A.
Selected Financial
Data
The
following selected financial data of the Company has been derived
from the audited consolidated financial statements of the Company
as at and for the years ended November 30, 2018, 2017, 2016, 2015,
and 2014. The comparative number of shares issued and outstanding,
basic and diluted loss per share have been amended to give effect
to this arrangement transaction. These statements were prepared in
accordance with accounting principles generally accepted in the
United States of America (“
U.S. GAAP
”). All dollar amounts in
this annual report are expressed in U.S. dollars, unless otherwise
indicated.
(in thousands of U.S. dollars, except for per share
data)
|
As
at and for the year ended November 30, 2018
|
As
at and for the year ended November 30, 2017
|
As
at and for the year ended November 30, 2016
|
As
at and for the year ended November 30, 2015
|
As
at and for the year ended November 30, 2014
|
|
$
|
$
|
$
|
$
|
$
|
Revenue
|
1,713
|
5,504
|
2,247
|
4,094
|
8,770
|
Loss for the
year
|
(13,747
)
|
(8,857
)
|
(10,144
)
|
(7,436
)
|
(3,856
)
|
Total
assets
|
11,474
|
7,397
|
7,975
|
5,224
|
7,875
|
Total
liabilities
|
7,372
|
7,010
|
6,858
|
5,362
|
2,966
|
Net
assets
|
4,102
|
386
|
1,116
|
(138
)
|
4,909
|
Capital
stock
|
44,328
|
35,290
|
29,831
|
21,481
|
18,941
|
Loss per share -
basic and diluted
|
(2.89
)
|
(2.86
)
|
(3.80
)
|
(3.13
)
|
(1.67
)
|
Dividends
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Weighted average
common shares
|
4,762
|
3,101
|
2,670
|
2,377
|
2,305
|
B.
Capitalization and
Indebtedness
Not
applicable.
C.
Reasons for the Offer and Use of
Proceeds
Not
applicable.
Prospects for
companies in the pharmaceutical industry generally may be regarded
as uncertain given the research and development
(“
R&D
”)
nature of the industry and uncertainty regarding the prospects of
successfully commercializing product candidates and, accordingly,
investments in companies such as ours should be regarded as very
speculative. An investor should carefully consider the risks and
uncertainties described below, as well as other information
contained in this annual report. The list of risks and
uncertainties described below is not an exhaustive list. Additional
risks and uncertainties not presently known to us or that we
believe to be immaterial may also adversely affect our business. If
any one or more of the following risks occur, our business,
financial condition and results of operations could be seriously
harmed. Further, if we fail to meet the expectations of the public
market in any given period, the market price of our common shares
could decline. If any of the following risks actually occurs, our
business, operating results, or financial condition could be
materially adversely affected.
Our activities entail significant risks. In addition to the usual
risks associated with a business, the following is a general
description of certain significant risk factors which may be
applicable to us.
Risks related to our Company
Our business is capital intensive and requires significant
investment to conduct the research and development, clinical and
regulatory activities necessary to bring our products to market,
which capital may not be available in amounts or on terms
acceptable to us, if at all.
Our
business requires substantial capital investment in order to
conduct the R&D, clinical and regulatory activities and to
defend against patent litigation claims in order to bring our
products to market and to establish commercial manufacturing,
marketing and sales capabilities. As of November 30, 2018, we had a
cash balance of $6.6 million. As of February 28, 2019, our cash
balance was $3.0 million. While we expect to satisfy short term
operational needs from cash on hand and profit transfer payments
from our commercial partners, we need to obtain additional funding
as we further the development of our product candidates. Potential
sources of capital may include payments from licensing agreements,
cost savings associated with managing operating expense levels,
other equity and/or debt financings, and/or new strategic
partnership agreements which fund some or all costs of product
development. We intend to utilize the equity markets to bridge any
funding shortfall and to provide capital
to
continue to advance our most promising product candidates. Our
future operations are highly dependent upon our ability to source
additional capital to support advancing our product pipeline
through continued R&D activities and to fund any significant
expansion of our operations. Our ultimate success will depend on
whether our product candidates receive approval by the FDA, Health
Canada, and the regulatory authorities of other countries in which
are products are proposed to be sold and whether we are able to
successfully market our approved products. We cannot be certain
that we will receive FDA, Health Canada, or such other regulatory
approval for any of our current or future product candidates, that
we will reach the level of sales and revenues necessary to achieve
and sustain profitability or that we can secure other capital
sources on terms or in amounts sufficient to meet our needs, or at
all. Our cash requirements for R&D during any period depend on
the number and extent of the R&D activities we focus on. At
present, we are working principally on our Oxycodone ER 505(b)(2),
PODRAS
™
technology (as
defined in Item 4.B. below), additional 505(b)(2) product
candidates for development in various areas, and selected generic
product candidate development projects. Our development of
Oxycodone ER will require significant expenditures, including costs
to defend against the Purdue litigation (as described below). For
our Regabatin
™
XR
505(b)(2) product candidate, Phase III clinical trials can be
capital intensive, and will only be undertaken consistent with the
availability of funds and a prudent cash management strategy. We
anticipate some investment in fixed assets and equipment over the
next several months, the extent of which will depend on cash
availability.
Effective October
1, 2018, the maturity date for the 2013 Debenture (as defined
below) was extended to April 1, 2019. The Company currently expects
to repay the current outstanding principal amount of $1,050,000 on
or about April 1, 2019, if the Company then has cash available. In
addition, the 2018 Debenture (as defined below) will mature on
September 1, 2020.
The
availability of equity or debt financing will be affected by, among
other things, the results of our R&D, our ability to obtain
regulatory approvals, our success in commercializing approved
products with our commercial partners and the market acceptance of
our products, the state of the capital markets generally, strategic
alliance agreements and other relevant commercial considerations.
In addition, if we raise additional funds by issuing equity
securities, our then-existing security holders will likely
experience dilution, and the incurring of indebtedness would result
in increased debt service obligations and could require us to agree
to operating and financial covenants that would restrict our
operations. In the event that we do not obtain sufficient
additional capital, it will raise substantial doubt about our
ability to continue as a going concern, realize our assets, and pay
our liabilities as they become due. Our cash outflows are expected
to consist primarily of internal and external R&D, legal and
consulting expenditures to advance our product pipeline and
selling, general and administrative expenses to support our
commercialization efforts. Depending upon the results of our
R&D programs, the impact of the litigation against us and the
availability of financial resources, we could decide to accelerate,
terminate, or reduce certain projects, or commence new ones. Any
failure on our part to successfully commercialize approved products
or raise additional funds on terms favorable to us, or at all, may
require us to significantly change or curtail our current or
planned operations in order to conserve cash until such time, if
ever, that sufficient proceeds from operations are generated, and
could result in us not taking advantage of business opportunities,
in the termination or delay of clinical trials or us not taking any
necessary actions required by the FDA or Health Canada for one or
more of our product candidates, in curtailment of our product
development programs designed to identify new product candidates,
in the sale or assignment of rights to our technologies, products
or product candidates, and/or our inability to file ANDAs,
Abbreviated New Drug Submissions (“
ANDSs
”) or NDAs, at all or in time
to competitively market our products or product
candidates.
Delays, suspensions and terminations in our preclinical studies and
clinical trials could result in increased costs to us and delay our
ability to generate product revenues.
The
commencement of clinical trials can be delayed for a variety of
reasons, including delays in:
●
demonstrating
sufficient safety and efficacy to obtain regulatory approval to
commence a clinical trial;
●
reaching agreement
on acceptable terms with prospective contract research
organizations and clinical trial sites;
●
manufacturing
sufficient quantities of a drug candidate;
●
obtaining
institutional review board approval to conduct a clinical trial at
a prospective clinical trial site;
●
patient enrollment;
and
●
for controlled
substances, obtaining specific permission to conduct a study, and
obtaining import and export permits to ship study
samples.
Once a
clinical trial has begun, it may be delayed, suspended or
terminated due to a number of factors, including:
●
the number of
patients that participate in the trial;
●
the length of time
required to enroll suitable subjects;
●
the duration of
patient follow-up;
●
the number of
clinical sites included in the trial;
●
changes in
regulatory requirements or regulatory delays or clinical holds
requiring suspension or termination of the trials;
●
delays, suspensions
or termination of clinical trials due to the institutional review
board overseeing the study at a particular site;
●
failure to conduct
clinical trials in accordance with regulatory
requirements;
●
unforeseen safety
issues, including serious adverse events or side effects
experienced by participants; and
●
inability to
manufacture, through third party manufacturers, adequate supplies
of the product candidate being tested.
Based
on results at any stage of product development, we may decide to
repeat or redesign preclinical studies or clinical trials, conduct
entirely new studies or discontinue development of products for one
or all indications. In addition, our product candidates may not
demonstrate sufficient safety and efficacy in pending or any future
preclinical testing or clinical trials to obtain the requisite
regulatory approvals. Even if such approvals are obtained for our
products, they may not be accepted in the market as a viable
alternative to other products already approved or pending
approvals.
If we
experience delays, suspensions or terminations in a preclinical
study or clinical trial, the commercial prospects for our products
will be harmed, and our ability to generate product revenues will
be delayed or we may never be able to generate such
revenues.
We have a history of operating losses, which may continue in the
foreseeable future
.
We have
incurred net losses from inception. We had an accumulated deficit
of $85,620,939 as of November 30, 2018 and have incurred additional
losses since such date. As we engage in the development of products
in our pipe line, we may continue to incur further losses. There
can be no assurance that we will ever be able to achieve or sustain
profitability or positive cash flow. In addition to the other
factors described in this annual report, our ultimate success will
depend on how many of our product candidates receive approval by
the FDA, Health Canada, and the regulatory authorities of the other
countries in which are products are proposed to be sold and whether
we are able to successfully market approved products. We cannot be
certain that we will be able to receive FDA, Health Canada or such
other regulatory approval for any of our current or future product
candidates, or that we will reach the level of sales and revenues
necessary to achieve and sustain profitability. If we are
unsuccessful in commercializing our products and/or securing
sufficient financing, we may need to cease or curtail our
operations.
Loss of key scientists and/or failure to attract qualified
personnel could limit our growth and negatively impact our
operations.
We are
dependent upon the scientific expertise of Dr. Isa Odidi, our
Chairman, Chief Executive Officer and Co-Chief Scientific Officer,
and Dr. Amina Odidi, our President, Chief Operating Officer and
Co-Chief Scientific Officer. Although we employ other qualified
scientists, Drs. Isa and Amina Odidi are our only employees with
the knowledge and experience necessary for us to continue the
development of controlled-release products. We do not maintain
key-person life insurance on any of our officers or employees.
Although we have employment agreements with key members of our
management team, each of our employees may terminate his or her
employment at any time. The success of our business depends, in
large part, on our continued ability to attract and retain highly
qualified management, scientific, manufacturing and sales and
marketing personnel, on our ability to successfully integrate new
employees, and on our ability to develop and maintain important
relationships with leading research and medical institutions and
key distributors. If we lose the services of our executive officers
or other qualified personnel or are unable to attract and retain
qualified individuals to fill these roles or develop key
relationships, our business, financial condition and results of
operations could be materially adversely affected.
Our intellectual property may not provide meaningful
protection for our products and product candidates.
We hold
certain U.S., Canadian and foreign patents and have pending
applications for additional patents outstanding. We intend to
continue to seek patent protection for, or maintain as trade
secrets, all of our commercially promising drug delivery platforms
and technologies. Our success depends, in part, on our and our
collaborative partners’ ability to obtain and maintain patent
protection for products and product candidates, maintain trade
secret protection and operate without infringing the proprietary
rights of third parties. Without patent and other similar
protection, other companies could offer substantially identical
products without incurring sizeable development costs which could
diminish our ability to recover expenses of and realize profits on
our developed products. If our pending patent applications are not
approved, or if we are unable to obtain patents for additional
developed technologies, the future protection for our technologies
will remain uncertain. Furthermore, third parties may independently
develop similar or alternative technologies, duplicate some or all
of our technologies, design around our patented technologies or
challenge our issued patents. Such third parties may have filed
patent applications, or hold issued patents, relating to products
or processes competitive with those we are developing or otherwise
restricting our ability to do business in a particular area. If we
are unable to obtain patents or otherwise protect our trade secrets
or other intellectual property and operate without infringing on
the proprietary rights of others, our business, financial condition
and results of operations could be materially adversely
affected.
We may be subject to intellectual property claims that could be
costly and could disrupt our business.
Third
parties may claim we have infringed their patents, trademarks,
copyrights or other rights. We may be unsuccessful in defending
against such claims, which could result in the inability to protect
our intellectual property rights or liability in the form of
substantial damages, fines or other penalties such as injunctions
precluding our manufacture, importation or sales of products. The
resolution of a claim could also require us to change how we do
business or enter into burdensome royalty or license agreements;
provided, however, we may not be able to obtain the necessary
licenses on acceptable terms, or at all. Insurance coverage may be
denied or may not be adequate to cover every claim that third
parties could assert against us. Even unsuccessful claims could
result in significant legal fees and other expenses, diversion of
management
’
s time and
disruptions in our business. Any of these claims could also harm
our reputation. Any of the foregoing may have a material adverse
effect upon our business and financial condition.
We are a defendant in litigation and are at risk of additional
similar litigation in the future that could divert
management’s attention and adversely affect our business and
could subject us to significant liabilities.
We are
a defendant in the litigation matters described below and under
Item 8.A. The defense of such litigation may increase our expenses
and divert our management
’
s attention and resources, and any
unfavorable outcome could have a material adverse effect on our
business and results of operations. Any adverse determination in
such litigation, or any settlement of such litigation matters could
require that we make significant payments. In addition, we may be
the target of other litigation in the future. Any negative outcome
in any ongoing or future litigation may have a material adverse
effect on our business and financial condition.
Recent and future legal developments could make it more difficult
and costly for us to obtain regulatory approvals for our product
candidates and negatively affect the prices we may
charge.
In the
United States and elsewhere, recent and proposed legal and
regulatory changes to healthcare systems could prevent or delay our
receipt of regulatory approval for our product candidates, restrict
or regulate our post-approval marketing activities, and adversely
affect our ability to profitably sell our products. We do not know
whether additional legislative changes will be enacted, or whether
the FDA’s regulations, guidance or interpretations will be
changed, or what impact any such changes will have, if any, on our
ability to obtain regulatory approvals for our product candidates.
Further, the U.S. Centers for Medicare and Medicaid Services, or
CMS, frequently changes product descriptors, coverage policies,
product and service codes, payment methodologies and reimbursement
values. Also, increased scrutiny by the U.S. Congress of the
FDA’s approval process could significantly delay or prevent
our receipt of regulatory approval for our product candidates and
subject us to more stringent product labeling and post-marketing
testing and other requirements.
We operate in a highly litigious environment.
From
time to time, we may be exposed to claims and legal actions in the
normal course of business. As of the date of this annual report, we
are not aware of any pending or threatened material litigation
claims against us other than as described below and under Item 8.A
below. Litigation to which we are, or may be, subject could relate
to, among other things, our patent and other intellectual property
rights or such rights of others, business or licensing arrangements
with other persons, product liability or financing activities. Such
litigation could include an injunction against the manufacture or
sale of one or more of our products or potential products or a
significant monetary judgment, including a possible punitive
damages award, or a judgment that certain of our patent or other
intellectual property rights are invalid or unenforceable or
infringe the intellectual property rights of others. If such
litigation is commenced, our business, results of operations,
financial condition and cash flows could be materially adversely
affected.
There
has been substantial litigation in the pharmaceutical industry
concerning the manufacture, use and sale of new products that are
the subject of conflicting patent rights. When we file an ANDA or
505(b)(2) NDA for a bioequivalent version of a drug, we may, in
some circumstances, be required to certify to the FDA that any
patent which has been listed with the FDA as covering the branded
product has expired, the date any such patent will expire, or that
any such patent is invalid or will not be infringed by the
manufacture, sale or use of the new drug for which the application
is submitted. Approval of an ANDA is not effective until each
listed patent expires, unless the applicant certifies that the
patents at issue are not infringed or are invalid and so notifies
the patent holder and the holder of the branded product. A patent
holder may challenge a notice of non-infringement or invalidity by
suing for patent infringement within 45 days of receiving notice.
Such a challenge prevents FDA approval for a period which ends 30
months after the receipt of notice, or sooner if an appropriate
court rules that the patent is invalid or not infringed. From time
to time, in the ordinary course of business, we face and have faced
such challenges and may continue to do so in the
future.
In
November 2016, we filed an NDA for our Oxycodone ER product
candidate, relying on the 505(b)(2) regulatory pathway, which
allowed us to reference data from the file of Purdue Pharma
L.P.(“
Purdue
”)
for its OxyContin
®
extended-release
oxycodone hydrochloride. Our Oxycodone ER application was accepted
by the FDA for further review in February 2017. We certified to the
FDA that we believed that our Oxycodone ER product candidate would
not infringe any of the OxyContin
®
patents listed in
the FDA
’
s Approved Drug
Products with Therapeutic Equivalence Evaluations, commonly known
as the
“
Orange Book
”
, or that such patents are invalid,
and so notified Purdue and the other owners of the subject patents
listed in the Orange Book of such certification. On April 7, 2017,
we received notice that Purdue, Purdue Pharmaceuticals L.P., The
P.F. Laboratories, Inc., or collectively the Purdue parties, Rhodes
Technologies, and Gr
ü
nenthal GmbH, or collectively the
Purdue litigation plaintiffs or plaintiffs, had commenced patent
infringement proceedings, or the Purdue litigation, against us in
the U.S. District Court for the District of Delaware (docket number
17-392) in respect of our NDA filing for Oxycodone ER, alleging
that our proposed Oxycodone ER infringes 6 out of the 16 patents
associated with the branded product OxyContin
®
, or the
OxyContin
®
patents, listed in
the Orange Book. The complaint seeks injunctive relief as well as
attorneys
’
fees and costs
and such other and further relief as the Court may deem just and
proper. An answer and counterclaim have been filed.
Subsequent to the
above-noted filing of lawsuit, 4 further such patents were listed
and published in the Orange Book. We then similarly certified to
the FDA concerning such further patents. On March 16, 2018, we
received notice that the Purdue litigation plaintiffs had commenced
further such patent infringement proceedings against us adding the
4 further patents. This lawsuit is also in the District of Delaware
federal court under docket number 18-404.
As a
result of the commencement of the first of these legal proceedings,
the FDA is stayed for 30 months from granting final approval to our
Oxycodone ER product candidate. That time period commenced on
February 24, 2017, when the Purdue litigation plaintiffs received
notice of our certification concerning the patents, and will expire
on August 24, 2019, unless the stay is earlier terminated by a
final declaration of the courts that the patents are invalid, or
are not infringed, or the matter is otherwise settled among the
parties.
On or
about June 26, 2018, the court issued an order to sever 6
“
overlapping
”
patents from the second Purdue
case, but ordered litigation to proceed on the 4 new (2017-issued)
patents. An answer and counterclaim was filed on July 9, 2018. The
existence and publication of additional patents in the Orange Book,
and litigation arising therefrom, is an ordinary and to be expected
occurrence in the course of such litigation.
On July
6, 2018, the court issued a so-called
“
Markman
”
claim construction ruling on the
first case and the October 22, 2018 trial date remained unchanged.
We believe that we have non-infringement and/or invalidity defenses
to all of the asserted claims of the subject patents in both of the
cases and will vigorously defend against these claims.
On July
24, 2018, the parties to the case mutually agreed to and did have
dismissed without prejudice the infringement claims related to the
Gr
ü
nenthal
‘
060 patent. The Gr
ü
nenthal
‘
060 patent is one of the six patents
included in the original litigation case, however, the dismissal
does not by itself result in a termination of the 30-month
litigation stay.
On
October 4, 2018, the parties mutually agreed to postpone the
scheduled court date pending a case status conference scheduled for
December 17, 2018. At that time, further trial scheduling and other
administrative matters were postponed pending the Company’s
anticipated resubmission of the Oxycodone ER NDA to the FDA, which
is due no later than February 28, 2019.
In July
2017, three complaints were filed in the U.S. District Court for
the Southern District of New York that were later consolidated
under the caption
Shanawaz v.
Intellipharmaceutics Int’l Inc., et al.
, No.
1:17-cv-05761 (S.D.N.Y.). The lead plaintiffs filed a consolidated
amended complaint on January 29, 2018. In the amended complaint,
the lead plaintiffs assert claims on behalf of a putative class
consisting of purchasers of our securities between May 21, 2015 and
July 26, 2017. The amended complaint alleges that the defendants
violated Sections 10(b) and 20(a) of the U.S. Securities Exchange
Act of 1934, as amended (the “
U.S. Exchange Act
”) and Rule 10b-5
promulgated thereunder by making allegedly false and misleading
statements or failing to disclose certain information regarding our
NDA for Oxycodone ER abuse-deterrent oxycodone hydrochloride
extended-release tablets. The complaint seeks, among other
remedies, unspecified damages, attorneys
’
fees and other costs, equitable
and/or injunctive relief, and such other relief as the court may
find just and proper. On March 30, 2018, the Company and the other
defendants filed a motion to dismiss the amended complaint for
failure to state a valid claim. The defendants’ motion to
dismiss was granted in part, and denied in part, in an Order dated
December 17, 2018. In its Order, the court dismissed certain of the
plaintiffs’ securities claims, to the extent that the claims
were based upon statements describing the Oxycodone ER
product’s abuse-deterrent features and its bioequivalence to
OxyContin. However, the court allowed the claims to proceed to the
extent plaintiffs challenged certain public statements describing
the contents of the Company’s Oxycodone ER NDA. Defendants
filed an answer to the amended complaint on January 7, 2019, and
discovery is ongoing. We intend to vigorously defend against the
remainder of the claims asserted in the consolidated
action.
On
February 21, 2019, the Company and its CEO, Dr. Isa Odidi, received
a Statement of Claim concerning an action against them in the
Superior Court of Justice of Ontario under the caption
Victor Romita, plaintiff, and
Intellipharmaceutics International Inc. and Isa Odidi,
defendants
. The action seeks certification as a class action
and alleges that certain public statements made by the Company in
the period February 29, 2016 to July 26, 2017 knowingly or
negligently contained or omitted material facts concerning the
Company’s NDA for Oxycodone ER abuse-deterrent oxycodone
hydrochloride extended release tablets. The plaintiff alleges that
he suffered loss and damages as a result of trading in the
Company’s shares on TSX during the above-noted period. The
claim seeks, among other remedies, unspecified damages, legal fees
and court and other costs as the court may permit. At this time,
the action has not been certified as a class action. The Company
intends to vigorously defend against the claims asserted in this
action.
We rely on maintaining as trade secrets our competitively sensitive
know-how and other information. Intentional or unintentional
disclosure of this information could impair our competitive
position.
As to
many technical aspects of our business, we have concluded that
competitively sensitive information is either not patentable or
that for competitive reasons it is not commercially advantageous to
seek patent protection. In these circumstances, we seek to protect
this know-how and other proprietary information by maintaining it
in confidence as a trade secret. To maintain the confidentiality of
our trade secrets, we generally enter into agreements that contain
confidentiality provisions with our employees, consultants,
collaborators, contract manufacturers and advisors upon
commencement of their relationships with us. These provisions
generally require that all confidential information developed by
the individual or made known to the individual by us during the
course of the individual’s relationship with us be kept
confidential and not disclosed to third parties. We may not have
these arrangements in place in all circumstances, and the
confidentiality provisions in our favor may be breached. We may not
become aware of, or have adequate remedies in the event of, any
such breach. In addition, in some situations, the confidentiality
provisions in our favor may conflict with, or be subject to, the
rights of third parties with whom our employees, consultants,
collaborators, contract manufacturers or advisors have previous
employment or consulting relationships. To the extent that our
employees, consultants, collaborators, contract manufacturers or
advisors use trade secrets or know-how owned by others in their
work for us, disputes may arise as to the ownership of relative
inventions. Also, others may independently develop substantially
equivalent trade secrets, processes and know-how, and competitors
may be able to use this information to develop products that
compete with our products, which could adversely impact our
business. The disclosure of our trade secrets could impair our
competitive position. Adequate remedies may not exist in the event
of unauthorized use or disclosure of our confidential
information.
Approvals for our product candidates may be delayed or become more
difficult to obtain if the FDA changes its approval
requirements.
The FDA
may institute changes to its ANDA approval requirements, which may
make it more difficult or expensive for us to obtain approval for
our new generic products. For instance, in July 2012, the Generic
Drug User Fee Amendments of 2012, or GDUFA, was enacted into law.
The GDUFA legislation implemented substantial fees for new ANDAs,
Drug Master Files, product and establishment fees. In return, the
program is intended to provide faster and more predictable ANDA
reviews by the FDA and more timely inspections of drug facilities.
For the FDA
’
s fiscal year
2019, the user fee rate is $178,799 for new ANDAs. For the
FDA
’
s fiscal year 2019,
the FDA will also charge an annual facility user fee of $226,305
plus a new general program fee of $186,217. Under GDUFA, generic
product companies face significant penalties for failure to pay the
new user fees, including rendering an ANDA not
“
substantially complete
”
until the fee is paid. It is
currently uncertain the effect the new fees will have on our ANDA
process and business. However, any failure by us or our suppliers
to pay the fees or to comply with the other provisions of GDUFA may
adversely impact or delay our ability to file ANDAs, obtain
approvals for new generic products and generate revenues and thus
may have a material adverse effect on our business, results of
operations and financial condition.
We cannot ensure the availability of raw materials.
Certain
raw materials necessary for the development and subsequent
commercial manufacture of our product candidates may be proprietary
products of other companies. While we attempt to manage the risk
associated with such proprietary raw materials through contractual
provisions in supply contracts, by management of inventory and by
continuing to search for alternative authorized suppliers of such
materials or their equivalents, if our efforts fail, or if there is
a material shortage, contamination, and/or recall of such
materials, the resulting scarcity could adversely affect our
ability to develop or manufacture our product candidates. In
addition, many third party suppliers are subject to governmental
regulation and, accordingly, we are dependent on the regulatory
compliance of, as well as on the strength, enforceability and terms
of our various contracts with, these third party
suppliers.
Further, the FDA
requires identification of raw material suppliers in applications
for approval of drug products. If raw materials are unavailable
from a specified supplier, the supplier does not give us access to
its technical information for our application or the supplier is
not in compliance with FDA or other applicable requirements, FDA
approval of the supplier could delay the manufacture of the drug
involved. Any inability to obtain raw materials on a timely basis,
or any significant price increases which cannot be passed on to our
customers, could have a material adverse effect on our business,
results of operations, financial condition and cash
flows.
Our product candidates may not be successfully developed or
commercialized.
Successful
development of our product candidates is highly uncertain and is
dependent on numerous factors, many of which are beyond our
control. Products that appear promising in research or early phases
of development may fail to reach later stages of development or the
market for several reasons including:
●
for ANDA
candidates, bioequivalence studies results may not meet regulatory
requirements or guidelines for the demonstration of
bioequivalence;
●
for NDA candidates,
a product may not demonstrate acceptable large-scale clinical trial
results, even though it demonstrated positive preclinical or
initial clinical trial results;
●
for NDA candidates,
a product may not be effective in treating a specified condition or
illness;
●
a product may have
harmful side effects on humans;
●
products may fail
to receive the necessary regulatory approvals from the FDA or other
regulatory bodies, or there may be delays in receiving such
approvals;
●
changes in the
approval process of the FDA or other regulatory bodies during the
development period or changes in regulatory review for each
submitted product application may also cause delays in the approval
or result in rejection of an application;
●
difficulties may be
encountered in formulating products, scaling up manufacturing
processes or in getting approval for manufacturing;
●
difficulties may be
encountered in the manufacture and/or packaging of our
products;
●
once manufactured,
our products may not meet prescribed quality assurance and
stability tests;
●
manufacturing
costs, pricing or reimbursement issues, other competitive
therapeutics, or other commercial factors may make the product
uneconomical; and
●
the proprietary
rights of others, and their competing products and technologies,
may prevent the product from being developed or
commercialized.
Further, success in
preclinical and early clinical trials does not ensure that
large-scale clinical trials will be successful, nor does success in
preliminary studies for ANDA candidates ensure that bioequivalence
studies will be successful. Results are frequently susceptible to
varying interpretations that may delay, limit or prevent regulatory
approvals. The length of time necessary to complete bioequivalence
studies or clinical trials and to submit an application for
marketing approval for a final decision by a regulatory authority
varies significantly and may be difficult to predict.
As a
result, there can be no assurance that any of our product
candidates currently in development will ever be successfully
commercialized.
Near-term revenue depends significantly on the success of our first
commercialized product, our once daily generic Focalin
XR
®
(dexmethylphenidate hydrochloride extended-release), and our second
commercialized product, generic Seroquel XR
®
(quetiapine
fumarate extended release).
We have
invested significant time and effort in the development of our
first ANDA product, our once daily generic Focalin XR
®
capsules, for
which we received final approval from the FDA in November 2013
under the Company ANDA (as defined in Item 4.B. below) to launch
the 15 and 30 mg strengths. Commercial sales of these strengths
were launched immediately by our commercialization partner in the
U.S., Par Pharmaceutical, Inc. (“
Par
”). Our 5, 10, 20 and 40 mg
strengths were also then tentatively FDA approved, subject to the
right of Teva Pharmaceuticals USA, Inc. (“
Teva
”) to 180 days of generic
exclusivity from the date of first launch of such products. Teva
launched its own 5, 10, 20 and 40 mg strengths of generic Focalin
XR
®
capsules on November 11, 2014, February 2, 2015, June 22, 2015 and
November 19, 2013, respectively. In January 2017, Par launched the
25 and 35 mg strengths of its generic Focalin XR
®
capsules in the
U.S., and in May 2017, Par launched the 10 and 20 mg strengths,
complementing the 15 and 30 mg strengths of our generic Focalin
XR
®
marketed by Par. The FDA granted final approval under the Par ANDA
(as defined in Item 4.B. below) for its generic Focalin
XR
®
capsules in the 5, 10, 15, 20, 25, 30, 35 and 40 mg strengths. As
the first filer of an ANDA for generic Focalin XR
®
in the 25 and
35 mg strengths, Par had 180 days of U.S. generic marketing
exclusivity for those strengths. In November 2017, Par launched the
remaining 5 and 40 mg strengths of generic Focalin XR
®
, complementing
the 10, 15, 20, 25, 30 and 35 mg strengths previously launched and
marketed by Par and providing us with the full line of general
Focalin XR
®
strengths
available in the U.S. market. Under a license and commercialization
agreement we entered into with Par in November 2015, as amended on
August 12, 2011 and September 24, 2013 (the “
Par agreement
”), we receive
calendar quarterly profit-share payments on Par’s U.S. sales
of generic Focalin XR
®
. There can be
no assurance whether any strengths will be successfully
commercialized. We depend significantly on the actions of our
marketing partner Par in the prosecution, regulatory approval and
commercialization of our generic Focalin XR
®
capsules and on
their timely payment to us of the contracted calendar quarterly
payments as they come due.
We have
also invested significant time and effort in the development of our
second ANDA product, our generic Seroquel XR
®
tablets in the
50, 150, 200, 300 and 400 mg strengths, and in May 2017 our ANDA
received final FDA approval for all of these strengths. Our
approved product is a generic equivalent for the corresponding
strengths of the branded product Seroquel XR
®
sold in the
U.S. by AstraZeneca Pharmaceuticals LP (“
AstraZeneca
”). The Company
manufactured and shipped commercial quantities of all strengths of
generic Seroquel XR
®
to our
marketing and distribution partner Mallinckrodt LLC
(“
Mallinckrodt
”), and Mallinckrodt
launched all strengths in June 2017. In October 2016, we announced
a license and commercial supply agreement with Mallinckrodt,
granting Mallinckrodt an exclusive license to market, sell and
distribute in the U.S. the following extended release drug product
candidates (the “
licensed
products
”) which have either been launched (generic
Seroquel XR
®
) or for which
we have ANDAs filed with the FDA (the “
Mallinckrodt
agreement
”):
●
Quetiapine fumarate
extended-release tablets (generic Seroquel XR
®
) –
Approved by FDA and launched
●
Desvenlafaxine
extended-release tablets (generic Pristiq
®
) – ANDA
Under FDA Review (tentatively approved)
●
Lamotrigine
extended-release tablets (generic Lamictal
®
XR™)
– ANDA Under FDA Review
Under
the terms of the 10-year agreement, we received a non-refundable
upfront payment of $3 million in October 2016. In addition, the
agreement also provides for a long-term profit sharing arrangement
with respect to these licensed products (which includes up to $11
million in cost recovery payments that are payable on future sales
of licensed product). We have agreed to manufacture and supply the
licensed products exclusively for Mallinckrodt on a cost plus
basis. The Mallinckrodt agreement contains customary terms and
conditions for an agreement of this kind, and is subject to early
termination in the event we do not obtain FDA approvals of the
Mallinckrodt licensed products by specified dates, or pursuant to
any one of several termination rights of each party. There can be
no assurance whether any strengths of our generic Seroquel
XR
®
will be successfully commercialized. We depend significantly on the
actions of our marketing partner Mallinckrodt in the
commercialization of our generic Seroquel XR
®
tablets and on
their timely payment to us of the contracted payments as they come
due.
Our
near term ability to generate significant revenue will depend upon
successful commercialization of our products in the U.S., where the
branded Focalin XR
®
product and the
branded Seroquel XR
®
product are in
the market. Although we have several other products in our
pipeline, and received final approval from the FDA for our generic
Keppra XR
®
(levetiracetam
extended-release tablets) for the 500 and 750 mg strengths and
final approval from the FDA for our metformin hydrochloride extend
release tablets in the 500 and 750 mg strengths, the majority of
the products in our pipeline are at earlier stages of development.
We will be exploring licensing and commercial alternatives for our
generic Keppra XR
®
product
strengths that have been approved by the FDA. We are also actively
evaluating options to realize commercial returns from the approval
of our generic Glucophage
®
XR.
Our significant expenditures on R&D may not lead to successful
product introductions.
We
conduct R&D primarily to enable us to manufacture and market
pharmaceuticals in accordance with FDA regulations. Typically,
research expenses related to the development of innovative
compounds and the filing of NDAs are significantly greater than
those expenses associated with ANDAs. As we continue to develop new
products, our research expenses will likely increase. We are
required to obtain FDA approval before marketing our drug products
and the approval process is costly and time consuming. Because of
the inherent risk associated with R&D efforts in our industry,
particularly with respect to new drugs, our R&D expenditures
may not result in the successful introduction of FDA approved new
pharmaceuticals.
We may not have the ability to develop or license, or otherwise
acquire, and introduce new products on a timely basis.
Product
development is inherently risky, especially for new drugs for which
safety and efficacy have not been established and the market is not
yet proven. Likewise, product licensing involves inherent risks
including uncertainties due to matters that may affect the
achievement of milestones, as well as the possibility of
contractual disagreements with regard to terms such as license
scope or termination rights. The development and commercialization
process, particularly with regard to new drugs, also requires
substantial time, effort and financial resources. The process of
obtaining FDA or other regulatory approval to manufacture and
market new and generic pharmaceutical products is rigorous, time
consuming, costly and largely unpredictable. We, or a partner, may
not be successful in obtaining FDA or other required regulatory
approval or in commercializing any of the product candidates that
we are developing or licensing.
Our business and operations are increasingly dependent on
information technology and accordingly we would suffer in the event
of computer system failures, cyber-attacks or a deficiency in
cyber-security.
Our
internal computer systems, and those of our vendors and current
and/or future drug development or commercialization partners of
ours, may be vulnerable to damage from cyber-attacks, computer
viruses, malware, natural disasters, terrorism, war,
telecommunication and electrical failures. The risk of a security
breach or disruption, particularly through cyber-attacks, including
by computer hackers, foreign governments, and cyber terrorists, has
generally increased as the number, intensity and sophistication of
attempted attacks and intrusions have increased. If such an event
were to occur and cause interruptions in our operations or those of
a drug development or commercialization partner, it could result in
a material disruption of our product development programs. For
example, the loss of clinical trial data from completed or ongoing
or planned clinical trials could result in delays in our regulatory
approval efforts and significantly increase our costs to recover or
reproduce the data. To the extent that any disruption or security
breach results in a loss of or damage to our data or applications,
or inappropriate disclosure of confidential or proprietary
information, we could incur significant liability and damage to our
reputation. In addition, further development of our drug candidates
could be adversely affected.
In
addition, the unauthorized dissemination of sensitive personal
information could expose us or other third parties to regulatory
fines or penalties, litigation and potential liability, or
otherwise harm our business.
Our business can be impacted by wholesaler buying patterns,
increased generic competition and, to a lesser extent, seasonal
fluctuations, which may cause our operating results to
fluctuate.
We
believe that the revenues derived from our generic Focalin
XR
®
capsules and generic Seroquel XR
®
tablets are subject
to wholesaler buying patterns, increased generic competition
negatively impacting price, margins and market share consistent
with industry post-exclusivity experience and, to a lesser extent,
seasonal fluctuations in relation to generic
Focalin XR
®
capsules (as these
products are indicated for conditions including attention deficit
hyperactivity disorder which we expect may see increases in
prescription rates during the school term and declines in
prescription rates during the summer months). Accordingly, these
factors may cause our operating results to fluctuate.
We may not achieve our projected development goals in the time
frames we announce and expect.
We set
goals regarding the expected timing of meeting certain corporate
objectives, such as the commencement and completion of clinical
trials, anticipated regulatory approval and product launch dates.
From time to time, we may make certain public statements regarding
these goals. The actual timing of these events can vary
dramatically due to, among other things, insufficient funding,
delays or failures in our clinical trials or bioequivalence
studies, the uncertainties inherent in the regulatory approval
process, such as failure to secure appropriate product labeling
approvals, requests for additional information, delays in achieving
manufacturing or marketing arrangements necessary to commercialize
our product candidates and failure by our collaborators, marketing
and distribution partners, suppliers and other third parties to
fulfill contractual obligations. In addition, the possibility of a
patent infringement suit regarding one or more of our product
candidates could delay final FDA approval of such candidates. If we
fail to achieve one or more of these planned goals, the price of
our common shares could decline.
We have limited manufacturing, sales, marketing or distribution
capability and we must rely upon third parties for
such.
While
we have our own manufacturing facility in Toronto, we rely on
third-party manufacturers to supply pharmaceutical ingredients, and
we will be reliant upon a third-party manufacturer to produce
certain of our products and product candidates. Third-party
manufacturers may not be able to meet our deadlines or adhere to
quality standards and specifications. Our reliance on third parties
for the manufacture of pharmaceutical ingredients and finished
products creates a dependency that could severely disrupt our
research and development, our clinical testing, and ultimately our
sales and marketing efforts if such third party manufacturers fail
to perform satisfactorily, or do not adequately fulfill their
obligations. If our manufacturing operation or any contracted
manufacturing operation is unreliable or unavailable, we may not be
able to move forward with our intended business operations and our
entire business plan could fail. There is no assurance that our
manufacturing operation or any third-party manufacturers will be
able to meet commercialized scale production requirements in a
timely manner or in accordance with applicable standards or current
Good Manufacturing Process.
If our manufacturing facility is unable to manufacture our
product(s) or the manufacturing process is interrupted due to
failure to comply with regulations or for other reasons, it could
have a material adverse impact on our business.
If our
manufacturing facility fails to comply with regulatory requirements
or encounter other manufacturing difficulties, it could adversely
affect our ability to supply products. All facilities and
manufacturing processes used for the manufacture of pharmaceutical
products are subject to inspection by regulatory agencies at any
time and must be operated in conformity with the current Good
Manufacturing Practices (“
cGMP
”) regulations. Compliance
with FDA and Health Canada cGMP requirements applies to both drug
products seeking regulatory approval and to approved drug products.
In complying with cGMP requirements, pharmaceutical manufacturing
facilities must continually expend significant time, money and
effort in production, record-keeping and quality assurance and
control so that their products meet applicable specifications and
other requirements for product safety, efficacy and quality.
Failure to comply with applicable legal requirements subjects our
manufacturing facility to possible legal or regulatory action,
including
shutdown, which may
adversely affect our ability to manufacture product. Were we not
able to manufacture products at our manufacturing facility because
of regulatory, business or any other reasons, the manufacture and
marketing of these products would be interrupted. This could have a
material adverse impact on our business, results of operations,
financial condition, cash flows and competitive
position.
The use of legal and regulatory strategies by competitors with
innovator products, including the filing of citizen petitions, may
delay or prevent the introduction or approval of our product
candidates, increase our costs associated with the introduction or
marketing of our products, or significantly reduce the profit
potential of our product candidates.
Companies with
innovator drugs often pursue strategies that may serve to prevent
or delay competition from alternatives to their innovator products.
These strategies include, but are not limited to:
●
filing
“citizen petitions” with the FDA that may delay
competition by causing delays of our product
approvals;
●
seeking to
establish regulatory and legal obstacles that would make it more
difficult to demonstrate a product’s bioequivalence or
“sameness” to the related innovator
product;
●
filing suits for
patent infringement that automatically delay FDA approval of
products seeking approval based on the Section 505(b)(2)
pathway;
●
obtaining
extensions of market exclusivity by conducting clinical trials of
innovator drugs in pediatric populations or by other
methods;
●
persuading the FDA
to withdraw the approval of innovator drugs for which the patents
are about to expire, thus allowing the innovator company to develop
and launch new patented products serving as substitutes for the
withdrawn products;
●
seeking to obtain
new patents on drugs for which patent protection is about to
expire; and
●
initiating
legislative and administrative efforts in various states to limit
the substitution of innovator products by pharmacies.
These
strategies could delay, reduce or eliminate our entry into the
market and our ability to generate revenues from our products and
product candidates.
Our products and product candidates, if approved for sale, may not
gain acceptance among physicians, patients and the medical
community, thereby limiting our potential to generate
revenue.
Even if
we are able to obtain regulatory approvals for our product
candidates, the success of any of our products will be dependent
upon market acceptance by physicians, healthcare professionals and
third-party payers and our profitability and growth will depend on
a number of factors, including:
●
demonstration of
safety and efficacy;
●
changes in the
practice guidelines and the standard of care for the targeted
indication;
●
relative
convenience and ease of administration;
●
the prevalence and
severity of any adverse side effects;
●
the availability of
alternative products from competitors;
●
the prices of our
products relative to those of our competitors;
●
pricing,
reimbursement and cost effectiveness, which may be subject to
regulatory control;
●
the number of
competitive product entries, and the nature and extent of any
aggressive pricing and rebate activities that may
follow;
●
the timing of our
market entry;
●
the ability to
market our products effectively at the retail level;
●
the acceptance of
our products by government and private formularies;
and
●
the availability of
adequate third-party insurance coverage or
reimbursement.
If any
product candidate that we develop does not provide a treatment
regimen that is as beneficial as, or is perceived as being as
beneficial as, the current standard of care or otherwise does not
provide patient benefit, that product candidate, if approved for
commercial sale by the FDA or other regulatory authorities, likely
will not achieve market acceptance. Our ability to effectively
promote and sell any approved products will also depend on pricing
and cost-effectiveness, including our ability to produce a product
at a competitive price and our ability to obtain sufficient
third-party coverage or reimbursement. If any product candidate is
approved but does not achieve an adequate level of acceptance by
physicians, patients and third-party payers, our ability to
generate revenues from that product would be substantially reduced.
In addition, our efforts to educate the medical community and
third-party payers on the benefits of our product candidates may
require significant resources, may be constrained by FDA rules and
policies on product promotion, and may never be
successful.
The risks and uncertainties inherent in conducting clinical trials
could delay or prevent the development and commercialization of our
own branded products, which could have a material adverse effect on
our results of operations, liquidity, financial condition, and
growth prospects.
There
are a number of risks and uncertainties associated with clinical
trials, which may be exacerbated by our relatively limited
experience in conducting and supervising clinical trials and
preparing NDAs. The results of initial clinical trials may not be
indicative of results that would be obtained from large scale
testing. Clinical trials are often conducted with patients having
advanced stages of disease and, as a result, during the course of
treatment these patients can die or suffer adverse medical effects
for reasons that may not be related to the pharmaceutical agents
being tested, but which nevertheless affect the clinical trial
results. In addition, side effects experienced by the patients may
cause delay of approval of our product candidates or a limited
application of an approved product. Moreover, our clinical trials
may not demonstrate sufficient safety and efficacy to obtain FDA
approval.
Failure
can occur at any time during the clinical trial process and, in
addition, the results from early clinical trials may not be
predictive of results obtained in later and larger clinical trials,
and product candidates in later clinical trials may fail to show
the desired safety or efficacy despite having progressed
successfully through earlier clinical testing. A number of
companies in the pharmaceutical industry have suffered significant
setbacks in clinical trials, even in advanced clinical trials after
showing positive results in earlier clinical trials. In the future,
the completion of clinical trials for our product candidates may be
delayed or halted for many reasons, including those relating to the
following:
●
delays in patient
enrollment, and variability in the number and types of patients
available for clinical trials;
●
regulators or
institutional review boards may not allow us to commence or
continue a clinical trial;
●
our inability, or
the inability of our partners, to manufacture or obtain from third
parties materials sufficient to complete our clinical
trials;
●
delays or failures
in reaching agreement on acceptable clinical trial contracts or
clinical trial protocols with prospective clinical trial
sites;
●
risks associated
with trial design, which may result in a failure of the trial to
show statistically significant results even if the product
candidate is effective;
●
difficulty in
maintaining contact with patients after treatment commences,
resulting in incomplete data;
●
poor effectiveness
of product candidates during clinical trials;
●
safety issues,
including adverse events associated with product
candidates;
●
the failure of
patients to complete clinical trials due to adverse side effects,
dissatisfaction with the product candidate, or other
reasons;
●
governmental or
regulatory delays or changes in regulatory requirements, policy and
guidelines; and
●
varying
interpretation of data by the FDA or other applicable foreign
regulatory agencies.
In
addition, our product candidates could be subject to competition
for clinical study sites and patients from other therapies under
development by other companies which may delay the enrollment in or
initiation of our clinical trials. Many of these companies have
significantly more resources than we do.
The FDA
or other foreign regulatory authorities may require us to conduct
unanticipated additional clinical trials, which could result in
additional expense and delays in bringing our product candidates to
market. Any failure or delay in completing clinical trials for our
product candidates would prevent or delay the commercialization of
our product candidates. There can be no assurance our expenses
related to clinical trials will lead to the development of
brand-name drugs which will generate revenues in the near future.
Delays or failure in the development and commercialization of our
own branded products could have a material adverse effect on our
results of operations, liquidity, financial condition, and our
growth prospects.
We rely on third parties to conduct clinical trials for our product
candidates, and if they do not properly and successfully perform
their legal and regulatory obligations, as well as their
contractual obligations to us, we may not be able to obtain
regulatory approvals for our product candidates.
We
design the clinical trials for our product candidates, but rely on
contract research organizations and other third parties to assist
us in managing, monitoring and otherwise carrying out these trials,
including with respect to site selection, contract negotiation and
data management. We do not control these third parties and, as a
result, they may not treat our clinical studies as their highest
priority, or in the manner in which we would prefer, which could
result in delays. Although we rely on third parties to conduct our
clinical trials, we are responsible for confirming that each of our
clinical trials is conducted in accordance with our general
investigational plan and protocol. Moreover, the FDA and foreign
regulatory agencies require us to comply with regulations and
standards, commonly referred to as good clinical practices, for
conducting, recording and reporting the results of clinical trials
to ensure that the data and results are credible and accurate and
that the trial participants are adequately protected. Our reliance
on third parties does not relieve us of these responsibilities and
requirements. The FDA enforces good clinical practices through
periodic inspections of trial sponsors, principal investigators and
trial sites. If we, our contract research organizations or our
study sites fail to comply with applicable good clinical practices,
the clinical data generated in our clinical trials may be deemed
unreliable and the FDA
may
require us to perform additional clinical trials before approving
our marketing applications. There can be no assurance that, upon
inspection, the FDA will determine that any of our clinical trials
comply with good clinical practices. In addition, our clinical
trials must be conducted with product manufactured under the
FDA’s cGMP regulations. Our failure, or the failure of our
contract manufacturers, if any are involved in the process, to
comply with these regulations may require us to repeat clinical
trials, which would delay the regulatory approval
process.
If
third parties do not successfully carry out their duties under
their agreements with us; if the quality or accuracy of the data
they obtain is compromised due to failure to adhere to our clinical
protocols or regulatory requirements; or if they otherwise fail to
comply with clinical trial protocols or meet expected deadlines,
our clinical trials may not meet regulatory requirements. If our
clinical trials do not meet regulatory requirements or if these
third parties need to be replaced, such clinical trials may be
extended, delayed, suspended or terminated. If any of these events
occur, we may not be able to obtain regulatory approval of our
product candidates, which could have a material adverse effect on
our results of operations, financial condition and growth
prospects.
Competition in our industry is intense, and developments by other
companies could render our products and product candidates
obsolete.
Many of
our competitors, including medical technology, pharmaceutical or
biotechnology and other companies, universities, government
agencies, or research organizations, have substantially greater
financial and technical resources and production and marketing
capabilities than we have. They also may have greater experience in
conducting bioequivalence studies, preclinical testing and clinical
trials of pharmaceutical products, obtaining FDA and other
regulatory approvals, and ultimately commercializing any approved
products. Therefore, our competitors may succeed in developing and
commercializing technologies and products that are more effective
than the drug delivery technologies we have developed or we are
developing or that will cause our technologies or products to
become obsolete or non-competitive. In addition, such competitors
may obtain FDA approval for products faster than us. Any of the
foregoing could render our products obsolete and uncompetitive,
which would have a material adverse effect on our business,
financial condition and results of operations. Even if we commence
further commercial sales of our products, we will be competing
against the greater manufacturing efficiency and marketing
capabilities of our competitors, areas in which we have limited or
no experience.
We rely
on collaborative arrangements with third parties that provide
manufacturing and/or marketing support for some or all of our
products and product candidates. Even if we find a potential
partner, we may not be able to negotiate an arrangement on
favorable terms or achieve results that we consider satisfactory.
In addition, such arrangements can be terminated under certain
conditions and do not assure a product
’
s success. We also face intense
competition for collaboration arrangements with other
pharmaceutical and biotechnology companies.
Although we believe
that our ownership of patents for some of our drug delivery
products will limit direct competition for such products, we must
also compete with established existing products and other
technologies, products and delivery alternatives that may be more
effective than our products and proposed products. In addition, we
may not be able to compete effectively with other commercially
available products or drug delivery technologies.
We require regulatory approvals for any products that use our drug
delivery technologies.
Our
drug delivery technologies can be quite complex, with many
different components. The development required to take a technology
from its earliest stages to its incorporation in a product that is
sold commercially can take many years and cost a substantial amount
of money. Significant technical challenges are common as additional
products incorporating our technologies progress through
development.
Any
particular technology such as our abuse-deterrent technology may
not perform in the same manner when used with different therapeutic
agents, and therefore this technology may not prove to be as useful
or valuable as originally thought, resulting in additional
development work.
If our
efforts do not repeatedly lead to successful development of product
candidates, we may not be able to grow our pipeline or to enter
into agreements with marketing and distribution partners or
collaborators that are willing to distribute or develop our product
candidates. Delays or unanticipated increases in costs of
development at any stage, or failure to solve a technical
challenge, could adversely affect our operating
results.
If
contract manufacturers fail to devote sufficient time and resources
to our concerns, or if their performance is substandard, the
commercialization of our products could be delayed or prevented,
and this may result in higher costs or deprive us of potential
product revenues.
We rely
on contract manufacturers for certain components and ingredients of
our clinical trial materials, such as active pharmaceutical
ingredients (“
APIs
”), and we may rely on such
manufacturers for commercial sales purposes as well. Our reliance
on contract manufacturers in these respects will expose us to
several risks which could delay or prevent the commercialization of
our products, result in higher costs, or deprive us of potential
product revenues, including:
●
Difficulties in
achieving volume production, quality control and quality assurance,
or technology transfer, as well as with shortages of qualified
personnel;
●
The failure to
establish and follow cGMP and to document adherence to such
practices;
●
The need to
revalidate manufacturing processes and procedures in accordance
with FDA and other nationally mandated cGMPs and potential prior
regulatory approval upon a change in contract
manufacturers;
●
Failure to perform
as agreed or to remain in the contract manufacturing business for
the time required to produce, store and distribute our products
successfully;
●
The potential for
an untimely termination or non-renewal of contracts;
and
●
The potential for
us to be in breach of our collaboration and marketing and
distribution arrangements with third parties for the failure of our
contract manufacturers to perform their obligations to
us.
In
addition, drug manufacturers are subject to ongoing periodic
unannounced inspection by the FDA and corresponding state and
foreign agencies to ensure strict compliance with cGMP and other
government regulations. While we may audit the performance of
third-party contractors, we will not have complete control over
their compliance with these regulations and standards. Failure by
either our third-party manufacturers or by us to comply with
applicable regulations could result in sanctions being imposed on
us, including fines, injunctions, civil penalties, failure of
applicable regulatory authorities to grant review of submissions or
market approval of drugs, delays, suspension or withdrawal of
approvals, product seizures or recalls, operating restrictions,
facility closures and criminal prosecutions, any of which could
harm our business.
We are subject to currency rate fluctuations that may impact our
financial results
.
Although our
financial results are reported in U.S. dollars and our revenues are
payable in U.S. dollars, a majority of our expenses are payable in
Canadian dollars. Our financial condition may be affected by
movements of the U.S. dollar against the Canadian dollar. There may
be instances where we have net foreign currency exposure. Any
fluctuations in exchange rates may have an adverse effect on our
financial results.
We are exposed to risks arising from the ability and willingness of
our third-party commercialization partners to provide documentation
that may be required to support information on revenues earned by
us from those commercialization partners.
If our
third-party commercialization partners, from whom we receive
revenues, are unable or unwilling to supply necessary or sufficient
documentation to support the revenue numbers in our financial
statements in a timely manner to the satisfaction of our auditors,
this may lead to delays in the timely publication of our financial
results, our ability to obtain an auditor’s report on our
financial statements and our possible inability to access the
financial markets during the time our results remain
unpublished.
We rely on commercial partners, and may rely on future commercial
partners, to market and commercialize our products and, if
approved, our product candidates, and one or more of those
commercial partners may fail to develop and effectively
commercialize our current, and any future, products.
Our
core competency and strategic focus is on drug development and we
now, and may in the future, utilize strategic commercial partners
to assist in the commercialization of our products and our product
candidates, if approved by the FDA. If we enter into strategic
partnerships or similar arrangements, we will rely on third parties
for financial resources and for commercialization, sales and
marketing. Our commercial partners may fail to develop or
effectively commercialize our current, and any future products, for
a variety of reasons, including, among others, intense competition,
lack of adequate financial or other resources or focus on other
initiatives or priorities. Any failure of our third-party
commercial partners to successfully market and commercialize our
products and product candidates would diminish our
revenues.
We have limited sales, marketing and distribution
experience.
We have
limited experience in the sales, marketing, and distribution of
pharmaceutical products. There can be no assurance that, if
required, we would be able to establish sales, marketing, and
distribution capabilities or make arrangements with our
collaborators, licensees, or others to perform such activities or
that such efforts would be successful. If we fail to establish
successful marketing and sales capabilities or to make arrangements
with third parties, our business, financial condition and results
of operations will be materially adversely affected.
Our effective tax rate may vary.
Various
internal and external factors may have favorable or unfavorable
effects on our future effective tax rate. These factors include,
but are not limited to, changes in tax laws, regulations and/or
rates, changing interpretations of existing tax laws or
regulations, future levels of R&D spending, the availability of
tax credit programs for the reimbursement of all or a significant
proportion of R&D spending, and changes in overall levels of
pre-tax earnings. At present, we qualify in Canada for certain
research tax credits for qualified scientific research and
experimental development pertaining to our drug delivery
technologies and drug products in research stages. If Canadian tax
laws relating to research tax credits were substantially negatively
altered or eliminated, or if a substantial portion of our claims
for tax credits were denied by the relevant taxing authorities,
pursuant to an audit or otherwise, it would have a material adverse
effect upon our financial results.
The
effect of U.S. federal income tax law changes enacted in 2017 on
the U.S. corporate income tax burden on our future U.S. operations
cannot be predicted. Although such legislation reduced the maximum
corporate income tax rate from 35% to 21%, it also introduced
several changes that could increase our effective rate of tax on
our net operating income. For example, if our operations are highly
leveraged, the new limitations on business interest deductions may
prevent us from being able to reduce our corporate income tax base
by a significant amount of interest incurred on debt necessary to
fund operations. In addition, newly enacted limitations on a
corporation’s ability to reduce its taxable income by net
operating loss carryovers may prevent us from using prior year
accumulated losses fully to offset taxable income earned in
profitable years. Finally, if we make significant payments for
interest, royalties, services and otherwise deductible items to our
foreign affiliates, the base erosion minimum tax enacted in 2017
may apply to increase our effective rate of U.S. corporate income
tax.
Risks related to our Industry
Generic drug manufacturers will increase competition for certain
products and may reduce our expected royalties.
Part of
our product development strategy includes making NDA filings
relating to product candidates involving the novel reformulation of
existing drugs with active ingredients that are off-patent. Such
NDA product candidates, if approved, are likely to face competition
from generic versions of such drugs in the future. Regulatory
approval for generic drugs may be obtained without investing in
costly and time consuming clinical trials. Because of substantially
reduced development costs, manufacturers of generic drugs are often
able to charge much lower prices for their products than the
original developer of a new product. If we face competition from
manufacturers of generic drugs on products we may commercialize,
such as our once-daily Oxycodone ER product candidate, the prices
at which such of our products are sold and the revenues we may
receive could be reduced.
Revenues from generic pharmaceutical products typically decline as
a result of competition, both from other pharmaceutical companies
and as a result of increased governmental pricing
pressure.
Our
generic drugs face intense competition. Prices of generic drugs
typically decline, often dramatically, especially as additional
generic pharmaceutical companies (including low-cost generic
producers based in China and India) receive approvals and enter the
market for a given product and competition intensifies.
Consequently, our ability to sustain our sales and profitability on
any given product over time is affected by the number of new
companies selling such product and the timing of their
approvals.
In
addition, intense pressure from government healthcare authorities
to reduce their expenditures on prescription drugs could result in
lower pharmaceutical pricing, causing decreases in our
revenues.
Furthermore, brand
pharmaceutical companies continue to defend their products
vigorously. For example, brand companies often sell or license
their own generic versions of their products, either directly or
through other generic pharmaceutical companies (so-called
“authorized generics”). No significant regulatory
approvals are required for authorized generics, and brand companies
do not face any other significant barriers to entry into such
market. Brand companies may seek to delay introductions of generic
equivalents through a variety of commercial and regulatory tactics.
These actions may increase the costs and risks of our efforts to
introduce generic products and may delay or prevent such
introduction altogether.
Market acceptance of our products will be limited if users of our
products are unable to obtain adequate reimbursement from
third-party payers.
Government health
administration authorities, private health insurers and other
organizations generally provide reimbursement for products like
ours, and our commercial success will depend in part on whether
appropriate reimbursement levels for the cost of our products and
related treatments are obtained from government authorities,
private health insurers and other organizations, such as health
maintenance organizations and managed care organizations. Even if
we succeed in bringing any of our products to market, third-party
payers may not provide reimbursement in whole or in part for the
use of such products.
Significant
uncertainty exists as to the reimbursement status of newly approved
health care products. Some of our product candidates, such as our
once-daily Oxycodone ER, are intended to replace or alter existing
therapies or procedures. These third-party payers may conclude that
our products are less safe, less effective or less economical than
those existing therapies or procedures. Therefore, third-party
payers may not approve our products for reimbursement. We may be
required to make substantial pricing concessions in order to gain
access to the formularies of large managed-care organizations. If
third party payers do not approve our products for reimbursement or
fail to reimburse them adequately, sales will suffer as some
physicians or their patients may opt for a competing product that
is approved for reimbursement or is adequately reimbursed. Even if
third-party payers make reimbursement available, these
payers
’
reimbursement
policies may adversely affect our ability and our potential
marketing and distribution partners
’
ability to sell our products on a
profitable basis.
We are subject to significant costs and uncertainties related to
compliance with the extensive regulations that govern the
manufacturing, labeling, distribution, cross-border imports and
promotion of pharmaceutical products as well as environmental,
safety and health regulations.
Governmental
authorities in the United States and Canada regulate the research
and development, testing and safety of pharmaceutical products. The
regulations applicable to our existing and future products may
change. Regulations require extensive clinical trials and other
testing and government review and final approval before we can
market our products. The cost of complying with government
regulation can be substantial and may exceed our available
resources, causing delay or cancellation of our product
introductions.
Some
abbreviated application procedures for controlled-release drugs and
other products, including those related to our ANDA filings, or to
the ANDA filings of unrelated third parties in respect of drugs
similar to or chemically related to those of our ANDA filings, are
or may become the subject of petitions filed by brand-name drug
manufacturers or other ANDA filers seeking changes from the FDA in
the interpretation of the statutory approval requirements for
particular drugs as part of their strategy to thwart or advance
generic competition. We cannot predict whether the FDA will make
any changes to its interpretation of the requirements applicable to
our ANDA applications as a result of these petitions, or whether
unforeseen delays will occur in our ANDA filings while the FDA
considers such petitions or changes or otherwise, or the effect
that any changes may have on us. Any such changes in FDA
interpretation of the statutes or regulations, or any legislated
changes in the statutes or regulations, may make it more difficult
for us to file ANDAs or obtain further approval of our ANDAs and
generate revenues and thus may materially harm our business and
financial results.
Any
failure or delay in obtaining regulatory approvals could make it so
that we are unable to market any products we develop and therefore
adversely affect our business, results of operations, financial
condition and cash flows. Even if product candidates are approved
in the United States or Canada, regulatory authorities in other
countries must approve a product prior to the commencement of
marketing the product in those countries. The time required to
obtain any such approval may be longer than in the United States or
Canada, which could cause the introduction of our products in other
countries to be cancelled or materially delayed.
The
manufacturing, distribution, processing, formulation, packaging,
labeling, cross-border importation and advertising of our products
are subject to extensive regulation by federal agencies, including
the FDA, Drug Enforcement Administration, Federal Trade Commission,
Consumer Product Safety Commission and Environmental Protection
Agency in the United States, and Health Canada and Canada Border
Services Agency in Canada, among others. We are also subject to
state and local laws, regulations and agencies. Compliance with
these regulations requires substantial expenditures of time, money
and effort in such areas as production and quality control to
ensure full technical compliance. Failure to comply with FDA and
Health Canada and other governmental regulations can result in
fines, disgorgement, unanticipated compliance expenditures, recall
or seizure of products, total or partial suspension of production
or distribution, suspension of the FDA’s or Health
Canada’s review of NDAs, ANDAs or ANDSs, as the case may be,
enforcement actions, injunctions and civil or criminal
prosecution.
Environmental laws
have changed in recent years and we may become subject to stricter
environmental standards in the future and face larger capital
expenditures in order to comply with environmental laws. We are
subject to extensive federal, state, provincial and local
environmental laws and regulations which govern the discharge,
emission, storage, handling and disposal of a variety of substances
that may be used in, or result from, our operations. We are also
subject periodically to environmental compliance reviews by
environmental, safety, and health regulatory agencies and to
potential liability for the remediation of contamination associated
with both present and past hazardous waste generation, handling,
and disposal activities. We cannot accurately predict the outcome
or timing of future expenditures that we may be required to make in
order to comply with the federal, state, local and provincial
environmental, safety, and health laws and regulations that are
applicable to our operations and facilities.
There has been an increased public awareness of the problems
associated with the potential for abuse of opioid-based
medications.
There
has been increasing legislative attention to opioid abuse in the
U.S., including passage of the 2016 Comprehensive Addiction and
Recovery Act and the 21st Century Cures Act, which, among other
things, strengthens state prescription drug monitoring programs and
expands educational efforts for certain populations. These laws
could result in fewer prescriptions being written for opioid drugs,
which could impact future sales of our Oxycodone ER and related
opioid product candidates.
Federal, state and
local governmental agencies have increased their level of scrutiny
of commercial practices of companies marketing and distributing
opioid products, resulting in investigations, litigation and
regulatory intervention affecting other companies. A number of
counties and municipalities have filed lawsuits against
pharmaceutical wholesale distributors, pharmaceutical manufacturers
and retail chains related to the distribution of prescription
opioid pain medications. Policy makers and regulators are seeking
to reduce the impact of opioid abuse on families and communities
and are focusing on policies aimed at reversing the potential for
abuse. In furtherance of those efforts, the FDA has developed an
Action Plan and has committed to enhance safety labeling, require
new data, strengthen post-market requirements, update the Risk
Evaluation and Mitigation Strategy program, expand access to and
encourage the development of abuse-deterrent formulations and
alternative treatments, and re-examine the risk-benefit profile of
opioids to consider the wider public health effects of opioids,
including the risk of misuse. Several states also have passed laws
and have employed other clinical and public health strategies to
curb prescription drug abuse, including prescription limitations,
increased physician education requirements, enhanced monitoring
programs, tighter restrictions on access, and greater oversight of
pain clinics. This increasing scrutiny and related governmental and
private actions, even if not related to a product that we intend to
manufacture and commercialize, could have an unfavorable impact on
the overall market for opioid-based products such as our Oxycodone
ER product candidate, or otherwise negatively affect our
business.
Healthcare reform measures could hinder or prevent the commercial
success of our products and product candidates.
In the
United States, there have been, and we expect there will continue
to be, a number of legislative and regulatory changes to the
healthcare system that could affect our future revenues and
potential profitability. Federal and state lawmakers regularly
propose and, at times, enact legislation that results in
significant changes to the healthcare system, some of which are
intended to contain or reduce the costs of medical products and
services. An example of this is the Patient Protection and
Affordable Care Act, as amended by the Health Care and Education
Reconciliation Act, or, collectively, the Affordable Care Act. In
addition, other legislative changes have been proposed and adopted
in the U.S. since the Affordable Care Act was enacted.
Members
of the U. S. Congress and the Trump administration have expressed
an intent to pass legislation or adopt executive orders to
fundamentally change or repeal parts of the Affordable Care
Act.
The
cost of prescription pharmaceuticals has also been the subject of
considerable discussion in the U.S. Members of Congress and the
Trump administration have indicated that they will address such
costs through new legislative and administrative measures. To date,
there have been several U.S. Congressional inquiries and proposed
and enacted federal and state legislation designed to, among other
things, bring more transparency to drug pricing, review the
relationship between pricing and manufacturer patient programs,
reduce the costs of drugs under Medicare and reform government
program reimbursement methodologies for drug products. At the
federal level, Congress and the Trump administration have each
indicated that it will continue to pursue new legislative and/or
administrative measures to control drug costs. The Trump
administration has proposed a plan to reduce the cost of drugs. The
Trump administration’s plan contains certain measures that
the U.S. Department of Health and Human Services is already working
to implement. For example, on October 25, 2018, CMS issued an
Advanced Notice of Proposed Rulemaking, or ANPRM, indicating it is
considering issuing a proposed rule in the Spring of 2019 on a
model called the International Pricing Index. This model would
utilize a basket of other countries’ prices as a reference
for the Medicare program to use in reimbursing for drugs covered
under Part B. The ANPRM also included an updated version of the
Competitive Acquisition Program, as an alternative to current
“buy and bill” payment methods for Part B drugs. Such a
proposed rule could limit our product pricing and have material
adverse effects on our business.
Individual state
legislatures in the U.S. have become increasingly aggressive in
passing legislation and implementing regulations designed to
control pharmaceutical and biological product pricing. Some of
these measures include price or patient reimbursement constraints,
discounts, restrictions on certain product access, marketing cost
disclosure and transparency measures, and, in some cases, measures
designed to encourage importation from other countries and bulk
purchasing. In addition, regional health care authorities and
individual hospitals are increasingly using bidding procedures to
determine what pharmaceutical products and which suppliers will be
included in their prescription drug and other health care programs.
These measures could reduce the ultimate demand for our products,
once approved, or put pressure on our product pricing.
We
expect that additional state and federal healthcare reform measures
will be adopted in the future, any of which could limit the amounts
that federal and state governments will pay for healthcare products
and services, and which could result in reduced demand for our
products once approved or additional pricing pressures, and may
adversely affect our operating results.
Our ability to market and promote our Oxycodone ER product
candidate and its abuse-deterrent features will be determined by
FDA-approved labeling requirements.
The
commercial success of our Oxycodone ER product candidate will
depend upon our ability to obtain requested FDA-approved labeling
describing its abuse-deterrent features. Our failure to achieve FDA
approval of requested product labeling containing such information
will prevent us from advertising and promoting the abuse-deterrent
features of our product candidate in a way to differentiate it from
competitive products. This would make our product candidate less
competitive in the market. Moreover, FDA approval is required in
order to make claims that a product has an abuse-deterrent
effect.
In
April 2015, the FDA published final guidance with respect to the
evaluation and labeling of abuse-deterrent opioids. The guidance
provides direction as to the studies and data required for
obtaining abuse-deterrent claims in a product label. If a product
is approved by the FDA to include such claims in its label, the
applicant may use the approved labeling information about the
abuse-deterrent features of the product in its marketing efforts to
physicians.
Although we intend
to provide data to the FDA to support approval of abuse-deterrence
label claims for Oxycodone ER, there can be no assurance that
Oxycodone ER or any of our other product candidates will receive
FDA-approved labeling that describes the abuse-deterrent features
of such products. The FDA may find that our studies and data do not
support our requested abuse-deterrent labeling or that our product
candidate does not provide substantial abuse-deterrence benefits
because, for example, its deterrence mechanisms do not address the
way it is most likely to be abused. Furthermore, the FDA could
change its guidance, which could require us to conduct additional
studies or generate additional data. If the FDA does not approve
our requested abuse-deterrent labeling, we will be limited in our
ability to promote Oxycodone ER based on its abuse-deterrent
features and, as a result, our business may suffer.
We may be subject to product liability claims for which we may not
have or be able to obtain adequate insurance coverage.
The
testing and marketing of pharmaceutical products entails an
inherent risk of product liability. Liability exposures for
pharmaceutical products can be extremely large and pose a material
risk. In some instances, we may be or may become contractually
obligated to indemnify third parties for such liability. Our
business may be materially and adversely affected by a successful
product liability claim or claims in excess of any insurance
coverage that we may have. Further, even if claims are not
successful, the costs of defending such claims and potential
adverse publicity could be harmful to our business.
While
we currently have, and in some cases are contractually obligated to
maintain, insurance for our business, property and our products as
they are administered in bioavailability/bioequivalence studies,
first and third party insurance is increasingly costly and narrow
in scope. Therefore, we may be unable to meet such contractual
obligations or we may be required to assume more risk in the
future. If we are subject to third party claims or suffer a loss or
damage in excess of our insurance coverage, we may be required to
bear that risk in excess of our insurance limits. Furthermore, any
first or third party claims made on our insurance policy may impact
our ability to obtain or maintain insurance coverage at reasonable
costs or at all in the future. Any of the foregoing may have a
material adverse effect on our business and financial
condition.
Our products involve the use of hazardous materials and
waste, and as a result we are exposed to potential liability claims
and to costs associated with complying with laws regulating
hazardous waste.
Our
R&D activities involve the use of hazardous materials,
including chemicals, and are subject to Canadian federal,
provincial and local laws and regulations governing the use,
manufacture, storage, handling and disposal of hazardous materials
and waste products. It is possible that accidental injury or
contamination from these materials may occur.
In the
event of an accident, we could be held liable for any damages,
which could exceed our available financial resources. Further, we
may not be able to maintain insurance to cover these costs on
acceptable terms, or at all. In addition, we may be required to
incur significant costs to comply with environmental laws and
regulations in the future.
Our operations may be adversely affected by risks associated with
international business.
We may
be subject to certain risks that are inherent in an international
business, including:
●
varying regulatory
restrictions on sales of our products to certain markets and
unexpected changes in regulatory requirements;
●
tariffs, customs,
duties, and other trade barriers;
●
difficulties in
managing foreign operations and foreign distribution
partners;
●
longer payment
cycles and problems in collecting accounts receivable;
●
foreign exchange
controls that may restrict or prohibit repatriation of
funds;
●
export and import
restrictions or prohibitions, and delays from customs brokers or
government agencies;
●
seasonal reductions
in business activity in certain parts of the world;
and
●
potentially adverse
tax consequences.
Depending on the
countries involved, any or all of the foregoing factors could
materially harm our business, financial condition and results of
operations.
In the event we pursue growth through international operations,
such growth could strain our resources, and if we are unable to
manage any growth we may experience, we may not be able to
successfully implement our business plan.
In
connection with any geographic expansion we may pursue,
international operations would involve substantial additional
risks, including, among others: difficulties complying with the
U.S. Foreign Corrupt Practices Act and other applicable
anti-bribery laws. difficulties maintaining compliance with the
various laws and regulations of multiple jurisdictions that may be
applicable to our business, many of which may be unfamiliar to us.
more complexity in our regulatory and accounting compliance.
differing or changing obligations regarding taxes, duties or other
fees. limited intellectual property protection in some
jurisdictions. risks associated with currency exchange and
convertibility, including vulnerability to appreciation and
depreciation of foreign currencies. uncertainty related to
developing legal and regulatory systems and standards for economic
and business activities in some jurisdictions. trade restrictions
or barriers, including tariffs or other charges and import-export
regulations, changes in applicable laws or policies. the impact of
and response to natural disasters. and the potential for war, civil
or political unrest and economic and financial instability. The
occurrence of any of these risks could limit our ability to pursue
international expansion, increase our costs or expose us to fines
or other legal sanctions, any of which could negatively impact our
business, reputation and financial condition.
Risks related to our common shares
Our share price has been highly volatile and our shares could
suffer a further decline in value.
The
trading price of our common shares has been highly volatile and
could continue to be subject to wide fluctuations in price in
response to various factors, many of which are beyond our control,
including:
●
sales of our common
shares, including any sales made in connection with future
financings;
●
announcements
regarding new or existing corporate relationships or
arrangements;
●
announcements by us
of significant acquisitions, joint ventures, or capital
commitments;
●
actual or
anticipated period-to-period fluctuations in financial
results;
●
clinical and
regulatory development regarding our product
candidates;
●
litigation or
threat of litigation;
●
failure to achieve,
or changes in, financial estimates by securities
analysts;
●
comments or
opinions by securities analysts or members of the medical
community;
●
announcements
regarding new or existing products or services or technological
innovations by us or our competitors;
●
conditions or
trends in the pharmaceutical and biotechnology
industries;
●
additions or
departures of key personnel or directors;
●
economic and other
external factors or disasters or crises;
●
limited daily
trading volume; and
●
developments
regarding our patents or other intellectual property or that of our
competitors.
In
addition, the stock market in general and the market for drug
development companies in particular have experienced significant
price and volume fluctuations that have often been unrelated or
disproportionate to the operating performance of those companies.
Further, there has been significant volatility in the market prices
of securities of life science companies. In the past, following
periods of volatility in the market price of a company’s
securities, securities class action litigation has often been
instituted.. Litigation of this type has been instituted against us
could result in substantial costs, potential liabilities, and the
diversion of management’s attention and
resources.
A large number of our common shares could be sold in the market in
the near future, which could depress our stock price.
As of
February 28, 2019, we had approximately 21,925,577 common shares
outstanding. In addition, a substantial portion of our shares are
currently freely trading without restriction under the U.S.
Securities Act of 1933, as amended (“
U.S. Securities Act
”), having been
registered for resale or held by their holders for over six months
and are eligible for sale under Rule 144.
On July
17, 2017, the Company’s most recent registration statement on
Form F-3 (the “
Shelf
Registration Statement
”) was declared effective by the
Securities and Exchange Commission (“
SEC
”). The Shelf Registration
Statement allows for, subject to securities regulatory requirements
and limitations, the potential offering of up to an aggregate of
US$100 million of the Company’s common shares, preference
shares, warrants, subscription receipts, subscription rights and
units, or any combination thereof, from time to time in one or more
offerings, and are intended to give the Company the flexibility to
take advantage of financing opportunities when, and if, market
conditions are favorable to the Company. The specific terms of such
future offerings, if any, would be established, subject to the
approval of the Company’s board of directors (the
“
Board
”), at the
time of such offering and will be described in detail in a
prospectus supplement filed at the time of any such offering. To
the extent any securities of the Company are issued by the Company
under the Shelf Registration Statement or the shelf prospectus, a
shareholder’s percentage ownership will be diluted and our
stock price could be further adversely affected. As of February 28,
2019, the Company has issued 1,246,969 common shares using the
Shelf Registration Statement, and there can be no assurance that
any additional securities will be sold under the Shelf Registration
Statement or the shelf prospectus.
On
October 22, 2009, IntelliPharmaCeutics Ltd. (“
IPC Ltd.
”) and Vasogen Inc.
(“
Vasogen
”)
completed a plan of arrangement and merger (the “
IPC Arrangement Agreement
”),
resulting in the formation of the Company. Our shareholders who
received shares under the IPC Arrangement Agreement who were not
deemed “affiliates” of either Vasogen, IPC Ltd. or us
prior to the IPC Arrangement Agreement were able to resell the
common shares that they received without restriction under the U.S.
Securities Act. The common shares received by an
“affiliate” after the IPC Arrangement Agreement or who
were “affiliates” of either Vasogen, IPC Ltd. or us
prior to the IPC Arrangement Agreement are subject to certain
restrictions on resale under Rule 144.
As of
February 28, 2019, there are currently common shares issuable upon
the exercise of outstanding options and warrants and DSUs and the
conversion of the Debentures for an aggregate of approximately
22,762,481 common shares. To the extent any of our options and
warrants is exercised and the convertible debenture is converted, a
shareholder’s percentage ownership will be diluted and our
stock price could be further adversely affected. Moreover, as the
underlying shares are sold, the market price could drop
significantly if the holders of these restricted shares sell them
or if the market perceives that the holders intend to sell these
shares.
We have no history or foreseeable prospect of paying cash
dividends.
We have
not paid any cash dividends on our common shares and do not intend
to pay cash dividends in the foreseeable future. We intend to
retain future earnings, if any, for reinvestment in the development
and expansion of our business. Dividend payments in the future may
also be limited by loan agreements or covenants contained in other
securities we may issue. Any future determination to pay cash
dividends will be at the discretion of our Board and depend on our
financial condition, results of operations, capital and legal
requirements and such other factors as our Board deems
relevant.
There may not be an active, liquid market for our common
shares.
There
is no guarantee that an active trading market for our common shares
will be maintained on Nasdaq or TSX. Investors may not be able to
sell their shares quickly or at the latest market price if trading
in our common shares is not active.
There
may be future sales or other dilution of our equity, which may
adversely affect the market price of our common
shares.
The
Company may, from time to time, issue additional common shares,
including any securities that are convertible into or exchangeable
for, or that represent the right to receive, common shares. The
market price of our common shares could decline as a result of
sales of common shares or securities that are convertible into or
exchangeable for, or that represent the right to receive, common
shares after this offering or the perception that such sales could
occur.
Future sales of our common shares may cause the prevailing market
price of our common shares to decrease.
We have
registered a substantial number of outstanding common shares and
common shares that are issuable upon the exercise of outstanding
warrants. If the holders of our registered common shares choose to
sell such shares in the public market or if holders of our warrants
exercise their purchase rights and sell the underlying common
shares in the public market, or if holders of currently restricted
common shares choose to sell such shares in the public market, the
prevailing market price for our common shares may decline. The sale
of shares issued upon the exercise of our warrants (and options)
could also further dilute the holdings of our then existing
shareholders. In addition, future public sales by holders of our
common shares could impair our ability to raise capital through
equity offerings.
Future issuances of our shares could adversely affect the trading
price of our common shares and could result in substantial dilution
to shareholders.
We may
need to issue substantial amounts of common shares in the future.
There can be no assurance that we will be able to sell any
additional shares. To the extent that the market price of our
common shares declines, we will need to issue an increasing number
of common shares per dollar of equity investment. In addition to
our common shares issuable in connection with the exercise of our
outstanding warrants, our employees, and directors will hold rights
to acquire substantial amounts of our common shares. In order to
obtain future financing if required, it is likely that we will
issue additional common shares or financial instruments that are
exchangeable for or convertible into common shares. Also, in order
to provide incentives to employees and induce prospective employees
and consultants to work for us, we may offer and issue options to
purchase common shares and/or rights exchangeable for or
convertible into common shares. Future issuances of shares could
result in substantial dilution to shareholders. Capital raising
activities, if available, and dilution associated with such
activities could cause our share price to decline. In addition, the
existence of common share purchase warrants may encourage short
selling by market participants. Also, in order to provide
incentives to current employees and directors and induce
prospective employees and consultants to work for us, we have
historically granted options and deferred share units
(“
DSUs
”), and
intend to continue to do so or offer and issue other rights
exchangeable for or convertible into common shares. Future
issuances of shares could result in substantial dilution to all our
shareholders. In addition, future public sales by holders of our
common shares could impair our ability to raise capital through any
future equity offerings.
On July
17, 2017, the Shelf Registration Statement was declared effective
by the SEC. The Shelf Registration Statement allows for, subject to
securities regulatory requirements and limitations, the potential
offering of up to an aggregate of $100 million of the
Company’s common shares, preference shares, warrants,
subscription receipts, subscription rights and units, or any
combination thereof, from time to time in one or more offerings,
and are intended to give the Company the flexibility to take
advantage of financing opportunities when, and if, market
conditions are favorable to the Company. The specific terms of such
future offerings, if any, would be established, subject to the
approval of the Company’s Board, at the time of such offering
and will be described in detail in a prospectus supplement filed at
the time of any such offering. As of February 28, 2019, the Company
has issued 1,246,969 common shares using the Shelf Registration
Statement, and there can be no assurance that any additional
securities will be sold under the Shelf Registration Statement. In
March 2018, the Company terminated its continuous offering under
the prospectus supplement dated July 18, 2017 and prospectus dated
July 17, 2017 in respect of its at-the-market program.
We may in the future issue preference shares which could adversely
affect the rights of holders of our common shares and the value of
such shares.
Our
Board has the ability to authorize the issue of an unlimited number
of preference shares in series, and to determine the price, rights,
preferences and privileges of those shares without any further vote
or action by the holders of our common shares. Although we have no
preference shares issued and outstanding, preference shares issued
in the future could adversely affect the rights and interests of
holders of our common shares.
Our common shares may not continue to be listed on the
TSX.
Failure
to maintain the applicable continued listing requirements of the
TSX could result in our common shares being delisted from the TSX.
The TSX will normally consider the delisting of securities if, in
the opinion of the exchange, it appears that the public
distribution, price, or trading activity of the securities has been
so reduced as to make further dealings in the securities on TSX
unwarranted. For example, participating securities may be delisted
from the TSX if, among other things, the market value of an
issuer’s securities that are listed on the TSX is less than
C$3,000,000 over any period of 30 consecutive trading days. In such
circumstances, the TSX may notify an issuer that it is under
delisting review and the issuer will normally be given up to 120
days from the date of such notification to correct the fall in
market value and such other deficiencies noted by the TSX. At any
time prior to the end of the delisting review period, the TSX will
provide the issuer with an opportunity to be heard where the issuer
may present submissions to satisfy the TSX that all deficiencies
identified in the TSX’s notice have been rectified. If at the
conclusion of the hearing the issuer cannot satisfy the TSX that
the deficiencies identified have been rectified and that no other
delisting criteria are then applicable to the issuer, the TSX will
determine whether to delist the issuer’s
securities.
If the
market price of our common shares declines further or we are unable
to maintain other listing requirements, the TSX may determine to
delist our common shares. If our common shares are no longer listed
on the TSX, they may be eligible for listing on the TSX Venture
Exchange. In the event that we are not able to maintain a listing
for our common shares on the TSX or the TSX Venture Exchange, it
may be extremely difficult or impossible for shareholders to sell
their common shares in Canada. Moreover, if we are delisted from
the TSX, but obtain a substitute listing for our common shares on
the TSX Venture Exchange, our common shares will likely have less
liquidity and more price volatility than experienced on the
TSX.
Shareholders may
not be able to sell their common shares on any such substitute
exchange in the quantities, at the times, or at the prices that
could potentially be available on a more liquid trading market. As
a result of these factors, if our common shares are delisted from
the TSX, the price of our common shares is likely to
decline.
Our common shares may not continue to be listed on
Nasdaq.
Failure
to meet the applicable quantitative and/or qualitative maintenance
requirements of Nasdaq could result in our common shares being
delisted from Nasdaq. For continued listing, Nasdaq requires, among
other things, that listed securities maintain a minimum bid price
of not less than $1.00 per share. If the bid price falls below the
$1.00 minimum for more than 30 consecutive trading days, an issuer
will typically have 180 days to satisfy the $1.00 minimum bid
price, which must be maintained for a period of at least ten
trading days in order to regain compliance.
If we
are delisted from Nasdaq, our common shares may be eligible for
trading on an over-the-counter market in the United States. In the
event that we are not able to obtain a listing on another U.S.
stock exchange or quotation service for our common shares, it may
be extremely difficult or impossible for shareholders to sell their
common shares in the United States. Moreover, if we are delisted
from Nasdaq, but obtain a substitute listing for our common shares
in the United States, it will likely be on a market with less
liquidity, and therefore experience potentially more price
volatility than experienced on Nasdaq. Shareholders may not be able
to sell their common shares on any such substitute U.S. market in
the quantities, at the times, or at the prices that could
potentially be available on a more liquid trading market. As a
result of these factors, if our common shares are delisted from
Nasdaq, the price of our common shares is likely to decline. In
addition, a decline in the price of our common shares will impair
our ability to obtain financing in the future.
We are
currently not in compliance with the requirements for the continued
listing of our common shares on Nasdaq. As described below, if we
are not in compliance with those requirements by March 7, 2019, a
Nasdaq Panel will determine whether we will be provided with an
extension of time for that purpose.
In
September 2017, we were notified by Nasdaq that we were not in
compliance with the minimum market value of listed securities
required for continued listing on Nasdaq. Nasdaq Listing Rule
5550(b) requires listed securities to maintain a minimum market
value of $35.0 million, among other alternatives, including minimum
stockholders’ equity of $2.5 million. A failure to meet the
minimum market value requirement exists if the deficiency continues
for a period of 30 consecutive business days. Based on the market
value of our common shares for the 30 consecutive business days
from August 8, 2017, we did not satisfy the minimum market value of
listed securities requirement. By rule, we were provided 180
calendar days, or until March 19, 2018, to regain compliance with
that requirement. To regain compliance, our common shares were
required to have a market value of at least $35.0 million for a
minimum of 10 consecutive business days prior to March 19, 2018,
which they did not. In the alternative, if the minimum market value
requirement for continued listing is not met, an issuer may
maintain continued listing under Nasdaq Listing Rule 5550(b) if it
has stockholders’ equity of at least $2.5
million.
On
April 20, 2018, we received notice that the Nasdaq Listings
Qualification staff (the “
Nasdaq Staff
”) had determined to
delist our common shares as a result of our failure to meet either
the minimum market value of listed securities requirement or the
minimum stockholders’ equity requirement for continued
listing. However, any delisting action by the Nasdaq Staff was
stayed pending the ultimate conclusion of our hearing before the
Nasdaq Panel.
In
addition to not meeting the minimum market value of listed
securities or minimum stockholders’ equity requirements, we
were separately notified in December 2017 that our common shares no
longer satisfied the minimum $1.00 per share bid requirement under
Nasdaq Listing Rule 5550(a)(2).
We
attended a hearing before the Nasdaq Panel on May 17, 2018, and
subsequently received formal notice that the Nasdaq Panel had
granted our request for continued listing provided that by
September 28, 2018, we (i) comply with Nasdaq’s $1.00 bid
price requirement by having a closing bid price of over $1.00 for
ten consecutive trading days, (ii) have stockholders’ equity
position of over $2.5 million, and (iii) provide the Nasdaq Panel
with updated financial projections demonstrating our ability to
maintain compliance with the stockholders’ equity rule for
the coming year. Following receipt of shareholder approval for a
reverse stock split (known as a share consolidation under Canadian
law) at our August 15, 2018 shareholders meeting, on September 12,
2018, we filed articles of amendment to effectuate a 1-for-10
reverse split, and our common shares began trading on each of
Nasdaq and TSX on a post-reverse split basis on September 14, 2018.
As a result of the closing bid price of our common shares exceeding
$1.00 for the period from September 14, 2018 to September 27, 2018,
we received a letter from Nasdaq Listing Qualification notifying us
that we had regained compliance with Nasdaq’s minimum bid
price requirement. On September 29, 2018, we were advised that the
Nasdaq Panel granted an extension through October 17, 2018 for us
to regain compliance with Nasdaq’s stockholders’ equity
continued listing requirement.
On
October 17, 2018, we filed with the SEC a report on Form 6-K
reporting that we believed we had regained compliance with
Nasdaq’s stockholders’ equity requirement after giving
effect to the proceeds from the October 2018 offering.
On
October 26, 2018, we announced that we had regained compliance with
Nasdaq’s stockholders’ equity requirement and that the
Nasdaq Panel determined that we would remain subject to a "Panel
Monitor” until October 22, 2019.
In
November 2018, we received written notification from Nasdaq
notifying us that the minimum bid price per share for our common
shares was below $1.00 for a period of 30 consecutive business days
and that, as a result, we were not in compliance with
Nasdaq’s minimum bid price requirement.
In
December 2018, we received written notification from Nasdaq
notifying us that a hearing with a Nasdaq Panel had been scheduled
for January 10, 2019.
At a
hearing held on January 10, 2019, we presented to the Nasdaq Panel
our plan to regain and maintain compliance with Nasdaq’s
continued listing requirements.
On
January 28, 2019, we announced that we had received notice from the
Nasdaq Panel extending the continued listing of our common shares
until March 7, 2019, subject to certain conditions, while we work
to regain compliance with Nasdaq’s requirements. Following
the March 7, 2019 deadline, the Nasdaq Panel will determine whether
a further extension period is warranted in the event we have not
regained compliance. However, there can be no assurance that the
Nasdaq Panel will grant such an extension. Moreover, there can be
no assurance that we will be able to regain compliance with
Nasdaq's requirements or, if we do, that we will be able to
maintain compliance with all applicable requirements for continued
listing on Nasdaq over the long term. The Nasdaq Panel's
determination requires us to promptly notify Nasdaq of any
significant events that occur during the extension period that may
affect our compliance with Nasdaq requirements.
There
is no assurance that the Company will be able to regain compliance
with Nasdaq
’
s listing
requirements, or if it does, that the Company will be able to
maintain compliance with Nasdaq
’
s listing requirements. If we are
unable to maintain compliance with Nasdaq
’
s continued listing requirements,
our common shares may no longer be listed on Nasdaq or another U.S.
national securities exchange and the liquidity and market price of
our common shares may be adversely affected. If our common shares
are delisted from Nasdaq, they may trade in the U.S. on the
over-the-counter market, which is a less liquid market. In such
case, our shareholders
’
ability to trade, or obtain quotations of the market value of, our
common shares would be severely limited because of lower trading
volumes and transaction delays. These factors could contribute to
lower prices and larger spreads in the bid and ask prices for our
securities. In addition, delisting could harm our ability to raise
capital through alternative financing sources on terms acceptable
to us, or at all, and may result in the potential loss of
confidence by investors, employees and fewer business development
opportunities.
If our common shares are not listed on a national securities
exchange, compliance with applicable state securities laws may be
required for subsequent offers, transfers and sales of the common
shares.
Because
our common shares are currently listed on Nasdaq, we are not
required to register or qualify in any state the subsequent offer,
transfer or sale of the common shares. If our common shares are
delisted from Nasdaq and are not eligible to be listed on another
national securities exchange, subsequent transfers of our common
shares by U.S. holders may not be exempt from state securities
laws. In such event, it will be the responsibility of the holder of
common shares to register or qualify the common shares for any
subsequent offer, transfer or sale in the United States or to
determine that any such offer, transfer or sale is exempt under
applicable state securities laws.
If our common shares are not listed on a national securities
exchange, they may become subject to the SEC’s penny stock
rules.
Transactions in
securities that are traded in the United States by companies with
net tangible assets of $5,000,000 or less and a market price per
share of less than $5.00 that are not traded on Nasdaq or on other
securities exchanges may be subject to the “penny
stock” rules promulgated under the U.S. Exchange Act. Under
these rules, broker-dealers who recommend such securities to
persons other than institutional investors must:
●
make a special
written suitability determination for the purchaser;
●
receive the
purchaser’s written agreement to a transaction prior to
sale;
●
provide the
purchaser with risk disclosure documents which identify risks
associated with investing in “penny stocks” and which
describe the market for these “penny stocks” as well as
a purchaser’s legal remedies; and
●
obtain a signed and
dated acknowledgment from the purchaser demonstrating that the
purchaser has actually received the required risk disclosure
document before a transaction in a “penny stock” can be
completed.
As a
result of these requirements, if our common shares are at such time
subject to the “penny stock” rules, broker-dealers may
find it difficult to effectuate customer transactions and trading
activity in these shares in the United States may be significantly
limited. Accordingly, the market price of the shares may be
depressed, and investors may find it more difficult to sell the
shares.
As a foreign private issuer in the United States, we are subject to
different U.S. securities laws and rules than a domestic U.S.
issuer.
As a
foreign private issuer under U.S. securities laws we are not
required to comply with all the periodic disclosure requirements of
the U.S. Exchange Act applicable to domestic United States
companies and therefore the publicly available information about us
may be different or more limited than if we were a United States
domestic issuer. In addition, our officers, directors, and
principal shareholders are exempt from the “real time”
reporting and “short swing” profit recovery provisions
of Section 16 of the U.S. Exchange Act and the rules thereunder.
Although under Canadian rules, our officers, directors and
principal shareholders are generally required to file on SEDI
(www.sedi.ca) reports of transactions involving our common shares
within five calendar days of such transaction, our principal
shareholders may not know when our officers, directors and
shareholders purchase or sell our common shares as timely as they
would if we were a United States domestic issuer.
We are exposed to risks if we are unable to comply with laws and
future changes to laws affecting public companies, including the
Sarbanes-Oxley Act of 2002 (“SOX”), and also to
increased costs associated with complying with such
laws.
Any
future changes to the laws and regulations affecting public
companies, as well as compliance with existing provisions of SOX in
the United States and applicable Canadian securities laws,
regulations, rules and policies, may cause us to incur increased
costs to comply with such laws and requirements, including, among
others, hiring additional personnel and increased legal, accounting
and advisory fees. Delays, or a failure to comply with applicable
laws, rules and regulations could result in enforcement actions,
the assessment of other penalties and civil suits. The new laws and
regulations may increase potential costs to be borne under
indemnities provided by us to our officers and directors and may
make it more difficult to obtain certain types of insurance,
including liability insurance for directors and officers; as such,
we may be forced to accept reduced policy limits and coverage or
incur substantially higher costs to obtain the same or similar
coverage. The impact of these events could also make it more
difficult to attract and retain qualified persons to serve on our
Board, or as executive officers.
We are
required annually to review and report on the effectiveness of our
internal control over financial reporting in accordance with SOX
Section 404 and Multilateral Instrument 52-109 –
Certification of Disclosure in Issuer’s Annual and Interim
Filings of the Canadian Securities Administrators. The results of
this review are reported in our Annual Report on Form 20-F and in
our Management Discussion and Analysis.
Management’s
review is designed to provide reasonable, not absolute, assurance
that all material weaknesses in our internal controls are
identified. Material weaknesses represent deficiencies in our
internal controls that may not prevent or detect a misstatement
occurring which could have a material adverse effect on our
quarterly or annual financial statements. In addition, there can be
no assurance that any remedial actions we take to address any
material weaknesses identified will be successful, nor can there be
any assurance that further material weaknesses will not be
identified in future years. Material errors, omissions or
misrepresentations in our disclosures that occur as a result of our
failure to maintain effective internal control over financial
reporting could have a material adverse effect on our business,
financial condition, results of operations, and the value of our
common shares.
We may be classified as a “passive foreign investment
company” for U.S. income tax purposes, which could have
significant and adverse tax consequences to U.S.
investors.
The
possible classification of our Company as a passive foreign
investment company (“
PFIC
”) for U.S. federal income tax
purposes could have significant and adverse tax consequences for
U.S. Holders (as defined below) of our common shares and warrants.
It may be possible for U.S. Holders of common shares, but not
holders of warrants with respect to periods prior to exercise, to
mitigate certain of these consequences by making an election to
treat us as a
“
qualified
electing fund
”
or
“
QEF
”
under Section 1295 of the Internal
Revenue Code (the
“
Code
”
) (a
“
QEF
Election
”
) or a
mark-to-market election under Section 1296 of the Code. A non-U.S.
corporation generally will be a PFIC if, for a taxable year (a) 75%
or more of the gross income of such corporation for such taxable
year consists of specified types of passive income or (b) on
average, 50% or more of the assets held by such corporation either
produce passive income or are held for the production of passive
income, based on the fair market value of such assets (or on the
adjusted tax basis of such assets, if such non-U.S. corporation is
not publicly traded and either is a
“
controlled foreign
corporation
”
under
Section 957(a) of the Code, or makes an election to determine
whether it is a PFIC based on the adjusted basis of the
assets).
The
determination of whether we are, or will be, a PFIC for a taxable
year depends, in part, on the application of complex U.S. federal
income tax rules, which are subject to various interpretations.
Although the matter is not free from doubt, we believe that we were
not a PFIC during our 2018 taxable year and will not likely be a
PFIC during our 2019 taxable year. Because PFIC status is based on
the composition of our income and assets and the nature of our
activities for the entire taxable year, and on our market
capitalization, it is not possible to determine whether we will be
characterized as a PFIC for the 2019 taxable year until after the
close of the taxable year. The tests for determining PFIC status
are subject to a number of uncertainties. These tests are applied
annually, and it is difficult to accurately predict future income,
assets and activities relevant to this determination. In addition,
because the market price of our common shares is likely to
fluctuate, the market price may affect the determination of whether
we will be considered a PFIC for any given year. There can be no
assurance that we will not be considered a PFIC for any taxable
year (including our 2019 taxable year). Absent one of the elections
described above, if we are a PFIC for any taxable year during which
a U.S. Holder holds our common shares, we generally will continue
to be treated as a PFIC with respect to such holder’s
proportionate share of our income arising in any year in which we
are a PFIC regardless of whether we cease to meet the PFIC tests in
one or more subsequent years. Accordingly, no assurance can be
given that we will not constitute a PFIC in the current (or any
future) tax year or that the United States Internal Revenue Service
(the
“
IRS
”
) will not challenge any
determination made by us concerning our PFIC status.
If we
are a PFIC, the U.S. federal income tax consequences to a U.S.
Holder of the ownership and disposition of our common shares will
depend on whether such U.S. Holder makes a QEF or mark-to-market
election. A U.S. Holder may only make a QEF election if we agree to
provide certain tax information to such holder annually. At this
time, we do not intend to provide U.S. Holders with such
information as may be required to make a QEF election
effective
.
Unless
otherwise provided by the IRS, a U.S. holder of our common shares
is generally required to file an informational return annually to
report its ownership interest in the Company during any year in
which we are a PFIC. If we are a PFIC for one or more years in
which a U.S. Holder holds a warrant prior to exercise, it is
possible that such holder could recognize gain on the sale,
exchange or disposition of that warrant that it would not otherwise
recognize if we were not a PFIC. Any U.S. income tax imposed on the
holder with respect to the inclusion of such gain or the inclusion
of a pro rata share of our income in his, her or its income
following exercise of such warrant could result in an interest
charge payable on such holder
’
s tax liability that is calculated
back to the first year in which such holder held that warrant in
which we were considered to be a PFIC.
The
foregoing only speaks to the United States federal income tax
considerations as to the Code in effect on the date of this annual
report.
The foregoing does not purport to be a complete enumeration or
explanation of the tax risks involved in an investment in our
company. Prospective investors should read this entire annual
report and consult with their own legal, tax and financial advisors
before deciding to invest in our company.
It may be difficult to obtain and enforce judgments against us
because of our Canadian residency.
We are
governed by the laws of Canada. All of our directors and officers
are residents of Canada and all or a substantial portion of our
assets and the assets of such persons may be located outside of the
United States. As a result, it may be difficult for shareholders to
effect service of process upon us or such persons within the United
States or to realize in the United States on judgments of courts of
the United States predicated upon the civil liability provisions of
the U.S. federal securities laws or other laws of the United
States. In addition, there is doubt as to the enforceability in
Canada of liabilities predicated solely upon U.S. federal
securities law against us, our directors, controlling persons and
officers who are not residents of the United States, in original
actions or in actions for enforcements of judgments of U.S.
courts.
Item
4.
Information on the
Company
A.
History and Development of the
Company
The
Company, Intellipharmaceutics International Inc., was incorporated
under the Canada Business Corporations Act (the “
CBCA
”) by certificate and articles
of arrangement dated October 22, 2009.
Our
registered principal office is located at 30 Worcester Road,
Toronto, Ontario, Canada M9W 5X2. Our telephone number is (416)
798-3001 and our facsimile number is (416) 798-3007.
Our
agent for service in the United States is Corporation Service
Company at 1090 Vermont Avenue N.W., Washington, D.C.
20005.
On
October 19, 2009, the shareholders of IPC Ltd. and Vasogen approved
the IPC Arrangement Agreement that resulted in the October 22, 2009
court-approved merger of IPC Ltd. and another U.S. subsidiary of
Intellipharmaceutics Inc., coincident with an arrangement pursuant
to which a predecessor of the Company combined with 7231971 Canada
Inc., a new Vasogen company that acquired substantially all of the
assets and certain liabilities of Vasogen, including the proceeds
from its non-dilutive financing transaction with Cervus LP (the
“
IPC Arrangement
Transaction
”). The completion of the IPC Arrangement
Transaction on October 22, 2009 resulted in the formation of the
Company, which is incorporated under the laws of Canada and
governed by the CBCA. The common shares of the Company are traded
on the TSX and Nasdaq.
For the
years ended November 30, 2018, 2017 and 2016, we spent a total of
$10,827,293, $9,271,353, and $8,166,736, respectively, on research
and development. Over the past three fiscal years and up to
February 28, 2019, we have raised approximately $36,095,962 in
gross proceeds from the issuance of equity and convertible debt
securities. Our common shares are listed on the TSX and on Nasdaq
under the symbol “IPCI”.
During
the last and current financial year, we have not been aware of any
indications of public takeover offers by third parties in respect
of the Company’s shares or by the Company in respect of other
companies’ shares.
For
additional information on key events, see Item 4.B
below.
For
information on the availability of, and access to, information
regarding the Company filed with the SEC or presented on the
Company’s website, see Item 10.H. below.
Corporate Developments
●
In February 2019,
we received tentative approval from the FDA for our ANDA for
desvenlafaxine extended-release tablets in the 50 and 100 mg
strengths. This product is a generic equivalent of the branded
product Pristiq
®
sold in
the U.S. by Wyeth Pharmaceuticals, LLC.
●
As more fully
described below (under “NASDAQ NOTICES AND NASDAQ HEARINGS
PANEL GRANT OF REQUEST FOR CONTINUED LISTING”), in January
2019, we announced that we had received notice from the Nasdaq
Panel extending the continued listing of our common shares until
March 7, 2019, subject to certain conditions, while we work to
regain compliance with Nasdaq’s requirements.
●
In January 2019, we
announced that we had commenced a R&D program of pharmaceutical
cannabidiol (“
CBD
”) based products. As part of
this R&D program, we filed provisional patent applications with
the United States Patent and Trademark Office pertaining to the
delivery and application of cannabinoid-based therapeutics, began
talks with potential commercialization partners in the cannabidiol
industry, and identified a potential supplier of CBD. We hold a
Health Canada Drug Establishment License and a dealer's license
under the Narcotics Control Regulations (“
NCR
”). Under the NCR license, we
are currently authorized to possess, produce, sell and deliver drug
products containing various controlled substances, including CBD,
in Canada.
●
In November 2018,
we announced that we had received final approval from the FDA for
our ANDA for venlafaxine hydrochloride extended-release capsules in
the 37.5, 75 and 150 mg strengths. The approved product is a
generic equivalent of the branded product Effexor® XR sold in
the U.S. by Wyeth Pharmaceuticals, LLC. We are actively exploring
the best approach to maximize our commercial returns from this
approval.
●
In November 2018,
we announced that we had submitted an investigational new drug
(“
IND
”)
application to the FDA for our oxycodone hydrochloride immediate
release (“
IPCI006
”) tablets in the 5, 10,
15, 20 and 30 mg strengths. This novel drug formulation
incorporates our Paradoxical OverDose Resistance Activating System
(“
PODRAS™
”) delivery
technology and our novel Point Of Divergence Drug Delivery System
(“
nPODDDS™
”) technology.
IPCI006 is designed to prevent, delay or limit the release of
oxycodone hydrochloride when more intact tablets than prescribed
are ingested, thus delaying or preventing overdose and allowing for
sufficient time for a rescue or medical intervention to take place.
It is also intended to present a significant barrier to abuse by
snorting, "parachuting," injecting or smoking finely crushed
oxycodone hydrochloride immediate release tablets.
●
In November 2018,
we announced that we had entered into an exclusive licensing and
distribution agreement for our abuse resistant Oxycodone ER product
candidate and four generic drug products with a pharmaceutical
distributor in the Philippines. A Philippines-based pharmaceutical
distributor was granted the exclusive right, subject to regulatory
approval, to import and market our first novel drug formulation,
abuse-deterrent Oxycodone ER, in the Philippines. Additionally,
this distributor was granted, subject to regulatory approval, the
exclusive right to import and market our generic Seroquel XR®,
Focalin XR®, Glucophage® XR, and Keppra XR® in the
Philippines. Under the terms of the agreement, the distributor will
be required to purchase a minimum yearly quantity of all products
included in the agreement and we will be the exclusive supplier of
these products.
●
In November 2018,
we announced that we had entered into two exclusive licensing and
distribution agreements with pharmaceutical distributors in
Malaysia and Vietnam:
o
A Malaysian
pharmaceutical distribution company was granted the exclusive
right, subject to regulatory approval, to import and market our
generic Seroquel XR® (quetiapine fumarate extended-release) in
Malaysia. Under the terms of the agreement, four strengths (50,
200, 300 and 400 mg) of generic Seroquel XR® will be
manufactured and supplied by us for distribution in Malaysia. We
are also in discussions to include other products in the agreement
with this distributor, who will be required to purchase a minimum
yearly quantity of all products included in the
agreement.
o
A Vietnamese
pharmaceutical distributor was granted the exclusive right, subject
to regulatory approval, to import and market our generic Seroquel
XR®, Glucophage® XR, and Keppra XR® in Vietnam.
Under the terms of the agreement, two strengths (500 and 750mg) of
generic Glucophage® XR, three strengths (50, 150 and 200mg) of
generic Seroquel XR® and one strength (500 mg) of generic
Keppra XR® will be manufactured and supplied by us for
distribution in Vietnam. The Vietnamese distributor will be
required to purchase a minimum yearly quantity of all products
included in the agreement.
●
In October 2018, we
completed an underwritten public offering in the United States,
resulting in the sale to the public of 827,970 Units at $0.75 per
Unit, which were comprised of one common share and one warrant (the
“
2018 Unit
Warrants
”) exercisable at $0.75 per share. We
concurrently sold an additional 1,947,261 common shares and
warrants to purchase 2,608,695 common shares exercisable at $0.75
per share (the “
2018 Option
Warrants
”) pursuant to the over-allotment option
exercised in part by the underwriter. The price for the common
shares issued in connection with exercise of the overallotment
option was $0.74 per share and the price for the warrants issued in
connection with the exercise of the overallotment option was $0.01
per warrant, less in each case the underwriting discount. In
addition, we issued 16,563,335 pre-funded units
(“
2018 Pre-Funded
Units
”), each 2018 Pre-Funded Unit consisting of one
pre-funded warrant (a “
2018
Pre-Funded Warrant
”) to purchase one common share and
one warrant (a “
2018
Warrant
”, and together with the 2018 Unit Warrants and
the 2018 Option Warrants, the “
2018 Firm Warrants
”) to purchase
one common share. The 2018 Pre-Funded Units were offered to the
public at $0.74 each and a 2018 Pre-Funded Warrant is exercisable
at $0.01 per share. Each 2018 Firm Warrant is exercisable
immediately and has a term of five years and each 2018 Pre-Funded
Warrant is exercisable immediately and until all 2018 Pre-Funded
Warrants are exercised. We also issued warrants to the placement
agents to purchase 1,160,314 common shares at an exercise price of
$0.9375 per share (the “
October 2018 Placement Agent
Warrants
”), which were exercisable immediately upon
issuance. In aggregate, we issued 2,775,231 common shares,
16,563,335 2018 Pre-Funded Warrants and 20,000,000
2018 Firm Warrants in addition to 1,160,314 October 2018
Placement Agent Warrants.
●
In October 2018, we
announced that we had completed the clinical portion of our
Category 2 and 3 human abuse liability studies for our Oxycodone ER
product candidate to support its abuse-deterrent label claims for
both the oral and intranasal route of administration. Bioanalytical
samples and statistical analysis for such studies are pending.
Results from the studies will be included in our response to the
FDA Complete Response Letter which is due no later than February
28, 2019
.
●
In September 2018,
we announced a one-for-ten share consolidation (reverse split). The
reverse split was implemented in order to qualify for continued
listing on Nasdaq, whereby we have to meet certain continued
listing criteria, including a closing bid price of at least $1.00
for a minimum of 10 consecutive business days. On September 12,
2018, we filed articles of amendment which implemented the reverse
split, and our shares began trading on each of Nasdaq and TSX on a
post-split basis under our existing trade symbol “IPCI”
at the market open on September 14, 2018. The reverse split reduced
the number of outstanding common shares from approximately 43.5
million to approximately 4.35 million at that time.
●
In September 2018,
we announced that we issued in a private placement financing (the
“
2018 Debenture
Financing
”) an unsecured convertible debenture in the
principal amount of $0.5 million (the “
2018 Debenture
”), which will
mature on September 1, 2020. The 2018 Debenture bears interest at a
rate of 10% per annum, payable monthly, is pre-payable at any time
at our option, and is convertible at any time into common shares at
a conversion price of $3.00 per common share at the option of the
holder. The 2018 Debenture Financing was non-brokered and the net
proceeds were used for working capital and general corporate
purposes.
●
In July 2018, we
announced that infringement claims related to one of the six
original patents included in the Purdue litigation were dismissed
without prejudice (as described below). As previously announced, in
April 2017, we had received notice that Purdue, Purdue
Pharmaceuticals L.P., The P.F. Laboratories, Inc., Rhodes
Technologies, and another party had commenced patent infringement
proceedings against us in the U.S. District Court for the District
of Delaware in respect of our NDA filing for Oxycodone ER. The
parties to the case mutually agreed to and did have dismissed
without prejudice the infringement claims related to the
Grünenthal ‘060 patent (which is one of the six patents
included in the original litigation case). On October 4, 2018, the
parties mutually agreed to postpone the scheduled court date
pending a case status conference scheduled for December 17, 2018.
At that time, further trial scheduling and other administrative
matters were postponed pending the Company’s anticipated
resubmission of the Oxycodone ER NDA to the FDA, which is due no
later than February 28, 2019.
●
In March 2018, we
announced the closing of two registered direct offerings. The first
offering consisted of 583,333 common shares at a price of $6.00 per
share for gross proceeds of approximately $3.5 million. We also
issued to the investors unregistered warrants to purchase an
aggregate of 291,666 common shares at an exercise price of $6.00
per share. The warrants became exercisable six months following the
closing date and will expire 30 months after the date they became
exercisable. After commissions and offering expenses, we received
net proceeds of approximately $3.0 million. We also issued to the
placement agents warrants to purchase 29,166 common shares at an
exercise price of $7.50 per share. In the second registered direct
offering, we issued 300,000 common shares at a price of $6.00 per
share for gross proceeds of $1.8 million. We also issued to the
investors unregistered warrants to purchase an aggregate of 150,000
common shares at an exercise price of $6.00 per share. The warrants
became exercisable six months following the closing date and will
expire 30 months after the date they became exercisable. After
commissions and offering expenses, we received net proceeds of
approximately $1.6 million. We also issued to the placement agents
warrants to purchase 15,000 common shares at an exercise price of
$7.50 per share.
●
In February 2018,
we met with the FDA to discuss a previously-announced Complete
Response Letter (“
CRL
”) for Oxycodone ER, including
issues related to the blue dye in the product candidate. Based on
those discussions, the product candidate will no longer include the
blue dye. The blue dye was intended to act as an additional
deterrent if Oxycodone ER is abused and serve as an early warning
mechanism to flag potential misuse or abuse. The FDA confirmed that
the removal of the blue dye is unlikely to have any impact on
formulation quality and performance. As a result, we will not be
required to repeat in vivo bioequivalence studies and
pharmacokinetic studies submitted in the Oxycodone ER NDA. The FDA
also indicated that, from an abuse liability perspective, Category
1 studies will not have to be repeated on Oxycodone ER with the
blue dye removed.
There can be no assurance that our products will be successfully
commercialized or produce significant revenues for us. Also, there
can be no assurance that we will not be required to conduct further
studies for our Oxycodone ER product candidate, that the FDA will
approve any of our requested abuse-deterrence label claims or that
the FDA will ultimately approve the NDA for the sale of our
Oxycodone ER product candidate in the U.S. market that we will be
successful in submitting any additional ANDAs or NDAs with the FDA
or ANDSs with Health Canada, that the FDA or Health Canada will
approve any of our current or future product candidates for sale in
the U.S. market and Canadian market, that any of our products or
product candidates will receive regulatory approval for sale in
other jurisdictions (including the Philippines, Malaysia and
Vietnam) that our desvenlafaxine extended-release will receive
final FDA approval or that any of our products will ever be
successfully commercialized and produce significant revenue for us.
Furthermore, there can be no assurances regarding our ability to
comply with the Nasdaq continued listing standards acceptable to a
Nasdaq Panel, as described below. Moreover, there can be no
assurance that any of our provisional patent applications will
successfully mature into patents, or that any cannabidiol-based
product candidates we develop will ever be successfully
commercialized or produce significant revenue for us.
NASDAQ NOTICES AND NASDAQ HEARINGS PANEL GRANT OF REQUEST FOR
CONTINUED LISTING
●
We are currently
not in compliance with the requirements for the continued listing
of
our common shares on Nasdaq. As
described below, if we are not in compliance with those
requirements by March 7, 2019, a Nasdaq Panel will determine
whether we will be provided with an extension of time for that
purpose.
In
September 2017, we were notified by Nasdaq that we were not in
compliance with the minimum market value of listed securities
required for continued listing on Nasdaq. Nasdaq Listing Rule
5550(b) requires listed securities to maintain a minimum market
value of $35.0 million, among other alternatives, including minimum
stockholders’ equity of $2.5 million. A failure to meet the
minimum market value requirement exists if the deficiency continues
for a period of 30 consecutive business days. Based on the market
value of our common shares for the 30 consecutive business days
from August 8, 2017, we did not satisfy the minimum market value of
listed securities requirement. By rule, we were provided 180
calendar days, or until March 19, 2018, to regain compliance with
that requirement. To regain compliance, our common shares were
required to have a market value of at least $35.0 million for a
minimum of 10 consecutive business days prior to March 19, 2018,
which they did not. In the alternative, if the minimum market value
requirement for continued listing is not met, an issuer may
maintain continued listing under Nasdaq Listing Rule 5550(b) if it
has stockholders’ equity of at least $2.5
million.
●
On April 20, 2018,
we received notice that the Nasdaq Staff had determined to delist
our common shares as a result of our failure to meet either the
minimum market value of listed securities requirement or the
minimum stockholders’ equity requirement for continued
listing. However, any delisting action by the Nasdaq Staff was
stayed pending the ultimate conclusion of our hearing before the
Nasdaq Panel.
●
In addition to not
meeting the minimum market value of listed securities or minimum
stockholders’ equity requirements, we were separately
notified in December 2017 that our common shares no longer
satisfied the minimum $1.00 per share bid requirement under Nasdaq
Listing Rule 5550(a)(2).
●
We attended a hearing before the Nasdaq Panel on
May 17, 2018, and subsequently received formal notice that the
Nasdaq Panel had granted our request for continued listing provided
that by September 28, 2018, we (i) comply with Nasdaq’s $1.00
bid price requirement by having a closing bid price of over $1.00
for ten consecutive trading days, (ii) have stockholders’
equity position of over $2.5 million, and (iii) provide the Nasdaq
Panel with updated financial projections demonstrating our ability
to maintain compliance with the stockholders’ equity rule for
the coming year. Following receipt of shareholder approval for a
reverse stock split (known as a share consolidation under Canadian
law) at our August 15, 2018 shareholders meeting, on September 12,
2018, we filed articles of amendment to effectuate a 1-for-10
reverse split, and our common shares began trading on each of
Nasdaq and TSX on a post-reverse split basis on September 14, 2018.
As a result of the closing bid price of our common shares exceeding
$1.00 for the period from September 14, 2018 to September 27, 2018,
we received a letter from Nasdaq Listing Qualification notifying us
that we had regained compliance with Nasdaq’s minimum bid
price requirement. On September 29, 2018, we were advised that the
Nasdaq Panel granted an extension through
October 17, 2018
for us to regain compliance with Nasdaq’s stockholders’
equity continued listing requirement.
●
On October 17,
2018, we filed with the SEC a report on Form 6-K reporting that we
believed we had regained compliance with Nasdaq’s
stockholders’ equity requirement after giving effect to the
proceeds from the October 2018 offering.
●
On October 26,
2018, we announced that we had regained compliance with
Nasdaq’s stockholders’ equity requirement and that the
Nasdaq Panel determined that we would remain subject to a "Panel
Monitor” until October 22, 2019.
●
In November 2018,
we received written notification from Nasdaq notifying us that the
minimum bid price per share for our common shares was below $1.00
for a period of 30 consecutive business days and that, as a result,
we were not in compliance with Nasdaq’s minimum bid price
requirement.
●
In December 2018,
we received written notification from Nasdaq notifying us that a
hearing with a Nasdaq Panel had been scheduled for January 10,
2019.
●
At a hearing held
on January 10, 2019, we presented to the Nasdaq Panel our plan to
regain and maintain compliance with Nasdaq’s continued
listing requirements.
●
On January 28,
2019, we announced that we had received notice from the Nasdaq
Panel extending the continued listing of our common shares until
March 7, 2019, subject to certain conditions, while we work to
regain compliance with Nasdaq’s requirements. Following the
March 7, 2019 deadline, the Nasdaq Panel will determine whether a
further extension period is warranted in the event we have not
regained compliance. However, there can be no assurance that the
Nasdaq Panel will grant such an extension. Moreover, there can be
no assurance that we will be able to regain compliance with
Nasdaq's requirements or, if we do, that we will be able to
maintain compliance with all applicable requirements for continued
listing on Nasdaq over the long term. The Nasdaq Panel's
determination requires us to promptly notify Nasdaq of any
significant events that occur during the extension period that may
affect our compliance with Nasdaq requirements.
NEW LITIGATION
On
February 21, 2019, the Company and its CEO, Dr. Isa Odidi, received
a Statement of Claim concerning an action against them in the
Superior Court of Justice of Ontario under the caption
Victor Romita, plaintiff, and
Intellipharmaceutics International Inc. and Isa Odidi,
defendants
. The action seeks certification as a class action
and alleges that certain public statements made by the Company in
the period February 29, 2016 to July 26, 2017 knowingly or
negligently contained or omitted material facts concerning the
Company’s NDA for Oxycodone ER abuse-deterrent oxycodone
hydrochloride extended release tablets. The plaintiff alleges that
he suffered loss and damages as a result of trading in the
Company’s shares on TSX during the above-noted period. The
claim seeks, among other remedies, unspecified damages, legal fees
and court and other costs as the court may permit. At this time,
the action has not been certified as a class action. The Company
intends to vigorously defend against the claims asserted in this
action.
Our Company
We are
a pharmaceutical company specializing in the research, development
and manufacture of novel and generic controlled-release and
targeted-release oral solid dosage drugs. Our patented
Hypermatrix™ technology is a multidimensional
controlled-release drug delivery platform that can be applied to
the efficient development of a wide range of existing and new
pharmaceuticals. Based on this technology platform, we have
developed several drug delivery systems and a pipeline of products
(some of which have received FDA approval) and product candidates
in various stages of development, including ANDAs filed with the
FDA (and one ANDS filed with Health Canada) and one NDA filing, in
therapeutic areas that include neurology, cardiovascular,
gastrointestinal tract (“
GIT
”), diabetes and
pain.
In
November 2005, we entered into the Par agreement (as amended on
August 12, 2011 and September 24, 2013), pursuant to which we
granted Par an exclusive, royalty-free license to make and
distribute in the U.S. all strengths of our generic Focalin
XR® (dexmethylphenidate hydrochloride extended-release)
capsules for a period of 10 years from the date of commercial
launch (which was November 19, 2013) Under the Par agreement, we
made a filing with the FDA for approval to market generic Focalin
XR® capsules in various strengths in the U.S. (the
“
Company ANDA
”),
and are the owner of that Company ANDA, as approved in part by the
FDA. We retain the right to make and distribute all strengths of
the generic product outside of the U.S. Calendar quarterly
profit-sharing payments for its U.S. sales under the Company ANDA
are payable by Par to us as calculated pursuant to the Par
agreement. Within the purview of the Par agreement, Par also
applied for and owns an ANDA pertaining to all marketed strengths
of generic Focalin XR® (the “
Par ANDA
”), and is now approved by
the FDA, to market generic Focalin XR® capsules in all
marketed strengths in the U.S. As with the Company ANDA, calendar
quarterly profit-sharing payments are payable by Par to us for its
U.S. sales of generic Focalin XR® under the Par ANDA as
calculated pursuant to the Par agreement.
We
received final approval from the FDA in November 2013 under the
Company ANDA to launch the 15 and 30 mg strengths of our generic
Focalin XR® capsules. Commercial sales of these strengths were
launched immediately by our commercialization partner in the U.S.,
Par. In January 2017, Par launched the 25 and 35 mg strengths of
its generic Focalin XR® capsules in the U.S., and in May 2017,
Par launched the 10 and 20 mg strengths, complementing the 15 and
30 mg strengths of our generic Focalin XR® marketed by Par.
The FDA granted final approval under the Par ANDA for its generic
Focalin XR® capsules in the 5, 10, 15, 20, 25, 30, 35 and 40
mg strengths, and subsequently Par launched the remaining 5 and 40
mg strengths. Under the Par agreement, we receive quarterly profit
share payments on Par’s U.S. sales of generic Focalin
XR®. We currently expect revenues from sales of the generic
Focalin XR® capsules to continue to be impacted by ongoing
competitive pressures in the generic market. There can be no
assurance whether revenues from this product will improve going
forward or that any recently launched strengths will be
successfully commercialized. We depend significantly on the actions
of our marketing partner Par in the prosecution, regulatory
approval and commercialization of our generic Focalin XR®
capsules and on its timely payment to us of the contracted calendar
quarterly payments as they come due.
In
February 2019, we received tentative approval from the FDA for our
ANDA for desvenlafaxine extended-release tablets in the 50 and 100
mg strengths. This product is a generic equivalent of the branded
product Pristiq
®
sold in
the U.S. by Wyeth Pharmaceuticals, LLC. There can be no assurance
that our desvenlafaxine extended-release tablets in the 50 and 100
mg strengths will receive final FDA approval or, if approved, that
they will be successfully commercialized and produce significant
revenue for us. We previously announced that we had entered into a
license and commercial supply agreement with Mallinckrodt, which
granted Mallinckrodt, subject to its terms, an exclusive license to
market, sell and distribute in the U.S. the Company's
desvenlafaxine extended-release tablets (generic Pristiq®).
Among other things, the agreement provides for the Company to have
a long-term profit sharing arrangement with respect to the licensed
product. Intellipharmaceutics has agreed to manufacture and supply
the licensed product exclusively for Mallinckrodt on a cost-plus
basis, and Mallinckrodt has agreed that Intellipharmaceutics will
be its sole supplier of the licensed product marketed in the
U.S.
In
November 2018, we received final approval from the FDA for our ANDA
for venlafaxine hydrochloride extended-release capsules in the
37.5, 75 and 150 mg strengths. The approved product is a generic
equivalent of the branded product Effexor® XR sold in the U.S.
by Wyeth Pharmaceuticals, LLC. We are actively exploring the best
approach to maximize our commercial returns from this approval.
There can be no assurance that our generic Effexor XR® for the
37.5, 75 and 150 mg strengths will be successfully commercialized
and produce significant revenue for us.
In
February 2017, we received final approval from the FDA for our ANDA
for metformin hydrochloride extended release tablets in the 500 and
750 mg strengths, a generic equivalent for the corresponding
strengths of the branded product Glucophage® XR sold in the
U.S. by Bristol-Myers Squibb. The Company is aware that several
other generic versions of this product are currently available that
serve to limit the overall market opportunity for this product. We
have been continuing to evaluate options to realize commercial
returns on this product, particularly in international markets. In
November 2018, we announced that we entered into two exclusive
licensing and distribution agreements with pharmaceutical
distributors in Vietnam and the Philippines pursuant to which the
distributors were granted the exclusive right, subject to
regulatory approval, to import and market our generic
Glucophage® XR in Vietnam and the Philippines, respectively.
There can be no assurance as to when and if such product will
receive regulatory approval for the sale in Vietnam or the
Philippines. Moreover, there can be no assurance that our metformin
hydrochloride extended release tablets will be successfully
commercialized and produce significant revenues for
us.
In
February 2016, we received final approval from the FDA of our ANDA
for generic Keppra XR® (levetiracetam extended-release)
tablets for the 500 and 750 mg strengths. Our generic Keppra
XR® is a generic equivalent for the corresponding strengths of
the branded product Keppra XR® sold in the U.S. by UCB, Inc.,
and is indicated for use in the treatment of partial onset seizures
associated with epilepsy. We are aware that several other generic
versions of this product are currently available that serve to
limit the overall market opportunity. We have been actively
exploring the best approach to maximize our commercial returns from
this approval and have been looking at several
international
markets
where, despite lower volumes, product margins are typically higher
than in the U.S. In November 2018, we announced that we entered
into two exclusive licensing and distribution agreements with
pharmaceutical distributors in Vietnam and the Philippines pursuant
to which the distributors were granted the exclusive right, subject
to regulatory approval, to import and market our generic Keppra
XR® in Vietnam and the Philippines, respectively. There can be
no assurance as to when and if such product will receive regulatory
approval for the sale in Vietnam or the Philippines. Moreover,
there can be no assurance that our generic Keppra XR® for the
500 and 750 mg strengths will be successfully commercialized and
produce significant revenues for us.
In May
2017, we received final approval from the FDA for our ANDA for
quetiapine fumarate extended-release tablets in the 50, 150, 200,
300 and 400 mg strengths. Our approved product is a generic
equivalent for the corresponding strengths of the branded product
Seroquel XR® sold in the U.S. by AstraZeneca. Pursuant to a
settlement agreement between us and AstraZeneca dated July 30,
2012, we were permitted to launch our generic versions of the 50,
150, 200, 300 and 400 mg strengths of generic Seroquel XR®, on
November 1, 2016, subject to FDA final approval of our ANDA for
those strengths. The Company manufactured and shipped commercial
quantities of all strengths of generic Seroquel XR® to our
marketing and distribution partner Mallinckrodt, and Mallinckrodt
launched all strengths in June 2017.
In
October 2016, we announced a license and commercial supply
agreement with Mallinckrodt, granting Mallinckrodt an exclusive
license to market, sell and distribute in the U.S, as licensed
products, the following extended release drug product candidates
which have either been launched (generic Seroquel XR) or for which
we have ANDAs filed with the FDA:
■
Quetiapine fumarate
extended-release tablets (generic Seroquel XR®) –
Approved and launched
■
Desvenlafaxine
extended-release tablets (generic Pristiq®) – ANDA Under
FDA Review (tentatively approved)
■
Lamotrigine
extended-release tablets (generic Lamictal® XR™) –
ANDA under FDA Review
Under
the terms of the 10-year agreement with Mallinckrodt, we received a
non-refundable upfront payment of $3 million in October 2016. In
addition, the agreement also provides for a long-term profit
sharing arrangement with respect to these licensed products (which
includes up to $11 million in cost recovery payments that are
payable on future sales of licensed product). We have agreed to
manufacture and supply the licensed products exclusively for
Mallinckrodt on a cost plus basis. The Mallinckrodt agreement
contains customary terms and conditions for an agreement of this
kind and is subject to early termination in the event we do not
obtain FDA approvals of the Mallinckrodt licensed products by
specified dates, or pursuant to any one of several termination
rights of each party. Upon the expiration of the initial term, and
absent any early termination actions, the Mallinckrodt agreement
will be automatically renewed for additional and consecutive terms
of one year (the 12-month period coinciding with
Mallinckrodt’s regularly established fiscal months), absent
notice of non-renewal given by one party to the other at least 180
days prior to the end of the initial or renewal term.
Our
goal is to leverage our proprietary technologies and know-how in
order to build a diversified portfolio of revenue generating
commercial products. We intend to do this by advancing our products
from the formulation stage through product development, regulatory
approval and manufacturing. We believe that full integration of
development and manufacturing will help maximize the value of our
drug delivery technologies, products and product candidates. We
also believe that out-licensing sales and marketing to established
organizations, when it makes economic sense, will improve our
return from our products while allowing us to focus on our core
competencies. We expect our expenditures for the purchase of
production, laboratory and computer equipment and the expansion of
manufacturing and warehousing capability to be higher as we prepare
for the commercialization of ANDAs, one NDA and one ANDS that are
pending FDA and Health Canada approval, respectively.
Our Strategy
Our
Hypermatrix™ technologies are central to the development and
manufacture of novel and generic controlled-release and
targeted-release oral solid dosage drugs. The Hypermatrix™
technologies are a multidimensional controlled-release drug
delivery platform that we believe can be applied to the efficient
development of a wide range of existing and new pharmaceuticals. We
believe that the flexibility of these technologies allows us to
develop complex drug delivery solutions within an
industry-competitive timeframe. Based on this technology platform,
we have developed several drug delivery systems and a pipeline of
products (some of which have received FDA approval) and product
candidates in various stages of development, including ANDAs filed
with the FDA (and one ANDS filed with Health Canada) and one NDA
filing, in therapeutic areas that include neurology,
cardiovascular, GIT, diabetes and pain. We expect that certain, but
not all, of the products in our pipeline may be developed from time
to time for third parties pursuant to drug
development
agreements with those third parties, under which our
commercialization partner may pay certain of the expenses of
development, make certain milestone payments to us and receive a
share of revenues or profits if the drug is developed successfully
to completion, the control of which would generally be in the
discretion of our drug development partner.
The
principal focus of our development activities previously targeted
difficult-to-develop controlled-release generic drugs which follow
an ANDA regulatory path. Our current development effort is
increasingly directed towards improved difficult-to-develop
controlled-release drugs which follow an NDA 505(b)(2) regulatory
pathway. We have increased our R&D emphasis towards specialty
new product development, facilitated by the 505(b)(2) regulatory
pathway, by advancing the product development program for both
Oxycodone ER and Regabatin
TM
. We have also
identified several additional 505(b)(2) product candidates for
development in various indication areas including cardiovascular,
dermatology, pulmonary disease and oncology. The technology that is
central to our abuse deterrent formulation of our Oxycodone ER is
the nPODDDS™, or novel Point of Divergence Drug Delivery
System. nPODDDS™ is designed to provide for certain unique
drug delivery features in a product. These include the release of
the active substance to show a divergence in a dissolution and/or
bioavailability profile. The divergence represents a point or a
segment in a release timeline where the release rate, represented
by the slope of the curve, changes from an initial rate or set of
rates to another rate or set of rates, the former representing the
usually higher rate of release shortly after ingesting a dose of
the drug, and the latter representing the rate of release over a
later and longer period of time, being more in the nature of a
controlled-release or sustained action. It is applicable for the
delivery of opioid analgesics in which it is desired to discourage
common methods of tampering associated with misuse and abuse of a
drug, and also dose dumping in the presence of alcohol. It can
potentially retard tampering without interfering with the
bioavailability of the product.
In
addition, our PODRAS™ or Paradoxical OverDose Resistance
Activating System delivery technology was initially introduced to
enhance our Oxycodone ER (abuse deterrent oxycodone hydrochloride
extended release tablets) product candidate. The PODRAS
TM
delivery technology
platform was designed to prevent overdose when more pills than
prescribed are swallowed intact. Preclinical studies of prototypes
of oxycodone with PODRAS™ technology suggest that, unlike
other third-party abuse-deterrent oxycodone products in the
marketplace, if more tablets than prescribed are deliberately or
inadvertently swallowed, the amount of drug active ingredient
(“
drug active
”)
released over 24 hours may be substantially less than expected.
However, if the prescribed number of pills is swallowed, the drug
release should be as expected. Certain aspects of our PODRAS™
technology are covered by U.S. Patent Nos. 9,522,119, 9,700,515,
9,700,516 and 9,801,939 and Canadian Patent No. 2,910,865 issued by
the U.S. Patent and Trademark Office and the Canadian Intellectual
Property Office in respect of “Compositions and Methods for
Reducing Overdose” in December 2016, July 2017 and October
2017, respectively. The issuance of these patents provides us with
the opportunity to accelerate our PODRAS™ development plan by
pursuing proof of concept studies in humans. We intend to
incorporate this technology in future product candidates, including
Oxycodone ER and other similar pain products, as well as pursuing
out-licensing opportunities. The Company is currently working on
the development of an Oxycodone immediate-release (IR) product
incorporating this technology.
The NDA
505(b)(2) pathway (which relies in part upon the FDA’s
findings for a previously approved drug) both accelerates
development timelines and reduces costs in comparison to NDAs for
new chemical entities. An advantage of our strategy for development
of NDA 505(b)(2) drugs is that our product candidates can, if
approved for sale by the FDA, potentially enjoy an exclusivity
period which may provide for greater commercial opportunity
relative to the generic ANDA route.
The
market we operate in is created by the expiration of drug product
patents, challengeable patents and drug product exclusivity
periods. There are three ways that we employ our controlled-release
technologies, which we believe represent substantial opportunities
for us to commercialize on our own or develop products or
out-license our technologies and products:
●
For branded
immediate-release (multiple-times-per-day) drugs, we can formulate
improved replacement products, typically by developing new,
potentially patentable, controlled-release once-a-day drugs. Among
other out-licensing opportunities, these drugs can be licensed to
and sold by the pharmaceutical company that made the original
immediate-release product. These can potentially protect against
revenue erosion in the brand by providing a clinically attractive
patented product that competes favorably with the generic
immediate-release competition that arises on expiry of the original
patent(s). The regulatory pathway for this approach requires NDAs
via a 505(b)(2) application for the U.S. or corresponding pathways
for other jurisdictions where applicable.
●
Some of our
technologies are also focused on the development of abuse-deterrent
and overdose preventive pain medications. The growing abuse and
diversion of prescription “painkillers”, specifically
opioid analgesics, is well documented and is a major health and
social concern. We believe that our technologies and know-how are
aptly suited to developing abuse-deterrent pain medications. The
regulatory pathway for this approach requires NDAs via a 505(b)(2)
application for the U.S. or corresponding pathways for other
jurisdictions where applicable.
●
For existing
controlled-release (once-a-day) products whose APIs are covered by
drug molecule patents about to expire or already expired, or whose
formulations are covered by patents about to expire, already
expired or which we believe we do not infringe, we can seek to
formulate generic products which are bioequivalent to the branded
products. Our scientists have demonstrated a successful track
record with such products, having previously developed several drug
products which have been commercialized in the U.S. by their former
employer/clients. The regulatory pathway for this approach requires
ANDAs for the U.S. and ANDSs for Canada.
We
intend to collaborate in the development and/or marketing of one or
more products with partners, when we believe that such
collaboration may enhance the outcome of the project. We also plan
to seek additional collaborations as a means of developing
additional products. We believe that our business strategy enables
us to reduce our risk by (a) having a diverse product portfolio
that includes both branded and generic products in various
therapeutic categories, and (b) building collaborations and
establishing licensing agreements with companies with greater
resources thereby allowing us to share costs of development and to
improve cash-flow. There can be no assurance that we will be able
to enter into additional collaborations or, if we do, that such
arrangements will be commercially viable or
beneficial.
Our Drug Delivery Technologies
Hypermatrix™
Our
scientists have developed drug delivery technology systems, based
on the Hypermatrix™ platform, that facilitate
controlled-release delivery of a wide range of pharmaceuticals.
These systems include several core technologies, which enable us to
flexibly respond to a wide range of drug attributes and patient
requirements, producing a desired controlled-release effect. Our
technologies have been incorporated in drugs manufactured and sold
by major pharmaceutical companies.
This
group of drug delivery technology systems is based upon the drug
active being imbedded in, and an integral part of, a homogeneous
(uniform), core and/or coatings consisting of one or more polymers
which affect the release rates of drugs, other excipients
(compounds other than the drug active), such as for instance
lubricants which control handling properties of the matrix during
fabrication, and the drug active itself. The Hypermatrix™
technologies are the core of our current marketing efforts and the
technologies underlying our existing development
agreements.
nPODDDS™
In
addition to continuing efforts with Hypermatrix™ as a core
technology, our scientists continue to pursue novel research
activities that address unmet needs. Oxycodone ER (abuse deterrent
oxycodone hydrochloride extended release tablets) is an NDA
candidate, with a unique long acting oral formulation of oxycodone
intended to treat moderate-to-severe pain. The formulation is
intended to present a significant barrier to tampering when
subjected to various forms of physical and chemical manipulation
commonly used by abusers. It is also designed to prevent dose
dumping when inadvertently co-administered with alcohol. The
technology that supports our abuse deterrent formulation of
oxycodone is the nPODDDS™ Point of Divergence Drug Delivery
System. The use of nPODDDS™ does not interfere with the
bioavailability of oxycodone. We intend to apply the nPODDDS™
technology platforms to other extended release opioid drug
candidates (e.g., oxymorphone, hydrocodone, hydromorphone and
morphine) utilizing the 505(b)(2) regulatory pathway.
PODRAS™
Our
Paradoxical OverDose Resistance Activating System (PODRAS™)
delivery technology is designed to prevent overdose when more pills
than prescribed are swallowed intact. Preclinical studies of
prototypes of oxycodone with PODRAS™ technology suggest that,
unlike other third-party abuse-deterrent oxycodone products in the
marketplace, if more tablets than prescribed are deliberately or
inadvertently swallowed, the amount of drug active released over 24
hours may be substantially less than expected. However, if the
prescribed number of pills is swallowed, the drug release should be
as expected. We are currently working on an alternate Oxycodone ER
product candidate incorporating our PODRAS™ delivery
technology. In April 2015, the FDA published
Guidance for Industry: Abuse-Deterrent
Opioids — Evaluation and Labeling
, which cited the
need for more efficacious abuse-deterrence technology. In this
Guidance, the FDA stated, “opioid products are often
manipulated for purposes of abuse by different routes of
administration or to defeat extended-release properties, most
abuse-deterrent technologies developed to date are intended to make
manipulation more difficult or to make abuse of the manipulated
product less attractive or less rewarding. It should be noted that
these technologies have not yet proven successful at deterring the
most common form of abuse—swallowing a number of intact
capsules or tablets to achieve a feeling of euphoria.” The
FDA reviewed our request for Fast Track designation for our abuse
deterrent Oxycodone ER development program incorporating
PODRAS™, and in May 2015 notified us that the FDA had
concluded that we met the criteria for Fast Track designation. Fast
Track is a designation assigned by the FDA in response to an
applicant’s request which meets FDA criteria. The designation
mandates the FDA to facilitate the development and expedite the
review of drugs intended to treat serious or life threatening
conditions and that demonstrate the potential to address unmet
medical needs.
In
December 2016, July 2017 and October 2017, U.S. Patent Nos.
9,522,119, 9,700,515, 9,700,516 and 9,801,939 and Canadian Patent
No. 2,910,865 were issued by the U.S. Patent and Trademark Office
and the Canadian Intellectual Property Office in respect of
“Compositions and Methods for Reducing Overdose”. The
issued patents cover aspects of the PODRAS™ delivery
technology. The issuance of these patents represents a significant
advance in our abuse deterrence technology platform. The
PODRAS™ platform has the potential to positively
differentiate our technology from others of which we are aware, and
may represent an important step toward addressing the FDA’s
concern over the ingestion of a number of intact pills or tablets.
In addition to its use with opioids, the PODRAS
TM
platform is
potentially applicable to a wide range of drug products, inclusive
of over-the-counter drugs, that are intentionally or inadvertently
abused and cause harm by overdose to those who ingest them. We
intend to apply the PODRAS™ technology platforms to other
extended release opioid drug candidates (e.g., oxymorphone,
hydrocodone, hydromorphone and morphine) utilizing the 505(b)(2)
regulatory pathway.
The Hypermatrix™ Family of Technologies
Our
platform of Hypermatrix™ drug delivery technologies include,
but are not limited to, IntelliFoam™,
IntelliGITransporter™, IntelliMatrix™,
IntelliOsmotics™, IntelliPaste™, IntelliPellets™,
IntelliShuttle™, nPODDDS™ and PODRAS™. Some of
their key attributes are described below.
These
technologies provide a broad range of release profiles, taking into
account the physical and chemical characteristics of a drug
product, the therapeutic use of the particular drug, and the
optimal site for release of the API in the GIT. At present those
technologies have been applied in the laboratory and/or in
bioavailability/bioequivalence studies in man to such orally
administered small molecule drugs as are used in the treatment of
neurological, cardiovascular, GIT, diabetes, pain and other
significant indications.
IntelliFoam™
The
IntelliFoam™ technology is based on the drug active being
embedded in, but separate from a syntactic foam substrate, the
properties of which are used to modulate the release of the drug
active. The drug actives are embedded in a resin polymer
matrix.
IntelliGITransporter™
The
IntelliGITransporter™ technology consists of an active drug
immobilized in a homogeneous (uniform) matrix structure. A precise
choice of mix ratios, polymers, and other ingredients imparts
characteristics which protect the drug composition from mechanical
degradation due to digestion, and/or from chemical degradation in
the acidic stomach environment, and ensures that this technology
allows control of release as well as releasing the medication at
certain parts of the stomach or intestines without significant food
effects or unintentional premature release of the entire drug dose.
We believe that this technology is most useful for drug molecules
with characteristics such as very low or very high potency, opiate
analgesics (pain medications derived from the chemical compounds
found in opium), or susceptibility to acid degradation. It is also
useful for products where a zero-order (constant rate over time,
independent of the amount of drug available for dissolution)
release profile is desirable.
IntelliMatrix™
The
IntelliMatrix™ technology is a proprietary blend of several
polymers. Depending on the constituents of the blend and the manner
in which these interact, the use of the blend with a drug allows
the drug to be released at predetermined rates, while imparting
protective characteristics to both the drug and the GIT. This is
most useful for drugs which require precisely controlled
first-order release profiles, where the amount released with time
is dependent on one component like the amount of drug available for
dissolution.
IntelliOsmotics™
The
IntelliOsmotics™ technology is based upon the inclusion of
multiple populations of polymers with distinct chemical bonding
characteristics. These set up a complex matrix of hydrophilic
(water attracting) and hydrophobic (water repelling) domains. When
the tablet or bead is in an aqueous environment, like gastric
contents, a “mixture” of water-soluble polymer and drug
core is surrounded by gel layer(s) of water-insoluble polymer.
Osmotic pressure drives the drug out when solvent passes through
the gel layer while the polymer molecules remain. This permits
control of the rate of release of the drug active by the variation
of polymer ratios. This technology is most useful for drug
molecules which require precisely controlled pseudo-first-order
release profiles, where the rate of release is proportional to the
amount available for dissolution as well as being proportional to
one other component; however the effect of the amount of drug is
overriding, so that the rate appears first-order. This type of
release control can be useful when attempting to match difficult
profiles for generic formulation.
IntelliPaste™
The
IntelliPaste™ technology is comprised of blends of multiple
polymers, oils, excipients and drug active(s) which result in a
paste-in-a-capsule dosage form. The physical attributes of the
paste include that it is thixotropic, pseudoplastic and
non-Newtonian or, in layman’s terms, like toothpaste.
Typically, it is formulated as having very low solubility in water
or oil, and low solubility in alcohol. These characteristics enable
the resulting drug product to have tamper-deterrent properties, and
to resist dissolution in even high concentrations of alcohol. As a
result, IntelliPaste™ is our preferred delivery technology
for the controlled delivery of opiates, narcotics and other central
nervous system drug products which are susceptible to unlawful
diversion or abuse.
IntelliPellets™
The
IntelliPellets™ technology consists of one or more type
(population) of granule, bead, pellet, or tablet in a holding
chamber or reservoir, such as a hard gelatin capsule. Each type
(population) may be uniquely different from the other in the manner
or rate it releases the drug. Our IntelliPellets™ technology
is designed to control, prolong, delay or modify the release of
drugs. It is particularly useful for the delivery of multiple
drugs, for delayed, timed, pulsed or for chronotherapeutic drug
delivery, designed to mimic our internal clocks for therapeutic
optimization (the drug is delivered in the right amount for the
patient at the right time). This technology is most useful for the
delivery of multiple-drug cocktails, or in situations where the
timing of a single dose or the sequencing of multiple doses of the
same drug is important.
IntelliShuttle™
The
IntelliShuttle™ technology provides for drug release past the
stomach, such as for drugs required for action beyond the stomach,
for drugs which could be destroyed by the stomach environment, or
for drugs which could harm the stomach itself. This technology
“shuttles” the drug past the stomach to be released at
predetermined times or sites where appropriate for optimum
therapeutic effect. This technology is most useful for acid labile
drug molecules (drugs that are destroyed in acid environment), such
as the proton pump inhibitors, of which well-known omeprazole
(Prilosec) and lansoprazole (Prevacid) are examples, or for drug
molecules which may harm the stomach, of which the well-known
aspirin is an example.
Each of
the above-noted proprietary technologies was fully developed and
ready for application to client drug delivery requirements from the
date of our inception. Each of them has been utilized and applied
to client drug delivery requirements under our existing and
previous development contracts; in several instances more than one
technology has been applied to a single drug development. We
continue to develop all of our existing technologies and to conduct
the necessary research to develop new products and
technologies.
Our Products and Product Candidates
The
table below shows the present status of our ANDA, ANDS and NDA
products and product candidates that have been disclosed to the
public.
Generic
name
|
Brand
|
Indication
|
Stage
of Development
(1)`
|
Regulatory
Pathway
|
Market
Size (in millions)
(2)
|
Rights
(3)
|
Dexmethylphenidate hydrochloride extended-release
capsules
|
Focalin
XR®
|
Attention deficit
hyperactivity disorder
|
Received final
approval for 5, 10,15, 20, 25, 30, 35 and 40 mg strengths from
FDA
(4)
|
ANDA
|
$851
|
Intellipharmaceutics
and Par (US)
Philippines rights
subject to licensing and distribution agreement
|
Levetiracetam extended-release tablets
|
Keppra XR®
|
Partial onset
seizures for epilepsy
|
Received final
approval for the 500 and 750 mg strengths from FDA
|
ANDA
|
$126
|
Intellipharmaceutics
Philippines and
Vietnamese rights subject to licensing and distribution
agreements
|
Venlafaxine hydrochloride extended-release capsules
|
Effexor XR
®
|
Depression
|
Received final
approval for 37.5, 75 and 150 mg strengths from FDA
|
ANDA
|
$774
|
Intellipharmaceutics
|
Pantoprazole sodium delayed- release tablets
|
Protonix
®
|
Conditions
associated with gastroesophageal reflux disease
|
ANDA application
for commercialization approval for 2 strengths under review by
FDA
|
ANDA
|
$367
|
Intellipharmaceutics
|
Metformin hydrochloride extended-release tablets
|
Glucophage® XR
|
Management of type
2 diabetes
|
Received final
approval for 500 and 750 mg strengths from FDA
|
ANDA
|
$388
(500 and 750 mg
only)
|
Intellipharmaceutics
Philippines and
Vietnamese rights subject to licensing and distribution
agreements
|
Quetiapine fumarate extended-release tablets
|
Seroquel XR®
|
Schizophrenia,
bipolar disorder & major depressive disorder
|
Received final FDA
approval for all 5 strengths. ANDS under review by Health
Canada
|
ANDA
|
$190
|
Intellipharmaceutics
and Mallinckrodt (US)
Philippines,
Malaysian and Vietnamese rights subject to licensing and
distribution agreements
|
Lamotrigine extended-release tablets
|
Lamictal® XR™
|
Anti-convulsant for
epilepsy
|
ANDA application
for commercialization approval for 6 strengths under review by
FDA
|
ANDA
|
$525
|
Intellipharmaceutics
and Mallinckrodt (US)
|
Desvenlafaxine extended-release tablets
|
Pristiq®
|
Depression
|
Received tentative
approval for the 50 and 100 mg strengths from FDA
|
ANDA
|
$279
|
Intellipharmaceutics
and Mallinckrodt (US)
|
Trazodone hydrochloride extended-release tablets
|
Oleptro™
|
Depression
|
ANDA application
for commercialization approval for 2 strengths under review by
FDA
|
ANDA
|
N/A
(5)
|
Intellipharmaceutics
|
Carvedilol phosphate extended- release capsules
|
Coreg CR®
|
Heart failure,
hypertension
|
Late-stage
development
|
ANDA
|
$66
|
Intellipharmaceutics
|
Oxycodone hydrochloride controlled-release capsules
|
OxyContin®
|
Pain
|
NDA application
accepted February 2017 and under review by FDA
|
NDA
505(b)(2)
|
$1,471
|
Intellipharmaceutics
Philippines rights
subject to licensing and distribution agreement
|
Pregabalin extended-release capsules
|
Lyrica®
|
Neuropathic
pain
|
IND
application submitted in August 2015
|
NDA
505(b)(2)
|
$5,425
|
Intellipharmaceutics
|
Ranolazine extended-release tablets
|
Ranexa®
|
Chronic
angina
|
ANDA application
for commercialization approval for 2 strengths under review by
FDA
|
ANDA
|
$1,013
|
Intellipharmaceutics
|
Oxycodone hydrochloride
immediate release tablets
(IPCI006)
|
Roxicodone®
|
Pain
|
IND application
submitted in November 2018
|
NDA
505(b)(2)
|
$653
|
Intellipharmaceutics
|
Notes
:
(1)
There can be no
assurance as to when, or if at all, the FDA or Health Canada will
approve any product candidate for sale in the U.S. or Canadian
markets.
(2)
Represents sales
for all strengths, unless otherwise noted, for the 12 months ended
January 2019 in the U.S., including sales of generics in TRx MBS
Dollars, which represents projected new and refilled prescriptions
representing a standardized dollar metric based on
manufacturer’s published catalog or list prices to
wholesalers, and does not represent actual transaction prices and
does not include prompt pay or other discounts, rebates or
reductions in price. Source: Symphony Health Solutions Corporation.
The information attributed to Symphony Health Solutions Corporation
herein is provided as is, and Symphony makes no representation
and/or warranty of any kind, including but not limited to, the
accuracy and/or completeness of such information.
(3)
For information
regarding the Par agreement, the Mallinckrodt agreement and the
licensing and distribution agreements with pharmaceutical
distributors in Malaysia, Vietnam and the Philippines, see
“Our Company” and “Other Potential Products and
Markets”. There can be no assurance as to when, or if at all,
any of our products or product candidates, as the case may be, will
receive regulatory approval for sale in the Philippines, Malaysia
or Vietnam. For unpartnered products, we are exploring licensing
agreement opportunities or other forms of distribution. While we
believe that licensing agreements are possible, there can be no
assurance that any can be secured.
(4)
Includes a Company
ANDA final approval for our 15 and 30 mg strengths, and a Par ANDA
final approval for their 5, 10, 15, 20, 25, 30, 35 and 40 mg
strengths. Profit sharing payments to us under the Par agreement
are the same irrespective of the ANDA owner.
(5)
Trazodone
Hydrochloride extended release tablets are not currently being
marketed in the United States.
We
typically select products for development that we anticipate could
achieve FDA or Health Canada approval for commercial sales several
years in the future. However, the length of time necessary to bring
a product to the point where the product can be commercialized can
vary significantly and depends on, among other things, the
availability of funding, design and formulation challenges, safety
or efficacy, patent issues associated with the product, and FDA and
Health Canada review times.
Dexmethylphenidate Hydrochloride – Generic
Focalin XR
®
(a
registered trademark of the brand manufacturer)
Dexmethylphenidate
hydrochloride, a Schedule II restricted product (drugs with a high
potential for abuse) in the U.S., is indicated for the treatment of
attention deficit hyperactivity disorder. In November 2005, we
entered into the Par agreement pursuant to which we granted Par an
exclusive, royalty-free license to make and distribute in the U.S.
all of our FDA approved strengths of our generic Focalin XR®
(dexmethylphenidate hydrochloride extended-release) capsules for a
period of 10 years from the date of commercial launch (which was
November 19, 2013). We retain the right to make and distribute all
strengths of the generic product outside of the U.S. Calendar
quarterly profit-sharing payments for its U.S. sales of all
strengths of generic Focalin XR® are payable by Par to us as
calculated pursuant to the Par agreement.
We
received final approval from the FDA in November 2013 under the
Company ANDA to launch the 15 and 30 mg strengths of our generic
Focalin XR
®
capsules.
Commercial sales of these strengths were launched immediately by
our commercialization partner in the U.S., Par. Our 5, 10, 20 and
40 mg strengths were also then tentatively FDA approved, subject to
the right of Teva to 180 days of generic exclusivity from the date
of first launch of such products. In January 2017, Par launched the
25 and 35 mg strengths of its generic Focalin XR
®
capsules in the
U.S., and in May 2017, Par launched the 10 and 20 mg strengths,
complementing the 15 and 30 mg strengths of our generic Focalin
XR
®
marketed by Par. In November 2017, Par launched the remaining 5 and
40 mg strengths providing us with the full line of generic Focalin
XR® strengths available in the U.S. market.
In
November 2018, we announced that we entered into an exclusive
licensing and distribution agreement with a pharmaceutical
distributor in the Philippines
pursuant
to which the distributor was granted the exclusive right, subject
to regulatory approval, to import and market our generic Focalin
XR® in the Philippines. Under the terms of the agreement, the
distributor will be required to purchase a minimum yearly quantity
of our generic Focalin XR®
and we
will be the exclusive supplier of such product. This multi-year
agreement is subject to early termination.
There
can be no assurance as to when and if such product will receive
regulatory approval for the sale in the Philippines or that, if so
approved, the product will be successfully commercialized there and
produce significant revenues for us.
Levetiracetam – Generic Keppra XR®
(a registered trademark of the brand
manufacturer)
We
received final approval from the FDA in February 2016 for the 500
and 750 mg strengths of our generic Keppra XR® (levetiracetam
extended-release) tablets. Keppra XR®, and the drug active
levetiracetam, are indicated for use in the treatment of partial
onset seizures associated with epilepsy. We are aware that several
other generic versions of this product are currently available and
serve to limit the overall market opportunity. We have been
actively exploring the best approach to maximize our commercial
returns from this approval and have been looking at several
international markets where, despite lower volumes, product margins
are typically higher than in the U.S.
In
November 2018, we announced that we entered into two exclusive
licensing and distribution agreements with pharmaceutical
distributors in Vietnam and the Philippines pursuant to which the
distributors were granted the exclusive right, subject to
regulatory approval, to import and market our generic Keppra
XR® in Vietnam and the Philippines, respectively. Under the
terms of the agreements, the distributors will be required to
purchase a minimum yearly quantity of our generic Keppra
XR®.
These
multi-year agreements are each subject to early
termination.
There
can be no assurance that the Company's generic Keppra XR® for
the 500 and 750 mg strengths will be successfully
commercialized.
Further,
there can be no assurance as to when and if such product will
receive regulatory approval for the sale in Vietnam or the
Philippines or that, if so approved, the product will be
successfully commercialized there and produce significant revenues
for us.
Metformin hydrochloride – Generic Glucophage® XR
(a registered trademark of the
brand manufacturer)
We
received final approval from the FDA in February 2017 for the 500
and 750 mg strengths of our generic Glucophage® XR (metformin
hydrochloride extended release) tablets. Glucophage® XR, and
the drug active metformin, are indicated for use in the management
of type 2 diabetes treatment. The Company is aware that several
other generic versions of this product are currently available and
serve to limit the overall market opportunity, however, we are
continuing to evaluate options to realize commercial returns on
this product, particularly in international markets.
In
November 2018, we announced that we entered into two exclusive
licensing and distribution agreements with pharmaceutical
distributors in the Vietnam and the Philippines pursuant to which
the distributors were granted the exclusive right, subject to
regulatory approval, to import and market our generic
Glucophage® XR in Vietnam and the Philippines, respectively.
Under the terms of the agreements, the distributors will be
required to purchase a minimum yearly quantity of our generic
Glucophage® XR.
These
multi-year agreements are each subject to early
termination.
There
can be no assurance that our generic Glucophage® XR for the
500 and 750 mg strengths will be successfully
commercialized.
Further,
there can be no assurance as to when and if such product will
receive regulatory approval for the sale in Vietnam or the
Philippines or that, if so approved, the product will be
successfully commercialized there and produce significant revenues
for us.
Venlafaxine hydrochloride – Effexor XR®
(a registered trademark of the
brand manufacturer)
We
received final approval from the FDA in November 2018 for our ANDA
for venlafaxine hydrochloride extended-release capsules in the
37.5, 75 and 150 mg strengths. The approved product is a generic
equivalent of the branded product Effexor® XR sold in the U.S.
by Wyeth Pharmaceuticals, LLC. Effexor® XR, and the drug
active venlafaxine hydrochloride, are indicated for the treatment
of major depressive disorder, or MDD. We are actively exploring the
best approach to maximize our commercial returns from this
approval. We are aware that several other generic versions of this
product are currently available and serve to limit the overall
market opportunity. There can be no assurance that the Company's
venlafaxine hydrochloride extended-release capsules for the 37.5
mg, 75 mg, and 150 mg will be successfully commercialized and
produce significant revenue for us.
Oxycodone ER (Abuse Deterrent Oxycodone Hydrochloride
Extended-Release Tablets)
One of
our non-generic products under development is our Oxycodone ER
(abuse deterrent oxycodone hydrochloride extended release tablets)
product candidate, intended as an abuse and alcohol-deterrent
controlled-release oral formulation of oxycodone hydrochloride for
the relief of pain. Our Oxycodone ER is a new drug candidate, with
a unique long acting oral formulation of oxycodone intended to
treat moderate-to-severe pain when a continuous, around the clock
opioid analgesic is needed for an extended period of time. The
formulation is intended to present a significant barrier to
tampering when subjected to various forms of physical and chemical
manipulation commonly used by abusers. It is also designed to
prevent dose dumping when inadvertently co-administered with
alcohol. Dose dumping is the rapid release of an active ingredient
from a controlled-release drug into the blood stream that can
result in increased toxicity, side effects, and a loss of efficacy.
Dose dumping can result by consuming the drug through crushing,
taking with alcohol, extracting with other beverages, vaporizing or
injecting. In addition, when crushed or pulverized and hydrated,
the proposed extended release formulation is designed to coagulate
instantaneously and entrap the drug in a viscous hydrogel, which is
intended to prevent syringing, injecting and snorting. Our
Oxycodone ER formulation is difficult to abuse through the
application of heat or an open flame, making it difficult to inhale
the active ingredient from burning.
In
March 2015, we announced the results of three definitive open
label, blinded, randomized, cross-over, Phase I pharmacokinetic
clinical trials in which our Oxycodone ER was compared to the
existing branded drug OxyContin® (extended release oxycodone
hydrochloride) under single dose fasting, single dose steady-state
fasting and single dose fed conditions in healthy volunteers. We
had reported that the results from all three studies showed that
Oxycodone ER met the bioequivalence criteria (90% confidence
interval of 80% to 125%) for all matrices, i.e., on the measure of
maximum plasma concentration or Cmax, on the measure of area under
the curve time (AUC
t
) and on the
measure of area under the curve infinity (AUC
inf
).
In May
2015, the FDA provided us with notification regarding our IND
submission for Oxycodone ER indicating that we would not be
required to conduct Phase III studies if bioequivalence to
OxyContin® was demonstrated based on pivotal bioequivalence
studies.
In
January 2016, we announced that pivotal bioequivalence trials of
our Oxycodone ER, dosed under fasted and fed conditions, had
demonstrated bioequivalence to OxyContin® extended release
tablets as manufactured and sold in the U.S. by Purdue. The study
design was based on FDA recommendations and compared the lowest and
highest strengths of exhibit batches of our Oxycodone ER to the
same strengths of OxyContin®. The results show that the ratios
of the pharmacokinetic metrics, Cmax, AUC
0-t
and
AUC
0-f
for Oxycodone ER vs OxyContin®, are within the interval of 80%
- 125% required by the FDA with a confidence level exceeding
90%.
In July
2016, we announced the results of a food effect study conducted on
our behalf for Oxycodone ER. The study design was a
randomized, one-treatment two periods, two sequences, crossover,
open label, laboratory-blind bioavailability study for Oxycodone ER
following a single 80 mg oral dose to healthy adults under fasting
and fed conditions. The study showed that Oxycodone ER can be
administered with or without a meal (i.e., no food effect).
Oxycodone ER met the bioequivalence criteria (90% confidence
interval of 80% to 125%) for all matrices, involving maximum plasma
concentration and area under the curve (i.e., Cmax ratio of
Oxycodone ER taken under fasted conditions to fed conditions, and
AUC metrics taken under fasted conditions to fed conditions). We
believe that Oxycodone ER is well differentiated from currently
marketed oral oxycodone extended release products.
In
November 2016, we filed an NDA seeking authorization to market our
Oxycodone ER in the 10, 15, 20, 30, 40, 60 and 80 mg strengths,
relying on the 505(b)(2) regulatory pathway which allowed us to
reference data from Purdue’s file for its OxyContin®. In
February 2017, the FDA accepted for filing our NDA, and set a
Prescription Drug User Fee Act, or PDUFA, target action date of
September 25, 2017. Our submission is supported by pivotal
pharmacokinetic studies that demonstrated that Oxycodone ER is
bioequivalent to OxyContin®. The submission also includes
abuse-deterrent studies conducted to support abuse-deterrent label
claims related to abuse of the drug by various pathways, including
oral, intra-nasal and intravenous, having reference to the FDA's
"Abuse-Deterrent Opioids - Evaluation and Labeling" guidance
published in April 2015.
Our NDA
was filed under Paragraph IV of the Hatch-Waxman Act, as amended.
We certified to the FDA that we believed that our Oxycodone
ER
product
candidate would not infringe any of the OxyContin® patents
listed in the FDA’s Orange Book, or that such patents are
invalid, and so notified all holders of the subject patents of such
certification. On April 7, 2017, we received notice that Purdue,
Purdue Pharmaceuticals L.P., The P.F. Laboratories, Inc., or
collectively the Purdue parties, Rhodes Technologies, and
Grünenthal GmbH, or collectively the Purdue litigation
plaintiffs, had commenced patent infringement proceedings, or the
Purdue litigation, against us in the U.S. District Court for the
District of Delaware (docket number 17-392) in respect of our NDA
filing for Oxycodone ER, alleging that our proposed Oxycodone ER
infringes 6 out of the 16 patents associated with the branded
product OxyContin®, or the OxyContin® patents, listed in
the Orange Book. The complaint seeks injunctive relief as well as
attorneys' fees and costs and such other and further relief as the
Court may deem just and proper. An answer and counterclaim have
been filed.
Subsequent to the
above-noted filing of lawsuit, 4 further such patents were listed
and published in the Orange Book. We then similarly certified to
the FDA concerning such further patents. On March 16, 2018, we
received notice that the Purdue litigation plaintiffs had commenced
further such patent infringement proceedings adding the 4 further
patents. This lawsuit is also in the District of Delaware federal
court under docket number 18-404.
As a
result of the commencement of the first of these legal proceedings,
the FDA is stayed for 30 months from granting final approval to our
Oxycodone ER product candidate. That time period commenced on
February 24, 2017, when the Purdue litigation plaintiffs received
notice of our certification concerning the patents, and will expire
on August 24, 2019, unless the stay is earlier terminated by a
final declaration of the courts that the patents are invalid, or
are not infringed, or the matter is otherwise settled among the
parties.
On or
about June 26, 2018, the court issued an order to sever 6
“overlapping” patents from the second Purdue case, but
ordered litigation to proceed on the 4 new (2017-issued) patents.
An answer and counterclaim was filed on July 9, 2018. The existence
and publication of additional patents in the Orange Book, and
litigation arising therefrom, is an ordinary and to be expected
occurrence in the course of such litigation.
On July
6, 2018, the court issued a so-called “Markman” claim
construction ruling on the first case and the October 22, 2018
trial date remained unchanged. We believe that we have
non-infringement and/or invalidity defenses to all of the asserted
claims of the subject patents in both of the cases and will
vigorously defend against these claims.
On July
24, 2018, the parties to the case mutually agreed to and did have
dismissed the infringement claims related to the Grünenthal
‘060 patent. The Grünenthal ‘060 patent is one of
the six patents included in the original litigation case, however,
the dismissal does not by itself result in a termination of the
30-month litigation stay.
On
October 4, 2018, the parties mutually agreed to postpone the
scheduled court date pending a case status conference scheduled for
December 17, 2018.
At that time,
further trial scheduling and other administrative matters were
postponed pending the Company’s anticipated resubmission of
the Oxycodone ER NDA to the FDA, which is due no later than
February 28, 2019.
In June
2017, we announced that a joint meeting of the Anesthetic and
Analgesic Drug Products Advisory Committee and Drug Safety and Risk
Management Advisory Committee of the FDA (together, the
“
Advisory
Committees
”) meeting was scheduled for July 26, 2017
to review our NDA for Oxycodone ER. The submission requested that
our Oxycodone ER product candidate include product label claims to
support the inclusion of language regarding abuse-deterrent
properties for the intravenous route of
administration.
In July
2017, the Company announced that the FDA Advisory Committees voted
22 to 1 in finding that the Company’s NDA for Oxycodone ER
should not be approved at this time. The Advisory Committees also
voted 19 to 4 that the Company had not demonstrated that Oxycodone
ER has properties that can be expected to deter abuse by the
intravenous route of administration, and 23 to 0 that there was not
sufficient data for Oxycodone ER to support inclusion of language
regarding abuse-deterrent properties in the product label for the
intravenous route of administration. The Advisory Committees
expressed a desire to review the additional safety and efficacy
data for Oxycodone ER that may be obtained from human abuse
potential studies for the oral and intranasal routes of
administration.
In
September 2017, the Company received a CRL from the FDA for the
Oxycodone ER NDA. In its CRL, the FDA provided certain
recommendations and requests for information, including that
Intellipharmaceutics complete Category 2 and Category 3 studies to
assess the abuse-deterrent properties of Oxycodone ER by the oral
and nasal routes of administration. The FDA also requested
additional information related to the inclusion of the blue dye in
the Oxycodone ER formulation, which is intended to deter abuse. The
FDA also requested that Intellipharmaceutics submit an alternate
proposed proprietary name for Oxycodone ER. The FDA determined that
it could not approve the application in its present form. The FDA
has granted our request for an extension to February 28, 2019 to
resubmit our NDA for Oxycodone ER under section 505(b)(2) of the
U.S. Federal Food, Drug and Cosmetic Act.
In
February 2018, the Company met with the FDA to discuss the
above-referenced CRL for Oxycodone ER, including issues related to
the blue dye in the product candidate. Based on those discussions,
the product candidate will no longer include the blue dye. The blue
dye was intended to act as an additional deterrent if Oxycodone ER
is abused and serve as an early warning mechanism to flag potential
misuse or abuse. The FDA confirmed that the removal of the blue dye
is unlikely to have any impact on formulation quality and
performance. As a result, the Company will not be required to
repeat in vivo bioequivalence studies and pharmacokinetic studies
submitted in the Oxycodone ER NDA. The FDA also indicated that,
from an abuse liability perspective, Category 1 studies will not
have to be repeated on Oxycodone ER with the blue dye
removed.
The
abuse liability studies for the intranasal route of abuse commenced
in May 2018 with subject screening, while the studies to support
abuse-deterrent label claims for the oral route of abuse commenced
in June 2018. The clinical part of both studies has now been
completed. Bioanalytical testing and statistical analysis for such
studies are pending.
There
can be no assurance that the studies will be adequate, that we will
not be required to conduct further studies for Oxycodone ER, that
the FDA will approve any of the Company’s requested
abuse-deterrence label claims or that the FDA will ultimately
approve our NDA for the sale of Oxycodone ER in the U.S. market, or
that it will ever be successfully commercialized and produce
significant revenue for us
In
November 2018, we announced that we entered into an exclusive
licensing and distribution agreement with a pharmaceutical
distributor in the Philippines
pursuant
to which the distributor was granted the exclusive right, subject
to regulatory approval, to import and market Oxycodone ER in the
Philippines. Under the terms of the agreement, the distributor will
be required to purchase a minimum yearly quantity of our Oxycodone
ER and we will be the exclusive supplier of our Oxycodone ER. This
multi-year agreement is subject to early termination. There can be
no assurance as to when and if such product candidate will receive
regulatory approval for the sale in the Philippines or that, if so
approved, the product will be successfully commercialized there and
produce significant revenues for us.
Oxycodone Hydrochloride IR Tablets (IPCI006) (Abuse Deterrent
and Overdose Resistant Oxycodone Hydrochloride Immediate Release
Tablets) – ROXICODONE®
In
November 2018, we announced that we had submitted an IND
application to the FDA for our IPCI006 oxycodone hydrochloride
immediate release tablets in the 5, 10, 15, 20 and 30 mg strengths.
This novel drug formulation incorporates the Company's
PODRAS™, or Paradoxical OverDose Resistance Activating
System, delivery technology and its nPODDDS™, or novel Point
Of Divergence Drug Delivery System, technology. IPCI006 is designed
to prevent, delay or limit the release of oxycodone hydrochloride
when more intact tablets than prescribed are ingested, thus
delaying or preventing overdose and allowing for sufficient time
for a rescue or medical intervention to take place. It is also
intended to present a significant barrier to abuse by snorting,
"parachuting," injecting or smoking finely crushed oxycodone
hydrochloride immediate release tablets. The data generated from
the studies conducted under this IND is expected to form part of an
NDA seeking FDA approval for IPCI006 tablets.
If
approved, IPCI006 may be the first immediate release formulation of
oxycodone hydrochloride intended to simultaneously prevent or delay
overdose and prevent abuse by intranasal or intravenous
routes.
There
can be no assurance that we will be successful in submitting any
NDA with the FDA, that the FDA will approve the Company's IPCI006
product candidate for sale in the U.S. market or any related
abuse-deterrent label claims, or that it will ever be successfully
commercialized and produce significant revenue for us.
Quetiapine fumarate extended-release tablets - Generic Seroquel
XR®
(a registered
trademark of the brand manufacturer)
In May
2017, we received final approval from the FDA for our ANDA for
quetiapine fumarate extended-release tablets in the 50, 150, 200,
300 and 400 mg strengths. Our approved product is a generic
equivalent for the corresponding strengths of the branded product
Seroquel XR® sold in the U.S. by AstraZeneca. Pursuant to a
settlement agreement between us and AstraZeneca dated July 30,
2012, we were permitted to launch our generic versions of the 50,
150, 200, 300 and 400 mg strengths of generic Seroquel XR®, on
November 1, 2016, subject to FDA final approval of our ANDA for
those strengths. Our final FDA approval followed the expiry of
180-day exclusivity periods granted to the first filers of generic
equivalents to the branded product, which were shared by Par and
Accord Healthcare. The Company manufactured and shipped commercial
quantities of all strengths of generic Seroquel XR® to our
marketing and distribution partner Mallinckrodt, and Mallinckrodt
launched all strengths in June 2017.
In
November 2018, we announced that we entered into three exclusive
licensing and distribution agreements with pharmaceutical
distributors in Malaysia, Vietnam and the Philippines pursuant to
which the distributors were granted the exclusive right, subject to
regulatory approval, to import and market our generic Seroquel
XR® in Malaysia, Vietnam and the Philippines, respectively.
Under the terms of the agreements, the distributors will be
required to purchase a minimum yearly quantity of our generic
Seroquel XR®. The multi-year agreements are each subject to
early termination. There can be no assurance as to when and if such
product will receive regulatory approval for the sale in Malaysia,
Vietnam or the Philippines or that, if so approved, the product
will be successfully commercialized there and produce significant
revenues for us.
Desvenlafaxine succinate extended-release tablets – Generic
Pristiq®
(a registered
trademark of the brand manufacturer)
In
February 2019, we received tentative approval from the FDA for our
ANDA for desvenlafaxine extended-release tablets in the 50 and 100
mg strengths. This product is a generic equivalent of the branded
product Pristiq® sold in the U.S. by Wyeth Pharmaceuticals,
LLC. There can be no assurance that our desvenlafaxine
extended-release tablets in the 50 and 100 mg strengths will
receive final FDA approval or, if approved, that they will be
successfully commercialized and produce significant revenue for us.
We previously announced that we had entered into a license and
commercial supply agreement with Mallinckrodt, which granted
Mallinckrodt, subject to its terms, an exclusive license to market,
sell and distribute in the U.S. the Company's desvenlafaxine
extended-release tablets (generic Pristiq®). Among other
things, the agreement provides for the Company to have a long-term
profit sharing arrangement with respect to the licensed product.
Intellipharmaceutics has agreed to manufacture and supply the
licensed product exclusively for Mallinckrodt on a cost-plus basis,
and Mallinckrodt has agreed that Intellipharmaceutics will be its
sole supplier of the licensed product marketed in the
U.S.
Regabatin™
XR (Pregabalin Extended-Release)
Another
Intellipharmaceutics non-generic controlled-release product under
development is Regabatin™ XR, pregabalin extended-release
capsules. Pregabalin is indicated for the management of neuropathic
pain associated with diabetic peripheral neuropathy, postherpetic
neuralgia, spinal cord injury and fibromyalgia. A
controlled-release version of pregabalin should reduce the number
of doses patients take, which could improve patient compliance, and
therefore possibly enhance clinical outcomes. Lyrica®
pregabalin, twice-a-day (“
BID
”) dosage and three-times-a-day
(“
TID
”) dosage,
are drug products marketed in the U.S. by Pfizer Inc. In October
2017, Pfizer also received approval for a Lyrica® CR, a
controlled-release version of pregabalin. In 2014, we conducted and
analyzed the results of six Phase I clinical trials involving a
twice-a-day formulation and a once-a-day formulation. For
formulations directed to certain indications which include
fibromyalgia, the results suggested that Regabatin™ XR 82.5
mg BID dosage was comparable in bioavailability to Lyrica® 50
mg (immediate-release pregabalin) TID dosage. For formulations
directed to certain other indications which include neuropathic
pain associated with diabetic peripheral neuropathy, the results
suggested that Regabatin™ XR 165 mg once-a-day dosage was
comparable in bioavailability to Lyrica® 75 mg BID
dosage.
In
March 2015, the FDA accepted a Pre-Investigational New Drug (or
Pre-IND) meeting request for our once-a-day Regabatin™ XR
non-generic controlled release version of pregabalin under the NDA
505(b)(2) regulatory pathway, with a view to possible
commercialization in the U.S. at some time following the December
30, 2018 expiry of the patent covering the pregabalin molecule.
Regabatin™ XR is based on our controlled release drug
delivery technology platform which utilizes the symptomatology and
chronobiology of fibromyalgia in a formulation intended to provide
a higher exposure of pregabalin during the first 12 hours of
dosing. Based on positive feedback and guidance from the FDA, we
submitted an IND application for Regabatin
TM
XR in August 2015.
The FDA completed its review of the IND application and provided
constructive input that we will use towards further development of
the program. We believe our product candidate has significant
additional benefits to existing treatments and are currently
evaluating strategic options to advance this
opportunity.
There
can be no assurance that any additional Phase I or other clinical
trials we conduct will meet our expectations, that we will have
sufficient capital to conduct such trials, that we will be
successful in submitting an NDA 505(b)(2) filing with the FDA, that
the FDA will approve this product candidate for sale in the U.S.
market, or that it will ever be successfully
commercialized.
Other Potential Products and Markets
We are
continuing our efforts to identify opportunities internationally,
particularly in China, that could if effectuated provide product
distribution alternatives through partnerships and therefore would
not likely require an investment or asset acquisition by us.
Discussions toward establishing a partnership to facilitate future
development activities in China are ongoing. We have not at this
time entered into and may not ever enter into any such
arrangements.
In
addition, we are seeking to develop key relationships in several
other international jurisdictions where we believe there may be
substantial demand for our generic products. These opportunities
could potentially involve out-licensing of our products,
third-party manufacturing supply and more efficient access to
pharmaceutical ingredients and therefore assist with the
development of our product pipeline.
In
November 2018, we announced that we had entered into an exclusive
licensing and distribution agreement for our abuse resistant
Oxycodone ER product candidate and four generic drug products with
a pharmaceutical distributor in the Philippines. Under the terms of
the agreement the distributor was granted the exclusive right,
subject to regulatory approval, to import and market our first
novel drug formulation, abuse-deterrent Oxycodone ER, in the
Philippines. Additionally, this distributor was granted, subject to
regulatory approval, the exclusive right to import and market our
generic Seroquel XR®, Focalin XR®, Glucophage® XR,
and Keppra XR® in the Philippines. Under the terms of the
agreement, the distributor will be required to purchase a minimum
yearly quantity of all products included in the agreement and we
will be the exclusive supplier of said products. The multi-year
agreement with the Philippines distributor is subject to early
termination. Financial terms of the agreement have not been
disclosed. There can be no assurance as to when or if any of our
products or product candidates will receive regulatory approval for
sale in the Philippines or that, if so approved, any such products
will be successfully commercialized there and produce significant
revenues for us. Moreover, there can be no assurance that we will
not be required to conduct further studies for Oxycodone ER, that
the FDA will approve any of our requested abuse-deterrent label
claims or that the FDA will ultimately approve the NDA for the sale
of Oxycodone ER in the U.S. market, or that it will ever be
successfully commercialized.
In
November 2018, we announced that we had entered into two exclusive
licensing and distribution agreements with pharmaceutical
distributors in Malaysia and Vietnam.
A
Malaysian pharmaceutical distribution company was granted the
exclusive right, subject to regulatory approval, to import and
market our generic Seroquel XR® (quetiapine fumarate
extended-release) in Malaysia. Under the terms of the agreement,
four strengths (50, 200, 300 and 400 mg) of generic Seroquel
XR® will be manufactured and supplied by us for distribution
in Malaysia. We are also in discussions to include other products
in the agreement with said distributor, who will be required to
purchase a minimum yearly quantity of all products included in the
agreement.
A
Vietnamese pharmaceutical distributor was granted the exclusive
right, subject to regulatory approval, to import and market our
generic Seroquel XR®, Glucophage® XR, and Keppra XR®
in Vietnam. Under the terms of the agreement, two strengths (500
and 750 mg) of generic Glucophage® XR, three strengths (50,
150 and 200 mg) of generic Seroquel XR® and one strength (500
mg) of generic Keppra XR® will be manufactured and supplied by
us for distribution in Vietnam. The Vietnamese distributor will be
required to purchase a minimum yearly quantity of all products
included in the agreement.
The
multi-year agreements with the Malaysian and Vietnamese
distributors are each subject to early termination. Financial terms
of the agreements have not been disclosed. There can be no
assurance as to when or if any of our products will receive
regulatory approval for sale in Malaysia or Vietnam or that, if so
approved, the products will be successfully commercialized there
and produce significant revenues for the Company.
Additionally, in
January 2018, we announced we had commenced a R&D program for
CBD based products. As part of this
R&D
program, we filed multiple provisional patent applications with the
United States Patent and Trademark Office pertaining to the
delivery and application of cannabinoid-based therapeutics, began
talks with potential commercialization partners in the cannabidiol
industry, and identified a potential supplier of CBD. The patent
filings, together with certain of our already issued drug delivery
patents, are intended to form the basis of the development of a
pipeline of novel controlled-release product candidates with CBD as
the main active ingredient.
COMPETITIVE ENVIRONMENT
We are
engaged in a business characterized by extensive research efforts,
rapid technological developments and intense competition. Our
competitors include medical technology, pharmaceutical,
biotechnology and other companies, universities and research
institutions. All of these competitors currently engage in, have
engaged in or may engage in the future, in development,
manufacturing, marketing and commercialization of new
pharmaceuticals and existing pharmaceuticals, some of which may
compete with our present or future products and product
candidates.
Our
drug delivery technologies may compete with existing drug delivery
technologies, as well as new drug delivery technologies that may be
developed or commercialized in the future. Any of these drugs and
drug delivery technologies may receive government approval or gain
market acceptance more rapidly than our products and product
candidates. As a result, our products and product candidates may
become non-competitive or obsolete.
We
believe that our ability to successfully compete will depend on,
among other things, the efficacy, safety and reliability of our
products and product candidates, the timing and scope of regulatory
approval, the speed at which we develop product candidates, our, or
our commercialization partners
’
, ability to manufacture and sell
commercial quantities of a product to the market, product
acceptance by physicians and other professional healthcare
providers, the quality and breadth of our technologies, the skills
of our employees and our ability to recruit and retain skilled
employees, the protection of our intellectual property, and the
availability of substantial capital resources to fund development
and commercialization activities.
MANUFACTURING
We have
internal manufacturing capabilities consisting of current Good
Laboratory Practices (
“
cGLP
”
) research laboratories and a cGMP
manufacturing plant for solid oral dosage forms at our 30 Worcester
Road Facility (as defined in Item 4.D. below). Raw materials used
in manufacturing our products are available from a number of
commercial sources and the prices for such raw materials are
generally not particularly volatile. In October 2014, the FDA
provided us with written notification that the 30 Worcester Road
Facility had received an
“
acceptable
”
classification. Such inspections
are carried out on a regular basis by the FDA and an
“
acceptable
”
classification is necessary to
permit us to be in a position to receive final approvals for ANDAs
and NDAs and to permit manufacturing of drug products intended for
commercial sales in the United States after any such approvals.
Similarly, Health Canada completed an inspection of our 30
Worcester Road Facility in September 2015 which resulted in a
“
compliant
”
rating. Once we have completed
certain renovations to our newly-leased 22 Worcester Road Facility
(as defined in Item 4.D. below), we plan to request an inspection
by regulatory agencies which will determine compliance of the
facility with cGMP.
INTELLECTUAL PROPERTY
Proprietary rights
are an important aspect of our business. These include know-how,
trade secrets and patents. Know-how and trade secrets are protected
by internal company policies and operating procedures, and where
necessary, by contractual provisions with development partners and
suppliers. We also seek patent protection for inventive advances
which form the basis of our drug delivery technologies. With
respect to particular products, we may seek patent protection on
the commercial composition, our methods of production and our uses,
to prevent the unauthorized marketing and sale of competitive
products.
Patents
which relate to and protect various aspects of our
Hypermatrix
™
family of
drug delivery technologies include the following United States,
Japanese, Chinese, Indian, Canadian and European patents which have
been issued to us:
Country
|
Issue
Date
|
|
Title
|
U.S.A.
|
October 31,
2017
|
9,801,939
|
Compositions and
Methods For Reducing Overdose
|
U.S.A.
|
July 11,
2017
|
9,700,516
|
Compositions and
Methods For Reducing Overdose
|
U.S.A.
|
July 11,
2017
|
9,700,515
|
Compositions and
Methods For Reducing Overdose
|
U.S.A.
|
Dec 20,
2016
|
9,522,119
|
Compositions and
Methods For Reducing Overdose
|
U.S.A.
|
July 14,
2015
|
9,078,827
|
Pharmaceutical
Composition Having Reduced Abuse Potential
|
U.S.A.
|
Aug 12,
2014
|
8,802,139
|
Proton
Pump-Inhibitor-Containing Capsules Which Comprise Subunits
Differently Structured For A Delayed Release Of The Active
Ingredient
|
U.S.A.
|
Dec 10,
2013
|
8,603,520
|
Oral
Multi-functional Pharmaceutical Capsule Preparations of Proton Pump
Inhibitors
|
U.S.A.
|
Mar 12,
2013
|
8,394,409
|
Controlled Extended
Drug Release Technology
|
U.S.A.
|
Mar 15,
2011
|
7,906,143
|
Controlled Release
Pharmaceutical Delivery Device and Process for Preparation
Thereof
|
U.S.A.
|
Dec 28,
2010
|
7,858,119
|
Extended Release
Pharmaceuticals
|
U.S.A.
|
Aug 15,
2006
|
7,090,867
|
Controlled Release
Delivery Device for Pharmaceutical Agents Incorporating Microbial
Polysaccharide Gum
|
U.S.A.
|
Oct 5,
2004
|
6,800,668
|
Syntactic
Deformable Foam Compositions and Methods for Making
|
U.S.A.
|
Nov 25,
2003
|
6,652,882
|
Controlled Release
Formulation Containing Bupropion
|
U.S.A.
|
Aug 19,
2003
|
6,607,751
|
Novel Controlled
Release Delivery Device for Pharmaceutical Agents Incorporating
Microbial Polysaccharide Gum
|
U.S.A.
|
Nov 12,
2002
|
6,479,075
|
Pharmaceutical
Formulations for Acid Labile Substances
|
U.S.A.
|
Oct 2,
2001
|
6,296,876
|
Pharmaceutical
Formulations for Acid Labile Substances
|
Japan
|
Aug 28,
2015
|
5,798,293
|
Pharmaceutical
Composition Having Reduced Abuse Potential
|
Japan
|
Jan 17,
2014
|
5,457,830
|
Controlled Release
Delivery Device Comprising An Organosol Coat
|
Japan
|
Aug 8,
2014
|
5,592,547
|
Drug Delivery
Composition
|
Japan
|
Aug 30,
2013
|
5,349,290
|
Drug Delivery
Composition
|
India
|
Feb 10,
2015
|
265,141
|
Pharmaceutical
Composition Having Reduced Abuse Potential
|
Europe
|
Nov 26,
2014
|
2,007,360
|
Controlled Release
Delivery Device Comprising an Organosol Coat
|
Canada
|
May 26,
2015
|
2,579,382
|
Controlled Release Composition Using Transition
Coating, And Method Of Preparing Same/
Controlled Release Delivery
Device
|
Canada
|
Jan 28,
2014
|
2,571,897
|
Controlled Extended
Drug Release Technology
|
Canada
|
Apr 8,
2014
|
2,576,556
|
/Drug Delivery
Device
|
Canada
|
Mar 11,
2014
|
2,648,280
|
Controlled Release
Delivery Device Comprising an Organosol Coat
|
Canada
|
Jun 19,
2012
|
2,626,558
|
Pharmaceutical
Composition having Reduced Abuse Potential
|
Canada
|
Sep 25,
2012
|
2,529,984
|
Oral
Multi-Functional Pharmaceutical Capsule Preparations of Proton Pump
Inhibitors
|
Canada
|
Feb 22,
2011
|
2,459,857
|
Combinatorial Type
Controlled Release Drug Delivery Device
|
Canada
|
Mar 15,
2005
|
2,435,276
|
Syntactic
Deformable Foam Compositions and Methods for Making
|
In
addition to these issued patents, we have several U.S. patent
applications, and corresponding foreign applications pending,
including Patent Cooperation Treaty - national stage processing and
entry applications, relating to various aspects of our
HyperMatrix
TM
drug delivery
technologies, including methods and compositions for coating of
tablets and beads, compositions incorporating disintegrants to
assist in controlled release, compositions incorporating multiple
drug actives, and compositions directed to classes of drug actives
designed as therapies for specific indications and compositions
intended to enhance deterrence of willful abuse of narcotic
compositions.
REGULATORY REQUIREMENTS
We
focus on the development of both branded drug products (which
require NDAs) and generic drug products (which require ANDAs). The
research and development, manufacture and marketing of
controlled-release pharmaceuticals are subject to regulation by
U.S., Canadian and other governmental authorities and agencies.
Such national agencies and other federal, state, provincial and
local entities regulate the testing, manufacturing, safety and
promotion of our products. The regulations applicable to our
products may change as the currently limited number of approved
controlled-release products increases and regulators acquire
additional experience in this area.
United States Regulation
New Drug Application
We will
be required by the FDA to comply with NDA procedures for our
branded products prior to commencement of marketing by us or our
licensees. New drug compounds and new formulations for existing
drug compounds which cannot be filed as ANDAs, but follow a
505(b)(2) regulatory pathway, are subject to NDA
procedures.
These
procedures for a new drug compound include (a) preclinical
laboratory and animal toxicology tests; (b) scaling and testing of
production batches; (c) submission of an IND, and subsequent
approval is required before any human clinical trials can commence;
(d) adequate and well controlled replicate human clinical trials to
establish the safety and efficacy of the drug for its intended
indication; (e) the submission of an NDA to the FDA; and (f) FDA
approval of an NDA prior to any commercial sale or shipment of the
product, including pre-approval and post-approval inspections of
our manufacturing and testing facilities. If all of this data in
the product application is owned by the applicant, the FDA will
issue its approval without regard to patent rights that might be
infringed or exclusivity periods that would affect the
FDA
’
s ability to grant an
approval if the application relied upon data which the applicant
did not own.
Preclinical
laboratory and animal toxicology tests may have to be performed to
assess the safety and potential efficacy of the product. The
results of these preclinical tests, together with information
regarding the methods of manufacture of the products and quality
control testing, are then submitted to the FDA as part of an IND
requesting authorization to initiate human clinical trials. Once
the IND notice period has expired, clinical trials may be
initiated, unless an FDA hold on clinical trials has been
issued.
A new
formulation for an existing drug compound requires a 505(b)(2)
application. This application contains full reports of
investigations of safety and effectiveness but at least some
information required for approval comes from studies not conducted
by or for the applicant and for which the applicant has not
obtained a right of reference. A 505(b)(2) application is submitted
when some specific information necessary for approval is obtained
from: (1) published literature and/or (2) the FDA findings of
safety and effectiveness for an approved drug. The FDA has
implemented this approach to encourage innovation in drug
development without requiring duplicative studies while protecting
the patent and exclusivity rights for the approved drug. A
505(b)(2) application can be submitted for a new chemical entity, a
new molecular entity or any changes to previously approved drugs
such as dosage form, strength, route of administration,
formulation, indication, or bioinequivalence where the application
may rely on the FDA
’
s
finding on safety and effectiveness of the previously approved
drug. In addition, the applicant may also submit a 505(b)(2)
application for a change in drug product that is eligible for
consideration pursuant to a suitability petition. For example, a
505(b)(2) application would be appropriate for a controlled-release
product that is bioinequivalent to a reference listed drug where
the proposed product is at least as bioavailable and the pattern of
release is at least as favorable as the approved pharmaceutically
equivalent product. A 505(b)(2) application may be granted three
years of exclusivity if one or more clinical investigations, other
than bioavailability/bioequivalence studies, was essential to the
approval and conducted or sponsored by the applicant; five years of
exclusivity is granted if it is for a new chemical entity. A
505(b)(2) application may also be eligible for orphan drug and
pediatric exclusivity.
A
505(b)(2) application must contain the following: (1)
identification of those portions of the application that rely on
the information the applicant does not have a right of reference,
(2) identification of any or all listed drugs by established name,
proprietary name, dosage form, strength, route of administration,
name of the listed drug
’
s
sponsor, and the application number if application relies on the
FDA
’
s previous findings
of safety and effectiveness for a listed drug, (3) information with
respect to any patents that claim the drug or the use of the drug
for which approval is sought, (4) patent certifications or
statement with respect to any relevant patents that claim the
listed drug, (5) if approval for a new indication, and not for the
indications approved for the listed drug, a certification so
stating, (6) a statement as to whether the listed drug has received
a period of marketing exclusivity, (7)
bioavailability/bioequivalence studies comparing the proposed
product to the listed drug (if any) and (8) studies necessary to
support the change or modification from the listed drugs or drugs
(if any). Before submitting the application, the applicant should
submit a plan to identify the types of bridging studies that should
be conducted and also the components of application that rely on
the FDA
’
s findings of
safety and effectiveness of a previously approved drug product. We
intend to generate all data necessary to support FDA approval of
the applications we file. A 505(b)(2) application must provide
notice of certain patent certifications to the NDA holder and
patent owner, and approval may be delayed due to patent or
exclusivity protections covering an approved product.
Clinical trials
involve the administration of a pharmaceutical product to
individuals under the supervision of qualified medical
investigators who are experienced in conducting studies under
“
Good Clinical
Practice
”
guidelines.
Clinical studies are conducted in accordance with protocols that
detail the objectives of a study, the parameters to be used to
monitor safety and the efficacy criteria to be evaluated. Each
protocol is submitted to the FDA and to an institutional review
board prior to the commencement of each clinical trial. Clinical
studies are typically conducted in three sequential phases, which
may overlap. In Phase I, the initial introduction of the product
into human subjects, the compound is tested for absorption, safety,
dosage, tolerance, metabolic interaction, distribution, and
excretion. Phase II involves studies in a limited patient
population with the disease to be treated to (1) determine the
efficacy of the product for specific targeted indications, (2)
determine optimal dosage and (3) identify possible adverse effects
and safety risks. In the event Phase II evaluations demonstrate
that a pharmaceutical product is effective and has an acceptable
safety profile, Phase III clinical trials are undertaken to further
evaluate clinical efficacy of the product and to further test its
safety within an expanded patient population at geographically
dispersed clinical study sites. Periodic reports on the clinical
investigations are required.
We, or
the FDA, may suspend clinical trials at any time if either party
believes the clinical subjects are being exposed to unacceptable
health risks. The results of the product development, analytical
laboratory studies and clinical studies are submitted to the FDA as
part of an NDA for approval of the marketing and commercialization
of a pharmaceutical product.
Abbreviated New Drug Application
In
certain cases, where the objective is to develop a generic version
of an approved product already on the market in controlled-release
dosages, an ANDA may be filed in lieu of filing an NDA. Under the
ANDA procedure, the FDA waives the requirement to submit complete
reports of preclinical and clinical studies of safety and efficacy
and instead requires the submission of bioequivalency data; that
is, demonstration that the generic drug produces the same effect in
the body as its brand-name counterpart and has the same
pharmacokinetic profile, or change in blood concentration over
time. The ANDA procedure is available to us for a generic version
of a drug product approved by the FDA. In certain cases, an ANDA
applicant may submit a suitability petition to the FDA requesting
permission to submit an ANDA for a drug product that differs from a
previously approved reference drug product (the
“
Listed Drug
”
) when the change is one authorized
by statute. Permitted variations from the Listed Drug include
changes in: (1) route of administration, (2) dosage form, (3)
strength and (4) one of the active ingredients of the Listed Drug
when the Listed Drug is a combination product. The FDA must approve
the petition before the ANDA may be submitted. An applicant is not
permitted to petition for any other kinds of changes from Listed
Drugs. The information in a suitability petition must demonstrate
that the change from the Listed Drug requested for the proposed
drug product may be adequately evaluated for approval without data
from investigations to show the proposed drug product
’
s safety or effectiveness. The
advantages of an ANDA over an NDA include reduced R&D costs
associated with bringing a product to market, and generally a
shorter review and approval time at the FDA.
GDUFA
implemented substantial fees for new ANDAs, Drug Master Files,
product and establishment fees. In return, the program is intended
to provide faster and more predictable ANDA reviews by the FDA and
more timely inspections of drug facilities. For the FDA
’
s fiscal year 2019, the user fee
rate is $178,799 . For the FDA
’
s fiscal year 2019, the FDA will
also charge an annual facility user fee of $226,305 plus a new
general program fee of $186,217. Under GDUFA, generic product
companies face significant penalties for failure to pay the new
user fees, including rendering an ANDA not
“
substantially complete
”
until the fee is paid. It is
currently uncertain the effect the new fees will have on our ANDA
process and business. However, any failure by us or our suppliers
to pay the fees or to comply with the other provisions of GDUFA may
adversely impact or delay our ability to file ANDAs, obtain
approvals for new generic products, generate revenues and thus may
have a material adverse effect on our business, results of
operations and financial condition.