strategy include:
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Capitalize
on Ropidoxuridine as an orally available, small molecule radiation sensitizer. To date, there is one drug (Cetuximab, a monoclonal
antibody) approved by the FDA specifically as a radiation sensitizer. If we are successful in developing Ropidoxuridine and obtaining
FDA approval, a small molecule sensitizer would then be enabled for clinical applications for radiation sensitization. |
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Expand
our leadership position within radiation sensitizers. In addition to our traditional radiation sensitizers, we plan to advance
our near-term pipeline to include radiation sensitizers for proton therapy. Proton Therapy is growing worldwide as a form of radiation
therapy due to its unique beam shaping characteristics. As a result, this new technology offers a major opportunity for Shuttle Pharma
to strive to develop an innovative and well-tolerated drug for proton therapy sensitization. |
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Execute
a disciplined business development strategy to strengthen our portfolio of product candidates. We have built our current product
pipeline through in-house development, partnerships with leading academic institutions and through in-licensing.
We will continue to evaluate new in-licensing opportunities and collaboration agreements with leading academic institutions and other
biotechnology companies around programs that seek to address areas of high unmet need and for which we believe there is a high probability
of clinical success, including programs beyond our target franchise areas and current technology footprint. |
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Invest
in our HDAC platform technology and maximize its utility across cancer therapies. We are initially applying the platform to develop drugs for cancer radiation
sensitization, normal tissue radiation protection and post radiation immune stimulation. Based on the data we have obtained thus far,
these drugs are immune regulatory. We intend to invest to develop other properties of our platform technology, as well. |
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Enter
into collaborations to realize the full potential of our platform. The breadth of our HDAC technology platform enables other
therapeutic applications, including radiation sensitization and immune therapy. We intend to seek collaborations centered on our
platform to maximize applications for cancer treatment. |
Radiation
Therapy
Radiation
Oncologists use Radiation Therapy (RT) to treat cancers that cannot be completely removed by surgery but have not yet spread to distant
sites within the body. RT has been a mainstay for the treatment of cancer malignancies for more than half a century. The combination
treatment of radiation therapy and chemotherapy has involved the use of cytotoxic drugs, targeted biologic agents and targeted external
beam radiation to increase the destruction of tumor cells and cure or delay cancer progression. The low number of drugs and biologic
agents under investigation as radiation sensitizing agents highlights an unmet need for new approaches and agents that provide greater
effectiveness, increased quality and better tolerability for patients.
Currently,
“chemo-radiation” treatments are established in cancers of the head and neck, esophagus, lung, stomach, breast, brain, pancreas,
rectum and uterine cervix. The ideal radiation sensitizer would reach the tumor in adequate concentrations and act selectively in the
tumor, as compared to surrounding normal tissues. It would have predictable pharmacokinetics for timing with radiation therapy and could
be administered with every radiation treatment approach. The ideal radiation sensitizer would have minimal toxicity or manageable enhancement
of radiation toxicity.
The
U.S. market for radiation sensitizing agents is experiencing dynamic growth through development of new radiation technology, the introduction
of new agents, growth in the number of diagnosed patients in a variety of cancers and changes in treatment patterns. New agents have
been introduced, including bevacizumab (Avastin®, Roche), panitumumab (Vectibix®, Amgen), temozolomide (Temodar®, Merck)
and cetuximab (Erbitux®, Eli Lilly/Imclone), with potential as radiation sensitizing agents (though all but cetuximab are used off
label); and all are recommended by the NCCN® (National Comprehensive Cancer Network) in clinical practice guidelines for use in combination
with established therapies such as FOLFOX (leucovorin, 5-FU, oxaliplatin), CapeOX (capecitabine, oxaliplatin) and FOLFIRI (leucovorin,
5-FU, irinotecan).
The
growth in the number of patients with cancers is being driven by an aging population and improved diagnostic tools. According to the
National Cancer Institute (NCI), more than half (~50 - 60%) of all cancer patients undergo some type of radiotherapy during the course
of their treatment. Confirming the patient estimate from the NCI, the American Society for Therapeutic Radiology and Oncology (ASTRO)
factsheet states approximately 67% of approximately 1.25 million cancer patients are treated with radiation therapy annually, either
one or more times during the course of treatment. In addition, in a study published by the Journal of Clinical Oncology in 2016, it is
estimated that the number of cancer patients needing radiation therapy will increase by 22% in the next 10 years. (See “The
Future of Radiation Oncology in the United States From 2010 to 2020: Will Supply Keep Pace With Demand?” Benjamin D. Smith, Bruce
G. Haffty, Lynn D. Wilson, Grace L. Smith, Akshar N. Patel, and Thomas A. Buchholz Journal of Clinical Oncology 2010 28:35, 5160-5165).
The
American Society of Clinical Oncology (ASCO) estimates more than 80% of cancers in the U.S. occur in people in the age group of 50 and
above with over 60% of cancers occurring in those 65 and over. (See, 2018 Clinical Cancer Advances Report, American College of
Clinical Oncology, 2018). For example, according to the American Cancer Society (ACS), more than 90% of colorectal cancer patients are
individuals aged 50 years and older, with approximately 40% of all cases occur in patients aged 75 years and over. The Colon Cancer Alliance
estimates that 90% of new cases and 95% of deaths from colorectal cancers occur in people aged 50 or older. Also, the U.S. Census estimates
that the age group of 65-84 will grow by 23% within the next five years, indicating a likely increase in the overall number of cancer
patients in the U.S.
The
table below details the number and rate of cancers occurring in the United States in 2022:
Estimated
New Cancer Cases in the U.S.
Male |
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Female |
Prostate |
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268,490 |
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27 |
% |
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Breast |
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287,850 |
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31 |
% |
Lung & bronchus |
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117,910 |
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12 |
% |
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Lung & bronchus |
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118,830 |
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13 |
% |
Colon & rectum |
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80,690 |
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8 |
% |
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Colon & rectum |
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70,340 |
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8 |
% |
Urinary bladder |
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61,700 |
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6 |
% |
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Uterine corpus |
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65,950 |
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7 |
% |
Melanoma of the skin |
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57,180 |
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6 |
% |
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Melanoma of the skin |
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42,600 |
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5 |
% |
Kidney & renal pelvis |
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50,290 |
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5 |
% |
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Thyroid |
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31,940 |
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3 |
% |
Non-Hodgkin lymphoma |
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44,120 |
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4 |
% |
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Non-Hodgkin lymphoma |
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36,350 |
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4 |
% |
Oral cavity & pharynx |
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38,700 |
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4 |
% |
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Kidney & renal pelvis |
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28,710 |
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3 |
% |
Leukemia |
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35,810 |
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4 |
% |
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Pancreas |
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29,240 |
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3 |
% |
Pancreas |
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32,970 |
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3 |
% |
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Leukemia |
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24,840 |
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3 |
% |
All sites |
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983,160 |
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All sites |
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934,870 |
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2022
Clinical Cancer Advances Report, American College of Clinical Oncology, 2022
Colon
Cancer Alliance. Colorectal Cancer Survival Rates from Facts and Figures, 2017. Chicago, IL; 2017
The
U.S. 2019 estimated incidence, deaths and five-year survival rate of cancer patients responsive to radiation therapy is significant (ACS
Facts & Figures, 2019). The top cancers responsive to radiation are shown, based on the number of newly diagnosed patients. The incidence
rates for some cancers are increasing by approximately 1-2% per year in the U.S. The number of newly diagnosed patients is significant
and growing due to the aging of the population and improved diagnostic techniques.
All
of the listed cancers illustrate the opportunity presented for radiation sensitizers. Of note is the low five-year survival of pancreas,
brain, lung and esophagus cancers—all are candidates for Shuttle’s pipeline of radiation sensitizing compounds. Cancers with
low survival rates are of interest since they show a high unmet need for new therapeutics and an opportunity for Shuttle to gain significant
uptake of their pipeline compounds.
Factors
that are challenges and may restrict growth in the radiation sensitizer market include the safety and tolerability of many of the newer
agents with radiation sensitizing properties; a regulatory environment that engenders greater levels of scrutiny of clinical practice
issues; the high cost of newer agents; and the changing (and more restrictive) reimbursement environment in radiation oncology through
CMS (Center for Medicare and Medicaid Services) and private payors. These factors may negatively impact the potential for growth in the
U.S. market.
Many
of the drugs used “off-label” as radiation sensitizers currently require close scrutiny of their potential for side effects
that can affect the safety and tolerability of their use with patients. All of the current agents carry significant potential for side
effects that can affect patients’ therapies and quality of life. Radiation sensitizing agents can cause both acute and chronic
side effects in patients. Side effects can vary from person to person depending on age, sex, type of cancer, dose given per day, total
dose given, and the patient’s general medical condition. Some common side effects of currently used radiation sensitizers include
leukopenia, skin damage, hair loss, fatigue, bladder problems, nausea, fibrosis, memory loss, infertility, and enhanced risk of developing
a second cancer, which may arise as a result of the patient’s weakened immune system due to cytotoxic drugs used in treatment or
when newer biologic agents cause the over-production of specific cytokines or proteins, which can lead to developing secondary cancers.
Over
the past five years, the FDA has taken an increasingly conservative approach to the approval of new agents for oncology treatment. There
is greater scrutiny of results from clinical trials regarding progression free survival, overall survival, and safety and tolerability
of new agents. Restrictions such as black box warnings and REMS (Risk Evaluation and Migration Strategies) are being applied to more
new products over the past five years compared to the previous five years. These restrictions require physicians to be more careful in
evaluating the use of newer agents and newer diagnostic tools to select the most appropriate patients for newer approved agents.
Many
of the new agents are molecularly targeted therapies that are biologic in their development and manufacturing. The cost of the newer
agents can be significant. For example, the cost for Avastin for one treatment course as a radiation sensitizer is estimated at $9,000-12,000
according to one Key Opinion Leader in the U.S. (Carl Schmidt, Consultant, Shuttle Pharmaceuticals Holdings, Inc., Business Plan 2018).
Recently, a CAR-T gene therapy from Novartis was launched with a yearly cost of $475,000. Further, as many private payors scrutinize
the cost and appropriate use of newer drugs, they require physicians to provide justification for use of newer agents through prior authorization
requests, use of step therapy and to follow guidelines that delay treatment, increase administrative costs and limit the therapeutic
choices for physicians and hospitals.
Public
payors for radiation oncology therapies such as CMS have instituted reimbursement reductions that potentially affect the overall cost
of therapy and can limit the acceptance of newer agents. With CMS announced reductions in reimbursement for radiation oncology, there
is increased pressure to find a more potent radiation sensitizer agent with reduced side effects, and greater cost-effectiveness.
Escalating
healthcare spending is adding pressure on government and commercial payors to contain drug costs. While the oncology space is arguably
not as tightly managed by payors as other therapeutic areas, utilization management of costly cancer therapeutics has become an increasing
priority for U.S. payors, especially with the advent of biologics. Payors (and market access agencies in the EU) will most often restrict
high-cost drugs, drugs with limited or no survival benefits, and drugs deemed to be at high risk for widespread off-label use.
Beyond
efforts at cost containment by insurers (which often require patients to first be prescribed lower cost drugs in order to determine effectiveness
prior to allowing for reimbursements for more expensive (or less cost effective) drugs), payors are also looking toward implementing
clinical pathways as a way to maintain or improve health outcomes while lowering costs. Clinical pathways are designed to address the
limitations of prior authorization and of reduced fee schedules, offering more durable cost containment to payors. These pathways may
lead to cost savings by encouraging the use of generics, streamlining treatment choices, and reducing side effects while maintaining
outcomes.
Engineered
Radiation Sensitizers
The
market for radiation sensitizers in selected cancer types is defined by the need to improve local-regional tumor control. Treatment regimens
have been developed to address patient needs for tumor control and quality of life. Since the initial applications of Ropidoxuridine
and selective HDAC inhibitors are as adjuncts to the standard of care for the treatment of radiation responsive cancers, the unmet needs
of the market lie in the potential for the following:
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Improvement
in efficacy of radiation treatments as determined by overall survival, progression free survival and response rates in comparison
to currently used “off-label” sensitizer drugs. |
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Reduction
in radiation doses needed to affect a positive clinical response for the patient. |
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Reduction
in the surgical extent that is needed to remove residual cancer. |
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Improvement
in quality-of-life outcomes. |
Various
sources have estimated that more than 800,000 patients in the U.S. are treated with radiation therapy for their cancers. According to
the American Cancer Society, about 50% are treated for curative purposes and the balance for palliative care. The market opportunity
for radiation sensitizers lies with the 400,000 patients treated for curative purposes. The number of patients being treated with RT
is expected to grow by more than 22% over the next five years. Based on a rough estimate of a course of radiation sensitizing brand drug
therapy (off label at this time) of $12,000 per patient—the market size would be in excess of $4.0 billion. This would represent
about 4% of the annual cost of cancer care in the U.S.
In
the past two decades, developments in the field of oncology have resulted in an increase in the number of clinical trials of marketed
products that exhibit radiation sensitizing properties. The following are a few examples of recently approved products that exhibit radiation
sensitizing properties: topotecan (Hycamtin®) was approved for ovarian and small-cell lung cancer and also in cervical cancer when
used in combination with cisplatin. Irinotecan (Camptosar®) is used for metastatic colorectal carcinoma, trastuzumab (Hercepetin®)
for breast cancer, and gefitinib (Iressa®) for locally advanced non-small-cell lung cancer. However, the claims on radiation sensitization
are anecdotal in the scientific literature.
In
addition, clinical trials are in progress to develop novel molecules (such as poly (ADP-ribose) polymerase (PARP), histone deacetylase
(HDAC) inhibitors (such Zolinza® (vorinostat) and heat-shock protein 90 (hsp90) inhibitors with potential to increase the therapeutic
use of compounds with radiation sensitizing properties for other cancers. Several drugs with radiation sensitizing properties are currently
in Phase III clinical trials, such as nimorazole (for head and neck cancer), motexafin gadolinium (for brain metastases), and cisplatin
(for cervical cancer); though none are likely to apply for a radiosensitizing claim with the FDA since the radiosensitizing element in
their clinical trials are not primary endpoints. While additional drugs with radiation sensitizing properties are expected to be launched
in the future, thereby driving the radiation sensitizers market further, to date, there is no indication that any drug in development
is expected to be approved specifically as a radiation sensitizer.
The
competitive environment for “off-label” radiation sensitizers for solid tumor cancers is anticipated to become predominantly
generic. Avastin, Erbitux, Camptosar and Xeloda have or will lose patent protection in the next three years. Newer products under investigation
or approved, such as Vectibix® (panitumumab) from Amgen will be promoted as having radiation sensitizing properties, along with indications
for treatment for specific cancers. The high cost of these new therapies coupled with limited efficacy compared to current standard of
care will be constrained by both public and private payors. Other new agents are in development but will face similar challenges.
We
anticipate that new products launching into the cancer market with anecdotal claims for use as radiation sensitizers with improved effectiveness,
quality and tolerability will initially be limited in their growth until they have been added to established clinical pathways and guidelines.
If their effectiveness, quality and tolerability are demonstrated clinically, as determined by the FDA, it is anticipated the National
Comprehensive Cancer Network (NCCN), the leading authority in oncology drug evaluation for treatment guidelines, would issue a recommendation
and addition to standard of care within approximately six to twelve months after launch. An NCCN recommendation would positively impact
the growth potential for a new product entering the market. Also, payors, both public and private, would add the new product to their
approved drug lists and provide reimbursement giving providers incentive to use the product as neoadjuvant and adjuvant therapy to standard
of care.
As
with many cancer therapies, side effects can often have a distinct impact on quality of life and influence the potential for market growth.
Patients increasingly have a stronger voice in the decision-making process for the appropriate therapies and costs to treat their cancers.
As payors are increasingly placing more of the financial burden of the cost of therapy directly on patients, patients are voicing their
opinions to their physicians and payors which have a direct effect on which products are selected. Many of the current therapies have
significant side effects:
Private
insurers are expected to have more restrictive formularies and medical benefits in which patients will be expected to carry more of the
burden of the cost of drugs. Also, it is anticipated that increased application of third party developed treatment guidelines, such as
those from the NCCN (National Comprehensive Cancer Network), are expected to be used by private payors to limit the access to products
for specific conditions through prior authorizations and implementation of step therapy or increased out of pocket cost approaches. As
many of the current drugs used as radiation sensitizers are expensive and not approved for use as radiation sensitizers (thus, such treatment
is “off label”), and as many of the products in clinical trials are expected to be at the current or higher price levels,
new products that may be specifically approved for an indication as the only approved product as a radiation sensitizer will have increased
consideration for reimbursement.
CMS
is increasingly moving many patients to private insurance through Medicare Advantage and ACOs. Medicare Advantage plans are capitation
HMO and PPO plans offered through private insurers to Medicare patients. ACOs are being developed to increase quality of care for their
patients. Most of the new ACOs are initially positioned for Medicare patients with over 400 approved by CMS. Several studies from the
Center for Health Strategies, 2017, Journal of American Medical Association, 2018 and the Brookings Institute, 2015 estimated that almost
1000 ACOs for Medicare and non-Medicare patient populations would be approved by CMS or developed by a variety of healthcare entities
to begin operating under the ACA in 2017. We expect the growth in ACOs to continue, regardless of any changes that may be made to the
ACA going forward. In early 2017, Health Affairs, a magazine tracking ACOs, estimated that over 22 million patients are enrolled in Medicare
and private ACOs. To address the quality of care measures designated by CMS and to gain additional incentives, use of clinical pathways
or treatment guidelines is anticipated to be increasingly instituted to manage patient care. The impact on the uptake of new products
in this environment can be profound if the new product is first in class and is included in national guidelines from organizations such
as the NCCN and/or approval by the regional CMS contracting groups.
ROPIDOXURIDINE
The
halogenated thymidine (TdR) analogs, bromodeoxyuridine (BUdR) and iododeoxyuridine (IUdR), are a class of pyrimidine analogs that have
been recognized as potent radiosensitizing agents since the early 1960s. (See Kinsella TJ. An Approach to the Radiosensitization
of Human Tumors. Cancer J Sci Am. Jul-Aug 1996:2(4); 184-193). Their cellular uptake and metabolism are dependent on the TdR salvage
pathway where they are initially phosphorylated to the monophosphate derivative by the rate-limiting enzyme, thymidine kinase (TK). (See
Shewach DS, Lawrence TS. Antimetabolite radiosensitizers. J Clin Oncol, Sep 10 2007; 25(26):4043-4050). After sequential phosphorylation
to triphosphates, they are then used in DNA replication, in competition with deoxythymidine triphosphate (dTTP), by DNA polymerase. DNA
incorporation is a prerequisite for radiosensitization of human tumors by the halogenated TdR analogs, and the extent of radiosensitization
correlates directly with the percentage TdR replacement in DNA. (See Lawrence TS, Davis MA, Maybaum J, Stetson PL, Ensminger WD.
The Dependence of Halogenated Pyrimidine Incorporation and Radiosensitization on the Duration of Drug Exposure. International Journal
of radiation oncology, biology, physics. Jun 1990; 18(6);1393-1398). The molecular mechanisms of radiosensitization are most likely
the result of increased susceptibility of TdR analog-substituted DNA to the generation of highly reactive uracil free radicals by ionizing
radiation (IR), which may also damage unsubstituted complementary-strand DNA. Repair of IR damage may also be reduced by pre-IR exposure
to these analogs.
The
rationale for using Ropidoxuridine as a radiation sensitizer is based on prior clinical studies with the active metabolite IUdR; identified
in NIH laboratories as a potent radiation sensitizer. Ropidoxuridine is an orally available prodrug of IUdR. In the body, Ropidoxuridine
is metabolized in the liver into IUdR. IUdR is incorporated into the DNA of actively growing cells and when cells are exposed to ionizing
radiation, DNA strand breaks are generated, resulting in more cell death and radiation sensitization. (See Gurkan E, Schupp JE,
Aziz MA, Kinsella TJ, Loparo KA. Probabilistic modeling of DNA mismatch repair effects on cell cycle dynamics and iododeoxyuridine-DNA
incorporation. Cancer Res. Nov 15 2007; 67(22):10993-11000).
Most
of the clinical efficacy data were obtained from NIH supported studies performed with IUdR, the active metabolite of Ropidoxuridine.
However, IUdR requires constant infusion over six weeks of therapy which creates a significant compliance issue for patients. Ropidoxuridine
can be given as a capsule for oral administration, resulting in greater ease of medication delivery and potentially improved compliance
and fewer complications.
Over
the last 20 years, there has been renewed interest in these halogenated TdR analogs as experimental radiation sensitizers in selected
cancer patient groups. These analogs are rapidly metabolized in both rodents and humans, principally with cleavage of deoxyribose and
subsequent dehalogenation by hepatic and extrahepatic metabolism, when given as a bolus infusion with a plasma half-life of <5 min.
Consequently, prolonged continuous or repeated intermittent drug infusions over several weeks before and during irradiation are necessary,
based on in vivo human tumor kinetics, to maximize the proportion of tumor cells that incorporate these analogs into DNA during the S
phase of the cell cycle. (See Fowler JF, Kinsella TJ. The Limiting Radiosensitization of Tumors by S-phase Sensitizers. Br
J Cancer. 1996;74 (Suppl)(27):294-296). Phase I and Phase II trials using prolonged continuous or repeated intermittent intravenous
infusions of BUdR or IUdR before and during radiation therapy (RT) have focused principally on patients with high-grade brain tumors.
These clinically radiation resistant tumors can have a rapid proliferation rate (potential tumor doubling times of 5–15 days) and
are surrounded by non-proliferating normal brain tissues that show little to no DNA incorporation of the TdR analogs. As such, high-grade
brain tumors are ideal targets for this approach to radiation sensitization. In Phase I/Phase II clinical trials, prolonged survival
outcomes were observed compared to RT alone in patients with anaplastic astrocytomas and in patients with glioblastoma multiforme IUdR
continuous IV infusion (1000 mg/m2/ day/ 14 days), Total 39 patients (F. Sullivan, et al. Int J Radiat Oncol Biol Phys. 1994;
30(3):583-90.) A therapeutic gain in clinical radiation sensitization using these halogenated TdR analogs was proposed for other types
of clinically poorly radiation responsive (radiation resistant) cancers, including locally advanced cervical cancer, head and neck cancers,
unresectable hepatic metastases from colorectal cancers, and locally advanced sarcomas, based on the results of other Phase I/Phase II
clinical trials.
Target
Indication: Glioblastoma, Sarcomas and Rectal Cancers
After
completion of the Phase I clinical trial of Ropidoxuridine and RT in advanced GI cancers, we proposed to perform Phase II efficacy clinical
trials in brain tumors (glioblastoma), soft tissue sarcomas, and rectal cancers. Glioblastoma multiforme is a deadly malignancy of the
brain with no known cure. Radiation therapy provides delay of disease progression and is standard of care following surgical resection
or biopsy. Radiation therapy is combined with Temodar, a drug that has shown activity (~ four months survival benefit) in treating brain
tumors. Preliminary data using radiation therapy in combination with IUdR resulted in a delay of disease progression of up to six months.
We propose to test IPdR in combination with radiation therapy in the Phase II clinical trial. Similarly, delay in disease progression
has been observed following treatment of sarcomas by the combination of IUdR and RT. Based on the Phase I data of our clinical trial
we know that therapeutic levels of IUdR are reached by administering the orally available prodrug, IPdR.
Clinical
Data
The
Phase I results of the clinical trial supported by an SBIR contract to Shuttle Pharma and a sub-contract to the Brown University Oncology
Group (BrUOG) at the LifeSpan/Rhode Island Hospital were reported by the subcontractor at the 30th EORTC-NCI-AACR Symposium in November
2018 and in the medical journal, Clinical Cancer Research, in 2019. Eighteen patients completed dose escalation to 1800 mg/day for 30
days, establishing the maximum tolerated dose (MTD) of 1,200 mg/day in combination with RT. Therapeutic blood levels of IUdR were achieved.
Four patients were scored as partial responses, nine patients had stable disease and one patient progressed in the target lesions. These
data support advancing IPdR and RT to clinical trials for the FDA to determine efficacy.
Development
Plan
A
key to driving the Ropidoxuridine product forward, the new formulation of IPdR/TPI, is the development of a clinical plan with aggressive
timelines and support within the radiation oncology community to participate in clinical trials with the appropriate patients to ensure
a comprehensive NDA dossier for each product. Initially, the plan is focused on the Phase I and Phase II clinical trials. Upon completion
of these studies, we will determine whether to extend the Phase II study to a randomized Phase II, or to perform a randomized Phase III
clinical trial. Such determination will be based, in part, on results of the initial clinical trials and the end of a Phase II meeting
with the FDA. Shuttle Pharmaceuticals requested and received FDA orphan drug status for Ropidoxuridine as a clinical radiation sensitizer
for treatment of glioblastoma and pre-operative treatment of soft tissue sarcomas. As a result, the application for “orphan”
designation for Ropidoxuridine with RT for glioblastoma has been approved. The application for sarcomas, however, was not approved and
will require addressing certain FDA comments and resubmission. The IPdR/TPI formulation clinical plan will focus on resectable stage
II and III rectal cancer patients.
Our
clinical plan for Ropidoxuridine development includes:
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GMP
manufacture and formulation of 24 kg of Ropidoxuridine for use in clinical trials. |
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Completion
of pre-clinical Ropidoxuridine and Temodar drug-drug interaction safety study. |
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Submission
of an IND for a Phase II clinical trial of Ropidoxuridine, Temodar and RT in glioblastoma. |
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Negotiations
for contract research organizations (CRO) contracts to perform the Phase II clinical trial. |
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Completion
of the Phase II clinical trial in glioblastomas to determine appropriate dosing, quality, effectiveness and tolerability. |
We
believe the data obtained from the NIH/NCI SBIR funded Phase I clinical trial supports efforts to raise additional capital to enable
performing the Phase II clinical trials of Ropidoxuridine. We aim to conduct and complete the Phase II clinical trial so that we may
present data to the FDA for its determination of efficacy. We believe this will support our efforts to raise the additional required
capital to fund Phase III clinical trials and seek FDA approval of an NDA with “orphan” designation.
The
clinical plan for the IPdR/TPI formulation will focus on resectable Stage II and Stage III rectal cancer patients. Nonetheless, we cannot
guarantee the successful completion of any of these trials. Our inability to meet any of the aforementioned milestones in the Phase II
or Phase III clinical trials will cause us to be unable to proceed with our present efforts and will likely cause us to be unable to
raise additional funds.
Our
HDAC Small Molecule Delivery Platform
General
Since
the founding of Shuttle Pharma, our discovery research and development efforts have been focused on our small molecule technology delivery
platform which uses HDAC inhibitors, designed to target cancer cells, while protecting healthy tissue.
HDACs
are a class of enzymes that regulate gene expression through chemical modification of histones and non-histone proteins. Increased HDAC
activity leads to a more condensed chromatin (which is a protein complex consisting of DNA and other proteins), decreased gene expression
and loss of key gene products, including tumor suppressor gene function. Inhibition of HDAC activity leads to a more open chromatin and
increased expression of the key gene products. This chromatin modification underlies the epigenetic cellular regulatory system and is
an area of intense investigation.
Our
research and development efforts to date have focused on the discovery of novel, dual functional molecules for potential use in cancer
treatment as radiation sensitizers of cancers, protectors of normal tissues, and activators of the immune responses to antigens expressed
by irradiated cancer cells. To date, we have produced three candidate molecules:
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SP-1-161,
a candidate lead of compounds demonstrating activation of the “ATM” gene product (mutated in Ataxia-Telangiectasia).
Ataxia-Telangiectasia is a human genetic disease characterized by neurological, immunological and radiobiological clinical features. |
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SP-2-225,
a candidate lead of compounds demonstrating Class II (HDAC6) selective inhibition. HDAC6 is a molecule integral to the presentation
of antigens by macrophages to T-lymphocytes. |
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SP-1-303
is a candidate Class I HDAC inhibitor with preferential efficacy against ER positive cancers. |
SP-1-161
- A Dual Functional Agent
SP-1-161
is an HDAC inhibitor of the hydroxamate chemical class of compounds and an ATM activator of the indole chemical class. HDACs modify histones
and non-histone proteins, which are key components of the chromatin structure, gene expression regulation, and cell growth. HDAC inhibitors
inhibit cell proliferation, angiogenesis and immunity. Eighteen human HDACs have been identified, subdivided into four classes based
on sequence and functional homology. In cancer cells, HDAC activity silences tumor suppressor genes important for cell growth regulation
and to chromosomal instability. Abnormal HDAC activity is also associated with tumor cell growth, invasion, metastasis and resistance
to therapy. Therefore, inhibitors of HDACs have emerged as anti-cancer agents for cancer therapy. Vorinostat and romidepsin have been
approved by the FDA for treatment of patients with relapsed or refractory T-cell lymphomas. In addition, panobinostat received FDA approval
for treatment of recurrent multiple myeloma in combination with bortezomib and dexamethasone.
In
preclinical studies, SP-1-161 inhibited the activity of pan-HDACs and activated the ATM gene product. ATM is a critical protein for the
activation of the cell stress response for cellular recovery from radiation exposure in normal cells, but not in cancer cells. ATM activates
the P53 protein, referred to as the “guardian of the genome,” and serves as a tumor suppressor critical for normal cell function
and activation of programmed cell death in cancer cells.
In
preclinical studies, SP-1-161 protected normal breast epithelial cells (184A1) following exposure to ionizing radiation while increasing
sensitivity of breast cancer cells (MCF7). SP-1-161 provides this dual function in a single molecule and this molecule is differentiated
from other HDAC inhibitors by treatment of cancers while protecting normal cells.
SP-2-225
SP-2-225
is a selective HDAC inhibitor that affects histone deacetylase (HDAC6) and is a member of the class IIb HDAC family. Class II HDACs play
important roles in cancer motility, invasion, neurological diseases, and immune checkpoint. HDAC6 inhibition has been most extensively
studied for its role in the treatment of hematological cancers. HDAC6 is unique among HDAC enzymes in having two active catalytic domains
and a unique physiological function. In addition to the modification of histones, HDAC6 targets specific substrates including α-tubulin
and HSP90, and are involved in protein trafficking and degradation, cell shape and migration. Selective HDAC6 inhibitors are an emerging
class of pharmaceuticals due to the involvement of HDAC6 in pathways related to neurodegenerative diseases, cancer and immunology. Specifically,
its potential to affect regulation of the immune system and enhance the immune response in cancer is of great interest. With the introduction
of check-point inhibitors, CAR-T therapies and personalized medicine in cancer, regulation of the immune response to this therapy is
of significant clinical and commercial interest. (See Grindrod S, Brown M, Jung M. “Development of dual Function Small Molecules
as Therapeutic Agents for Cancer Research,” Poster presentation #A178, American Association of Cancer Research Oct 2017).
Selective
inhibition of HCAC6 reduces dose limiting side effects associated with non-selective HDAC inhibitors. Selective HDAC6 inhibitors may
be combined with other cytotoxic agents. Shuttle’s discovery of selective HDAC inhibitors has yielded several HDAC6 selective candidate
molecules including SP-2-225. HDAC6 inhibitors are under investigation for roles in the treatment of diseases such as multiple myeloma.
SP-1-303
- Target Indication: Breast Cancer
Histone
deacetylase inhibitors sensitize cancers to the effects of radiation, protect normal tissues from radiation injury and activate the
immune system. SP-1-303 is a selective Class I HDAC inhibitor that inhibits HDAC1, 3 and 6 and has direct cellular toxicity in ER positive
breast cancer cells. Furthermore, SP-1-303 increases the PD-L1 expression level in a time-dependent manner, support combination of SP-1-303
with an immune checkpoint blocker to enhance the therapeutic benefits. We are currently conducting preclinical efficacy studies of these
molecules.
Development
Plan
The
HDAC inhibitor platform of candidate molecules will require pre-clinical evaluation, completion of IND-enabling studies and the lead
drug candidates will be tested in Phase I clinical trials for pharmacokinetics and MTD determination. We have three lead candidates for
potential development for the treatment of solid tumors, including breast cancer, lung cancer and multiple myeloma.
The
results of Phase I and Phase II clinical trials will determine further drug development and Shuttle will seek to establish collaborative
partnerships with other pharmaceutical companies to complete pre-clinical and clinical development, drug manufacturing and marketing
of our product candidates. In the event we are unsuccessful in completing our clinical trials at any stage, or in the event we obtain
negative results, we will likely be unable to raise additional funding related to our HDAC studies or will have to change direction of
our research efforts regarding the HDAC inhibitor platform of candidate molecules.
Our
Manufacturing Strategy
We
have no manufacturing facilities that are company owned or operated. We have performed laboratory scale synthesis and testing in our
research laboratories in Gaithersburg, Maryland. GMP synthesis of API, drug formulation and human dosage preparation will be performed
under contracts with third-party manufacturers.
Strategic
Agreements
We
have developed important strategic agreements with academic institutions for access to resources such as intellectual property, core
facilities and contracting relationships. In addition, we have established an agreement with Propagenix for intellectual property in-licensing.
Our current and ongoing relationships include:
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Sub-contractor
for the SBIR supported African-American prostate cancer patient health disparities project (completed). The conditional reprogramming
of cells (CRC) technology was invented at Georgetown University and Georgetown University owns the intellectual property. Propagenix
holds the license for the intellectual property for the CRC technology from Georgetown University. The intellectual property for
cells derived from African-American patients under the Georgetown University subcontract belong to Shuttle Pharmaceuticals, Inc.
based on our sub-licensing agreement with Propagenix. |
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Sub-contractor
for the SBIR supported metabolomic predictive biomarker project (completed). The metabolomic biomarker intellectual property belongs
to Georgetown University and Shuttle Pharma holds an exclusive option to license the intellectual property. |
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Sub-contractor
of the SBIR supported Phase I clinical trial of IPdR and RT (completed). |
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Research
collaboration to develop heavy oxygen molecules for proton radiation sensitizer applications. |
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George
Washington University |
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Material
transfer agreement for testing HDAC inhibitor effects in immune model systems |
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The
material transfer agreement that protects our HDAC inhibitor intellectual property is with George Washington University, transferring
drugs for research purposes and sharing authorship on publications. There is no transfer of funds related to such activities. |
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License
agreement for “conditional re-programmed cell” (CRC) technology. The cells established by Shuttle Pharma scientists at
Georgetown University belong to us, based on the sublicense from Propagenix, Inc. An up-front licensing fee of $25,000 was paid to
Propagenix. No other future milestone or royalty payments owed related to the Propagenix agreement. |
Competition
“Off-Label” Use
![](https://content.edgar-online.com/edgar_conv_img/2023/03/15/0001493152-23-007686_form10-k_002.jpg)
Drugs
with radiation sensitizing properties.
Our
Product Candidates
We
are advancing a clinical stage product candidate, Ropidoxuridine, that we believe will target cancer cells while protecting healthy tissue
when used in conjunction with RT.
Ropidoxuridine
Ropidoxuridine,
an orally available halogenated pyrimidine with strong cancer radiation sensitizing properties, is our lead “clinical phase”
product candidate. Halogenated pyrimidines are incorporated into DNA by rapidly growing cancer cells and become more sensitive to the
effects of RT. We have received an SBIR contract from the NIH to fund a Phase I clinical trial in collaboration with Brown University
at the Lifespan/Rhode Island Hospital to determine the maximum tolerated dose in patients with advanced gastrointestinal cancers. In
connection with the trial, NCI has approved the Phase I clinical protocol and provided drug and clinical data management support to Rhode
Island Hospital. The Phase I clinical trial has been completed and the results support advancing Ropidoxuridine to Phase II clinical
trials of brain tumors, sarcomas and other tumors through CROs.
The
following tables provide data from reported clinical trials of Iododeoxyuridine and RT therapy in brain cancers (glioblastoma multiforme)
and high-grade sarcomas. Our primary strategy for Ropidoxuridine and RT therapy is to provide oral drug delivery to effect radiation
sensitization of cancers and validate effectiveness in glioblastoma and sarcoma, potential “Orphan” indications.
Brain
Cancer Treatment
Efficacy
compared to historical RT-alone controls for treatment
of
high-grade primary brain tumors (RTOG*, NCI** trials)
![](https://content.edgar-online.com/edgar_conv_img/2023/03/15/0001493152-23-007686_form10-k_003.jpg)
** |
IUdR
continuous IV infusion (1000 mg/m2/ day/ 14 days), Total of 39 patients (F. Sullivan, et al. Int J Radiat Oncol Biol Phys. 1994;
30(3):583-90) |
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* |
IUdR
continuous IV infusion (2000 mg/m2/ 4 day infusion/ 6 week treatment), Total of 21 patients (R. Urtasun, et al. Int J Radiat Oncol
Biol Phys. 1996;36(5):1163-7.) |
Sarcoma
Treatment
Efficacy
compared to historical RT-alone controls for treatment
of
high-grade sarcomas (University of Michigan*** trials)
![](https://content.edgar-online.com/edgar_conv_img/2023/03/15/0001493152-23-007686_form10-k_004.jpg)
*** |
16
patients were treated with continuous infusion (1000-1600 mg/m2/day) plus RT (J.M. Robertson, et al. Int J Radiat Oncol Biol Phys.
1995; 31(1):87-92). |
In
addition to our primary product candidate, we are developing and planning to develop other cancer radiation sensitizers and radiation
protectors, which target protecting normal tissue during the administration of RT, and other products utilizing our HDAC small molecule
technology platform.
SBIR
Contracts
The
SBIR Program
The
Small Business Innovation Research program, as developed by Congress under the Small Business Innovation Development Act of 1982, is
designed to encourage domestic small businesses to engage in Federal Research/Research and Development (“R/R&D”) that
has the potential for commercialization. Through a competitive awards-based program, SBIR enables small businesses to explore their technological
potential and provides the incentive to profit from its commercialization. Some of the SBIR’s program goals include stimulating
technological innovation, meeting Federal research and development needs and encouraging participation in innovation and entrepreneurship.
The
SBIR program is a three-phase program. Phase 1 is to establish the technical merit and commercial potential of the proposed R/R&D
efforts. Phase 2 is to continue the R/R&D efforts initiated in Phase 1 and funding is based on the results achieved in Phase 1. Phase
3 allows for the small business to pursue commercialization objectives resulting from the Phase 1 and 2 R/R&D activities. In addition,
companies that have successfully completed Phases I and II are also eligible to apply for Phase IIb funding.
In
addition to the SBIR contract to fund our Phase I clinical study on Ropidoxuridine in combination with RT for treatment of advanced gastrointestinal
cancers, we have also received awards of SBIR contracts from the NIH to address prostate cancer health disparities and prostate cancer
radiation biomarker development.
As
of the date of this Annual Report, all SBIR contracts received by the Company have been completed. The Company submitted a final report
for SBIR contract # 75N81018C00031 on March 28, 2022. The following summary of terms for the three Phase II SBIR contracts is provided
below.
Summary
of SBIR Contracts
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SBIR
contract #261201400013C: Phase I ($191,971) and Phase II ($1,428,117) for Clinical Development of IPdR for Radiosensitization, dates
September 19, 2014 through August 3, 2017, Subcontract to Brown University/LifeSpan Rhode Island Hospital. No related intellectual
property. |
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SBIR
contracts # HHSN261201600038C; Phase I ($224,687) and #261201800016C: Cell-Based Models for Prostate Cancer Health Disparity Research
- Moonshot Project (Phase II), award amount $1,484,350, dates September 19, 2016 through September 16, 2021, Subcontract to Georgetown
University, Intellectual property consists of cell cultures and is property of Shuttle Pharmaceuticals, Inc. via licensing agreement. |
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SBIR
contracts #HHSN261201600027C ($299,502) and #75N81018C00031: Predictive Biomarkers of Prostate Cancer Patient Sensitivity for Radiation
Late Effects, award amount $1,903,015, dates September 16, 2019 through March 15, 2022. Subcontract to Georgetown University, Intellectual
property is owned by subcontractor Georgetown University with option to license to Shuttle Pharmaceuticals, Inc. |
Prostate
Cancer Studies to Address Health Disparities
Prostate
cancer health disparities studies have shown that African-American men are at higher risk for developing prostate cancer, as well as
at higher risk of cancer specific death rates as compared to Caucasian American men. The causes of disparities have been attributed to
socioeconomic differences, environmental exposures and biological factors. Most disparities studies have been population based, in part,
due to the lack of relevant in vitro and in vivo models to support biological studies.
Shuttle
Pharma has been awarded Phase I and II SBIR contracts entitled “Cell-based models for prostate cancer health disparity research”
to develop African-American prostate cancer cell lines with donor matched normal prostate epithelial cell lines from African American
men.
The
commercialization of the prostate cells will require additional support through the SBIR funding mechanism. Companies that have completed
Phase I and II SBIR awards are eligible to apply for Phase IIb SBIR funding. These awards are intended to de-risk a project by providing
up to $4 million of matching funding for product development to commercialization. We intend to apply for such government funding to
advance laboratory facilities and to expand the availability of the cell cultures. We did not raising capital through our IPO for the
health disparities project. Should we not be successful for SBIR IIb funding, we will pause and may have to terminate this project.
Prostate
Cancer Biomarker Development
Patients
treated for prostate cancer may experience treatment related late effects that adversely affect quality of life and may prove life-threatening.
Shuttle Pharma has been awarded a Phase I SBIR contract entitled “Predictive biomarkers for prostate cancer patient sensitivity
for radiation late effects” to determine the technical and commercial feasibility of a biomarker panel predictive of radiation
mediated late effects in patients treated for prostate cancer.
Through
collaboration with Georgetown University, patients treated with SBRT for prostate cancers will be analyzed for urinary and rectal symptoms
and their blood will be analyzed by mass spectroscopy for predictive biomarkers. The discovery and validation of metabolite panels to
serve as a predictive biomarker of patient outcomes following radiation therapy will support future development and commercialization
of a diagnostic product through a Phase 2 SBIR effort.
The
development to commercialization of the metabolite predictive biomarker panel will require additional support through the SBIR funding
mechanism. We will be eligible to apply for Phase IIb SBIR funding the next round of solicitation. A Phase IIb will help de-risk the
project by providing up to $4 million of matching funds for performing the clinical validation trial for product development to commercialization.
We intend to apply for such government funding to advance this project. We do not intend to use the funds raised through our IPO for
the health disparities project. Should we not be successful for SBIR IIb funding, we will terminate this project.
Collaborative
Arrangements
While
we intend to enter into collaborative arrangements to further develop our drug candidates in the future, at present we have not entered
into any collaborative arrangements with third parties to develop our drug candidates as we are still completing clinical trials and,
as a result, there can be no assurance that we will be able to do so on commercially reasonable terms or otherwise.
Intellectual
Property
We invest significant amounts in research and development.
Our research and development expenses before contract reimbursements were $1,699,985 and $1,527,185 for the fiscal years ended December
31, 2022 and 2021 respectively. After reimbursements for contracts of $211,455 and $505,377 for the fiscal years ended December 31, 2022
and 2021, net research and development expenses were $1,488,530 and $1,021,808, respectively.
We
are seeking multifaceted protection for our intellectual property that includes licenses, confidentiality and non-disclosure agreements,
copyrights, patents, trademarks and common law rights, such as trade secrets. We enter into confidentiality and proprietary rights agreements
with our employees, consultants, collaborators, subcontractors and other third parties and generally control access to our documentation
and proprietary information.
As
of the date of this Annual Report, we have filed five patent applications with the USPTO with respect to various aspects of our HDAC
small molecule delivery platform and Ropidoxuridine, our lead product candidate. The following is the status of the patent applications
Shuttle has filed to date:
Summary
of Shuttle Pharma’s Intellectual Property Portfolio
USPTO
number |
|
Title |
|
Date
Filed |
|
Date
Granted |
|
Anticipated
Expiration Date** |
U.S.
Application No.: 16/475,999 |
|
Methods
and compositions for cancer therapies that include delivery of halogenated thymidines and thymidine phosphorylase inhibitors in combination
with radiation |
|
7/3/2019
|
|
|
|
|
U.S.
Application No.: 17/484,876 |
|
Dual
function molecules for histone deacetylase inhibition and ataxia telangiectasia mutated activation and methods of use thereof |
|
9/24/2021 |
|
|
|
|
U.S.
Application No.: 17/315,567 |
|
Selective
histone deacetylase inhibitors for the treatment of human disease |
|
5/10/2021 |
|
|
|
|
U.S.
Patent No: 11,407,723
16/959,570 |
|
Selective
histone deacetylase inhibitors for the treatment of human disease |
|
7/01/2020 |
|
8/9/2022 |
|
|
U.S.
Patent No.: 9,809,539 |
|
Dual
function molecules for histone deacetylase inhibition and ataxia telangiectasia mutated activation and methods of use thereof |
|
3/3/2015 |
|
11/7/2017 |
|
3/3/2035 |
U.S.
Patent No.: 11,034,667 |
|
Selective
histone deacetylase inhibitors for the treatment of human disease |
|
7/3/2019 |
|
6/15/2021 |
|
1/9/2038 |
U.S.
Patent No.: 10,730,834 |
|
Selective
histone deacetylase inhibitors for the treatment of human disease |
|
8/4
/2020 |
|
8/4/2020 |
|
3/3/2035 |
U.S.
Patent No.: 10,745,352 |
|
Selective
histone deacetylase inhibitors for the treatment of human disease |
|
8/18/2020 |
|
8/18/2020 |
|
3/3/2035 |
U.S.
Patent Application No. 17/851,8551 |
|
Selective
histone deacetylase inhibitors for the treatment of human disease |
|
6/28/2022 |
|
|
|
|
Morgan,
Lewis & Bockius LLP prepared patent applications related to Ropidoxuridine (IpdR) and HDAC inhibitors, and, in the fourth quarter
of 2018, found no freedom to operate (FTO) issue for Ropidoxuridine used as radiosensitizer and used with tipiracil, and HDAC inhibitors
SP-1-161 and SP-2-225.
Our
strategy around protection of our proprietary technology, including any innovations and improvements, is to obtain worldwide patent coverage
with a focus on jurisdictions that represent significant global pharmaceutical markets. Generally, patents have a term of twenty years
from the earliest priority date, assuming that all maintenance fees are paid, no portion of the patent has been terminally disclaimed
and the patent has not been invalidated. In certain jurisdictions, and in certain circumstances, patent terms can be extended or shortened.
We are obtaining worldwide patent protection for at least novel molecules, composition of matter, pharmaceutical formulations, methods
of use, including treatment of disease, methods of manufacture and other novel uses for the inventive molecules originating from our
research and development efforts. We continuously assess whether it is strategically more favorable to maintain confidentiality for the
“know-how” regarding a novel invention rather than pursue patent protection. For each patent application that is filed we
strategically tailor our claims in accordance with the existing patent landscape around a particular technology.
There
can be no assurance that an issued patent will remain valid and enforceable in a court of law through the entire patent term. Should
the validity of a patent be challenged, the legal process associated with defending the patent can be costly and time consuming. Issued
patents can be subject to oppositions, interferences and other third-party challenges that can result in the revocation of the patent
limit patent claims such that patent coverage lacks sufficient breadth to protect subject matter that is commercially relevant. Competitors
may be able to circumvent our patents. Development and commercialization of pharmaceutical products can be subject to substantial delays
and it is possible that at the time of commercialization any patent covering the product has expired or will be in force for only a short
period of time following commercialization. We cannot predict with any certainty if any third-party U.S. or foreign patent rights or
other proprietary rights will be deemed infringed by the use of our technology. Nor can we predict with certainty which, if any, of these
rights will or may be asserted against us by third parties. Should we need to defend ourselves and our partners against any such claims,
substantial costs may be incurred. Furthermore, parties making such claims may be able to obtain injunctive or other equitable relief,
which could effectively block our ability to develop or commercialize some or all of our products in the U.S. and abroad, and could result
in the award of substantial damages. In the event of a claim of infringement, we or our partners may be required to obtain one or more
licenses from a third party. There can be no assurance that we can obtain a license on a reasonable basis should we deem it necessary
to obtain rights to an alternative technology that meets our needs. The failure to obtain a license may have a material adverse effect
on our business, results of operations and financial condition.
We
also rely on trade secret protection for our confidential and proprietary information. No assurance can be given that we can meaningfully
protect our trade secrets on a continuing basis. Others may independently develop substantially equivalent confidential and proprietary
information or otherwise gain access to our trade secrets.
It
is our policy to require our employees and consultants, outside scientific collaborators, sponsored researchers and other advisors who
receive confidential information from us to execute confidentiality agreements upon the commencement of employment or consulting relationships.
These agreements provide that all confidential information developed or made known to these individuals during the course of the individual’s
relationship with the company is to be kept confidential and is not to be disclosed to third parties except in specific circumstances.
The agreements provide that all inventions conceived by an employee will be the property of our company. There can be no assurance, however,
that these agreements will provide meaningful protection or adequate remedies for our trade secrets in the event of unauthorized use
or disclosure of such information.
Our
success will depend in part on our ability to obtain and maintain patent protection, preserve trade secrets, prevent third parties from
infringing upon our proprietary rights and operate without infringing upon the proprietary rights of others, both in the U.S. and other
territories worldwide.
Manufacturing
and Supply
We
do not currently own or operate manufacturing facilities for the production of preclinical, clinical or commercial quantities of any
of our product candidates. We currently use a number of our suppliers for the raw materials and formulation to meet the preclinical and
any clinical requirements of our product candidates. We do not have a long-term agreement with any of these parties and we believe alternative
sources of supply exist.
We
intend to enter into collaborations for the manufacture of our product candidates, with our collaborators assuming responsibility for
such manufacturing. Manufacturing is subject to extensive regulations that impose various procedural and documentation requirements,
which govern record keeping, manufacturing processes and controls, personnel, quality control and quality assurance, among others. Any
collaborator or third-party contract manufacturer we use would need to be compliant with cGMP. cGMP is a regulatory standard for the
production of pharmaceuticals that will be used in humans.
Competition
The
development and commercialization of drugs is highly competitive. We compete with a variety of multinational pharmaceutical companies
and specialized biotechnology companies, as well as technology being developed at universities and other research institutions. Our competitors
have developed, are developing or will develop product candidates and processes competitive with our product candidates. Competitive
therapeutic treatments include those that have already been approved and accepted by the medical community and any new treatments that
enter the market. We believe that a significant number of products are currently under development, and may become commercially available
in the future, for the treatment of conditions for which we may try to develop product candidates.
Many
of our competitors have significantly greater financial, technical, manufacturing, marketing, sales and supply resources or experience
than we have. If we are able to obtain approval for any product candidate, we will face competition based on many different factors,
including the quality and effectiveness of our products, the ease with which our products can be administered and the extent to which
patients accept relatively new routes of administration, the timing and scope of regulatory approvals for these products, the availability
and cost of manufacturing, marketing and sales capabilities, price, reimbursement coverage and patent position. Competing products could
present superior treatment alternatives, including by being more effective, safer, and less expensive or marketed and sold more effectively
than any products we may develop. Competitive products may make any products we develop obsolete or noncompetitive before we recover
the expense of developing and commercializing our product candidates. Such competitors could also recruit our employees, which could
negatively impact our level of expertise and our ability to execute our business plan.
The
following figure provides summary information about cytotoxic drugs that may be used with radiation therapy for their sensitizing properties
that currently comprise the competition for Shuttle’s agents.
![](https://content.edgar-online.com/edgar_conv_img/2023/03/15/0001493152-23-007686_form10-k_005.jpg)
Fluorouracil
(5-FU) is an anti-metabolite used to treat cancer, by injection, for colon cancer, esophageal cancer, stomach cancer, pancreatic
cancer, breast cancer, and cervical cancer. Fluorouracil was patented in 1956 and is an effective and safe drug with radiation sensitizing
properties. Capecitabine, an orally available formulation of 5-FU and was patented in 1992. It is used for the treatment of gastric,
esophageal and other cancers for sensitization to radiation therapy.
Cetuximab
is an epidermal growth factor receptor (EGFR) inhibitor used for the treatment of metastatic colorectal, lung cancer and head and
neck cancers. This monoclonal antibody is administered by intravenous infusion and improves the 5-year survival of patients when used
in combination with radiation therapy, compared with radiotherapy alone.
Platinum
based compounds (cis-platin, carbo-platin and oxaloplatin) also exhibit radiation sensitizing properties. Platinum and radiation
are used together for the treatment of locally advanced cervical cancer and for head and neck cancers. Cisplatin is believed to augment
the effects of radiation by inhibiting the repair of radiation-induced sub-lethal damage.
Bevacizumab
works as an anti-angiogenic agent. It was approved for medical use in the United States in 2004. The addition of bevacizumab to standard
treatment can prolong the lives of breast and lung cancer patients by several months and may be used with radiation therapy.
Irinotecan
is given by injection and is used to treat colon cancer and small cell lung cancer and can be combined with radiation therapy. For
colon cancer it is used either alone or with fluorouracil.
Government
Regulation and Product Approval
Governmental
authorities in the U.S., at the federal, state and local level, and other countries extensively regulate, among other things, the research,
development, testing, manufacture, labeling, packaging, promotion, storage, advertising, distribution, marketing and export and import
of products such as those we are developing. Our product candidates must be approved by the FDA through the NDA process before they may
be legally marketed in the U.S. and will be subject to similar requirements in other countries prior to marketing in those countries.
The process of obtaining regulatory approvals and the subsequent compliance with applicable federal, state, local and foreign statutes
and regulations require the expenditure of substantial time and financial resources.
U.S.
government regulation
NDA
approval processes
In
the U.S., the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act (the “FDCA”) and implementing regulations.
Failure to comply with the applicable U.S. requirements at any time during the product development or approval process, or after approval,
may subject an applicant to administrative or judicial sanctions, any of which could have a material adverse effect on us. These sanctions
could include:
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of an approval; |
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imposition
of a clinical hold; |
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warning
letters; |
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product
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The
process required by the FDA before a drug may be marketed in the U.S. generally involves the following:
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completion
of nonclinical laboratory tests, animal studies and formulation studies conducted according to GLPs or other applicable regulations; |
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submission
to the FDA of an IND, which must become effective before human clinical trials may begin; |
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performance
of adequate and well-controlled human clinical trials according to GCPs to produce data that the FDA may review to determine safety
and efficacy of the product candidate for its intended use; |
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submission
to the FDA of an NDA; |
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satisfactory
completion of an FDA inspection of the manufacturing facility or facilities at which the product candidate is produced to assess
compliance with cGMPs to assure that the facilities, methods and controls are adequate to preserve the product candidate’s
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Once
a pharmaceutical candidate is identified for development, it enters the preclinical or nonclinical testing stage. Nonclinical tests include
laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies. An IND sponsor must submit the results
of the nonclinical tests, together with manufacturing information and analytical data, to the FDA as part of the IND. Some nonclinical
testing may continue even after the IND is submitted. In addition to including the results of the nonclinical studies, the IND will also
include a protocol detailing, among other things, the objectives of the clinical trial, the parameters to be used in monitoring quality
and the effectiveness criteria to be evaluated if the first phase lends itself to an efficacy determination. The IND automatically becomes
effective thirty (30) days after receipt by the FDA, unless the FDA, within the thirty (30) day time period, places the IND on clinical
hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before clinical trials can begin. A clinical
hold may occur at any time during the life of an IND and may affect one or more specific studies or all studies conducted under the IND.
All
clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCPs. They must be
conducted under protocols detailing the objectives of the trial, dosing procedures, research subject selection and exclusion criteria
and the quality and effectiveness criteria to be evaluated. Each protocol must be submitted to the FDA as part of the IND, and progress
reports detailing the status of the clinical trials must be submitted to the FDA annually. Sponsors also must timely report to FDA serious
and unexpected adverse reactions, any clinically important increase in the rate of a serious suspected adverse reaction over that listed
in the protocol or investigation brochure or any findings from other studies or animal or in vitro testing that suggest a significant
risk in humans exposed to the drug. An IRB at each institution participating in the clinical trial must review and approve the protocol
before a clinical trial commences at that institution and must also approve the information regarding the trial and the consent form
that must be provided to each research subject or the subject’s legal representative, monitor the study until completed and otherwise
comply with IRB regulations.
Human
clinical trials are typically conducted in three sequential phases that may overlap or be combined.
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Phase
I—The product candidate is initially introduced into healthy human subjects and tested for quality, dosage tolerance, absorption,
metabolism, distribution and elimination. In the case of some product candidates for severe or life-threatening diseases, such as
cancer, especially when the product candidate may be inherently too toxic to ethically administer to healthy volunteers, the initial
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II—Clinical trials are performed on a limited patient population intended to identify possible adverse effects and safety
risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and
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Phase
III—Clinical trials are undertaken to further evaluate dosage and produce data that the FDA may determine to establish
clinical efficacy and safety in an expanded patient population at geographically dispersed clinical study sites. These studies are
intended to establish the overall risk-benefit ratio of the product and provide an adequate basis for product labeling. |
Human
clinical trials are inherently uncertain and Phase I, Phase II and Phase III testing may not achieve desired results or otherwise be
completed. The FDA or the sponsor may suspend a clinical trial at any time for a variety of reasons, including a finding that the research
subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical
trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the product
candidate has been associated with unexpected serious harm to patients.
During
the development of a new product candidate, sponsors are given opportunities to meet with the FDA at certain points. These points may
be prior to the submission of an IND, at the end of Phase II and before an NDA is submitted. Meetings at other times may be requested.
These meetings can provide an opportunity for the sponsor to share information about the data gathered to date and for the FDA to provide
advice on the next phase of development. Sponsors typically use the meeting at the end of Phase II to discuss their Phase II clinical
results and present their plans for the pivotal Phase III clinical trial that they believe will support the approval of the new drug.
If a Phase II clinical trial is the subject of discussion at the end of Phase II meeting with the FDA, a sponsor may be able to request
a Special Protocol Assessment (“SPA”), the purpose of which is to reach agreement with the FDA on the Phase III clinical
trial protocol design and analysis that will form the primary basis of an efficacy claim.
According
to published guidance on the SPA process, a sponsor which meets the prerequisites may make a specific request for a SPA and provide information
regarding the design and size of the proposed clinical trial. The FDA is supposed to evaluate the protocol within forty-five (45) days
of the request to assess whether the proposed trial is adequate, which evaluation may result in discussions and a request for additional
information. An SPA request must be made before the proposed trial begins, and all open issues must be resolved before the trial begins.
If a written agreement is reached, it will be documented and made part of the record. The agreement will be binding on the FDA and may
not be changed by the sponsor or the FDA after the trial begins except with the written agreement of the sponsor and the FDA or if the
FDA determines that a substantial scientific issue essential to determining the safety or efficacy of the product candidate was identified
after the testing began.
Concurrent
with clinical trials, sponsors usually complete additional animal safety studies and also develop additional information about the chemistry
and physical characteristics of the product candidate and finalize a process for manufacturing commercial quantities of the product candidate
in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product
candidate and the manufacturer must develop methods for testing the quality, purity and potency of the product candidate. Additionally,
appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the product candidate does
not undergo unacceptable deterioration over its proposed shelf-life.
The
results of product development, nonclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical
tests and other control mechanisms, proposed labeling and other relevant information are submitted to the FDA as part of an NDA requesting
approval to market the product. The submission of an NDA is subject to the payment of user fees, but a waiver of such fees may be obtained
under specified circumstances. The FDA reviews all NDAs submitted to ensure that they are sufficiently complete for substantive review
before it accepts them for filing. It may request additional information rather than accept an NDA for filing. In this event, the NDA
must be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it
for filing.
Once
the submission is accepted for filing, the FDA begins an in-depth review. NDAs receive either standard or priority review. A drug representing
a significant improvement in treatment, prevention or diagnosis of disease may receive priority review. The FDA may refuse to approve
an NDA if the applicable regulatory criteria are not satisfied or may require additional clinical or other data. Even if such data are
submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. The FDA reviews an NDA to determine,
among other things, whether a product is safe and effective for its intended use and whether its manufacturing is cGMP-compliant. The
FDA may refer the NDA to an advisory committee for review and recommendation as to whether the application should be approved and under
what conditions. The FDA is not bound by the recommendation of an advisory committee, but it generally follows such recommendations.
Before approving an NDA, the FDA will inspect the facility or facilities where the product is manufactured and tested.
Expedited
review and approval
The
FDA has various programs, including Fast Track, priority review and accelerated approval, which are intended to expedite or simplify
the process for reviewing product candidates, or provide for the approval of a product candidate on the basis of a surrogate endpoint.
Even if a product candidate qualifies for one or more of these programs, the FDA may later decide that the product candidate no longer
meets the conditions for qualification or that the time period for FDA review or approval will be shortened. Generally, product candidates
that are eligible for these programs are those for serious or life-threatening conditions, those with the potential to address unmet
medical needs and those that offer meaningful benefits over existing treatments. For example, Fast Track is a process designed to facilitate
the development and expedite the review of product candidates to treat serious or life-threatening diseases or conditions and fill unmet
medical needs. Priority review is designed to give product candidates that offer major advances in treatment or provide a treatment where
no adequate therapy exists an initial review within six months as compared to a standard review time of ten (10) months.
Although
Fast Track and priority review do not affect the standards for approval, the FDA will attempt to facilitate early and frequent meetings
with a sponsor of a Fast Track designated product candidate and expedite review of the application for a product candidate designated
for priority review. Accelerated approval, which is described in Subpart H of 21 CFR Part 314, provides for an earlier approval for a
new product candidate that is intended to treat a serious or life-threatening disease or condition and that fills an unmet medical need
based on a surrogate endpoint. A surrogate endpoint is a laboratory measurement or physical sign used as an indirect or substitute measurement
representing a clinically meaningful outcome. As a condition of approval, the FDA may require that a sponsor of a product candidate receiving
accelerated approval perform post-marketing clinical trials.
In
the Food and Drug Administration Safety and Innovation Act (“FDASIA”), the U.S. Congress encouraged the FDA to utilize innovative
and flexible approaches to the assessment of product candidates under accelerated approval. The law required the FDA to issue related
draft guidance within a year after the law’s enactment and also promulgate confirming regulatory changes. In June 2013, the FDA
published a draft Guidance for Industry titled “Expedited Programs for Serious Conditions—Drugs and Biologics,” which
provides guidance on FDA programs that are intended to facilitate and expedite development and review of new product candidates as well
as threshold criteria generally applicable to concluding that a product candidate is a candidate for these expedited development and
review programs.
In
addition to the Fast Track, accelerated approval and priority review programs discussed above, the FDA also provided guidance on a new
program for Breakthrough Therapy designation. The FDA defines a Breakthrough Therapy as a drug that is intended, alone or in combination
with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates
that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as
substantial treatment effects observed early in clinical development. A drug designated as a Breakthrough Therapy is eligible for accelerated
approval. The FDA must take certain actions, such as holding timely meetings and providing advice, intended to expedite the development
and review of an application for approval of a Breakthrough Therapy. Even if a product qualifies for one or more of these programs, the
FDA may later decide that the product no longer meets the conditions for qualification or decide that the time period for FDA review
or approval will not be shortened. A request for Breakthrough Therapy designation should be submitted concurrently with, or as an amendment
to an IND. FDA has already granted this designation to approximately thirty (30) new product candidates and has begun approving Breakthrough
Therapy designated drugs.
Patent
term restoration and marketing exclusivity
Depending
upon the timing, duration and specifics of FDA approval of the use of our product candidates, some of our U.S. patents may be eligible
for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-
Waxman Act. The Hatch-Waxman Act permits a patent restoration term of up to five years as compensation for patent term lost during product
development and the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond
a total of fourteen (14) years from the product candidate’s approval date. The patent term restoration period is generally one
half of the time between the effective date of an IND and the submission date of an NDA, plus the time between the submission date of
an NDA and the approval of that application. Only one patent applicable to an approved product candidate is eligible for the extension
and the application for extension must be made prior to expiration of the patent. The USPTO, in consultation with the FDA, reviews and
approves the application for any patent term extension or restoration. In the future, we intend to apply for restorations of patent term
for some of our currently owned or licensed patents to add patent life beyond their current expiration date, depending on the expected
length of clinical trials and other factors involved in the submission of the relevant NDA.
Market
exclusivity provisions under the FDCA also can delay the submission or the approval of certain applications. The FDCA provides a five-year
period of non-patent marketing exclusivity within the U.S. to the first applicant to gain approval of an NDA for a new chemical entity.
A product candidate is a new chemical entity if the FDA has not previously approved any other new product candidate containing the same
active moiety, which is the molecule or ion responsible for the action of the product candidate substance. During the exclusivity period,
the FDA may not accept for review an abbreviated new drug application (“ANDA”) or a 505(b)(2) NDA submitted by another company
for another version of such product candidate where the applicant does not own or have a legal right of reference to all the data required
for approval. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement.
The FDCA also provides three years of marketing exclusivity for an NDA, 505(b) (2) NDA, or supplement to an approved NDA if new clinical
investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential
to the approval of the application, for example, for new indications, dosages or strengths of an existing product candidate. This three-year
exclusivity covers only the conditions associated with the new clinical investigations and does not prohibit the FDA from approving ANDAs
for product candidates containing the original active agent. Five-year and three-year exclusivity will not delay the submission or approval
of a full NDA. However, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the
preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate quality and effectiveness.
Orphan
drug designation
Under
the Orphan Drug Act, the FDA may grant orphan drug designation to product candidates intended to treat a rare disease or condition, which
is generally a disease or condition that affects fewer than 200,000 individuals in the U.S. or more than 200,000 individuals in the U.S.
and for which there is no reasonable expectation that the cost of developing and making available in the U.S. a product candidate for
this type of disease or condition will be recovered from sales in the U.S. for that product candidate. Orphan drug designation must be
requested before submitting an NDA. After the FDA grants orphan drug designation, the FDA publicly discloses the identity of the therapeutic
agent and its potential orphan use. Orphan drug designation does not convey any advantage in or shorten the duration of the regulatory
review and approval process.
If
a product candidate that has orphan drug designation subsequently receives the first FDA approval for the disease for which it has such
designation, the product candidate is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications
to market the same product candidate for the same indication, except in very limited circumstances, for seven years. Orphan drug exclusivity,
however, could also block the approval of one of our product candidates for seven years if a competitor obtains approval of the same
product candidate as defined by the FDA or if our product candidate is determined to be contained within the competitor’s product
candidate for the same indication or disease.
Pediatric
exclusivity and pediatric use
Under
the Best Pharmaceuticals for Children Act (“BPCA”), certain product candidates may obtain an additional six months of exclusivity
if the sponsor submits information requested in writing by the FDA (a “Written Request”) relating to the use of the active
moiety of the product candidate in children. The FDA may not issue a Written Request for studies on unapproved or approved indications
or where it determines that information relating to the use of a product candidate in a pediatric population, or part of the pediatric
population, may not produce health benefits in that population.
In
addition, the Pediatric Research Equity Act (“PREA”) requires a sponsor to conduct pediatric studies for most product candidates
and biologics, for a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration. Under
PREA, original NDAs, biologics license application and supplements thereto must contain a pediatric assessment unless the sponsor has
received a deferral or waiver. The required assessment must assess the quality and effectiveness of the product candidate for the claimed
indications in all relevant pediatric subpopulations and support dosing and administration for each pediatric subpopulation for which
the product candidate is safe and effective. The sponsor or FDA may request a deferral of pediatric studies for some or all of the pediatric
subpopulations. A deferral may be granted for several reasons, including a finding that the product candidate or biologic is ready for
approval for use in adults before pediatric studies are complete, or that additional quality or effectiveness data needs to be collected
before the pediatric studies begin. After April 2013, the FDA must send a noncompliance letter to any sponsor that fails to: submit the
required assessment, keep a deferral current, or submit a request for approval of a pediatric formulation.
Post-approval
requirements
Once
an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements is not maintained or if problems
occur after the product candidate reaches the market. Later discovery of previously unknown problems with a product candidate may result
in restrictions on the product candidate or even complete withdrawal of the product candidate from the market. After approval, some types
of changes to the approved product candidate, such as adding new indications, manufacturing changes and additional labeling claims, are
subject to further FDA review and approval. In addition, the FDA may require testing and surveillance programs to monitor the effect
of approved product candidates that have been commercialized, and the FDA has the power to prevent or limit further marketing of a product
candidate based on the results of these post-marketing programs.
Any
product candidates manufactured or distributed by us pursuant to FDA approvals are subject to continuing regulation by the FDA, including,
among other things:
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notifying
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Drug
manufacturers and other entities involved in the manufacture and distribution of approved product candidates are required to register
their establishments with the FDA and certain state agencies and are subject to periodic unannounced inspections by the FDA and some
state agencies for compliance with cGMP and other laws.
Regulation
outside of the U.S.
In
addition to regulations in the U.S., we will be subject to regulations of other countries governing any clinical trials and commercial
sales and distribution of our product candidates. Whether or not we obtain FDA approval for a product, we must obtain approval by the
comparable regulatory authorities of countries outside of the U.S. before we can commence clinical trials in such countries and approval
of the regulators of such countries or economic areas, such as the European Union, before we may market products in those countries or
areas. The approval process and requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary
greatly from place to place, and the time may be longer or shorter than that required for FDA approval.
Under
European Union regulatory systems, a company may submit marketing authorization applications either under a centralized or decentralized
procedure. The centralized procedure, which is compulsory for medicines produced by biotechnology or those medicines intended to treat
AIDS, cancer, neurodegenerative disorders or diabetes and is optional for those medicines which are highly innovative, provides for the
grant of a single marketing authorization that is valid for all European Union member states. The decentralized procedure provides for
mutual recognition of national approval decisions. Under this procedure, the holder of a national marketing authorization may submit
an application to the remaining member states. Within 90 days of receiving the applications and assessments report, each member state
must decide whether to recognize approval. If a member state does not recognize the marketing authorization, the disputed points are
eventually referred to the European Commission, whose decision is binding on all member states.
As
in the U.S., we may apply for designation of a product candidate as an orphan drug for the treatment of a specific indication in the
European Union before the application for marketing authorization is made. Orphan drugs in Europe enjoy economic and marketing benefits,
including up to ten years of market exclusivity for the approved indication unless another applicant can show that its product is safer,
more effective or otherwise clinically superior to the orphan-designated product.
Reimbursement
Sales
of our products will depend, in part, on the extent to which the costs of our products will be covered by third-party payors, such as
government health programs, commercial insurance and managed healthcare organizations. These third-party payors are increasingly challenging
the prices charged for medical products and services. Additionally, the containment of healthcare costs has become a priority of federal
and state governments and the prices of drugs have been a focus in this effort. The U.S. government, state legislatures and foreign governments
have shown significant interest in implementing cost-containment programs, including price controls, restrictions on reimbursement and
requirements for substitution of generic products. Adoption of price controls and cost-containment measures, and adoption of more restrictive
policies in jurisdictions with existing controls and measures, could further limit our net revenue and results. If these third-party
payors do not consider our products to be cost-effective compared to other therapies, they may not cover our products after approved
as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow us to sell our products on a profitable
basis.
The
Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (“MMA”) imposed new requirements for the distribution
and pricing of prescription drugs for Medicare beneficiaries. Under Part D, Medicare beneficiaries may enroll in prescription drug plans
offered by private entities which will provide coverage of outpatient prescription drugs. Part D plans include both stand-alone prescription
drug benefit plans and prescription drug coverage as a supplement to Medicare Advantage plans. Unlike Medicare Part A and B, Part D coverage
is not standardized. Part D prescription drug plan sponsors are not required to pay for all covered Part D drugs, and each drug plan
can develop its own drug formulary that identifies which drugs it will cover and at what tier or level. However, Part D prescription
drug formularies must include drugs within each therapeutic category and class of covered Part D drugs, though not necessarily all the
drugs in each category or class. Any formulary used by a Part D prescription drug plan must be developed and reviewed by a pharmacy and
therapeutics committee. Government payment for some of the costs of prescription drugs may increase demand for our products for which
we receive marketing approval. However, any negotiated prices for our products covered by a Part D prescription drug plan will likely
be lower than the prices we might otherwise obtain. Moreover, while the MMA applies only to drug benefits for Medicare beneficiaries,
private payors often follow Medicare coverage policy and payment limitations in setting their own payment rates. Any reduction in payment
that results from the MMA may result in a similar reduction in payments from non-governmental payors.
The
American Recovery and Reinvestment Act of 2009 provides funding for the federal government to compare the effectiveness of different
treatments for the same illness. A plan for the research will be developed by the Department of Health and Human Services, the Agency
for Healthcare Research and Quality and the National Institutes for Health, and periodic reports on the status of the research and related
expenditures will be made to the U.S. Congress. Although the results of the comparative effectiveness studies are not intended to mandate
coverage policies for public or private payors, it is not clear what effect, if any, the research will have on the sales of any product,
if any such product or the condition that it is intended to treat is the subject of a study. It is also possible that comparative effectiveness
research demonstrating benefits in a competitor’s product could adversely affect the sales of our product candidates. If third-party
payors do not consider our products to be cost-effective compared to other available therapies, they may not cover our products as a
benefit under their plans or, if they do, the level of payment may not be sufficient to allow us to sell our products on a profitable
basis.
The
Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act of 2010, collectively
referred to as the “ACA,” enacted in March 2010, had a significant impact on the health care industry by expanding coverage
for the uninsured. With regard to pharmaceutical products, among other things, ACA is expanded and increased industry rebates for drugs
covered under Medicaid programs and made changes to the coverage requirements under the Medicare Part D program. The administration and
Congress which took office in January 2017, has pledged to repeal and replace the ACA, largely because of significantly increasing health
insurance premiums and decreasing participation by members of the insurance companies. We cannot predict the impact of any repeal, replacement
or modifications which may be enacted.
In
addition, in some non-U.S. jurisdictions, the proposed pricing for a product candidate must be approved before it may be lawfully marketed.
The requirements governing drug pricing vary widely from country to country. For example, the European Union provides options for its
member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and
to control the prices of medicinal products for human use. A member state may approve a specific price for the medicinal product or it
may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market.
There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical products will allow
favorable reimbursement and pricing arrangements for any of our product candidates. Historically, product candidates launched in the
European Union do not follow price structures of the U.S. and generally tend to be significantly lower.
Environment
Our
third-party manufacturers are subject to inspections by the FDA for compliance with cGMP and other U.S. regulatory requirements, including
U.S. federal, state and local regulations regarding environmental protection and hazardous and controlled substance controls, among others.
Environmental laws and regulations are complex, change frequently and have tended to become more stringent over time. We have incurred,
and may continue to incur, significant expenditures to ensure we are in compliance with these laws and regulations. We would be subject
to significant penalties for failure to comply with these laws and regulations.
Sales
and Marketing
Our
current focus is on the development of our existing portfolio, the completion of clinical trials and, if and where appropriate, the registration
of our product candidates. We currently do not have marketing, sales and distribution capabilities. If we receive marketing and commercialization
approval for any of our product candidates, we intend to market the product either directly or through collaborations, strategic alliances
and distribution agreements with third parties. The ultimate implementation of our strategy for realizing the financial value of our
product candidates is dependent on the results of clinical trials for our product candidates, the availability of funds and the ability
to negotiate acceptable commercial terms with third parties.
Employees
As of the date of this Annual Report, we have seven
employees, including our four executive officers, one engaged in research and development and two in administration. We consider our relationship
with our employees to be good.
Recent Financings – Our IPO and Post-2022 Financing
On September 2, 2022, we closed on our IPO of
1,225,888 units (each a “Unit,” and collectively, the “Units”), with each Unit consisting of one share of
the Company’s common stock and one warrant to purchase one share of common stock, at a public offering price of $8.125 per
Unit. Our IPO, which was underwritten by Boustead Securities, LLC (“Boustead”), resulted in gross proceeds of
$9,960,430, before deducting underwriting discounts and commissions. On September 29, 2022, Boustead exercised its overallotment
option, purchasing an additional 183,883 Units, resulting in gross proceeds of $1,494,041, before deducting underwriter commissions
and discounts. As a result, our IPO raised a total of $11,454,474, before deducting underwriting discounts, commissions and related
IPO expenses.
On January 11, 2023, we entered into a securities purchase agreement (the “SPA”) with Alto Opportunity Master
Fund, SPC – Segregated Master Portfolio B, a Cayman entity (the “Investor”), pursuant to which the Company sold to the
Investor a $4.3 million convertible note (the “Convertible Note”) and warrant (the “Warrant”) to purchase 1,018,079
shares of common stock of the Company, in exchange for gross proceeds of $4.0 million (the
“Investment Amount”). The Convertible Note amortizes on a monthly basis and the Company can make such monthly amortization
payments in cash or, subject to certain equity conditions, in registered shares of common stock or a combination thereof. For equity repayment,
the Convertible Note is convertible into shares of common stock at price per share equal to the lower of (i) $2.35 (ii) 90% of the three
lowest daily VWAPs of the 15 trading days prior to the payment date or (iii) 90% of the VWAP of the trading day prior to payment date.
The Convertible Note is repayable over 26 months and bears interest at the rate of 5% per annum. The Warrant is exercisable for four years
from the date of closing and is exercisable at $2.35 per share. In the event the Investor exercises the Warrant in full, such exercise
would result in additional gross proceeds to the Company of approximately $2.4 million.
Item
1A. Risk Factors
An
investment in our securities involves a high degree of risk. You should carefully consider all of the risks described below, together
with the other information contained in this Annual Report on Form 10-K, including our financial statements and related notes, before
making a decision to invest in our securities. If any of the following events occur, our business, financial condition and operating
results may be materially adversely affected. In that event, the trading price of our securities could decline, and you could lose all
or part of your investment.
Summary
Risk Factors
The
risks described under the heading “Risk Factors” beginning on page 26 of this Annual Report on Form 10-K may cause
us not to realize the full benefits of our strengths and/or may cause us to be unable to successfully execute all or part of our strategy.
Some of the more significant challenges we face include:
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Our
success is primarily dependent on the successful development, regulatory approval and commercialization of our product candidates,
all of which are in the early stages of development. |
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We
currently have no source of product sales revenue. |
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We
face competition from entities that have developed or may develop product candidates for our target disease indications, including
companies developing novel treatments and technology platforms based on modalities and technology similar to ours. If these companies
develop technologies or product candidates more rapidly than we do or their technologies, including delivery technologies, are more
effective, our ability to develop and commercialize product candidates may be adversely affected. |
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If
we fail to comply with U.S. and foreign regulatory requirements, regulatory authorities could limit or withdraw any marketing or
commercialization approvals we may receive and subject us to other penalties that could materially harm our business. |
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If
we do not comply with laws regulating the protection of the environment and health and human safety, our business could be adversely
affected. |
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If
we are not able to obtain and enforce patent protection for our technologies or product candidates, development and commercialization
of our product candidates may be adversely affected. |
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We
or our licensors, or any future collaborators or a strategic partners may become subject to third party claims or litigation alleging
infringement of patents or other proprietary rights or seeking to invalidate patents or other proprietary rights, and we may need
to resort to litigation to protect or enforce our patents or other proprietary rights, all of which could be costly, time consuming,
delay or prevent the development and commercialization of our product candidates, or put our patents and other proprietary rights
at risk. |
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If
we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed. |
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We
may be unable to obtain U.S. or foreign regulatory approval and, as a result, unable to commercialize our product candidates. |
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Any
drugs we develop may become subject to unfavorable pricing regulations, third-party reimbursement practices or healthcare reform
initiatives, thereby harming our business. |
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Our
ability to obtain services, reimbursement or funding from the federal government may be impacted by possible reductions in federal
spending. |
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If
any of our product candidates receives marketing approval and we or others later identify undesirable side effects caused by the
product candidate, our ability to market and derive revenue from the product candidates could be compromised. |
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Our
stock price may be volatile, and purchasers of our common stock could incur substantial losses. |
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The
future issuance of equity or of debt securities that are convertible into common stock will dilute our share capital. |
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If
securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading
opinion regarding our stock, our stock price and trading volume could decline. |
RISK
FACTORS
An
investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors and all the other
information in this Annual Report before you decide to buy our common stock. If any of the following risks related to our business actually
occurs, our business, financial condition, operating results, and prospects would be adversely affected. The market price of our common
stock could decline due to any of these risks and uncertainties related to our business, or related to an investment in our common stock,
and you may lose part or all of your investment.
Risks
Related to Our Business, Financial Condition and Capital Requirements
Because
we had limited funds prior to our initial public offering, our independent auditing firm issued a going concern opinion related to
our audit for the year ended December 31, 2021; we have since raised adequate funds through our IPO and post-IPO financing
activities but will require additional funding to complete the required clinical trials.
Prior
to the closing of our IPO on September 2, 2022, we were funded by investments from private investors and government contracts obtained
from the NIH for performing research. While this has allowed us to complete a Phase I clinical trial for Ropidoxuridine and a pre-clinical
trial for our HDAC inhibitor platform, we have not yet completed our clinical trials and do not know if any of our products will ever
achieve commercial viability. The closing of our IPO and the underwriter’s exercise of the overallotment option resulted in gross
proceeds of $11,088,764. In addition, on January 11, 2023, in exchange for a $4.0 million investment, we closed on an offering of a $4.3
million convertible note, which note bears interest at 5% and is repayable over 26 months, and a warrant to purchase 1,018,079 shares
of commons stock, exercisable for cash at a $2.35 per share exercise price. Following completion of our IPO and the convertible note
and warrant offering, we believe will allow us to fund IND-enabling and Phase I and II clinical trials of our product candidates, including
Ropidoxuridine, IPdR/TPI and our HDAC inhibitor small molecule technology platform. However, additional funding will be required to complete Phase III clinical trials.
Our
success is primarily dependent on the successful development, regulatory approval and commercialization of our product candidates, all
of which are in the early stages of development.
We
currently have one clinical stage product candidate in the early stages of development. Ropidoxuridine has undergone an SBIR funded Phase
1 clinical trial at Lifespan/Rhode Island Hospital. We also have an HDAC inhibitor small molecule platform. The three lead drug candidate
molecules are in preclinical phases of development. None of our product candidates have gained marketing approval for sale in the United
States or any other country, and we cannot guarantee that we will ever have marketable products. To date, we have invested substantially
all of our efforts and financial resources in the research and development and commercial planning for our current product candidate
and our HDAC small molecule delivery platform. Our near-term prospects, including our ability to finance our Company and generate
revenue, as well as our future growth, will depend heavily on the development, marketing approval and commercialization of our product
candidates. The clinical and commercial success of product candidates will depend on a number of factors, including the following:
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obtaining
favorable results from our Phase 1 clinical trial for IPdR and proceeding to Phase II and Phase III clinical trials, which may be
slower or cost more than we currently anticipate; |
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our
ability to demonstrate safety and efficacy of our product candidates, which are ongoing determinations that are solely within the
authority of the FDA; |
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even
if our clinical trials are completed, there can be no assurance that the FDA will agree that we have satisfactorily demonstrated
safety or efficacy or that the FDA will not raise new issues regarding the design of our clinical trials; |
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whether
we are required by the FDA to conduct additional clinical trials to support the approval of our product candidates; |
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the
acceptance by the FDA of our proposed parameters for regulatory approval, including our proposed indication, endpoints and endpoint
measurement tools relating to our product candidates; |
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the
incidence, duration and severity of adverse side effects; |
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the
timely receipt of necessary marketing approvals from the FDA; |
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whether
we are able to secure collaborations for completing the development and, if approved, commercialization of our product candidates; |
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the
effectiveness of our and our potential collaborators’ marketing, sales and distribution strategy and operations of product
candidates that are approved; |
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our
success in educating physicians and patients about the benefits, administration and use of our product candidates; |
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the
ability of our third-party manufacturers and potential collaborators to manufacture clinical trial and commercial supplies of our
product candidates to remain in good standing with regulatory bodies, and to develop, validate and maintain commercially viable manufacturing
processes that are compliant with current Good Manufacturing Practices (“cGMP”) regulations; |
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our
ability to commercialize our product candidates, if approved for marketing; |
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our
ability to enforce our intellectual property rights; |
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our
ability to avoid third-party patent interference or patent infringement claims; |
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acceptance
of our product candidates as safe and effective by patients and the medical community; and |
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a
continued acceptable quality profile of our product candidates following approval. |
Many
of the above-listed factors are beyond our control. Accordingly, we cannot assure you that we will ever be able to generate revenue through
the sale of our product candidates. Any one of these factors or other factors discussed in this Annual Report could affect our ability
to commercialize product candidates, which could impact our ability to earn sufficient revenues to transition from a developmental stage
company and continue our business. If we do not obtain marketing approval of and commercialization of our product candidates, or are
significantly delayed in doing so, our business will be materially harmed. We have a limited operating history and have incurred significant
losses since our inception, and we anticipate that we will continue to incur losses for the foreseeable future and may never achieve
or maintain profitability.
We
are a Phase I clinical stage pharmaceutical company with a limited operating history upon which you can evaluate our business and prospects.
Specialty pharmaceutical product development is a highly speculative undertaking and involves a substantial degree of risk. We do not
currently have any product candidates in advanced clinical trials or approved for sale, and we continue to incur significant research
and development and general and administrative expenses related to our operations. In addition, we have limited experience and have not
yet demonstrated an ability to successfully overcome many of the risks and uncertainties frequently encountered by companies in new and
rapidly evolving fields, particularly in the specialty pharmaceutical industry. We have not generated any revenue and have incurred losses
in each year since our founding in December 2012. Our accumulated deficit as of December 31, 2022 was $8,894,889. We expect to continue
to incur significant losses for the foreseeable future. Even if we achieve profitability in the future, we may not be able to sustain
profitability in subsequent periods.
We
currently have no source of product sales revenue.
We
have not generated any revenues from commercial sales of our product candidates. Our ability to generate product revenue depends upon
our ability to develop and commercialize products, including any of our current product candidates or other product candidates that we
may develop, in-license or acquire in the future. We do not anticipate generating revenue from the sale of products for the foreseeable
future. Our ability to generate future product revenue from our current or future product candidates also depends on a number of additional
factors, including our ability to:
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complete
research and clinical development of current and future product candidates, either directly or through collaborative relationships; |
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establish
and maintain supply and manufacturing relationships with third parties, and ensure adequate and legally compliant manufacturing of
bulk drug substances and drug products to maintain that supply; |
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obtain
regulatory approval from relevant regulatory authorities in jurisdictions where we intend to market our product candidates, either
directly or through collaborative relationships; |
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launch
and commercialize future product candidates for which we obtain marketing approval, if any, through collaborative partners; |
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obtain
coverage and adequate product reimbursement from third-party payors, including government payors; |
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achieve
market acceptance for our products, if any; |
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establish,
maintain and protect our intellectual property rights; and |
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attract,
hire and retain qualified personnel. |
In
addition, because of the numerous risks and uncertainties associated with clinical product development, including that our product candidates
may not advance through development or achieve the endpoints of applicable clinical trials, we are unable to predict the timing or amount
of any potential future product sales revenues. Our expenses also could increase beyond expectations if we decide to or are required
by the FDA, or comparable foreign regulatory authorities, to perform studies or trials in addition to those that we currently anticipate.
Even if we complete the development and regulatory processes described above, we anticipate incurring significant costs associated with
launching and commercializing these products.
The
market may not be receptive to our product candidates based on our novel therapeutic modality, and we may not generate any future revenue
from the sale or licensing of product candidates.
Even
if approval is obtained for a product candidate, we may not generate or sustain revenue from sales of the product due to factors such
as whether the product can be sold at a competitive cost and otherwise accepted in the market. The product candidates that we are developing
are based on new delivery platform therapeutic approaches (there currently is no drug which has FDA approval for indications of radiation
sensitization). Market participants with significant influence over acceptance of new treatments, such as physicians and third-party
payors, may not accept our delivery platform, and we may not be able to convince the medical community and third-party payors to accept
and use, or to provide favorable reimbursement for, any product candidates developed by us. Market acceptance of our product candidates
will depend on, among other factors:
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timing
of our receipt of any marketing and commercialization approvals; |
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terms
of any approvals and the countries in which approvals are obtained; |
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safety
and efficacy of our product candidates, which are determinations solely within the authority of the FDA; |
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prevalence
and severity of any adverse side effects associated with our product candidates; |
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warnings
contained in any labeling approved by the FDA or other regulatory authority; |
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convenience
and ease of administration of our product candidates; |
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success
of our physician education programs; |
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availability
of adequate government and third-party payor reimbursement; |
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pricing
of our products, particularly as compared to alternative treatments; and |
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availability
of alternative effective products for indications our product candidates are intended to treat. |
We
will require substantial additional financing in order to obtain marketing approval of our product candidates and commercialize our product
candidates; a failure to obtain this necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce
or terminate our product development, other operations or commercialization efforts.
Since
our inception, substantially all of our resources have been dedicated to the preclinical and clinical development of our HDAC small molecule
delivery platform and our initial product candidate, Ropidoxuridine. Our capital needs to date have been met by contributions from existing
stockholders, as well as through private offerings and IPO of our securities and our SBIR contracts. We believe that we will continue
to expend substantial resources for the foreseeable future on the completion of clinical development and regulatory preparedness of our
product candidates, preparations for a commercial launch of our product candidates, if approved, and development of any other current
or future product candidates we may choose to further develop. These expenditures will include costs associated with research and development,
conducting preclinical studies and clinical trials, obtaining marketing approvals, and, if we are not able to enter into planned collaborations,
manufacturing and supply as well as marketing and selling any products approved for sale. In addition, other unanticipated costs may
arise. Because the outcome of any drug development process is highly uncertain, we cannot reasonably estimate the actual amounts necessary
to complete the development and commercialization of our current product candidates, if approved, or future product candidates, if any.
We
believe that the proceeds we received in our IPO and subsequent $4.0 million follow on convertible note offering, along with our existing
capital resources, will be sufficient to fund our operations through 2024. In addition, should the investor in the convertible note offering
choose to exercise its warrant, which is exercisable for four years we will receive an additional $2.39 million in funding, which would
provide us enough funding through 2025 (assuming it is exercised in the next year). Notwithstanding the aforementioned funds, our operating
plans may change as a result of factors currently unknown to us, and we may need to seek additional funds sooner than planned, through
public or private equity or debt financings or other sources, such as strategic collaborations. Such financing may result in dilution
to stockholders, imposition of debt covenants and repayment obligations, or other restrictions that may adversely affect our business.
In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have
sufficient funds for our current or future operating plans.
Our
future capital requirements depend on many factors, including:
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the
scope, progress, results and costs of researching and developing our current product candidates, future product candidates and conducting
preclinical and clinical trials; |
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the
cost of commercialization activities if our current product candidates and future product candidates are approved for sale, including
securing collaborative ventures for completing development of, securing marketing approval for and ultimately marketing, selling
and distributing our product candidates, if approved or building a corporate infrastructure if we have to undertake these activities
directly; |
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our
ability to establish and maintain strategic collaborations, licensing or other arrangements and the financial terms of such agreements; |
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the
number and characteristics of any additional product candidates we may develop or acquire; |
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any
product liability or other lawsuits related to our products or commenced against us; |
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the
expenses needed to attract and retain skilled personnel; |
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the
costs associated with being a public company; |
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the
costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs
and the outcome of such litigation; and |
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the
timing, receipt and amount of sales of, or royalties on, any future approved products, if any. |
Additional
funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us
on a timely basis, we may be required to:
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delay,
limit, reduce or terminate preclinical studies, clinical trials or other development activities for our current product candidates
or future product candidates, if any; |
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delay,
limit, reduce or terminate our research and development activities; or |
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delay,
limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary to commercialize
our current or future product candidates. |
Raising
additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our
technologies or product candidates.
We
may seek additional capital through a combination of public and private equity offerings, debt financings, strategic collaborations and
alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities,
your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights
as a stockholder. The incurrence of indebtedness would result in increased fixed payment obligations and could involve certain restrictive
covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire or license intellectual
property rights and other operating restrictions that could adversely impact our ability to conduct our business. If we raise additional
funds through strategic collaborations and alliances and licensing arrangements with third parties, we may have to relinquish valuable
rights to our technologies or product candidates or grant licenses on terms unfavorable to us.
Unfavorable
and/or unstable global market and economic conditions, including those caused by the ongoing conflict between the Ukraine and Russia
and the ongoing COVID-19 pandemic, could have serious adverse consequences on our business, financial condition and results
of operations.
The
global economy, including credit and financial markets, has experienced extreme volatility and disruptions as a result of the
ongoing conflict between the Ukraine and Russia and challenges arising from the ongoing COVID-19 pandemic, including
severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in
unemployment rates, increases in inflation rates and uncertainty about economic stability. Our results of operations could be adversely affected by the general conditions
of the global economy and the global financial markets. In addition, any such volatility and disruptions may
have adverse consequences on us or the third parties upon whom we rely. For example, in 2008, the global financial crisis caused extreme volatility and disruptions in the capital and credit markets and the current COVID-19 pandemic has caused significant volatility and uncertainty in U.S. and international markets. Inflation rates, particularly in the United States, have increased recently to levels not seen in years. Increased inflation may result in increased operating costs (including our labor costs), reduced liquidity, and limitations on our ability to access credit or otherwise raise debt and equity capital. In addition, the United States Federal Reserve has raised, and may again raise, interest rates in response to concerns about inflation. Increases in interest rates, especially if coupled with reduced government spending and volatility in financial markets, may have the effect of further increasing economic uncertainty and heightening these risks, which may impact our ability to raise additional capital in the future. The March 2023 failure of Silicon Valley Bank, the pressure such failure has placed on other mid-sized banks, and its potential near- and long-term effects on the biotechnology industry and its participants such as our vendors, suppliers and investors, may also adversely affect our operations and stock price. In addition, U.S. and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and Ukraine. On February 24, 2022, a full-scale military invasion of Ukraine by Russian troops began. Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in Ukraine has led to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain disruptions. Various of Russia’s actions have led to sanctions and other penalties being levied by the United States, Australia, the European Union, and other countries, as well as other public and private actors and companies, against Russia and certain other geographic areas, including agreement to remove certain Russian financial institutions from the Society for Worldwide Interbank Financial Telecommunication payment system and restrictions on imports of Russian oil, liquified natural gas and coal. Additional potential sanctions and penalties have also been proposed and/or threatened. Russian military actions and the resulting sanctions could disrupt or otherwise adversely impact our operations and the operations of third parties upon which we rely, as well as the global economy and financial markets, and lead to instability and lack of liquidity in capital markets, potentially making it more difficult for us to obtain additional funds. Related sanctions, export controls or other actions that may be initiated by nations including the United States, the European Union or Russia (e.g., potential cyberattacks, disruption of energy flows, etc.), which could adversely affect our business and/or our supply chain, our CROs, CMOs and other third parties with which we conduct business. A severe or prolonged economic downturn, inflationary environment, rising interest rates, or political unrest could result in a variety of risks to our business, including, weakened demand for our product candidates and our ability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy could also strain our suppliers, possibly resulting in supply disruption, or cause our customers to delay making payments for our services. The extent and duration of the military action, sanctions, and resulting market disruptions are impossible to predict, but could be substantial. Any such disruptions may also magnify the impact of other risks described in this Annual Report on Form 10-K and the documents incorporated by reference herein.
Our
product candidates are in the early stages of development and may fail in development or suffer delays that materially adversely affect
their commercial viability.
We
have no products on the market and all of our product candidates are in the early stages of development. Our ability to achieve and sustain
profitability depends on obtaining regulatory approvals, including IRB approval, for and commercializing our product candidates, either
alone or with third parties. Before obtaining regulatory approval for the commercial distribution of our product candidates, we or one
of our collaborators must conduct extensive preclinical tests and clinical trials to demonstrate the safety and efficacy in humans of
our product candidates, the final determination of which rests solely in the authority of the FDA. Preclinical testing and clinical trials
are expensive, difficult to design and implement, can take many years to complete and are uncertain as to outcome. The start or end of
a clinical study is often delayed or halted due to changing regulatory requirements, manufacturing challenges, required clinical trial
administrative actions, slower than anticipated patient enrollment, changing standards of care, availability or prevalence of use of
a comparative drug or required prior therapy, clinical outcomes or financial constraints. For instance, delays or difficulties in patient
enrollment or difficulties in retaining trial participants can result in increased costs, longer development times or termination of
a clinical trial. Clinical trials of a new product candidate require the enrollment of a sufficient number of patients, including patients
who are suffering from the disease the product candidate is intended to treat and who meet other eligibility criteria. Rates of patient
enrollment are affected by many factors, including the size of the patient population, the eligibility criteria for the clinical trial,
the age and condition of the patients, the stage and severity of disease, the nature of the protocol, the proximity of patients to clinical
sites and the availability of effective treatments for the relevant disease.
A
product candidate can unexpectedly fail at any stage of preclinical and clinical development. The historical failure rate for product
candidates is high due to scientific feasibility, lack of quality and effectiveness, changing standards of medical care and other variables.
The results from preclinical testing or early clinical trials of a product candidate may not predict the results that will be obtained
in later phase clinical trials of the product candidate. We, the FDA or other applicable regulatory authorities may suspend clinical
trials of a product candidate at any time for various reasons, including a belief that subjects participating in such trials are being
exposed to unacceptable health risks or adverse side effects. We may not have the financial resources to continue development of, or
to enter into collaborations for, a product candidate if we experience any problems or other unforeseen events that delay or prevent
regulatory approval of, or our ability to commercialize, product candidates, including:
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negative
or inconclusive results from our clinical trials or the clinical trials of others for product candidates similar to ours, leading
to a decision or requirement to conduct additional preclinical testing or clinical trials or abandon a program; |
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serious
and unexpected drug-related side effects experienced by participants in our clinical trials or by individuals using drugs similar
to our product candidates; |
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delays
in submitting an Investigational New Drug application (“IND”) or delays or failure in obtaining the necessary approvals
from regulators to commence a clinical trial, or a suspension or termination of a clinical trial once commenced; |
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conditions
imposed by the FDA or comparable foreign authorities regarding the scope or design of our clinical trials; |
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delays
in enrolling research subjects in clinical trials; |
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high
drop-out rates of research subjects; |
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greater
than anticipated clinical trial costs; |
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poor
effectiveness of our product candidates during clinical trials; |
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unfavorable
FDA or other regulatory agency inspection and review of a clinical trial site; |
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failure
of our third-party contractors or investigators to comply with regulatory requirements or otherwise meet their contractual obligations
in a timely manner, or at all; |
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delays
and changes in regulatory requirements, policy and guidelines, including the imposition of additional regulatory oversight around
clinical testing generally or with respect to our technology in particular; or |
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varying
interpretations of data by the FDA and similar foreign regulatory agencies. |
If
third parties on which we depend to conduct our preclinical studies, or any future clinical trials, do not perform as contractually required,
fail to satisfy regulatory or legal requirements or miss expected deadlines, our development program could be delayed with materially
adverse effects on our business, financial condition, results of operations and prospects.
We
are relying on third party collaborators to conduct our efficacy clinical trials for Ropidoxuridine and plan to rely on third party clinical
investigators, CROs, clinical data management organizations and consultants to design, conduct, supervise and monitor preclinical studies
of our product candidates and will do the same for any clinical trials. Because we plan to largely rely on third parties and do not have
the ability to conduct preclinical studies or clinical trials independently, we have less control over the timing, quality and other
aspects of preclinical studies and clinical trials than we would if we conducted them on our own. These investigators, CROs, and consultants
are not our employees and we have limited control over the amount of time and resources that they dedicate to our programs. These third
parties may have contractual relationships with other entities, some of which may be our competitors, which may draw time and resources
from our programs. The third parties with whom we contract might not be diligent, careful or timely in conducting our preclinical studies
or clinical trials, resulting in the preclinical studies or clinical trials being delayed or unsuccessful.
If
we cannot contract with acceptable third parties on commercially reasonable terms, or at all, or if these third parties do not carry
out their contractual duties, satisfy legal and regulatory requirements for the conduct of preclinical studies or clinical trials or
meet expected deadlines, our clinical development programs could be delayed and otherwise adversely affected. In all events, we are responsible
for ensuring that each of our preclinical studies and clinical trials is conducted in accordance with the general investigational plan
and protocols for the trial. The FDA requires clinical trials to be conducted in accordance with good clinical practices, including for
conducting, recording and reporting the results of preclinical studies and clinical trials to assure that data and reported results are
credible and accurate and that the rights, integrity and confidentiality of clinical trial participants are protected. Our reliance on
third parties that we do not control does not relieve us of these responsibilities and requirements. Any such event could have a material
adverse effect on our business, financial condition, results of operations and/or prospects.
Because
we rely on third party manufacturing and supply partners, our supply of research and development, preclinical and clinical development
materials may become limited or interrupted or may not be of satisfactory quantity or quality.
We
rely on third party supply and manufacturing partners to supply the materials and components for, and manufacture, our research and development,
preclinical and clinical trial drug supplies. We do not own manufacturing facilities or supply sources for such components and materials.
There can be no assurance that our supply of research and development, preclinical and clinical development drugs and other materials
will not be limited, interrupted, restricted in certain geographic regions or of satisfactory quality or continue to be available at
acceptable prices. In particular, any replacement of any drug product formulation manufacturer we may use could require significant effort
and expertise in the event there are a limited number of qualified replacements for a particular product candidate.
The
manufacturing process for a product candidate is subject to FDA and foreign regulatory authority review. Suppliers and manufacturers
must meet applicable manufacturing requirements and undergo rigorous facility and process validation tests required by regulatory authorities
in order to comply with regulatory standards, such as Current Good Manufacturing Practice (or CGMP). In the event that any of our suppliers
or manufacturers fail to comply with such requirements or to perform its obligations to us in relation to quality, timing or otherwise,
or if our supply of components or other materials becomes limited or interrupted for other reasons, we may be forced to manufacture the
materials ourselves, for which we currently do not have the capabilities or resources, or enter into an agreement with another third
party, which we may not be able to do on reasonable terms, if at all. In some cases, the technical skills or technology required to manufacture
our product candidates may be unique or proprietary to the original manufacturer, and we may have difficulty, or there may be contractual
restrictions prohibiting us from, transferring such skills or technology to another third party and a feasible alternative may not exist.
These factors would increase our reliance on such manufacturer or require us to obtain a license from such manufacturer in order to have
another third party manufacture our product candidates. If we are required to change manufacturers for any reason, we will be required
to verify that the new manufacturer maintains facilities and procedures that comply with quality standards and with all applicable regulations
and guidelines. The delays associated with the verification of a new manufacturer could negatively affect our ability to develop product
candidates in a timely manner or within budget.
We
expect to continue to rely on third party manufacturers if we receive regulatory approval for any product candidate. To the extent that
we have existing or future manufacturing arrangements with third parties, we will depend on these third parties to perform their obligations
in a timely manner consistent with contractual and regulatory requirements, including those related to quality control and assurance.
If we are unable to obtain or maintain third-party manufacturing for product candidates, or to do so on commercially reasonable terms,
we may not be able to fully develop and commercialize our product candidates. Our or a third party’s failure to execute on our
manufacturing requirements could adversely affect our business in a number of ways, including:
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an
inability to initiate or continue clinical trials of product candidates under development; |
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delay
in submitting regulatory applications, or receiving regulatory approvals, for product candidates; |
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loss
of the cooperation of a collaborator; |
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subjecting
our product candidates to additional inspections by regulatory authorities; |
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requirements
to cease distribution or to recall batches of our product candidates; and |
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in
the event of approval to market and commercialize a product candidate, an inability to meet commercial demands for our products. |
We
may be unsuccessful in engaging in strategic transactions which could adversely affect our ability to develop and commercialize product
candidates, impact our cash position, increase our expense and present significant distractions to our management.
From
time to time, we may consider strategic transactions, such as collaborations, acquisitions of companies, asset purchases and out- or
in- licensing of product candidates or technologies. In particular, we will evaluate and, if strategically attractive, seek to enter
into additional collaborations, including with major biotechnology or pharmaceutical companies to complete development and marketing
of our product candidates, if approved. The competition for collaborators is intense, and the negotiation process is time-consuming and
complex. Any proposed collaboration may be on terms that are not optimal for us, and we may not be able to maintain any new or existing
collaboration if, for example, development or approval of a product candidate is delayed, sales of an approved product candidate do not
meet expectations or the collaborator terminates the collaboration. Any such collaboration, or other strategic transaction, may require
us to incur non-recurring or other charges, increase our near- and long-term expenditures and pose significant integration or implementation
challenges or disrupt our management or business. These transactions would entail numerous operational and financial risks, including
exposure to unknown liabilities, disruption of our business and diversion of our management’s time and attention in order to manage
a collaboration or develop acquired products, product candidates or technologies, incurrence of substantial debt or dilutive issuances
of equity securities to pay transaction consideration or costs, higher than expected collaboration, acquisition or integration costs,
write-downs of assets or goodwill or impairment charges, increased amortization expenses, difficulty and cost in facilitating the collaboration
or combining the operations and personnel of any acquired business, impairment of relationships with key suppliers, manufacturers or
customers of any acquired business due to changes in management and ownership and the inability to retain key employees of any acquired
business. Accordingly, although there can be no assurance that we will undertake or successfully complete any transactions of the nature
described above, any transactions that we do complete may be subject to the foregoing or other risks and have a material adverse effect
on our business, results of operations, financial condition and prospects. Conversely, any failure to enter into any collaboration or
other strategic transaction that would be beneficial to us could delay the development and potential commercialization of our product
candidates and have a negative impact on the competitiveness of any product candidate that reaches market.
We
face competition from entities that have developed or may develop product candidates for our target disease indications, including companies
developing novel treatments and technology platforms based on modalities and technology similar to ours. If these companies develop technologies
or product candidates more rapidly than we do or their technologies, including delivery technologies, are more effective, our ability
to develop and commercialize product candidates may be adversely affected.
The
development and commercialization of drugs is highly competitive. We compete with a variety of multinational pharmaceutical companies
and specialized biotechnology companies, as well as with universities and other research institutions which are developing new technology.
Our competitors have developed, are developing or will develop product candidates and processes competitive with our product candidates.
Competitive therapeutic treatments include those that have already been approved and accepted by the medical community and any new treatments
that enter the market. We believe that a significant number of products are currently under development, and may become commercially
available in the future, for the treatment of conditions for which we may try to develop product candidates.
Many
of our competitors have significantly greater financial, technical, manufacturing, marketing, sales and supply resources or experience
than we have. If we obtain approval for any product candidate, we will face competition based on many different factors, including the
quality and effectiveness of our products, the ease with which our products can be administered and the extent to which patients accept
relatively new routes of administration, the timing and scope of regulatory approvals for these products, the availability and cost of
manufacturing, marketing and sales capabilities, price, reimbursement coverage and patent position. Competing products could present
superior treatment alternatives, including by being more effective, safer, less expensive or marketed and sold more effectively than
any products we may develop. Competitive products may make any products we develop obsolete or noncompetitive before we recover the expense
of developing and commercializing our product candidates. Such competitors could also recruit our employees, which could negatively impact
our level of expertise and our ability to execute our business plan.
Any
inability to attract and retain qualified key management and technical personnel would impair our ability to implement our business plan.
Our
success largely depends on the continued service of certain key management and other specialized personnel, including Anatoly Dritschilo,
M.D., our Chief Executive Officer, Mira Jung, Ph.D., our Chief Scientific Officer, Michael Vander Hoek, our Chief Financial
Officer and Vice President Operations and Regulatory, and Peter Dritschilo, our President and Chief Operating Officer. The loss of one
or more members of our management team or other key employees or advisors could delay our research and development programs and materially
harm our business, financial condition, results of operations and prospects. The relationships that our key managers have cultivated
within our industry make us particularly dependent upon their continued employment with us. We are dependent on the continued service
of our technical personnel because of the highly technical nature of our product candidates and technologies and the specialized nature
of the regulatory approval process. Because our management team and key employees are not obligated to provide us with continued service,
they could terminate their employment with us at any time without penalty. We do not maintain key person life insurance policies on any
of our management team members or key employees. Our future success will depend in large part on our continued ability to attract and
retain other highly qualified scientific, technical and management personnel, as well as personnel with expertise in clinical testing,
manufacturing, governmental regulation and commercialization. We face competition for personnel from other companies, universities, public
and private research institutions, government entities and other organizations.
If
our product candidates advance into Phase II and Phase III clinical trials, we may experience difficulties in managing our growth and
expanding our operations.
We
have limited experience in drug development and have not begun clinical trials for any of our product candidates, other than a Phase
1 clinical trial for Ropidoxuridine. As our product candidates enter and advance through preclinical studies and any clinical trials,
we will need to expand our development, regulatory and manufacturing capabilities or contract with other organizations to provide these
capabilities for us. In the future, we expect to have to manage additional relationships with collaborators or partners, suppliers and
other organizations. Our ability to manage our operations and future growth will require us to continue to improve our operational, financial
and management controls, reporting systems and procedures. We may not be able to implement improvements to our management information
and control systems in an efficient or timely manner and may discover deficiencies in existing systems and controls.
If
any of our product candidates are approved for marketing and commercialization and we are unable to develop sales, marketing and distribution
capabilities on our own or enter into agreements with third parties to perform these functions on acceptable terms, we will be unable
to commercialize any such future products.
We
currently have no sales, marketing or distribution capabilities or experience. If any of our product candidates is approved, we plan
to enter into collaborations with third parties to sell, market and distribute our products. In the alternative, we would have to develop
internal sales, marketing and distribution capabilities to commercialize any approved product, which would be expensive and time-consuming,
or, as is more likely, enter into collaborations with third parties to perform these services. If we rely on third parties with sales,
marketing and distribution capabilities to market our products or decide to co-promote products with collaborators, we will need to establish
and maintain marketing and distribution arrangements with third parties, and there can be no assurance that we will be able to enter
into such arrangements on acceptable terms, if, at all. In entering into third-party marketing or distribution arrangements, any revenue
we receive will depend upon the efforts of the third parties and there can be no assurance that such third parties will establish adequate
sales and distribution capabilities or be successful in gaining market acceptance of any approved product. If we decide to market our
products directly, we will need to commit significant financial and managerial resources to develop a marketing and sales force with
technical expertise and supporting distribution, administration and compliance capabilities. If we are not able to commercialize any
product approved in the future, either on our own or through third parties, our business, financial condition, results of operations
and prospects could be materially adversely affected.
If
we fail to comply with U.S. and foreign regulatory requirements, regulatory authorities could limit or withdraw any marketing or commercialization
approvals we may receive and subject us to other penalties that could materially harm our business.
Even
if we receive marketing and commercialization approval of a product candidate, there can be no assurance we will not be subject to future
or continuing regulatory review, including in relation to adverse patient experiences with the product and clinical results that are
reported after a product is made commercially available, both in the U.S. and any foreign jurisdiction in which we seek regulatory approval.
The FDA has significant post-market authority, including the authority to require labeling changes based on new safety information and
to require post-market studies or clinical trials to evaluate safety risks related to the use of a product or to require withdrawal of
the product from the market. The FDA also has the authority to require a risk evaluation and mitigation strategies (“REMS”)
plan after approval, which may impose further requirements or restrictions on the distribution or use of an approved drug. The manufacturer
and manufacturing facilities we use to make a future product, if any, will also be subject to periodic review and inspection by the FDA
and other regulatory agencies, including for continued compliance with CGMP requirements. The discovery of any new or previously unknown
problems with our third-party manufacturers, manufacturing processes or facilities may result in restrictions on the product, manufacturer
or facility, including withdrawal of the product from the market. If we rely on third-party manufacturers, we will not have control over
compliance with applicable rules and regulations by such manufacturers. Any product promotion and advertising will also be subject to
regulatory requirements and continuing regulatory review. If we or our collaborators, manufacturers or service providers fail to comply
with applicable continuing regulatory requirements in the U.S. or foreign jurisdictions in which we seek to market our products, we or
they may be subject to, among other things, fines, warning letters, holds on clinical trials, refusal by the FDA to approve pending applications
or supplements to approved applications, suspension or withdrawal of regulatory approval, product recalls and seizures, refusal to permit
the import or export of products, operating restrictions, injunction, civil penalties and criminal prosecution.
Our
business entails a significant risk of product liability and our ability to obtain sufficient insurance coverage could have a material
effect on our business, financial condition, results of operations or prospects.
Our
business exposes us to significant product liability risks inherent in the development, testing, manufacturing and marketing of therapeutic
treatments. Product liability claims could delay or prevent completion of our development programs. If we succeed in marketing products,
such claims could result in an FDA investigation of the quality and effectiveness of our products, our manufacturing processes and facilities
or our marketing programs and potentially a recall of our products or more serious enforcement action, limitations on the approved indications
for which they may be used or suspension or withdrawal of approvals. Regardless of the merits or eventual outcome, liability claims may
also result in decreased demand for our products, injury to our reputation, costs to defend the related litigation, a diversion of management’s
time and our resources, substantial monetary awards to trial participants or patients and a decline in our stock price. We currently
have product liability insurance that we believe is appropriate for our stage of development and may need to obtain higher levels prior
to marketing any of our product candidates. Any insurance we have or may obtain may not provide sufficient coverage against potential
liabilities. Furthermore, clinical trial and product liability insurance is becoming increasingly expensive. As a result, we may be unable
to obtain sufficient insurance at a reasonable cost to protect us against losses caused by product liability claims that could have a
material adverse effect on our business.
Our
employees, principal investigators, CROs and consultants may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.
We
are exposed to the risk that our employees, principal investigators, CROs and consultants may engage in fraud, other misconduct or
illegal activity. Misconduct by these parties could include intentional failures to comply with FDA regulations, provide accurate
information to the FDA, comply with manufacturing standards we may establish, comply with federal and state healthcare fraud and
abuse laws and regulations, report financial information or data accurately or disclose unauthorized activities to us. In
particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations,
kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing,
discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. While we make
an effort to maintain strict work processes and oversight of our employees, contractors and consultants, any misconduct could expose us to liability through the improper
use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our
reputation. Furthermore, it is not always possible to identify and deter such misconduct, and the precautions we take to detect
and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from
governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations.
If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those
actions could have a significant impact on our business, including the imposition of significant fines or other
sanctions.
Our
internal computer systems, or those of our CROs or other contractors or consultants, may fail or suffer security breaches, which could
result in a material disruption of our product development programs.
Despite
the implementation of cyber security measures, our internal computer systems and those of our CROs and other contractors and consultants
are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical
failures. Such events could cause interruptions of our operations. For example, the loss of preclinical data or data from any future
clinical trial involving our product candidates could result in delays in our development and regulatory filing efforts and significantly
increase our costs. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data, or inappropriate
disclosure of confidential or proprietary information, we could incur liability and the development of our product candidates could be
delayed.
Our
proprietary information, or that of our customers, suppliers and business partners, may be lost or we may suffer security breaches.
In
the ordinary course of our business, we collect and store sensitive data, including intellectual property, clinical trial data, our proprietary
business information and that of our customers, suppliers and business partners, and personally identifiable information of our customers,
clinical trial subjects and employees, in our data centers and on our networks. The secure processing, maintenance and transmission of
this information is critical to our operations. Despite our security measures, our information technology and infrastructure may be vulnerable
to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Although to our knowledge we have not experienced
any such material security breach to date , any such breach could compromise our network, or the networks of our CROs or other third
party service providers, and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure
or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information,
regulatory penalties, disrupt our operations, damage our reputation, and cause a loss of confidence in our products and our ability to
conduct clinical trials, which could adversely affect our business and reputation and lead to delays in gaining regulatory approvals
for our drugs. Although we maintain business interruption insurance coverage, our insurance might not cover all losses from any future
breaches of our systems.
Failure
of our information technology systems could significantly disrupt the operation of our business.
Our
business increasingly depends on the use of information technologies, which means that certain key areas such as research and development,
production and sales are to a large extent dependent on our information systems or those of third-party providers. Our ability to execute
our business plan and to comply with regulatory requirements with respect to data control and data integrity, depends, in part, on the
continued and uninterrupted performance of our information technology systems, or IT systems and the IT systems supplied by third-party
service providers. These systems are vulnerable to damage from a variety of sources, including telecommunications or network failures,
malicious human acts and natural disasters. Moreover, despite network security and backup measures, some of our servers are potentially
vulnerable to physical or electronic break-ins, computer viruses and similar disruptive problems. Despite the precautionary measures
we and our third-party service providers have taken to prevent unanticipated problems that could affect our IT systems, sustained or
repeated system failures or problems arising during the upgrade of any of our IT systems that interrupt our ability to generate and maintain
data, and in particular to operate our proprietary technology platform, could adversely affect our ability to operate our business.
If
we do not comply with laws regulating the protection of the environment and health and human safety, our business could be adversely
affected.
Our
research, development and manufacturing involve the use of hazardous materials and various chemicals. We maintain quantities of various
flammable and toxic chemicals in our facilities in Gaithersburg, Maryland that are required for our research, development and manufacturing
activities. We are subject to federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal
of these hazardous materials. We believe our procedures for storing, handling and disposing these materials in our Gaithersburg facilities
comply with the relevant guidelines of Gaithersburg, the State of Maryland and the Occupational Safety and Health Administration of the
U.S. Department of Labor. Although we believe that our safety procedures for handling and disposing of these materials comply with the
standards mandated by applicable regulations, the risk of accidental contamination or injury from these materials cannot be eliminated.
If an accident occurs, we could be held liable for resulting damages, which could be substantial. We are also subject to numerous environmental,
health and workplace safety laws and regulations, including those governing laboratory procedures, exposure to blood-borne pathogens
and the handling of animals and biohazardous materials. Although we maintain workers’ compensation insurance to cover us for costs
and expenses, we may incur due to injuries to our employees resulting from the use of these materials, this insurance may not provide
adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may
be asserted against us in connection with our storage or disposal of biological or hazardous materials. Additional federal, state and
local laws and regulations affecting our operations may be adopted in the future. We may incur substantial costs to comply with, and
substantial fines or penalties if we violate any of these laws or regulations.
Our
information technology systems could face serious disruptions that could adversely affect our business.
Our
information technology and other internal infrastructure systems, including corporate firewalls, servers, leased lines and connection
to the Internet, face the risk of systemic failure that could disrupt our operations. A significant disruption in the availability of
our information technology and other internal infrastructure systems could cause interruptions in our collaborations with our partners
and delays in our research and development work.
Changes
in accounting rules and regulations, or interpretations thereof, could result in unfavorable accounting charges or require us to change
our compensation policies.
Accounting
methods and policies for pharmaceutical companies, including policies governing revenue recognition, research and development and related
expenses and accounting for stock-based compensation are subject to review, interpretation and guidance from relevant accounting authorities,
including the SEC. Changes to accounting methods or policies, or interpretations thereof, may require us to reclassify, restate or otherwise
change or revise our financial statements, including those contained in this Annual Report.
Risks
Related to Our Intellectual Property
If
we are not able to obtain and enforce patent protection for our technologies or product candidates, development and commercialization
of our product candidates may be adversely affected.
Our
success depends in part on our ability to obtain and maintain patents and other forms of intellectual property rights, including in-licenses
of intellectual property rights of others, for our product candidates, methods used to manufacture our product candidates and methods
for treating patients using our product candidates, as well as our ability to preserve our trade secrets, to prevent third parties from
infringing upon our proprietary rights and to operate without infringing upon the proprietary rights of others. As of the date of this
Annual Report, we have filed five patent applications with the U.S. Patent and Trademark Office (the “USPTO”) with respect
to various aspects of our HDAC inhibitor small molecule delivery platform and Ropidoxuridine, our lead product candidate. However,
we may not be able to apply for patents on certain aspects of our product candidates or delivery technologies in a timely fashion or
at all. To date, four U.S. patents and two European patents have been granted. There is no guarantee that any of our pending patent
applications will result in issued or granted patents, that any of our issued, granted or licensed patents will not later be found to
be invalid or unenforceable or that any issued, granted or licensed patents will include claims that are sufficiently broad to cover
our product candidates or delivery technologies or to provide meaningful protection from our competitors. Moreover, the patent position
of specialty pharmaceutical companies can be highly uncertain because it involves complex legal and factual questions. We will be able
to protect our proprietary rights from unauthorized use by third parties only to the extent that our current and future proprietary technology
and product candidates are covered by valid and enforceable patents or are effectively maintained as trade secrets. If third parties
disclose or misappropriate our proprietary rights, it may materially and adversely impact our position in the market.
The
USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other
requirements during the patent process. There are situations in which noncompliance can result in abandonment or lapse of a patent or
patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors
might be able to enter the market earlier than would otherwise have been the case. The standards applied by the USPTO and foreign patent
offices in granting patents are not always applied uniformly or predictably. For example, there is no uniform worldwide policy regarding
patentable subject matter or the scope of claims allowable in pharmaceutical patents. As such, we do not know the degree of future protection
that we will have on our proprietary products and technology. While we will endeavor to try to protect our product candidates with intellectual
property rights such as patents, as appropriate, the process of obtaining patents is time-consuming, expensive and sometimes unpredictable.
We
may decide for business reasons to no longer pursue or to abandon certain intellectual property rights in the U.S. or elsewhere, including
due to non-cooperation of inventors or owners of such intellectual property, prior art, or scope of protection, or for other reasons.
Once
granted, patents may remain open to opposition, interference, re-examination, post-grant review, inter partes review, nullification or
derivation action in court or before patent offices or similar proceedings for a given period after allowance or grant, during which
time third parties can raise objections against such initial grant. In the course of such proceedings, which may continue for a protracted
period of time, the patent owner may be compelled to limit the scope of the allowed or granted claims thus attacked, or may lose the
allowed or granted claims altogether. In addition, there can be no assurance that:
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others
will not or may not be able to make, use or sell compounds that are the same as or similar to our product candidates but that are
not covered by the claims of the patents that we own or license; |
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we
or our licensors, collaborators or any future collaborators are the first to make the inventions covered by each of our issued patents
and pending patent applications that we own or license; |
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we
or our licensors, collaborators or any future collaborators are the first to file patent applications covering certain aspects of
our inventions; |
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others
will not independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual
property rights; |
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A
third party may not challenge our patents and, if challenged, a court may not hold that our patents are valid, enforceable and infringed; |
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any
issued patents that we own or have licensed will provide us with any competitive advantages, or will not be challenged by third parties; |
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we
may develop additional proprietary technologies that are patentable; |
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the
patents of others will not have an adverse effect on our business; and |
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our
competitors do not conduct research and development activities in countries where we do not have enforceable patent rights and then
use the information learned from such activities to develop competitive products for sale in our major commercial markets. |
We
intend to license patent rights from third-party owners or licensees. If such owners or licensees do not properly or successfully obtain,
maintain or enforce the patents underlying such licenses, or if they retain or license to others any competing rights, our competitive
position and business prospects may be adversely affected. We may not be able to protect our intellectual property rights throughout
the world.
Obtaining
a valid and enforceable issued or granted patent covering our technology in the U.S. and worldwide can be extremely costly. In jurisdictions
where we have not obtained patent protection, competitors may use our technology to develop their own products and further, may export
otherwise infringing products to territories where we have patent protection, but where it is more difficult to enforce a patent as compared
to the U.S. Competitor products may compete with our future products in jurisdictions where we do not have issued or granted patents
or where our issued or granted patent claims or other intellectual property rights are not sufficient to prevent competitor activities
in these jurisdictions. The legal systems of certain countries, particularly certain developing countries, make it difficult to enforce
patents and such countries may not recognize other types of intellectual property protection, particularly that relating to biopharmaceuticals.
This could make it difficult for us to prevent the infringement of patents or marketing of competing products in violation of our proprietary
rights generally in certain jurisdictions. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial
cost and divert our efforts and attention from other aspects of our business.
We
generally file a provisional patent application first (a priority filing) at the USPTO. A U.S. utility application and international
application under the Patent Cooperation Treaty (PCT) are usually filed within twelve months after the priority filing. Based on the
PCT filing, national and regional patent applications may be filed in the European Union, Japan, Australia and Canada and other countries.
We have so far not filed for patent protection in all national and regional jurisdictions where such protection may be available. In
addition, we may decide to abandon national and regional patent applications before grant. Finally, the grant proceeding of each national
or regional patent is an independent proceeding which may lead to situations in which applications might in some jurisdictions be refused
by the relevant registration authorities, while granted by others. It is also quite common that depending on the country, various scopes
of patent protection may be granted on the same product candidate or technology. The laws of some jurisdictions do not protect intellectual
property rights to the same extent as the laws in the U.S., and many companies have encountered significant difficulties in protecting
and defending such rights in such jurisdictions. If we or our licensors encounter difficulties in protecting, or are otherwise precluded
from effectively protecting, the intellectual property rights important for our business in such jurisdictions, the value of these rights
may be diminished, and we may face additional competition from others in those jurisdictions. Many countries have compulsory licensing
laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries limit the enforceability
of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which
could materially diminish the value of such patent. If we or any of our licensors are forced to grant a license to third parties with
respect to any patents relevant to our business, our competitive position in the relevant jurisdiction may be impaired and our business
and results of operations may be adversely affected.
We
or our licensors, or any future collaborators or a strategic partners may become subject to third party claims or litigation alleging
infringement of patents or other proprietary rights or seeking to invalidate patents or other proprietary rights, and we may need to
resort to litigation to protect or enforce our patents or other proprietary rights, all of which could be costly, time consuming, delay
or prevent the development and commercialization of our product candidates, or put our patents and other proprietary rights at risk.
We
or our licensors, or any future collaborators or strategic partners may be subject to third-party claims for infringement or misappropriation
of patent or other proprietary rights. We are generally obligated under our license or collaboration agreements to indemnify and hold
harmless our licensors or collaborator for damages arising from intellectual property infringement by us. If we or our licensors, or
any future collaborators or strategic partners are found to infringe a third-party patent or other intellectual property rights, we could
be required to pay damages, potentially including treble damages, if we are found to have willfully infringed. In addition, we or our
licensors, collaborators or any future strategic partners may choose to seek, or be required to seek, a license from a third party, which
may not be available on acceptable terms, if at all. Even if a license can be obtained on acceptable terms, the rights may be non-exclusive,
which could give our competitors access to the same technology or intellectual property rights licensed to us. If we fail to obtain a
required license, we or our collaborator, or any future collaborator, may be unable to effectively market product candidates based on
our technology, which could limit our ability to generate revenue or achieve profitability and possibly prevent us from generating revenue
sufficient to sustain our operations. In addition, we may find it necessary to pursue claims or initiate lawsuits to protect or enforce
our patent or other intellectual property rights. The cost to us in defending or initiating any litigation or other proceeding relating
to patent or other proprietary rights, even if resolved in our favor, could be substantial, and litigation would divert our management’s
attention. Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because
they have substantially greater resources. Uncertainties resulting from the initiation and continuation of patent litigation or other
proceedings could delay our research and development efforts and limit our ability to continue our operations.
If
we were to initiate legal proceedings against a third party to enforce a patent covering one of our products or our technology, the defendant
could counterclaim that our patent is invalid or unenforceable. In patent litigation in the U.S., defendant counterclaims alleging invalidity
or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements,
for example, lack of novelty, obviousness or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone
connected with prosecution of the patent withheld relevant information from the USPTO, or made a misleading statement, during prosecution.
The outcome following legal assertions of invalidity and unenforceability during patent litigation is unpredictable. With respect to
the validity question, for example, we cannot be certain that there is no invalidating prior art, of which we and the patent examiner
were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose
at least part, and perhaps all, of the patent protection on one or more of our products or certain aspects of our platform technology.
Such a loss of patent protection could have a material adverse impact on our business. Patents and other intellectual property rights
also will not protect our technology if competitors design around our protected technology without legally infringing our patents or
other intellectual property rights.
Intellectual
property rights of third parties could adversely affect our ability to commercialize our product candidates, and we might be required
to litigate or obtain licenses from third parties in order to develop or market our product candidates. Such litigation or licenses could
be costly or not available on commercially reasonable terms.
Our
competitive position may suffer if patents issued to third parties or other third-party intellectual property rights cover our products
or elements thereof, or our manufacture or uses relevant to our development plans. In such cases, we may not be in a position to develop
or commercialize products or product candidates unless we successfully pursue litigation to nullify or invalidate the third-party intellectual
property right concerned, or enter into a license agreement with the intellectual property right holder, if available on commercially
reasonable terms.
Third
party intellectual property right holders may also actively bring infringement claims against us. We cannot guarantee that we will be
able to successfully settle or otherwise resolve such infringement claims. If we are unable to successfully settle future claims on terms
acceptable to us, we may be required to engage in or continue costly, unpredictable and time-consuming litigation and may be prevented
from or experience substantial delays in marketing our products. If we fail in any such dispute, in addition to being forced to pay damages,
we may be temporarily or permanently prohibited from commercializing any of our product candidates that are held to be infringing. We
might, if possible, also be forced to redesign product candidates so that we no longer infringe the third-party intellectual property
rights. Any of these events, even if we were ultimately to prevail, could require us to divert substantial financial and management resources
that we would otherwise be able to devote to our business.
If
we fail to comply with our obligations under any license, collaboration or other agreements, we may be required to pay damages and could
lose intellectual property rights that are necessary for developing and protecting our product candidates and delivery technologies or
we could lose certain rights to grant sublicenses.
Our
current licenses impose, and any future licenses we enter into are likely to impose, various development, commercialization, funding,
milestone, royalty, diligence, sublicensing, insurance, patent prosecution and enforcement, and other obligations on us. If we breach
any of these obligations, or use the intellectual property licensed to us in an unauthorized manner, we may be required to pay damages
and the licensor may have the right to terminate the license, which could result in us being unable to develop, manufacture and sell
products that are covered by the licensed technology or enable a competitor to gain access to the licensed technology. Moreover, our
licensors may own or control intellectual property that has not been licensed to us and, as a result, we may be subject to claims, regardless
of their merit, that we are infringing or otherwise violating the licensor’s rights. In addition, while we cannot currently determine
the amount of the royalty obligations we would be required to pay on sales of future products, if any, the amounts may be significant.
The amount of our future royalty obligations will depend on the technology and intellectual property we use in products that we aim to
develop and commercialize, if any. Therefore, even if we are able to develop and commercialize products, we may be unable to achieve
or maintain profitability.
If
we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
In
addition to seeking patent protection for certain aspects of our product candidates and delivery technologies, we also consider trade
secrets, including confidential and unpatented know-how important to the maintenance of our competitive position. We protect trade secrets
and confidential and unpatented know-how, in part, by entering into non-disclosure and confidentiality agreements with parties who have
access to such knowledge, such as our employees, corporate collaborators, outside scientific collaborators, CROs, contract manufacturers,
consultants, advisors and other third parties. We also enter into confidentiality and invention or patent assignment agreements with
our employees and consultants that obligate them to maintain confidentiality and assign their inventions to us. Despite these efforts,
any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not
be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade
secret is difficult, expensive and time- consuming, and the outcome is unpredictable. In addition, some courts in the U.S. and certain
foreign jurisdictions are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained
or independently developed by a competitor, we would have no right to prevent them from using that technology or information to compete
with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would
be harmed.
We
may be subject to claims that we or our employees or consultants have wrongfully used or disclosed alleged trade secrets of our employees’
or consultants’ former employers or their clients. These claims may be costly to defend and if we do not successfully do so, we
may be required to pay monetary damages and may lose valuable intellectual property rights or personnel.
Many
of our employees were previously employed at universities or biotechnology or pharmaceutical companies, including our competitors or
potential competitors. Although no claims against us are currently pending, we may be subject to claims that these employees or we have
inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may
be necessary to defend against these claims. If we fail in defending such claims, in addition to paying monetary damages, we may lose
valuable intellectual property rights or personnel. A loss of key research personnel or their work product could hamper our ability to
commercialize, or prevent us from commercializing, our product candidates, which could severely harm our business. Even if we are successful
in defending against these claims, litigation could result in substantial costs and be a distraction to management.
If
our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest
and our business may be adversely affected.
Our
trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks.
We may not be able to protect our rights to these trademarks and trade names or may be forced to stop using these names, which we need
for name recognition by potential partners or customers in our markets of interest. If we are unable to establish name recognition based
on our trademarks and trade names, we may not be able to effectively compete and our business may be adversely affected.
Risks
Related to Government Regulation and Product Approvals
We
may be unable to obtain U.S. or foreign regulatory approval and, as a result, unable to commercialize our product candidates.
Our
product candidates are subject to extensive governmental regulations relating to, among other things, research, testing, development,
manufacturing, safety, efficacy, approval, recordkeeping, reporting, labeling, storage, packaging, advertising and promotion, pricing,
marketing and distribution of drugs. Rigorous preclinical testing and clinical trials and an extensive regulatory approval process are
required to be completed in the U.S. and in many foreign jurisdictions before a new drug can be marketed. Satisfaction of these and other
regulatory requirements is costly, time consuming, uncertain and subject to unanticipated delays. It is possible that none of the product
candidates we may develop will obtain the regulatory approvals necessary for us or our collaborators to begin selling them.
We
have very limited experience in conducting and managing the clinical trials necessary to obtain regulatory approvals, including approval
by the FDA. The time required to obtain FDA and other approvals is unpredictable but typically takes many years following the commencement
of clinical trials, depending upon the type, complexity and novelty of the product candidate. The standards that the FDA and its foreign
counterparts use when regulating us are not always applied predictably or uniformly and can change. Any analysis we perform of data from
preclinical and clinical activities is subject to confirmation and interpretation by regulatory authorities, which could delay, limit
or prevent regulatory approval. We may also encounter unexpected delays or increased costs due to new government regulations, for example,
from future legislation or administrative action, or from changes in FDA policy during the period of product development, clinical trials
and FDA regulatory review. It is impossible to predict whether legislative changes will be enacted, or whether FDA or foreign regulations,
guidance or interpretations will be changed, or what the impact of such changes, if any, may be.
Any
delay or failure in obtaining required approvals could have a material adverse effect on our ability to generate revenues from the particular
product candidate for which we are seeking approval. Furthermore, any regulatory approval to market a product may be subject to limitations
on the approved uses for which we may market the product or the labeling or other restrictions. In addition, the FDA has the authority
to require a Risk Evaluation and Mitigation Strategy (REMS) plan as part of an NDA or biologics license application (BLA) or after approval,
which may impose further requirements or restrictions on the distribution or use of an approved drug or biologic, such as limiting prescribing
to certain physicians or medical centers that have undergone specialized training, limiting treatment to patients who meet certain safe-use
criteria and requiring treated patients to enroll in a registry. These limitations and restrictions may limit the size of the market
for the product and affect reimbursement by third-party payors.
If
we or our collaborators, manufacturers or service providers fail to comply with healthcare laws and regulations, we or they could be
subject to enforcement actions, which could affect our ability to develop, market and sell our products and may harm our reputation.
We
and our collaborators are subject to federal, state, and foreign healthcare laws and regulations pertaining to fraud and abuse and patients’
rights. These laws and regulations include:
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the
U.S. federal healthcare program anti-kickback law, which prohibits, among other things, persons from soliciting, receiving or providing
remuneration, directly or indirectly, to induce either the referral of an individual for a healthcare item or service, or the purchasing
or ordering of an item or service, for which payment may be made under a federal healthcare program such as Medicare or Medicaid; |
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the
U.S. federal false claims law, which prohibits, among other things, individuals or entities from knowingly presenting or causing
to be presented, claims for payment by government funded programs such as Medicare or Medicaid that are false or fraudulent, and
which may apply to us by virtue of statements and representations made to customers or third parties; |
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the
U.S. federal Health Insurance Portability and Accountability Act (HIPAA) and Health Information Technology for Economic and Clinical
Health (HITECH) Act, which prohibit executing a scheme to defraud healthcare programs, impose requirements relating to the privacy,
security, and transmission of individually identifiable health information, and require notification to affected individuals and
regulatory authorities of certain breaches of security of individually identifiable health information; |
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the
federal Open Payments regulations under the National Physician Payment Transparency Program have been issued under the Patient Protection
and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, and will require that manufacturers
of pharmaceutical and biological drugs covered by Medicare, Medicaid, and Children’s Health Insurance Programs report all consulting
fees, travel reimbursements, research grants, and other payments or gifts with values over $10 made to physicians and teaching hospitals;
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state
laws comparable to each of the above federal laws, such as, for example, anti-kickback and false claims laws applicable to commercial
insurers and other non-federal payors, requirements for mandatory corporate regulatory compliance programs, and laws relating to
patient data privacy and security. |
If
our operations are found to be in violation of any such requirements, we may be subject to penalties, including civil or criminal penalties,
monetary damages, the curtailment or restructuring of our operations, loss of eligibility to obtain approvals from the FDA, or exclusion
from participation in government contracting, healthcare reimbursement or other government programs, including Medicare and Medicaid,
any of which could adversely our financial results. Although effective compliance programs can mitigate the risk of investigation and
prosecution for violations of these laws, these risks cannot be entirely eliminated. Any action against us for an alleged or suspected
violation could cause us to incur significant legal expenses and could divert our management’s attention from the operation of
our business, even if our defense is successful. In addition, achieving and sustaining compliance with applicable laws and regulations
may be costly to us in terms of money, time and resources.
If
we or our collaborators, manufacturers or service providers fail to comply with applicable federal, state or foreign laws or regulations,
we could be subject to enforcement actions, which could affect our ability to develop, market and sell our products successfully and
could harm our reputation and lead to reduced acceptance of our products by the market. These enforcement actions include, among others:
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adverse
regulatory inspection findings; |
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warning
letters; |
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voluntary
or mandatory product recalls or public notification or medical product safety alerts to healthcare professionals; |
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restrictions
on, or prohibitions against, marketing our products; |
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restrictions
on, or prohibitions against, importation or exportation of our products; |
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suspension
of review or refusal to approve pending applications or supplements to approved applications; |
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exclusion
from participation in government-funded healthcare programs; |
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exclusion
from eligibility for the award of government contracts for our products; |
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suspension
or withdrawal of product approvals; |
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product
seizures; |
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injunctions;
and |
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civil
and criminal penalties and fines. |
Any
drugs we develop may become subject to unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives,
thereby harming our business.
The
regulations that govern marketing approvals, pricing and reimbursement for new drugs vary widely from country to country. Some countries
require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing
or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing
governmental control even after initial approval is granted. Although we intend to monitor these regulations, our programs are currently
in the early stages of development and we will not be able to assess the impact of price regulations for a number of years. As a result,
we might obtain regulatory approval for a product in a particular country, but then be subject to price regulations that delay our commercial
launch of the product and negatively impact the revenues we are able to generate from the sale of the product in that country.
Our
ability to commercialize any products also will depend in part on the extent to which reimbursement for these products and related treatments
will be available from government health administration authorities, private health insurers and other organizations. Even if we succeed
in bringing one or more products to the market, these products may not be considered cost-effective, and the amount reimbursed for any
products may be insufficient to allow us to sell our products on a competitive basis. Because our programs are in the early stages of
development, we are unable at this time to determine their cost effectiveness or the likely level or method of reimbursement. Increasingly,
the third-party payors who reimburse patients or healthcare providers, such as government and private insurance plans, are requiring
that drug companies provide them with predetermined discounts from list prices and are seeking to reduce the prices charged or the amounts
reimbursed for pharmaceutical products. If the price we are able to charge for any products we develop, or the reimbursement provided
for such products, is inadequate in light of our development and other costs, our return on investment could be adversely affected.
Our
current product candidates will need to be administered under the supervision of a physician on an outpatient basis. Under currently
applicable U.S. law, certain drugs that are not usually self-administered (including injectable drugs) may be eligible for coverage under
the Medicare Part B program if:
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are incident to a physician’s services; |
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are reasonable and necessary for the diagnosis or treatment of the illness or injury for which they are administered according to
accepted standards of medical practice; and |
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have been approved by the FDA and meet other requirements of the statute. |
There
may be significant delays in obtaining coverage for newly-approved drugs, and coverage may be more limited than the purposes for which
the drug is approved by the FDA. Moreover, eligibility for coverage does not imply that any drug will be reimbursed in all cases or at
a rate that covers our costs, including research, development, manufacture, sale and distribution. Interim payments for new drugs, if
applicable, may also not be sufficient to cover our costs and may not be made permanent. Reimbursement may be based on payments allowed
for lower- cost drugs that are already reimbursed, may be incorporated into existing payments for other services and may reflect budgetary
constraints or imperfections in Medicare data. Net prices for drugs may be reduced by mandatory discounts or rebates required by government
healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where
they may be sold at lower prices than in the U.S. Third-party payors often rely upon Medicare coverage policy and payment limitations
in setting their own reimbursement rates. Our inability to promptly obtain coverage and adequate reimbursement rates from both government-funded
and private payors for new drugs that we develop and for which we obtain regulatory approval could have a material adverse effect on
our operating results, our ability to raise capital needed to commercialize products and our financial condition.
We
believe that the efforts of governments and third-party payors to contain or reduce the cost of healthcare and legislative and regulatory
proposals to broaden the availability of healthcare will continue to affect the business and financial condition of pharmaceutical and
biopharmaceutical companies. A number of legislative and regulatory changes in the healthcare system in the U.S. and other major healthcare
markets have been proposed in recent years, and such efforts have expanded substantially in recent years. These developments have included
prescription drug benefit legislation that was enacted and took effect in January 2006, healthcare reform legislation enacted by certain
states, and Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act
(the “ACA”), a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcare
spending and enhance remedies against fraud and abuse. The ACA also contains provisions that will affect companies in the pharmaceutical
industry and other healthcare related industries by imposing additional costs and changes to business practices. Provisions affecting
pharmaceutical companies include the following:
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mandatory
rebates for drugs sold into the Medicaid program have been increased, and the rebate requirement has been extended to drugs used
in risk-based Medicaid managed care plans; |
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the
340B Drug Pricing Program under the Public Health Services Act has been extended to require mandatory discounts for drug products
sold to certain critical access hospitals, cancer hospitals and other covered entities; |
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pharmaceutical
companies are required to offer discounts on brand-name drugs to patients who fall within the Medicare Part D coverage gap, commonly
referred to as the “Donut Hole”; and |
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pharmaceutical
companies are required to pay an annual non-tax deductible fee to the federal government based on each company’s market share
of prior year total sales of branded products to certain federal healthcare programs, such as Medicare, Medicaid, Department of Veterans
Affairs and Department of Defense. Since we expect our branded pharmaceutical sales to constitute a small portion of the total federal
health program pharmaceutical market, we do not expect this annual assessment to have a material impact on our financial condition. |
Moreover,
we cannot predict what healthcare reform initiatives may be adopted in the future. Further federal and state legislative and regulatory
developments are likely, and we expect ongoing initiatives in the U.S. to increase pressure on drug pricing. Such reforms could have
an adverse effect on anticipated revenues from product candidates that we may develop and for which we may obtain regulatory approval
and may affect our overall financial condition and ability to develop product candidates.
Our
ability to obtain services, reimbursement or funding from the federal government may be impacted by possible reductions in federal spending.
U.S.
federal government agencies currently face potentially significant spending reductions. Under the Budget Control Act of 2011, the failure
of Congress to enact deficit reduction measures of at least $1.2 trillion for the years 2013 through 2021 triggered automatic cuts to
most federal programs. These cuts would include aggregate reductions to Medicare payments to providers of up to two percent per fiscal
year, starting in 2013. Under the American Taxpayer Relief Act of 2012, which was enacted on January 1, 2013, the imposition of these
automatic cuts was delayed until March 1, 2013. Certain of these automatic cuts have been implemented. The full impact on our business
of these automatic cuts is uncertain. If federal spending is reduced, anticipated budgetary shortfalls may also impact the ability of
relevant agencies, such as the FDA or the NIH to continue to function at current levels. Amounts allocated to federal grants and contracts
may be reduced or eliminated. These reductions may also impact the ability of relevant agencies to timely review and approve drug research
and development, manufacturing, and marketing activities, which may delay our ability to develop, market and sell any products we may
develop.
If
any of our product candidates receives marketing approval and we or others later identify undesirable side effects caused by the product
candidate, our ability to market and derive revenue from the product candidates could be compromised.
In
the event that any of our product candidates receive regulatory approval and we or others identify undesirable side effects caused by
one of our products, any of the following adverse events could occur, which could result in the loss of significant revenue to us and
materially and adversely affect our results of operations and business:
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regulatory
authorities may withdraw their approval of the product or seize the product; |
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we
may be required to recall the product or change the way the product is administered to patients; |
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additional
restrictions may be imposed on the marketing of the particular product or the manufacturing processes for the product or any component
thereof; |
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we
may be subject to fines, injunctions or the imposition of civil or criminal penalties; |
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regulatory
authorities may require the addition of labeling statements, such as a “black box” warning or a contraindication; |
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we
may be required to create a Medication Guide outlining the risks of such side effects for distribution to patients; |
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we
could be sued and held liable for harm caused to patients; |
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the
product may become less competitive; and |
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our
reputation. |
Risks
Related to our Common Stock
Our
internal controls may be inadequate, which could cause our financial reporting to be unreliable and lead to misinformation being disseminated
to the public.
Our
management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Rule 13a-15(f)
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), internal control over financial reporting is
a process designed by, or under the supervision of, the principal executive and principal financial officer and effected by the board
of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those
policies and procedures that:
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pertain
to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; |
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provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with
authorizations of management and/or directors of the Company; and |
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provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s
assets that could have a material effect on the financial statements. |
We
are required to include a report of management on the effectiveness of our internal control over financial reporting. We expect to incur
additional expenses and diversion of management’s time as a result of performing the system and process evaluation, testing and
remediation required in order to comply with the management certification requirements.
We
do not have a sufficient number of employees to segregate responsibilities and may be unable to afford increasing our staff or engaging
outside consultants or professionals to overcome our lack of employees. During the course of our testing, we may identify other deficiencies
that we may not be able to timely remediate. Moreover, effective internal controls, particularly those related to revenue recognition,
are necessary for us to produce reliable financial reports and are important to help prevent financial fraud. If we cannot provide reliable
financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported
financial information, and the trading price of our common stock, if a market ever develops, could drop significantly.
The
Jobs Act has reduced the information that we are required to disclose.
Under
the Jobs Act, the information that we will be required to disclose has been reduced in a number of ways.
As
a company that had gross revenues of less than $1.0 billion during the Company’s last fiscal year, the Company is an “emerging
growth company,” as defined in the Jobs Act (an “EGC”). We will retain that status until the earliest of (a) the last
day of the fiscal year which we have total annual gross revenues of $1,000,000,000 (as indexed for inflation in the manner set forth
in the Jobs Act) or more; (b) the last day of the fiscal year of following the fifth anniversary of the date of the first sale of the
common stock pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”);
(c) the date on which we have, during the previous three year period, issued more than $1,000,000,000 in non-convertible debt; or (d)
the date on which we are deemed to be a “large accelerated filer,” as defined in Rule 12b-2 under the Exchange Act or any
successor thereto. As an EGC, the Company is relieved from the following:
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The
Company is excluded from Section 404(b) of Sarbanes-Oxley Act (“Sarbanes-Oxley”), which otherwise would have required
the Company’s auditors to attest to and report on the Company’s internal control over financial reporting. The JOBS Act
also amended Section 103(a)(3) of Sarbanes-Oxley to provide that (i) any new rules adopted by the PCAOB requiring mandatory audit
firm rotation or changes to the auditor’s report to include auditor discussion and analysis (in the event the PCAOB adopts
an auditor rotation requirement) will not apply to an audit of an EGC; and (ii) any other future rules adopted by the PCAOB will
not apply to the Company’s audits unless the SEC determines otherwise. |
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The
Jobs Act amended Section 7(a) of the Securities Act to provide that the Company need not present more than two years of audited financial
statements in an initial public offering registration statement and in any other registration statement, need not present selected
financial data pursuant to Item 301 of Regulation S-K for any period prior to the earliest audited period presented in connection
with such initial public offering. In addition, the Company is not required to comply with any new or revised financial accounting
standard until such date as a private company (i.e., a company that is not an “issuer” as defined by Section 2(a) of
Sarbanes-Oxley) is required to comply with such new or revised accounting standard. Corresponding changes have been made to the Exchange
Act, which relates to periodic reporting requirements, which would be applicable if the Company were required to comply with them. |
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As
long as we are an EGC, we may comply with Item 402 of Regulation S-K, which requires extensive quantitative and qualitative disclosure
regarding executive compensation, by disclosing the more limited information required of a “smaller reporting company.” |
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The
Jobs Act will also exempt us from the following additional compensation-related disclosure provisions that were imposed on U.S. public
companies pursuant to the Dodd-Frank Act: (i) the advisory vote on executive compensation required by Section 14A(a) of the Exchange
Act; (ii) the requirements of Section 14A(b) of the Exchange Act relating to stockholders advisory votes on “golden parachute”
compensation; (iii) the requirements of Section 14(i) of the Exchange Act as to disclosure relating to the relationship between executive
compensation and our financial performance; and (iv) the requirement of Section 953(b)(1) of the Dodd-Frank Act, which requires disclosure
as to the relationship between the compensation of our chief executive officer and median employee pay. |
Our
stock price may be volatile, and purchasers of our common stock could incur substantial losses.
Since
commencement of trading on Nasdaq Stock Market LLC or Nasdaq, on August 29, 2022, our stock price has been extremely volatile, having
traded as high as $126.26 and as low as $1.67. As a result of this volatility, investors may not be able to sell their common stock at
or above the initial public offering price. The market price for our common stock may be influenced by many factors, including the other
risks described in this section of this Annual Report entitled “Risk Factors” and the following:
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the
success of competitive products or technologies; |
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results
of preclinical and clinical studies of our product candidates, or those of our competitors, our existing collaborator or any future
collaborators; |
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regulatory
or legal developments in the U.S. and other countries, especially changes in laws or regulations applicable to our products; |
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introductions
and announcements of new products by us, our commercialization partners, or our competitors, and the timing of these introductions
or announcements; |
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actions
taken by regulatory agencies with respect to our products, clinical studies, manufacturing process or sales and marketing terms; |
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actual
or anticipated variations in our financial results or those of companies that are perceived to be similar to us; |
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the
success of our efforts to acquire or in-license additional technologies, products or product candidates; |
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developments
concerning our collaborations, including but not limited to those with our sources of manufacturing supply and our commercialization
partners; |
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announcements
by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments; |
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developments
or disputes concerning patents or other proprietary rights, including patents, litigation matters and our ability to obtain patent
protection for our products; |
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our
ability or inability to raise additional capital and the terms on which we raise it; |
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the
recruitment or departure of key personnel; |
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changes
in the structure of healthcare payment systems; |
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market
conditions in the pharmaceutical and biotechnology sectors; |
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actual
or anticipated changes in earnings estimates or changes in stock market analyst recommendations regarding our common stock, other
comparable companies or our industry generally; |
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our
failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to
the market; |
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fluctuations
in the valuation of companies perceived by investors to be comparable to us; |
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announcement
and expectation of additional financing efforts; |
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speculation
in the press or investment community; |
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trading
volume of our common stock; |
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sales
of our common stock by us or our stockholders; |
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the
concentrated ownership of our common stock; |
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changes
in accounting principles; |
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terrorist
acts, acts of war or periods of widespread civil unrest; |
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natural
disasters and other calamities; and |
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general
economic, industry and market conditions. |
In
addition, the stock markets in general, and the markets for pharmaceutical stocks, in particular, have experienced extreme volatility
that has been often unrelated to the operating performance of the issuer. These broad market and industry factors may seriously harm
the market price of our common stock, regardless of our operating performance.
The
future issuance of equity or of debt securities that are convertible into common stock will dilute our share capital.
We
may choose to raise additional capital in the future, depending on market conditions, strategic considerations and operational requirements.
To the extent that additional capital is raised through the issuance of shares or other securities convertible into shares of our common
stock, our stockholders will be diluted. Future issuances of our common stock or other equity securities, or the perception that such
sales may occur, could adversely affect the trading price of our common stock and impair our ability to raise capital through future
offerings of shares or equity securities. No prediction can be made as to the effect, if any, that future sales of common stock or the
availability of common stock for future sales will have on the trading price of our common stock.
Following
our IPO on August 29, 2022, Holders of 1% or more of our common stock prior to our IPO are subject to a six month lock-up agreement,
and all directors, officers and 10% shareholders are subject to a one year lock-up post-IPO. At such time as such stock becomes available
for sale, it is possible a significant number of our shares may cause the market price of our common stock to drop significantly.
Commencing
at the end of February 2023, 6,348,990 shares of our fully diluted common stock outstanding as of the date of this Annual Report will
be eligible for sale in the public market from time to time thereafter pursuant to Rule 144 under the Securities Act, and 3,030,108 shares
of our fully diluted common stock will be eligible for resale following a one-year lock-up period; some of such shares may be subject
to the volume and other restrictions of Rule 144. Further, we have 2,581,146 shares reserved for issuance under our 2018 Equity Incentive
Plan (the “Plan”), which shares may be issued from time to time by our management and which will then be subject to vesting
and other requirements, and 23,724 shares which have been issued under the Plan but remain subject to vesting conditions. At such time
as the lock-up periods end, or if it ends earlier pursuant to the discretion of the underwriter for our initial public offering, it is
possible that a significant number of such shares will be sold into the market. At such time, the sale of a significant number of shares
of our common stock in the public market or the perception that such sales may occur could significantly reduce the market price of our
common stock.
If
we fail to maintain applicable listing requirements, Nasdaq may delist our common stock from trading, in which case the liquidity and
market price of our common stock could decline.
We
cannot assure you that we will be able to meet the continued listing standards of Nasdaq in the future. If we fail to comply with the
applicable listing standards and Nasdaq delists our common stock, we and our stockholders could face significant material adverse consequences,
including:
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a
limited availability of market quotations for shares of our common stock; |
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reduced
liquidity for our common stock; |
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a
determination that our common stock is “penny stock,” which would require brokers trading in our common stock to adhere
to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for shares of
our common stock; |
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a
limited amount of news about us and analyst coverage of us; and |
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a
decreased ability for us to issue additional equity securities or obtain additional equity or debt financing in the future. |
The
National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the
sale of certain securities, which are referred to as “covered securities.” Because our common stock are listed on Nasdaq,
such securities will be deemed covered securities. Although the states will be preempted from regulating the sale of our securities,
the federal statute does allow states to investigate companies if there is a suspicion of fraud and, if there is a finding of fraudulent
activity, then the states can regulate or bar the sale of covered securities in a particular case. Further, if we were no longer listed
on Nasdaq, our securities would not be covered securities and we would be subject to regulations in each state in which we offer our
securities.
Because
our management has broad discretion over the use of the net proceeds we received from our IPO and follow-on offering, you may not agree with how we use
them and the proceeds may not be invested successfully.
We
intend to use the net proceeds to us from our IPO and follow-on offering to fund preclinical and clinical trials of product
candidates, Ropidoxuridine and new formulations of Ropidoxuridine with Tipiracil, O-18 containing molecules for proton radiation
sensitization, continued HDAC technology platform development, working capital and general corporate purposes, including the costs
of operating as a public company, as well as potential acquisition or in-licensing activities. Therefore, our management has
broad discretion as to the use of the IPO proceeds and proceeds from our subsequent private placement. Accordingly, you will be relying on the judgment of our management with regard
to the use of these net proceeds, and you will not have the opportunity, as part of your investment decision, to assess whether the
proceeds are being used appropriately. It is possible that the proceeds will be invested in a way that does not yield a favorable,
or any, return for our Company.
If
securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion
regarding our stock, our stock price and trading volume could decline.
The
trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about
us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no or few
securities or industry analysts commence coverage of us, the trading price for our stock would be negatively impacted. In the event we
obtain securities or industry analyst coverage, if any of the analysts who cover us issue an adverse or misleading opinion regarding
us, our business model, our intellectual property or our stock performance, or if our target studies and operating results fail to meet
the expectations of analysts, our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to
publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading
volume to decline.
Our
board of directors has the authority, without stockholder approval, to issue preferred stock with terms that may not be beneficial
to holders of our common stock and such issuance could potentially adversely affect stockholders’ voting power and perpetuate their
control over us.
Our
Certificate of Incorporation, as amended to date, allows us to issue shares of preferred stock without any vote or further action by
our stockholders. Our board of directors has the authority to fix and determine the relative rights and preferences of any preferred
stock. As a result, our board of directors could authorize the issuance of a series of preferred stock that would grant to holders the
preferred right 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 shares, together with a premium, prior to the redemption of shares of our common
stock. These rights and preferences could negatively affect the holders of our common stock.
The
ability of our executive officers and directors, who are our principal stockholders, to control our business may limit or eliminate the
ability of minority stockholders to influence corporate affairs.
Our
executive officers and directors, who are our principal stockholders, own approximately 47.6% of our issued and outstanding common stock.
Accordingly, they may be able to effectively control the election of directors, as well as all other matters requiring stockholder approval.
The interests of our principal stockholders may differ from the interests of other stockholders with respect to the issuance of shares,
business transactions with or sales to other companies, selection of other directors and other business decisions. The minority stockholders
have no way of overriding decisions made by our principal stockholders. This level of control may also have an adverse impact on the
market value of our shares because our principal stockholders may institute or undertake transactions, policies or programs that result
in losses and may not take any steps to increase our visibility in the financial community and/or may sell sufficient numbers of shares
to significantly decrease our price per share.
Our
Certificate of Incorporation and Bylaws, each as amended to date, provide for indemnification of officers and directors at the expense
of the Company and limit their liability that may result in a major cost to us and hurt the interests of our stockholders because corporate
resources may be expended for the benefit of officers and/or directors.
Our
Certificate of Incorporation and Bylaws, each as amended to date, provide for the indemnification of our officers and directors. We have
been advised that, in the opinion of the SEC, indemnification for liabilities arising under federal securities laws is against public
policy as expressed in the Securities Act and is therefore, unenforceable.
Our
Certificate of Incorporation, as amended to date, provides that disputes must be resolved in the Court of Chancery of the State of Delaware,
except for cases brought under the Securities Act or Exchange Act.
Our
Certificate of Incorporation, as amended to date, provides that the Court of Chancery in the State of Delaware will be the exclusive
forum for dispute resolution for certain enumerated actions, excluding any actions brought under the Securities Act or Exchange Act,
or unless the Company consents in writing to an alternative jurisdiction. This exclusive forum selection clause may cause inconvenience
of our stockholders or other stakeholders, should they need to bring suit against the Company for an action other than one arising under
the Securities Act or Exchange Act.
We
do not expect to pay cash dividends in the foreseeable future.
We
have never paid cash dividends on our common stock. We do not expect to pay cash dividends on our common stock at any time in the
foreseeable future. The future payment of dividends on our common stock directly depends upon our future earnings, capital
requirements, financial requirements and other factors that our board of directors will consider. Since we do not anticipate paying
cash dividends on our common stock, return on your investment, if any, will depend solely on an increase, if any, in the market
value of our common stock.
Provisions
in our amended and restated certificate of incorporation, as amended, and bylaws, as amended, as well as Delaware law, might discourage,
delay or prevent a change of control of our company or changes in our management and, therefore, depress the market price of our common
stock.
Our
Certificate of Incorporation and Bylaws, each as amended to date, and bylaws contain provisions that could depress the market price of
our common stock by acting to discourage, delay, or prevent a change in control of our company or changes in our management that the
stockholders of our company may deem advantageous. These provisions, among other things:
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permit
the board of directors to establish the number of directors; |
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provide
that directors may only be removed “for cause” and only with the approval of 66 2/3 percent of our stockholders; |
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require
super-majority voting to amend some provisions in our Certificate of Incorporation and Bylaws; |
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authorize
the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights
plan (also known as a “poison pill”); |
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eliminate
the ability of our stockholders to call special meetings of stockholders; |
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prohibit
stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders; |
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provide
that the board of directors is expressly authorized to make, alter or repeal our bylaws; and |
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establish
advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon
by stockholders at annual stockholder meetings. |
In
addition, Section 203 of the Delaware General Corporation Law may discourage, delay or prevent a change in control of our company. Section
203 imposes certain restrictions on merger, business combinations and other transactions between us and holders of 15% or more of our
common stock.