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 the development of
ingredients and products with the aim of achieving 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
development that the company plans to undertake,
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:
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cannabinoid, cannabinoid-like
and non-cannabinoid pharmaceutical active pharmaceutical ingredients (APIs) globally;
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pharmaceutical
medicines made from cannabinoid,
cannabinoid-like and non-cannabinoid APIs globally;
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cannabinoid,
cannabinoid-like and non-cannabinoid
food-grade ingredients
with the aim of achieving European
novel food approval of
such ingredients;
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non-pharmaceutical (nutraceutical
/ dietary supplement) products containing cannabinoids,
cannabinoid-like and non-cannabinoid food-grade ingredients with the aim of achieving
European novel food approval of such products; and
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Supply of cosmetic ingredients
to potential customers who may develop products containing cannabinoids, cannabinoid-like
and non-cannabinoid ingredients
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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 integrate
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.
On May 24, 2021, we and the shareholders of ABTI Pharma memorialized a
new closing date in an amendment to the Agreement (the “Amendment”). We have already issued the 600,000,000 shares in anticipation
of the closing and the transaction closed on May 26, 2021, upon the filing of our December 31, 2020 quarterly report on Form 10-Q with
the Securities and Exchange Commission.
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. The Company expects that these funds will be
available in the coming weeks, but may exceed the 15 day deadline before this is available to the Company.
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 closing of the Agreement. The
Company also expects that these funds will be available in the future, but may exceed the 45 day deadline before this is available
to the Company.
As part of the Agreement, Amsterdam Café Holdings Limited cancelled
and returned to us 200,000,000 shares it holds and we issued Bulls Run Investments Limited 19,100,000 shares of common stock. Another
2,000,000 shares were also issued for services rendered.
Operations of ABTI Pharma
ABTI Pharma Ltd 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 molecules with patents pending, some of which have demonstrable pharmacological activity, similar to that of CBD. This means
that some of 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 organism has the potential to be genetically modified to produce multiple cannabinoids at a very low cost of
goods. It is anticipated that the selected genetically modified organisms will
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, know-how 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 and cannabinoid-like molecules.
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 cannabinoids
such as 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) in the USA. 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 has acquired 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 in principle agreements 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 an appropriately scheduled 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 or through the Mutual Recognition Procedure (MRP) 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: 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.
The process of obtaining regulatory marketing approvals and the subsequent
compliance with the appropriate national and local statutes and regulations of Japan require the expenditure of substantial time and financial
resources and we may not be successful.
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 process of obtaining regulatory marketing approvals
and the subsequent compliance with the appropriate national, federal, state, local and foreign statutes and regulations of other countries
(ex-US, Europe and Japan) require the expenditure of substantial time and financial resources and we may not be successful.
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 preclinical 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 to develop these or other drug candidates.
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, amongst other things, 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 to develop these or other drug candidates.
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
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the Centralized Procedure
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the De-Centralized Procedure
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the Mutual Recognition Procedure
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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 member states / 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.
Orphan Drug Designation in Europe
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:
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it must be intended for the treatment, prevention or diagnosis of a disease that is life-threatening or chronically debilitating;
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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;
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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 affected by the condition
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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, although it can take longer in some cases.
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
– cannot 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 controlled 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
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 preclinical and 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, prescribers 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’ / prescribers
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 as medicines 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:
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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);
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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);
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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;
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requirements by the FDA and EMA (or any other country’s medicine regulatory body) to conduct additional clinical trials;
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disapproval by the FDA or EMA or other applicable foreign regulatory authorities of certain formulations, labeling or specifications of pipeline drug candidates;
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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;
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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
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the FDA, European Commission or other applicable foreign regulatory agencies may change their approval policies or adopt new regulations.
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Any of these factors, many
of which are beyond our control, could increase development time and / or costs
or jeopardize our ability to obtain regulatory approval for our drug candidates.
We may apply for orphan drug status
granted by the FDA and / or EMA 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.
Whilst the company may wish to apply for ODDs for
some or all of its pipeline drug candidates, there is no guarantee that FDA or EMA (or any other international regulatory body) will grant
an ODD for any of the company’s pipeline drug candidates.
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 and other molecules that are produced
from a variety of sources: (1) produced via chemical synthesis and / or (2) produced biosynthetically
and / or (3) produced via botanical means.
A number of cannabinoid-containing
medicines, such as Marinol®
or Syndros®
(containing dronabinol), or Epidiolex (containing botanically-derived
cannabidiol) or Cesamet®
(containing nabilone) have
been approved by the FDA for variousindications.
In the USA, while plant-derived cannabinoids
– during development - are categorized as Schedule I substances under the CSA, the scheduling changes once a medicine has
been approved by the FDA.
Marinol®,
a capsule formulation which contains synthetic tetrahydrocannabinol, or THC when
formulated is a Schedule III medicine. Syndros®
(which also contains synthetic THC, dronabinol) is a
liquid formulation as is classified as Schedule II.
Epidiolex®
was initially a Schedule V medicine when it was introduced
in 2018, but was descheduled by the DEA in 2020.
It is our intention to produce
pipeline drug candidates via synthetic, and / or biosynthetic
and / or botanical means, which may produce
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 if the company conducts preclinical
studies or clinical 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 and
clinical 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, for those that are considered controlled
substances under the CSA, 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 (in the USA) and the corresponding competent authorities around
the world.
The scheduling process may take one or more years
beyond FDA approval in the USA, thereby significantly delaying the launch of our drugs /
medicines. 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
/ medicines or APIs (or food or cosmetic ingredients outside of the USA).
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 for our drug pipeline
candidates, or prove that our present assumptions for the current and planned research are scientifically compelling. The API content
of the Investigational Medicinal Products (IMPs) can vary from one IMP to another – hence it is not necessarily possible to extrapolate
results from studies with one product and predict efficacy of safety with another product containing a similar API a different source.
Whilst the principal cannabinoid component may be similar, the APIs may differ in terms of minor cannabinoid content, impurity profiles
or degradant profiles. While we are encouraged by the results of clinical trials by others
(where they exist), there can be no assurance that any preclinical study or 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:
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lack of effectiveness of any API, formulation or delivery system during clinical trials;
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discovery of serious or unexpected toxicities or side effects experienced by trial participants or other safety issues;
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slower than expected rates of subject recruitment and enrollment rates in clinical trials;
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delays or inability in manufacturing or obtaining sufficient quantities of GMP-grade materials for use in clinical trials due to regulatory and manufacturing constraints;
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delays in obtaining regulatory authorization to commence a trial, including Institutional Review Board (“IRB”) approvals or DEA approvals, licenses required for obtaining and using cannabis , cannabis-derived cannabinoid or cannabinoid-like substances for research, either before or after a trial is commenced;
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unfavorable results from ongoing pre-clinical studies and clinical trials;
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patients or investigators failing to comply with clinical trial protocols;
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patients failing to return for post-treatment follow-up at the expected rate;
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sites participating in an ongoing clinical trial withdraw, requiring us to engage new sites;
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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;
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third-party entities do not perform data collection and analysis in a timely or accurate manner or at all; or
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regulatory inspections of our clinical trials require us to undertake corrective action or suspend or terminate our clinical trials.
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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 (or a Clinical Trial Authorisation (CTA) to the EMA). 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, will be developed in the future 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 cannabinoid-containing or other non-cannabinoid-containing
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, preclinical
research and development 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-containing 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.
Our failure to
be able to out-licence some or all of our pipeline drug candidates could harm our plan of
operations.
The cost of drug development is high and the attrition rate of new drug
pipeline candidates is also high during the drug development process. In order to help fund the development of some of our pipeline drug
candidates, the company may wish / need to out-licence some of its assets to other (big) pharmaceutical or biotechnology companies. The
aim of such out-licensing would be generate funds for the company which may take the form of up-front payments and / or milestone payments
and / or royalties. Such decisions will be taken on a case-by-case basis, as the opportunity arises or is required.
There is no guarantee that the company will generate pipeline drug candidates
which are suitable for out-licensing. In addition, even if the company does produce pipeline drug candidates that are suitable for out-licensing
there is no guarantee that the company will be successful in being able to identify potential licencees and successfully negotiate such
out-licensing agreements, on agreeable terms if and when required. Any failure to secure such out-licensing agreements may materially
affect our ability to finance or develop and / or commercialize one or more of our pipeline drug candidates. Any such failure may materially
adversely affect our business.
Our failure to
be able to enter Research and Development (R & D) Collaboration Agreements or Joint Venture (JV)
Agreements for some or all of our pipeline drug candidates could harm our plan of operations
As mentioned above, the cost of drug development is high. In order to help
fund the development of some of our pipeline drug candidates, the company may wish to enter into Research
and Development Collaboration Agreements or Joint Venture Agreements with other (big) pharmaceutical or biotechnology companies
to help research and develop some of its assets and for those companies pay for some or all of the associated R & D costs. The aim
of such Collaboration or JV agreements would be to offset some of the company’s R & D costs. Depending upon the outcome of such
R & D or JV Agreements, it may lead to the opportunity to outlicence one or more of the assets investigated under the Collaboration
Agreement to the same other (big) pharmaceutical or biotechnology company who may be our R &D Collaboration / JV partner. If successful,
this may generate funds for the company which may take the form of up-front payments and / or milestone payments and / or royalties. Such
decisions will be taken on a case-by-case basis, as the opportunity arises or is required.
There is no guarantee that the company will generate pipeline drug candidates
which are suitable for R & D Collaborations or JV Agreements. In addition, even if the company does produce pipeline drug candidates
that are suitable for such collaborations or JVs, there is no guarantee that the company will be successful in being able to identify
potential R & D collaboration partners or JV partners and successfully negotiate such collaboration or JV agreements, on agreeable
terms if and when required. Depending upon the financial status of the company, any failure to secure such collaboration or JV agreements
agreements may materially affect our ability to finance or develop and / or commercialize one or more of our pipeline drug candidates.
Any such failure may materially adversely affect our business.
COVID-19 pandemic
The recent
novel coronavirus (COVID-19) pandemic has impacted business across the world and the current situation or worsening of the current situation
or any future similar situation could further impact our future operations and the operations of our third-party suppliers, manufacturers,
and CROs as a result of quarantines, facility closures, travel and logistics restrictions, and other limitations in connection with the
outbreak. While we expect this to be temporary, there is uncertainty around its duration and its broader impact.
It is also
possible that other future possible non-COVID-19 pandemics may similarly impact the business in the future.