UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
(Mark
One)
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ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 |
For
the fiscal year ended December 31, 2019
or
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 |
For
the transition period
from
to
(Commission
file number): 001-33635
GENE
BIOTHERAPEUTICS INC.
(Exact
name of registrant as specified in its charter)
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Delaware |
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27-0075787 |
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(State
of incorporation) |
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(IRS
Employer Identification No.) |
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11230
Sorrento Valley Rd., Suite 220
San
Diego, California 92121
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(858)
414-1477 |
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(Address
of principal executive offices) |
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(Registrant’s
telephone number) |
Securities
registered under Section 12(b) of the Exchange Act:
None
Securities
registered under Section 12(g) of the Exchange Act:
Common
Stock, par value $0.0001 per share
Indicate
by check mark if the Registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. [ ] Yes
[X] No
Indicate
by check mark if the Registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act.
[ ] Yes [X] No
Indicate
by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days. [ ] Yes [X] No
Indicate
by checkmark whether the Registrant has submitted electronically
every Interactive Data File required to be submitted and posted
pursuant for Rule 405 of Regulation S-T during the preceding 12
months (or for such shorter period that the Registrant was required
to submit such files). [ ] Yes [X] No
Indicate
by check mark whether the Registrant is a large, accelerated filer,
an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of
“large, accelerated filer,” “accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule 12b-2 of the
Exchange Act.
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Large,
accelerated
filer |
[ ] |
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Accelerated
filer |
[ ] |
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Non-accelerated
filer |
[X] |
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Smaller
reporting company |
[X] |
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Emerging
Growth Company |
[ ] |
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act.
[ ]
Indicate
by check mark whether the Registrant has filed a report on and
attestation to its management’s assessment of the effectiveness of
its internal control over financial reporting under Section 404(b)
of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report.
[ ]
Indicate
by check mark whether the Registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). [ ] Yes [X]
No
The
aggregate market value of voting and non-voting stock held by
non-affiliates of the Registrant as of June 30, 2019, the last
business day of the Registrant’s most recently completed second
fiscal quarter was approximately $1.1 million. Solely for purposes
of this disclosure, shares of common stock held by executive
officers, directors and by persons who own 10% or more of the
outstanding common stock of the Registrant on such date have been
excluded because such person may be deemed to be affiliates. This
does not reflect a determination that such persons are affiliates
for any other purpose.
As of
March 31, 2021, 49,622,154 shares of the
Registrant’s common stock were issued and outstanding.
TABLE
OF CONTENTS
EXPLANATORY NOTE
We
are filing this comprehensive Annual Report on Form 10-K for the
fiscal year ended December 31, 2019 with expanded financial and
other disclosures in lieu of filing a separate Annual Report on
Form 10-K for the fiscal years ended December 31, 2018 and December
31, 2017, and separate Quarterly Reports on Form 10-Q for the
quarterly periods ended March 31, June 30, and September 30 during
2019, 2018 and 2017. Unless context requires otherwise, all
references in this report to the “Company”, “Gene Biotherapeutics”,
“Taxus Cardium”, “Cardium”, “we”, “our”, and “us” refer to Gene
Biotherapeutics Inc. and as applicable, our consolidated
subsidiaries: Angionetics, Inc. (“Angionetics”), Activation
Therapeutics, Inc. (“Activation Therapeutics”) and LifeAgain
Insurance Solutions, Inc. (“LifeAgain’). Due to financial hardship,
we were unable to secure auditor review or audit of our financial
statements and suspended regular reporting of our financial results
of operations following our quarterly report for the period ended
March 31, 2017. On May 22, 2020, after the period covered by this
report, we secured a $1,700,000 financing arrangement and have used
a portion of those proceeds to complete the financial statements
and disclosures in this report.
The
filing of this report will not result in us becoming “current” in
our reporting requirements under the Securities Exchange Act of
1934. It is our intention to become current, and we are preparing
quarterly reports for the periods ended March 31, June 30, and
September 30, 2020. Once we do become current, we will continue to
be precluded from the use of certain abbreviated registration
statements and forms, which are predicated on timely filing all
required reports over the prior 12-month period.
FORWARD-LOOKING
STATEMENTS
This
report, including the sections entitled “Business”, “Risk Factors”,
and “Management’s Discussion and Analysis of Financial Condition
and Results of Operations,” contains forward-looking statements
that reflect our current expectations and views of future events.
These forward-looking statements can also be identified by words
such as “may,” “will,” “should,” “could,” “would,” “expects,”
“plans,” “believes,” “anticipates,” “intends,” “estimates,”
“approximates,” “predicts,” or “projects,” or similar terms.
Forward-looking statements in this report may include statements
about:
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our
ability to fund operations and business plans, and the timing of
any funding or corporate development transactions we may
pursue; |
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planned
development pathways and potential commercialization activities or
opportunities for our product candidates; |
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the
timing, conduct and outcome of submissions to the FDA and other
regulatory agencies, regulatory submissions, and clinical trials,
including the timing for completion of clinical
studies; |
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the
anticipated results of our clinical studies and trials, as well as
our expectations concerning the safety and efficacy of our products
and product candidates; |
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our
ability to generate revenues, and raise sufficient financing,
maintain stock price and valuation, and to regain the listing of
our common stock on a national exchange; |
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our
ability to enter into acceptable relationships with one or more
contract manufacturers and our expectations concerning the ability
of such contract manufacturers to manufacture biologics, devices,
other key products, or components, or to provide other services, of
an acceptable quality on a timely and cost-effective
basis; |
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our
ability to enter into acceptable relationships with one or more
development or commercialization partners to advance the
commercialization of new products and product candidates and the
timing of any product launches; |
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our
growth, expansion and acquisition strategies, the success of such
strategies, and the benefits we believe can be derived from such
strategies; |
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the
protection expected from our intellectual property rights and those
of others, including actual or potential competitors;
and |
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statements
that are not statements of historical facts. |
Caution
should be taken not to place undue reliance on any such
forward-looking statements. Forward-looking statements are subject
to certain events, risks, and uncertainties that may be outside of
our control that could cause actual results to differ materially
from those expressed in or implied by the forward-looking
statements. These factors include, among others, the risks
described under Item 1A and elsewhere in this report, as well as in
other reports and documents we file with the United States
Securities and Exchange Commission (the “SEC”). The forward-looking
statements in this report speak only as of the date of this report.
We do not undertake to update or revise any forward-looking
statements in the report, except as required by law.
PART I
We
are a clinical stage biotechnology company focused on pre-clinical,
clinical and commercialization of angiogenic gene therapy
biotherapeutics for strategic niche markets primarily for the
treatment of cardiovascular disease. Our technology platform is
designed to biologically activate the human body’s innate
angiogenic healing process to stimulate the growth of microvascular
networks for patients with ischemic cardiovascular, cerebral, and
other medical conditions and diseases, as well as for advanced
tissue engineering applications.
Our
lead product candidate Generx [Ad5FGF-4] is an angiogenic gene
therapy product candidate designed for medical revascularization
for the potential treatment of patients with myocardial ischemia
and refractory angina due to advanced coronary artery disease.
Generx has been cleared by the U.S. Food and Drug Administration
(“FDA”) for a Phase 3 clinical study—the AFFIRM study. We have been
working to secure the funding necessary to conduct that clinical
trial and, if successful, commercialize Generx for marketing and
sale in the U.S.
The
Generx product candidate has been under clinical development for
over a decade. Our management and consulting team have been
responsible for the development of Generx from the initial
scientific discoveries by researchers at the University of
California, San Diego, through the first in-man U.S.-based clinical
studies and late-stage clinical studies, the acquisition of the
Generx development program by Schering AG following the successful
completion of a five-year strategic partnership, and the
re-acquisition of the Generx development program by Gene
Biotherapeutics after Schering AG was acquired by Bayer Healthcare.
Generx represents one of only a few cardiovascular DNA-based
therapeutic product candidates to successfully advance into
late-stage, U.S. Phase 3 clinical study.
History
We
were incorporated in Delaware in 2003. In 2006, we changed our name
to Cardium Therapeutics Inc. In 2013, we changed the Company’s name
to Taxus Cardium Pharmaceuticals Group Inc. to reflect a broadened
business plan to include small molecule drugs and medical devices.
Based on the refocus of the Company on the clinical development of
DNA-based angiogenic therapeutics in 2018, we changed the name of
the Company to Gene Biotherapeutics.
During
the period covered by this report, our operations have been
conducted principally through operating subsidiaries including the
following:
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Angionetics,
Inc., an 85% owned subsidiary focused on the late-stage clinical
development and commercialization of Generx, an angiogenic gene
therapy product candidate designed for medical revascularization
for the potential treatment of patients with myocardial ischemia
and refractory angina due to advanced coronary artery
disease; |
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Activation
Therapeutics, Inc., a wholly owned subsidiary focused on the
development and commercialization of Excellagen®, a patented U.S.
FDA-cleared wound conforming matrix for advanced wound care;
and |
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LifeAgain
Insurance Solutions, Inc., a wholly owned subsidiary focused on
advanced medical data analytics for developing innovative insurance
and healthcare solutions. |
We
entered 2017 in a cash constrained position. At that time, our
principal operating goal was to secure the capital necessary to
advance the clinical development and commercialization of Generx.
In October 2017 we entered into an agreement with Landmark Pegasus,
Inc. (“Landmark”), a business development and strategic partnering
company, to assist us with the previously announced plans to sell
our Excellagen product and assist with the strategic partnering for
the development of Generx. In lieu of a cash engagement fee, we
transferred our residual investment in LifeAgain along with our
minority equity investment in Healthy Brands to Landmark,
effectively exiting those businesses.
In
July 2018, we sold our FDA-cleared Excellagen® product to Olaregen
Therapeutix, Inc. (“Olaregen”) for aggregate consideration of up to
$4,000,000. At closing, we received a cash payment of $650,000, the
remaining to be paid as royalty payments of 10% of all worldwide
sales of Excellagen totaling up to an additional $3,350,000. As of
the date of this report, no royalties have been received. We
retained rights to manufacture, market and sell Excellagen in
Greater China, The Russian Federation, and the Commonwealth of
Independent States (Armenia, Azerbaijan, Belarus, Kazakhstan,
Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, and
Uzbekistan).
In April
2020, after the period covered by this report, we transferred our
residual rights in Excellagen to Shanxi Taxus Pharmaceuticals Co.
Ltd. (“Shanxi”) in exchange for the release of any rights or claims
in ownership interest in Gene Biotherapeutics. In connection with
this transaction, Shanxi agreed to apply its previously funded
$600,000 subscription payment as cash consideration in exchange for
the Excellagen ownership rights. Shanxi also released any future
rights or claims against us.
On April
10, 2020, after the period covered by this report, our Angionetics,
Inc. subsidiary entered into a Distribution and License Agreement
with Shanxi (as amended, the “Shanxi License Agreement”), granting
Shanxi certain license rights with respect to our Generx product
candidate. The distribution and license rights commence only after
we obtain U.S. FDA approval for marketing and sale of Generx in the
United States. The license rights include (a) a non-exclusive right
to manufacture Generx products in China, and (b) an exclusive right
to market and sell Generx products in Singapore, Macau, Hong Kong,
Taiwan, any other municipality other than mainland China where
Chinese (Mandarin or Cantonese) is the common language, the Russian
Federation, and the Commonwealth of Independent States (the “CIS”).
The Shanxi License Agreement provides for a progress royalty
ranging from 5% up to 10% based on annual net sales up to and
including $50 million at 5%; 6% for sales ranging greater than $50
million to $200 million; 8% for sales greater than $200 million to
$450 million and at 10% for any sales greater than $450 million of
the Generx product sold by Shanxi in the licensed
territory.
In May
2020, after the period covered by this report, we entered into a
Preferred Stock Purchase Agreement with Nostrum Pharmaceuticals,
LLC (“Nostrum”), selling Nostrum 1,700,000 shares of our newly
authorized Series B Convertible Preferred Stock in exchange for
$1,700,000. Each share of Series B Convertible Preferred Stock is
convertible into shares of Common Stock at a conversion ratio of
0.0113. Consequently the 1,700,000 shares are convertible into an
aggregate of 150,442,478 shares of Common Stock. In addition,
Nostrum entered into an agreement with Sabby Healthcare Master Fund
Ltd. (“Sabby”), the sole holder of our outstanding Series A
Convertible Preferred Stock, under which Nostrum purchased 220
shares of our Series A Convertible Preferred Stock from Sabby,
which is convertible into 88,496 shares of common stock.
Consequently, the 220 shares are convertible into an aggregate of
19,469,026 shares of Common Stock. Nostrum also agreed to purchase
up to 570 additional Series A Convertible Preferred Stock from
Sabby, within one year following the effective date of the
transaction. Since May 2020, 397 shares of Series A Preferred Stock
have been converted into 35,132,755 shares of our Common Stock
(conversion rate of 88,496), that has increased our outstanding
Common Stock to 49,622,154 shares as of March 31, 2021. As a result
of these transactions, Nostrum currently controls approximately
75.2% of the voting interests of our Company.
Nostrum is
a privately held pharmaceutical company engaged in the formulation
and commercialization of specialty pharmaceutical products and
controlled release, orally administered, branded and generic drug
products. We will use the proceeds from the sale of the Series B
Convertible Preferred Stock to fund working capital requirements in
preparation for conducting the U.S. FDA-approved Phase 3 clinical
trial for our Generx product candidate, and a portion of these
proceeds will be used to complete the financial statements and
disclosures in this report. We believe that Nostrum’s assets and
experience in the formulation and commercialization of
pharmaceutical products will facilitate the administration and
completion of the Phase 3 clinical trial for Generx on a
cost-effective basis.
In March
2021, after the period covered by this report, the Company entered
into an agreement with FUJIFILM Diosynth Biotechnologies (“FDB”) to
manufacture the Generx [Ad5FGF-4] angiogenic gene therapy product
candidate for Phase 3 clinical evaluation for the treatment of
refractory angina due to late-stage coronary artery disease.
Manufacturing operations will be conducted at FDB’s facilities in
College Station, Texas where FDB will perform technology transfer
and process development activities for Phase 3 clinical and
commercial-scale GMP manufacturing of Generx.
Accordingly, our
current business is centered around the clinical development and
commercialization of Generx for the potential treatment of patients
with myocardial ischemia and refractory angina due to advanced,
late-stage coronary artery disease. In the future, we expect to
pursue other potential ischemia-related cardiovascular and cerebral
therapeutic opportunities as well as advanced tissue engineering
applications. We estimate that there are up to 1.2 million patients
in the U.S. with refractory angina, representing up to $6.0 billion
addressable market opportunity, and up to $20.0 billion
worldwide.
The
Generx Product Candidate
Our lead
product candidate, Generx, is a first in class, single dose,
angiogenic gene therapy product candidate that is designed to
improve blood flow and to increase the supply of oxygenated blood
in patients with refractory angina and myocardial ischemia due to
advanced coronary artery disease. Generx has been designed to
improve cardiac perfusion by promoting the formation of functional
coronary collateral blood vessels within the heart through
enlargement of existing arterioles (arteriogenesis) and formation
on new capillary vessels (angiogenesis). This process, termed
“medical revascularization,” represents a fundamentally new
mechanism of action that involves the stimulation of the formation
of new biological structures in the heart, as opposed to currently
available pharmacologic therapies, which only address the symptoms
of angina, or mechanical revascularization through surgical
procedures involving stents or coronary artery bypass graft
surgery.
Medical
Revascularization for Refractory Angina
The
Ad5FGF-4 product candidate requires three key elements: (1) a
myocardial delivery vector, (2) a therapeutic transgene, and (3) a
method of gene delivery. Generx is biologically engineered using an
E1-region deleted, replication deficient adenovirus serotype 5
vector to deliver the 621 base pair gene encoding human fibroblast
growth factor-4 (FGF-4) under the control of a modified
cytomegalovirus (CMV) promoter. Adenovirus is one of the most
well-characterized and widely used gene therapy vectors in
preclinical and human clinical studies and has cGMP (defined below)
manufacturing and testing standards established by the U.S. FDA.
The Generx FGF-4 transgene has been engineered to include a signal
peptide, which enables effective secretion from cells that express
the protein (such as cardiac myocytes). Our preclinical studies
have shown that therapeutic efficacy is significantly increased by
the presence of such a signal sequence in the growth factor DNA
construct [Gao et al., Human Gene Therapy 2005; 16:1058-64]. The
CMV promoter can drive high levels of transgene protein expression
in transfected cells for up to 3 weeks. This short-term expression
is ideal for tissue regeneration clinical applications requiring
generation of new biological structures, including promotion of new
vessel growth in the heart.
The
transfected heart cells then express and release FGF-4 protein,
which we believe promotes the growth of new blood vessels and
increased blood flow to ischemic heart tissue. The evidence shows
that FGF-4 expressed by Ad5FGF-4 has the capacity to enlarge
pre-existing collateral arterioles (arteriogenesis) and to form new
capillary vessels (angiogenesis) when driven by cardiac
hemodynamic-impairment and ischemic stimuli. In a pig model of
myocardial ischemia, adenovirus mediated FGF gene therapy promoted
increased regional myocardial blood flow, as measured by contrast
echocardiography, that correlated with an increase in capillary
number, determined by histologic assessment. Stimulation of
angiogenesis by Ad5FGF-4 has also been demonstrated in an in vitro
assay that recapitulates all phases of the in vivo angiogenesis
process and provides a functional bioassay for Ad5FGF-4. This assay
demonstrates a synergistic interaction between FGF-4 expressed by
Ad5FGF-4, and endogenous vascular endothelial growth factor (VEGF)
in the promotion of neo-vessel formation, with evidence that FGF-4
controls angiogenesis upstream of VEGF. FGF-4 appears to be a key
angiogenic regulatory protein that stimulates the release and
action of other angiogenic factors, including vascular endothelial
growth factors (VEGF), platelet-derived growth factors (PDGF), and
hepatocyte growth factor (HGF), to orchestrate and promote the
growth of a functional collateral network in ischemic cardiac
tissue.
Generx
is administered to patients during a simple one-hour angiogram-like
procedure by an interventional cardiologist using a standard
cardiac balloon catheter, with no special training or new medical
devices required. Generx is distributed into the microvascular
pathways of the heart and transfects cardiac cells by binding to
cell surface coxsackievirus-adenovirus receptors (CAR). A central
finding from the Generx clinical development program is that
cardiac ischemia drives Generx transfection into heart cells and
possibly other cells, and that regional cardiac ischemia is an
essential precursor to support the growth of collateral blood
vessels for treatment response to Generx angiogenic gene therapy.
Company-sponsored in vivo pre-clinical research conducted at Emory
University demonstrated that intracoronary Ad5-based gene delivery
under conditions of transient ischemia, and following pre-treatment
with nitroglycerin, significantly enhances transgene expression in
the heart by over two orders of magnitude (>800x), as compared
to prior intracoronary delivery methods. We believe that the
significant improvements in gene transfer are likely due to
ischemia-driven up-regulation of the cardiac CAR receptors and
improved transit through dilated gap junctions due to enhanced cell
permeability that is believed to be activated using
nitroglycerin.
Addressable Market
Generx
is expected to initially target patients with refractory
angina—chronic and disabling angina that: (1) are no longer
responsive to small molecule anti-anginal drug therapy, (2) would
not expect to benefit from mechanical revascularization procedures,
including stents and coronary artery bypass graft surgery; or (3)
continue to experience refectory angina following a mechanical
revascularization procedure. We estimate that there are up to 1.2
million patients in the U.S. with refractory angina, representing
up to $6.0 billion addressable market opportunity, and up to $20.0
billion worldwide.
Proposed
Generx Treatment Algorithm for Patients with Refractory
Angina
Consistent
with Positioning in FDA-Cleared U.S. Phase 3 Clinical
Trial
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(1) |
Range
0.6M – 1.8M [mean 1.2M] McGillion et al., Canadian J Cardiology
28:S20-S41 (2012) other figures, Benjamin et al., Circulation,
American Heart Association, Statistics 2017. |
Given
the widespread use of lipid-lowering drugs in the general
population in the U.S., and increasingly worldwide, we now see more
patients reporting angina with little or no evidence of obstructive
coronary artery disease based on angiographic diagnostics. In the
past 10 years, the number of ST-Elevation Myocardial Infarction
patients has fallen by 50%, bypass surgery is down 40%, and the use
of stents has been reduced by 30%. We believe that this trend away
from mechanical revascularization will potentially increase the
opportunity for Generx medical revascularization.
The
most recently FDA approved anti-anginal drug with a novel mechanism
of action is Ranexa® (ranolazine). It was FDA approved in 2006 as a
treatment for chronic angina as a metabolic modulator designed to
reduce the heart’s oxygen demand. Following FDA approval, Ranexa
was acquired by Gilead Sciences for $1.4 billion in 2009. Ranexa is
prescribed to be taken twice daily, generally as a 1000 mg oral
tablet and Ranolazine is now available in generic form.
To
support our go to market strategy, we conducted a survey of U.S.
interventional cardiologists to gauge their experience-based
assessment of the prevalence of refractory angina patients, and
their openness to integrate the use of the Generx angiogenic gene
therapy product candidate, upon FDA approval, into their clinical
practice. The survey confirmed that all survey responders see
patients with long-term refractory angina, and all were strongly
positive and without reservation about adoption of Generx. All
cardiologists surveyed felt there is a current need for Generx to
treat refractory angina and they would consider using Generx in
their daily practice if approved by the FDA. As shown in the
following table, the Generx product candidate for medical
revascularization therapy generated statistically significant
improvements in cardiac perfusion (measured using SPECT as a
reduction in reversible perfusion defect) as compared to placebo
controls in both the U.S-based Phase 2 clinical study (AGENT-2),
and a small confirmatory international study (ASPIRE), and the
observed improvements were similar in magnitude to those reported
following mechanical revascularization.
Generx
AGENT-2 and ASPIRE SPECT Data
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a. |
Improvement
in RPDS as measured by SPECT imaging at 8 weeks following a single
treatment. |
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b. |
Grines
et al. JACC 42:1339-47 (2003). Tables 1 and 2. |
Generx Clinical Studies and FDA Developments
The
Generx FDA regulatory dossier represents one of the most extensive
and advanced DNA-based clinical data platforms ever compiled.
Generx has been evaluated as a treatment for patients with
refractory angina in four prior FDA-cleared, multi-center,
randomized and placebo-controlled clinical studies (AGENT 1-4,
Phase 1/2 to Phase 2b/3) and one small international study
(ASPIRE). The four AGENT studies combined enrolled over 650
patients at over 100 medical centers in the U.S. and Western Europe
and have generated over 2,500 patient years of safety
data.
In
these multiple prior clinical studies, the Generx product candidate
appeared safe and well-tolerated, and has generated preliminary
findings of efficacy in men and women, in measures of cardiac
perfusion, cardiac performance, and angina status, including: (1)
significant improvement in exercise duration by Exercise Treadmill
Testing; (2) significant improvement in cardiac perfusion as
assessed by SPECT imaging, with observed improvements comparable in
magnitude to those seen with coronary artery bypass surgery and
angioplasty with the use of stents; (3) significant and durable
improvement in physical exertion capacity, as assessed by
functional classification of angina out to 12 months
post-treatment; (4) improvement in angina status, as assessed by
documented reduction in angina episodes and nitroglycerin usage;
and (5) significant reduction in incidence of worsening
angina.
A
central finding from the Generx AGENT clinical development program
is that cardiac ischemia drives Generx transfection into heart
cells, and that regional cardiac ischemia is an essential precursor
to support the growth of collateral blood vessels for treatment
response to Generx angiogenic gene therapy. Company-sponsored in
vivo pre-clinical research conducted at Emory University
demonstrated that intracoronary Ad5-based gene delivery under
conditions of transient ischemia, and following pre-treatment with
nitroglycerin, significantly enhances transgene expression in the
heart by over two orders of magnitude (>800x), as compared to
prior intracoronary delivery methods. We believe that the
significant improvements in gene transfer are likely due to
ischemia-driven up-regulation of the cardiac
Coxsackievirus-Adenovirus Receptor (CAR) and improved transit
through dilated gap junctions due to enhanced cell permeability
that is believed to be activated using nitroglycerin.
Based
on these pre-clinical findings, Generx was evaluated in a small
international pilot study involving the use of a new balloon
catheter-based delivery technique, and a higher Generx dose level,
to induce transient ischemia during Generx delivery, and to
potentially reduce variability and enhance efficacy responses by
leveraging pre-conditioning cardiac physiology and our enhanced
understanding of cell surface receptor-mediated uptake. Generx was
administered under conditions of transient ischemia, achieved by
balloon inflation, and following pre-treatment with nitroglycerin.
This clinical study of 11 patients with refractory angina confirmed
the preliminary efficacy (as evaluated by improvement in cardiac
perfusion based on SPECT imaging) and safety (based on troponin
measures to detect any heart muscle damage) of transient ischemia
during Generx administration, together with the use of a higher
single dose level of Generx. Based on positive findings from this
study, the new catheter delivery techniques and higher dose level
have been integrated into the U.S.-based Phase 3 AFFIRM clinical
study protocol.
In
September 2016, the FDA cleared the Generx AFFIRM Phase 3 clinical
study protocol. The primary endpoint in the AFFIRM study is the
change from baseline to month 6 in Exercise Tolerance Test (“ETT”)
duration, with exercise duration limited by angina. FDA clearance
of the AFFIRM protocol was based on over 2,500 patient years of
accumulated safety data, a study design based on findings from a
detailed meta-analysis of patient data from prior clinical studies
that characterized male and female patient responders (including
ETT data for approximately 600 patients and 3,000 treadmill tests),
and demonstration in a small international study that balloon
catheter-based delivery of Generx at an increased dose level, and
under conditions of transient ischemia to improve gene
transfection, is safe (based on measurement of serum troponin
levels, an indicator of damage to heart muscle).
On
February 3, 2017, the FDA granted the Phase 3 AFFIRM clinical study
Fast Track designation. By granting Fast Track designation to the
Generx Phase 3 clinical development program, FDA acknowledges that
there remains unmet medical need for patients with refractory
angina. The limited available therapies for patients with
refractory angina primarily address the symptoms of refractory
angina by reducing myocardial oxygen demand or transiently
increasing blood flow to the ischemic myocardium and require
prolonged use or numerous rounds of therapy. Furthermore, available
therapies have modest and heterogenous response rates. Generx is
unique in its angiogenic biological mechanism of action and
disease-modifying potential.
In
July 2020, we submitted a protocol amendment to FDA, refining some
of the patient inclusion criteria and clarifying ETT stopping
criteria for enrolled patients. In addition, an adaptive trial
design was incorporated to allow for interim analysis and
re-estimation of sample size required to achieve the primary
efficacy endpoint of statistically significant improvement in ETT
with Generx compared to Placebo at 6 months. Based on further
statistical analysis of historical ETT data, the target sample size
was reduced from 320 patients, without an interim analysis, to 160
patients with an interim analysis after 80 patients have been
enrolled. The adaptive design allows for an increase in sample size
up to 226 total patients if needed to reach statistical
significance.
On a
global basis, over 650 patients have been enrolled in four
FDA-cleared clinical studies of Generx at over 100 medical centers
in the U.S., Western Europe, and Asia, 455 of whom received a
one-time intracoronary administration of Generx. Based on these
studies, and other pre-clinical and further international clinical
evaluations, our Generx product candidate appears to be safe and
well-tolerated and has generated preliminary efficacy findings in
men and women, based on multiple efficacy measures within patient
subset groups. Long-term safety follow-up has generated over 2,500
patient years of safety data. With the successful completion of the
planned AFFIRM Phase 3 clinical study, the Generx clinical research
will have evaluated over 800 patients in clinical study protocols.
Based on our FDA Fast-Track designation, and our established
manufacturing processes, we believe that we would be in a position
to initiate the submission to the FDA of a rolling Biologics
License Application (“BLA”).
FDA Registration Pathway
For
registration purposes, the FDA has classified our Generx product
candidate to be an “anti-anginal” medication as a treatment for
patients who have been diagnosed with stable exertional angina due
to coronary artery disease and who are no longer responsive to
current pharmaceutical therapy and mechanical interventional
therapy. FDA approval of anti-anginal drugs and biologicals
requires statistically significant efficacy improvements in
exercise capacity as measured by ETT compared to a placebo control
group. Developing a new and innovative anti-anginal is a
challenging process and FDA approvals have been few and far
between. In the past-50 years only one anti-anginal with a new
mechanism of action has been approved and registered for marketing
and sale in the U.S.
In
2006, following a 21-year clinical and commercial development
process, the FDA approved Ranexa (ranolazine), a small molecule
drug in tablet form that is taken twice daily with a new mechanism
of action described as metabolic modulation, to reduce the heart’s
oxygen demand. Based on the Ranexa package insert, the CARISA
clinical study showed that Ranexa was safe and well tolerated by
refractory angina patients and that patients treated with Ranexa
showed an improvement in the primary efficacy endpoint ETT of +24
seconds (+28%) compared to the placebo control over the 12- week
study period. Based on our retrospective subset analysis of data
from the Generx AGENT-3 clinical study, and the FDA-cleared
Ad5FGF-4 Phase 3 AFFIRM clinical study design, the Generx product
candidate offers the potential to meet or exceed the ETT efficacy
data reported in the Ranexa CARISA clinical study. As a result, we
plan to submit a BLA following successful completion of the Phase 3
AFFIRM study.
Generx Competitive Advantage
We
believe that the most significant factors in the field of new drugs
and biologics are safety and efficacy as well as relative cost, and
ease of administration as compared to other products, product
candidates or approaches that may be useful for treating a
particular disease condition. We believe that our Generx product
candidate competes favorably against the current standard of care
in each of these areas:
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Safety.
The FDA-cleared Phase 3 AFFIRM study is preceded in the U.S. by
four completed and one early discontinued study. On a global basis,
over 650 patients have been enrolled in FDA-approved studies, 455
of whom received a one-time intracoronary administration of Generx,
which has consistently been found to be safe and well-tolerated
(based on over 2,500 patient years of safety data). Efficient
uptake in the heart following intracoronary administration of
Generx has been demonstrated in preclinical studies (~98% first
pass extraction) and clinical studies (~90% first pass extraction).
Administration of Ad5FGF-4 after stent implantation in a
preclinical model of atherosclerosis and hypercholesterolemia found
no evidence of increased neointima formation (restenosis) with both
bare metal and drug-eluting stents. Fever is an expected side
effect of adenoviral gene therapy and has been observed in ~8% of
patients receiving Ad5FGF-4, occurring within the first few days
after study product administration and resolving with no treatment
or with antipyretic medication. No other adverse events have been
associated with intracoronary administration Ad5FGF-4. |
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Effectiveness.
A central finding from the Generx AGENT clinical development
program is that cardiac ischemia drives Generx transfection into
heart cells, and that regional cardiac ischemia is an essential
precursor to support the growth of collateral blood vessels for
treatment response to Generx angiogenic gene therapy. Our delivery
strategy is to distribute Ad5FGF-4 throughout the microvascular
circulation of the heart under conditions of transient ischemia to
enhance uptake, with the angiogenic response being selective to
ischemic zones. An angiogenic response to Generx has been
demonstrated in preclinical studies, in which increased regional
myocardial blood flow was identified by contrast echocardiography
and correlated with increased vessel number, determined
histologically. In clinical studies SPECT imaging has demonstrated
cardiac perfusion improvements approximately up to 75% of the
perfusion levels achieved from classic mechanical
revascularization. The clinical response is observed in patients
within four to eight weeks following administration, and it is
anticipated that once formed, new vessels will persist as long as
there is blood flow through the vessel. |
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Cost-Effective
Manufacture. We have established and validated the Generx cGMP
(defined below) manufacturing process, which is not expected to
require significant additional capital investment or major process
modifications for commercial manufacture. Product stability enables
manufacture in large, cost-effective batch sizes. Based
on our established manufacturing process, we are in a position to
competitively price our Generx product candidate in alignment with
cardiac stents. |
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Fits
within Current Medical Practice. Generx therapy is designed to
easily fit within the current practice of medicine, as a
ready-to-use, one-time treatment, administered by interventional
cardiologists during an approximately one-hour, out-patient,
angiogram-like procedure. There are approximately 1.0 million
angiogram procedures performed in the U.S. each year. Through our
extensive clinical efforts, we have established appropriate dose
levels, enhanced delivery techniques and simplified product
administration. With regulatory approval, Generx could
be the first FDA-approved gene therapy for an otherwise healthy
population that would be universally affordable within healthcare
medical reimbursement programs and for private pay
environments. |
Additional Indications
Following
our planned initial registration for refractory angina there are
other potential ischemia-related cardiovascular and cerebral
therapeutic opportunities that we may consider advancing forward
with based on our angiogenic technology platform using varying dose
levels and differing routes of administration.
Potential
Pipeline of Generx (Ad5FGF-4) Medical Indications
Cardiac
Syndrome X. A meta-analysis study [Vermeltfoort et al.,
Clinical Research in Cardiology. 2010; 99:475-81] reported that
approximately 20% of patients who have a coronary angiography due
to ongoing angina do not have obvious large vessel disease, a
condition generally referred to as Cardiac Syndrome X (“CSX”).
Patients with CSX are presumed to have coronary disease that is
diffuse and/or affects smaller vessels within the heart. CSX is
therefore sometimes referred to as “microvascular angina”. CSX
cannot be addressed using traditional surgical approaches such CABG
or PCI. We believe patients with CSX may potentially benefit from
Generx microvascular angiogenic gene therapy, and plan to conduct a
U.S.-based safety and efficacy study under the current FDA-approved
IND. There are approximately 200,000 patients in the U.S. with CSX,
65% of whom are women.
Congestive
Heart Failure. Congestive Heart Failure is a clinical syndrome
that occurs when the heart is unable to pump sufficiently to
maintain blood flow to meet the body’s needs. Common causes of
heart failure include coronary artery disease, heart attack, high
blood pressure, atrial fibrillation, valvular heart disease, excess
alcohol use, infection, and cardiomyopathy of an unknown cause. In
prior clinical studies of Generx in patients with myocardial
ischemia and refractory angina, approximately 50% of enrolled
patients were also diagnosed with mild congestive heart failure.
The rationale supporting the application of angiogenic therapy for
heart failure is based on the fact that mild and/or intermittent
ischemia in the sub-endocardium (inner wall) can and often does
occur in congestive heart failure with almost all primary causes.
In a preclinical model of heart failure due to chronic
sub-endocardial ischemia, a single administration of Generx
resulted in significant improvement in cardiac function [McKirnan
et al., Cardiac Vascular Regeneration. 2000; 1:11-21]. These
preclinical findings support the potential use of Generx [Ad5FGF-4]
angiogenic gene therapy as a non-surgical treatment option for
heart failure. We are evaluating a Phase 2 clinical study of Generx
angiogenic therapy for the treatment of patients with certain forms
of congestive heart failure due to ischemic
cardiomyopathy.
Moyamoya
Disease & Cerebral Ischemia. Moyamoya disease (“MMD”) is a
chronic occlusive, cerebrovascular disease that is characterized by
progressive stenosis at the terminal portion of the internal
carotid artery and an abnormal network of collateral vessels at the
base of the brain. Pursuant to the Orphan Drug Act of 1983, MMD is
an orphan indication, with <1 case per 100,000 in the U.S. The
prevalence of MMD is much higher in East Asian countries than in
Western countries. The highest prevalence of MMD is found in Japan
at 3.16 per 100,000. Currently, there is no known medical treatment
capable of reversing or stabilizing progression of MMD. Surgical
revascularization such as extracranial-intracranial bypass is the
preferred procedure for MMD patients with the main goal of
preventing further ischemic injury by increasing collateral blood
flow to hypo-perfused areas of the cortex. Collateral vessels are
seen to sprout from bypassed vessels, thus providing increased
blood flow to ischemic regions of the brain. We believe that Generx
may potentially offer a new and simpler medical revascularization
approach to the treatment of MMD, with a view toward further
clinical development of angiogenic gene therapeutics for patients
with a broader range of cerebral ischemic conditions, including
vascular dementia. Preclinical studies have demonstrated that
adenovectors can transfect cells in the brain, and we are
investigating potential routes of administration to MMD patients
that include, (1) adjunctive application of Ad5FGF-4 during burr
hole surgery to augment collateralization, and (2) infusion into
the carotid artery, to target ischemic regions and stimulate
collateral vessel formation.
Angiogenic
Research Initiative for COVID-19.
Early
research has provided evidence of respiratory, neurological, and
cardiac abnormalities in patients who have had severe COVID-19
immunological response requiring acute care (including protracted
hospitalization and the need for mechanical ventilation). For
patients who have survived and seek to return to normal life,
several continuing residual adverse medical conditions appear to
persist.
While
the scientific literature remains uncertain, it has been suggested
that mechanisms by which COVID-19 could lead to cardiovascular
morbidity include direct myocardial injury as a result of
inflammatory cascade or cytokine release, acute coronary syndrome
from acute inflammation-triggered destabilization of atheroma,
microvascular damage due to disseminated intravascular coagulation
and thrombosis, direct entry of SARS-CoV-2 into myocardial cells
via ACE2 receptors, and hypoxemia combined with metabolic demands
of acute illness leading to myocardial injury akin to a myocardial
infarction.
Based
on these preliminary insights, Gene Biotherapeutics’ research is
focused on the design of an observational clinical study to
evaluate if COVID-19 may exacerbate microvascular damage and
perfusion impairment in patients with pre-existing coronary artery
disease and cardiac reversible perfusion defects (“RPD”) prior to
COVID-19 infection. We are proposing to assess the damage using
SPECT (Single-Photon Emission Computed Tomography) imaging to
evaluate changes in RPD as a result of COVID-19 infection.
Demonstration of worsening perfusion due to COVID-19 would be
supportive of the potential to evaluate the therapeutic benefit of
the Generx [Ad5FGF-4] product candidate angiogenic gene therapy in
this patient population.
Commercialization Business Strategy
We
are committed to applying our first-mover scientific and clinical
development leadership position in the field of angiogenic gene
therapy for the treatment of patients with a variety of
cardiovascular conditions which are related by insufficient cardiac
perfusion and other potential ischemia-related cerebral therapeutic
opportunities as well as advanced tissue engineering applications.
The core elements of our commercial strategy include:
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Advance
our FDA-cleared Generx [Ad5FGF-4] AFFIRM Phase 3 clinical study and
commercial development for the treatment of patients with
refractory angina due to advanced coronary artery disease and
secure FDA registration to market and sell Generx in the
U.S.; |
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Following
U.S. registration for refractory angina, initiate the registration
process to market and sell Generx in China, the Russian Federation,
and the CIS with our current strategic partners, and consider
registration in other prioritized regional markets; |
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Following
FDA approval, we would also plan to (1) enter a strategic
agreement(s) to market and sell Generx in other countries
worldwide, or (2) undertake a terminal value transaction covering
the sale of Generx to an established strategic player which has
established worldwide marketing, sales, and distribution
capabilities; |
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Expand
the initial labeling of Generx by initiating a Phase 2 clinical
study to support the use of Generx for patients with CSX, which is
characterized by symptomatic angina in the absence of large
coronary artery obstruction, and for certain forms of congestive
heart failure, including ischemic cardiomyopathy; |
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Advance
our pre-clinical research which is focused on applying our Ad5FGF-4
technology platform as a potential treatment for patients with MMD,
an orphan medical condition characterized by restricted blood flow,
and collateral blood vessel dysfunction in certain regions of the
brain, with a view toward further clinical development of
angiogenic gene therapeutics for patients with a broader range of
cerebral ischemic conditions, including vascular
dementia; |
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Establish
a Generx patient registry and conduct additional clinical studies
to evaluate the safety and clinical efficacy of repeat dosing of
Generx in patients as their coronary artery disease advances
causing additional perfusion defects; and |
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Initiate
additional studies to assess the potential long-term prognostic
benefits of refractory angina patients receiving angiogenic therapy
through medical revascularization. |
Government
Regulation
Gene
therapy biologics are subject to extensive regulation in the United
States under the federal Food, Drug, and Cosmetic Act. In addition,
biologics are also regulated under the Public Health Service Act.
Both statutes and their corresponding regulations govern, among
other things, the testing, manufacturing, distribution, safety,
efficacy, labeling, storage, record keeping, advertising and other
promotional practices involving biologics or new drugs. FDA
approval or other clearances must be obtained before clinical
testing, and before manufacturing and marketing of biologics and
drugs. Obtaining FDA approval has historically been a costly and
time-consuming process. Different regulatory regimes are applicable
in other major markets.
Any
product candidate we develop will require regulatory approvals on a
country-by-country basis before human trials and additional
regulatory approvals before marketing. Currently, each human study
protocol is reviewed by the FDA and, in some instances, the
National Institutes of Health (“NIH”), on a case-by-case basis. For
biologics, we must sponsor and file an Investigational New Drug
(“IND”) application with the FDA and be responsible for initiating
and overseeing human clinical trials to demonstrate the safety and
efficacy and, for a biologic product, the potency, which are
necessary to obtain FDA approval of any such products. For any new
drug applications, we will be required to select qualified
investigators (usually physicians within medical institutions) to
supervise the administration of the products, and we will be
required to ensure that the clinical trials are conducted and
monitored in accordance with FDA regulations and the general
investigational plan and protocols contained in the IND
application. The FDA receives reports on the progress of each phase
of testing, and it may require the modification, suspension, or
termination of trials if an unwarranted risk is present to
patients. If the FDA imposes a clinical hold, trials may not
recommence without FDA authorization and then only under terms
authorized by the FDA. The IND application process can thus result
in substantial delay and expense.
Our
Generx product candidate is a gene therapy product, which is a
relatively new category of therapeutics. The FDA and the NIH have
published guidance documents with respect to the development and
submission of gene therapy protocols. However, there is generally
less information available for us to estimate the length of any
trial period, the number of patients the FDA will require to be
enrolled in the trials to establish the safety, efficacy, and
potency of human gene therapy products, or that the data generated
in these studies will be acceptable to the FDA to support marketing
approval. Ethical, social, and legal concerns about gene therapy
could result in additional regulations restricting or prohibiting
the processes we or our suppliers may use. Federal and state
agencies, congressional committees and foreign governments have
expressed interest in further regulating biotechnology. More
restrictive regulations or claims that our products are unsafe or
pose a hazard could prevent us from commercializing any such
products.
After the
completion of trials of a new drug or biologic product, we will
have to secure FDA marketing approval. The New Drug Application
(“NDA”) or BLA must include results of product development,
laboratory, animal and human studies, and manufacturing
information. The testing and approval processes require substantial
time and effort and there can be no assurance that the FDA will
accept the NDA or BLA for filing and, even if filed, that any
approval will be granted on a timely basis, if at all. In the past,
NDAs and BLAs submitted to the FDA have taken, on average, one to
two years to receive approval after submission of all test data. If
questions arise during the FDA review process, the approval process
can take more than two years.
Notwithstanding the
submission of all relevant data, the FDA may ultimately decide that
the NDA or BLA does not satisfy its regulatory criteria for
approval and may require additional studies. In addition, the FDA
may condition marketing approval on the conduct of specific
post-marketing studies to further evaluate safety and
effectiveness. Rigorous and extensive FDA regulation of
pharmaceutical products continues after approval, particularly with
respect to compliance with Current Good Manufacturing Practices
(“cGMPs”), reporting of adverse effects, advertising, promotion,
and marketing. Discovery of previously unknown problems or failure
to comply with the applicable regulatory requirements may result in
restrictions on the marketing of a product or withdrawal of the
product from the market, as well as possible civil or criminal
sanctions.
In
addition to FDA approval for the commercialization of our product
candidates, our business is subject to state and federal laws
regarding environmental protection and hazardous substances,
including the Occupational Safety and Health Act, the Resource
Conservancy and Recovery Act and the Toxic Substances Control Act.
These and other laws govern our use, handling and disposal of
various biological, chemical, and radioactive substances used in,
and wastes generated by, our operations.
To
the extent that we conduct operations outside the United States,
any such operations would be similarly regulated by various
agencies and entities in the countries in which we operate. The
regulations of these countries may conflict with those in the
United States and may vary from country to country. In markets
outside the United States, we may be required to obtain approvals,
licenses, or certifications from a country’s ministry of health or
comparable agency before we begin operations or the marketing of
products in that country. Approvals or licenses may be conditioned
or unavailable for certain products. These regulations may limit
our ability to enter certain markets outside the United
States.
Competition
The
pharmaceutical industry is intensely competitive. Our product
candidates will compete with existing drugs, therapies,
biotherapies, stem cell therapies, medical devices, or procedures
and with others under development. There are many pharmaceutical,
biotechnology and medical device companies, public and private
universities and research organizations actively engaged in
research and development of products for the treatment of
cardiovascular and related diseases.
Our
Generx product candidate is a first in class, single-dose, disease
altering therapeutic specifically targeted for the cardiac
micro-vasculature, that is designed to stimulate and augment the
formation of new biologic structures in the heart to increase the
level of micro-vascularity and enhance cardiac perfusion, and
improve cardiac performance, as measured by exercise tolerance and
the occurrence and severity of myocardial ischemia-driven angina.
Current pharmacologic therapies for patients with refractory angina
are limited to anti-anginal medications to relieve angina chest
pain, which are dosed daily or episodically and carry physiologic
side effects, and surgical and percutaneous interventions, such as
stents or by-pass surgery, to address large vessel coronary artery
disease.
We
are aware of products currently under development by competitors
targeting the same or similar cardiovascular and vascular diseases
as our Generx product candidate. These include small molecule drugs
and biological treatments using forms of genes and stem
cells.
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Ranexa®
(ranolazine; Gilead Sciences, Inc.) is a small molecule drug first
approved by the FDA in 2006 for the treatment of chronic angina in
patients who have not responded to other anti-anginal drugs
(long-acting nitrates, calcium channel blockers and beta blockers).
In 2008, the FDA approved Ranexa for first line anti-anginal use.
Ranexa is taken twice daily, and FDA approval was based on clinical
trial findings that both angina attacks per week and nitroglycerin
tablet usage per week were reduced by 33% (from 3 to 2 for both).
These studies also report that the response in women only was only
about 30% of that seen in men. The mechanism of action of Ranexa’s
antianginal effects has not been determined. Ranexa is
prescribed to be taken twice daily, generally as a 1000 mg oral
tablet. Ranolazine is now available in generic form. |
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The
Neovasc Reducer™ (“Reducer”) is a stainless steel, hourglass-shaped
medical device that is implanted into the coronary sinus using a
procedure similar to that used for stent implantation. It is
designed to create a focal narrowing in the coronary sinus,
resulting in increased back pressure and redistribution of blood
into ischemic myocardium. In 2015, results from a Phase 2 study
(the “COSIRA” study; N=104) were published, reporting that
significantly more patients in the treatment group, as compared to
control, had an improvement in CCS class and quality of life at 6
months, but no significant improvement in exercise time. In
December 2018, Neovasc announced publication of 12-year follow-up
data from 7 patients demonstrating sustained improvement of angina
class compared with baseline status. The Reducer is currently
available only in the European Union, receiving CE mark designation
in 2011. In October 2018, Neovasc announced that the Reducer™ was
granted Breakthrough Device designation by the U.S. FDA, and in
December 2019, Neovasc announced submission to FDA of a Premarket
Approval application (PMA) for the treatment of refractory angina.
On October 27, 2020, an 18 member FDA Advisory Committee reviewed
the PMA submission, voting 17 to 1 “against” on the issue of a
reasonable assurance of effectiveness, voting 14 to 4 “in favor”
that the Reducer is safe when used as intended, and voting 13 to 3
“against” (2 abstained) on whether the relative benefits outweighed
the relative risks. |
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Caladrius
Biosciences is developing an autologous CD34+ stem cell product
candidate for refractory angina (“CLBS14”). Caladrius acquired an
exclusive worldwide license to data and regulatory filings for the
late stage CD34+ cell therapy program from Shire plc in March 2018.
CD34+ therapy is thought to work by increasing microvascular blood
flow in the heart muscle via the development and formation of new
blood vessels. Cells are collected from patients after
drug-induced mobilization, followed by isolation, concentration,
and formulation prior to intramyocardial injection guided by
mapping catheter (NOGA). CLBS14 has been studied in Phase 1, Phase
2 and Phase 3 randomized, double-blind placebo-controlled clinical
trials that reveal significant improvements in exercise capacity
and angina frequency. According to public records, initiation of a
Phase 3 confirmatory trial is postponed pending access to
sufficient capital to complete the study uninterrupted. |
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In
May 2020, Caladrius announced positive results from a 20-patient
Phase 2 proof of concept study with CD34+ cell therapy (CLBS16) in
patients with CSX. Data showed statistically significant
improvement in coronary flow reserve correlating with symptom
relief after a single intracoronary injection of
CLBS16. |
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XyloCor
Therapeutics is developing an adenovirus-based gene therapy
encoding a hybrid gene for human vascular endothelial growth factor
(“XC001”) for patients with refractory angina. XC001 is designed to
relieve angina by promoting angiogenesis. In July 2020, XyloCor
announced dosing of the first patients in the initial Phase 1/2
dose-escalation clinical study. XC001 is administered by
transthoracic epicardial injection. |
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BioCardia
Inc. is developing the CardiAmp™ Cell Therapy System, which
provides an autologous bone marrow-derived stem cell therapy for
the treatment of chronic myocardial ischemia. In July 2020,
BioCardia announced activation of a Phase 3 clinical trial studying
percutaneously injected cells for the treatment of refractory
angina and chronic myocardial ischemia. |
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Juventas
Therapeutics is developing a non-viral, plasmid gene therapy
product candidate (JVS-100) that expresses stromal cell-derived
factor-1 (“SDF-1”) for the treatment of advanced ischemic heart
failure. SDF-1 has been shown to create a homing signal that
recruits the body’s own stem cells to the site of injury to induce
tissue repair and regeneration. In May 2015, Juventas
announced Phase 2 clinical study data showing that chronic heart
failure patients receiving a single endomyocardial injection of
JVS-100 demonstrated improvements at 12 months after treatment as
measured by median change in left ventricle ejection fraction (3.5%
over placebo) and left ventricular end-systolic volume (8.5 ml over
placebo). In June 2015, Juventas announced that FDA had granted
fast track status for JVS-100 and approved a Phase 2b study
protocol to evaluate JVS-100 in patients with advanced ischemic
heart failure and a prior history of heart attack. |
Manufacturing
Strategy
We
will rely on contract manufacturing for the Generx product
candidate. Based on the FDA clearance of the Generx Phase 3
clinical study protocol, all significant cGMP manufacturing factors
have been resolved for our Generx product candidate in preparation
for a commercial launch. The cGMP Generx manufacturing processes
have been validated and are scalable.
We
have been actively advancing our Generx product candidate’s
engineering and process technology in preparation for
commercialization. The adenovector Ad5FGF-4 is propagated in
suspension cultures of fully characterized HEK 293 cells using
serum-free/animal product-free growth medium, and aseptically
purified using a combination of chromatography and filtration
methods. The final product is vialed at a defined viral particle VP
concentration and stored at -70°C. Clinical doses are expressed in
total number of viral particles. We have established validated test
methods and product specifications to ensure that each batch of
Generx meets rigorous quality control standards. These quality
control test methods include a cell-based vessel formation
bioactivity assay that measures and confirms the pro-angiogenic
potency of each newly manufactured batch of Generx.
Generx’s
long-term product stability (at the current storage temperature of
-70°C) makes it possible to manufacture Generx in large, cost
effective batch sizes. Based on the current Generx validated cGMP
manufacturing processes, we believe that the manufacture of Generx
can be scaled to large batch quantities (up to approximately 2.0
million doses annually) without the need for significant additional
capital investment or major process technology engineering. This
flexibility will allow the manufacture of Generx at a highly
economical direct cost, which could yield gross margins that would
be approximately equivalent to a classic small molecule drug model.
This would represent a significant commercial advantage in the
market and could be orders of magnitude lower than the expected
high cost associated with the manufacture of complex donor-based
autologous cell therapies, that are currently under development by
other biotechnology companies for cardiovascular
applications.
In
March 2021, the Company entered into an agreement with FUJIFILM
Diosynth Biotechnologies (“FDB”) to manufacture the Generx
[Ad5FGF-4] angiogenic gene therapy product candidate for Phase 3
clinical evaluation for the treatment of refractory angina due to
late-stage coronary artery disease. Manufacturing operations will
be conducted at FDB’s facilities in College Station, Texas where
FDB will perform technology transfer and process development
activities for Phase 3 clinical and commercial-scale GMP
manufacturing of Generx.
Marketing
and Sales
Our
product candidates, such as Generx, must undergo clinical trials
before any marketing and sales can begin. If we should obtain
marketing approvals, we do not currently have the financial
resources and internal capabilities to market and sell Generx. In
conjunction with regulatory approval, we may develop a direct and
highly focused internal marketing and sales force for the Generx
product candidates, or establish strategic partnerships and
alliances with pharmaceutical, biotechnology, medical device and
cardiac diagnostic companies for the marketing and sale of Generx
in the United States. Outside the U.S., we expect to rely on
strategic partnerships and distributors for marketing and sales of
Generx product candidates. However, our marketing and sales
strategies may vary by product, medical indication and the size of
the addressable market.
Commercialization
Relationships
Huapont
Life Sciences Co. Ltd (“Huapont”). Huapont is a China-based
company focused on the research and development of new and
innovative healthcare products, and the manufacture, marketing and
sale of leading pharmaceutical products, active pharmaceutical
ingredients, and a portfolio of safe and effective agricultural
herbicides serving the agricultural business throughout the U.S.
and South American markets. Huapont’s pharmaceutical business
includes dermatology products, cardiovascular products,
anti-tuberculosis agents, autoimmune-related products, and
oncology-related products. Huapont’s API business involves the
production and sale of bulk pharmaceutical chemicals,
pharmaceutical intermediates, and preparations of Western
medicines, with current annual revenues of approximately U.S. $1.5
billion, and approximately 12,000 employees operating throughout
Mainland China. Huapont is listed on the Shenzhen Stock Exchange
(002004.SZ) and carries a current market capitalization of
approximately U.S. $1.7 billion.
In
July 2016, Pineworld Capital Limited, an investment fund affiliated
with Huapont acquired a 15% preferred stock equity interest in our
Angionetics, Inc. subsidiary (the entity that holds the Generx
product) in exchange for a $3.0 million investment. Concurrently
with that investment, Angionetics entered into a Distribution and
License Agreement, granting Huapont an exclusive license to
clinically develop, manufacture, market and sell the Generx
angiogenic gene therapy product candidate in mainland China. The
distribution and license rights commence only after we obtain U.S.
FDA approval for marketing and sale of Generx in the United States.
Once the license is effective, Huapont has agreed, at its expense,
to use commercially reasonable efforts to conduct clinical trials,
make regulatory filings and take such other actions as may be
necessary to commercialize Generx in mainland China. The
Distribution and License Agreement calls for Huapont to make
quarterly royalty payments at a rate of 10% of net sales of Generx
products in mainland China, reducing to a 5% royalty based on the
volume of annual sales. The royalty payments commence on the first
commercial sale and expire on the earlier of the termination of any
patent or regulatory exclusivity in China or fifteen years after
the first commercial sale. The term of the agreement continues
(unless terminated for breach) until Huapont has no remaining
payment obligations to Angionetics. Upon expiration (but not an
earlier termination) Huapont shall have a perpetual, non-exclusive,
fully paid-up, and royalty-free license to Generx in mainland
China.
Olaregen
Therapeutix Inc. In July 2018, we sold our Excellagen product
to Olaregen for aggregate consideration of up to $4,000,000. At
closing, we received a cash payment of $650,000, and we will be
entitled to receive royalty payments of 10% of worldwide net sales
of Excellagen totaling up to $3,350,000.
Shanxi
Taxus Pharmaceuticals Co., Ltd. on April 10, 2020, after the
period covered by this report, our Angionetics, Inc. subsidiary
entered into the Shanxi License Agreement, granting Shanxi certain
license rights with respect to our Generx product candidate. The
distribution and license rights commence only after we obtain U.S.
FDA approval for marketing and sale of Generx in the United States.
The license rights include (a) a non-exclusive right to manufacture
Generx products in China, and (b) an exclusive right to market and
sell Generx products in Singapore, Macau, Hong Kong, Taiwan, any
other municipality other than mainland China where Chinese
(Mandarin or Cantonese) is the common language, the Russian
Federation, and the CIS (i.e., Armenia, Azerbaijan, Belarus,
Kazakhstan, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, and
Uzbekistan). The Shanxi License Agreement provides for a royalty
ranging from 5% up to 10% based on the level of annual net sales of
the Generx product sold by Shanxi in the licensed
territory.
On April
10, 2020, our Activation Therapeutics, Inc. subsidiary entered into
a License and Patent Assignment Agreement with Shanxi (the “Shanxi
Assignment Agreement”) pursuant to which we transferred of all of
our residual rights and assets related to our Excellagen product to
Shanxi. Under the terms of the Shanxi Assignment Agreement, we
transferred all our license rights to manufacture, use, market and
sell Excellagen to Shanxi in Greater China, the Russian Federation,
and the CIS. We also assigned to Shanxi a Chinese patent that we
received on Excellagen. In connection with the license, Shanxi
agreed to apply previously funded $600,000 subscription payment to
the license fee, and Shanxi released any future rights or claims
against us. As a result, we have divested all its interest in
Excellagen, other than the right to receive 10% royalty on
worldwide net sales of Excellagen totaling up to $3,350,000,
excluding China, Russia, and countries in the CIS.
Nostrum
Pharmaceuticals, LLC. In May 2020, after the period covered by
this report, we entered into a Preferred Stock Purchase Agreement
with Nostrum selling 1,700,000 shares of our newly authorized
Series B Convertible Preferred Stock in exchange for $1,700,000.
The shares of Series B Convertible Preferred Stock are convertible
into an aggregate of 150,442,478 shares of Common Stock. In
addition, Nostrum entered into an agreement with the holder of our
outstanding Series A Convertible Preferred Stock, under which
Nostrum purchased 220 shares of our Series A Convertible Preferred
Stock, convertible into an aggregate of 19,469,026 shares of Common
Stock and agreed to purchase up to 570 additional Series A
Convertible Preferred Stock. Since May 2020, such holder has
converted 397 shares of Series A Convertible Preferred Stock into
35,132,755 shares of our Common stock, that has increased our
outstanding Common Stock to 49,622,154 shares as of March 31, 2021.
As a result of these transactions, Nostrum currently controls
approximately 75.2% of the voting interests of our Company. Nostrum
is a privately held pharmaceutical company engaged in the
formulation and commercialization of specialty pharmaceutical
products and controlled release, orally administered, branded and
generic drug products. We believe that Nostrum’s assets and
experience in the formulation and commercialization of
pharmaceutical products will facilitate the administration and
completion of the AFFIRM Phase 3 clinical trial on a cost-effective
basis. However, we do not have any formal commercialization
agreements in place with Nostrum currently.
Intellectual
Property and Licensing-
We
generally seek to protect our intellectual property through a
combination of patents and trade secrets. We originally licensed
certain assets and technology from Schering AG Group (now part of
Bayer AG) relating to (a) methods of gene therapy for the treatment
of cardiovascular disease (including methods for the delivery of
genes to the heart or vasculature and the use of angiogenic and/or
non-angiogenic genes for the potential treatment of diseases of the
heart or vasculature); (b) therapeutic genes that include
fibroblast growth factors (including FGF-4); insulin-like growth
factors (including IGF-I); and potentially other related biologics;
and (c) other technology and know-how, including manufacturing and
formulation technology, as well as data relating to the clinical
development of Generx and corresponding FDA regulatory matters.
Under this agreement, we may be required to pay Schering AG a $10
million milestone payment upon the first commercial sale of each
product. We also may be obligated to pay royalties equal to: (i) 5%
on net sales following a first commercial sale of an FGF-4 based
product such as Generx in the United States, Europe, or Japan, or
(ii) 4% on net sales of other products developed based on
technology transferred by Schering AG following a first commercial
sale in the United States, Europe, or Japan, and (iii) a royalty of
2.5% (for FGF-4 based technology) or 2% (for other products) in
territories where the product would not infringe the patent rights
which were licensed by Schering AG.
In
connection with the Schering portfolio, we acquired the rights to
certain patents owned by the University of California related to
the use of the catheter as part of the Generx treatment and New
York University which held a patent on the FGF-4 gene. However, the
underlying patents have subsequently expired. Accordingly, we do
not own or have rights to any specific patent projection with
respect to the Generx product candidate. Our principal intellectual
property rights with respect to Generx are trade secrets that we
have developed over the past decade.
In June
2016 we entered into a Distribution and License Agreement with an
affiliate of Huapont whereby we granted the Huapont affiliate an
exclusive license to clinically develop, manufacture, market and
sell the Generx angiogenic gene therapy product candidate in
mainland China. In April 2020 we entered into a similar agreement
with Shanxi to manufacture Generx in mainland China and to sell
Generx in Greater China, the Russian Federation, and the CIS. The
licenses are effective only upon FDA approval of Generx in the U.S.
For additional terms of the licenses, see
“Business—Commercialization Relationships.”
In July
2018, we sold our Excellagen product to Olaregen for cash proceeds
of $650,000, which has been recognized in the statement of
operations as a gain on sale of assets and intellectual property.
Under the terms of that arrangement, we transferred all assets and
rights to the product retaining the rights to China, the Russian
Federation, and the CIS. We are also entitled to royalty payments
of 10% of all Olaregen’s worldwide sales of Excellagen, if any, up
to an aggregate of $3,350,000. In April 2020, after the period
covered by this report, we transferred our residual rights in
Excellagen, covering China, the Russian Federation, and the CIS to
Shanxi. We no longer have any ownership interest or rights in
Excellagen, other than the royalty arrangement with
Olaregen.
In
the future, we or any future licensors may file and prosecute
patent applications related to various technologies under license
or development. There are several uncertainties affecting our
ability to enforce any of our intellectual property rights as
described under “RISK FACTORS - Risks Related to Our Intellectual
Property”. There can be no assurance that any intellectual property
assets, or other approaches to marketing exclusivity or priority,
would be sufficient to protect our commercialization opportunities,
nor that our planned commercialization activities will not infringe
any intellectual property rights held or developed by third
parties.
Employees
As of
December 31, 2019, we had four full-time employees. Our employees
are not represented by a collective bargaining agreement and we
have not experienced any work stoppages as a result of labor
disputes.
Available
Information
Our
website address is www.genebiotherapeutics.com. We make available,
free of charge, through our website our Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and
amendments to those reports filed or furnished pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934, as amended,
as soon as reasonably practicable after we electronically file or
furnish such reports to the SEC. The information on our website is
not part of this or any other report we file with, or furnish to,
the SEC.
You
should carefully review and consider the risks described below, as
well as the other information in this report and in other reports
and documents we file with the SEC when evaluating our business and
future prospects. The risks and uncertainties described below are
not the only ones we face. Additional risks and uncertainties, not
presently known to us, or that we currently perceive as immaterial
or remote, may also occur. If any of the following risks or any
additional risks and uncertainties actually occur, our business
could be materially harmed, and our financial condition, results of
operations and future growth prospects could be materially and
adversely affected. In that event, the market price of our Common
Stock could decline, and you could lose all or a portion of the
value of your investment in our stock. You should not draw any
inference as to the magnitude of any particular risk from its
position in the following discussion.
Risks Related to the Development of Product
Candidates
The regulatory approval processes of the FDA are inherently
unpredictable, and if we are ultimately unable to obtain regulatory
approval for our product candidates, we may never generate revenue
or achieve profitability.
To
generate revenues, we must successfully complete clinical trials of
our product candidates and obtain marketing approval from the FDA.
We may never succeed in securing FDA approval for Generx or any new
product candidate, and, even if we do, we may never generate
sufficient revenue to achieve profitability. Our product candidates
could fail to receive regulatory approval for many reasons,
including the following:
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The
FDA may disagree with the design or implementation of our clinical
trials; |
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We
may be unable to demonstrate sufficiently to the FDA that our
product candidate is safe and effective for its proposed
indication; |
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The
results of our clinical trials may not meet the level of
statistical significance required by the FDA for
approval; |
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The
approval policies or regulations of the FDA may change
significantly, in a manner rendering our clinical data insufficient
for approval. |
Generally,
there is a high rate of failure for drug candidates proceeding
through clinical trials. The results of preclinical studies and
early clinical trials of our product candidates may not be
predictive of the results of later-stage clinical trials. Product
candidates in later stages of clinical trials may fail to show the
desired safety and efficacy traits despite having progressed
through preclinical studies and initial clinical trials. It is not
uncommon for companies in the biopharmaceutical industry to suffer
significant setbacks in advanced clinical trials due to nonclinical
findings made while clinical studies were underway and safety or
efficacy observations made in clinical studies, including
previously unreported adverse events.
We
cannot be certain that any of our product candidates will be
successful in clinical trials or receive regulatory approval.
Further, our product candidates may not receive regulatory approval
even if they are successful in clinical trials. If we do not
receive regulatory approvals for our product candidates, we may not
be able to continue our operations.
In
addition, even if we were to obtain approval, regulatory
authorities may approve any of our product candidates for fewer or
more limited indications than we request, may not approve the price
we intend to charge for our products, may grant approval contingent
on the performance of costly post-marketing clinical trials, may
approve a product candidate with a label that does not include the
labeling claims necessary or desirable for the successful
commercialization of that product candidate or may restrict its
distribution. Any of the foregoing scenarios could materially harm
the commercial prospects for our product candidates.
Clinical trials are expensive, time-consuming, and difficult to
design and implement, and involve an uncertain
outcome.
Before
obtaining marketing approval from the FDA or other comparable
foreign regulatory authorities for the sale of our product
candidates, we must complete pre-clinical development and extensive
clinical trials to demonstrate the safety and efficacy of our
product candidates. Clinical testing is expensive and can take many
years to complete, and its outcome is inherently uncertain. Failure
can occur at any time during the clinical trial process. Although
we are planning for certain clinical trials relating to Generx and
our other product candidates, there can be no assurance that the
FDA will accept our proposed trial designs.
We
may experience delays in our clinical trials, and we do not know
whether planned clinical trials will begin on time, need to be
redesigned, enroll patients on time or be completed on schedule, if
at all. Clinical trials can be delayed for a variety of reasons,
including delays related to:
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the
FDA disagreeing as to the design or implementation of our clinical
studies; |
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reaching
mutually acceptable agreements with prospective contract research
organizations (“CROs”); |
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securing
a sufficient number of clinical trial sites on acceptable
terms; |
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clinical
sites deviating from trial protocol or dropping out of a
trial; |
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obtaining
institutional review board (“IRB”), approval at each site, or
independent ethics committee, approval at any sites outside the
United States; |
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securing
sufficient quantities of our product candidate from third party
contract manufacturers to support the trial; |
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any
changes to our manufacturing process that may be necessary or
desired; |
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addressing
patient safety concerns that arise during the course of a
trial; |
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imposition
of a clinical hold by regulatory authorities, including as a result
of unforeseen safety issues or side effects or failure of trial
sites to adhere to regulatory requirements; |
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the
occurrence of serious adverse events in trials of the same class of
agents conducted by other companies or institutions; |
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changes
to clinical trial protocols; |
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selection
of clinical end points that require prolonged periods of clinical
observation or analysis of the resulting data; or |
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lack
of adequate funding to continue the clinical trial. |
If we
experience delays in the completion of, or termination of, any
clinical trial of our product candidates, the commercial prospects
of our product candidates will be harmed, and our ability to
generate product revenues from any of these product candidates will
be delayed. In addition, any delays in completing our clinical
trials will increase our costs, slow down our product candidate
development and approval process and jeopardize our ability to
commence product sales and generate revenues. Any of these
occurrences would harm our business, financial condition, and
prospects significantly. In addition, many of the factors that
cause, or lead to, a delay in the commencement or completion of
clinical trials may also ultimately lead to the denial of
regulatory approval of our product candidates.
If the third parties that we rely on for pre-clinical and clinical
trial support do not successfully perform their contractual legal
and regulatory duties or meet expected deadlines, we may not be
able to obtain regulatory approval for or commercialize our product
candidates.
We
have relied upon and plan to continue to rely upon third-party
medical institutions, clinical investigators, contract laboratories
and other third party CROs to monitor and manage data for our
ongoing preclinical and clinical programs. We rely on these parties
for execution of our preclinical and clinical trials, and control
only certain aspects of their activities. Nevertheless, we are
responsible for ensuring that each of our studies is conducted in
accordance with the applicable protocol, legal, regulatory, and
scientific standards, and our reliance on the CROs does not relieve
us of our regulatory responsibilities. We and our CROs are required
to comply with Good Clinical Practices (“GCPs”), which are
regulations and guidelines enforced by the FDA, the Competent
Authorities of the member states of the European Economic Area
(EEA), and comparable foreign regulatory authorities for all our
products in clinical development.
Regulatory
authorities enforce these GCPs through periodic inspections of
trial sponsors, principal investigators, and trial sites. If we or
any of our CROs fail to comply with applicable GCPs, the clinical
data generated in our clinical trials may be deemed unreliable and
the FDA, the European Medicines Agency (“EMA”) or comparable
foreign regulatory authorities may require us to perform additional
clinical trials before approving our marketing applications. We
cannot assure you that upon inspection by a given regulatory
authority, such regulatory authority will determine that any of our
clinical trials comply with GCP regulations. In addition, our
clinical trials must be conducted with product produced under cGMP
regulations. Our failure to comply with these regulations may
require us to repeat clinical trials, which would delay the
regulatory approval process.
In
addition, our CROs are not our employees, and except for remedies
available to us under our agreements with such CROs, we cannot
control whether or not they devote sufficient time and resources to
our on-going clinical, non-clinical and preclinical programs. If
CROs do not successfully carry out their contractual duties or
obligations or meet expected deadlines, if they need to be replaced
or if the quality or accuracy of the clinical data, they obtain is
compromised due to the failure to adhere to our clinical protocols,
regulatory requirements or for other reasons, our clinical trials
may be extended, delayed, or terminated and we may not be able to
obtain regulatory approval for or successfully commercialize our
product candidates. As a result, our results of operations and the
commercial prospects for our product candidates would be harmed,
our costs could increase and our ability to generate revenues could
be delayed.
If
any of our relationships with these third-party CROs terminate, we
may not be able to enter into arrangements with alternative CROs or
to do so on commercially reasonable terms. Switching or adding
additional CROs involves additional cost and requires management
time and focus. In addition, there is a natural transition period
when a new CRO commences work. As a result, delays occur, which can
materially impact our ability to meet our desired clinical
development timelines.
If we are unable to enroll patients in our clinical trials, our
research and development efforts could be adversely
affected.
The
timely completion of clinical trials in accordance with their
protocols depends, among other things, on our ability to enroll a
sufficient number of patients who remain in the study until its
conclusion. We may experience difficulties in patient enrollment in
our clinical trials for a variety of reasons. Patient enrollment is
affected by many factors including:
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the
size and nature of the patient population; |
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the
proximity of patients to clinical sites; |
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the
eligibility criteria for the clinical trial; |
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the
design of the clinical trial; |
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the
size of the patient population required for analysis of the trial’s
primary endpoints; |
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our
ability to recruit clinical trial investigators with the
appropriate competencies and experience; |
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our
ability to obtain and maintain patient consents; |
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the
risk that patients enrolled in clinical trials will drop out of the
trials before completion, and |
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competing
clinical trials and clinicians’ and patients’ perceptions as to the
potential advantages of the drug being studied in relation to other
available therapies, including any new drugs that may be approved
for the indications we are investigating. |
Many
pharmaceutical companies are conducting clinical trials in patients
with the disease indications that our potential drug products
target. As a result, we must compete with them for clinical sites,
physicians and the limited number of patients who fulfill the
stringent requirements for participation in clinical trials. Also,
due to the confidential nature of clinical trials, we do not know
how many of the eligible patients may be enrolled in competing
studies and who are consequently not available to us for our
clinical trials. Our clinical trials may be delayed or terminated
due to the inability to enroll enough patients. The delay or
inability to meet planned patient enrollment may result in
increased costs and delay or termination of our trials, which could
have a harmful effect on our ability to develop
products.
We may be unable to maintain sufficient clinical trial liability
insurance to fully insure against liabilities arising out of
clinical trial activities.
We
will require all patients enrolled in our clinical trials to sign
consents, which explain various risks involved with participating
in the trial. However, patient consents provide only a limited
level of protection, and it may be alleged that the consent did not
address or did not adequately address a risk that the patient
suffered from. Additionally, we will generally be required to
indemnify the clinical product manufacturers, clinical trial
centers, medical professionals and other parties conducting related
activities in connection with losses they may incur through their
involvement in the clinical trials. We may not be able to obtain or
maintain product liability insurance on acceptable terms or with
adequate coverage against potential liabilities.
Our
inability to retain sufficient clinical trial liability insurance
at an acceptable cost to protect against potential liability claims
could prevent or inhibit our ability to conduct clinical trials for
product candidates we develop. We may be unable to obtain
appropriate levels of such insurance. Even if we do secure clinical
trial liability insurance for our programs, we may not be able to
achieve sufficient levels of such insurance. Any claim that may be
brought against us could result in a court judgment or settlement
in an amount that is not covered, in whole or in part, by our
insurance or that is more than the limits of our insurance
coverage. We expect we will supplement our clinical trial coverage
with product liability coverage in connection with the commercial
launch of Generx or other product candidates we develop in the
future; however, we may be unable to obtain such increased coverage
on acceptable terms or at all. If we are found liable in a clinical
trial lawsuit or a product liability lawsuit in the future, we will
have to pay any amounts awarded by a court or negotiated in a
settlement that exceed our coverage limitations or that are not
covered by our insurance, and we may not have, or be able to
obtain, sufficient capital to pay such amounts.
We currently have only one significant product candidate—our Generx
product candidate—and our business is substantially dependent on
its success.
We do
not currently have any viable product candidates other than Generx.
Accordingly, our success is substantially dependent on our ability
to successfully secure marketing approval and to commercialize
Generx. If we fail to secure marketing approval for Generx, we
could be forced to try to secure an alternative product candidate.
Our internal research and development capabilities are limited and
will initially be focused on the Phase 3 Generx clinical trial. We
may evaluate, acquire, license, develop and/or market additional
product candidates and technologies. We do not currently have
substantial resources to procure additional technologies. The
success of this strategy depends partly upon our ability to
identify, select, and acquire promising pharmaceutical product
candidates and products. The process of proposing, negotiating, and
implementing a license or acquisition of a product candidate or
approved product is lengthy and complex. Other companies, including
some with substantially greater financial, marketing and sales
resources, may compete with us for the license or acquisition of
product candidates and approved products. We have limited resources
to identify and execute the acquisition or in-licensing of
third-party products, businesses and technologies and integrate
them into our current infrastructure. Moreover, we may devote
resources to potential acquisitions or in-licensing opportunities
that are never completed, or we may fail to realize the anticipated
benefits of such efforts. We may not be able to acquire the rights
to additional product candidates on terms that we find acceptable,
or at all. If we are unable to receive marketing approval and
successfully commercialize Generx we may not be able to secure
rights to another viable product candidate and may be forced to
cease operations.
Interim “top-line” and preliminary data from our clinical trials
may change as more patient data become available and are subject to
verification procedures that could result in material changes in
the final data.
From
time to time, we may publicly disclose interim top-line or
preliminary data from our clinical trials, which is based on a
preliminary analysis of then-available data, and the results and
related findings and conclusions are subject to change following a
more comprehensive review of the data related to the particular
study or trial. We also make assumptions, estimations,
calculations, and conclusions as part of our analyses of data, and
we may not have received or had the opportunity to evaluate all
data fully and carefully. As a result, the top-line, or preliminary
results that we report may differ from future results of the same
studies, or different conclusions or considerations may qualify
such results once additional data have been received and fully
evaluated. Top-line or preliminary data also remain subject to
verification procedures that may result in the final data being
materially different from the top-line or preliminary data we
previously published. As a result, top-line and preliminary data
should be viewed with caution until the final data are
available.
Regulatory
agencies may not accept or agree with our assumptions, estimates,
calculations, conclusions, or analyses or may interpret or weigh
the importance of data differently, which could impact the value of
the particular program, the approvability or commercialization of
the particular product candidate or product and our company in
general. In addition, the information we choose to publicly
disclose regarding a particular study or clinical trial is based on
what is typically extensive information, and you or others may not
agree with what we determine is material or otherwise appropriate
information to include in our disclosure.
If
the interim, top-line or preliminary data that we report differ
from actual results, or if others, including regulatory
authorities, disagree with the conclusions reached, our ability to
obtain approval for, and commercialize, our product candidates may
be harmed, which could harm our business, operating results,
prospects, or financial condition.
We have obtained Fast Track Designation for Generx, but that
designation may not lead to a faster development, regulatory
review, or approval.
If a
product is intended for the treatment of a serious condition and
nonclinical or clinical data demonstrate the potential to address
unmet medical need for this condition, a product sponsor may apply
for FDA Fast Track designation. We have obtained Fast Track
designation for Generx for investigation into the treatment of
refractory angina, providing opportunity for expedited clinical
development and regulatory review. Fast Track Designation does not
ensure that we will receive marketing approval or that approval
will be granted within any particular timeframe. We may not
experience a faster development or regulatory review or approval
process with Fast Track designation compared to conventional FDA
procedures. In addition, the FDA may withdraw Fast Track
designation if it believes that the designation is no longer
supported by data from our clinical development program. Fast Track
designation alone does not guarantee qualification for the FDA’s
priority review procedures.
If
the FDA does not conclude that our product candidates satisfy the
requirements for the 505(b)(2) regulatory approval pathway, or if
the requirements for approval of any of our product candidates
under Section 505(b)(2) are not as we expect, the approval pathway
for our product candidates will likely take significantly longer,
cost significantly more, and encounter significantly greater
complications and risks than anticipated, and in any case may not
be successful.
We
intend to seek FDA approval through the 505(b)(2) regulatory
pathways for Generx. Section 505(b)(2) of the Food Drug and
Cosmetics Act permits the filing of an NDA where at least some of
the information required for approval comes from studies that were
not conducted by or for the applicant. If the FDA does not allow us
to pursue the 505(b)(2) regulatory pathways for our product
candidates as anticipated, we may need to conduct additional
clinical trials, provide additional data and information, and meet
additional standards for regulatory approval. If this were to
occur, the time and financial resources required to obtain FDA
approval for our product candidates would likely substantially
increase. Moreover, the inability to pursue the 505(b)(2)
regulatory pathways could result in new competitive products
reaching the market faster than our product candidates, which could
materially adversely impact our competitive position and prospects.
Even if we can pursue the 505(b)(2) regulatory pathways for a
product candidate, we cannot assure you that we will receive the
requisite or timely approvals for commercialization of such product
candidate. In addition, we expect that our competitors will file
citizens’ petitions with the FDA in an effort to persuade the FDA
that our product candidates, or the clinical studies that support
their approval, contain deficiencies. Such actions by our
competitors could delay or even prevent the FDA from approving any
NDA that we submit under Section 505(b)(2).
Our product candidates may cause undesirable side effects or have
other properties that could delay or prevent their regulatory
approval, limit the commercial profile of an approved label, or
result in other significant negative
consequences.
Undesirable
side effects caused by our product candidates could cause us or
regulatory authorities to interrupt, delay or halt clinical trials
and could result in a more restrictive label or the delay or denial
of regulatory approval by the FDA or other comparable foreign
authorities. The clinical evaluation of Generx and our other
product candidates in patients is still in the early stages and it
is possible that there may be side effects associated with their
use. Results of our trials could reveal a high and unacceptable
severity and prevalence of side effects. In such an event, we, the
FDA, the IRBs at the institutions in which our studies are
conducted, or the Data Safety Monitoring Board could suspend or
terminate our clinical trials, or the FDA or comparable foreign
regulatory authorities could order us to cease clinical trials or
deny approval of our product candidates for any or all targeted
indications.
While
we are not presently aware of any side effects from the use of
Generx, possible serious side effects of gene transfer include
viral or gene product toxicity resulting in inflammation or other
injury to the heart or other parts of the body. The development or
worsening of cancer in a patient could potentially be a perceived
or actual side effect of gene therapy technologies. Furthermore,
there is a possibility of side effects or decreased effectiveness
associated with an immune response toward any viral vector or gene
used in gene therapy. The possibility of such response may increase
if there is a need to deliver the viral vector more than
once.
Treatment-related
side effects could also affect patient recruitment or the ability
of enrolled patients to complete the clinical trial or result in
potential product liability claims. In addition, these side effects
may not be appropriately recognized or managed by the treating
medical staff. We expect to have to train medical personnel using
our product candidates to understand the side effect profiles for
our clinical trials and upon any commercialization of any of our
product candidates. Inadequate training in recognizing or managing
the potential side effects of our product candidates could result
in patient injury or death. Any of these occurrences may harm our
business, financial condition, and prospects
significantly.
If we
elect or are forced to suspend or terminate any planned clinical
trial of Generx or any other of our product candidates, the
commercial prospects for that product will be harmed and our
ability to generate product revenue from that product may be
delayed or eliminated. Furthermore, any of these events could
prevent us or our partners from achieving or maintaining market
acceptance of the affected product and could substantially increase
the costs of commercializing our product candidates and impair our
ability to generate revenue from the commercialization of these
products.
Risks Related to Product Commercialization
Even if we obtain regulatory approvals to commercialize Generx or
other product candidates, our product candidates may not be
accepted by physicians or the medical community in
general.
Our
ongoing business depends on the success of our technologies and
product candidates. Gene-based therapy, like our Generx product
candidate, is a relatively new and rapidly evolving medical
approach. Biotechnology and pharmaceutical companies have
successfully developed and commercialized only a limited number of
biologic-based products and to date only a limited number of
cellular and gene therapy products have been approved by the U.S.
FDA. Our product candidates, and the technology underlying them,
are new and unproven and there is no guarantee that health care
providers or patients will be interested in our products even if
they are approved for use.
We
cannot be certain that Generx or any other product candidate we
successfully develop will be accepted by physicians, hospitals, and
other health care facilities. The degree of market acceptance of
any drugs we develop depends on a number of factors,
including:
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timing
of market approval and commercial launch of Generx and our other
product candidates; |
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the
clinical indication(s) for which Generx and our other product
candidates are approved; |
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product
label and package insert requirements; |
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physician
and patient perception of the safety and efficacy of our
products; |
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strength
of sales, marketing, and distribution support; |
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product
pricing relative to alternative treatments; |
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future
changes in health care laws, regulations, and medical policies;
and |
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availability
of reimbursement codes and coverage in select jurisdictions, and
future changes to reimbursement policies of government and
third-party payors. |
If
the market does not accept our products or product candidates, when
and if we are able to commercialize them, then we may never become
profitable. It is difficult to predict the future growth of our
business, if any, and the size of the market for our product
candidates because the market and technology are continually
evolving. There can be no assurance that our technologies and
product candidates will prove superior to technologies and products
that may currently be available or may become available in the
future or that our technologies or research and development
activities will result in any commercially profitable products. If
our products do not gain market acceptance, we may not be able to
fund future operations either through operating or financing
activities.
Even if we obtain marketing approval for Generx or another product
candidate, we will still face extensive and ongoing regulatory
requirements which could significantly impact our
operations.
Any
product candidate for which we obtain marketing approval, along
with the manufacturing processes, post-approval clinical data,
labeling, packaging, distribution, adverse event reporting,
storage, recordkeeping, export, import, advertising, and
promotional activities for such product, among other things, will
be subject to extensive and ongoing requirements of and review by
the FDA and other regulatory authorities. These requirements
include submissions of safety and other post-marketing information
and reports, establishment registration and drug listing
requirements, continued compliance with cGMP requirements relating
to manufacturing, quality control, quality assurance and
corresponding maintenance of records and documents, requirements
regarding the distribution of samples to physicians and
recordkeeping and GCP requirements for any clinical trials that we
conduct post-approval.
Even
if marketing approval of a product candidate is granted, the
approval may be subject to limitations on the indicated uses for
which the product candidate may be marketed or to the conditions of
approval, including a requirement to implement a REMS. If any of
our product candidates receives marketing approval, the
accompanying label may limit the approved indicated use of the
product candidate, which could limit sales of the product
candidate. The FDA may also impose requirements for costly
post-marketing studies or clinical trials and surveillance to
monitor the safety or efficacy of a product. Violations of the
Federal Food, Drug, and Cosmetic Act, or FDCA, relating to the
promotion of prescription drugs may lead to FDA enforcement actions
and investigations alleging violations of federal and state
healthcare fraud and abuse laws, as well as state consumer
protection laws.
Later
discovery of previously unknown adverse events or other problems
with our products, manufacturers or manufacturing processes or
failure to comply with regulatory requirements, could result
in:
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fines,
restitution, or disgorgement of profits or revenues; |
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restrictions
on the labeling or marketing of products; |
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restrictions
on product manufacturing, distribution or use; |
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requirements
to conduct post-marketing studies or clinical trials; |
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warning
letters or untitled letters; |
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refusal
to approve pending applications or supplements to approved
applications that we submit; |
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recall
of products; |
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or
withdrawal of products from the market; or |
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injunctions
or the imposition of civil or criminal penalties. |
Further,
the FDA’s policies may change, and additional government
regulations may be enacted that could impose extensive and ongoing
regulatory requirements and obligations on any product candidate
for which we obtain marketing approval. If we are slow or unable to
adapt to changes in existing requirements or the adoption of new
requirements or policies, or if we are not able to maintain
regulatory compliance, we may lose any marketing approval that we
may have obtained, which would adversely affect our business,
prospects, and ability to achieve or sustain
profitability.
Healthcare reform measures could hinder or prevent our product
candidates’ commercial success.
New
laws, regulations and judicial decisions, or new interpretations of
existing laws, regulations, and decisions, that relate to
healthcare availability, methods of delivery or payment for
products and services, or sales, marketing, or pricing, may limit
our potential revenue, and we may need to revise our research and
development programs. The continuing efforts of the U.S. and
foreign governments, insurance companies, managed care
organizations and other payors of health care services to contain
or reduce health care costs may adversely affect our ability to set
prices for our products which we believe are fair, and our ability
to generate revenues and achieve and maintain profitability. We
cannot predict the reform initiatives that may be adopted in the
future or whether initiatives that have been adopted will be
repealed or modified.
Further
federal and state proposals and health care reforms are likely
which could limit the prices that can be charged for the product
candidates that we develop and may further limit our commercial
opportunities. Our proposed products may not be considered
cost-effective, and coverage and reimbursement may not be available
or sufficient to allow us to sell our proposed products on a
profitable basis. Our results of operations could be materially
adversely affected by proposed healthcare reforms, by the Medicare
prescription drug coverage legislation, by the possible effect of
such current or future legislation on amounts that private insurers
will pay and by other health care reforms that may be enacted or
adopted in the future.
We intend to rely on third parties to produce commercial supplies
of any approved product candidate, and our commercialization of any
future product could be stopped or delayed or made less profitable
if third party manufacturers fail to obtain approval of the FDA or
comparable regulatory authorities or fail to provide us with drug
product in sufficient quantities or at acceptable
prices.
The
manufacture of biotechnology and pharmaceutical products is complex
and requires significant expertise, capital investment, process
controls and know-how. Common difficulties in biotechnology and
pharmaceutical manufacturing may include:
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sourcing
and producing raw materials; |
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transferring
technology from chemistry and development activities to production
activities; |
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validating
initial production designs; |
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scaling
manufacturing techniques: |
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improving
costs and yields; |
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establishing
and maintaining quality controls and stability
requirements; |
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eliminating
contaminations and operator errors; and |
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maintaining
compliance with regulatory requirements. |
We do
not currently have nor do we plan to acquire the infrastructure or
capability internally to produce an adequate supply of compounds to
meet future requirements for clinical trials and commercialization
of our products or to produce our products in accordance with cGMP
prescribed by the FDA. Drug manufacturing facilities are subject to
inspection before the FDA will issue an approval to market a new
drug product, and all of the manufacturers that we intend to use
must adhere to the cGMP regulations prescribed by the
FDA.
We
expect to rely on third-party manufacturers for clinical supplies
of our product candidates that we may develop. These third-party
manufacturers will be required to comply with cGMPs, and other
applicable laws and regulations. We will have no control over the
ability of these third parties to comply with these requirements,
or to maintain adequate quality control, quality assurance and
qualified personnel. If the FDA or any other applicable regulatory
authorities do not approve the facilities of these third parties
for the manufacture of our other product candidates or any products
that we may successfully develop, or if it withdraws any such
approval, or if our suppliers or contract manufacturers decide they
no longer want to supply or manufacture for us, we may need to find
alternative manufacturing facilities, in which case we might not be
able to identify manufacturers for clinical or commercial supply on
acceptable terms, or at all. Any of these factors would
significantly impact our ability to develop, obtain regulatory
approval for or market our product candidates and adversely affect
our business.
Manufacturing biologic products is subject to a multitude of
manufacturing risks, any of which could substantially increase our
costs and limit supply of our products.
We
and/or our third-party manufacturers may be adversely affected by
developments outside of our control, and these developments may
delay or prevent further manufacturing of our products. Adverse
developments may include:
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labor
disputes, resource constraints, shipment delays, or inventory
shortages; |
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product
loss due to contamination, equipment failure or improper
installation or operation of equipment, or vendor or operator
error; |
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reduced
production yields, product defects, and other supply disruptions
due to deviations, even minor, from normal manufacturing and
distribution processes; |
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microbial,
viral, or other contaminations in our product candidate or in the
manufacturing facilities in which our product candidate is made,
which may result in the closure of such manufacturing facilities
for an extended period of time to allow for the investigation and
remediation of the contamination; |
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lawsuits
related to our manufacturing techniques, equipment used during
manufacturing, or composition of matter; |
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unstable
political environments, acts of terrorism, war, natural disasters,
and other natural and man-made disasters. |
If we
or our third-party manufacturers were to encounter any of the above
difficulties, or otherwise fail to comply with contractual
obligations, our ability to provide any product for commercial
purposes would be jeopardized. This may increase the costs
associated with completing our commercial production. We may also
have to take inventory write-offs and incur other charges and
expenses for products that fail to meet specifications or pass
safety inspections. Inability to meet the demand for our product
candidate could damage our reputation and the reputation of our
product among physicians, healthcare payors, patients, or the
medical community, which could adversely affect our ability to
operate our business and our results of operations. If production
difficulties cannot be solved with acceptable costs, expenses, and
timeframes, we may be forced to abandon our commercialization
plans, which could have a material adverse effect on our business,
prospects, financial condition, and the value of our
securities.
If we are unable to develop satisfactory sales and marketing
capabilities, we may not succeed in commercializing Generx or any
other product candidate.
We
have limited experience in marketing and selling drug products.
Typically, pharmaceutical companies would employ groups of sales
representatives and associated sales and marketing staff numbering
in the hundreds to thousands of individuals to call on many
physicians and hospitals. If we seek to market and sell our drugs
directly, we will need to hire additional personnel skilled in
marketing and sales. The establishment of a direct sales force or a
contract sales force or a combination direct and contract sales
force to market our products will be expensive and time-consuming
and could delay any product launch. Further, we can give no
assurances that we may be able to maintain a direct and/or contract
sales force for any period or that our sales efforts will be
sufficient to grow our revenues or that our sales efforts will ever
lead to profits.
We
may seek to collaborate with a third party to market our products.
If we seek to collaborate with a third party, we cannot be sure
that a collaborative agreement can be reached on terms acceptable
to us. We cannot be sure that we will be able to acquire, or
establish third party relationships to provide, any or all these
marketing and sales capabilities.
We operate in a highly competitive industry and the emergence of an
alternative product or technology could significantly impact the
market opportunity for our products.
Biopharmaceutical
product development is highly competitive and subject to rapid and
significant technological advancements. We face and will continue
to face intense competition from a variety of businesses, including
large, fully integrated, well-established pharmaceutical companies
who already possess a large share of the market, specialty
pharmaceutical and biopharmaceutical companies, academic
institutions, government agencies and other private and public
research institutions in the United States, the European Union, and
other jurisdictions. These companies have significantly greater
financial resources and expertise in research and development,
manufacturing, preclinical testing, conducting clinical trials,
obtaining regulatory approvals, and marketing approved drugs than
we do. This may make it easier for them to respond more quickly
than us to new or changing opportunities, technologies, or market
needs.
For
our Generx product candidate, we will have to demonstrate that it
provides advantages over existing standards of care including
stents, enhanced external counter-pulsation, and Ranexa®
(ranolazine). In addition, a number of competitors are developing
alternative treatments for refractory angina, including product
candidates being developed by Neovasc, BioCardia, Caladrius, and
others.
Our
competitors may develop more effective or more affordable products
or achieve earlier patent protection or product commercialization
and market penetration than us. As these competitors develop their
technologies, they may develop proprietary positions that prevent
us from successfully commercializing our future products. If we are
unable to adapt, products and technologies developed by our
competitors may render our products and product candidates
uneconomical or obsolete, and we may not be successful in marketing
our products and product candidates against competitors. We may
never be able to capture and maintain the market share necessary
for growth and profitability and there is no guarantee we will be
able to compete successfully against current or future
competitors.
If we successfully commercialize Generx or another product
candidate, we will face the risk of product liability claims, which
could adversely affect our business and financial
condition.
Our
sales and marketing will expose us to product liability risks that
are inherent in the testing, manufacturing, and marketing of
biotechnology products. Product liability may result from harm to
patients using our products, such as a complication that was either
not communicated as a potential side effect or was more extreme
than communicated. Failure to obtain or maintain sufficient product
liability insurance or otherwise protect against product liability
claims could prevent or delay the commercialization or marketing of
our products or product candidates or expose us to substantial
liabilities and diversions of resources, all of which can
negatively impact our business. Regardless of the merit or eventual
outcome, product liability claims may result in withdrawal of
product candidates from clinical trials, costs of litigation,
damage to our reputation, substantial monetary awards to plaintiffs
and decreased demand for products.
Risks Related to Intellectual Property Rights
Our intellectual property may not be sufficient to protect our
products from competition, which may negatively affect our business
as well as limit our partnership or acquisition
appeal.
The
patents relating to the fundamental processes for our Generx
product candidate have expired. We do not currently have any patent
protection related to Generx. For Generx, and other product
candidates we may develop, we rely on trade secrets, know-how,
continuing technological innovations and licensing opportunities to
develop and maintain our competitive position.
We
may be subject to competition despite the existence of intellectual
property we license or own. We can give no assurances that our
intellectual property claims will be sufficient to prevent third
parties from designing around patents we own or license and
developing and commercializing competitive products. The existence
of competitive products that avoid our intellectual property could
materially adversely affect our operating results and financial
condition. Furthermore, limitations, or perceived limitations, in
our intellectual property may limit the interest of third parties
to partner, collaborate or otherwise transact with us, if third
parties perceive a higher than acceptable risk to commercialization
of our products or future products.
It is difficult and costly to protect our proprietary rights, and
we may not be able to ensure their protection. If we fail to
adequately protect our product candidates, others could compete
against us more directly.
Our
commercial success will depend in part on obtaining and maintaining
patent protection and trade secret protection of our current and
future product candidates, the processes used to manufacture them
and the methods for using them, as well as successfully defending
these patents against third-party challenges.
The
patent positions of biotechnology and pharmaceutical companies can
be highly uncertain and involve complex legal and factual questions
for which important legal principles remain unresolved. No
consistent policy regarding the breadth of claims allowed in
pharmaceutical patents has emerged to date in the United States or
in foreign jurisdictions outside of the United States. Changes in
either the patent laws or interpretations of patent laws in the
United States and other countries may diminish the value of our
intellectual property. Accordingly, we cannot predict the breadth
of claims that may be enforced in the patents that may be issued
from the applications we currently or may in the future own or
license from third parties. Further, if any patents we obtain or
license are deemed invalid and unenforceable, our ability to
commercialize or license our technology could be adversely
affected.
The
degree of future protection for our proprietary rights is uncertain
because legal means afford only limited protection and may not
adequately protect our rights or permit us to gain or keep our
competitive advantage. For example:
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others
may be able to make compounds that are similar to our product
candidates, but that are not covered by the claims of our
patents; |
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we
might not have been the first to make the inventions covered by our
pending patent applications; |
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we
might not have been the first to file patent applications for these
inventions; |
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our
patent applications may not result in issued patents; |
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the
claims of our issued patents or patent applications when issued may
not cover our products or product candidates; |
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any
patents that we obtain may not provide us with any competitive
advantages; |
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any
granted patents may be held invalid or unenforceable as a result of
legal challenges by third parties; |
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the
patents of others may have an adverse effect on our business;
and |
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there
may be significant pressure on the United States government and
other international governmental bodies to limit the scope of
patent protection both inside and outside the United States for
treatments that prove successful as a matter of public policy
regarding worldwide health concerns. |
We
cannot be certain that any future patents will issue with claims
that cover our product candidates. Our ability to stop third
parties from making, using, selling, offering to sell, or importing
our product candidates is dependent upon the extent to which we
have rights under valid and enforceable patents or trade secrets
that cover these activities.
If we are not able to adequately prevent disclosure of trade
secrets and other proprietary information, the value of our
technology and products could be significantly
diminished.
We
also rely on trade secrets to protect our proprietary technologies,
especially where we do not believe patent protection is appropriate
or obtainable. However, trade secrets are difficult to protect. We
rely in part on confidentiality agreements with our employees,
consultants, outside scientific collaborators, sponsored
researchers, and other advisors to protect our trade secrets and
other proprietary information. These agreements may not effectively
prevent disclosure of confidential information and may not provide
an adequate remedy in the event of unauthorized disclosure of
confidential information.
Furthermore,
any license agreements we enter in the future may require us to
notify, and in some cases license back to the licensor, certain
additional proprietary information, or intellectual property that
we developed using the rights licensed to us under these
agreements. Any such licenses back to the licensor could allow our
licensors to use that proprietary information or intellectual
property in a manner that could harm our business. In addition,
others may independently discover our trade secrets and proprietary
information. For example, the FDA, as part of its transparency
initiative, is currently considering whether to make additional
information publicly available on a routine basis, including
information that we may consider to be trade secrets or other
proprietary information, and it is not clear at the present time
how the FDA’s disclosure policies may change in the future, if at
all. Costly and time-consuming litigation could be necessary to
enforce and determine the scope of our proprietary rights, and
failure to obtain or maintain trade secret protection could
adversely affect our competitive business position.
We may incur substantial costs because of litigation or other
proceedings relating to patents and other intellectual property
rights.
If we
choose to commence a proceeding or litigation to prevent another
party from infringing our patents, that party will have the right
to ask the examiner or court to rule that our patents are invalid
or should not be enforced against them. There is a risk that the
examiner or court will decide that our patents are not valid and
that we do not have the right to stop the other party from using
the related inventions. There is also the risk that, even if the
validity of our patents is upheld, the examiner or court will
refuse to stop the other party on the ground that such other
party’s activities do not infringe our rights to such patents. In
addition, the U.S. Supreme Court has recently modified some tests
used by the U.S. Patent and Trademark Office, or USPTO, in granting
patents over the past 20 years, which may decrease the likelihood
that we will be able to obtain patents and increase the likelihood
of challenge to any patents we obtain or license.
Any
proceedings or litigation to enforce our intellectual property
rights or defend ourselves against claims of infringement of
third-party intellectual property rights could be costly and divert
the attention of managerial and scientific personnel, regardless of
whether such litigation is ultimately resolved in our favor. We may
not have sufficient resources to bring these actions to a
successful conclusion. Some of our competitors who may assert
infringement may be able to sustain the costs of complex patent
litigation more effectively than we can because they are better
capitalized and have more resources than us. Moreover, any
uncertainties resulting from the initiation and continuation of any
litigation could have a material adverse effect on our ability to
raise the funds necessary to continue our operations.
If we
are unable to successfully defend against claims that we have
infringed the intellectual property rights of others, we may be
prevented from using certain intellectual property and may be
liable for damages, which in turn could materially adversely affect
our business, financial condition, or results of operations.
Alternatively, we could be compelled to seek licenses from one or
more third parties who could be direct or indirect competitors and
who might not make licenses available on terms that we find
commercially reasonable or at all.
Risks Related to International Operations
We may be subject to extensive regulations outside the United
States and may not obtain marketing approvals for products in
Europe and other jurisdictions.
In
addition to regulations in the United States, should we or our
collaborators pursue marketing approvals for Generx and our other
product candidates internationally, we and our collaborators will
be subject to a variety of regulations in other jurisdictions
governing, among other things, clinical trials and any commercial
sales and distribution of our products. Whether or not we, or our
collaborators, obtain FDA approval for a product, we must obtain
the requisite approvals from regulatory authorities in foreign
countries prior to the commencement of clinical trials or marketing
of the product in those countries. The requirements and process
governing the conduct of clinical trials, product licensing,
pricing and reimbursement vary from country to country.
We
expect to pursue marketing approvals for Generx and our other
product candidates in Europe and other jurisdictions outside the
United States with collaborative partners. The time and process
required to obtain regulatory approvals and reimbursement in Europe
and other jurisdictions may be different from those in the United
States, and regulatory approval in one jurisdiction does not ensure
approvals in any other jurisdiction; however, negative regulatory
decisions in any jurisdiction may have a negative impact on the
regulatory process in other jurisdictions.
Following
a national referendum and enactment of legislation by the
government of the United Kingdom, the United Kingdom withdrew from
the European Union, or Brexit, on January 31, 2020, and entered
into a transition period during which it will continue its ongoing
and complex negotiations with the European Union relating to the
future trading relationship between the parties. Significant
political and economic uncertainty remains about whether the terms
of the relationship will differ materially from the terms before
withdrawal, as well as about the possibility that a so-called “no
deal” separation will occur if negotiations are not completed by
the end of the transition period. Any delay in obtaining, or an
inability to obtain, any marketing approvals, as a result of Brexit
or otherwise, would prevent us from commercializing our product
candidates in the United Kingdom and/or the European Union and
restrict our ability to generate revenue and achieve and sustain
profitability. If any of these outcomes occur, we may be forced to
restrict or delay efforts to seek regulatory approval in the United
Kingdom and/or European Union for our product candidates, which
could significantly and materially harm our business.
We have entered into agreements with third parties to market our
Generx product candidate in certain territories if approved by
relevant regulatory authorities, but there can be no assurance that
the efforts of such third parties will meet our expectations or
result in any significant product sales.
We have
entered into license agreements with Pineworld Capital Ltd, and
Shanxi for the right to manufacture and sell Generx in greater
China and the CIS. The licenses are effective upon FDA approval to
market Generx in the United States. Our licenses to Pineworld
Capital Ltd, and Shanxi are exclusive, and we do not have a right
to separately manufacture, use or sell our Generx product candidate
into those territories. Consequently, we are dependent on the
resources, efforts, and success of our licensees to successfully
develop a market for Generx in those territories. We do not control
the operations of our licensees and have limited rights to
terminate the licenses under the terms of our agreements. We cannot
be certain that our licensees will successfully generate any
significant product sales, or that the royalties that we ultimately
receive from these arrangements will meet our
expectations.
Collaborations with Third Parties outside the United States
presents additional risks.
Conducting
clinical trials in foreign countries, as we may do for our current
and future product candidates, presents additional risks that may
delay completion of our clinical trials. These risks include the
failure of enrolled patients in foreign countries to adhere to the
clinical protocol as a result of differences in healthcare services
or cultural customs, managing additional administrative burdens
associated with foreign regulatory schemes, as well as political
and economic risks relevant to such foreign countries.
To
the extent we agree to work exclusively with one collaborator in
each area, our opportunities to collaborate with other entities
could be curtailed. Lengthy negotiations with potential new
collaborators may lead to delays in the research, development, or
commercialization of product candidates. The decision by our
collaborators to pursue alternative technologies or the failure of
our collaborators to develop or successfully commercialize any
product candidate to which they have obtained rights from us could
materially harm our business, financial condition, and results of
operations.
To the extent that we enter markets outside the United States, our
business will be subject to political, economic, legal, and social
risks in those markets, which could adversely affect our
business.
There
are significant regulatory and legal barriers in markets outside
the United States that we must overcome to the extent we enter or
attempt to enter markets in countries other than the United States.
We will be subject to the burden of complying with a wide variety
of national and local laws, including multiple and possibly
overlapping and conflicting laws. We also may experience
difficulties adapting to new cultures, business customs and legal
systems. Any sales and operations outside the United States would
be subject to political, economic, and social uncertainties
including, among others:
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changes
and limits in import and export controls; |
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increases
in custom duties and tariffs; |
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changes
in currency exchange rates; |
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economic
and political instability; |
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changes
in government regulations and laws; |
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absence
in some jurisdictions of effective laws to protect our intellectual
property rights; and |
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currency
transfer and other restrictions and regulations that may limit our
ability to sell certain products or repatriate profits to the
United States. |
Any
changes related to these and other factors could adversely affect
any business operations that we conduct outside the United
States.
Risks Related to Financial Position, Need for Additional Capital,
and Worldwide Environment
We have incurred losses since inception and anticipate that we will
continue to incur significant net losses for the foreseeable future
and may never achieve or maintain profitability.
We
have sustained operating losses since our inception and will likely
continue to sustain losses as we seek to develop our products and
product candidates. We expect these losses to be substantial
because of the significant amounts we expect to spend on
development activities and clinical trials for our product
candidates. We expect our net losses from operations to continue
for at least the next few years.
Whether
we will generate additional revenues and become profitable will
depend on our ability, alone or with potential collaborators, to
efficiently and successfully complete the development of our
product candidates, successfully complete pre-clinical and clinical
tests, obtain necessary regulatory approvals, and manufacture and
market our products. There can be no assurance that any such events
will occur or that we will ever become profitable. Even if we do
achieve profitability, we cannot predict the level of such
profitability. If we sustain losses over an extended period of
time, we may be unable to continue our business.
We will need substantial additional funding to develop our Generx
product candidate, and if we are unable to raise capital when
needed, we could be forced to delay, reduce, or eliminate our
product development programs or commercialization
efforts.
We
expect that our current cash will support our administrative
operations only into 2021. Our expenses will increase over the next
several years as we continue to develop and conduct clinical trials
with respect to our Generx or other product candidates, seek
regulatory approvals, and initiate commercialization efforts.
Accordingly, we will be required to obtain further funding through
public or private equity offerings, debt financings, collaborations
and licensing arrangements or other sources. We do not have any
arrangements for future financing in place currently. If we are
unable to obtain such funds when needed, we may have to delay,
scale back or terminate our product development or our
business.
To
the extent we raise additional capital through the sale of equity
securities, the ownership position of existing stockholders could
be substantially diluted. Anti-dilution adjustments to our Series A
Convertible Preferred Stock and Series B Convertible Preferred
Stock could cause further dilution. If additional funds are raised
through the issuance of preferred stock or debt securities, these
securities are likely to have rights, preferences and privileges
senior to our common stock and may involve significant fees,
interest expense, restrictive covenants, and the granting of
security interests in our assets.
Future sales of securities could result in additional dilution of
the percentage ownership of our stockholders and could cause the
share price for our Common Stock to fall.
We
expect that significant additional capital will be needed in the
future to continue our planned operations, including conducting
clinical trials, hiring new personnel, commercializing our
products, and continuing activities as an operating public company.
We expect to raise additional capital through the sale of debt or
equity securities, but we do not have any firm arrangements for
capital in place currently. To the extent we raise additional
capital by issuing equity securities, our stockholders may
experience substantial dilution. We may sell common stock,
preferred stock or other convertible securities or other equity
securities in one or more transactions at prices and in a manner,
we determine from time to time. If we sell common stock,
convertible securities, or other equity securities in more than one
transaction, investors may be materially diluted by subsequent
sales. Such sales may also result in material dilution to our
existing stockholders, and new investors could gain rights superior
to our existing stockholders.
We do not know how much additional financing will be necessary to
finance our continued operations, which creates additional risk
that financing will not be available to us when needed, or that the
terms may not be favorable or may result in additional dilution to
our current stockholders.
Our
estimate as to how long we expect our existing cash to be able to
continue to fund our operations and the costs required to move our
Generx product candidate to commercialization are based on
assumptions that may prove to be wrong, and we could use our
available capital resources sooner than we currently expect.
Further, changing circumstances, some of which may be beyond our
control, could cause us to consume capital significantly faster
than we currently anticipate, and we may need to seek additional
funds sooner than planned. Our future funding requirements, both
short-term and long-term, will depend on many factors,
including:
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the
scope, progress, timing, costs, and results of clinical trials of
Generx and our other product candidates; |
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the
costs, timing, and outcome of seeking regulatory
approvals; |
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our
ability to enter into, and the terms and timing of, any
collaboration arrangements |
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the
costs of commercialization activities for any of our product
candidates that receive marketing approval; |
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our
overhead growth and associated costs; |
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revenue
received from commercial sales, if any, of our current and future
product candidates; |
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changes
in regulatory policies or laws that may affect our operations;
or |
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competing
technological and market developments. |
Because of
the numerous risks and uncertainties associated with product
development, we are unable to accurately predict the timing or
amount of expenses or when, or if, we will obtain marketing
approval to commercialize any of our product candidates. If we are
required by the U.S. Food and Drug Administration, or FDA, or other
regulatory authorities such as the EMA, to perform studies and
trials in addition to those currently expected, or if there are any
delays in the development, or in the completion of any planned or
future preclinical studies or clinical trials of our current or
future product candidates, our expenses could increase, and
profitability could be further delayed.
As a
result, we cannot predict with certainty the amount of capital that
we will need to raise to finance our continued operations. If we
encounter unexpected delays or expenses or setback in our product
development efforts, we may be compelled to seek additional
financing, which may not be available on terms that are favorable
to our investors at that time.
Our recurring losses from operations raise substantial doubt
regarding our ability to continue as a going
concern.
Our
consolidated financial statements for the years ending December 31,
2019, 2018 and 2017 were prepared under the assumption that we will
continue as a going concern for the next twelve months from the
issuance date of these financial statements. Due to our recurring
losses from operations from our inception and our limited cash
resources, we concluded that there is substantial doubt in our
ability to continue as a going concern within one year after the
financial statements are issued without additional capital becoming
available. Our independent registered public accounting firm has
issued an audit opinion that included an explanatory paragraph
referring to our projected future losses along with recurring
losses from operations and expressing substantial doubt in our
ability to continue as a going concern without additional capital
becoming available. Our ability to continue as a going concern is
dependent upon our ability to obtain additional equity or debt
financing, attain further operating efficiencies, reduce
expenditures, and, ultimately, to generate revenue. The financial
statements do not include any adjustments that might result from
the outcome of this uncertainty.
We are currently dependent on the services of a few key employees
and need to increase the size of our
organization.
As of
December 31, 2019, we employed a total of four full-time employees.
We will need to expand our managerial, operational, technical,
scientific, financial, and other resources to manage our operations
and clinical trials, continue our research and development
activities, and commercialize our product candidate. Our management
and scientific personnel, systems, and facilities currently in
place may not be adequate to support our future growth, and the
loss of one or more of our executive officers or key employees or
an inability to attract and retain highly skilled employees could
adversely affect our business. We will need to attract and retain
enough talented employees to:
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manage
our clinical trials effectively, including our planned clinical
trials of Generx; |
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manage
our internal development efforts; |
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establish
and manage contract relationships with third parties;
and |
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improve
our operational, financial and management controls and reporting
systems. |
Competition
for qualified personnel is intense among companies, academic
institutions, and other organizations. The pool of qualified
personnel with experience working with the pharma market is limited
overall. In addition, many of the companies with which we compete
for experienced personnel have greater resources than we have. If
we are unable to attract and retain key personnel, it may
negatively affect our ability to successfully develop, test,
commercialize and market our products and product candidates. If we
fail to secure sufficient qualitied and talented personnel our
development efforts may be delayed, become more costly or more
susceptible to failure.
We may have material weaknesses in our internal control over
financial reporting which may result in misstatements in our
financial statements or erode investor
confidence.
We
have had limited financial resources and have historically had
material weaknesses in our internal control over financial
reporting, as described elsewhere in this report. We have applied a
portion of the funds secured from the Nostrum financing to enhance
and strengthen our internal controls and financial reporting. If we
fail to completely mitigate those material weaknesses or
significant deficiencies in our internal controls continue or occur
in the future, we may fail to meet our future reporting obligations
on a timely basis, or our financial statements could contain errors
or misstatements. If such errors were sufficiently material, we
would be required to restate prior period financial results, which
may subject us to class action litigation.
Any
failure to address the ineffectiveness of our internal controls
could also adversely affect the periodic management evaluations of
the effectiveness of our internal controls over financial reporting
and our disclosure controls and procedures that are required to be
included in our annual report on Form 10-K. Continued reporting of
internal control deficiencies could also cause investors to lose
confidence in our reported financial information, which could
adversely impact demand for stock and stock price.
We
now plan to file our quarterly reports on Form 10-Q for the
quarters ended March 31, 2020, June 30, 2020 and September 30, 2020
and become current with our Section 13(a) filing obligations under
the Securities Exchange Act of 1934. If remedial measures become
required or if material weaknesses or significant deficiencies in
our internal controls continue or occur in the future, any of the
following may occur:
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we
will continue to fail to meet our future reporting obligations on a
timely basis; |
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|
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our
consolidated financial statements may contain material
misstatements; |
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we
could be required to restate our prior period financial
results; |
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our
operating results may be harmed; |
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we
may be subject to class action litigation; and |
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we
may be unable to list our Common Stock on a National
Exchange. |
Any
failure to address the ineffectiveness of our disclosure controls
and procedures could also adversely affect the periodic management
evaluations of the effectiveness of our internal controls over
financial reporting and our disclosure controls and procedures that
are required to be included in our annual report on Form 10-K.
Internal control deficiencies and ineffective disclosure controls
and procedures could also cause investors to lose confidence in our
reported financial information. The future measures we plan to take
may not remediate the ineffectiveness of our disclosure controls
and procedures, and material weaknesses and restatements of
financial results may arise in the future due to a failure to
implement and maintain adequate internal control over financial
reporting and adequate disclosure controls and procedures. In
addition, even if we are successful in strengthening our controls
and procedures, in the future those controls, and procedures may
not be adequate to prevent or identify irregularities or errors or
to facilitate the fair presentation of our consolidated financial
statements.
We are not current with our reporting requirements under Section
13(a) of the Securities Exchange Act of 1934.
We
suspended our public reporting beginning in 2017 due to financial
hardship. Following the filing of our Annual Report on Form 10-K
for the 2019, 2018 and 2017 fiscal years, which is covered by this
filing, we plan to submit our Quarterly Reports on Form 10-Q for
the quarterly periods ended March 31, 2020, June 30, 2020, and
September 30, 2020, and become current with our reporting
obligations, and thereafter resume a timely filing schedule with
respect to our future SEC reports. We expect to continue to face
many of the risks and challenges related to the matters that led to
the delay in the filing of our Annual Report on Form 10-K for the
years ending December 31, 2017 and 2018, and 2019, including the
following:
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failure
to timely file our SEC reports and make our current financial
information available, has placed, and will continue to place,
downward pressure on our stock price; |
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further
delay in the filing of our SEC reports will delay our ability to
seek the relisting of our common stock on a national securities
exchange, and as a result, may continue to reduce the liquidity of
our common stock; |
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litigation
and claims as well as regulatory examinations, investigations,
proceedings, and orders arising out of our failure to file SEC
reports on a timely basis will continue to divert management
attention and resources from the operation of our
business; |
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we
may not be able to recapture lost business or business
opportunities due to ongoing reputational harm; and |
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negative
reports or actions on our commercial credit ratings would increase
our costs of, or reduce our access to, future commercial credit
arrangements and limit our ability to refinance existing
indebtedness. |
If
one or more of the foregoing risks or challenges persist, our
business, operations and financial condition are likely to be
materially and adversely affected.
Impact of Coronavirus Outbreak
On
January 30, 2020, the World Health Organization (“WHO”) announced a
global health emergency because of a new strain of coronavirus
originating in Wuhan, China (the “COVID-19 outbreak”) and the risks
to the international community as the virus spreads globally beyond
its point of origin. In March 2020, the WHO classified the COVID-19
outbreak as a pandemic, based on the rapid increase in exposure
globally and since then authorities throughout the world have
implemented measures to contain or mitigate the spread of the
virus, including physical distancing, travel bans and restrictions,
closure of non-essential businesses, quarantines, work-from-home
directives, and shelter-in-place orders. These measures have
caused, and are continuing to cause, business slowdowns or
shutdowns in affected areas, both regionally and worldwide, which
have impacted our business and results of operations.
The
full impact of the COVID-19 outbreak continues to evolve as of the
date of this report. As such, it is uncertain as to the full
magnitude that the pandemic will have on the Company’s financial
condition, liquidity, and future results of operations. Management
is actively monitoring the impact of the global situation on its
financial condition, liquidity, operations, suppliers, industry,
and workforce. Given the daily evolution of the COVID-19 outbreak
and the global responses to curb its spread, the Company is not
able to estimate the effects of the COVID-19 outbreak on its
results of operations, financial condition, or liquidity for fiscal
year 2020 and 2021.
Risks Related to Our Capital Structure and Owning our Common
Stock
Our outstanding shares of Preferred Stock and warrants to purchase
Common Stock far exceed the number of shares of our Common Stock
outstanding and their conversion or exercise will result in
substantial dilution to holders of our Common
Stock.
As of
March 31, 2021, we had 49,622,154 shares of Common Stock issued and
outstanding. In addition, we had 393 shares of Series A Convertible
Preferred Stock and 1,700,000 shares of Series B Convertible
Preferred Stock outstanding. The Series A Convertible Preferred
Stock is currently convertible into an aggregate of 34,778,761
shares of our Common Stock, and each share of Series B Convertible
Preferred Stock is convertible into aggregate of 150,442,478 shares
of Common Stock. Both our Series A Convertible Preferred Stock and
our Series B Convertible Preferred Stock have anti-dilution
protection in the event that we issue shares of Common Stock or
equivalents at a price less than the current $0.0113 conversion
price. In addition, as of March 31, 2021, we had warrants
outstanding to purchase 14,799,333
shares of our Common Stock at prices of $0.19 or $0.80 per share.
The warrants expire at various times from 2024 to 2027. The
conversion of outstanding Series A Convertible Preferred Stock and
Series B Convertible Preferred Stock and the exercise of
outstanding warrants would substantially reduce the percentage
ownership of holders of our Common Stock. The addition of
substantial additional shares of Common Stock in the market could
result in excess supply and adversely affect prevailing market
prices of our Common Stock.
We may consider affecting a reverse stock split or other share
recapitalization transaction, which could impact the value of our
Common Stock.
The
total number of shares of our Common Stock, on a fully diluted
basis, nearly exceeds our authorized capital. In addition, we would
like to increase the per share price of our outstanding Common
Stock to a range that would meet initial listing standards for a
national exchange, should we otherwise qualify for a listing. We
have not fixed the terms of any such share recapitalization. Often
when companies affect a reverses stock split, their post-split
trading price does not reflect the full multiple, resulting in an
effective decrease in value.
Nostrum’s
control of
approximately 75.2% of our voting securities gives them control
over any action requiring stockholder approval and may discourage
some investors from investing.
Nostrum
through its ownership of our Series A Convertible Preferred Stock
and Series B Convertible Preferred Stock controls approximately
75.2% of the voting interests our company. Nostrum will control the
outcome of matters submitted to our stockholders for approval,
including the election of directors and any merger, consolidation,
or sale of all or substantially all our assets. In addition,
Nostrum will exercise significant control over the management and
affairs of our company. This concentration of ownership might harm
the market price of our Common Stock if:
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Our
stockholders generally perceive that Nostrum’s goals as a
shareholder differ from their own; |
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|
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Activist
investors are dissuaded from investing because they cannot secure
meaningful control; and |
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Potential
acquirors would be discouraged from making a tender offer or
otherwise attempting to gain control of the company; or |
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|
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Nostrum
determines to a significant portion of its holdings. |
Our Common Stock is not listed on a national exchange which may
diminish the market interest, liquidity, and price for our Common
Stock.
Our
common stock currently is listed only on the OTC Pink Sheets. We
hope to have our Common Stock re-established on the OTC QB once our
SEC filing delinquencies are rectified. OTC QB is a reporting
service and not a securities exchange. It is our intent to secure a
listing on the Nasdaq Capital Market or another National Exchange,
but we do not currently meet the listing criteria and we may never
qualify for trading on a national exchange.
Many
institutional investors are prohibited from investing in stock
unless they are listed on a national exchange. Also index funds are
generally restricted to exchange listed securities. Accordingly,
stock listed on the over-the counter market is less likely to
secure general market interest, including analyst and research
coverage. Stocks that trade on the over-the-counter market may
experience lower trading volumes, higher spreads between bid and
ask pricing, increased volatility, and lower prices generally that
those traded on a national exchange. The inability to list our
Common Stock on a national exchange may negatively impact the
volume of trading and market price for our common stock.
We are subject to SEC rules concerning the regulation of “penny
stocks” which may reduce investor demand and market prices for our
Common Stock.
Our
Common Stock is currently a “penny stock” under applicable SEC
rules. While we have that designation, broker-dealers trading in
our common stock must make a special suitability determination for
the purchaser and receive the purchaser’s written agreement to the
transaction prior to the sale. This requirement may impair the
ability of broker-dealers to sell our Common Stock and the ability
of interested purchasers to acquire shares. In addition to
additional SEC regulation, penny stocks are generally perceived as
more susceptible to trading manipulation schemes such as (a)
control of the market by one or a few broker dealers, (b)
manipulation of pricing through wash sale transactions, (c)
so-called “boiler room” practices involving high pressure sales
tactics, (d) excessive and undisclosed bid-ask differentials and
mark-ups by selling broker-dealers. Consequently, many
institutional investors will not invest in stock that are
classified as penny stocks. These circumstances may reduce the
demand for our Common Stock and could result in reduced liquidity
or lower market prices for our Common Stock.
To raise capital to fund the development of our Generx product
candidate, we have sold shares in our Angionetics
subsidiary.
In
2016 we sold a 15% interest in our Angionetics, Inc. subsidiary to
Pineworld Capital Limited. Our management did this because it
believed that it could raise capital at a better valuation, and
with less dilution to existing stockholders, than if it were to
sell shares of Gene Biotherapeutics. Angionetics holds the
intellectual property rights for our Generx product candidate.
Consequently, Gene Biotherapeutics is only entitled to 85% of the
economic return from the commercialization of Generx or any sale of
Angionetics. While it is not currently contemplated, if Angionetics
were to issue additional equity securities to third party
investors, it will dilute the interest of Gene Biotherapeutics, and
consequently our stockholders in Angionetics and the Generx product
candidate.
The price of our Common Stock may fluctuate substantially and an
investment in our Common Stock could decline substantially in
value.
The
market price for our Common Stock may be subject to greater
volatility than other stock as a result of:
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the
limited size of our public float; |
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our
stock trading on the over the counter market; |
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our
dependence on a single or limited number of products
candidates; |
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the
binary nature of the drug development and approval process;
and |
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our
current capital structure. |
Investment
in our Common Stock is risky, and you should invest in our common
stock only if you can withstand a significant loss and wide
fluctuations in the market value of your investment. Moreover,
substantial volatility in our trading price would increase the
potential for us to be subject to shareholder lawsuits that, even
if unsuccessful, could be costly to defend and a distraction
management time and resources away from our core
operations.
We have never paid cash dividends on our capital stock and do not
intend to pay cash dividends on our shares of common stock in the
foreseeable future.
We do
not anticipate generating cash from operations for several years
while we continue development and qualification of our product
candidates. For the foreseeable future, we intend to retain any
future earnings for the development, operation and expansion of our
business and do not anticipate declaring or paying any cash
dividends. Any return to stockholders will therefore be limited to
the increase, if any, of our share price.
We are a “smaller reporting company” and can avail ourselves of
reduced disclosure requirements applicable to small reporting
companies, which could make our common stock less attractive to
investors.
We
are a smaller reporting company, and we will remain a smaller
reporting company until the fiscal year following the determination
that our voting and non-voting common stock held by non-affiliates
is more than $250 million measured on the last business day of our
second fiscal quarter, or our annual revenues are more than $100
million during the most recently completed fiscal year and our
voting and non-voting common stock held by non-affiliates is more
than $700 million measured on the last business day of our second
fiscal quarter. Smaller reporting companies can provide simplified
executive compensation disclosure, are exempt from the auditor
attestation requirements of Section 404, and have certain other
reduced disclosure obligations, including, among other things,
being required to provide only two years of audited financial
statements and not being required to provide selected financial
data, supplemental financial information, or risk factors. We have
elected to take advantage of certain of the reduced reporting
obligations, which may render our common stock less attractive to
some investors.
Our charter and Delaware law have anti-takeover effects that could
discourage, delay, or prevent a change in control, which may
discourage third party offers to acquire our
Company.
Our
company could be difficult to acquire due to anti-takeover
provisions in our charter and Delaware law. Our bylaws provide for
advance shareholder notice for actions to be taken at meetings of
stockholders. In addition, our certificate of incorporation
includes a provision for “blank check” preferred stock, which could
be used to implement a stockholder rights plan. These provisions
may make it more difficult for stockholders to take corporate
actions and may have the effect of delaying or preventing a change
in control. These provisions also could deter or prevent
transactions that stockholders deem to be in their
interests.
In
addition, we are subject to the anti- takeover provisions of
Section 203 of the Delaware General Corporation Law. Subject to
specified exceptions, this section provides that a corporation may
not engage in any business combination with any interested
stockholder during the three-year period following the time that
such stockholder becomes an interested stockholder. This provision
could have the effect of delaying or preventing a change of control
of our company. The foregoing factors could reduce the price that
investors or an acquirer might be willing to pay in the future for
shares of our common stock.
| ITEM 1B. |
UNRESOLVED
STAFF COMMENTS |
None.
We do
not own any real property. We lease facilities for our corporate
headquarters at 11230 Sorrento Valley Road, Suite #220, San Diego,
CA 92121. We believe that our current facilities are in good
condition and suitable for our current needs.
| ITEM 3. |
LEGAL
PROCEEDINGS |
During
our business, we may become involved in proceedings such as
disputes involving goods or services provided by various third
parties, intellectual property infringement claims, and employment
disputes. We are not currently a party to any legal proceedings
that we believe would reasonably be expected to have a material
effect on our financial position. In October 2014, we received a
complaint filed by BioRASI LLC (“BioRASI”) in Broward County,
Florida, seeking payments allegedly owed for services that BioRASI
provided in connection with our clinical trial conducted in the
Russian Federation. We filed counterclaims. On September 27, 2017,
all parties to this action executed a mutual release settlement
agreement with no monies awarded.
|
ITEM 4. |
MINE
SAFETY DISCLOSURES |
Not
applicable.
PART II
|
ITEM 5. |
MARKET
FOR OUR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES |
Market
Information
Our
common stock currently trades on the OTC Pink market under the
symbol “CRXM.” Any over-the-counter market quotations for our
common stock on the OTC Pink market reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not
necessarily represent actual transactions.
Holders
As of
December 21, 2020, there were approximately 100 stockholders of
record of our common stock. Based on information we receive from
brokerage firms in connection with proxy solicitations, we believe
that there are approximately 5,000 beneficial owners of our common
stock.
Dividends
We
have never declared or paid any cash dividends on our common stock
and we do not intend to declare or pay a dividend in the
foreseeable future. We expect to sustain losses over the next
several years. To the extent we do have earnings, we intend to
retain any earnings to help provide funds for the development of
our product candidates, the implementation of our business strategy
and for our future growth.
Recent
Sales of Unregistered Securities
We
did not issue any securities in unregistered transactions during
the years ended December 31, 2019, 2018 and 2017.
Repurchases
of Equity Securities
We
did not repurchase any of our outstanding equity securities the
years ended December 31, 2019, 2018 and 2017.
Equity
Compensation Plan Information
We do
not currently have an equity incentive plan. Our prior 2005 Equity
Incentive Plan expired on October 20, 2015, ten years after its
adoption. All options or other awards issued under the 2005 Equity
Incentive plan prior to its expiration remain outstanding in
accordance with their terms.
Prior
to 2017 we granted warrants to purchase common stock to our
directors, executive officers, and employees. There were no
warrants issued to our directors, executive officers, and employees
in each of 2019, 2018 and 2017. The issued warrants had exercise
prices of $0.19 and $0.80 per share, were granted with ten-year
terms, and remain outstanding. Certain of the warrants were issued
with anti-dilution protection, now expired, which increased the
number of common shares in which the warrants were exercisable but
did not change the exercise price. As of December 31, 2019, after
considering anti-dilution adjustments, there are warrants
outstanding to purchase an aggregate of 12,111,333 shares of Common
Stock which are held by current and former directors, executive
officers, and employees
The
following table summarizes equity compensation plans approved by
stockholders and equity compensation plans that were not approved
by stockholders as of December 31, 2019.
|
Plan
Category |
|
(a)
Number
of securities
to
be issued upon
exercise
of outstanding
options,
warrants and
rights
|
|
|
(b)
Weighted
average
exercise
price of
outstanding
options,
warrants
and rights
|
|
|
(c)
Number
of securities remaining
available
for future issuance under
equity
compensation plans
(excluding
securities reflected in
column
(a))
|
|
| Equity compensation
plans approved by stockholders |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
| Equity compensation
plans not approved by stockholders |
|
|
12,111,333 |
|
|
$ |
0.71 |
|
|
|
— |
|
| Total |
|
|
12,111,333 |
|
|
$ |
0.71 |
|
|
|
— |
|
|
ITEM 6. |
SELECTED
FINANCIAL DATA |
As a
smaller reporting company, we are not required to provide the
information required by this item.
|
ITEM 7. |
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS |
The
following discussion and analysis are intended to help you
understand our financial condition and results of operations for
the last three years ended December 31, 2019. You should read the
following discussion and analysis together with our audited
consolidated financial statements and the notes to the consolidated
financial statements included under Item 8 in this report.
Statements in the following discussion that are not historical in
nature are forward looking statements, and inherently subject to
risk. Our future financial condition and results of operations will
vary from our historical financial condition and results of
operations described below based on a variety of factors. You
should carefully review the risks described under Item 1A and
elsewhere in this report, which identify certain important factors
that could cause our future financial condition and results of
operations to vary from our historical operations and from our
current expectations of future results.
Overview
We
are a clinical stage biotechnology company focused on pre-clinical,
clinical and commercialization of angiogenic gene therapy
biotherapeutics for strategic niche markets, primarily for the
treatment of cardiovascular disease. Our technology platform is
designed to biologically activate the human body’s innate
angiogenic healing process to stimulate the growth of microvascular
networks for patients with ischemic cardiovascular, cerebral, and
other medical conditions and diseases, as well as for advanced
tissue engineering applications. Historically, we have developed
and sold various medical devices, product candidates and
products.
We
operated throughout the period covered by this report, with
severely limited financial resources. During 2015 and 2016, prior
to the period covered in this report, we took significant actions
to reduce our operating expenses, including headcount reductions,
downsizing offices, and suspending some operations while we sought
capital to continue our business operations. In 2016 we contributed
our assets related to our Generx product candidate into our
Angionetics, Inc. subsidiary. We then sold a 15% preferred equity
ownership interest in Angionetics, Inc. to Huapont in exchange for
$3.0 million. After the filing of our quarterly report for the
period ended March 31, 2017, we suspended filing our periodic
reports with the SEC because we lacked the financial resources to
continue the financial statement review and audits. This report
covers our results of operations for the years ended December 31,
2019, 2018 and 2017.
Our
current business is focused exclusively on the development of
Generx, a gene therapy product candidate targeted for men and women
with advanced ischemic heart disease and refractory angina. We have
received FDA clearance and FAST Track designation covering our
conduct of the AFFIRM Phase 3 clinical trial. We do not currently
have any other products or other product candidates under clinical
study, and have not generated any revenues from operations for the
years ended December 31, 2019, 2018 and 2017. Our operations
currently comprise one segment for financial reporting
purposes.
Significant
Developments
During
the period covered by this report we entered into the following
significant transactions:
| |
● |
In
October 2017 we entered into an agreement with Landmark to assist
us in our efforts to sell our Excellagen product and assist with
the strategic partnering for the development of Generx. In lieu of
an initial cash engagement fee of $50,000, we assigned our residual
investment in LifeAgain along with a minority equity investment in
Healthy Brands to Landmark, effectively exiting those
businesses. We recorded this initial engagement fee as a
consulting cost and the transfer of the assets, which had a net
book value of zero, as a gain on transfer of assets and licenses in
other income in the statement of operations. In
connection with this agreement, and in exchange for business advice
and marketing of the business for the purposes of raising
financing, we issued Landmark a ten-year warrant to purchase up to
2.0 million shares of our Common Stock at a price of $0.25 per
share. The fair value of the warrants was determined, using the
Black-Scholes-Merton model, to be $230,000 and was recorded in the
statement of operations as consulting services in selling, general
and administrative expenses the period in which the services were
rendered. |
| |
|
|
| |
● |
On
November 14, 2017, we issued 700,000 warrants to a consultant for
general business and scientific consulting services. The
fair value of these warrants was determined to be $79,223 and was
recorded in the statement of operations as consulting services in
selling, general and administrative expenses in the period in which
the services were rendered. |
| |
|
|
| |
● |
In
August 2018, we sold our Excellagen® product to Olaregen for
aggregate consideration of up to $4.0 million. At
closing, we received a cash payment of $650,000, plus royalty
payments of 10% of all worldwide sales of Excellagen outside of
China, the Russian Federation, and the CIS, up to an additional
$3,350,000. We recognized the gain on sale of
Excellagen® in the amount of $650,000 during our third quarter
ended September 30, 2018. The remaining $3,350,000 in
additional consideration will be recognized as a gain in the
periods that Olaregen reports sales that are subject to royalty and
collection is reasonably assured. To date no royalty payments have
been received. |
| |
● |
During
2019, we took a number of measures to restructure our accounts
payable to third party vendors, including negotiated settlements
with vendors that resulted in forgiveness of a portion of the
accounts payable. For the year ended December 31, 2019,
we recognized in our Statement of Operations $1,659,917 as a gain
on re-negotiation of vendor payables. The total gain on
re-negotiation includes $397,449 in restructured amounts that
become due and payable when and if the Company receives FDA
approval or when the Company commercializes. For amounts
that are payable contingent upon FDA approval or commercialization,
the Company has recognized included the amount in the gain on
forgiveness and disclosed the contingent payable since the timing
and ultimate payment is not determinable. As of December
31, 2019, we had outstanding trade payable and accrued liabilities
of $3,763,816. |
Subsequent
Events
The
following significant events took place after the period covered by
this report:
| |
● |
On
September 10, 2019, December 30, 2019, and April 30, 2020, we
issued Nostrum a promissory note in exchange for cash of $120,000
on September and December 2019 and $25,000 on April 30, 2020. These
bear interest at 6% per annum and mature 24 months from the date of
issuance. The cash funding related to the December 30,
2019 promissory note was not received by the Company until January
2020, so the Company recorded the note payable in the consolidated
balance sheet in January 2020, upon receipt of the cash from
Nostrum. |
| |
|
|
| |
● |
As of
December 31, 2019, we had an outstanding balance in accrued but
unpaid salaries and benefits for current and former employees
totaling $2,866,717. In January 2020, all affected
current and former employees agreed to defer their compensation,
less applicable tax withholdings, upon the earliest to occur of (a)
the FDA’s approval of Generx for marketing and sale in the U.S.;
(b) the EMA approval of Generx for marketing and sale in the
European Union and the United Kingdom; (c) the sale of Generx to an
independent third party for an aggregate value equal to or greater
than $35,000,000; (d) our entry into a strategic partnership that
would facilitate a capital contribution equal to or greater than
$35,000,000 for the purpose of supporting the clinical and
commercial development of Generx; (e) our successful completion of
a public or private equity offering for the issuance of its common
stock equal to $35,000,000; or (f) at such other time, as our board
of directors determines that we have the financial ability to make
such payments without jeopardizing our ability to operate as a
going concern. |
| |
|
|
| |
● |
On
April 10, 2020, we entered into the Ratification Agreement with
Shanxi. In connection with the Ratification Agreement, we
terminated all prior agreements with Shanxi, cancelled a prepaid
$600,000 equity subscription and entered into a mutual release of
claims. |
| |
|
|
| |
● |
On
April 10, 2020, our Angionetics, Inc. subsidiary entered into the
Shanxi License Agreement, granting Shanxi certain license rights
with respect to our Generx product candidate. The distribution and
license rights commence only after we obtain U.S. FDA approval for
marketing and sale of Generx in the United States. The license
rights include (a) a non-exclusive right to manufacture Generx
products in China, and (b) an exclusive right to market and sell
Generx products in Singapore, Macau, Hong Kong, Taiwan, any other
municipality other than mainland China where Chinese (Mandarin or
Cantonese) is the common language, the Russian Federation, and the
CIS (i.e., Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan,
Moldova, Tajikistan, Turkmenistan, and Uzbekistan). The Shanxi
License Agreement provided for payment of $600,000 upfront, which
was paid by application of the prepaid equity subscription, and a
royalty ranging from 5% up to 10% based on the level of annual net
sales of the Generx product sold by Shanxi in the licensed
territory. |
| |
|
|
| |
● |
On
April 10, 2020, our Activation Therapeutics, Inc. subsidiary
entered into the Shanxi Assignment Agreement pursuant to which we
transferred all of our license rights to manufacture, use, market
and sell Excellagen to Shanxi. We also assigned to Shanxi a Chinese
patent that we received on Excellagen. As a result, we no longer
have an interest in Excellagen, other than the right to the royalty
payments from Olaregen. |
| |
|
|
| |
● |
In
May 2020, we entered into a Preferred Stock Purchase Agreement with
Nostrum, selling Nostrum 1,700,000 shares of our newly authorized
Series B Convertible Preferred Stock in exchange for
$1,700,000. We will use the proceeds from the sale of
the Series B Convertible Preferred Stock to fund working capital
requirements in preparation for conducting a Phase 3 clinical trial
in the U.S. for our Generx product candidate. We believe
that Nostrum’s assets and experience in the formulation and
commercialization of pharmaceutical products will facilitate the
administration and completion of the Phase 3 clinical trial for
Generx on a cost-effective basis. |
| |
● |
The
Series B Convertible Preferred Stock financing resulted in a reset
of the conversion price of our outstanding Series A Convertible
Preferred Stock, such that each Series A Convertible Preferred
Stock is convertible into Common Stock at a conversion rate of
88,496. In a separate but concurrent transaction, when
Nostrum acquired the 1,700,000 shares of Series B Convertible
Preferred Stock, it also acquired 220 shares of Series A
Convertible Preferred Stock from the current holder Sabby
Healthcare Master Fund, Ltd., which is convertible into 19,469,026
shares of Common Stock. Nostrum also agreed to purchase
the remaining up to 570 shares of Series A Convertible Preferred
Stock from Sabby Healthcare Master Fund Ltd. within one year of the
initial acquisition. Sabby Healthcare Master Fund, Ltd.
retains the right prior to any such sale, to convert the Series A
Convertible Preferred Stock prior to the anniversary. Since May
2020 and through March 31, 2021 a total of 397 shares of
Series A Convertible Preferred Stock have been converted into
35,132,755 shares of Common Stock. As of March 31, 2021, there are
393 shares of Series A Convertible Preferred Stock outstanding
including 220 held by Nostrum (convertible into 19,469,026 shares
of Common Stock) and 173 shares held by Sabby Healthcare Master
Fund Ltd. (convertible into 15,309,735 shares of Common Stock).
|
| |
|
|
| |
● |
During
2020, we entered into additional settlement agreements with third
party vendors resulting in additional gains on vendor payables of
$68,032 on our accounts payable. |
| |
|
|
| |
● |
In March 2021, the Company entered
into an agreement with FUJIFILM Diosynth Biotechnologies (“FDB”) to
manufacture the Generx [Ad5FGF-4] angiogenic gene therapy product
candidate for Phase 3 clinical evaluation for the treatment of
refractory angina due to late-stage coronary artery disease.
Manufacturing operations will be conducted at FDB’s facilities in
College Station, Texas where FDB will perform technology transfer
and process development activities for Phase 3 clinical and
commercial-scale GMP manufacturing of Generx. |
Critical
Accounting Policies and Estimates
Our
consolidated financial statements included in this report have been
prepared in accordance with accounting principles generally
accepted in the United States (“U.S. GAAP”). The preparation of our
financial statements in accordance with U.S. GAAP requires that we
make estimates and assumptions that affect the amounts reported in
our financial statements and their accompanying notes. Accounting
estimates or assumptions are inherently subject to change, and
certain estimates or assumptions are difficult to measure or value.
Our estimates are based on historical experience, industry
standards, and various other assumptions that we believe are
reasonable under the circumstances. Actual results could differ
from these estimates under different assumptions or
conditions.
We
believe that the following accounting policies involve the most
complex judgments concerning assumptions and estimates with the
greatest potential impact on our consolidated financial statements.
Therefore, we consider these to be our critical accounting policies
and estimates. For further information on all of our significant
accounting policies, see the notes to our consolidated financial
statements included in this report.
The
preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires us to
make estimates and assumptions that affect the reported amounts of
our assets, liabilities, revenues, and expenses, and that affect
our recognition and disclosure of contingent assets and
liabilities.
While
our estimates are based on assumptions that we consider reasonable
at the time they were made, actual results may differ from our
estimates, perhaps significantly. If results differ materially from
our estimates, we will adjust our financial statements
prospectively as we become aware of the necessity for an
adjustment.
We
believe it is important for you to understand our most critical
accounting policies. These are our policies that require us to make
our most significant judgments and, as a result, could have the
greatest impact on our future financial results.
Preferred
Stock
The
Company applies the accounting standards for distinguishing
liabilities from equity when determining the classification and
measurement of its preferred stock. Shares that are subject to
mandatory redemption (if any) are classified as liability
instruments and are measured at fair value. The Company classifies
conditionally redeemable preferred shares, which includes preferred
shares that feature redemption rights that are either within the
control of the holder or subject to redemption upon the occurrence
of uncertain events not solely within our control, as temporary
equity. At all other times, preferred shares are classified as
stockholders’ equity.
Income
Taxes
Income
taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating losses and tax credit
carry forwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income(loss)
in the years in which those temporary differences are expected to
be recovered or settled. Due to the Company’s history of losses, a
full valuation allowance has been recognized against the deferred
tax assets.
The
Company has adopted the provisions of ASC 740-10, which clarifies
the accounting for uncertain tax positions. ASC 740-10 requires
that the Company recognize the impact of a tax position in its
financial statements if the position is more likely than not to be
sustained upon examination base on the technical merits of the
position. For the year ended December 31, 2019, the Company had no
material unrecognized tax benefits, and based on the information
currently available, no significant changes in unrecognized tax
benefits are expected in the next twelve months.
The
Company’s policy is to recognize interest and penalties related to
income tax matters in income tax expense. For the years ended
December 31, 2019, 2018 and 2017, the Company has not recorded any
interest or penalties related to income tax matters. The Company
does not foresee any material changes in unrecognized tax benefits
within the next twelve months.
When
tax returns are filed, there may be uncertainty about the merits of
positions taken or the amount of the position that would be
ultimately sustained. The benefit of a tax position is recognized
in the financial statements in the period during which, based on
all available evidence, management believes it is more likely than
not that the position will be sustained upon examination, including
the resolution of appeals or litigation processes, if any. Tax
positions taken are not offset or aggregated with other
positions.
Tax
positions that meet the more likely than not recognition threshold
is measured at the largest amount of tax benefit that is more than
50 percent likely of being realized upon settlement with the
applicable taxing authority. The portion of the benefit associated
with tax positions taken that exceed the amount measured as
described above should be reflected as a liability for uncertain
tax benefits in the accompanying balance sheet along with any
associated interest and penalties that would be payable to the
taxing authorities upon examination. The Company believes our tax
positions are all more likely than not to be upheld upon
examination. As such, the Company has not recorded a liability for
uncertain tax benefits.
Warrants
Warrants
issued to third parties in connection with consulting and other
services do not trade in an active securities market, and as such,
we estimate the fair value of these warrants using an option
pricing model. Following the authoritative accounting guidance,
warrants with variable exercise price features or with potential
cash settlement outside of our control are accounted for as
liabilities, with changes in the fair value included in operating
expenses, otherwise warrants determined to be equity classified are
fair valued at the date of issuance, with no change in the fair
value recorded in subsequent periods. We estimated the fair value
of the warrants using the Black Scholes option pricing model. The
Black Scholes model requires that our management make certain
estimates regarding the expected stock volatility, the risk–free
interest rate, the warrant’s expected life, and the expected
forfeiture rate, to derive an estimated fair market
value.
Results
of Operations
Fiscal 2019 Compared to Fiscal 2018
The
following tables sets forth our results of operations for the years
ended December 31, 2019 and 2018, and the relative dollar and
percentage change between the two years.
| |
|
Year
Ended
December 31, |
|
|
Change
(2019
to 2018)
|
|
|
|
|
2019 |
|
|
2018 |
|
|
($) |
|
|
% |
|
|
Operating
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development |
|
$ |
243,453 |
|
|
$ |
255,394 |
|
|
|
(11,941 |
) |
|
|
(4.7 |
)% |
|
Selling,
general and administrative |
|
|
593,549 |
|
|
|
907,836 |
|
|
|
(314,287 |
) |
|
|
(34.6 |
)% |
|
Total
Operating Expenses |
|
|
837,002 |
|
|
|
1,163,230 |
|
|
|
(326,228 |
) |
|
|
(28.0 |
)% |
|
Gain on
sale of assets and technology |
|
|
— |
|
|
|
(650,000 |
) |
|
|
650,000 |
|
|
|
100 |
% |
|
Income
(Loss) from Operations |
|
|
(837,002 |
) |
|
|
(513,230 |
) |
|
|
323,772 |
|
|
|
63.1 |
% |
|
Other
Income (Expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on
forgiveness of account payables |
|
|
1,659,917 |
|
|
|
— |
|
|
|
1,659,917 |
|
|
|
100 |
% |
|
Interest
Expense |
|
|
(43,787 |
) |
|
|
(39,514 |
) |
|
|
(4,273 |
) |
|
|
10.8 |
% |
|
Total
Other Income (Expense) |
|
|
1,616,130 |
|
|
|
(39,514 |
) |
|
|
1,655,644 |
|
|
|
(4,190.0 |
)% |
|
Net Income
(Loss) |
|
|
779,128 |
|
|
|
(552,744 |
) |
|
|
1,331,872 |
|
|
|
241.0 |
% |
|
Net (Loss)
attributable to the non-controlling interest |
|
|
(87,547 |
) |
|
|
(117,863 |
) |
|
|
30,316 |
|
|
|
(25.7 |
)% |
|
Net Income
(Loss) attributable to the controlling interest |
|
|
866,675 |
|
|
|
(434,881 |
) |
|
|
1,301,556 |
|
|
|
(299.3 |
)% |
Research
and development decreased in 2019 compared to 2018 by $11,941 or
4.7% due to a decrease in employee benefits.
Selling,
general and administrative expenses decreased in 2019 by $314,287
or 34.6% compared to 2018 mainly due to a reduction in employee
salary costs of $152,852 resulting from a headcount reduction of
two employees on a permanent basis and one employee on a temporary
basis during 2019. In addition, the Company incurred consulting
costs of approximately $80,000 in relation to raising capital funds
for the Company in 2018 compared with $nil in 2019, and an overall
reduction in legal and regulatory professional fees of $61,851, in
addition to a decrease in office supplies as the Company focused
time and resources on raising capital resources and putting on hold
regulatory filing matters therefore reducing the selling, general
and administrative expenses in 2019 when compared to 2018. In
addition, the depreciation expense in 2019 was lower due to Company
property and equipment becoming fully depreciated.
During
the year ended December 31, 2018, the company recognized a gain on
sale of Excellagen® product to Olaregen in the amount of $650,000
which also represented the cash proceeds on the sale of the
technological asset. The sale of Excellagen® was consistent with
management restructuring of the company’s operations in order to
focus efforts on development and sale of Generx.
Other
expenses for the year ended December 31, 2019 included a gain on
debt forgiveness in the amount of $1,659,917. The debt forgiveness
is the result of settlement agreements reached with certain vendors
as part of the pre-financing restructuring efforts of the Company.
Of these amounts, $172,449 becomes due and payable upon FDA
approval of Generx, and when total cumulative net sales of Generx
reach $100 million, an additional amount totaling $225,000 will be
due and payable. Interest expense increased in 2019 compared to
2018 by $4,273 primarily as result of an increase in the notes
payable in the third quarter ended 2019 of approximately $120,000
bearing interest at 6% per annum on advances received from
Nostrum.
Fiscal 2018 Compared to Fiscal 2017
The
following tables sets forth our results of operations for the years
ended December 31, 2018 and 2017, and the relative dollar and
percentage change between the two years.
| |
|
Year
Ended
December 31, |
|
|
Change
(2018 to 2017) |
|
|
|
|
2018 |
|
|
2017 |
|
|
($) |
|
|
% |
|
|
Operating
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development |
|
$ |
255,394 |
|
|
$ |
344,976 |
|
|
|
(89,582 |
) |
|
|
(26.0 |
)% |
|
Selling,
general and administrative |
|
|
907,836 |
|
|
|
1,781,309 |
|
|
|
(873,473 |
) |
|
|
(49.0 |
)% |
|
Total
Operating Expenses |
|
|
1,163,230 |
|
|
|
2,126,285 |
|
|
|
(963,055 |
) |
|
|
(45.3 |
)% |
|
Gain
on sale of assets and technology |
|
|
(650,000 |
) |
|
|
(50,000 |
) |
|
|
600,000 |
|
|
|
1,200 |
% |
|
Income
(Loss) from Operations |
|
|
(513,230 |
) |
|
|
(2,076,285 |
) |
|
|
1,563,055 |
|
|
|
(75.3 |
)% |
|
Other
Income (Expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Expense |
|
|
(39,514 |
) |
|
|
(20,219 |
) |
|
|
(11,339 |
) |
|
|
56.1 |
% |
|
Total
Other Income (Expense) |
|
|
(39,514 |
) |
|
|
(20,219 |
) |
|
|
(11,339 |
) |
|
|
56.1 |
% |
|
Net
Loss |
|
|
(552,744 |
) |
|
|
(2,096,504 |
) |
|
|
(1,543,760 |
) |
|
|
(73.6 |
)% |
|
Net
Loss attributable to the non-controlling interest |
|
|
(117,863 |
) |
|
|
(202,362 |
) |
|
|
(84,499 |
) |
|
|
(41.8 |
)% |
|
Net
Loss attributable to the controlling interest |
|
|
(434,881 |
) |
|
|
(1,894,142 |
) |
|
|
(1,459,262 |
) |
|
|
(77.0 |
)% |
Research
and development decreased in 2018 compared to 2017 by $89,582 or 26
%. The decrease in spending is primarily due to the Company’s
continued cash constrained position in 2018 resulting in management
focusing Company resources on raising capital to provide the
resources to advance the development and commercialization of
Generx. The Company also discontinued further development of other
product lines and focused actively on selling intellectual property
developed not related to the Generx product line.
Selling,
general and administrative expenses decreased by $873,473 or 49.0%
in 2018 compared to 2017 as a result of a concentrated effort to
contain costs, reduction in salary expense due to a reduction in
headcount, reduced legal and other professional fees as a result of
the Company’s decision to suspend SEC filings beginning in
2017.
During
the year ended December 31, 2018, the Company recognized a gain on
the sale of Excellagen® product to Olaregen in the amount of
$650,000. This compares to a gain on the sale of assets in 2017 of
$50,000 related to the transfer of the Company’s residual
investment in LifeAgain along with a minority equity investment in
Healthy Brands in exchange for strategic financing consulting
services.
Other
expense for the year ended December 31, 2018 and 2017 also included
interest expense related to interest on notes payable with
unrelated parties. The total interest expense in 2018 was $31,558
compared with $20,219 in 2017, as a result of the note payable in
the principal amount of $208,500, being outstanding for the full
year in 2018 compared to an increase in the note through the 2017
year.
Fiscal 2017 Compared to Fiscal 2016
The
following tables sets forth our results of operations for the years
ended December 31, 2017 and 2016, and the relative dollar and
percentage change between the two years.
| |
|
Year
Ended
December 31, |
|
|
Change
(2017
to 2016)
|
|
|
|
|
2017 |
|
|
2016 |
|
|
($) |
|
|
% |
|
|
Operating
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development |
|
$ |
344,976 |
|
|
$ |
641,572 |
|
|
|
(296,596 |
) |
|
|
(46.2 |
)% |
|
Selling,
general and administrative |
|
|
1,781,309 |
|
|
|
2,199,412 |
|
|
|
(418,103 |
) |
|
|
(19.0 |
)% |
|
Total
Operating Expenses |
|
|
2,126,285 |
|
|
|
2,840,984 |
|
|
|
(714,699 |
) |
|
|
(25.2 |
)% |
|
Gain
on sale of assets and technology |
|
|
(50,000 |
) |
|
|
— |
|
|
|
(50,000 |
) |
|
|
100.0 |
% |
|
Income
(Loss) from Operations |
|
|
(2,076,285 |
) |
|
|
(2,840,984 |
) |
|
|
764,699 |
|
|
|
(26.9 |
)% |
|
Other
Income (Expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Expense |
|
|
(20,219 |
) |
|
|
(172,825 |
) |
|
|
152,606 |
|
|
|
(88.3 |
)% |
|
Total
Other Income (Expense) |
|
|
(20,219 |
) |
|
|
(172,825 |
) |
|
|
152,606 |
|
|
|
(88.3 |
)% |
|
Net
Loss |
|
|
(2,096,504 |
) |
|
|
(3,013,809 |
) |
|
|
917,305 |
|
|
|
(30.4 |
)% |
|
Net
Loss attributable to the non-controlling interest |
|
|
(202,362 |
) |
|
|
(95,581 |
) |
|
|
(106,781 |
) |
|
|
111.7 |
% |
|
Net
Loss attributable to the controlling interest |
|
|
(1,894,142 |
) |
|
|
(2,918,228 |
) |
|
|
(1,024,086 |
) |
|
|
(35.1 |
)% |
Research
and development expense decreased in 2017 compared to 2016 by
$296,596 0r 46.2% as a result of the Company reducing all
discretionary expenses in 2017 in order to conserve cash and focus
on raising capital to be used for the Company’s efforts to continue
the development of their core technologies and due to a decrease in
employee salary expenses as a result of a reduction in
headcount.
Selling,
general and administrative expenses decreased in 2017 compared to
2016 by $418,103 or 19% due to the Company reducing headcount and
discretionary expenditures during 2017, including suspending SEC
filings to reduce legal, accounting and filing costs.
The
Company recognized a gain on sale of assets in the amount of
$50,000 in the year ended December 31, 2017. In October 2017, the
Company entered into an agreement with Landmark to assist with the
Company’s efforts to sell the Excellagen product and assist with
the strategic partnering for the development of Generx. In lieu of
an initial cash engagement fee of $50,000, the Company assigned our
residual investment in LifeAgain along with a minority equity
investment in Healthy Brands to Landmark, effectively exiting the
development and commercialization of the product lines. The Company
determined the fair value of the non-monetary exchange to be
$50,000, since this was the negotiated third-party initial cost
negotiated between two independent third parties and the transfer
of the assets settled the initial fee in full.
Other
income/expense includes interest expense which decreased by
$152,606 in 2017 compared with 2016. In 2016 $146,996 in interest
charges on unpaid license fees were expensed that were not charged
in 2017. The remaining interest charges in each of 2016 and 2017
related to interest on advances and notes payable.
Liquidity
and Capital Resources
The
following table summarizes our liquidity and working capital
position on December 31, 2019, 2018 and 2017:
| |
|
Year Ended
December 31, |
|
| |
|
2019 |
|
|
2018 |
|
|
2017 |
|
| Cash |
|
$ |
400 |
|
|
$ |
82,115 |
|
|
$ |
48,989 |
|
| Other Current
Assets |
|
|
32,395 |
|
|
|
18,965 |
|
|
|
25,000 |
|
| Accounts
Payable |
|
|
967,126 |
|
|
|
1,857,951 |
|
|
|
1,870,215 |
|
| Other Current
Liabilities |
|
|
3,795,863 |
|
|
|
3,932,835 |
|
|
|
3,485,440 |
|
| Working Capital
(Deficiency) |
|
|
(4,730,194 |
) |
|
|
(5,689,706 |
) |
|
|
(5,281,666 |
) |
Following
the period covered by this report:
| |
● |
We
entered into several agreements with employees, former employees,
and vendors to restructure claims reducing the amount of our
accounts payable and our other current liabilities and/or extending
the payment terms until after commercialization and Generx products
sales commence. |
| |
● |
In
May 2020 we secured $1,700,000 financing from the sale of our newly
authorized Series B Convertible Preferred Stock to
Nostrum. We will use the proceeds from the sale of the
Series B Convertible Preferred Stock to fund working capital
requirements in preparation for conducting a Phase 3 clinical trial
in the U.S. for our Generx product
candidate. |
The
following table summarizes our cash flows from (used in) operating,
investing, and financing activities for the years ended December
31, 2019, 2018 and 2017:
| |
|
Year Ended
December 31, |
|
| |
|
2019 |
|
|
2018 |
|
|
2017 |
|
| Net cash generated
from (used in) operating activities |
|
$ |
(137,162 |
) |
|
$ |
(451,503 |
) |
|
$ |
(1,062,388 |
) |
| Net cash generated
from investing activities |
|
|
— |
|
|
|
650,000 |
|
|
|
— |
|
| Net cash generated
from (used in) financing activities |
|
|
55,447 |
|
|
|
(165,371 |
) |
|
|
180,980 |
|
| Net increase
(decrease) in cash and cash equivalents |
|
|
(81,715 |
) |
|
|
33,126 |
|
|
|
(881,408 |
) |
The Company has not generated cash from operating activities. We
did not generate revenue in any of the years covered by this
report, and generally record operating losses in each of the
years.
In 2018, the Company sold Excellagen for cash proceeds of $650,000
resulting in cash being generated from investing activities. The
Company can also earn royalties on future sales on Excellagen,
under the terms of the sales agreement.
Net cash provided by financing activities in 2019 compared to cash
used by financing activities in 2018 is primarily due to Nostrum
providing $120,000 in cash in exchange for a note payable, due in
24 months, bearing interest at 6%, offset by an increase in the
notes payable resulting from interest accruals and payments made on
the loan from officer of approximately $99,000. On December 31,
2019, we did not have any significant requirements for capital
expenditures.
After the period covered by this report, we secured the $1,700,000
in financing from Nostrum as described above.
We
anticipate that negative cash
flows from operations will continue for the foreseeable future. We
do not have any unused credit facilities. Our cash position, even
after the Series B Convertible Preferred Stock financing with
Nostrum, will not be sufficient to sustain our operations for more
than twelve months. We intend to secure additional working capital
to support our continued operations through sales of additional
equity and debt securities. As long as any shares of our Preferred
Stock are outstanding, we have agreed that we will not, without the
consent of the holders of two-thirds of the Series A Convertible
Preferred Stock, incur indebtedness other than specified “Permitted
Indebtedness”, or incur any liens other than specified “Permitted
Liens”.
Our principal business objective
is to advance or Generx
product candidate through the AFFIRM Phase 3 clinical trial
and to begin
commercialization of Generx in the United States. We expect that
support from Nostrum will decrease the overall costs of the trial,
but we estimate that we will still need $12.0 to $15.0 million in
additional capital to complete manufacturing of Generx clinical
supplies for the conduct of the planned Phase 3 AFFIRM clinical
study, and administrative and operating expenses that include the
costs associated with Gene Biotherapeutics remaining a public
company. We plan to secure that capital through the sale of
additional equity or debt securities or through other transactions
that could include strategic partnering and distribution
agreements. There are no agreements or arrangement for any
additional financing in place at this time.
Our
history of recurring losses and uncertainties as to whether our
operations will become profitable raise substantial doubt about our
ability to continue as a going concern. Our consolidated financial
statements do not include any adjustments related to the
recoverability of assets or classifications of liabilities that
might be necessary should we be unable to continue as a going
concern.
Off-Balance
Sheet Arrangements
As of
December 31, 2019, we did not have any significant off-balance
sheet debt, nor did we have any transactions, arrangements,
obligations (including contingent obligations) or other
relationships with any unconsolidated entities or other persons
that have or are reasonably likely to have a material current or
future effect on financial condition, changes in financial
condition, results of operations, liquidity, capital expenditures,
capital resources, or significant components of revenue or expenses
material to investors.
Recent
Accounting Pronouncements
See
Note 2 to the Consolidated Financial Statements included elsewhere
in this report for disclosure and discussion of new accounting
standards.
Quarterly
Results of Operations
As
described in the Explanatory Note, we are presenting our quarterly
results of operations for each of the periods ended September 30,
June 30, and March 31 for 2019, 2018 and 2017, respectively,
herein, in lieu of filing separate Quarterly Reports on Form 10-Q
for such periods.
For the Three Months Ended March 31, 2019 compared to the Three
Months Ended March 31, 2018
The
following tables sets forth our results of operations for the
three-month period ended March 31, 2019 and 2018, and the relative
dollar and percentage change between the two periods.
| |
|
Three
Months
March 31, |
|
|
Change
(2019
to 2018)
|
|
| |
|
2019 |
|
|
2018 |
|
|
($) |
|
|
% |
|
| Operating
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Research and
development |
|
$ |
63,379 |
|
|
$ |
62,767 |
|
|
|
612 |
|
|
|
1.0 |
% |
| Selling, general and
administrative |
|
|
179,599 |
|
|
|
234,630 |
|
|
|
(55,031 |
) |
|
|
(23.5 |
)% |
| Total Operating
Expenses |
|
|
242,978 |
|
|
|
297,397 |
|
|
|
(54,419 |
) |
|
|
(18.3 |
)% |
| Loss from
Operations |
|
|
(242,978 |
) |
|
|
(297,397 |
) |
|
|
54,419 |
|
|
|
(18.3 |
)% |
| Other Income
(Expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest
Expense |
|
|
(10,129 |
) |
|
|
(7,927 |
) |
|
|
(2,202 |
) |
|
|
27.8 |
% |
|
Total
Other Income (Expense) |
|
|
(10,129 |
) |
|
|
(7,927 |
) |
|
|
(2,202 |
) |
|
|
27.8 |
% |
| Net Loss |
|
|
(253,107 |
) |
|
|
(305,324 |
) |
|
|
52,217 |
|
|
|
(17.1 |
)% |
| Net Loss attributable
to the non-controlling interest |
|
|
(26,738 |
) |
|
|
(29,351 |
) |
|
|
2,614 |
|
|
|
(8.9 |
)% |
| Net Loss attributable
to the controlling interest |
|
|
(226,369 |
) |
|
|
(275,973 |
) |
|
|
49,603 |
|
|
|
(18.0 |
)% |
Selling,
general and administrative expenses decreased, for the three months
ended March 31, in 2019 by $55,031 compared to 2018 mainly due to a
reduction in employees’ salary cost of approximately $24,000
resulting from two employees shifting from full-time to part-time
in 2019. In addition, the company incurred consulting cost of
$25,000 in relation to raising capital funds for the company in
2018 compared with nil in 2019.
Other
expense increased $2,202 during the three-month period ended March
31, 2019 compared with March 31, 2018 primarily as a result of
increase in the interest rate and due to the compounded interest
rate impact on the note payable in 2019.
For the Three Months and Six Months Ended June 30, 2019 compared to
the Three Months and Six Months Ended June 30,
2018
The
following tables sets forth our results of operations for the
three-month period and six-month ended June 30, 2019 and 2018, and
the relative dollar and percentage change between the two
periods.
| |
|
Three
Months
June 30, |
|
|
Change
(2019
to 2018)
|
|
|
Six
Months
June 30, |
|
|
Change
(2019
to 2018)
|
|
| |
|
2019 |
|
|
2018 |
|
|
($) |
|
|
% |
|
|
2019 |
|
|
2018 |
|
|
($) |
|
|
% |
|
|
Operating
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development |
|
$ |
60,355 |
|
|
$ |
63,049 |
|
|
|
(2,694 |
) |
|
|
(4.3 |
)% |
|
$ |
123,734 |
|
|
$ |
125,816 |
|
|
|
(2,082 |
) |
|
|
(1.7 |
)% |
|
Selling,
general and administrative |
|
|
180,473 |
|
|
|
267,629 |
|
|
|
(87,156 |
) |
|
|
(32.6 |
)% |
|
|
360,072 |
|
|
|
502,259 |
|
|
|
(142,187 |
) |
|
|
(28.3 |
)% |
|
Total
Operating Expenses |
|
|
240,828 |
|
|
|
330,678 |
|
|
|
(89,850 |
) |
|
|
(27.2 |
)% |
|
|
483,806 |
|
|
|
628,075 |
|
|
|
(144,269 |
) |
|
|
(23.0 |
)% |
|
Loss from
Operations |
|
|
(240,828 |
) |
|
|
(330,678 |
) |
|
|
89,850 |
|
|
|
(27.2 |
)% |
|
|
(483,806 |
) |
|
|
(628,075 |
) |
|
|
144,269 |
|
|
|
(23.0 |
)% |
|
Other
Income (Expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Expense |
|
|
(10,504 |
) |
|
|
(9,097 |
) |
|
|
(1,406 |
) |
|
|
15.5 |
% |
|
|
(20,633 |
) |
|
|
(17,025 |
) |
|
|
(3,608 |
) |
|
|
21.2 |
% |
|
Total
Other Income (Expense) |
|
|
(10,504 |
) |
|
|
(9,097 |
) |
|
|
(1,406 |
) |
|
|
15.5 |
% |
|
|
(20,633 |
) |
|
|
(17,025 |
) |
|
|
(3,608 |
) |
|
|
21.2 |
% |
|
Net
Loss |
|
|
(251,332 |
) |
|
|
(339,775 |
) |
|
|
88,442 |
|
|
|
(26.0 |
)% |
|
|
(504,440 |
) |
|
|
(645,099 |
) |
|
|
140,659 |
|
|
|
(21.8 |
)% |
|
Net Loss
attributable to the non-controlling interest |
|
|
(24,963 |
) |
|
|
(27,568 |
) |
|
|
2,604 |
|
|
|
(9.4 |
)% |
|
|
(51,701 |
) |
|
|
(56,919 |
) |
|
|
5,218 |
|
|
|
(9.2 |
)% |
|
Net Loss
attributable to the controlling interest |
|
|
(226,369 |
) |
|
|
(312,207 |
) |
|
|
85,838 |
|
|
|
(27.5 |
)% |
|
|
(452,739 |
) |
|
|
(588,180 |
) |
|
|
135,441 |
|
|
|
(23.0 |
)% |
Research
and development expense for the three-month and six-month periods
ended June 30, 2019 and 2018 remained substantially the same period
over period.
Selling,
general and administrative expenses decreased for the three-month
period ended June 30, 2019 compared to the three-month period ended
June 30, 2018 by $87,156 or 32.6% primarily as a result of $80,000
in consulting costs in relation to raising capital funds for the
Company during the three-month period ended June 30, 2018 compared
with $nil for the three-month period ended June 30, 2019. The
Company’s employee salary costs also decreased by $18,958 as result
of two employees transitioning from full-time to part-time on a
temporary basis, these decreased were offset by increases in
miscellaneous office expenses.
Selling,
general and administrative expenses decreased for the six-month
period ended June 30, 2019 compared to the six-month period ended
June 30, 2018 by $142,187 or 28.3% primarily as a result of
$105,000 in consulting costs in relation to raising capital funds
for the Company during the six-month period ended June 30, 2018
compared with $nil in the six-month period ended June 30, 2019. In
addition, salaries and benefits decreased by $44,374 resulting from
two employees shifting from full-time to part-time in 2019 on a
temporary basis, offset by increases in miscellaneous office
expenses.
Other
income/expense increased for the three-month period ended June 30,
2019 compared to the three-month period ended June 30, 2018 by
$1,406 or 15.5% primarily as a result of an increase in the
interest rate on the notes payable effective May, 2018 and due to
the compounded interest impact on the note.
Other
income/expense increased for the six-month period ended June 30,
2019 compared to the six-month period ended June 30, 2018 by $3,608
or 21.2% primarily as a result of an increase in the interest rate
on the outstanding notes payable effective May 2018 and due to the
compounded interest impact on the note.
For the Three Months and Nine Months Ended September 30, 2019
compared to the Three Months and Nine Months Ended September 30,
2018
The
following tables sets forth our results of operations for the
three-month period and Nine-month ended September 30, 2019 and
2018, and the relative dollar and percentage change between the two
periods.
|
|
|
Three
Months
September 30, |
|
|
Change
(2019
to 2018)
|
|
|
Nine
Months
September 30, |
|
|
Change
(2019
to 2018)
|
|
|
|
|
2019 |
|
|
2018 |
|
|
($) |
|
|
% |
|
|
2019 |
|
|
2018 |
|
|
($) |
|
|
% |
|
| Operating
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development |
|
$ |
61,443 |
|
|
$ |
66,442 |
|
|
|
(4,999 |
) |
|
|
(7.5 |
)% |
|
$ |
185,177 |
|
|
$ |
192,258 |
|
|
|
(7,081 |
) |
|
|
(3.7 |
)% |
|
Selling,
general and administrative |
|
|
114,047 |
|
|
|
207,279 |
|
|
|
(93,232 |
) |
|
|
(45.0 |
)% |
|
|
474,119 |
|
|
|
709,538 |
|
|
|
(235,419 |
) |
|
|
(33.3 |
)% |
|
Total
Operating Expenses |
|
|
175,490 |
|
|
|
273,721 |
|
|
|
(134,216 |
) |
|
|
(35.9 |
)% |
|
|
659,296 |
|
|
|
901,796 |
|
|
|
(242,500 |
) |
|
|
(26.9 |
)% |
|
Gain on
sale of assets and technology |
|
|
— |
|
|
|
(650,000 |
) |
|
|
650,000 |
|
|
|
(100.0 |
)% |
|
|
— |
|
|
|
(650,000 |
) |
|
|
650,000 |
|
|
|
(100.0 |
)% |
|
Income
(Loss)from Operations |
|
|
(175,490 |
) |
|
|
376,279 |
|
|
|
(515,784 |
) |
|
|
(146.6 |
)% |
|
|
(659,296 |
) |
|
|
(251,796 |
) |
|
|
(407,500 |
) |
|
|
161.8 |
% |
|
Other
Income (Expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on
account payable forgiveness |
|
|
35,985 |
|
|
|
— |
|
|
|
— |
|
|
|
100.0 |
% |
|
|
35,985 |
|
|
|
— |
|
|
|
35,985 |
|
|
|
100.0 |
% |
|
Interest
Expense |
|
|
(10,952 |
) |
|
|
(12,603 |
) |
|
|
(1,651 |
) |
|
|
(13.1 |
)% |
|
|
(31,585 |
) |
|
|
(29,628 |
) |
|
|
(1,957 |
) |
|
|
6.6 |
% |
|
Total
Other Income (Expense) |
|
|
25,033 |
|
|
|
(12,603 |
) |
|
|
37,636 |
|
|
|
(298.6 |
)% |
|
|
(4,400 |
) |
|
|
(29,628 |
) |
|
|
34,028 |
|
|
|
(114.9 |
)% |
|
Net
Loss |
|
|
(150,457 |
) |
|
|
363,676 |
|
|
|
(514,132 |
) |
|
|
(141.4 |
)% |
|
|
(654,896 |
) |
|
|
(281,423 |
) |
|
|
(373,473 |
) |
|
|
132.7 |
% |
|
Net Loss
attributable to the non-controlling interest |
|
|
(19,790 |
) |
|
|
(31,675 |
) |
|
|
11,886 |
|
|
|
(37.5 |
)% |
|
|
(71,490 |
) |
|
|
(88,594 |
) |
|
|
17,104 |
|
|
|
(19.3 |
)% |
|
Net Loss
attributable to the controlling interest |
|
|
(130,667 |
) |
|
|
395,351 |
|
|
|
(526,018 |
) |
|
|
(133.1 |
)% |
|
|
(583,406 |
) |
|
|
(192,829 |
) |
|
|
(390,577 |
) |
|
|
202.6 |
% |
Research
and development expense decreased for the three-month period ended
September 30, 2019 compared to three-month period ended September
30, 2018 by $4,999 or 7.5% primarily due to a decreased in employee
salary and benefit expenses.
Research
and development expense decreased for the nine-month period ended
September 30, 2019 compared to nine-month period ended September
30, 2018 by 7,081 or 3.7% primarily due to a decrease in employee
salary and benefit expenses and the company’s continued cash
constrained position resulting in management focusing company
resources on raising capital to provide the resources to advance
the development and commercialization of Generx.
Selling,
general and administrative expenses decreased for the three-months
period ended September 30, 2019 compared to the three-month period
ended September 30, 2018 by $93,232 or 45.0% primarily as a result
of decrease in employee wages and benefits by $56,875, a decrease
in consulting expenses by $27,000, and other discretionary
expenditures.
Selling,
general and administrative expenses decreased for the nine-month
period ended September 30, 2019 compared to the nine-month period
ended September 30, 2018 by $235,419 or 33.2% mainly due to a
reduction in employee salary and benefit expenses of $101,250
resulting from a reduction in headcount and two employees moving
from full-time to part-time on a temporary basis. In addition, the
company incurred consulting costs of approximately $130,000 in
relation to raising capital funds in 2018 compared with $nil in
2019, and an overall reduction in other miscellaneous expenses as
the company focused time and resources on raising
capital.
During
the three-month period and nine-month period ended September 2018,
the company recognized a gain on sale of Excellagen technology to
Olaregen in the amount of $650,000, which also represented the cash
proceeds on the sale.
Other
income/expense increased for the three-month period ended September
30, 2019 compared to the three-month period ended September 30,
2018 by $37,363 or 298.6% primarily as a result of accounts payable
forgiveness settlement agreements totaling $35,985, with certain
vendors as a part of the pre-financing restructuring efforts of the
company. The increase in other income was offset by an increase in
interest expense for the nine-month period ended September 30, 2019
compared to the nine-month period ended September 30, 2018 by
$1,651 primarily as a result of an increase in the notes payable of
$120,000 received from Nostrum in September 2019, which bears an
interest at 6% per annum.
For the Three Months Ended March 31, 2018 compared to the Three
Months Ended March 31, 2017
The
following tables sets forth our results of operations for the
three-month period ended March 31, 2018 and 2017, and the relative
dollar and percentage change between the two periods.
| |
|
Three
Months
March 31, |
|
|
Change
(2018
to 2017)
|
|
| |
|
2018 |
|
|
2017 |
|
|
($) |
|
|
% |
|
| Operating
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Research and
development |
|
$ |
62,767 |
|
|
$ |
130,762 |
|
|
|
(67,995 |
) |
|
|
(52.0 |
)% |
| Selling, general and
administrative |
|
|
234,630 |
|
|
|
522,565 |
|
|
|
(287,935 |
) |
|
|
(55.1 |
)% |
| Total Operating
Expenses |
|
|
297,397 |
|
|
|
653,327 |
|
|
|
(355,930 |
) |
|
|
(54.5 |
)% |
| Loss from
Operations |
|
|
(297,397 |
) |
|
|
(653,327 |
) |
|
|
355,930 |
|
|
|
(54.5 |
)% |
| Other Income
(Expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest
Expense |
|
|
(7,927 |
) |
|
|
(1,956 |
) |
|
|
(5,970 |
) |
|
|
305.1 |
% |
|
Total
Other Income (Expense) |
|
|
(7,927 |
) |
|
|
(1,956 |
) |
|
|
(5,970 |
) |
|
|
305.1 |
% |
| Net Loss |
|
|
(305,324 |
) |
|
|
(655,283 |
) |
|
|
349,959 |
|
|
|
(53.4 |
)% |
| Net Loss attributable
to the non-controlling interest |
|
|
(29,351 |
) |
|
|
(75,160 |
) |
|
|
45,809 |
|
|
|
(60.9 |
)% |
| Net Loss attributable
to the controlling interest |
|
|
(275,973 |
) |
|
|
(580,123 |
) |
|
|
304,150 |
|
|
|
(52.4 |
)% |
Research
and development expense decreased for the three-month period ended
March 31, 2018 compared to three-month period ended March 31, 2017
by $67,995 or 52.0% primarily due to a decrease in clinical trial
expenses as a result of the Company focusing available resources
and time on raising capital for the ongoing development of the
Generx product and restructuring the business to sell all other
assets and technology that the Company restructured as non-core
products.
Selling,
general and administrative expenses decreased for the three-month
period ended March 31, 2018 compared to the three-month period
ended March 31, 2017 by $287,935 or 55.1% due to a decrease in
employee salaries and benefits of approximately $72,280 as a result
of a decrease in headcount and reduced legal and other professional
fees as a result of the Company’s decision to suspend SEC filings
beginning in 2017 of approximately $145,000 and a decrease in
general office expenses, insurances costs and travel costs of
approximately $66,000.
Other
income/expense increased for the three-month period ended March 31,
2018 compared to the three-month period ended March 31, 2017 by
$5,970 or 305.1% primarily as a result of an increase in the notes
payable during the third and fourth quarter of 2017, resulting in
an increase in interest expense.
For the Three Months and Six Months Ended June 30, 2018 compared to
the Three Months and Six Months Ended June 30,
2017
The
following tables sets forth our results of operations for the
three-month period and six-month ended June 30, 2018 and 2017, and
the relative dollar and percentage change between the two
periods.
| |
|
Three
Months
June 30, |
|
|
Change
(2018
to 2017)
|
|
|
Six
Months
June 30, |
|
|
Change
(2018
to 2017)
|
|
| |
|
2018 |
|
|
2017 |
|
|
($) |
|
|
% |
|
|
2018 |
|
|
2017 |
|
|
($) |
|
|
% |
|
|
Operating
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development |
|
$ |
63,049 |
|
|
$ |
66,182 |
|
|
|
(3,133 |
) |
|
|
(4.7 |
)% |
|
$ |
125,816 |
|
|
$ |
196,944 |
|
|
|
(71,128 |
) |
|
|
(36.1 |
)% |
|
Selling,
general and administrative |
|
|
267,629 |
|
|
|
389,387 |
|
|
|
(121,758 |
) |
|
|
(31.3 |
)% |
|
|
502,259 |
|
|
|
911,952 |
|
|
|
(409,693 |
) |
|
|
(44.9 |
)% |
|
Total
Operating Expenses |
|
|
330,678 |
|
|
|
455,569 |
|
|
|
(124,891 |
) |
|
|
(27.4 |
)% |
|
|
628,075 |
|
|
|
1,108,896 |
|
|
|
(480,821 |
) |
|
|
(43.4 |
)% |
|
Loss from
Operations |
|
|
(330,678 |
) |
|
|
(455,569 |
) |
|
|
(124,891 |
) |
|
|
(27.4 |
)% |
|
|
(628,075 |
) |
|
|
(1,108,896 |
) |
|
|
480,821 |
|
|
|
(43.4 |
)% |
|
Other
Income (Expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Expense |
|
|
(9,097 |
) |
|
|
(4,709 |
) |
|
|
(4,389 |
) |
|
|
93.2 |
% |
|
|
(17,025 |
) |
|
|
(6,666 |
) |
|
|
(10,359 |
) |
|
|
155.4 |
% |
|
Total
Other Income (Expense) |
|
|
(9,097 |
) |
|
|
(4,709 |
) |
|
|
(4,389 |
) |
|
|
93.2 |
% |
|
|
(17,025 |
) |
|
|
(6,666 |
) |
|
|
(10,359 |
) |
|
|
155.4 |
% |
|
Net
Loss |
|
|
(339,775 |
) |
|
|
(460,278 |
) |
|
|
120,503 |
|
|
|
(26.2 |
)% |
|
|
(645,099 |
) |
|
|
(1,115,561 |
) |
|
|
470,462 |
|
|
|
(42.2 |
)% |
|
Net Loss
attributable to the non-controlling interest |
|
|
(27,568 |
) |
|
|
(42,785 |
) |
|
|
15,217 |
|
|
|
(35.6 |
)% |
|
|
(56,919 |
) |
|
|
(117,945 |
) |
|
|
61,026 |
|
|
|
(51.7 |
)% |
|
Net Loss
attributable to the controlling interest |
|
|
(312,207 |
) |
|
|
(417,493 |
) |
|
|
105,286 |
|
|
|
(25.2 |
)% |
|
|
(588,180 |
) |
|
|
(997,616 |
) |
|
|
409,436 |
|
|
|
(41.0 |
)% |
Research
and development expense for the three months ended June 30, 2018
compared with the three months ended June 30, 2017 remained
consistent and for the six months ended June 30, 2018 compared to
the six months ended June 30, 2017 decreased $71,128 or 36.1%. The
decrease is primarily related to a decrease in clinical trial
expenses of $63,028, decrease in employee salaries and benefits of
approximately $6,357 and a decrease in other miscellaneous expenses
such as travel and supplies.
Selling,
general and administrative expenses for the three months ended June
30, 2018 compared with the three months ended June 30, 2017
decreased $121,758 or 31.3%. The decrease is related to a decrease
in employee salaries and benefits of $58,941 due to a decrease in
employer taxes and employee benefits due the Company reducing costs
in 2018 and deferring the payment of salaries and wages in order to
preserve cash and resources to raise additional capital for the
Company. The Company also reduced legal and other professional fees
as a result of the Company’s decision to suspend SEC filings
beginning in 2017 of approximately $103,000. The decrease in
expense was offset by an increase in consulting costs of
approximately $80,000 related to raising capital funds for the
ongoing operations of the Company.
Selling,
general and administrative expenses for the six-month period ended
June 30, 2018 compared with the three- month period ended June 30,
2017 decreased $409,693 or 44.9%. The decrease is related to a
reduction in employee salaries and benefits of $129,687 due to a
decrease in headcount, employer related payroll taxes and health
benefit costs and a decrease of $383,144 related to reduced legal
and other professional fees as a result of the Company’s decision
to suspend SEC filings and other legal costs related to the
development of non-core products, decrease in sales and marketing
expenses, insurance costs and other general office expenses as the
Company reduced all discretionary spending. These decreases were
offset by an increase in consulting costs of approximately $105,435
to raise capital funds for the ongoing operations and development
of Generx.
Interest
expense increased for the three-month period ended March 31, 2018
compared to the three-month period ended March 31, 2017 by $4,389
or 93.2% and by $10,359 or 155.4% for the six-month period ended
June 30, 2018 compared to the six-month period ended June 30, 2017
due to an increase in the note payable during the third and fourth
quarter of 2017 of approximately $155,000.
For the Three Months and Nine Months Ended September 30, 2018
compared to the Three Months and Nine Months Ended September 30,
2017
The
following tables sets forth our results of operations for the
three-month period and Nine-month ended September 30, 2018 and
2017, and the relative dollar and percentage change between the two
periods.
| |
|
Three
Months
September 30, |
|
|
Change
(2018
to 2017)
|
|
|
Nine
Months
September 30, |
|
|
Change
(2018
to 2017)
|
|
| |
|
2018 |
|