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.
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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)
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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.
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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.
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Improvement
in RPDS as measured by SPECT imaging at 8 weeks following a single treatment.
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b.
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Grines
et al. JACC 42:1339-47 (2003). Tables 1 and 2.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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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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.
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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.
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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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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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Nostrum
determines to a significant portion of its holdings.
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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.
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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.