Item 1. Business
Our Business
The business plan of the company
will no longer be focused on a chewing gum delivery system but it will re-focus its activities to the development of cannabinoid,
cannabinoid-like, and non-cannabinoid pharmaceutical active pharmaceutical ingredients (APIs), pharmaceutical medicines made from
cannabinoid, cannabinoid-like, and non-cannabinoid APIs and European novel food approval of cannabinoid-based, cannabinoid-like
and non-cannabinoid ingredients and products .In addition, the company plans to develop such bulk ingredients for supply into the
cosmetic sector.
Because the IP relating to
the development of a chewing gum with nutraceutical/functional ingredients is not relevant to the pharmaceutical type operations
that the company plans to conduct, the IP surrounding the chewing gum may no longer benefit the company’s operations going
forward. While company has not yet decided on the proper disposition of the IP at present, the company will likely divest ownership
in the near future.
The new business plan of the
company is for the company’s operations to be repositioned as a fully regulatory-compliant pharmaceutical company specializing
in the development of the following:
• cannabinoid, cannabinoid-like
and non-cannabinoid pharmaceutical active pharmaceutical ingredients (APIs) globally;
• pharmaceutical medicines
made from cannabinoid, cannabinoid-like and non-cannabinoid APIs globally;
• European novel food
approval of cannabinoid-based, cannabinoid-like and non-cannabinoid ingredients;
• European novel food
approval of products containing cannabinoids, cannabinoid-like and non-cannabinoid ingredients; and
• Supply of cosmetic ingredients
to potential customers who may develop products containing cannabinoids, cannabinoid-like and non-cannabinoid ingredients
The controlled drugs / cannabinoid
pharmaceutical market worldwide has experienced exponential growth over the past few years in the development of cannabinoid medicines.
It is Alterola’s intention to develop ingredients and products on a global basis, fully compliant with the appropriate international
laws and regulations and also compliant with the relevant national laws and regulations on a territory-by-territory basis.
In December 2020, the company
retained new management and board members that have experience in the pharmaceutical, botanical and nutraceutical industries. Further
to this objective, the company is also interested in recruiting key executives and personnel that have experience in the controlled
drugs / cannabinoid medicines industry. The focus will be on recruiting outstanding talents that have contributed or can contribute
more in the future with the company’s expansion plans.
The company also has interest
in licensing / acquiring other IP from companies that have IP pertinent to the aforementioned products the company plans to develop.
Under consideration are companies that have existing pharmaceutical research and/or development or manufacturing capability or
associated IP. Some of these companies have IP which is available to consolidate into our company strategy. These acquisition or
in-licensing opportunities are expected to facilitate the company to develop API and medicines globally and food-grade ingredients
and products for the food and beverage industry in Europe.
Acquisition of ABTI Pharma
On January 19, 2021, we entered into an Stock
Transfer Agreement (the “Agreement”) with ABTI Pharma Limited, a company registered in England and Wales (“ABTI
Pharma”), pursuant to which the Company will acquire all of the outstanding shares of capital stock of ABTI Pharma from its
shareholders in exchange for 600,000,000 shares of the Company pro rata to the ABTI Pharma shareholders. The shares have been issued
in anticipation of the closing and the transaction will close upon the ABTI Pharma Limited Shares being transferred to the company
which will occur upon the filing by the company of its outstanding annual report and form 10 k for 2019, and its quarterly reports
for 2020, that are anticipated to be filed by March 30th2021.
Pursuant to the Agreement, from the date
of execution, the Company will provide funding to ABTI Pharma to pay for operating expenses including salaries, office expenses
and additional expenses or projects in the amount of US$500,000 within fifteen (15) days from closing the Agreement and shall
fund an additional US $200,000 every 30 days thereafter until a total funding of US $1,100,000 has been delivered.
Further under the Agreement, Alterola will
endeavor to raise a total of at least $50,000,000 with $45,000,000 in net proceeds and Alterola will arrange an underwriting commitment
of the first ($25,000,000 USD) to be funded at a price of not less than $1.00 per share within 45 days of execution of the Agreement.
As part of the Agreement, Amsterdam Café
Holdings Limited has agreed to cancel and return to the Company 200,000,000 shares it holds and Bulls Run Investments Limited will
be issued 19,100,000 shares of common stock.
Operations of ABTI Pharma
We have entered into an agreement to acquire
ABTI Pharma Limited, with the closing expected as outlined above. ABTI Pharma Limited is a UK-based pharmaceutical company developing
cannabinoid, cannabinoid-like, and non-cannabinoid pharmaceutical active pharmaceutical ingredients (APIs), pharmaceutical medicines
made from cannabinoid, cannabinoid-like, and non-cannabinoid APIs and targeting European novel food approval of cannabinoid-based,
cannabinoid-like and non-cannabinoid ingredients and products .In addition, the company is seeking to develop such bulk ingredients
for supply into the cosmetic sector.
ABTI Pharma Ltd is a UK-based pharma company
working with cannabinoid and cannabinoid like molecules. It has three areas of focus:
1) Development of regulated pharmaceuticals
(human and animal health) and regulated food products. This has been achieved via the strategic acquisition of Phytotherapeutix
Ltd.
2) Production of low cost of goods Active
Pharmaceutical Ingredient (API) and food-grade ingredients (supported by the strategic acquisition of Ferven Ltd, and
3) Formulation, and drug delivery, providing
improved bioavailability, solubility and stability (supported by the exclusive licensing of IP and technology from Nano4M Ltd).
Phytotherapeutix Ltd, is a company which has
been acquired, which has generated a number of IP-protected molecules with demonstrable pharmacological activity, similar to that
of CBD. This means these molecules are anticipated to have a similar market potential to CBD across a range of therapeutic areas.
Ferven Ltd, is a company, which is looking
to produce cannabinoids by fermentation. The exclusively licensed gene modified organism
has the potential to produce multiple cannabinoids at a very low cost of goods. The selected organisms grow very quickly, which
in turn, reduces the cost of production.
Nano4M Ltd is a company which has exclusively
licensed its nano-formulation patents and know-how to ABTI Pharma Ltd.
Additionally, in principle
agreements have been reached to bring a number of other IP-protected technologies into Alterola via the deal with ABTI Pharma.
ABTI Pharma management has extensive proven
experience, knowhow and connections in the cannabinoid medicines sector, and is looking to utilize this knowledge and experience
for the development of such medicines from existing cannabinoids.
Competition
Pharmaceutical Sector
The cannabinoid-based and cannabinoid-like
pharmaceutical medicine research and development sector and is and will likely remain competitive. In general, the biotechnology
and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition, and a strong emphasis on
proprietary drugs / medicines.
We expect that Alterola will
be required to compete with a variety of multinational pharmaceutical companies and specialized biotechnology companies, as well
as drugs and processes being developed at universities and other research institutions. Our competitors may develop or may already
have developed drugs comparable or competitive with our pipeline drug candidates. Competitive therapeutic treatments for diseases,
disorders and medical conditions that are included in our pipeline development projects have already been approved by the pharmaceutical
regulatory bodies around the world (e.g. FDA, EMA etc.) and used / prescribed by the medical community and any new treatments that
may enter the market would face fierce competition.
We are aware of a number of
companies that are engaged in cannabinoid-based drug development. In addition, several other U.S.-based companies are in early
stage discovery and preclinical development utilizing synthetic and/or plant-derived CBD and/or THC.
Non-Pharmaceutical Sector
Due to Federal regulation,
it is not currently possible to develop THC or CBD-containing products for non-pharmaceutical use (e.g. as food ingredients or
dietary supplements). However, it is possible to develop cannabinoid-containing ingredients and products in the food sector in
Europe through the Novel Food Approvals route.
Again this sector is and will
likely remain competitive in territories where it is legal to develop and sell such products. Further it is also possible to develop
cannabinoid-containing ingredients in the cosmetics sector.
For both pharmaceutical and
non-pharmaceutical markets, established companies may have a competitive advantage due to their size and experiences, positive
cash flows and institutional networks. Many of our pharma and non-pharma competitors may have significantly greater financial,
technical and human resources than we do. Due to these factors, our competitors may have a range of competitive advantages and
may obtain regulatory approval of their active pharmaceutical ingredient (API), or medicines; or food ingredients or food products
or cosmetic ingredients before we are able to develop or commercialize our pharma or non pharma active ingredients or products.
Our competitors may also develop ingredients or products that are safer, more effective, more widely used and less expensive than
ours. Furthermore, some of these competitors may make acquisitions or establish collaborative relationships among themselves or
with third parties to increase their ability to rapidly gain market share and/or increase their ingredient or product lines.
Mergers and acquisitions in
the pharmaceutical and biotechnology and non-pharmaceutical industries may result in even more resources being concentrated among
a smaller number of competitors. Smaller and other early-stage companies, such as ours, may also prove to be significant competitors,
particularly through collaborative arrangements with large and established companies. We aim to compete with large and small companies
in recruiting and retaining qualified scientific, management and commercial personnel, and using our management knowhow and expertise
in the sector to develop ingredients and products in a compliant manner, as well as in acquiring technologies complementary to
our development programs.
Intellectual
Property:
Through the acquisition of
ABTI Pharma, Alterola is expected to acquire ABTI Pharma’s IP portfolio, which includes:
1) IP including patent applications
pertaining to novel compounds for development of pharmaceutical drug candidates and their therapeutic use;
2) IP (including organisms,
protocols and knowhow) pertaining to low cost of goods production of Active Pharmaceutical Ingredient (API) and food-grade ingredients;
and
3) IP including granted patents
pertaining to particle engineering technology, formulation, and drug delivery technologies, which will provide improved drug performance.
In addition, ABTI Pharma have
terms agreed to bring in additional complimentary technologies with incumbent IP.
Regulatory
Matters
Pharmaceuticals
USA
As a development stage company that intends to have its pipeline
drug candidates approved in the U.S., we are subject to extensive regulation by regulatory agencies. The U.S. Food, Drug, and Cosmetic
Act and its implementing regulations set forth, among other things, requirements for the research, testing, development, manufacture,
quality control, safety, effectiveness, approval, labeling, storage, record keeping, reporting, distribution, import, export, advertising
and promotion of our drugs (medicines). Generally, our activities in other countries will be subject to regulations that are similar
in nature and scope as those in the United States, although there can be important differences. Additionally, some significant
aspects of regulation in the European Union are addressed in a centralized way through the European Medicines Agency (“EMA”)
and the European Commission, but country-specific regulation remains essential in many respects. The process of obtaining regulatory
marketing approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require
the expenditure of substantial time and financial resources and we may not be successful.
Given that the active ingredients present in our APIs, food ingredients
and cosmetic ingredients are in some cases considered to be controlled substances in certain jurisdictions / territories, there
are additional regulations which are applicable to the research, development, import, receipt, possession, storage, preparation,
extraction, synthesis, biosynthesis, manufacture, processing, analysis, release, formulation, dispensing, packaging and labelling,
import/export, transport, commercialization, advertising and supply / distribution of Controlled Substances. This means that Alterola
needs to be compliant with competent authorities such as the DEA (USA), The Home Office (UK) and the corresponding authorities
in each country.
We intend to conduct some of our research and development relating
to our drug candidates in the United States, at which time, our research and development, future manufacturing, distribution and
sale of our drugs will become subject to the United States Federal Controlled Substances Act of 1970 and regulations promulgated
thereunder. While cannabis is a Schedule I controlled substance, drugs approved for medical use in the United States that contain
cannabis or cannabis extracts must be placed in Schedules II-V, since approval by the FDA satisfies the “accepted medical
use” requirement. If any of our pipeline drug candidates will receive approval by the FDA, it must be listed by the DEA as
a Schedule II or III controlled substance to be allowed for commercialization. Consequently, the manufacture, importation, exportation,
domestic distribution, storage, sale and legitimate use of our future drugs will be subject to a significant degree of regulation
by the DEA. In addition, individual states in the United States have also established controlled substance laws and regulations.
Though state-controlled substances laws often mirror federal law, because the states are separate jurisdictions, they may separately
schedule our drugs.
Europe
It is the company’s intention have its pipeline drug candidates
approved in countries in addition to the USA and hence we are subject to extensive regulation by other international regulatory
agencies, and the applicable local laws and regulations.
Similarly to the U.S. Food, Drug, and Cosmetic Act in the USA and
its implementing regulations, there are similar laws and regulations in Europe for the research, testing, development, manufacture,
quality control, safety, effectiveness, approval, labeling, storage, record keeping, reporting, distribution, import, export, advertising
and promotion of our drugs (medicines). Again, our activities in Europe will be subject to regulations that are similar in nature
and scope as those in the United States, although there can be important differences.
Our pipeline candidates may be developed or approved through the
Centralized Procedure or Decentralized Procedure through the European Medicines Agency (“EMA”) and the European Commission;
however it should be noted that country-specific regulation remains essential in many respects. The process of obtaining regulatory
marketing approvals and the subsequent compliance with the appropriate national, federal, state, local and foreign statutes and
regulations require the expenditure of substantial time and financial resources and we may not be successful.
Again, given that the active ingredients present in our APIs, food
ingredients and cosmetic ingredients are in some countries are considered to be controlled substances in certain European jurisdictions
/ territories, there are additional regulations which are applicable to the research, development, import, receipt, possession,
storage, preparation, extraction, synthesis, biosynthesis, manufacture, processing, analysis, release, formulation, dispensing,
packaging and labelling, import/export, transport, commercialisation, advertising and supply / distribution of Controlled Substances.
This means that Alterola needs to be compliant with each competent authority in each European country as applicable.
Japan
It is the company’s intention have its pipeline drug candidates
in due course approved in Japan and hence we are subject to extensive regulation by the pharmaceutical regulatory authority of
Japan is the Pharmaceutical and Food Safety Bureau (PFSB) of the Japanese Ministry of Health, Labor and Welfare (MHLW), and the
Japanese applicable local laws and regulations.
Japan has its own laws and regulations for the research, testing,
development, manufacture, quality control, safety, effectiveness, approval, labeling, storage, record keeping, reporting, distribution,
import, export, advertising and promotion of our drugs (medicines).
Again, given that the active ingredients present in our APIs, food
ingredients and cosmetic ingredients are in some countries are considered to be controlled substances in Japan, there are additional
regulations which are applicable to the research, development, import, receipt, possession, storage, preparation, extraction, synthesis,
biosynthesis, manufacture, processing, analysis, release, formulation, dispensing, packaging and labelling, import/export, transport,
commercialization, advertising and supply / distribution of Controlled Substances. This means that Alterola needs to be compliant
with the Japanese competent authority requirements.
Rest of the World
It is the company’s intention have its pipeline drug candidates
in due course approved in other countries around the world (Rest of World) and hence we are subject to extensive regulation by
the various national pharmaceutical regulatory authorities which govern the various countries, and the applicable local laws and
regulations.
Different countries have different laws and regulations for the
research, testing, development, manufacture, quality control, safety, effectiveness, approval, labeling, storage, record keeping,
reporting, distribution, import, export, advertising and promotion of our drugs (medicines).
Again, given that the active ingredients present in our APIs, food
ingredients and cosmetic ingredients are in some countries are considered to be controlled substances in some countries, there
are additional regulations which are applicable to the research, development, import, receipt, possession, storage, preparation,
extraction, synthesis, biosynthesis, manufacture, processing, analysis, release, formulation, dispensing, packaging and labelling,
import/export, transport, commercialization, advertising and supply / distribution of Controlled Substances. This means that Alterola
needs to be compliant with each competent authority in each country as applicable.
The Regulatory Process for the approval of New Medicines
The company operate in a highly controlled new drugs / medicines
regulatory environment. Strict regulations establish requirements relating to demonstration of quality, safety and efficacy of
a medicine. Regulations also cover preclinic and clinical research and development, manufacturing and reporting procedures, both
pre- and post-approval. Failure to comply with regulations can result in stringent sanctions, including product recalls, withdrawal
of approvals, seizure of products and criminal prosecution. Further, many countries have stringent regulations relating to the
possession and use of cannabis or cannabinoid or cannabis-based medicines.
Before obtaining regulatory approvals for the commercial sale of
our future drug candidates, we must demonstrate that the proposed medicine demonstrates quality, safety and efficacy. From a quality
perspective this is done through demonstrating appropriate chemistry and manufacturing controls (CMC), and from a safety and efficacy
perspective, this is done through demonstrating that our drug candidates are safe and effective in preclinical studies and clinical
trials.. Historically, the results from preclinical studies and early clinical trials often have not accurately predicted results
of later clinical trials. In addition, many pharmaceuticals have shown promising results in clinical trials but subsequently failed
to establish sufficient safety and efficacy results to obtain necessary regulatory approvals.
We expect to incur substantial expense for, and devote a significant
amount of time to, the development of quality ingredients and products as well as preclinical studies and clinical trials. Many
factors can delay the commencement and rate of completion of clinical trials, including the inability to recruit patients at the
expected rate, the inability to follow patients adequately after treatment, the failure to manufacture sufficient quantities of
materials used for clinical trials, and the emergence of unforeseen safety issues and governmental and regulatory delays. If a
drug candidate fails to demonstrate safety and efficacy in clinical trials, this failure may delay development of other drug candidates
and hinder our ability to develop and / or conduct related preclinical studies and clinical trials. Additionally, if we have pipeline
candidate failures, we may also be expected to experience challenges, delays or even the inability to obtain additional financing
at acceptable terms and conditions.
Governmental authorities in all major markets require that a new
drug be approved or exempted from approval before it is marketed, and have established high standards for technical appraisal,
which can result in an expensive and lengthy approval process. The time to obtain approval of a new medicine or indication varies
by country and some drugs are never approved. The lengthy process of conducting new product or formulation development, preclinical
studies and clinical trials, seeking approval and the subsequent compliance with applicable statutes and regulations, if approval
is obtained, are very costly and require the expenditure of substantial resources.
United States
In the United States, the Public Health Service Act and the Federal
Food, Drug, and Cosmetic Act, as amended, and the regulations promulgated thereunder, and other federal and state statutes and
regulations govern, among other things, the safety and effectiveness standards for our drugs and the raw materials and components
used in the production of, testing, manufacture, labeling, storage, record keeping, approval, distribution, advertising and promotion
of drug candidates on a product-by-product basis.
Preclinical tests include in vitro and in vivo evaluation of the
drug candidate, including animal studies to assess potential safety and efficacy. Certain preclinical tests must be conducted in
compliance with good laboratory practice regulations. Violations of these regulations can, in some cases, lead to invalidation
of the studies, requiring them to be replicated. In addition, non-clinical studies (Chemistry and Manufacturing Controls, CMC)
are undertaken to evaluate a new drug’s chemistry, and to determine the active ingredients’ and finished product formulation’s
stability and batch-to-batch reproducibility.
After laboratory analysis and preclinical testing, a Sponsor files
an Investigational New Drug Application, or IND, to begin clinical development (clinical trials in humans). Typically, a manufacturer
conducts a three-phase human clinical development program which itself is subject to numerous laws and regulatory requirements,
including adequate monitoring, reporting, record keeping and informed consent. In Phase I, small clinical trials are conducted
to determine the safety and tolerability of drug candidates. In Phase II, clinical trials are conducted to assess safety and gain
preliminary evidence of the efficacy of drug candidates, and to determine appropriate dose ranges in patients with the target indication.
In Phase III, clinical trials are conducted in appropriate patient populations to provide sufficient data for the statistically
valid evidence of safety and efficacy. The time and expense that will be required for us to perform this clinical development can
vary and is substantial. We cannot be certain that we will successfully complete Phase I, Phase II or Phase III clinical trials
within any specific period, if at all. Furthermore, the FDA, the IRB are responsible for approving and monitoring the clinical
trials at a given site, the Data Safety Monitoring Board, where one is used, or we may suspend the clinical trials at any time
on various grounds, including a finding that subjects or patients are exposed to unacceptable health risk. Given that a number
of our clinical trials are likely to be performed using drug candidates containing controlled substances, there is the added requirement
for compliance with DEA regulations (or equivalent competent authority in ex-US countries where the preclinical studies and clinical
trials may be conducted). DEA requirements for State and Federal DEA Registration for receipt, storage and dispensing of controlled
substances vary from state to state and the DEA Registration process can be lengthy and requirement multiple site visits by DEA
personnel. This is further complicated if the controlled substance needs temperature regulation as well as controlled access /
storage. Failure to gain or delay to gaining the necessary DEA registrations at one or more non-clinical (CMC), laboratory or manufacturing
or packaging or labelling sites. preclinical study sites, analytical laboratories or clinical trial sites may delay the delivery
of materials to key stakeholders. For example, delay of delivery of investigational product to a clinical trial site, may ultimately
delay the initiation, conduct or completion of clinical trials critical for the approval of the product. These failures or delays
may delay also the development of other drug candidates and hinder our ability to develop and / or conduct related preclinical
studies and clinical trials. Additionally, if we have failures or delays in DEA registrations in pivotal or critical programs,
we may also be expected to experience challenges, delays or even the inability to obtain additional financing at acceptable terms
and conditions.
If the clinical data from these clinical trials (Phases I, II and
III) are deemed to support the safety and effectiveness of the drug candidate for its intended use, and the preclinical and quality
data are also acceptable, then we may proceed to seek to file with the FDA, a New Drug Application, or NDA, with the US FDA seeking
approval to market a new drug for one or more specified intended uses. We have not completed our non-clinical (CMC) studies or
preclinical studies or clinical trials for any candidate drug for any intended use and therefore, we cannot ascertain whether the
clinical data will support and justify filing an NDA. Nevertheless, if and when we are able to ascertain that the clinical data
supports and justifies filing an NDA, we intend to make such appropriate filing.
The purpose of the NDA is to provide the FDA with sufficient information
so that it can assess whether the candidate drug has a positive benefit / risk profile and whether it should approve the drug candidate
for marketing for specific intended uses.
The fact that the FDA has previously granted a candidate drug an
IND, or designated a drug as an orphan drug for a specific intended use, or granted it Breakthrough status, or fast track status
or an expedited review does not mean that the drug has been approved for marketing. Only after an NDA has been approved by the
FDA is marketing allowed. A request for orphan drug status (orphan drug designation) must be filed before the NDA is filed. The
orphan drug designation, though, provides certain benefits, including a seven-year period of market exclusivity subject to certain
exceptions.
The NDA normally includes, but is not limited to, sections describing
the quality safety and efficacy of the medicine. The quality section describes the chemistry, manufacturing, and controls, the
preclinical (non-clinical) section describes the non-clinical pharmacology, safety pharmacology, drug metabolism and pharmacokinetics
(DMPK) and toxicology, human pharmacokinetics and bioavailability, , and the clinical section describes the efficacy and safety
results of the clinical trials, and the proposed labeling which contains, among other things, the intended uses of the candidate
drug. Importantly for drug candidates containing controlled substances, studies investigating the medicine’s potential for
abuse are also undertaken and reported.
We cannot take any action to market any new drug or biologic drug
in the United States until our appropriate marketing application has been approved by the FDA. The FDA has substantial discretion
over the approval process and may disagree with our interpretation of the data submitted. The process may be significantly extended
by requests for additional information or clarification regarding information already provided. As part of this review, the FDA
may refer the application to an appropriate advisory committee, typically a panel of clinicians. Satisfaction of these and other
regulatory requirements typically takes several years, and the actual time required may vary substantially based upon the type,
complexity and novelty of the drug. Government regulation may delay or prevent marketing of potential drugs for a considerable
period and impose costly procedures on our activities. We cannot be certain that the FDA or other regulatory agencies will approve
any of our drugs on a timely basis, if at all. Success in preclinical or early stage clinical trials does not assure success in
later-stage clinical trials. Even if a drug receives regulatory approval, the approval may be significantly limited to specific
indications or uses and these limitations may adversely affect the commercial viability of the drug / medicine. Delays in obtaining,
or failures to obtain regulatory approvals, would have a material adverse effect on our business.
Even after we obtain FDA approval, we may be required to conduct
further studies which may be additional preclinical studies or clinical trials (e.g. Phase IV trials) and provide additional data
on safety and effectiveness. We are also required to gain separate approval for the use of an approved drug as a treatment for
indications other than those initially approved. In addition, side effects or adverse events that are reported during clinical
trials can delay, impede or prevent marketing approval. Similarly, adverse events that are reported after marketing approval can
result in additional limitations being placed on the drug’s use and, potentially, withdrawal of the drug from the market.
Any adverse event, either before or after marketing approval, can result in product liability claims against the company.
As an alternate path for FDA approval of new indications or new
formulations of previously-approved drugs, a company may file a Section 505(b)(2) NDA, instead of a “stand-alone” or
“full” NDA. Section 505(b)(2) of the Food, Drug, and Cosmetic Act was enacted as part of the Drug Price Competition
and Patent Term Restoration Act of 1984, otherwise known as the Hatch-Waxman Amendments. Section 505(b)(2) permits the submission
of an NDA where at least some of the information required for approval comes from studies not conducted by or for the applicant
and for which the applicant has not obtained a right of reference. Some examples of drugs that may be allowed to follow a 505(b)(2)
path to approval are drugs that have a new dosage form, strength, route of administration, formulation or indication. The Hatch-Waxman
Amendments permit the applicant to rely upon certain published nonclinical or clinical studies conducted for an approved drug or
the FDA’s conclusions from prior review of such studies. The FDA may require companies to perform additional studies or measurements
to support any changes from the approved drug. The FDA may then approve the new drug for all or some of the labeled indications
for which the referenced listed drug has been approved, as well as for any new indication supported by the NDA. While references
to nonclinical and clinical data not generated by the applicant or for which the applicant does not have a right of reference are
allowed, all development, process, stability, qualification and validation data related to the manufacturing and quality of the
new drug must be included in an NDA submitted under Section 505(b)(2).
To the extent that the Section 505(b)(2) applicant is relying on
the FDA’s conclusions regarding studies conducted for an already approved drug, the applicant is required to certify to the
FDA concerning any patents listed for the approved drug in the FDA’s “Orange Book” publication. Specifically,
the applicant must certify that: (i) the required patent information has not been filed; (ii) the listed patent has expired; (iii)
the listed patent has not expired, but will expire on a particular date and approval is sought after patent expiration; or (iv)
the listed patent is invalid or will not be infringed by the new drug. The Section 505(b)(2) application also will not be approved
until any non-patent exclusivity, such as exclusivity for obtaining approval of a new chemical entity, listed in the Orange Book
for the reference drug has expired. Thus, the Section 505(b)(2) applicant may invest a significant amount of time and expense in
the development of its drugs only to be subject to significant delay and patent litigation before its drugs may be commercialized.
In addition to regulating and auditing human clinical trials, the
FDA regulates and inspects equipment, facilities, laboratories and processes used in the manufacturing and testing of such drugs
prior to providing approval to market a drug.
Orphan Drug Designation in the U.S.
Under the Orphan Drug Act, the FDA may grant orphan drug designation
to a drug intended to treat a rare disease or condition, which is a disease or condition that affects fewer than 200,000 individuals
in the United States. If the disease or condition affects more than 200,000 individuals in the United States, orphan drug designation
may nevertheless be available if there is no reasonable expectation that the cost of developing and making the drug would be recovered
from sales in the United States. In the United States, a drug that has received orphan drug designation is eligible for financial
incentives, such as opportunities for grant funding towards clinical trial costs, tax credits for certain research and user fee
waivers under certain circumstances. The Orphan Drug Act provides that, if a designated drug is approved for the rare disease or
condition for which it was designated, the approved drug will be granted seven years of orphan drug exclusivity, which means the
FDA generally will not approve any other application for a drug containing the same active moiety for the same indication for a
period of seven years, except in limited circumstances, such as a showing of clinical superiority over the drug with orphan drug
exclusivity. Orphan drug exclusivity does not prevent the FDA from approving a different drug for the same disease or condition,
or the same drug for a different disease or condition.
Orphan drug designation must be requested before submission of an
application for marketing approval. Products that qualify for orphan designation may also qualify for other FDA programs that are
intended to expedite the development and approval process and, as a practical matter, clinical trials for orphan products may be
smaller, simply because of the smaller patient population. Nonetheless, the same approval standards apply to orphan-designated
products as for other drugs. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory
review and approval process.
Europe
The drug development process in Europe is essentially the same as
that required to develop drugs in an acceptable manner, in that a drug must meet the requirements for quality safety and efficacy.
The international regulators (including the FDA) have a system which allows them to mutually recognize the standards of drug development.
This is called the ICH standard (international Conference on Harmonization). This avoids the need for pharmaceutical companies
to repeat their costly drug development programs for different jurisidctions / international territories. There are nuances between
the requirements of the USA, Europe and Japan – but the standards to which development programs must be conducted are essentially
the same.
There are essentially three mechanisms for obtaining a marketing
authorization (MA) in Europe
1) the Centralized Procedure
2) the De-Centralized Procedure
3) the Mutual Recognition Procedure
Centralized Procedure (CP)
The advantage of the centralized procedure is that it requires a
single application which, if successful, results in a single marketing authorization with the same product information available
in all EU languages and valid in all EU countries, as well as Iceland, Liechtenstein, and Norway. The scientific assessment of
the marketing authorization application is carried out by the Committee on Human Medicinal Products (CHMP). The scientific review
process consists of alternating periods of active evaluation and periods during which the clock is stopped in order to give the
applicant time to resolve any issues identified during the evaluation. In total, the duration of the process is up to 210 ‘active’
days before an opinion is issued by the CHMP. Once an opinion has been given, it is forwarded to the European Commission which
then has 67 days to issue a legally binding decision on the marketing authorization. Once a marketing authorization has been granted,
the applicant can start to market the medicine in any EU Member State of its choice. However, in practice before a medicine is
marketed, it will be subject to pricing negotiations and a review of its cost-effectiveness. This is carried out at national level
by Member States to determine reimbursement criteria. Initially, the centralized procedure was mandatory only for biotechnology
medicines, as was the case with the previous concertation procedure. Over time, however, the mandatory scope of the centralized
procedure has been gradually expanded and by 2005, it included orphan medicines (medicines for rare diseases) as well as human
medicines that contain a new active substance (not previously authorized in the Union before 20 November 2005) and that are intended
for the treatment of AIDS, cancer, neurodegenerative disorders, diabetes, auto-immune and other immune dysfunctions, and viral
diseases. In 2009, the centralized procedure also became mandatory for advanced therapy medicines. The centralized procedure is
also optional for other medicines that contain a new active substance not authorized in the Union before 20 November 2005, and
for products which are considered to be a significant therapeutic, scientific, or technical innovation, or for which an EU-wide
authorization is considered to be in the interests of public health.
The Decentralized Procedure (DCP)
In the decentralized procedure, the applicant chooses one country
as the reference Member State when making its application for marketing authorization. The chosen reference Member State then prepares
a draft assessment report that is submitted to the other Member States where approval is sought for their simultaneous consideration
and approval. In allowing the other Member States access to this assessment at an early stage, any issues and concerns can be dealt
with quickly without delay, which sometimes is known to occur with the mutual recognition procedure (MRP, see below). Compared
with the MRP, the decentralized procedure has the advantage that the marketing authorization in all chosen Member States is received
simultaneously, enabling simultaneous marketing of the medicine and reducing the administrative and regulatory burden.
The Mutual Recognition Procedure (MRP)
The mutual recognition procedure has been in place since 1995 and
evolved from the multi-state licensing procedure. The applicant must initially receive national approval in one EU Member State,
referred to as the “Reference Member State” (RMS) and then seek approval for the medicine in other, so-called ‘Concerned
Member States’ in a second step based on the assessment done in the RMS. This process has significant differences from the
former multi-state licensing procedure, notably the requirement that disagreements between Member States must now be resolved at
EU level. Disagreements are handled by the Co-ordination Group for Mutual Recognition and Decentralized Procedures – Human
(CMDh), a body representing Member States, which is responsible for any questions in two or more Member States relating to the
Marketing Authorization (MA) of a medicinal product approved through the mutual recognition or the decentralized procedure. If
there is a disagreement between Member States on grounds of a potential serious risk to public health, the CMDh considers the matter
in order to reach an agreement within 60 days. If resolution is not possible by the CMDh, the procedure is referred to the CHMP
in a procedure called a referral. The CHMP will then carry out a scientific assessment of the relevant medicine on behalf of the
EU. In contrast to the previous (multi-state) procedure, the outcome of the CHMP is binding on the Member States involved once
it has been adopted by the European Commission. The timelines for assessment by CHMP is 60 days. Since the introduction of the
decentralized procedure, the mutual recognition procedure is used for extending existing marketing authorizations to other countries.
There are other nuances to Marketing Authorization approval of medicines
in Europe compared with the FDA. For example a Pediatric Investigation Plan (PIP) is a development plan aimed at ensuring that
the necessary data are obtained through studies in children, to support the authorization of a medicine for children. All applications
for marketing authorization for new medicines have to include the results of studies as described in an agreed PIP, unless the
medicine is exempt because of a deferral or waiver.
In the European Union, it is also possible to obtain an orphan drug
designation for a pipeline drug candidate. This also entitles a company to financial incentives such as a reduction of fees or
fee waivers and ten years of market exclusivity following drug approval. This period may be reduced to six years if the orphan
drug designation criteria are no longer met, including where it is shown that the drug is sufficiently profitable not to justify
maintenance of market exclusivity. The definition of what qualifies as a rare disease in Europe is slightly different to the USA
definition.
To qualify for orphan designation in Europe,
a medicine must meet a number of criteria:
-
it must be intended for the treatment, prevention or diagnosis
of a disease that is life-threatening or chronically debilitating;
-
the prevalence of the condition in the EU must not be
more than 5 in 10,000 or it must be unlikely that marketing of the medicine would generate sufficient returns to justify the investment
needed for its development;
-
no satisfactory method of diagnosis, prevention or treatment
of the condition concerned can be authorized, or, if such a method exists, the medicine must be of significant benefit to
those
As with the USA, European Orphan drug designation does not convey
any advantage in, or shorten the duration of, the regulatory review and approval process.
In the same way that there is no guarantee than any medicines developed
by Alterola will be approved in the USA, there is similarly no guarantee that any of Alterola’s medicines will be approved
in Europe.
Non-Pharmaceuticals
Food, Drinks & Dietary Supplements
USA
According to the FDA, it is currently illegal to market THC or CBD
by adding it to a food or labeling it as a dietary supplement. Based on available evidence, FDA has concluded that THC and CBD
products are excluded from the dietary supplement definition under section 201(ff)(3)(B) of the FD&C Act [21 U.S.C. §
321(ff)(3)(B)]. Under that provision, if a substance (such as THC or CBD) is an active ingredient in a drug product that has been
approved under section 505 of the FD&C Act [21 U.S.C. § 355], or has been authorized for investigation as a new drug for
which substantial clinical investigations have been instituted and for which the existence of such investigations has been made
public, then products containing that substance are excluded from the definition of a dietary supplement. FDA considers a substance
to be "authorized for investigation as a new drug" if it is the subject of an Investigational New Drug application (IND)
that has gone into effect. Under FDA’s regulations (21 CFR 312.2), unless a clinical investigation meets the limited criteria
in that regulation, an IND is required for all clinical investigations of products that are subject to section 505 of the FD&C
Act.
There is an exception to section 201(ff)(3)(B) if the substance
was "marketed as" a dietary supplement or as a conventional food before the drug was approved or before the new drug
investigations were authorized, as applicable. However, based on available evidence, FDA has concluded that this is not the case
for THC or CBD.
FDA is not aware of any evidence that would call into question its
current conclusions that THC and CBD products are excluded from the dietary supplement definition under section 201(ff)(3)(B) of
the FD&C Act. FDA continues to review information that is submitted to FDA on this issue, but to date this has not caused FDA
to change their conclusions.
Given the legal / regulatory situation at present in the USA, at
this time, Alterola will not be looking to commercialize cannabinoid-containing ingredients or products in the food, drinks or
dietary supplements sector in the USA.
Europe - Novel Food Application (Europe)
Under EU regulations, any food that was not consumed “significantly”
prior to May 1997 is considered to be a “Novel Food”. The category covers new foods, food from new sources, new substances
used in food as well as new ways and technologies for producing food. There is a specific procedure for gaining a Novel Food Approval
in Europe.
The novel food status of CBD extracts was confirmed in January 2019.
This means that applicants need to apply for authorisation of CBD extracts and isolates using the procedure for full applications
(rather than a traditional food) outlined in the European Food Standards Agency (EFSA) guidance.
In general, the process is as follows: (1) The applicant submits
a Novel Food application; (2) the application is reviewed and if compliant validated by the European Commission to see if it falls
within the scope of Novel Food Regulation (EU) 2015 / 2283 (EC validity check); (3) the European Food Standards Agency (EFSA) undertakes
a suitability check to see if the application fulfils the requirements of article 10(2) of (EU) 2015 / 2283; (4) EFSA reviews and
performs a risk assessment and gives an opinion within 9 months of receipt of a valid application (5) the EC drafts an implementing
act authorizing the placement on the market of a Novel Food and updating the EU list, within 7 months of the EFSA opinion. This
process can take approximately 18 months from receipt of a valid application.
Given the legal and regulated process in Europe, Alterola intends
to submit Novel Food applications for cannabinoid-containing ingredients and / or products in the food, drinks or dietary supplements
sector in Europe, where it is legal to do so. It may be several years before we can obtain
approval and commence commercialization of such ingredients, if ever.
Rest
of the World (RoW)
Given the varying legal and regulated processes for regulatory
approval of for cannabinoid-containing ingredients and / or products in the food, drinks or dietary supplements sector in countries
outside of the USA and Europe, Alterola will consider gaining such approval in countries / territories where it is legal to do
so. These will be considered on a case-by-case basis as appropriate. It may be several years
before we can obtain approval and commence commercialization of such ingredients, if ever.
Cosmetics
USA
A cosmetic is defined in the Food, Drug and Cosmetics Act 201(i)
as "(1) articles intended to be rubbed, poured, sprinkled, or sprayed on, introduced into, or otherwise applied to the human
body or any part thereof for cleansing, beautifying, promoting attractiveness, or altering the appearance, and (2) articles intended
for use as a component of any such articles; except that such term shall not include soap."
Under the FD&C Act, cosmetic products and ingredients are not
subject to premarket approval by FDA, except for most color additives. Certain cosmetic ingredients are prohibited or restricted
by regulation, but currently that is not the case for any cannabis or cannabis-derived ingredients. Ingredients not specifically
addressed by regulation must nonetheless comply with all applicable requirements, and no ingredient – including a cannabis
or cannabis-derived ingredient – can be used in a cosmetic if it causes the product to be adulterated or misbranded in any
way. A cosmetic generally is adulterated if it bears or contains any poisonous or deleterious substance which may render it injurious
to users under the conditions of use prescribed in the labeling, or under such conditions of use as are customary or usual (section
601(a) of the FD&C Act [21 U.S.C. § 361(a)]).
Alterola may choose to supply active
ingredient(s) to cosmetic companies within the USA where it is legal to do so. However, although the company is focussed upon producing
low cost of goods ingredients, there is no guarantee that the company will be able to produce cosmetic ingredients at the purity
required of at a cost of goods which will enable the company to compete within other suppliers of cosmetic ingredients to cosmetic
companies. Alterola has no intention in producing its own cosmetic products. It may
be several years before we can obtain approval and commence commercialization of such ingredients, if ever.
Europe
The use of CBD in
cosmetics is harmonised within the European Cosmetic Regulation 1223/2009 , under entry 306 ‘Narcotics, natural and synthetic’
of Annex II , and has been for some time. The regulation prohibits use of cannabis and cannabis extracts in cosmetics, as they
are banned substances in Schedule I of the 1961 Single Convention on Narcotic Drugs.
However, CBD specifically
is not referenced in this convention. At the beginning of 2019, the European Commission
(EC) added two entries to its database of cosmetics ingredients for CBD to differentiate
between: CBD “derived from extract or tincture or resin of cannabis”
and CBD “synthetically produced”.
Both entries contain the same text: “Cannabidiol (CBD) as such, irrespective of its
source, is not listed in the Schedules of the 1961 Single Convention on Narcotic Drugs. However, it shall be prohibited from use
in cosmetic products (II/306) if it is prepared as an extract or tincture or resin of Cannabis in accordance with the Single Convention.
Please note that national legislations on controlled substances may also apply.” Essentially,
use of naturally-derived CBD from cannabis plants is prohibited in the EU but use of hemp-derived or synthetically-produced CBD
is allowed. However, the Single Convention’s banned ingredients list does not include cannabis seeds or leaves without tops,
meaning use of CBD derived from these parts of the cannabis plant is not currently prohibited.
It is Alterola’s intention
to supply active ingredient(s) to cosmetic companies within the EU where it is legal to do so. However, although the company is
focussed upon producing low cost of goods ingredients, there is no guarantee that the company will be able to produce cosmetic
ingredients at the purity required of at a cost of goods which will enable the company to compete within other suppliers of cosmetic
ingredients to cosmetic companies. Alterola has no intention in producing its own cosmetic products. It
may be several years before we can obtain approval and commence commercialization of such ingredients, if ever.
Rest
of the World (RoW)
Given the varying legal and regulated processes for regulatory
approval of for cannabinoid-containing ingredients and / or products in the cosmetic sector in countries outside of the USA and
Europe, Alterola will consider gaining such approval in countries / territories where it is legal to do so. These will be considered
on a case-by-case basis as appropriate.
Employees
At present, we have no other employees other than our officers and
directors. They oversee all responsibilities in corporate administration, business development and research. If finances permit,
however, we intend to expand our current management to retain skilled directors, officers and employees with experience relevant
to our business focus.
Item 1A. Risk Factors
Risks Relating to Drug Development
Our future success will
largely depend on the success of our drug candidates, which development will require significant capital resources and years of
clinical development effort.
We currently have no drug products
on the market, and none of our drug development projects / pipeline drug candidates has reached preclinical study or clinical trial
status. Our business depends almost entirely on the successful clinical development, regulatory approval and commercialization
of our pipeline drug candidates. Investors need to be aware that substantial additional investments including clinical development
and regulatory approval efforts will be required before we are permitted to market and commercialize our pipeline drug candidates,
if ever. It may be several years before we can commence clinical trials, if ever. Any clinical trial will be subject to extensive
and rigorous review and regulation by numerous government authorities in the United States, the European Union, and other jurisdictions
where we intend, if approved, to market our pipeline drug candidates. Before obtaining regulatory approvals for any of our pipeline
drug candidates, we must demonstrate through preclinical testing and clinical trials that the pipeline drug candidate is safe and
effective for its specific application. This process can take many years and may include post-marketing studies and surveillance,
which would require the expenditure of substantial resources. Of the large number of drugs in development for approval in the United
States, European Union (and the rest of the world), only a small percentage will successfully complete the FDA regulatory approval
process or be granted authorization to be marketed in the European Commission or the other competent authorities in the European
Union (“EU”) Member States, or the rest of the world. Accordingly, even if we obtain the sufficient financing to fund
our planned research, development and clinical programs, we cannot assure you that any of our pipeline drug candidates will be
successfully developed or commercialized.
We may be unable to formulate
or scale-up any or all of our pipeline drug candidates. There is no guarantee that any of the pipeline drug candidates will be
or are able to be manufactured or produced in a manner to meet the FDA’s criteria for product stability, content uniformity
and all other criteria necessary for product approval in the United States and other markets. Any of our pipeline drug candidates
may fail to achieve their specified endpoints in clinical trials. Furthermore, pipeline drug candidates may not be approved even
if they achieve their specified endpoints in clinical trials. The FDA may disagree with our trial design and our interpretation
of data from clinical trials, or may change the requirements for approval even after it has reviewed and commented on the design
for our clinical trials. The FDA may also approve a drug for fewer or more limited indications than we request, or may grant approval
contingent on the performance of costly post-approval clinical trials (i.e., Phase IV trials). In addition, the FDA may not approve
the labeling claims that we believe are necessary or desirable for the successful commercialization of our pipeline drug candidates.
If we are unable to expand
our pipeline and obtain regulatory approval for our pipeline drug candidates within the timelines we anticipate, we will not be
able to execute our business strategy effectively and our ability to substantially grow our revenues will be limited, which would
have a material adverse impact on our long-term business, results of operations, financial condition, and prospects.
Our drug development
projects, if approved, may be unable to achieve the expected market acceptance and, consequently, limit our ability to generate
revenue.
Even when drug development
is successful and regulatory approval has been obtained, our ability to generate significant revenue depends on the acceptance
of our (then) approved medicines by physicians and patients. We cannot assure you that any of our pipeline drug candidates will
achieve the expected market acceptance and revenue, if and when we obtain the regulatory approvals. The market acceptance of any
drug depends on a number of factors, including the indication statement and warnings approved by regulatory authorities for the
drug label, continued demonstration of efficacy and safety in commercial use, physicians’ willingness to prescribe the drug,
reimbursement from third-party payers such as government health care systems and insurance companies, the price of the drug, the
nature of any post-approval risk management plans mandated by regulatory authorities, competition, and marketing and distribution
support. Any factors preventing or limiting the market acceptance of our drugs could have a material adverse effect on our business,
results of operations and financial condition.
Results of preclinical
studies and earlier clinical trials are not necessarily predictive indicators of future results.
Any positive results from future
preclinical testing of our pipeline drug candidates and potential future clinical trials may not necessarily be predictive of the
results from Phase 1, Phase 2 or Phase 3 clinical trials. In addition, our interpretation of results derived from clinical data
or our conclusions based on our preclinical data may prove inaccurate. Frequently, pharmaceutical and biotechnology companies have
suffered significant setbacks in clinical trials after achieving positive results in preclinical testing and early phase clinical
trials, and we cannot be certain that we will not face similar setbacks. These setbacks may be caused by the fact that preclinical
and clinical data can be susceptible to varying interpretations and analyses. Furthermore, certain pipeline drug candidates may
perform satisfactorily in preclinical studies and clinical trials, but nonetheless fail to obtain FDA approval, a marketing authorization
granted by the European Commission, or appropriate approvals by the appropriate medicines regulatory authorities in other countries.
If we fail to produce positive results in our clinical trials for our pipeline drug candidates, the development timeline and regulatory
approval and commercialization prospects for them and as a result our business and financial prospects, would be materially adversely
affected.
The regulatory approval
processes with the FDA, the EMA and other comparable foreign regulatory authorities is lengthy and inherently unpredictable.
We are not permitted to market
our drug candidates in the United States or the European Union or other countries until we receive approval of a New Drug Application
(“NDA”) from the FDA or a Marketing Authorization Application (“MAA”) from the European Commission, respectively,
or in any foreign countries until we receive the approval from the regulatory authorities of such countries. Prior to submitting
an NDA to the FDA or an MAA to the EMA for approval of our drug candidates we will need to have completed our preclinical studies
and clinical trials. Successfully completing any clinical program and obtaining approval of an NDA or MAA is a complex, lengthy,
expensive and uncertain process, and the FDA or EMA (or other country medicines regulatory body) may delay, limit or deny approval
of pipeline drug candidates for many reasons, including, among others, because:
|
|
§
|
an inability to demonstrate
that our pipeline drug candidates are safe and effective in treating patients to the satisfaction of the FDA or EMA (or any other
country’s medicine regulatory body);
|
|
|
§
|
results of clinical trials
that may not meet the level of statistical or clinical significance required by the FDA or EMA (or any other country’s medicine
regulatory body);
|
|
|
§
|
disagreements with the FDA
or EMA (or any other country’s medicine regulatory body) with respect to the number, design, size, conduct or implementation
of clinical trials;
|
|
|
§
|
requirements by the FDA and
EMA (or any other country’s medicine regulatory body) to conduct additional clinical trials;
|
|
|
§
|
disapproval by the FDA or
EMA or other applicable foreign regulatory authorities of certain formulations, labeling or specifications of pipeline drug candidates;
|
|
|
§
|
findings by the FDA or EMA
(or any other country’s medicine regulatory body) that the data from preclinical studies and clinical trials are insufficient;
|
|
|
§
|
the FDA or EMA (or any other
country’s medicine regulatory body) may disagree with the interpretation of data from preclinical studies and clinical trials;
and
|
|
|
§
|
the FDA, European Commission
or other applicable foreign regulatory agencies may change their approval policies or adopt new regulations.
|
Any of these factors, many
of which are beyond our control, could increase development costs or jeopardize our ability to obtain regulatory approval for our
drug candidates.
We may apply for orphan
drug status granted by the FDA for some of our drug candidates for the treatment of rare diseases.
Regulatory authorities in some
jurisdictions, including the United States and the European Union, may designate drugs for relatively small patient populations
as orphan drugs. The FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition that affects
fewer than 200,000 individuals annually in the United States. In the European Union, the EMA’s Committee for Orphan Medicinal
Products grants orphan drug designation to promote the development of drugs that are intended for the diagnosis, prevention or
treatment of life-threatening or chronically debilitating conditions affecting not more than 5 in 10,000 persons in the European
Union. Additionally, such designation is granted for drugs intended for the diagnosis, prevention or treatment of a life-threatening,
seriously debilitating or serious and chronic condition and when, without incentives, it is unlikely that sales of the drug in
the European Union would be sufficient to justify the necessary investment in developing the drug.
In the USA, orphan drug designation
entitles a party to financial incentives, such as opportunities for grant funding towards clinical trial costs, tax credits for
certain research and user fee waivers under certain circumstances. In addition, if a drug receives the first FDA approval for the
drug and indication for which it has orphan drug designation, the drug is entitled to seven years of market exclusivity, which
means the FDA may not approve any other application for the same drug for the same indication for a period of seven years, except
in limited circumstances, such as a showing of clinical superiority over the drug with orphan drug exclusivity. Orphan drug exclusivity
does not prevent the FDA from approving a different drug for the same disease or condition, or the same drug for a different disease
or condition.
In the European Union, orphan
drug designation also entitles a party to financial incentives such as reduction of fees or fee waivers and ten years of market
exclusivity following drug approval. This period may be reduced to six years if the orphan drug designation criteria are no longer
met, including where it is shown that the drug is sufficiently profitable so that market exclusivity is no longer justified.
Our drug candidates may
become subject to controlled substance laws and regulations in the U.S.
While cannabis and some cannabinoids
are controlled substances under the CSA in the United States, we plan to initially focus our drug development projects using cannabinoids
that are produced from a variety of sources : (1) produced via chemical synthesis (2) produced biosynthetically and (3) produced
via botanical means. Some of these synthetics, such as dronabinol, have been approved by the FDA for various medical research and
conditions. While plant-derived cannabinoids are categorized as Schedule I substances under the CSA, dronabinol, which is synthetic
tetrahydrocannabinol, or THC is a Schedule III substance in capsule form, although it is a Schedule I substance in bulk form. Even
though dronabinol is still a controlled substance, research based on Schedule III substances, including trials in the United States,
are substantially less restrictive.
It is our intention to produce
pipeline drug candidates via biosynthetic means, which may product complex extracts or purified drug substance as API.
Depending upon the content
of our selected API(s), and their subsequent controlled drug status in the USA, and are conducting those trials in the United States,
we will become subject to the CSA laws and regulation in addition to FDA regulations.. If the Company decides to proceed with APIs
which are controlled drugs, it will evaluate where it is best to conduct its research and preclinical trials. This may or may not
be the USA.
Nevertheless, our finished
drug products may contain controlled substances as defined in the CSA. Pipeline drug candidates which contain controlled substances
are subject to a high degree of regulation under the CSA, which establishes, among other things, certain registration, manufacturing
quotas, security, recordkeeping, reporting, import, export and other requirements administered by the DEA. The DEA classifies controlled
substances into five schedules: Schedule I, II, III, IV or V substances. Schedule I substances, by definition, have a high potential
for abuse, have no currently “accepted medical use” in the United States, lack accepted safety for use under medical
supervision, and may not be prescribed, marketed or sold in the United States. Pharmaceutical products approved for use in the
United States may be listed as Schedule II, III, IV or V, with Schedule II substances considered to present the highest potential
for abuse or dependence and Schedule V substances the lowest relative risk of abuse among such substances. Schedule I and II drugs
are subject to the strictest controls under the CSA, including manufacturing and procurement quotas, security requirements and
criteria for importation. In addition, dispensing of Schedule II drugs is further restricted. For example, they may not be refilled
without a new prescription.
While cannabis and certain
of its derivatives and certain cannabinoids are Schedule I controlled substances, drugs approved for medical use in the United
States that contain cannabis, cannabis extracts or certain cannabinoids must be placed in Schedules II - V, since approval by the
FDA satisfies the “accepted medical use” requirement. If, and when any of our pipeline drug candidates receive FDA
approval, the DEA will make a scheduling determination and place it in a schedule other than Schedule I for it to be prescribed
for patients in the United States. If approved by the FDA, depending upon the products potential for abuse amongst other factors,
we expect the finished dosage forms of any of our pipeline drug candidates to be listed by the DEA as a Schedule II-V controlled
substance. Consequently, their manufacture, importation, exportation, domestic distribution, storage, sale and legitimate use will
be subject to a significant degree of regulation by the DEA. The scheduling process may take one or more years beyond FDA approval,
thereby significantly delaying the launch of our drugs. However, the DEA must issue a temporary order scheduling the drug within
90 days after the FDA approves the drug and the DEA receives a scientific and medical evaluation and scheduling recommendation
from the Department of Health and Human Services. Furthermore, if the FDA, DEA or any foreign regulatory authority determines that
any of our drugs may have potential for abuse, it may require us to generate more clinical data than that which is currently anticipated,
which could increase the cost and/or delay the launch of our drugs.
Clinical trials of cannabinoid-based
drug candidates are novel with very limited or non-existing history; we face a significant risk that the trials will not result
in commercially viable drugs and treatments.
At present, there is only a
very limited documented clinical trial history from which we can derive any scientific conclusions, or prove that our present assumptions
for the current and planned research are scientifically compelling. While we are encouraged by the results of clinical trials by
others, there can be no assurance that any clinical trial will result in producing results which will lead to commercially viable
drugs or treatments.
Clinical trials are expensive,
time consuming and difficult to design and implement. We, as well as the regulatory authorities may suspend, delay or terminate
our clinical trials at any time, may require us, for various reasons, to conduct additional clinical trials, or may require a particular
clinical trial to continue for a longer duration than originally planned, including, among others:
|
|
§
|
lack of effectiveness of
any API, formulation or delivery system during clinical trials;
|
|
|
§
|
discovery of serious or unexpected
toxicities or side effects experienced by trial participants or other safety issues;
|
|
|
§
|
slower than expected rates
of subject recruitment and enrollment rates in clinical trials;
|
|
|
§
|
delays or inability in manufacturing
or obtaining sufficient quantities of GMP-grade materials for use in clinical trials due to regulatory and manufacturing constraints;
|
|
|
§
|
delays in obtaining regulatory
authorization to commence a trial, including Institutional Review Board (“IRB”) approvals, licenses required for obtaining
and using cannabis , cannabis derived or cannabinoid substances for research, either before or after a trial is commenced;
|
|
|
§
|
unfavorable results from
ongoing pre-clinical studies and clinical trials;
|
|
|
§
|
patients or investigators
failing to comply with clinical trial protocols;
|
|
|
§
|
patients failing to return
for post-treatment follow-up at the expected rate;
|
|
|
§
|
sites participating in an
ongoing clinical trial withdraw, requiring us to engage new sites;
|
|
|
§
|
third-party clinical investigators
decline to participate in our clinical trials, do not perform the clinical trials on the anticipated schedule, or act in ways inconsistent
with the established investigator agreement, clinical trial protocol, good clinical practices, and other IRB requirements;
|
|
|
§
|
third-party entities do not
perform data collection and analysis in a timely or accurate manner or at all; or
|
|
|
§
|
regulatory inspections of
our clinical trials require us to undertake corrective action or suspend or terminate our clinical trials.
|
Any of the foregoing could
have a material adverse effect on our business, results of operations and financial condition.
The FDA has not approved
any complex botanically-derived cannabinoid drug as a safe and effective drug for any indication.
To
date, the FDA has not approved any complex botanical cannabinoid medicine as safe and effective for any indication. It has however
approved a cannabinoid medicine containing a highly purified cannabinoid (CBD) medicine (Epidiolex®)
for a limited number of indications. However, the FDA is aware that there is considerable interest in the use of complex botanical
medicines (e.g. Sativex®
- which is not approved in the USA, but is approved
in some other countries) or purified cannabinoids (e.g. Epidiolex®) or synthesized cannabinoid medicines (e.g. Marinol) to
attempt to treat a number of medical conditions.
Before conducting testing in
humans of a drug that has not been approved by the FDA, we will need to submit an investigational new drug (“IND”)
application to the FDA. Failure to comply with applicable U.S. requirements may subject a company to a variety of administrative
or judicial sanctions, such as the FDA’s refusal to approve pending NDAs, warning letters, product recalls, product seizures,
total or partial suspension of production or distribution, injunctions, fines, civil penalties and criminal prosecution. Failure
to comply with similarly applicable regulatory requirements in other countries may also subject a company to a variety of administrative
or judicial sanctions within their country.
We face a potentially
highly competitive market.
Demand for cannabinoid-containing
or cannabis-based medicines will likely be dependent on a number of social, political and economic factors that are beyond our
control. While we believe that there will be a demand for such drugs, and that the demand will grow, there is no assurance that
such demand will happen, that we will benefit from any demand or that our business, in fact, will ever generate revenues from our
drug development programs or become profitable.
The emerging markets for cannabinoid-containing
or cannabis-derived medicines and medical research and development is and will likely remain competitive. The development and commercialization
of drugs / medicines is highly competitive. We compete with a variety of multinational pharmaceutical companies and specialized
biotechnology companies, as well as products and processes being developed by universities and other research institutions. Many
of our competitors have developed, are developing, or will develop drugs and processes which may be competitive with our drug candidates.
Competitive therapeutic treatments include those that have already been approved by medicines regulators and accepted by the medical
community and any new treatments that may enter the market. For some of our drug development programs / areas of therapeutic interest,
other treatment options are currently available, under development, and may become commercially available in the future. If any
of our pipeline drug candidates is approved for the diseases and conditions we are currently pursuing, they may compete with a
range of medicines / therapeutic treatments that are either in development or currently marketed.
We are aware of many companies
that are engaged in cannabinoid-derived drug development activities. In addition, other U.S.-based and foreign-based companies
are in early stage discovery and preclinical development utilizing the cannabinoids CBD and/or THC.
Established companies may have
a competitive advantage over us due to their size and experiences, financial resources, and institutional networks. Many of our
competitors may have significantly greater financial, technical and human resources than we do. Due to these factors, our competitors
may have an advantage in marketing their approved drugs and may obtain regulatory approval of their drug candidates before we are
able to, which may limit our ability to develop or commercialize our drug candidates. Our competitors may also develop drugs /
medicines that are safer, more effective, more widely used and less expensive than ours. These advantages could materially impact
our ability to develop and, if approved, commercialize our pipeline drug candidates successfully. Furthermore, some of these competitors
may make acquisitions or establish collaborative relationships among themselves or with third parties to increase their ability
to rapidly gain market share.
Our pipeline drug candidates
may compete with other cannabinoid or cannabis-based drugs, in addition to competing with state-licensed medical and recreational
marijuana, in markets where the recreational and/or medical use of marijuana is legal. There is continuing support in the USA for
further state legalization of marijuana. In markets where recreational and/or medical marijuana is not legal, our pipeline drug
candidates, once approved by regulators, may compete with marijuana or marijuana-based products purchased in the illegal drug market.
This may or may not affect the commercial price that we may be able to achieve for our regulatory-approved medicines, should they
be approved by the FDA.
Moreover, as generic versions
of drug products enter the market, the price for such medicines may be expected to decline rapidly and substantially. Even if we
are the first to obtain FDA approval of one of our pipeline drug candidates, the future potential approval of generics could adversely
affect the price we are able to charge and the profitability of our product(s) will likely decline.
Mergers and acquisitions in
the pharmaceutical and biotechnology industries may result in more resources being concentrated among a smaller number of our competitors.
Smaller and other early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements
with large and established companies. These companies may compete with us in recruiting and retaining qualified scientific, management
and commercial personnel, utilizing contract manufacturing facilities or contract research organizations (CROs), or establishing
clinical trial sites and subject registration for clinical trials, as well as in acquiring technologies complementary to our research
projects.
Our failure to comply
with existing and potential future laws and regulations relating to drug development could harm our plan of operations.
Our business is, and will be,
subject to wide-ranging existing federal and state laws and regulations and other governmental bodies in each of the countries
we may develop and/or market our pipeline drug candidates. We must comply with all regulatory requirements if we expect to be successful.
If any of our cannabinoid-containing
or cannabis-based pipeline drug candidates are controlled substances and are approved in the United States, they will be subject
to ongoing regulatory requirements including federal and state requirements. As a result, we and our collaborators and/or joint
venture partners must continue to expend time, money and effort in all areas of regulatory compliance, including, if applicable,
manufacturing, production, quality control and assurance and, of upmost importance, clinical trials. We will also be required to
report certain adverse reactions and production problems, if any and applicable, to the FDA, and to comply with advertising and
promotion requirements for our cannabinoid-derived drug candidates.
Any failure to comply with
ongoing regulatory or controlled drug requirements may significantly and adversely affect our ability to conduct clinical trials
which are prerequisites to our ability to commercialize our cannabinoid-based drugs and related treatments. If regulatory sanctions
are applied or if regulatory approval, once obtained, is for any reason suspended or withdrawn, the value of our business and our
operating results could be materially adversely affected.