RISK FACTORS
An investment in our
securities involves a high degree of risk. This prospectus contains a discussion of the risks applicable to an investment in our securities.
Prior to making a decision about investing in our securities, you should carefully consider the specific factors discussed within this
prospectus. The risks and uncertainties we have described are not the only ones we face. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial may also affect our operations. The occurrence of any of these known or unknown risks
might cause you to lose all or part of your investment in the offered securities.
Risks Related to Our Financial Position and Need for Capital
We have generated no significant revenue from commercial
sales to date and our future profitability is uncertain.
We were incorporated in September
2017 and have a limited operating history and our business is subject to all of the risks inherent in the establishment of a new business
enterprise. Our likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays frequently
encountered in connection with development and expansion of a new business enterprise. Since inception, we have incurred losses and expect
to continue to operate at a net loss for at least the next several years as we commence our research and development efforts, conduct
clinical trials and develop manufacturing, sales, marketing and distribution capabilities. Our net loss for the years ended December
31, 2021 and 2020 was $46,371,364 and $9,149,227, respectively, and our accumulated deficit as of December 31, 2021 was $67,352,809.
Our net loss for the six months ended June 30, 2022 and 2021 was $11,909,147 and $12,558,103, respectively, and our accumulated deficit
as of June 30, 2022 was $79,261,956. There can be no assurance that the products under development by us will be approved for sale in
the U.S. or elsewhere. Furthermore, there can be no assurance that if such products are approved, they will be successfully commercialized,
and the extent of our future losses and the timing of our profitability are highly uncertain. If we are unable to achieve profitability,
we may be unable to continue our operations.
If we fail to obtain the capital necessary to fund our
operations, we will be unable to continue or complete our product development and you will likely lose your entire investment.
We will need to continue to seek capital from time to time to
continue development of our lead drug candidate beyond our initial combined Phase I/IIa clinical trial and to acquire and develop other
product candidates. Once approved for commercialization, we cannot provide any assurances that any revenues it may generate in the future
will be sufficient to fund our ongoing operations.
Our business or operations may change in a manner that would
consume available funds more rapidly than anticipated and substantial additional funding may be required to maintain operations, fund
expansion, develop new or enhance products, acquire complementary products, business or technologies or otherwise respond to competitive
pressures and opportunities, such as a change in the regulatory environment or a change in preferred treatment modalities. In addition,
we may need to accelerate the growth of our sales capabilities and distribution beyond what is currently envisioned, and this would require
additional capital. However, we may not be able to secure funding when we need it or on favorable terms. We may not be able to raise sufficient
funds to commercialize the product candidates we intend to develop.
If we cannot raise adequate funds to satisfy our capital requirements,
we will have to delay, scale back or eliminate our research and development activities, clinical studies or future operations. We may
also be required to obtain funds through arrangements with collaborators, which arrangements may require us to relinquish rights to certain
technologies or products that we otherwise would not consider relinquishing, including rights to future product candidates or certain
major geographic markets. This could result in sharing revenues which we might otherwise retain for ourselves. Any of these actions may
harm our business, financial condition and results of operations.
The amount of capital we may need depends on many factors, including
the progress, timing and scope of our product development programs; the progress, timing and scope of our preclinical studies and clinical
trials; the time and cost necessary to obtain regulatory approvals; the time and cost necessary to further develop manufacturing processes
and arrange for contract manufacturing; our ability to enter into and maintain collaborative, licensing and other commercial relationships;
and our partners’ commitment of time and resources to the development and commercialization of our products.
Our financial situation creates doubt whether we will continue
as a going concern.
The Company was incorporated
on September 28, 2017 and through the date of this report has generated no significant revenues. For the years ended December 31, 2021
and 2020, the Company had a net loss of $46,371,364 and $9,149,227, respectively. For the six months ended June 30, 2022 and 2021, the
Company had a net loss of $11,909,147 and $12,558,103, respectively. There can be no assurances that we will be able to achieve a level
of revenues adequate to generate sufficient cash flow from operations or additional financing through private placements, public offerings
and/or bank financing necessary to support our working capital requirements. To the extent that funds generated from any private placements,
public offerings and/or bank financing are insufficient, we will have to raise additional working capital. No assurance can be given
that additional financing will be available, or if available, will be on acceptable terms. These conditions raise substantial doubt about
our ability to continue as a going concern. If adequate working capital is not available, we may be forced to discontinue operations,
which would cause investors to lose their entire investment.
We may need to raise additional funding, which may not
be available on acceptable terms, or at all. Failure to obtain this necessary capital when needed may force us to delay, limit or terminate
our product development efforts or other operations.
We do not expect that our current cash position will be sufficient
to fund our current operations for the next 12 months. Our operating plan may change as a result of many factors currently unknown to
us, and we may need to seek additional funds sooner than planned, through public or private equity or debt financings, government or other
third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements
or a combination of these approaches. In any event, we will require additional capital to obtain regulatory approval for, and to commercialize,
our product candidates. Raising funds in the current economic environment may present additional challenges. Even if we believe we have
sufficient funds for our current or future operating plans, we may seek additional capital if market conditions are favorable or if we
have specific strategic considerations.
Any additional fundraising efforts may divert our management
from their day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates. In addition,
we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. Moreover, the
terms of any financing may adversely affect the holdings or the rights of our stockholders and the issuance of additional securities,
whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our shares to decline. The sale of additional
equity or convertible securities may dilute our existing stockholders. The incurrence of indebtedness would result in increased fixed
payment obligations and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional
debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could
adversely impact our ability to conduct our business. We could also be required to seek funds through arrangements with collaborative
partners or otherwise at an earlier stage than otherwise would be desirable and we may be required to relinquish rights to some of our
technologies or product candidates or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our
business, operating results and prospects.
If we are unable to obtain funding on a timely basis, we may
be required to significantly curtail, delay or discontinue one or more of our research or development programs or the commercialization
of any product candidate or be unable to expand our operations or otherwise capitalize on our business opportunities, as desired, which
could materially affect our business, financial condition and results of operations.
Even if we can raise additional funding, we may be required
to do so on terms that are dilutive to you.
The capital markets have been unpredictable in the past for unprofitable
companies such as ours. In addition, it is generally difficult for development stage companies to raise capital under current market conditions.
The amount of capital that a company such as ours is able to raise often depends on variables that are beyond our control. As a result,
we may not be able to secure financing on terms attractive to us, or at all. If we are able to consummate a financing arrangement, the
amount raised may not be sufficient to meet our future needs. If adequate funds are not available on acceptable terms, or at all, our
business, including our results of operations, financial condition and our continued viability will be materially adversely affected.
Risks Related to Product Development, Regulatory Approval,
Manufacturing and Commercialization
The regulatory approval process is expensive, time-consuming
and uncertain and may prevent us from obtaining approvals for the commercialization of our future product candidates, if any.
We will not be permitted to market our product candidates in
the United States until we receive approval from the FDA, or in any foreign countries until we receive the requisite approval from corresponding
agencies in such countries. The testing, manufacturing, labeling, approval, selling, marketing and distribution of health and life science-related
products are subject to extensive regulation, which regulations differ from country to country.
Successfully completing our clinical program and obtaining approval
of a Biologics License Application (“BLA”) is a complex, lengthy, expensive and uncertain process, and the FDA or other applicable
foreign regulator may delay, limit or deny approval of our product candidates for many reasons, including, among others, because:
|
● |
we may not be able to demonstrate that our product candidates are safe and effective in treating patients to the satisfaction of the FDA or foreign regulator; |
|
● |
the results of our clinical trials may not meet the level of statistical or clinical significance required by the FDA or foreign regulator for marketing approval; |
|
● |
the FDA or foreign regulator may disagree with the number, design, size, conduct or implementation of our clinical trials; |
|
● |
the FDA or foreign regulator may require that we conduct additional clinical trials; |
|
● |
the FDA or foreign regulator may not approve the formulation, labeling or specifications of our product candidates; |
|
● |
the contract research organizations (CROs) and other contractors that we may retain to conduct our clinical trials may take actions outside of our control that materially adversely impact our clinical trials; |
|
● |
the FDA or foreign regulator may find the data from preclinical studies and clinical trials insufficient to demonstrate that our product candidate(s) are safe and effective for their proposed indications; |
|
● |
the FDA or foreign regulator may disagree with our interpretation of data from our preclinical studies and clinical trials; |
|
● |
the FDA or foreign regulator may not accept data generated at our clinical trial sites or may disagree with us over whether to accept efficacy results from clinical trial sites outside the United States or outside the EU, as applicable, where the standard of care is potentially different from that in the United States or in the EU, as applicable; |
|
● |
if and when our BLAs or foreign equivalents are submitted to the applicable regulatory authorities, such agencies may have difficulties scheduling the necessary review meetings in a timely manner, may recommend against approval of our application or may recommend or require, as a condition of approval, additional preclinical studies or clinical trials, limitations on approved labeling or distribution and use restrictions; |
|
● |
the FDA or foreign regulator may require development of a Risk Evaluation and Mitigation Strategy (REMS), which would use risk minimization strategies to ensure that the benefits of certain prescription drugs outweigh their risks, as a condition of approval or post-approval; |
|
● |
the FDA or other applicable foreign regulatory agencies may not approve the manufacturing processes or facilities of third-party manufacturers with which we contract; or |
|
● |
the FDA or the other applicable foreign regulatory agencies may change their approval policies or adopt new regulations. |
We may encounter substantial delays in completing our clinical
studies which in turn will require additional costs, or we may fail to demonstrate adequate safety and efficacy to the satisfaction of
applicable regulatory authorities.
It is difficult to predict if or when any of our product candidates,
will prove safe or effective in humans or will receive regulatory approval. Before obtaining marketing approval from regulatory
authorities for the sale of our product candidates, we must conduct extensive clinical studies to demonstrate the safety and efficacy
of the product candidates in humans. Clinical testing is expensive, time-consuming and uncertain as to outcome. We cannot guarantee that
any clinical studies will be conducted as planned or completed on schedule, if at all. A failure of one or more clinical studies can occur
at any stage of testing. Events that may prevent successful or timely completion of clinical development include:
|
● |
delays in reaching, or failing to reach, a consensus with regulatory agencies on study design; |
|
● |
delays in reaching, or failing to reach, agreement on acceptable terms with a sufficient number of prospective contract research organizations (“CROs”) and clinical study sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites; |
|
|
|
|
● |
delays in obtaining required Institutional Review Board (“IRB”) or Ethics Committee (“EC”) approval at each clinical study site; |
|
|
|
|
● |
delays in recruiting a
sufficient number of suitable patients to participate in our clinical studies including, but not limited to, recruitment challenges
due to COVID-19;; |
|
|
|
|
● |
imposition of a clinical hold by regulatory agencies, after an inspection of our clinical study operations or study sites; |
|
|
|
|
● |
failure by our CROs, other third parties or us to adhere to the clinical study, regulatory or legal requirements; |
|
|
|
|
● |
failure to perform in accordance with the FDA’s good clinical practices (“GCP”) or applicable regulatory guidelines in other countries; |
|
|
|
|
● |
delays in the testing, validation, manufacturing and delivery of sufficient quantities of our product candidates to the clinical sites; |
|
|
|
|
● |
delays in having patients’ complete participation in a study or return for post-treatment follow-up; |
|
|
|
|
● |
clinical study sites or patients dropping out of a study; |
|
|
|
|
● |
delay or failure to address any patient safety concerns that arise during the course of a trial; |
|
|
|
|
● |
unanticipated costs or increases in costs of clinical trials of our product candidates; |
|
|
|
|
● |
occurrence of serious adverse events associated with the product candidates that are viewed to outweigh their potential benefits; or |
|
|
|
|
● |
changes in regulatory requirements and guidance that require amending or submitting new clinical protocols. |
We could also encounter delays if a clinical trial is suspended or
terminated by us, by the IRBs or ECs of the institutions in which such trials are being conducted, by an independent Safety Review Board
(“SRB”) for such trial or by the FDA, European Medicines Agency (“EMA”), or other regulatory authorities. Such
authorities may suspend or terminate a clinical trial due to a number of factors, including failure to conduct the clinical
trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site
by the FDA, EMA, or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side
effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of
adequate funding to continue the clinical trial.
Any inability to successfully complete preclinical and clinical development
could result in additional costs to us or impair our ability to generate revenues from product sales, regulatory and commercialization
milestones and royalties. In addition, if we make manufacturing or formulation changes to our product candidates, we may need to conduct
additional studies to bridge our modified product candidates to earlier versions.
Clinical study delays could also shorten any periods during which
we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we
do, which could impair our ability to successfully commercialize our product candidates. 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 may significantly harm our business, financial condition
and prospects. 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.
The outcome of preclinical studies and early clinical trials
may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final
results. Further, preclinical and clinical data are often susceptible to various interpretations and analyses, and many companies that
have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have, nonetheless, failed to
obtain marketing approval. If the results of our clinical studies are inconclusive or if there are safety concerns or adverse events
associated with our other product candidates, we may:
|
● |
be delayed in obtaining marketing approval for our product candidates, if approved at all; |
|
|
|
|
● |
obtain approval for indications or patient populations that are not as broad as intended or desired; |
|
|
|
|
● |
obtain approval with labeling that includes significant use or distribution restrictions or safety warnings; |
|
|
|
|
● |
be required to change the way the product is administered; |
|
|
|
|
● |
be required to perform additional clinical studies to support approval or be subject to additional post-marketing testing requirements; |
|
|
|
|
● |
have regulatory authorities withdraw their approval of a product or impose restrictions on its distribution in the form of a modified risk evaluation and mitigation strategy; |
|
|
|
|
● |
be sued; or |
|
|
|
|
● |
experience damage to our reputation. |
If we, ours collaborators, or our contract manufacturing
organizations (“CMOs”) fail to comply with applicable regulatory requirements at any stage during the regulatory process, such
noncompliance could result in, among other things delays in the approval of applications or supplements to approved applications; refusal
of a regulatory authority, including the FDA, to review pending market approval applications or supplements to approved applications;
warning letters; fines; import and/or export restrictions; product recalls or seizures; injunctions; total or partial suspension of production;
civil penalties; withdrawals of previously approved marketing applications or licenses; recommendations by the FDA or other regulatory
authorities against governmental contracts; and/or criminal prosecutions.
Additionally, our product candidates could potentially cause
other adverse events that have not yet been predicted. The inclusion of ill patients in our clinical studies may result in deaths or other
adverse medical events due to other therapies or medications that such patients may be using. As described above, any of these events
could prevent us from achieving or maintaining market acceptance of our product candidates and impair our ability to commercialize our
products.
We may not be able to meet
requirements for the chemistry, manufacturing and control of our drug product candidates.
In order to receive approval
of our products by the FDA and comparable foreign regulatory authorities, we must show that we and our contract manufacturing partners
are able to characterize, control and manufacture our drug products safely and in accordance with regulatory requirements. This includes
synthesizing the active ingredient, developing an acceptable formulation, performing tests to adequately characterize the formulated product,
documenting a repeatable manufacturing process, and demonstrating that our drug products meet stability requirements. Meeting these chemistry,
manufacturing and control (“CMC”) requirements is a complex task that requires specialized expertise. If we are not able to
meet the CMC requirements, we may not be successful in getting our products approved.
Enrollment and retention of patients
in clinical trials is an expensive and time-consuming process and could be made more difficult or rendered impossible by multiple factors
outside our control.
We may encounter delays
or difficulties in enrolling, or be unable to enroll, a sufficient number of patients to complete any of our clinical trials on its current
timelines, or at all, and even once enrolled we may be unable to retain a sufficient number of patients to complete any of our trials.
Enrollment in our clinical trials may be slower than we anticipate, leading to delays in our development timelines. For example, we may
face difficulty enrolling or maintaining a sufficient number of patients in our clinical trials due to the existing alternative treatments
approved for any of our targeted indications as patients may decline to enroll or decide to withdraw from our clinical trials due to the
risk of receiving placebo. Patient enrollment and retention in clinical trials depends on many factors, including the size of the patient
population, the nature of the trial protocol, our ability to recruit clinical trial investigators with the appropriate competencies and
experience, the existing body of safety and efficacy data with respect to the study drug, the number and nature of competing treatments
and ongoing clinical trials of competing drugs for the same indication, the proximity of patients to clinical sites, the eligibility criteria
for the trial and the proportion of patients screened that meets those criteria, our ability to obtain and maintain patient consents,
and our ability to successfully complete prerequisite studies before enrolling certain patient populations.
Furthermore, any negative
results or new safety signals we may report in clinical trials of our product candidates may make it difficult or impossible to recruit
and retain patients in other clinical trials. Similarly, negative results reported by our competitors about their drug candidates may
negatively affect patient recruitment in our clinical trials. Also, marketing authorization of competitors in this same class of drugs
may impair our ability to enroll patients into our clinical trials, delaying or potentially preventing it from completing recruitment
of one or more of our trials.
Delays or failures in
planned patient enrollment or retention may result in increased costs, program delays or both, which could have a harmful effect on our
ability to develop our product candidates or could render further development impossible. In addition, we expect to rely on CROs and clinical
trial sites to ensure proper and timely conduct of our future clinical trials, and, while we intend to enter into agreements governing
their services, we will be limited in our ability to compel their actual performance.
If our future pre-clinical development or future clinical Phase
I/II studies are unsuccessful, we may be unable to obtain regulatory approval of, or commercialize, our product candidates on a timely
basis or at all.
The successful completion of pre-clinical development and multiple
clinical trials is critical to the success of our future products. If the pre-clinical development and clinical trials are unsuccessful
or produce inconsistent results or unanticipated adverse side effects, or if we are unable to collect reliable data, regulatory approval
of our products could be delayed or not given and as a result we may be unable to commercialize our products. Generally, we expect to
engage third parties such as consultants, universities or other collaboration partners to conduct clinical trials on our behalf. Incompatible
practices or misapplication of our products by these third parties could impair the success of our clinical trials.
Even if we receive regulatory approval for any of our product
candidates, we may not be able to successfully commercialize the product and the revenue that we generate from their sales, if any, may
be limited.
If approved for marketing, the commercial success of our product
candidates will depend upon each product’s acceptance by the medical community, including physicians, patients and health care payors.
The degree of market acceptance for any of our product candidates will depend on a number of factors, including:
|
● |
demonstration of clinical safety and efficacy; |
|
|
|
|
● |
relative convenience, dosing burden and ease of administration; |
|
|
|
|
● |
the prevalence and severity of any adverse effects; |
|
|
|
|
● |
the willingness of physicians to prescribe our product candidates, and the target patient population to try new therapies; |
|
|
|
|
● |
efficacy of our product candidates compared to competing products; |
|
|
|
|
● |
the introduction of any new products that may in the future become available targeting indications for which our product candidates may be approved; |
|
|
|
|
● |
new procedures or therapies that may reduce the incidences of any of the indications in which our product candidates may show utility; |
|
● |
pricing and cost-effectiveness; |
|
|
|
|
● |
the inclusion or omission of our product candidates in applicable therapeutic and vaccine guidelines; |
|
|
|
|
● |
the effectiveness of our own or any future collaborators’ sales and marketing strategies; |
|
|
|
|
● |
limitations or warnings contained in approved labeling from regulatory authorities; |
|
|
|
|
● |
our ability to obtain and maintain sufficient third-party coverage or reimbursement from government health care programs, including Medicare and Medicaid, private health insurers and other third-party payors or to receive the necessary pricing approvals from government bodies regulating the pricing and usage of therapeutics; and |
|
|
|
|
● |
the willingness of patients to pay out-of-pocket in the absence of third-party coverage or reimbursement or government pricing approvals. |
If any of our product candidates are approved, but do not achieve an
adequate level of acceptance by physicians, health care payors, and patients, we may not generate sufficient revenues and we may not be
able to achieve or sustain profitability. Our efforts to educate the medical community and third-party payors on the benefits of our product
candidates may require significant resources and may never be successful.
In addition, even if we obtain regulatory approvals, the timing
or scope of any approvals may prohibit or reduce our ability to commercialize our product candidates successfully. For example, if the
approval process takes too long, we may miss market opportunities and give other companies the ability to develop competing products or
establish market dominance. Any regulatory approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments
that render our product candidates not commercially viable. For example, regulatory authorities may approve any of our product candidates
for fewer or more limited indications than we request, may grant approval contingent on the performance of costly post-marketing clinical
trials, or may approve any of our product candidates with a label that does not include the labeling claims necessary or desirable for
the successful commercialization for that indication. Further, the FDA or comparable foreign regulatory authorities may place conditions
on approvals or require risk management plans or a Risk Evaluation and Mitigation Strategy (“REMS”) to assure the safe use
of the drug. If the FDA or applicable foreign regulatory agency concludes a REMS is needed, the sponsor of the BLA must submit a proposed
REMS; the regulatory agencies will not approve the BLA without an approved REMS, if required. A REMS could include medication guides,
physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk
minimization tools. The regulatory agencies may also require a REMS for an approved product when new safety information emerges. Any of
these limitations on approval or marketing could restrict the commercial promotion, distribution, prescription or dispensing of our product
candidates. Moreover, product approvals may be withdrawn for non-compliance with regulatory standards or if problems occur following the
initial marketing of the product. Any of the foregoing scenarios could materially harm the commercial success of our product candidates.
Adverse events involving our products may lead the FDA
or applicable foreign regulatory agency to delay or deny clearance for our products or result in product recalls that could harm our reputation,
business and financial results.
Once a product receives regulatory clearance or approval, the
agency has the authority to require the recall of commercialized products in the event of adverse side effects, material deficiencies
or defects in design or manufacture. The authority to require a recall must be based on a regulatory finding that there is a reasonable
probability that the product would cause serious injury or death. Manufacturers may, under their own initiative, recall a product if any
material deficiency in a product is found. A government-mandated or voluntary recall by us or one of our distributors could occur as a
result of adverse side effects, impurities or other product contamination, manufacturing errors, design or labeling defects or other deficiencies
and issues. Recalls of any of our products would divert managerial and financial resources and have an adverse effect on our financial
condition and results of operations. The regulatory agencies require that certain classifications of recalls be reported to them within
ten (10) working days after the recall is initiated. Companies are required to maintain certain records of recalls, even if they are not
reportable to the regulatory agency. We may initiate voluntary recalls involving our products in the future that we determine do not require
notification of the regulatory agencies. If the regulatory agency disagrees with our determinations, they could require us to report those
actions as recalls. A future recall announcement could harm our reputation with customers and negatively affect our sales. In addition,
the regulatory agency could take enforcement action for failing to report the recalls when they were conducted.
The in-licensing of technologies and the successful testing
and early development of technologies in the laboratory may not be indicative of future results and may not result in commercially viable
technologies or products. Further, our future products may have to be modified from their originally conceived versions in order to reach
or be successful in the market.
Positive results from laboratory testing and early developmental
successes, may not be predictive of future successful development, commercialization and sales results and should not be relied upon as
evidence that products developed from our technologies will become commercially viable and successful. Further, the products we plan to
develop in the future may have to be significantly modified from their originally conceived versions in order for us to control costs,
compete with similar products, receive market acceptance, meet specific development and commercialization timeframes, avoid potential
infringement of the proprietary rights of others, or otherwise succeed in developing our business and earning ongoing revenues. This can
be a costly and resource draining activity. What appear to be promising technologies when we license them may not lead to viable technologies
or products, or to commercial success.
Complying with numerous regulations pertaining to our business
is an expensive and time-consuming process, and any failure to comply could result in substantial penalties.
We are subject to the Clinical Laboratory Improvement Amendment
of 1988, or CLIA, which is a federal law regulating clinical laboratories that perform testing on specimens derived from humans for the
purpose of providing information for the diagnosis, prevention or treatment of disease. Our clinical laboratory is located in Richmond,
Virginia and must be certified under CLIA in order for us to perform testing on human specimens. CLIA is intended to ensure the quality
and reliability of clinical laboratories in the United States by mandating specific standards in the areas of personnel qualifications,
administration, and participation in proficiency testing, patient test management, quality control, quality assurance and inspections.
We currently hold a CLIA certificate to perform high-complexity testing. Laboratories performing high complexity testing are required
to meet more stringent requirements than laboratories performing less complex tests. CLIA regulations require clinical laboratories like
ours to comply with various operational, personnel, facilities administration, quality, and proficiency testing requirements intended
to ensure that testing services are accurate, reliable and timely. CLIA certification is a prerequisite for reimbursement eligibility
for services provided to state and federal health care program beneficiaries. CLIA is user-fee funded. Therefore, all costs of administering
the program must be covered by the regulated facilities, including certification and survey costs. To renew this certificate, we are subject
to survey and inspection every two years. Moreover, CLIA inspectors may make periodic inspections of our clinical laboratory outside of
the renewal process. The failure to comply with CLIA requirements can result in enforcement actions, including the revocation, suspension,
or limitation of our CLIA certificate of compliance, as well as a directed plan of correction, state on-site monitoring, civil money penalties,
civil injunctive suit and/or criminal penalties. We must maintain CLIA compliance and certification to be eligible to bill for assays
provided to Medicare beneficiaries. If we were to be found out of compliance with CLIA program requirements and subjected to sanctions,
our business and reputation could be harmed. Even if it were possible for us to bring our laboratory back into compliance, we could incur
significant expenses and potentially lose revenue in doing so.
Additionally, certain states require laboratory licenses in order
to test specimens from patients in those states or received from ordering physicians in those states. We may also be subject to regulation
in foreign jurisdictions if we seek to expand international distribution of our assays outside the United States.
If we were to lose our CLIA certification or state laboratory
licenses, whether as a result of a revocation, suspension or limitation, we would no longer be able to offer our assays (including our
AditxtScore™ platform), which would limit our revenues and harm our business. If we were to lose, or fail to obtain, a license in
any other state where we are required to hold a license, we would not be able to test specimens from those states.
Our AditxtScore™ tests are currently
being offered as a LDTs. Should the FDA disagree that AditxtScore™ tests are LDTs, if our LDTs do not receive the required emergency
use authorizations, or if the FDA’s regulatory approach to LDTs should change in the future, our commercialization strategy may
be adversely affected, which would negatively affect our results of operations and financial condition.
The FDA has historically asserted its authority
to regulate Laboratory Developed Tests (LDTs) as medical devices under the Federal Food, Drug, and Cosmetic Act (the “FDCA”),
but it has generally exercised enforcement discretion with regard to LDTs. This means that even though the FDA believes it can impose
regulatory requirements on LDTs, such as requirements to obtain premarket approval, de novo classification, or clearance
of LDTs, it has generally chosen not to enforce those requirements. The FDA has, on occasion, sent warning letters to laboratories offering
LDTs that the agency believed were not eligible for enforcement discretion because of how they were developed, validated, performed or
marketed and consequent risks to the public.
The FDA considers an LDT
to be a test that is developed, validated, and performed within a single laboratory. We are providing AditxtScore™ as a service
as a Laboratory Developed Test (LDT) to assess immunity status to COVID-19. Our AditxtScore™ tests are currently manufactured
in our Mountain View, CA facility and performed in our Richmond, VA facility. If the FDA believes that the AditxtScore™ is not
regulated as an LDT, we may be forced to stop performing AditxtScore™ while we worked to obtain the appropriate FDA authorizations
which could negative affect our business, results of operations and financial condition.
On November 15, 2021, FDA revised its guidance
document titled “Policy for Coronavirus Disease-2019 Tests During the Public Health Emergency (Revised)” (“FDA COVID-19
Testing Guidance”) to require all COVID-19 diagnostic assays conducted as LDTs to apply for EUA authorization within a 60-day period
from the revised guidance’s issuance date. The FDA COVID-19 Testing Guidance states that FDA does not intend to object to
continued offering of LDTs that are the subject of submitted EUA requests while FDA reviews the EUA requests. The FDA COVID-19 Testing
Guidance further states that if FDA declines to issue an EUA or otherwise decides not to authorize a test for any reason, including a
determination that there is a lack of adequate data to support authorization, FDA generally expects developers to cease marketing and
offering their test within 15 calendar days. Moreover, if FDA identifies a significant problem or concern with a test, based either on
the provided information or external reports, FDA generally would expect the developer to take appropriate steps to address such problems,
which could include a recall of the test and/or notification concerning corrected test reports indicating prior test results may not
be accurate. We have submitted EUA requests for our SARS-CoV-2 LDTs and the applications are pending before FDA. There can
be no assurance that the EUA requests that we submitted for our SARS-CoV-2 LDTs will be granted on a timely basis or at all.
If FDA declines to issue a EUAs for our SARS-CoV-2 LDTs, we may be required to cease marketing the tests and our business, results
of operations and financial condition could be negatively affected. Regardless of if our EUA applications are granted by FDA, we may
recall, replace, or make corrections to our LDTs if we become aware of a product concern, which could negatively impact manufacturing,
supply and customer relationships, and may result in adverse regulatory action, including revision or revocation of an EUA.
In addition, there have
been numerous legislative proposals to clarify the FDA’s regulatory authority over medical devices. These include two bills reintroduced
in 2021: the VALID Act, which would expressly grant the FDA authority to regulate LDTs under a risk-based framework; and the VITAL Act,
which would assign LDTs to regulation solely under CLIA and would direct CMS to update its CLIA regulations. We cannot predict if either
of these bills will be enacted in their current (or any other) form and cannot quantify the effect of these bills on our business. In
the meantime, the regulation by the FDA of LDTs remains uncertain. If FDA premarket review, classification or approval is required for
AditxtScore™, our laboratory could be forced to stop performing AditxtScore™ while we worked to obtain the appropriate
FDA authorizations which could negative affect our business, results of operations and financial condition.
We are subject to various governmental
regulations relating to the labeling, marketing and sale of our products.
Both before and after
a product is commercially released, we have ongoing responsibilities under regulations promulgated by the FDA, the Federal Trade Commission,
and similar U.S. and foreign regulations governing product labeling and advertising, distribution, sale and marketing of our products.
Manufacturers of
medical devices are permitted to promote products solely for the uses and indications set forth in the device’s authorization.
A number of enforcement actions have been taken against manufacturers that promote products for “off-label” uses
(i.e., uses that are not described in the device’s authorization), including actions alleging that claims submitted to government
healthcare programs for reimbursement of products that were promoted for “off-label” uses are fraudulent in violation
of the Federal False Claims Act or other federal and state statutes and that the submission of those claims was caused by off-label promotion.
The failure to comply with prohibitions on “off-label” promotion can result in significant monetary penalties,
revocation or suspension of a company’s business license, suspension of sales of certain products, product recalls, civil or criminal
sanctions, exclusion from participating in federal healthcare programs, or other enforcement actions. In the United States, allegations
of such wrongful conduct could also result in a corporate integrity agreement with the U.S. government that imposes significant administrative
obligations and costs.
We and our employees and contractors
are subject, directly or indirectly, to federal, state and foreign healthcare fraud and abuse laws, including false claims laws. If we
are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.
Our operations are subject
to various federal, state and foreign fraud and abuse laws. These laws may constrain our operations, including the financial arrangements
and relationships through which we market, sell and distribute our products.
U.S. federal and state
laws that affect our ability to operate include, but are not limited to:
| ● | the
federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from
knowingly and willfully soliciting, receiving, offering or paying any remuneration (including
any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or
in kind in return for, the purchase, recommendation, leasing or furnishing of an item or
service reimbursable under a federal healthcare program, such as the Medicare and Medicaid
programs; |
| ● | federal
physician self-referral law, which prohibits a physician from referring a patient to an entity
with which the physician (or an immediate family member) has a financial relationship, for
the furnishing of certain designated health services for which payment may be made by Medicare
or Medicaid, unless an exception applies; |
| ● | federal
civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among
other things, individuals or entities from knowingly presenting, or causing to be presented,
claims for payment or approval from Medicare, Medicaid, or other government payers that are
false or fraudulent; |
| ● | Section
242 of HIPAA codified at 18 U.S.C. § 1347, which created new federal criminal statutes
that prohibit a person from knowingly and willfully executing a scheme or from making false
or fraudulent statements to defraud any healthcare benefit program (i.e., public or private); |
| ● | federal
transparency laws, including the Physician Payments Sunshine Act which requires the tracking
and disclosure to the federal government by pharmaceutical and medical device manufacturers
of payments and other transfers of value to physicians and teaching hospitals as well as
ownership and investment interests that are held by physicians and their immediate family
members; and |
| ● | state
law equivalents of each of these federal laws, such as anti-kickback and false claims laws
that may apply to items or services reimbursed by any third-party payer, including commercial
insurers; state laws that require pharmaceutical and medical device companies to comply with
their industry’s voluntary compliance guidelines and the applicable compliance guidance
promulgated by the federal government or otherwise restrict certain payments that may be
made to healthcare providers and other potential referral sources; state laws that require
drug and medical device manufacturers to report information related to payments and other
transfers of value to physicians and other healthcare providers or marketing expenditures;
state laws that prohibit giving gifts to licensed healthcare professionals; and state laws
governing the privacy and security of health information in certain circumstances, many of
which differ from each other in significant ways and may not have the same effect, thus complicating
compliance efforts in certain circumstances, such as specific disease states. |
In particular, activities
and arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, waste and other
abusive practices. These laws and regulations may restrict or prohibit a wide range of activities or other arrangements related to the
development, marketing or promotion of products, including pricing and discounting of products, provision of customer incentives, provision
of reimbursement support, other customer support services, provision of sales commissions or other incentives to employees and independent
contractors and other interactions with healthcare practitioners, other healthcare providers and patients.
Because of the breadth
of these laws and the narrow scope of the statutory or regulatory exceptions and safe harbors available, our business activities could
be challenged under one or more of these laws.
Government expectations
and industry best practices for compliance continue to evolve and past activities may not always be consistent with current industry
best practices. Further, there is a lack of government guidance as to whether various industry practices comply with these laws, and
government interpretations of these laws continue to evolve, all of which create compliance uncertainties. Any non-compliance could result
in regulatory sanctions, criminal or civil liability and serious harm to our reputation. It is not always possible to identify and deter
misconduct concerning applicable laws, regulations, guidelines, policies and standards, and the precautions we take to detect and prevent
this activity may not be effective in preventing such conduct, mitigating risks, or reducing the chance of governmental investigations
or other actions or lawsuits stemming from a failure to comply with these laws or regulations.
If a government entity
opens an investigation into possible violations of any of these laws (which may include the issuance of subpoenas or civil investigative
demands), we would have to expend significant resources to defend ourselves against the allegations. Allegations that we, our officers,
or our employees violated any one of these laws can be made by individuals called “whistleblowers” who may be our employees,
customers, competitors or other parties. Government policy is to encourage individuals to become whistleblowers and file a complaint
in federal court alleging wrongful conduct. The government is required to investigate all of these complaints and decide whether to intervene.
If the government intervenes and we are required to pay money back to the government, the whistleblower, as a reward, is awarded a percentage
of the collection. If the government declines to intervene, the whistleblower may proceed on their own and, if they are successful, they
will receive a percentage of any judgment or settlement amount the company is required to pay. The government may also initiate an investigation
on its own. Such actions could have a significant impact on our business, including the imposition of significant fines, and other sanctions
that may materially impair our ability to run a profitable business. In particular, if our operations are found to be in violation of
any of the laws described above or if we agree to settle with the government without admitting to any wrongful conduct or if we are found
to be in violation of any other governmental regulations that apply to us, we, our officers and employees may be subject to sanctions,
including civil and criminal penalties, damages, fines, exclusion from participation in government health care programs, such as Medicare
and Medicaid, imprisonment, the curtailment or restructuring of our operations and the imposition of a corporate integrity agreement,
any of which could adversely affect our business, results of operations and financial condition.
Risks Related to the Company and our Business
Our technology is subject to licenses from LLU and Stanford,
each of which are revocable in certain circumstances, including in the event we do not achieve certain payments and milestone deadlines.
Without these licenses, we may not be able to continue to develop our product candidates.
The LLU License Agreement may be terminated by LLU in the event
of a breach by us of any non-payment provision (including the provision that requires us to meet certain deadlines for milestone events
(each, a “Milestone Deadline”)) not cured within 90 days after delivery of written notice by LLU. Additional Milestone Deadlines
include: (i) the requirement to have regulatory approval of an IND application to initiate first-in-human clinical trials on or before
March 31, 2022, (ii) the completion of first-in-human (phase I/II) clinical trials by March 31, 2024, (iii) the completion of Phase III
clinical trials by March 31, 2026 and (iv) biologic licensing approval (BLA) by the FDA by March 31, 2027. If the LLU License Agreement
were to be terminated by LLU, we would lose our most significant asset and may no longer be able to develop our product candidates, which
would have a material adverse effect on our operations.
The February 2020 License Agreement with Stanford may be terminated
by Stanford if we (i) are delinquent on any report or payments; (ii) are not diligently developing and commercializing Licensed Product
(as defined in the February 2020 License Agreement); (iii) miss a milestone described in the agreement; (iv) are in breach of any other
provision of the agreement; or (v) if we provide a false report to Stanford. The Termination discussed above will take effect only upon
30 days written notice by Stanford unless we remedy the breach within a 30-day cure period. If the February 2020 License Agreement were
to be terminated by Stanford, we would lose a significant asset and may no longer be able to develop our product candidates, which would
have a material adverse effect on our operations.
Our results of operations will be affected by the level
of royalty and milestone payments that we are required to pay to third parties.
The LLU License Agreement and February 2020 License Agreement
with Stanford each require us to remit royalty payments and meet certain performance milestones related to in-licensed intellectual property.
Any failure on our part to pay royalties owed or meet milestones could lead to us losing rights under our licenses and could thereby adversely
affect our business. As our product sales increase, we may, from time-to-time, disagree with our third-party collaborators as to the appropriate
royalties owed and the resolution of such disputes may be costly and may consume management’s time. Furthermore, we may enter into
additional license agreements in the future, which may also include royalty payments.
We face substantial competition, which may result in others
discovering, developing or commercializing products before or more successfully than we do.
The development and commercialization of drugs is highly competitive.
We compete with a variety of multinational pharmaceutical companies and specialized biotechnology companies, as well as products and processes
being developed at universities and other research institutions. Our competitors have developed, are developing or will develop product
candidates and processes competitive with our product candidates. Competitive therapeutic treatments include those that have already been
approved and accepted by the medical community and any new treatments that may enter the market. We believe that a significant number
of products are currently available, under development, and may become commercially available in the future, for the treatment of indications
for which we may try to develop product candidates.
More established companies may have a competitive advantage over
us due to their greater size, cash flows and institutional experience. Compared to us, many of our competitors may have significantly
greater financial, technical and human resources. As a result of these factors, our competitors may have an advantage in marketing their
approved products and may obtain regulatory approval of their product candidates before we are able to, which may limit our ability to
develop or commercialize our product candidates. Our competitors may also develop drugs that are safer, more effective, more widely used
and less expensive than ours, and may also be more successful than us in manufacturing and marketing their products.
Mergers and acquisitions in the pharmaceutical and biotechnology
industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller and other early-stage
companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.
These companies compete with us in recruiting and retaining qualified scientific, management and commercial personnel, establishing clinical
trial sites and subject registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our
programs.
Our technologies and products under development, and our
business, may fail if we are not able to successfully commercialize them and ultimately generate significant revenues as a result.
Successful development of technologies and our product candidates
will require significant additional investment, including costs associated with additional development, completing trials and obtaining
regulatory approval, as well as the ability to manufacture or have others manufacture our products in sufficient quantities at acceptable
costs while also preserving product quality. Difficulties often encountered in scaling up production include problems involving production
yields, quality control and assurance, shortage of qualified personnel, production costs and process controls. In addition, we are subject
to inherent risks associated with new technologies and products. These risks include the possibility that any of our technologies or future
products may:
|
● |
be ineffective or less effective than anticipated; |
|
● |
fail to receive necessary regulatory approvals; |
|
● |
be difficult to competitively price relative to alternative solutions; |
|
● |
be harmful to consumers or the environment; |
|
● |
be difficult to manufacture on an economically viable scale; |
|
● |
be subject to supply chain constraints for raw materials; |
| ● | fail to be developed and accepted by the market prior to the
successful marketing of alternative products by competitors; |
| ● | be difficult to market because of infringement on the proprietary
rights of third parties; or |
| ● | be too expensive for commercial use. |
Furthermore, we may be faced with lengthy market partner or distributor
evaluation and approval processes. Consequently, we may incur substantial expenses and devote significant management effort in order to
customize products for market partner or distributor acceptance, though there can be no assurance of such acceptance. As a result, we
cannot accurately predict the volume or timing of any future sales.
Customers may not adopt our products quickly, or at all.
Customers in the sector in which we operate can be generally
cautious in their adoption of new products and technologies. In addition, given the relative novelty of our future planned products (including
our AditxtScore™ platform), customers of those products may require education regarding their utility and use, which may delay their
adoption. There can be no assurance that customers will adopt our products quickly, or at all.
The significant level of competition in the markets for
our products developed in the future may result in pricing pressure, reduced margins or the inability of our future products to achieve
market acceptance.
The markets for our future products are intensely competitive
and rapidly changing. We may be unable to compete successfully, which may result in price reductions, reduced margins and the inability
to achieve market acceptance for our products.
Our competitors may have longer operating histories, significantly
greater resources, greater brand recognition and large customer bases than we do. As a result, they may be able to devote greater resources
to the manufacture, promotion or sale of their products, receive greater resources and support from market partners and independent distributors,
initiate or withstand substantial price competition or more readily take advantage of acquisition or other opportunities.
We rely on third parties for the distribution of our current
and future products, including our AditxtScore™ platform. If these parties do not distribute our products in a satisfactory
or timely manner, in sufficient quantities or at an acceptable cost, our sales and development efforts could be delayed or otherwise negatively
affected.
We rely on third parties for the distribution of our current
and future products, including our AditxtScore™ platform. Our reliance on third parties to distribute products may present significant
risks to us, including the risk that should any of these third parties fail to adequately distribute our products and services to end
consumers and other market participants, our business may be materially harmed. Additionally, if we need to enter into agreements for
the distribution of our future products with other third parties, there can be no assurance we will be able to do so on favorable terms,
if at all.
We may rely on third parties for the production of our
future products. If these parties do not produce our products at a satisfactory quality, in a timely manner, in sufficient quantities
or at an acceptable cost, our sales and development efforts could be delayed or otherwise negatively affected.
We may rely on third parties for the manufacture of our future
products. Our reliance on third parties to manufacture our future products may present significant risks to us, including the following:
| ● | reduced control over delivery schedules, yields and product
reliability; |
| ● | manufacturing
deviations from internal and regulatory specifications; |
| ● | the
failure of a key manufacturer to perform as we require for technical, market or other reasons; |
| ● | difficulties
in establishing additional manufacturer relationships if we are presented with the need to transfer our manufacturing process technologies
to them; |
| ● | misappropriation
of our intellectual property; and |
| ● | other
risks in potentially meeting our product development schedule or satisfying the requirements of our market partners, distributors, direct
customers and end users. |
If we need to enter into agreements for the manufacturing of our future
products, there can be no assurance we will be able to do so on favorable terms, if at all.
If we are unable to establish successful relations with
third-party market partners or distributors, or these market partners or distributors do not focus adequate resources on selling our products
or are otherwise unsuccessful in selling them, sales of our products may not develop.
We anticipate relying on independent market partners and distributors
to distribute and assist us with the marketing and sale of our products. Our future revenue generation and growth will depend in large
part on our success in establishing and maintaining this sales and distribution channel. If our market partners and distributors are unable
to sell our products, or receive negative feedback from end users, they may not continue to purchase or market our products. In addition,
there can be no assurance that our market partners and distributors will focus adequate resources on selling our products to end users
or will be successful in selling them. Many of our potential market partners and distributors are in the business of distributing and
sometimes manufacturing other, possibly competing, products. As a result, these market partners and distributors may perceive our
products as a threat to various product lines currently being distributed or manufactured by them. In addition, these market partners
and distributors may earn higher margins by selling competing products or combinations of competing products. If we are unable to establish
successful relationships with independent market partners and distributors, we will need to further develop our own sales and distribution
capabilities, which would be expensive and time-consuming and might not be successful.
If we are not able to attract and retain highly skilled
employees and contractors, we may not be able to implement our business model successfully.
We will rely upon employees and third-party consultant/contractors
to effectively establish, manage and grow our business. Consequently, we believe that our future viability will depend largely on our
ability to attract and retain highly skilled personnel. In order to do so, we may need to pay higher compensation, fees, and/or other
incentives to our employees or consultants than we currently expect, and such higher compensation payments would have a negative effect
on our operating results. Competition for experienced, high-quality employees, consultants and contractors is intense and we cannot assure
that we will be able to recruit and retain such personnel. We may not be able to hire or retain the necessary personnel to implement our
business strategy. Our failure to hire and retain such personnel could impair our ability to develop new products and manage our business
effectively.
The loss of our management team or other key personnel
would have an adverse impact on our future development and impair our ability to succeed.
In the early stages of development, our business will be significantly
dependent on the Company’s management team and other key personnel. Our success will be particularly dependent upon Mr. Amro Albanna
and Dr. Shahrokh Shabahang. The loss of any one of these individuals or any other future key personnel could have a material adverse effect
on the Company and our ability to further execute our intended business.
The use of our products may be limited by regulations, and we
may be exposed to product liability and remediation claims.
The use of our planned products may be regulated by various local,
state, federal and foreign regulators. Even if we are able to comply with all such regulations and obtain all necessary registrations,
we cannot provide assurance that our future products will not cause injury to the environment, people, or animals and/or otherwise have
unintended adverse consequences, under all circumstances. For example, our products may be improperly combined with other chemicals or,
even when properly combined, our products may be blamed for damage caused by those other chemicals. The costs of remediation or products
liability could materially adversely affect our results, financial condition and operations.
We may be held liable for, or incur costs to settle, liability
and remediation claims if any products we develop, or any products that use or incorporate any of our technologies, cause injury or are
found unsuitable during product testing, manufacturing, marketing, sale or use. These risks exist even with respect to products that have
received, or may in the future receive, regulatory approval, registration or clearance for commercial use. We cannot guarantee that we
will be able to avoid product liability exposure.
At the stage customary to do so, we expect to maintain product
liability insurance at levels we believe are sufficient and consistent with industry standards for like companies and products. However,
we cannot guarantee that our product liability insurance will be sufficient to help us avoid product liability-related losses. In the
future, it is possible that meaningful insurance coverage may not be available on commercially reasonable terms or at all. In addition,
a product liability claim could result in liability to us greater than our assets or insurance coverage. Moreover, even if we have adequate
insurance coverage, product liability claims or recalls could result in negative publicity or force us to devote significant time and
attention to these matters, which could harm our business.
There may be limitations on the effectiveness of our internal
controls, and a failure of our control systems to prevent error or fraud may materially harm our Company.
We do not expect that internal control over financial accounting and
disclosure, even if timely and well established, will prevent all error and all fraud. A control system, no matter how well designed and
operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design
of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative
to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, have been detected. Failure of our control systems to prevent error or fraud could
materially adversely affect our business.
COVID-19 may impact our operations.
On January 30, 2020, the World Health Organization declared the COVID-19
coronavirus outbreak a “Public Health Emergency of International Concern” and on March 10, 2020, declared it to be a pandemic.
Actions taken around the world to help mitigate the spread of the coronavirus include restrictions on travel, and quarantines in certain
areas, and forced closures for certain types of public places and businesses. The COVID-19 coronavirus and actions taken to mitigate it
have had and are expected to continue to have an adverse impact on the economies and financial markets of many countries, including the
geographical area in which the Company operates. While it is unknown how long these conditions will last and what the complete financial
effect will be to the Company, capital raise efforts and additional development of our technologies may be negatively affected.
Risks Relating to Our Intellectual Property Rights
The failure to obtain or maintain patents, licensing agreements
and other intellectual property could materially impact our ability to compete effectively.
In order for our business to be viable and to compete effectively,
we need to develop and maintain, and we will heavily rely on, a proprietary position with respect to our technologies and intellectual
property. However, there are significant risks associated with our actual or proposed intellectual property. The risks and uncertainties
that we face with respect to our rights principally include the following:
| ● | pending
patent applications we have filed or will file may not result in issued patents or may take longer than we expect to result in issued
patents; |
| ● | we
may be subject to interference proceedings; |
| ● | we
may be subject to reexamination proceedings; |
| ● | we
may be subject to post grant review proceedings; |
| ● | we
may be subject to inter partes review proceedings; |
| ● | we
may be subject to derivation proceedings; |
| ● | we
may be subject to opposition proceedings in the U.S. or in foreign countries; |
| ● | any
patents that are issued to us may not provide meaningful protection; |
| ● | we
may not be able to develop additional proprietary technologies that are patentable; |
| ● | other
companies may challenge patents licensed or issued to us; |
| ● | other
companies may have independently developed and patented (or may in the future independently develop and patent) similar or alternative
technologies, or duplicate our technologies; |
| ● | other
companies may design around technologies we have licensed or developed; |
| ● | enforcement
of patents is complex, uncertain and very expensive and we may not be able to secure, enforce and defend our patents; and |
| ● | in
the event that we were to ever seek to enforce our patents in ligation, there is some risk that they could be deemed invalid, not infringed,
or unenforceable. |
We cannot be certain that any patents will be issued as a result of
any pending or future applications, or that any patents, once issued, will provide us with adequate protection from competing products.
For example, issued patents may be circumvented or challenged, declared invalid or unenforceable, or narrowed in scope. In addition, since
publication of discoveries in scientific or patent literature often lags behind actual discoveries, we cannot be certain that we or our
licensors were the first to invent or to file patent applications covering them.
It is also possible that others may have or may obtain issued
patents that could prevent us from commercializing our products or require us to obtain licenses requiring the payment of significant
fees or royalties in order to enable us to conduct our business. There is no guarantee that such licenses will be available based on commercially
reasonable terms. As to those patents that we have licensed, our rights depend on maintaining our obligations to the licensor under the
applicable license agreement, and we may be unable to do so.
If we are unable to obtain and maintain patent protection
for our products, or if the scope of the patent protection obtained is not sufficiently broad, competitors could develop and commercialize
products similar or identical to ours, and our ability to successfully commercialize our products could be impaired.
The patent prosecution process is expensive and time-consuming,
and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost, in a timely manner,
or in all jurisdictions. It is also possible that we will fail to identify patentable aspects of our development output before it is too
late to obtain patent protection.
The patent position of life science companies generally is highly
uncertain, involves complex legal and factual questions and has in past years been the subject of much litigation. In addition, the laws
of foreign countries may not protect our rights to the same extent as the laws of the United States and we may fail to seek or obtain
patent protection in all major markets. For example, unlike the U.S., European patent law restricts the patentability of methods of treatment
of the human body. Our pending and future patent applications may not result in patents being issued which protect our technology or products,
in whole or in part, or which effectively prevent others from commercializing competitive technologies and products. Changes in either
the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or
narrow the scope of our patent protection, even post-grant.
Recent patent reform legislation has increased the uncertainties
and costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents. On September 16, 2011,
the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a number of significant
changes to United States patent law. These include provisions that affect the way patent applications are prosecuted and may also affect
patent litigation. The U.S. Patent and Trademark Office, or USPTO, recently developed new regulations and procedures to govern administration
of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the
first to file provisions, only became effective on March 16, 2013. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act
will have on the operation of our business. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs
surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a
material adverse effect on our business and financial condition.
Moreover, we may be subject to a third-party pre-issuance submission
of prior art to the USPTO, or become involved in opposition, derivation, reexamination, inter partes review, post-grant
review or interference proceedings challenging our patent rights (whether licensed or otherwise held) or the patent rights of others.
An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights
(whether licensed or otherwise held), allow third parties to commercialize our technology or products and compete directly with us, without
payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights. In addition,
if the breadth or strength of protection provided by our patents and patent applications (whether licensed or otherwise held) is threatened,
it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates.
Even if our patent applications (whether licensed or otherwise
held) result in the issuance of patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors
from competing with us or otherwise provide us with any competitive advantage. Our competitors may be able to circumvent our owned or
licensed patents by developing similar or alternative technologies or products in a non-infringing manner.
The issuance of a patent is not conclusive as to its inventorship,
scope, validity or enforceability, and our licensed or owned patents may be challenged in the courts or patent offices in the United States
and abroad. Such challenges may result in loss of exclusivity or freedom to operate or in patent claims being narrowed, invalidated or
held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical
products, or limit the duration of the patent protection of our products. Given the amount of time required for the development, testing
and regulatory review of new life science product candidates, patents protecting such candidates might expire before or shortly after
such candidates are commercialized. As a result, our intellectual property rights portfolio may not provide us with sufficient rights
to exclude others from commercializing products similar or identical to ours.
We may become involved in lawsuits to protect or enforce
our intellectual property rights, which could be expensive, time-consuming and ultimately unsuccessful.
Competitors may infringe our intellectual property. To counter
infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming. Any claims
we assert against perceived infringers could provoke these parties to assert counterclaims against us alleging that we infringe their
intellectual property or that our intellectual property is invalid or unenforceable. In addition, in a patent infringement proceeding,
a court may decide that a licensed or owned patent of ours is invalid or unenforceable, in whole or in part, construe the patent’s
claims narrowly or refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover that
technology. Moreover, lawsuits to protect or enforce our intellectual property rights could be expensive, time-consuming and ultimately
unsuccessful.
Third parties may initiate legal proceedings alleging that
we are infringing their intellectual property rights, the outcome of which would be uncertain.
Our commercial success depends upon our ability to develop, manufacture,
market and sell our product candidates without infringing the proprietary rights of third parties. There is considerable intellectual
property litigation in the life sciences industry. We cannot guarantee that our product candidates will not infringe third-party patents
or other proprietary rights. We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual
property rights with respect to our products and technology, including inter partes review, interference, or derivation
proceedings before the USPTO and similar bodies in other countries. Third parties may assert infringement claims against us based on existing
intellectual property rights and intellectual property rights that may be granted in the future.
If we are found to infringe a third party’s intellectual
property rights, we could be required to obtain a license from such third party to continue developing and marketing our products. However,
we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain a license,
it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including
by court order, to cease commercializing the infringing technology or product. In addition, we could be found liable for monetary damages,
including treble damages and attorneys’ fees if we are found to have willfully infringed a patent. A finding of infringement could
prevent us from commercializing our product candidates or force us to cease some of our business operations, which could materially harm
our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar
negative impact on our business.
Obtaining and maintaining our patent protection depends on compliance
with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our own
patent protection could be reduced or eliminated for noncompliance with these requirements.
Periodic maintenance fees and annuities on any issued patent
are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of the patent. The USPTO and various foreign
governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during
the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance
with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application,
resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment
or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time
limits, non-payment of fees and failure to properly legalize and submit formal documents. In such an event, our competitors might be able
to enter our markets, which could have a material adverse effect on our business.
We may be subject to claims by third parties asserting
that our employees or we have misappropriated their intellectual property or claiming ownership of what we regard as our own intellectual
property.
Certain employees and contractors were previously employed at universities
or other companies, including potential competitors. Although we try to ensure that our employees and contractors do not use the proprietary
information or know-how of others in their work for us, we may be subject to claims that these employees or we have used or disclosed
intellectual property, including trade secrets or other proprietary information, of any such employee’s former employer. Litigation
may be necessary to defend against these claims, and any such litigation could have an unfavorable outcome.
In addition, while it is our policy to require our employees and contractors
who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may
be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own. Our
and their assignment agreements may not be self-executing or may be breached, and we may be forced to bring claims against third parties,
or defend claims they may bring against us, to determine the ownership of what we regard as our intellectual property.
If we fail in prosecuting or defending any such claims, in addition
to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in prosecuting or
defending against such claims, litigation could result in substantial costs and adverse results, and be a distraction to management.
Some intellectual property which we own or have licensed
may have been discovered through government funded programs such as, for example, the government funded programs referenced in intellectual
property licensed under the LLU License Agreement, and thus may be subject to federal regulations such as “march-in” rights,
certain reporting requirements, and a preference for United States industry. Compliance with such regulations may limit our exclusive
rights, subject us to expenditure of resources with respect to reporting requirements, and limit our ability to contract with non-U.S.
manufacturers.
Some of the intellectual property rights we own or have licensed
have been generated through the use of United States government funding and may therefore be subject to certain federal regulations. As
a result, the United States government may have certain rights to intellectual property embodied in our current or future products and
product candidates pursuant to the Bayh-Dole Act of 1980. These United States government rights in certain inventions developed under
a government-funded program include a non-exclusive, non-transferable, irrevocable worldwide license to use inventions for any governmental
purpose. In addition, the United States government has the right to require us to grant exclusive, partially exclusive, or non-exclusive
licenses to any of these inventions to a third party if it determines that: (i) adequate steps have not been taken to commercialize
the invention; (ii) government action is necessary to meet public health or safety needs; or (iii) government action is necessary
to meet requirements for public use under federal regulations (also referred to as “march-in rights”). The United States government
also has the right to take title to these inventions if we fail to disclose the invention to the government and fail to file an application
to register the intellectual property within specified time limits. In addition, the United States government may acquire title to these
inventions in any country in which a patent application is not filed within specified time limits. Intellectual property generated under
a government funded program is also subject to certain reporting requirements, compliance with which may require us to expend substantial
resources. In addition, the United States government requires that any products embodying the subject invention or produced through the
use of the subject invention be manufactured substantially in the United States. The manufacturing preference requirement can be waived
if the owner of the intellectual property can show that reasonable but unsuccessful efforts have been made to grant licenses on similar
terms to potential licensees that would be likely to manufacture substantially in the United States or that under the circumstances domestic
manufacture is not commercially feasible. This preference for United States manufacturers may limit our ability to contract with non-U.S.
product manufacturers for products covered by such intellectual property. Any exercise by the government of any of the foregoing rights
could harm our competitive position, business, financial condition, results of operations and prospects.
Intellectual property litigation could cause us to spend
substantial resources and distract our personnel from their normal responsibilities.
Even if resolved in our favor, litigation or other legal proceedings
relating to intellectual property claims may cause us to incur significant expenses and could distract our technical and management personnel
from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim
proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have an adverse effect
on the price of our common stock. Such litigation or proceedings could increase our operating losses and reduce the resources available
for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources
to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings
more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation
of patent litigation or other proceedings could compromise our ability to compete in the marketplace.
We may spend considerable resources developing and maintaining
patents, licensing agreements and other intellectual property that may later be abandoned or may otherwise never result in products brought
to market.
Not all technologies and candidate products that initially show
potential as the basis for future products ultimately meet the rigors of our development process and as a result may be abandoned and/or
never otherwise result in products brought to market. In some cases, prior to abandonment we may be required to incur significant
costs developing and maintaining intellectual property and/or maintaining license agreements and our business could be harmed by such
costs.
We rely on information technology, and if we are unable
to protect against service interruptions, data corruption, cyber-based attacks or network security breaches, our operations could be disrupted,
and our business could be negatively affected.
We rely on information technology networks and systems to process,
transmit and store electronic and financial information; to coordinate our business; and to communicate within our Company and with customers,
suppliers, partners and other third-parties. These information technology systems may be susceptible to damage, disruptions or shutdowns,
hardware or software failures, power outages, computer viruses, cyber-attacks, telecommunication failures, user errors or catastrophic
events. If our information technology systems suffer severe damage, disruption or shutdown, and our business continuity plans do not effectively
resolve the issues in a timely manner, our operations could be disrupted, and our business could be negatively affected. In addition,
cyber-attacks could lead to potential unauthorized access and disclosure of confidential information, and data loss and corruption. There
is no assurance that we will not experience these service interruptions or cyber-attacks in the future.
Risks Related to Our Common Stock
We received a written notice from Nasdaq that we have failed
to comply with certain listing requirements of the Nasdaq Stock Market, which could result in our Common Stock being delisted from the
Nasdaq Stock Market.
On January 18, 2022, we received
a notification from Nasdaq related to our failure to maintain a minimum bid price of $1 per share. Based upon the closing bid price for
the last 30 consecutive business days, we no longer meet this requirement. However, the Nasdaq Listing Rules also provide us a compliance
period of 180 calendar days in which to regain compliance. Accordingly, if at any time from the date of this notice until July 18, 2022,
the closing bid price our common stock is at least $1 for a minimum of ten consecutive business days, Nasdaq will provide us with written
confirmation of compliance and the matter will be closed. On July 20, 2022, we received a notification from Nasdaq that we had not regained
compliance with the minimum bid price rule by July 18, 2022 and that our common stock would be suspended from trading on Nasdaq unless
we requested a hearing before a hearings panel no later than July 26, 2022. We timely requested a hearing with the panel, which request
stayed any trading suspension of our common stock until the completion of the Nasdaq hearing process and the expiration of any additional
extension period granted by the panel following the hearing. The hearing was held on September 8, 2022. We expect the panel to issue
its decision within the thirty days following the hearing. On August 24, 2022, we received a notification from Nasdaq stating that,
based upon the stockholders equity reported by the Company in its Form 10-Q for the period ended June 30, 2022, and as of August 15,
2022, the Company was no longer in compliance with Nasdaq Listing Rule 5550(b)(1), which requires a company to maintain a minimum of
$2,500,000 in stockholders’ equity, a market value of listed securities of at least $35 million, or net income from continuing
operations of $500,000 in the most recently completed fiscal year or in two of the three most recently completed fiscal years.
On
September 13, 2022, we filed a Certificate of Amendment to our Certificate of Incorporation, as amended, to effect the reverse stock
split at a ratio of one-for-fifty (1-for-50) in order to regain compliance with the Nasdaq minimum
bid requirement. In addition, following the completion of this offering, we believe we will regain compliance
with Nasdaq’s stockholders’ equity continued listing requirement. However, we can provide no assurance that Nasdaq will accept
our plan of compliance or grant us any additional time to demonstrate our ability to sustain compliance with the continued listing requirements
over the long term. If we are delisted from Nasdaq, our common stock may be eligible for trading on an over-the-counter market.
If we are not able to obtain a listing on another stock exchange or quotation service for our common stock, it may be extremely difficult
or impossible for stockholders to sell their shares. We intend to monitor the closing bid price of our common stock and may be required
to seek approval from our stockholders to affect a reverse stock split of the issued and outstanding shares of our common stock. However,
there can be no assurance that the reverse stock split would be approved by our stockholders. Further, there can be no assurance that
the market price per new share of our common stock after the reverse stock split will remain unchanged or increase in proportion to the
reduction in the number of old shares of our common stock outstanding before the reverse stock split. Even if the reverse stock split
is approved by our stockholders, there can be no assurance that we will be able to regain compliance with the minimum bid price requirement
or will otherwise be in compliance with other Nasdaq listing rules.
If we are delisted from Nasdaq, but obtain a substitute listing
for our common stock, it will likely be on a market with less liquidity, and therefore experience potentially more price volatility than
experienced on Nasdaq. Stockholders may not be able to sell their shares of common stock on any such substitute market in the quantities,
at the times, or at the prices that could potentially be available on a more liquid trading market. As a result of these factors, if our
common stock is delisted from Nasdaq, the value and liquidity of our common stock, warrants and pre-funded warrants would likely be significantly
adversely affected. A delisting of our common stock from Nasdaq could also adversely affect our ability to obtain financing for our operations
and/or result in a loss of confidence by investors, employees and/or business partners.
We
effected a reverse one-for-fifty (1-for-50) stock split of our outstanding common stock prior to the closing of this offering.
We
expect that the reverse stock split will increase the market price of our common stock while our stock is trading
and enable us to meet the minimum market price requirement of the listing rules of the Nasdaq Capital Market. However, the effect of
a reverse stock split upon the market price of our common stock cannot be predicted with certainty, and the results
of reverse stock splits by companies in similar circumstances have been varied. It is possible that the market price of our common stock
following the reverse stock split will not increase sufficiently for us to be in compliance with the minimum market
price requirement of the Nasdaq Capital Market, or if it does, that such price will be sustained. If we are unable to meet the minimum
market price requirement, we may be unable to list our shares on the Nasdaq Capital Market, in which case such an offering may not be
completed.
Even
if the reverse stock split achieves the requisite increase in the market price of our common stock, we cannot assure you that we will
be approved for listing on the Nasdaq Capital Market or able to comply with other continued listing standards of the Nasdaq Capital Market.
Even
if the reverse stock split achieves the requisite increase in the market price of our common stock to be in compliance with the minimum
bid price of Nasdaq, there can be no assurance that the market price of our common stock following the reverse stock split will remain
at the level required for continuing compliance with that requirement. It is not uncommon for the market price of a company’s common
stock to decline in the period following a reverse stock split. If the market price of our common stock declines following the effectuation
of the reverse stock split, the percentage decline may be greater than would occur in the absence of a reverse stock split. In any event,
other factors unrelated to the number of shares of our common stock outstanding, such as negative financial or operational results, could
adversely affect the market price of our common stock and jeopardize our ability to meet or maintain Nasdaq’s minimum bid price
requirement.
The
Nasdaq Capital Market requires that the trading price of its listed stocks remain above one dollar in order for the stock to remain listed.
If a listed stock trades below one dollar for more than 30 consecutive trading days, then it is subject to delisting from Nasdaq. In
addition, to maintain a listing on Nasdaq, we must satisfy minimum financial and other continued listing requirements and standards,
including those regarding director independence and independent committee requirements, minimum stockholders’ equity, and certain
corporate governance requirements. If we are unable to satisfy these requirements or standards, we could be subject to delisting, which
would have a negative effect on the price of our common stock and would impair your ability to sell or purchase our common stock when
you wish to do so. Although we are taking certain actions to regain compliance with Nasdaq listing standards, including the reverse stock
split and this offering, we can provide no assurance that any such action taken by us would enable us to regain or remain in compliance,
stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the minimum bid
price requirement, or prevent future non-compliance with the listing requirements.
The
reverse stock split may decrease the liquidity of the shares of our common stock.
The
liquidity of the shares of our common stock may be affected adversely by the reverse stock split given the reduced number of shares that
will be outstanding following the reverse stock split, especially if the market price of our common stock does not increase as a result
of the reverse stock split. In addition, the reverse stock split may increase the number of shareholders who own odd lots (less than
100 shares) of our common stock, creating the potential for such shareholders to experience an increase in the cost of selling their
shares and greater difficulty effecting such sales.
Following
the reverse stock split, the resulting market price of our common stock may not attract new investors, including institutional investors,
and may not satisfy the investing requirements of those investors. Consequently, the trading liquidity of our common stock may not improve.
Although
we believe that a higher market price of our common stock may help generate greater or broader investor interest, there can be no assurance
that the reverse stock split will result in a share price that will attract new investors, including institutional investors. In addition,
there can be no assurance that the market price of our common stock will satisfy the investing requirements of those investors. As a
result, the trading liquidity of our common stock may not necessarily improve.
We do not expect to pay dividends in the foreseeable future.
We do not intend to declare dividends for the foreseeable future,
as we anticipate that we will reinvest any and all future earnings in the development and growth of our business. Therefore, investors
will not receive any funds unless they sell their securities, and holders may be unable to sell their securities on favorable terms or
at all. We cannot assure you of a positive return on your investment or that you will not lose the entire amount of your investment.
Future sales or issuances of substantial amounts of our
common stock, including, potentially, as a result of the acquisition transaction with Cellvera Global f/k/a AiPharma Global, could result
in significant dilution.
On December 28, 2021,
we entered into a Share Exchange Agreement with Cellvera Global f/k/a AiPharma Global, pursuant to which we (i) will acquire 9.5%
of the issued and outstanding equity interests in Cellvera Global in exchange for the issuance of 96,324 shares of our common stock of
Aditxt and a cash payment of $250,000, at an initial closing upon the satisfaction or waiver of certain conditions to closing; and (ii)
acquire the remaining 90.5% of the issued and outstanding equity interests in Cellvera Global in exchange for the issuance of 798,559
shares of our common stock and a cash payment of $250,000 at a secondary closing upon the satisfaction or waiver of certain conditions
to closing. Additionally, we may elect to raise additional capital due to market conditions or strategic considerations. If additional
shares are issued in connection with the proposed acquisition transaction or additional capital is raised through the sale of equity
or convertible debt securities, the issuance of those securities could result in further dilution to our stockholders.
While we have entered into a Share Exchange Agreement with Cellvera
Global, we cannot assure you that the transactions contemplated by the Share Exchange Agreement will be consummated or, that if such
transactions are consummated, they will be accretive to stockholder value.
The initial closing under the Share Exchange Agreement was expected
to occur on or before January 31, 2022. The initial closing has not occurred and we can provide no assurance that the conditions to the
initial closing will be satisfied. Further, even if we are able to complete the initial closing following the satisfaction of such
conditions, there is no guarantee that the conditions to the secondary closing, including but not limited to, the approval of the transaction
by our stockholders, will be completed in the time frame or in the manner currently anticipated, or that we will recognize the anticipated
benefits of the transaction.
In connection with the contemplated
acquisition of Cellvera Global, we have provided secured loans to Cellvera Global in the aggregate principal amount of $14.5 million,
which amounts came due on January 31, 2022. Although, we have agreed to forbear from exercising our rights and remedies against Cellvera
Global while we continue to work towards an initial closing under the Share Exchange Agreement, if we are unable to complete the transactions
contemplated by the Share Exchange Agreement, we cannot provide any assurance that we will be able to collect such amounts from Cellvera
Global, if at all.
In connection with the contemplated acquisition with Cellvera Global, we
entered into a secured credit agreement dated August 27, 2021 (the “Credit Agreement”) with Cellvera Global and certain affiliated
entities (collectively, the “Borrower”), pursuant to which we made a secured loan to Cellvera Global in the principal amount
of $6.5 million (the “Loan”). The Loan was funded on August 31, 2021, following the closing of the Company’s August
2021 Offering. The Loan bears interest at a rate of 8% per annum and matured on November 30, 2021. The Loan is secured by certain
accounts receivable and other assets of Cellvera Global and certain of its affiliates. The Credit Agreement also contains certain covenants
that prohibit Cellvera Global from incurring additional indebtedness, incurring liens or making any dispositions of its property.
On October 18, 2021, the Company entered into the first amendment
to the Credit Agreement with Cellvera Global and certain affiliated entities (the “Credit Agreement Amendment”), pursuant
to which the Company agreed to increase the amount which Cellvera Global was permitted to borrow under the Credit Agreement by $8.5 million
to an aggregate of $15.0 million, of which $6.5 million was outstanding prior to entering the Credit Agreement Amendment. The Company
agreed to fund such additional borrowings, as requested by Cellvera Global, by advancing 70% of any amounts received by the Company from
the exercise of existing warrants or any other capital raises, including the October Offering. As of December 31, 2021 an additional
$8.0 million was advanced under the Credit Agreement for a total of $14.5 million.
The Credit Agreement was amended on multiple occasions, for which the
final amendment was signed on December 31, 2021, extending the Loan’s maturity date to January 31, 2022.
On January 31, 2022, the Company’s $14.5 million loan to
Cellvera Global became fully due and payable under the Credit Agreement. On February 14, 2022, the Company entered into a Forbearance
Agreement and Seventh Amendment to Credit Agreement (the “Forbearance Agreement”) with Cellvera Global.
Pursuant to the Forbearance Agreement, the Company agreed to forbear
from exercising its rights and remedies against Cellvera Global and certain affiliated guarantor parties until the earlier of (i) June
30, 2022 or (ii) the date of occurrence of any event of default under the Forbearance Agreement (the “Forbearance Period”).
Given that the parties continue to conduct due diligence in connection with the Share Exchange Agreement the Company and Cellvera Global
also agreed that should the initial closing occur under the Share Exchange Agreement, the existing event of default will be waived. Under
the Forbearance Agreement, the Company and Cellvera Global also agreed to certain amendments to the Credit Agreement, including, but not
limited to: (i) the delivery by the Borrower of certain financial statements and forecasts, and (ii) certain regularly scheduled payments
to be made by Cellvera Global to the Company during the Forbearance Period. As of the date these financial statements were available to
be issued; the regularly scheduled payments under the Forbearance Agreement were not made, and the note receivable remains fully impaired.
On April 4, 2022, the Company and the Cellvera Global entered into
a Forbearance Agreement and Eighth Amendment to the Credit Agreement (the “April Forbearance Agreement”) pursuant to which
among other things (i) the Company agreed to extend the forbearance period until the earlier of March 31, 2023 or the date of occurrence
of any event of default under the April Forbearance Agreement, (ii) Cellvera Global shall be permitted to factor certain receivables,
and (iii) certain conforming changes were made relating to the Revenue Sharing Agreement (as defined below). In connection with the Forbearance
Agreement, the Company entered into a series of security agreements with Cellvera Global (the “Security Agreements”) and certain
affiliated entities pursuant to which Cellvera Global enhanced the Company’s security interest in connection with the Credit Agreement.
In addition, and as a condition to entering into the April Forbearance Agreement, the Company required that Cellvera Global enter into
a Revenue Sharing Agreement (the “Revenue Sharing Agreement”), pursuant to which, among other things, Cellvera Global agreed
to pay the Company a certain portion of its revenues up to the aggregate amount of $30 million.
Concurrently with the execution of the April Forbearance Agreement
and the Revenue Sharing Agreement, the Company and AiPharma Group, Ltd. entered into an Amendment to the Share Exchange Agreement (the
“Share Exchange Amendment”) which amended the Share Exchange Agreement to, among other things: (i) modify the financial statements
required to be delivered by AiPharma Group, Ltd. at the initial closing to include the unaudited financial statements for the three months
ended March 31, 2022 and 2021, (ii) permit the Company to amend its Certificate of Incorporation without the consent of AiPharma Group,
Ltd. in order to effect a reverse stock split of the Company’s common stock, if necessary, in order to maintain its listing on the
Nasdaq Capital Market, and (iii) make certain other conforming changes related to the March Forbearance Agreement and Revenue Sharing
Agreement.
The Company has determined
that Cellvera Global may not have the ability to repay the note receivable. Accordingly, the Company recognized a full impairment of
$14.5 million as of December 31, 2021.
We may engage in future acquisitions or strategic transactions,
including the transaction with Cellvera Global, which may require us to seek additional financing or financial commitments, increase
our expenses and/or present significant distractions to our management.
As described herein, we entered into a Share Exchange Agreement
with Cellvera Global in December 2021. We also entered into a non-binding letter of intent to acquire a point-of care diagnostic technology
development company in December 2021. We may need to acquire additional financing to fund our obligations under the Share Exchange Agreement,
the letter of intent or to fund other potential acquisitions or strategic transactions (particularly, if the acquired entity is not cash
flow positive or does not have significant cash on hand). Obtaining financing through the issuance or sale of additional equity and/or
debt securities, if possible, may not be at favorable terms and may result in additional dilution to our current stockholders. Additionally,
any such transaction may require us to incur non-recurring or other charges, may increase our near and long-term expenditures and may
pose significant integration challenges or disrupt our management or business, which could adversely affect our operations and financial
results. For example, an acquisition or strategic transaction may entail numerous operational and financial risks, including the risks
outlined above and additionally:
|
● |
exposure to unknown liabilities; |
|
|
|
|
● |
disruption of our business and diversion of our management’s time and attention in order to develop acquired products or technologies; |
|
|
|
|
● |
higher than expected acquisition and integration costs; |
|
|
|
|
● |
write-downs of assets or goodwill or impairment charges; |
|
|
|
|
● |
increased amortization expenses; |
|
|
|
|
● |
difficulty and cost in combining the operations and personnel of any acquired businesses with our operations and personnel; |
|
|
|
|
● |
impairment of relationships with key suppliers or customers of any acquired businesses due to changes in management and ownership; and |
|
|
|
|
● |
inability to retain key employees of any acquired businesses. |
Accordingly, although there can be no assurance that we will undertake
or successfully complete any transactions of the nature described above, and any transactions that we do complete could have a material
adverse effect on our business, results of operations, financial condition and prospects.
Upon dissolution of our Company, you may not recoup all
or any portion of your investment.
In the event of a liquidation, dissolution or winding-up of our
Company, whether voluntary or involuntary, our assets would be used to pay all of our debts and liabilities, and only thereafter would
any remaining assets be distributed to our stockholders, subject to rights of the holders of the Preferred Stock, if any, on a pro
rata basis. There can be no assurance that we will have assets available from which to pay any amounts to our stockholders upon
such a liquidation, dissolution or winding-up. In such an event, you would lose all of your investment.
Limitation of Liability and Indemnification of Management.
The Delaware General Corporation Law and the Company’s
Amended and Restated Certificate of Incorporation provide for the limitation of the liability of directors for monetary damages. Such
provisions may discourage shareholders from bringing a lawsuit against directors for breaches of fiduciary duty and may also have the
effect of reducing the likelihood of derivative litigation against directors and officers even though such action, if successful, might
otherwise be a benefit to the Company’s shareholders. In addition, a shareholder’s investment in the Company may be adversely
affected to the extent that costs of settlement and damage awards against the Company’s officers or directors are paid by the Company
pursuant to such provisions. Additionally, in accordance with Delaware law and the Company’s Amended and Restated Certificate of
Incorporation, the Company shall indemnify, hold harmless and provide advancement of expenses, to the fullest extent permitted by applicable
law, directors, officers, employees, and agents that are made a party or threatened to be made a party to legal proceedings by reason
of the fact that such parties were working at the request of the Company. We direct you to the Company’s Amended and Restated
Certificate of Incorporation for more information.
Anti-takeover provisions under Delaware law could discourage,
delay or prevent a change in control of our Company and could affect the trading price of our securities.
We are a Delaware corporation and the anti-takeover provisions
of the Delaware General Corporation Law may discourage, delay or prevent a change in control by prohibiting us from engaging in a business
combination with an interested stockholder for a period of three years after the person becomes an interested stockholder, even if a change
in control would be beneficial to our existing stockholders.
Our management team is required to devote substantial time to
public company compliance initiatives.
As a publicly reporting company, we incur significant legal,
accounting and other expenses. Our management and other personnel devote a substantial amount of time to comply with our reporting obligations.
Moreover, these reporting obligations increase our legal and financial compliance costs and make some activities more time-consuming and
costly.
Failure to develop our internal controls over financial
reporting as we grow could have an adverse impact on us.
As our Company matures, we will need to develop our current internal
control systems and procedures to manage our growth. We are required to establish and maintain appropriate internal controls over financial
reporting. Failure to establish appropriate controls, or any failure of those controls once established, could adversely impact our public
disclosures regarding our business, financial condition or results of operations. In addition, management’s assessment of internal
controls over financial reporting may identify weaknesses and conditions that need to be addressed in our internal controls over financial
reporting or other matters that may raise concerns for investors. Any actual or perceived weaknesses and conditions that need to be addressed
in our internal control over financial reporting, disclosure of management’s assessment of our internal controls over financial
reporting or disclosure of our public accounting firm’s attestation to or report on management’s assessment of our internal
controls over financial reporting may have an adverse impact on the price of our common stock.
We could issue “blank check” preferred
stock without stockholder approval with the effect of diluting interests of then-current stockholders and impairing their voting
rights, and provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable.
Our Amended and Restated Certificate of Incorporation provides
for the authorization to issue up to 3,000,000 shares of “blank check” preferred stock with designations, rights
and preferences as may be determined from time to time by our board of directors. Our board of directors is empowered, without stockholder
approval, to issue one or more series of preferred stock with dividend, liquidation, conversion, voting or other rights which could dilute
the interest of, or impair the voting power of, our common stockholders. The issuance of a series of preferred stock could be used as
a method of discouraging, delaying or preventing a change in control. For example, it would be possible for our board of directors to
issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of our
company. In addition, advanced notice is required prior to stockholder proposals, which might further delay a change of control.
Our Amended and Restated Certificate of Incorporation provides
that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for substantially all disputes between the
Company and its stockholders, which could limit stockholders’ ability to obtain a favorable judicial forum for disputes with the
Company or its directors, officers or employees.
Our Amended and Restated Certificate of Incorporation provides
that unless the Company consents in writing to the selection of an alternative forum, the State of Delaware is the sole and exclusive
forum for: (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a
fiduciary duty owed by any director, officer or other employee of the Company to the Company or the Company’s stockholders, (iii)
any action asserting a claim against the Company, its directors, officers or employees arising pursuant to any provision of the Delaware
General Corporation Law (the “DGCL”) or our Amended and Restated Certificate of Incorporation or the Company’s
Amended and Restated Bylaws, or (iv) any action asserting a claim against the Company, its directors, officers, employees or agents governed
by the internal affairs doctrine, except for, as to each of (i) through (iv) above, any claim as to which the Court of Chancery determines
that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent
to the personal jurisdiction of the Court of Chancery within ten days following such determination), which is vested in the exclusive
jurisdiction of a court or forum other than the Court of Chancery, or for which the Court of Chancery does not have subject matter jurisdiction.
This exclusive forum provision would not apply to suits brought to enforce any liability or duty created by the Securities Act or the
Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. To the extent that any such claims may be based
upon federal law claims, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty
or liability created by the Exchange Act or the rules and regulations thereunder.
Section 22 of the Securities Act creates concurrent jurisdiction
for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations
thereunder. However, our Amended and Restated Bylaws contain a federal forum provision which provides that unless the Company consents
in writing to the selection of an alternative forum, the federal district courts of the United States of America will be the exclusive
forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. Any person or entity purchasing
or otherwise acquiring any interest in shares of capital stock of the Corporation are deemed to have notice of and consented to this provision.
The Supreme Court of Delaware has held that this type of exclusive federal forum provision is enforceable. There may be uncertainty, however,
as to whether courts of other jurisdictions would enforce such a provision, if applicable.
These choice of forum provisions may limit a stockholder’s
ability to bring a claim in a judicial forum that it finds favorable for disputes with the Company or its directors, officers or other
employees, which may discourage such lawsuits against us and our directors, officers and other employees. Alternatively, if a court were
to find our choice of forum provisions contained in either our Amended and Restated Certificate of Incorporation or Amended and Restated
Bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other
jurisdictions, which could harm our business, results of operations, and financial condition.
We are an “emerging growth company” and will
be able to avail ourselves of reduced disclosure requirements applicable to emerging growth companies, which could make our common stock
less attractive to investors.
We are an “emerging growth company,” as defined in
the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and we intend to take advantage of certain exemptions from
various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including
not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure
obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding
a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
In addition, pursuant to Section 107 of the JOBS Act, as an “emerging growth company” we intend to take advantage of
the extended transition period provided in Section 7(a)(2)(B) of the Securities Act, for complying with new or revised accounting
standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those
standards would otherwise apply to private companies. As a result, our financial statements may not be comparable to those of companies
that comply with public company effective dates for complying with new or revised accounting standards.
We cannot predict if investors will find our common stock less attractive
because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active
trading market for our common stock and our stock price may be more volatile. We may take advantage of these reporting exemptions until
we are no longer an “emerging growth company.” We will remain an “emerging growth company” until the earliest
of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more; (ii) the
last day of our fiscal year following the fifth anniversary of the date of the completion of our initial public offering; (iii) the
date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on
which we are deemed to be a large accelerated filer under the rules of the SEC.
BUSINESS
Overview
We are a biotech innovation
company with a mission of prolonging life and enhancing its quality by improving the health of the immune system.
We are developing biotechnologies
specifically focused on improving the health of the immune system through immune mapping and reprogramming. Our immune mapping technologies
are designed to provide a personalized comprehensive profile of the immune system and we plan to utilize them in our upcoming reprogramming
clinical trials to monitor subjects’ immune response before, during and after drug administration. Our immune reprogramming technologies
are designed to retrain the immune system to induce tolerance with the objectives of addressing rejection of transplanted organs as well
as ameliorate autoimmune diseases and allergies. These programs are currently in the pre-clinical stage with one product candidate slated
for GMP manufacturing (clinical grade material) and toxicology studies in preparation for clinical trials.
Immune Reprogramming - Immune Modulation
The discovery of immunosuppressive
(anti-rejection and monoclonal) drugs over 40 years ago has made possible life-saving organ transplantation procedures and blocking of
unwanted immune responses in autoimmune diseases. However, immune suppression leads to significant undesirable side effects, such as increased
susceptibility to life-threatening infections and cancers, because it indiscriminately and broadly suppresses immune function throughout
the body. While the use of these drugs has been justifiable because they prevent or delay organ rejection, their use for treatment of
autoimmune diseases and allergies may not be acceptable because of the above-mentioned side effects. Furthermore, transplanted organs
often ultimately fail despite the use of immune suppression, and about 40% of transplanted organs survive no more than 5 years.
New, focused therapeutic approaches
are needed that modulate only the small portion of immune cells that are involved in rejection of the transplanted organ, as this approach
can be safer for patients than indiscriminate immune suppression. Such approaches are referred to as immune tolerance, and when therapeutically
induced, may be safer for patients and also potentially allow long-term survival of transplanted tissues and organs.
In the late 1990s, academic
research on these approaches was conducted at the Transplant Center at Loma Linda University in connection with a project that secured
initial grant funding from the U.S. Department of Defense. The focus of that project was for skin grafting for burn victims. Twenty years
of research at LLU and an affiliated incubator led to a series of discoveries that have been translated into a large patent portfolio
of therapeutic approaches that may be applied to the modulation of the immune system in order to induce tolerance to self and transplanted
organs.
We have an exclusive worldwide
license from LLU for commercializing this nucleic acid-based technology (which is currently at the pre-clinical stage), called Apoptotic
DNA Immunotherapy™ (ADI™), which utilizes a novel approach that mimics the way our bodies naturally induce tolerance to our
own tissues (“therapeutically induced immune tolerance”). While immune suppression requires continuous administration to prevent
rejection of a transplanted organ, induction of tolerance has the potential to retrain the immune system to accept the organ for longer
periods of time. Thus, ADI™ may allow patients to live with transplanted organs with significantly reduced immune suppression. ADI™
is a technology platform, which we believe can be engineered to address a wide variety of indications.
We are developing ADI™
product candidates for organ transplantation including skin grafting, autoimmune diseases including psoriasis and type 1 diabetes (T1D),
and allergies, with an initial focus on psoriasis, T1D, and skin allografting., To submit a Biologics License Application (“BLA”)
for a biopharmaceutical product, clinical safety and efficacy must be demonstrated in a series of clinical studies conducted with human
subjects. For products in our class of drugs, the first-in-human trials will be a combination of Phase I (safety/tolerability) and Phase
II (efficacy) in affected subjects. To obtain approval to initiate the Phase I/II studies, an Investigational New Drug (IND) Application
will be submitted compiling non-clinical efficacy data as well as manufacturing and pre-clinical or clinical toxicology data. To date,
we have conducted non-clinical studies in a stringent model of skin transplantation using genetically mismatched donor and recipient animals
demonstrating a 3-fold increase in the survival of the skin graft in animals that were tolerized with ADI™ compared to animals that
receive immune suppression alone. Prolongation of graft life was observed despite discontinuation of immune suppression after the first
5 weeks. Additionally, in an induced non-clinical model for psoriasis, ADI™ treatment resulted in a 69% reduction in skin thickness
and a 38% decrease in skin flaking (two clinical parameters for assessment of psoriasis skin lesions). The Phase I/II studies in psoriasis
will evaluate the safety/tolerability of ADI™ in patients diagnosed with psoriasis. Since the drug will be administered in subjects
diagnosed with psoriasis, effectiveness of the drug to improve psoriatic lesions will also be evaluated. In another Phase I/II study,
patients requiring skin allografts will receive weekly intra-dermal injections of ADI™ in combination with standard immune suppression
to assess safety/tolerability and possibility of reducing levels of immunosuppressive drugs as well as prolongation of graft life.
ADI™ Advantages
ADI™ is a nucleic acid-based
technology (e.g., DNA-based) which we believe selectively suppresses only those immune cells involved in the rejection of tissues
and transplanted organs. It does so by tapping into the body’s natural process of cell death (apoptosis) to reprogram the immune
system to stop unwanted attacks on self or transplanted tissues. Apoptosis is a natural process used by the body to clear dying cells
and to allow recognition and tolerance to self-tissues. ADI™ triggers this process enabling the cells of the immune system to recognize
the targeted tissues as “self”. Conceptually, it is designed to retrain the immune system to become accepting of the organ
similar to how natural apoptosis reminds our immune system to be tolerant to our own “self” tissues.
While efforts have been made
by various groups to promote tolerance through cell therapies and ex vivo manipulation of patient cells (takes place outside the
body typically requiring hospitalization), to our knowledge, we will be unique in our approach of using in-body induction of apoptosis
to promote tolerance to specific tissues. In addition, ADI™ treatment itself will not require additional hospitalization, only an
injection of minute amounts of the therapeutic drug into the skin.
Reduce Chronic Rejection
While immunosuppressants control
acute rejection during the early time-period after receiving an organ, chronic rejection of the organ that occurs one or more years after
the transplant procedure continues to pose a major challenge for organ recipients.
Chronic rejection has been
likened to autoimmunity (a misdirected immune response that occurs when the immune system goes awry), where specific tissues in the transplanted
organ are attacked by the immune system. In other words, chronic rejection may not be caused just by differences between the donor and
the recipient, but rather by an immune response by the recipient to specific tissues in the organ. Our pre-clinical studies suggest that
ADI™ has the ability to tolerize to specific tissues in a transplanted organ, and conceivably, reducing incidences of chronic rejection.
Moreover, preclinical studies
have demonstrated that ADI™ treatment significantly and substantially prolongs graft survival, in addition to successfully “reversing”
other established immune-mediated inflammatory processes.
Reduce immune suppression
Studies in animal models have
shown that conditioning/desensitizing the animals to receive the transplant, prolongs the survival of the transplanted tissue or organ.
These studies have used repeated exposure to low doses of protein components in specific organs to reduce immunologic recognition and
attack on the transplanted organ.
Based on some of our data,
we believe that with ADI™ treatment, recipients can be conditioned/desensitized ahead of transplantation, thereby retraining the
immune system to more readily accept the organ and also reduce the levels of immunosuppressive drugs needed post-transplantation.
Preformed Antibodies
Studies have shown that presence
of preformed antibodies prior to transplantation procedures increases the rate of organ rejection. Preformed antibodies can develop in
previously transplanted patients, patients who have given birth, and patients who have previously received blood transfusions. With more
than 113,000 patients on transplant waiting lists in the U.S. alone, patients with pre-existing antibodies have much lower chances at
qualifying to receive organs due to their increased risk of rejection - even with immune suppression.
Sadly, transplanted patients
have a probability of needing re-transplantation at some point due to eventual chronic rejection of their transplanted organ, with the
possible exception of some newborn recipients. With increased incidence of preformed antibodies, these patients may never have the opportunity
to receive another organ. Based on experimental data, we believe that ADI™ may have the potential to address this issue providing
these individuals better opportunities at receiving an organ transplantation.
ADI™ Key Differentiators
Ease of Delivery
Therapeutic products are typically
administered systemically (i.e., by mouth in pill form or injected intramuscularly/intravenously). This requires repeated large doses
of the drug to allow sufficient concentrations to reach the affected sites. ADI™ is a DNA-based product that can be injected directly
into the skin where the target cells of the immune system reside, thereby significantly simplifying the delivery of the product and reducing
the amount of product needed.
Repeat Dosing
DNA-based products are less
likely to result in formation of neutralizing antibodies, which lend themselves to repeat dosing as may be required by ADI™ products.
Cost of Goods Advantage
ADI™ products are DNA-based
and cost-effective to manufacture. Furthermore, DNA-based products are very stable and do not require adherence to cold chain (temperature-controlled)
protocols for shipping. This also makes the product ideal for global distribution.
Simplified Therapy Delivery System
We believe that tolerance induction
using ADI™ may potentially obviate the need for hospitalization because it can simply be injected into the skin. This approach reduces
treatment costs and complexities in treatment delivery. The anticipated administration of ADI™ will include an initial priming regimen
that will require injections administered once a week for several weeks. Thereafter, booster or maintenance doses will be provided on
an individual basis as determined by immune and inflammation testing. ADI™ treatments will be significantly more convenient and
comfortable for patients because they do not require removal of patient cells for ex vivo manipulation.
ADI™ Technology Platform
ADI™ utilizes a novel
approach that mimics the way our bodies naturally induce tolerance to our own tissues. It is a technology platform which we believe can
be engineered to address a wide variety of indications. ADI™ includes two DNA molecules which are designed to deliver signals to
induce tolerance. The first DNA molecule encodes a pro-apoptotic protein, which induces ‘programmed’ cell death. This is a
core component of the technology because it is intended to greatly increase the recruitment of dendritic cells, which are implicated in
regulating the immune system. The second DNA molecule encodes the protein of interest (guiding antigen), which is modified to promote
a path of tolerance. The guiding antigen is intended to result in tolerance induction specific to the tissue where the protein is found.
ADI™ has shown efficacy
in several preclinical models (skin grafting, psoriasis, type 1 diabetes, alopecia areata and multiple sclerosis) and its efficacy can
be attributed to multiple factors:
|
1. |
ADI™ does not rely on a single mechanistic approach. It has multiple components (interchangeable target antigen, apoptosis, methylated plasmid DNA) that affect different arms of the immune system, which can be manipulated. |
|
2. |
ADI™ activates key immune cells known to maintain tolerance in test animals and humans. |
|
3. |
ADI™ has been successfully applied to a stringent transplantation model. |
|
4. |
ADI™ lends itself to repeat dosing, which may be required to achieve its full potential therapeutic effect. |
Proof of Concept: Skin Grafting
Results shown are 5 weeks
post-transplantation
The proof-of-concept experiment
performed in transplantation was a skin allograft transplantation procedure in which the donor skin was obtained from white BALB/c mice
and transplanted to black C57BL/6 mice. The experiment was designed to address a more challenging scenario where the donor tissue was
obtained from a donor which is genetically mismatched with the recipient. This is unlike clinical scenarios where the donor and recipient
are genetically matched as much as possible. While these experiments were repeated in several separate experiments, the results shown
here were obtained from a study conducted with 14 mice in the ADI™ treatment group and 7 mice in the control group. Prior to submission
of an Investigational New Drug Application, additional non-clinical studies will be conducted in a pig model to establish the precise
protocol (e.g. timing of vaccine administration, dosing, and appropriate immunosuppressive agents that will be used in combination with
ADI™) that will be used in the clinical trials. In addition, IND-enabling safety/toxicology studies will be conducted by a GLP lab
to ensure product safety for clinical testing.
Proof of Concept: Psoriasis
|
● |
Psoriasis causes increased skin thickness and scaling in an established 10-day psoriasis model |
|
● |
ADI™ treatment resulted in a 69% reduction in skin thickening and 38% reduction in scaling over the 10-day study period |
Proof of Concept: Type 1 Diabetes
90% of female NOD mice developed
spontaneous autoimmune diabetes. Disease progression may be different for individual animals.
ADI™ was administered
once a week for 8 weeks after each animal developed hyperglycemia. All animals responded with 80% showing durable response for the entire
40-week study period.
|
● |
Type 1 or autoimmune diabetes is a condition where the body’s immune system mistakenly attacks cells in the pancreas resulting in diminished production of insulin |
|
● |
ADI™ incorporates an antigen (GAD) expressed in the pancreas |
|
● |
Administration of ADI™ using GAD as the antigen over an 8-week period in animals with T1D restores insulin production and reverses hyperglycemia |
License Agreement with Loma Linda University -
On March 8, 2018, we entered
into an Assignment Agreement (the “Assignment Agreement”) with Sekris Biomedical, Inc. (“Sekris”). Sekris was
a party to a License Agreement with Loma Linda University (“LLU”), entered into and made effective on May 25, 2011, and amended
on June 24, 2011, July 16, 2012 and December 27, 2012 (the “Original Agreement,” and together with the Assignment Agreement,
the “Sekris Agreements”). Pursuant to the Assignment Agreement, Sekris transferred and assigned all of its rights and obligations
in and to liabilities under the Original Agreement, of whatever kind or nature, to us. In exchange, on March 8, 2018, we issued a warrant
to Sekris to purchase up to 10,000 shares of our common stock (the “Sekris Warrant”). The warrant was immediately exercisable
and has an exercise price of $200.00 per share. The expiration date of the warrant is March 8, 2023. On March 15, 2018, as amended on
July 1, 2020, we entered into a LLU License Agreement directly with Loma Linda University, which amends and restates the Sekris Agreements.
Pursuant to the LLU License
Agreement, we obtained the exclusive royalty-bearing worldwide license in and to all intellectual property, including patents, technical
information, trade secrets, proprietary rights, technology, know-how, data, formulas, drawings, and specifications, owned or controlled
by LLU and/or any of its affiliates (the “LLU Patent and Technology Rights”) and related to therapy for immune-mediated inflammatory
diseases (the ADI™ technology). In consideration for the LLU License Agreement, we issued 500 shares of common stock to LLU.
Pursuant to the LLU License
Agreement, we are required to pay an annual license fee to LLU. Also, we paid LLU $455,000 in July 2020 for outstanding milestone payments
and license fees. We are also required to pay to LLU milestone payments in connection with certain development milestones. Specifically,
we are required to make the following milestone payments: $175,000 on March 31, 2022; $100,000 on March 31, 2024; $500,000 on March 31,
2026; and $500,000 on March 31, 2027. Additionally, as consideration for prior expenses incurred by LLU to prosecute, maintain and defend
the LLU Patent and Technology Rights, we made the following payments to LLU: $70,000 due at the end of December 2018, and a final payment
of $60,000 due at the end of March 2019. We are required to defend the LLU Patent and Technology Rights during the term of the LLU License
Agreement. Additionally, we will owe royalty payments of (i) 1.5% of Net Product Sales and Net Service Sales on any Licensed Products
(defined as any finished pharmaceutical products which utilizes the LLU Patent and Technology Rights in its development, manufacture or
supply), and (ii) 0.75% of Net Product Sales and Net Service Sales for Licensed Products and Licensed Services not covered by a valid
patent claim for technology rights and know-how for a three (3) year period beyond the expiration of all valid patent claims. We also
are required to produce a written progress report to LLU, discussing our development and commercialization efforts, within 45 days following
the end of each year. All intellectual property rights in and to LLU Patent and Technology Rights shall remain with LLU (other than improvements
developed by or on our behalf).
The LLU License Agreement
shall terminate on the last day that a patent granted to us by LLU is valid and enforceable or the day that the last patent application
licensed to us is abandoned. The LLU License Agreement may be terminated by mutual agreement or by us upon 90 days written notice to LLU.
LLU may terminate the LLU License Agreement in the event of (i) non-payments or late payments of royalty, milestone and license maintenance
fees not cured within 90 days after delivery of written notice by LLU, (ii) a breach of any non-payment provision (including the provision
that requires us to meet certain deadlines for milestone events (each, a “Milestone Deadline”)) not cured within 90 days after
delivery of written notice by LLU and (iii) LLU delivers notice to us of three or more actual breaches of the LLU License Agreement by
us in any 12-month period. Additional Milestone Deadlines include: (i) submission of an IND/clinical trial application to initiate first-in-human
clinical trials on or before March 31, 2022, (ii) the completion of first-in-human (phase I/II) clinical trials by March 31, 2024, (iii)
the completion of Phase III clinical trials by March 31, 2026 and (iv) biologic licensing approval by the FDA by March 31, 2027.
Pre-clinical and Clinical Plans
The resources and efforts
used for the IND-enabling work summarized below supports both the psoriasis and TID clinical programs
High-level objectives for
psoriasis clinical program:
|
● |
Completion of IND-enabling work. Aditxt has initiated GMP manufacturing of clinical grade material that will be used for the first-in-human studies in subjects with psoriatic lesions. Included in the manufacturing program is stability studies; the regulatory agency requires one month of stability data for the GMP material for submission of the clinical trial application (CTA). Stability data will continue to be gathered while the clinical trials are ongoing and up to 24 months. Aditxt has also completed the in-life portion of the toxicology studies. Safety data have been recorded and Aditxt is now awaiting immunotoxicology data, which are forthcoming. |
|
|
|
|
● |
Upon completion of GMP manufacturing and toxicology studies, a CTA will be submitted in Q4 2022 to initiate the Phase I/II FIH clinical trials. |
The FIH clinical studies will
combine Phase I (designed to test clinical safety) and Phase IIa (designed to obtain proof of effectiveness in human subjects), in subjects
with psoriatic skin lesions. We have selected this indication for several reasons, including:
|
1. |
Our existing preclinical data have shown promising results in reducing scaling and skin thickness in the mouse model; |
|
2. |
The relative ease of visualization of healing of psoriatic lesions; and |
|
3. |
The need for therapies that suitable and justifiable in individuals with mild to moderate psoriasis (current biologic therapies are primarily used in moderate to severe cases). |
We have identified a contract
research organization with capabilities to conduct a multi-center study and ability to recruit the needed number of subjects to complete
the clinical trials. Upon approval by the regulatory agency clinical trials will be initiated.
High-level objectives for
type 1 diabetes (T1D) clinical program:
|
● |
Completion of IND-enabling work. Aditxt has initiated GMP manufacturing of clinical grade material that will be used for the first-in-human studies in subjects with psoriatic lesions. Included in the manufacturing program is stability studies; the regulatory agency requires one month of stability data for the GMP material for submission of the clinical trial application (CTA). Stability data will continue to be gathered while the clinical trials are ongoing and up to 24 months. Aditxt has also completed the in-life portion of the toxicology studies. Safety data have been recorded and Aditxt is now awaiting immunotoxicology data, which are forthcoming. |
|
|
|
|
● |
Clinical Phase I/II Study to demonstrate safety and clinical proof-of-concept in T1D |
Our clinical studies will
combine Phase I (designed to test clinical safety) and Phase II (designed to obtain proof of effectiveness in human subjects), in T1D
patients. We have selected this indication for several reasons, including:
|
1. |
Our existing preclinical data have shown promising results using ADI™ to reverse hyperglycemia in the mouse model; and |
|
|
|
|
2. |
There is currently no treatment for T1D and the only option for patients suffering from T1D is insulin replacement therapy. |
We will be identifying clinical
trial centers with adequate patients. Upon approval by the FDA and/or the applicable regulatory agency clinical trials will be initiated.
High-level objectives for
skin allograft clinical program:
|
● |
Completion of preclinical studies to identify the appropriate protocol for dosing and combination of ADI™ with immune suppression protocols. |
|
|
|
|
● |
Completion of IND-enabling work including GMP manufacturing and toxicology studies. |
|
|
|
|
● |
Clinical Phase I/II Study to demonstrate safety and clinical proof-of-concept in patients requiring skin allografts. |
Our clinical studies will
combine Phase I (designed to test clinical safety) and Phase II (designed to obtain proof of effectiveness in human subjects), in patients
requiring skin allografts. We have selected this indication for several reasons, including:
|
1. |
Our existing preclinical data have shown promising results using ADI™ to prolong skin allograft survival in mismatched mouse model; and |
|
|
|
|
2. |
The relative ease of visualization of graft quality without the need for biopsies. |
We will be identifying clinical
trial centers with adequate patients. Upon approval by the FDA and/or the applicable regulatory agency clinical trials will be initiated.
We are developing our immune
monitoring platforms with the objective of utilizing them as clinical assays in pre-clinical and clinical studies. The multiplex technologies
could potentially allow evaluation of more analytes with less tissue samples.
Drug Approval Process
In the United States, FDA
approval is required before any new drugs can be introduced to the market. We currently have a product candidate for our first-in-human
studies, but as of the date of report, we have not submitted an application to the regulatory agencies for approval.
We are working with a contract
manufacturer who has the know-how, product ingredients including plasmid DNA molecules, and our patent-pending bacterial strain. Several
batch runs have been successfully completed to demonstrate our ability to produce the DNA plasmids in a GMP facility. Based on validation
studies, we are reasonably confident in our ability to produce clinical grade product candidates at larger scales. The contract manufacturer
has provided a proposal for manufacturing of our clinical grade material, which will be signed and accepted once we are ready to initiate
GMP manufacturing. We are not currently party to an agreement with this contract manufacturer.
The product candidate selected
for clinical trials must be subjected to pre-clinical safety/toxicology studies by an independent GLP (Good Laboratory Practice) laboratory
to demonstrate its suitability for clinical testing in human patients. Upon completion of manufacturing and safety/toxicology testing,
an Investigational New Drug (IND) application will be prepared for submission to the regulatory agencies.
Upon receipt of clearance
to initiate clinical testing, the ADI™ product can be tested in human patients. Our product will be tested in clinical trials, one
in patients with psoriasis and one in patients who require skin allografting. Therefore, our first-in-human studies will be combined Phase
I/Phase II studies in which safety and efficacy data will be obtained. We plan to start with in skin indications (psoriasis and skin allografting)
because we believe these indications will be most efficient in providing safety and efficacy data in clinical trials. In parallel, we
will continue to develop additional product formulations for other indications.
We are developing our immune
monitoring platforms with the objective of utilizing them as clinical assays in pre-clinical and clinical studies. The multiplex technologies
could potentially allow evaluation of more analytes with less tissue samples. In the U.S., FDA approval is required before any In Vitro
Diagnostic (“IVD”) device can be introduced to the market for clinical use (excluding research purposes). This process does
not require clinical trials, but it does require validation data demonstrating accuracy of the device.
Target Market
Psoriasis affects close to
100 million people worldwide and presents a large market estimated at over $20 billion annually. Treatments range include topical and
systemic therapeutics including vitamin D analogs, steroids, retinoids, immunosuppressants and biologics (i.e. monoclonal antibodies).
While in more recent years, several classes of biologics have entered the market, most are primarily used for patients suffering from
moderate to severe psoriasis because of their impairment of systemic immune responsiveness to infections and cancers. Aditxt believes
that products based on the ADI™ platform will not be associated with similar side effects and can be targeted for use in mild to
moderate cases.
T1D is one of the most common
chronic disorders in children and affects nearly 2 million Americans, and has an incidence and prevalence increasing at alarming rates
in industrialized countries. Current treatment consists of daily delivery of insulin as replacement therapy, but administration of the
hormone can induce life-threatening hypoglycemia and does not completely prevent morbidity and mortality associated with the disease.
Aditxt is leveraging the ADI™ technology to develop a new class of immunotherapy designed to arrest the autoimmune destruction of
the insulin producing beta cells of the pancreas. This will be the first therapy to accomplish that long sought after goal, thus increasing
life span and quality of life for up to 40,000 of US citizens and about 300,000 people around the world who develop T1D each year, with
a 3-5% increase in yearly incidence.
In the U.S. alone, there are
over 36,000 patients who receive organ transplantations each year, with more than 113,000 on transplant waiting lists.
The field of organ transplantation
has been made possible and continues to rely on broad-acting immunosuppressive drugs, high levels of which can result in a compromised
immune system that renders organ recipients susceptible to cancer and potentially life-threatening infections including re-activation
of latent viruses.
In addition, immunosuppressants
control acute rejection during the early time-period after receiving an organ but chronic rejection of the organ remains an unmet challenge
for surgeons and transplant recipients.
While efforts have been made
by various groups to promote tolerance through cell therapies and ex vivo manipulation of patient cells, these procedures take
place outside the body and typically require hospitalization.
Moreover, transplanted patients
will need re-transplantation at some point, with the possible exception of some newborn recipients. With increased incidence of preformed
antibodies, these patients may never have the opportunity to receive another organ. Preformed antibodies can develop in previously transplanted
patients, patients who have given birth, and patients who have previously received blood transfusions. These patients have much lower
chances at qualifying to receive organs due to their increased risk of rejection - even with immune suppression. The potential to reduce
formation of preformed antibodies in these patients will provide better opportunities for them to receive another transplanted organ.
There are gaps between current
approaches and what the market needs. We believe that ADI™ addresses these gaps. ADI™ is easy to administer (does not require
ex-vivo treatment of patient cells), it does not appear to suppress the immune system, it may allow patients to live with transplanted
organs with significantly reduced immune suppression, it may provide for long-term survival of transplanted tissues and organs, may be
more effective because it does not rely on a single immune pathway/mechanism, and potentially provides patients with pre-existing antibodies
a chance to qualify to receive organs.
While these advantages present
opportunities for unmet medical needs in the field of organ transplantation, the industry in which we operate is highly competitive. A
small company such as us will meet significant challenges including regulatory requirements for approval of a new class of therapeutic
agents, challenges in large scale manufacturing and marketing, cost of developing a novel therapeutic agent, which may require co-development
partners who may or may not be willing to work with us, and the willingness of transplant surgeons to adopt our therapeutic vaccines in
their existing immune suppression protocols. These challenges pose risks that we may not be able to overcome.
Immune Mapping - Immune Monitoring
We believe that understanding
the dynamic status of an individual’s immune system is key to developing and administering precision immunotherapies such as ADI™.
We have secured an exclusive worldwide license for commercializing a technology platform which provides a personalized comprehensive profile
of the immune system. It is intended to be informative for individual immune responses to viruses, bacterial antigens, peptides, drugs,
bone marrow and solid organ transplants, and cancer. It has broad applicability to many other agents of clinical interest impacting the
immune system, including those not yet identified such as future infectious agents. We plan to brand this technology, and other future
licensed and/or in-house developed monitoring technologies collectively as AditxtScore™.
AditxtScore™ is being
designed to allow individuals to understand, manage and monitor their immune profiles in order to be informed about attacks on or by their
immune system. We believe AditxtScore™ can also assist the medical community in anticipating possible immune responses and reactions
to viruses, bacteria, allergens and transplanted organs. It can be useful in anticipating attacks on the body by having the ability to
determine its potential response and for developing a plan to deal with an undesirable reaction by the immune system. Its advantages include
the ability to provide a simple, rapid, accurate, high throughput, single platform assay that can be multiplexed to determine the immune
status with respect to several factors simultaneously, in 3-16 hours, as well as detect antigen and antibody in a single test (i.e. infectious,
recovered, immune). In addition, it can determine and differentiate between various types of cellular and humoral immune responses (T
and B cells). It also provides for simultaneous monitoring of cell activation and levels of cytokine release (i.e., cytokine storms).
We plan to utilize AditxtScore™
in our upcoming clinical trials to monitor subjects’ immune response before, during and after ADI™ drug administration. We
are working with regulatory consultants with the objective to obtain FDA approval for AditxtScore™ as a clinical assay. We are currently
securing marketing and distribution partnerships for application of AditxtScore™ in the infectious diseases market. To obtain FDA
approval to use AditxtScore™ as a clinical assay, we are performing validation studies to demonstrate AditxtScore™’s
utility to evaluate various components of the immune system reproducibly. We believe that these data will show AditxtScore™’s
ability to measure various components of the immune system (e.g. humoral and cell-mediated immune responses) to provide a broader view
of the immune system and its status in health and disease. Our plan is to submit a 510(K) application to the FDA after compilation of
these data. Beyond infectious diseases, we plan to develop AditxtScore™ for applications in additional markets such as organ rejection,
allergies, drug/vaccine response, and disease susceptibility. The following are further descriptions of the applications of AditxtScoreTM:
(1) Organ Rejection
Typically, by the time a transplanted
or a native organ shows signs of failure, the damage is already done, and reversal of the tissue injury becomes challenging. Access to
early warning signs of damage would be invaluable to reverse or even prevent the damage. There are currently no practical, efficient assays
available to measure cellular immune responses and available tools do not provide timely information for patients. AditxtScore™
can be used to provide a sensitive and rapid tool to determine T cell response and to differentiate between various types of cellular
immune responses. It can be multiplexed providing information about the number of cells responding as well as quantifying the amounts
of various cytokines released by the cells in a single assay. Determination of cellular response has valuable applications for prediction,
monitoring, early detection, and treatment of disease, including organ failure/rejection, as well as treatment efficacy. It can also reveal
dysfunction of the immune system potentially contributing to more severe disease.
(2) Allergies
Our immune system protects
us by acting as a barrier against foreign substances and by eliminating them when they penetrate our bodies. Once the initial exposure
has occurred, memory cells develop to prepare the body against a future exposure. This process is called immunity. In certain situations,
however, instead of immunity, the immune system develops memory cells that result in a more severe reaction during a future exposure to
the same substance. This type of response is called a hypersensitivity response, commonly known as an allergic response. AditxtScore™
can be used to develop multiplex assays each designed to test and monitor immune response to allergens. Based on the ability of this technology
to run multiple tests in a single assay, 100 or more substances can potentially be tested for simultaneously.
(3) Drug/Vaccine Response
There are currently no effective
assays to predict and easily assess responses to vaccination. To determine whether an individual has responded to a particular vaccine,
antibody titers are measured. This process may take several days. Furthermore, for vaccines that require a series of injections, titers
are not measured between injections and may not be known for months. AditxtScore™ can be used to determine whether a patient is
a responder or non-responder. It can provide an effective and rapid tool for potentially determining beneficial responses to a vaccine
and can be used to monitor titer development post vaccination. It can allow evaluation of multiple vaccines in a single test (for memory
B cell detection). This application can be useful for vaccines, cancer therapeutics anti-rejection drugs, anti-viral drugs, among others.
(4) Disease Susceptibility
Disease susceptibility can
vary from one individual to another, and it can be a function of various factors, including genetic variability and differences in human
leukocyte antigens (HLA) encoded by major histocompatibility complex (MHC) and responsible for regulation of the immune system in humans.
People with certain HLA types may have higher or lower susceptibility to diseases. AditxtScore™ can be used to develop assays to
evaluate differences in HLA types in individuals to help elucidate the relationship between certain HLA types and susceptibility to various
diseases.
(5) Infectious Diseases
Infectious diseases can cause
a major predicament for scientific and medical professionals, epidemiologists, and infectious disease specialists, among others, who need
to determine how to treat patients in real time while efficacious therapies are still being developed. Proper decision making requires
understanding why some affected individuals show minor or no symptoms, some recover, and others die. This is fundamental to creating effective
targeted therapeutics which may differ depending on the underlying profile of the individual at risk for, or with, disease. The immune
system plays a major role in how any given individual responds to the infectious agent. This response can be inadequate or too robust
or appropriately effective. Regardless, the kinetics of the response by the cellular and humoral (antibody) immune systems to the infectious
agent are often unknown. A basic critical question, then, is what do the dynamics of the immune response look like from exposure to and
through the disease period and during convalescence for those who survive and those who don’t; and how might vaccines and therapies
alter these profiles such that predictions of vaccine/drug efficacy could be inferred prior to vaccination/treatment and/or disease severity
or progression be prognosticated. AditxtScore™ can be used to help address these questions with multiplex assays each designed to
test and monitor the immune response to infectious agents. Based on the ability to run multiple tests in a single assay, 100 or more agents
can potentially be tested for simultaneously.
License Agreement with Leland Stanford Junior
University (“Stanford”)
On February 3, 2020, we entered
into an exclusive license agreement (the “February 2020 License Agreement”) with Stanford with regard to a patent concerning
a method for detection and measurement of specific cellular responses. Pursuant to the February 2020 License Agreement, other than as
described below, we received an exclusive worldwide license to Stanford’s patent with regard to use, import, offer, and sale of
Licensed Products (as defined in the agreement). The license to the patented technology is exclusive, including the right to sublicense,
beginning on the effective date of the agreement and ending when the patent expires. Under the exclusivity agreement, we acknowledged
that Stanford had already granted a non-exclusive license in the Nonexclusive Field of Use, under the Licensed Patents in the Licensed
Field of Use in the Licensed Territory (as those terms are defined in the February 2020 License Agreement”). However, Stanford agreed
to not grant further licenses under the Licensed Patents in the Licensed Field of Use in the Licensed Territory. On December 29, 2021,
we entered into an amendment to the February 2020 License Agreement which extended our exclusive right to license the technology deployed
in AditxtScoreTM and securing worldwide exclusivity in all fields of use of the licensed technology.
We were obligated to pay
and paid a fee of $25,000 to Stanford within 60 days of February 3, 2020. We also issued 375 shares of the Company’s common stock
to Stanford. An annual licensing maintenance fee is payable by us on the first anniversary of the February 2020 License Agreement in
the amount of $40,000 for 2021 through 2024 and $60,000 starting in 2025 until the license expires upon the expiration of the patent.
The Company is required to pay and has paid $25,000 for the issuances of certain patents. The Company will pay milestone fees of $50,000
on the first commercial sales of a licensed product and $25,000 at the beginning of any clinical study for regulatory clearance of an
in vitro diagnostic product developed and a potential licensed product. We are also required to: (i) provide a listing of the management
team or a schedule for the recruitment of key management positions by March 31, 2020 (which has been completed), (ii) provide a business
plan covering projected product development, markets and sales forecasts, manufacturing and operations, and financial forecasts until
at least $10,000,000 in revenue by June 30, 2020 (which has been completed), (iii) conduct validation studies by September 30, 2020 (which
has been completed), (iv) hold a pre-submission meeting with the FDA by September 30, 2020 (which has been completed), (v) submit a 510(k)
application to the FDA, Emergency Use Authorization (“EUA”), or a Laboratory Developed Test (“LDT”) by March
31, 2021, (which has been completed), (vi) develop a prototype assay for human profiling by December 31, 2021 (which has been completed),
(vii) execute at least one partnership for use of the technology for transplant, autoimmunity, or infectious disease purposes by March
31, 2022, and (viii) will provide further development and commercialization milestones for specific fields of use in writing by December
31, 2022.
In addition to the annual
license maintenance fees outlined above, we will pay Stanford royalties on Net Sales (as such term is defined in the February 2020 License
Agreement) during the of the term of the agreement as follows: 4% when Net Sales are below or equal to $5 million annually or 6% when
Net Sales are above $5 million annually. The February 2020 License Agreement may be terminated upon our election on at least 30 days advance
notice to Stanford, or by Stanford if we: (i) are delinquent on any report or payment; (ii) are not diligently developing and commercializing
Licensed Product; (iii) miss certain performance milestones; (iv) are in breach of any provision of the February 2020 License Agreement;
or (v) provide any false report to Stanford. Should any events in the preceding sentence occur, we have a thirty (30) day cure period
to remedy such violation.
Plan of Operations - Immune Monitoring
As previously announced on
August 6, 2020, the initial application of the platform will be AditxtScore™ for COVID-19 which has been designed to provide a more
complete assessment of an individual’s infection and immunity status with respect to the SARS-CoV-2 virus. Infection status will
be determined by evaluating the presence or absence of the virus, and immunity status by measuring levels of antibodies against viral
antigens and their ability to neutralize the virus. We will soon be expanding the panel to measure other components of the immune response
such as cellular immunity.
In August 2020, we filed for
an Emergency Use Authorization (EUA) with the FDA with the ultimate objective of filing a 510(K) application. On January 14, 2022, we
submitted requests to obtain two EUAs for our antibody and neutralizing tests following an on November 15, 2021 by the Department of Health
and Human Services that COVID-19 related tests will require FDA review and FDA’s position that COVID-19 tests that have been in
use prior to the announcement must submit applications for EUAs but can continue to operate unless informed otherwise. In the meantime,
we are providing AditxtScore™ as a service as a Laboratory Developed Test (LDT) to assess immunity status to COVID-19.
In early 2021, we established
our AditxtScore™ Immune Monitoring Center in Richmond, Virginia (the “Center”). The Center operates as a Clinical Laboratory
Improvement Amendments (CLIA) certified facility for the processing of our AditxtScore™ for COVID-19 Lab Developed Test (LDT) for
our prospective channel partners, including labs and hospitals.
Intellectual Property (IP)
We strive to protect and enhance
the proprietary technology, inventions, and improvements that are commercially important to our business, including seeking, maintaining
and defending patent rights, whether developed internally or licensed from third parties. Our policy is to seek to protect our proprietary
position by, among other methods, filing patent applications in the United States and in jurisdictions outside of the United States, to
protect our proprietary technology, inventions, improvements and product candidates that are important to the development and implementation
of our business. We also rely on trade secrets and know-how relating to our proprietary technology and product candidates, continuing
innovation, and in-licensing opportunities to develop, strengthen and maintain our proprietary position in the field of immuno-therapy.
We also plan to rely on data exclusivity, market exclusivity, and patent term extensions when available. Our commercial success will depend
in part on our ability to obtain and maintain patent and other proprietary protection for our technology, inventions, and improvements;
to preserve the confidentiality of our trade secrets; to obtain and maintain licenses to use intellectual property owned by third parties;
to defend and enforce our proprietary rights, including any patents that we may own in the future; and to operate without infringing on
the valid and enforceable patents and other proprietary rights of third parties.
The ADi™ technology
falls in two main categories, the AditxtReprogramming™ therapeutic program (which includes Apoptotic DNA Immunotherapy™ also
known as ADi™) and the AditxtScore™ diagnostic technology. Both categories are protected by multiple families of patents and
patent applications, including several issued U.S. and non-U.S. patents.
The projected expiration dates
for the AditxtReprogramming™ patents and patents issuing from pending applications extend until 2043 for some patents. As of the
date of this report, our patent portfolio for AditxtReprogramming™ includes both patents and patent applications licensed from LLU
or Stanford and patent applications owned solely by Aditxt, including 7 U.S. patents, 6 U.S. applications, 88 foreign patents, and 13
foreign applications. These patents and patent applications cover three different technical aspects of AditxtReprogramming™, treatment
of autoimmune diseases and type 1 diabetes, treatment of organ transplantation, and development of a new class of immunotherapeutics for
various indications. The patents and patent applications cover both methods of treatment for these indications as well as a compositions
of matter including plasmids that are able to induce tolerance of antigens or immune attack on antigens, depending on the indication,
along with methods of producing such plasmids.
The AditxtScore™ technology
is also protected by protected by multiple families of patents and patent applications, including several issued U.S. and non-U.S. patents.
The projected expiration dates for these AditxtScore™ patents and patents issuing from pending applications ranges from 2037 to
2043. As of the date of this report, our patent portfolio for AditxtScore™ includes both patents and patent applications licensed
from Stanford and patent applications owned solely by Aditxt, including 2 U.S. patents, 4 U.S. applications, and 2 foreign applications.
These patents and patent applications encompass methods, systems and kits for detection and measurement of specific immune responses.
We also possess and/or in-license
substantial know-how and trade secrets relating to the development and commercialization of our product candidates, including related
manufacturing processes and technology. We plan to continue expanding and strengthening our IP portfolio with additional patent applications
in the future.
In March 2021, Aditxt signed
an agreement with a regulatory consultant based in Munich, Germany, which will play a central role in navigating the first AditxtReprogramming™
therapeutic program through the clinical trial and regulatory process. The firm will work with the Aditxt’s AditxtReprogramming™
team to submit a clinical trial application to the regulatory agency in Germany. Psoriasis is the first indication being targeted for
clinical trial in the AditxtReprogramming™ therapeutics pipeline. Other candidates that are advancing toward clinical trials include
ADi™ for type 1 diabetes and skin allografting.
Employees
We have sixty-eight (68) full time employees. We consider the relations
with our employees to be good.