Overview
We are a biopharmaceutical company focused on acquiring, developing
and commercializing clinical-stage drugs for inflammatory and
immune-related diseases with clear unmet medical needs. Our two
lead product candidates, EB05 and EB01, are in later stage clinical
studies.
EB05
is a monoclonal antibody therapy that we are developing as a
treatment for Acute Respiratory Distress Syndrome (ARDS) in
COVID-19 patients. ARDS is a life-threatening form of respiratory
failure, and the leading cause of death among COVID-19 patients.
ARDS can be also caused by bacterial pneumonia, sepsis, chest
injury and other causes. Specifically, EB05 inhibits toll-like
receptor 4 (TLR4), a key immune signaling protein and an important
mediator of inflammation that has been shown to be activated by
SARS-COV2 as well as other respiratory infections such as
influenza. In multiple third-party studies, high serum levels of
alarmins (damage signaling molecules) that bind to and activate
TLR4 are associated with poor outcomes and disease progression in
COVID-19 patients. Since EB05 has demonstrated the ability to block
signaling irrespective of the presence or concentration of the
various molecules that frequently bind with TLR4, we believe that
EB05 could ameliorate TLR4-mediated inflammation cascades in ARDS
patients, thereby reducing lung injury, ventilation rates and
mortality. In November 2020, we initiated a Phase 2/Phase 3
clinical study of EB05 and are currently enrolling
subjects.
In addition to EB05, we are developing an sPLA2 inhibitor,
designated as EB01, as a topical treatment for chronic allergic
contact dermatitis (ACD), a common, potentially debilitating
condition and occupational illness. EB01 employs a novel,
non-steroidal mechanism of action and in two clinical studies has
demonstrated statistically significant improvement of multiple
symptoms in ACD patients. We initiated a Phase 2B clinical study
evaluating EB01 for chronic ACD in the fourth calendar quarter of
2019 and are currently enrolling subjects.
In addition to our current clinical programs, we intend to expand
the utility of our technologies and clinical-stage assets across
other indications.
Competitive Strengths
We believe that we possess a number of competitive strengths that
position us to become a leading biopharmaceutical company focused
on inflammatory and immune-related diseases,
including:
●
Validated technology and
drug development capabilities. We believe that the strength of our
technologies has been validated by favorable clinical data from Phase 1 and
Phase 2 studies; and, our multiple arrangements with third parties
to develop and commercialize their clinical-stage drug
candidates.
●
Novel pipeline
addressing large underserved markets. Our product candidates include novel
clinical-stage compounds and antibodies that have significant
scientific rationale for effectiveness. By initially targeting
large markets that have significant unmet medical needs, we believe
that we can drive adoption of new products and improve our
competitive position. For example, we believe that the novel,
non-steroidal mode of action of our sPLA2 technology will be
appealing alternatives for managing the symptoms of ACD and
hemorrnoids disease (HD). These diseases impact millions of people
in the United States and Canada, and can have significant effects
on patients’ quality of life and, in the case of many chronic
ACD patients and their employers, significant workplace-related
costs and limitations.
●
Intellectual property
protection and market exclusivity. We have opportunities to develop our
competitive position through patents, trade secrets, technical
know-how and continuing technological innovation. We have exclusive
license rights in our target indications to multiple patents and
pending patent applications in the United States and in various
foreign jurisdictions. In addition to patent protection, we intend
to utilize trade secrets and market exclusivity afforded to a New
Chemical Entity, where applicable, to enhance or maintain our
competitive position.
●
Experienced
leadership. Our
leadership team possesses core capabilities in dermatology,
infectious diseases, gastrointestinal medicine, drug development
and commercialization, chemistry, manufacturing and controls, and
finance. Our founder, Chief Executive Officer, Pardeep Nijhawan,
MD, FRCPC, AGAF, is a board-certified gastroenterologist and
hepatologist with a successful track record of building life
science businesses, including Medical Futures, Inc., which was sold
to Tribute Pharmaceuticals in 2015. In addition to our internal
capabilities, we have also established a network of key opinion
leaders, contract research organizations, contract manufacturing
organizations and consultants. As a result, we believe we are well
positioned to efficiently develop novel treatments for inflammatory
and immune-related diseases.
Our Business Strategy
We plan to develop and commercialize innovative drug products that
address unmet medical needs for large, underserved markets where
there is limited competition. Key elements of our strategy
include:
●
Rapidly develop EB05 as
a novel therapy for hospitalized COVID-19 patients.
We intend to apply
our expertise in immune modulation and inflammation therapies and
clinical trial management to rapidly develop EB05 as a potential
treatment for ARDS. With potential investigational sites in
multiple jurisdictions, we believe there will be sufficient
patients available and that we can complete the study amid the
global health crisis. Should the antibody treatment demonstrate
promising results at the Phase 2 readout, we plan to continue with
a pivotal Phase 3 study, subject to funding and additional
regulatory approvals in certain
jurisdictions.
●
Establish EB01 as the
leading treatment for chronic ACD. Our goal is to obtain regulatory approval
for EB01 and commercialize EB01 for use in the treatment of ACD.
Based on promising clinical trial results in which patients treated
with EB01 experienced statistically significant improvements of
their symptoms with minimal side effects, we initiated a Phase 2B
clinical study evaluating EB01. The protocol includes a blinded
interim readout following the completion of the first part of the
Phase 2B study. In November 2020, we completed enrollment of more
than 50% of the patients planned for this part of a
study.
●
Selectively targeting
additional indications. In addition to our ARDS and ACD programs, we
plan to efficiently generate proof-of-concept data for other
programs where modulation of immune pathways or the inhibition of
sPLA2 activity may have therapeutic benefits. For example, we are
planning a proof-of-concept clinical study of our sPLA2 technology
as a potential treatment for patients with HD, subject to funding
and the resumption of normal, pre-pandemic operations at targeted
clinical sites.
●
In-license promising
product candidates. We
are applying our cost-effective development approach to advance and
expand our pipeline. Our current product candidates are in-licensed
from academic institutions or other biopharmaceutical companies,
and, from time to time, we plan to identify, evaluate and
potentially obtain rights to and develop additional assets. Our
objective is to maintain a well-balanced portfolio with product
candidates across various stages of development. In general, we
seek to identify product candidates and technology that represent a
novel therapeutic approach, are supported by compelling science,
target an unmet medical need, and provide a meaningful commercial
opportunity. We do not currently intend to invest significant
capital in basic research, which can be expensive and
time-consuming.
●
Capture the full
commercial potential of our product candidates. If our product candidates are successfully
developed and approved, we may build commercial infrastructure
capable of directly marketing the products in North America and
potentially other major geographies of strategic interest. We also
plan to evaluate strategic licensing arrangements with
pharmaceutical companies for the commercialization of our drugs,
where applicable, such as in territories where a partner may
contribute additional resources, infrastructure and
expertise.
Acute Respiratory Distress Syndrome (ARDS)
Acute
respiratory distress syndrome (ARDS) is a life-threatening form of
respiratory failure, and the leading cause of death among COVID-19
patients. In addition to virus-induced pneumonia, ARDS can be
caused by bacterial pneumonia, sepsis, chest injury and other
causes.
Specifically, ARDS
involves an exaggerated immune response leading to inflammation and
injury to the lungs that deprives the body of oxygen. ARDS is
classified as mild, moderate and severe by using an arterial
partial pressure of oxygen (PaO2) to fraction of inspired oxygen
(FIO2) threshold of 300, 200, and 100 mm Hg, respectively. For
moderate to severe cases, there are currently few meaningful
treatments, other than supplemental oxygen and mechanical
ventilation, and patients suffer high mortality rates. Prior to
COVID-19, ARDS accounted for 10% of intensive care unit admissions,
representing more than 3 million patients globally each year. ARDS
has historically affected approximately 200,000 patients each year
in the United States, resulting in nearly 75,000 deaths annually,
according to medical literature.
Countering the
exaggerated innate immune response in ARDS has been a key area of
interest among researchers. One of the most studied targets has
been Toll-like receptor 4 (TLR4) – a key component of the
innate immune system and an important mediator of inflammation.
Since TLR4 detects molecules found in pathogens and also binds to
endogenous molecules produced as a result of injury, it is a key
receptor on which both infectious and noninfectious stimuli
converge to induce a proinflammatory response. Specifically, TLR4
signaling activates leukocytes to secrete proinflammatory cytokines
(i.e., CXCL10, IL-6,
IFN-b, IL-1b, TNF-a), which under certain circumstances can result
in a “cytokine storm” – a severe immune reaction
in which the body releases too many cytokines into the blood too
quickly.
Such
upregulation of TLR4 and its associated cytokines has been observed
in SARS-CoV-2 as well as other respiratory infections such as
influenza. In multiple third-party studies, high serum levels of
alarmins, such as calprotectin and HMGB1(high mobility group
protein B1), that bind to and activate TLR4 are associated with
poor outcomes and disease progression in COVID-19 patients. In
addition, TLR4 inhibition (antagonism) prevents cytokine production
at a very early stage and has been shown to have a protective
effect. For example, in preclinical studies in mice, it was
demonstrated that administration of a TLR4 antagonist blocked
influenza-induced lethality and ameliorated virus-induced acute
lung injury. Antagonism of TLR4 has also been shown to modulate the
secretion of proinflammatory cytokines (IL-6, CRP, IFNb, TNF-a,
CXCL-10, IL8 and MIP-1b). Based on this data as well as previous
clinical results, we believe that the modulation of the TLR4
provides a compelling opportunity to treat ARDS.
EB05
Overview and Status
EB05 is a monoclonal antibody (mAb) that has been engineered to
alter inflammatory signaling by binding to and blocking the
activation of TLR4. Specifically, EB05 dampens TLR4 signaling by
blocking receptor dimerization (and subsequent intracellular
signaling cascades). The drug has demonstrated the ability to block
signaling irrespective of the presence or concentration of the
various molecules that frequently bind with TLR4, known as ligands.
Based on this broad mechanism of action, we believe that EB05 could
ameliorate TLR4-mediated inflammation cascades in ARDS patients,
thereby reducing lung injury, ventilation rates and mortality. EB05
has demonstrated the ability to resolve fever and stabilize heart
and breathing rates in human subjects that were injected with
lipopolysaccharide (LPS) – a potent inducer of the acute
systemic inflammation. In previous Phase 1 and Phase 2 clinical
studies, EB05 has demonstrated favorable safety and tolerability
profiles.
Our
Phase 2/3 protocol has been approved in Canada. We have also
received approved for the Phase 2 portion of our study in the
United States. The company is currently enrolling patients at U.S.
and Canadian hospitals.
As
planned, our Phase 2/Phase 3 study is an adaptive, multicenter,
randomized, double-blind, placebo-controlled trial to evaluate the
efficacy and safety of EB05 in adult hospitalized COVID-19
patients. We expect to enroll approximately 316 patients. Patients
will be intravenously infused with EB05 or placebo.
Standard-of-care COVID-19 treatment will be given to all patients.
The total follow-up duration of each patient will be 28 days.
Should the drug treatment demonstrate promising results at the
Phase 2 readout, the protocol allows for enrollment to continue as
a pivotal Phase 3 study in Canada. In the U.S., we expect to have
an end of Phase 2 meeting with the U.S. Food and Drug
Administration (FDA) to finalize the Phase 3 protocol.
Previous Phase 1 and Phase 2 Clinical Studies of EB05
In a randomized, double blind, placebo-controlled, PK/PD guided
Phase 1 study, 60 healthy volunteers were given escalating, single
intravenous infusion of EB05 in the absence and presence of an in
vivo LPS challenge. Forty-eight (48) subjects were exposed to
escalating doses between 0.001 to 15 mg/kg in Part 1 of the study.
The highest dose of EB05 displayed a pharmacological effect
(defined by 80% inhibition of cytokine after ex vivo LPS challenge)
lasting up to 14 weeks. Twelve (12) subjects were exposed to an in
vivo LPS challenge (2 ng/kg) in Part 2 of the study. Of these, 3
received EB05 at a dose of 0.01 mg/kg and 9 at a dose of 0.25
mg/kg. No safety signals were identified after administration up to
a dose of 15 mg/kg.
In a previous Phase 2 clinical study, EB05 was administered to 57
rheumatoid arthritis patients and demonstrated a favorable safety
and tolerability profile. Patients received intravenous infusions
of EB05 at 5mg/kg every 2 weeks for a total of 6 doses. EB05
blocked cytokine release after ex vivo LPS challenge, with full
effect from a dose of 1 mg/kg onwards. The duration of inhibition
of cytokine release was dependent on the dose and lasted up to 14
weeks at a dose of 15 mg/kg. The pharmacological effects of EB05
after the ex vivo and in vivo LPS challenges were comparable. At a
dose of 0.25 mg/kg, EB05 prevented the laboratory and clinical
changes induced by an in vivo LPS administration, up to 22 days.
LPS effects were fully recovered between 22 and 40 days after EB05
administration.
Allergic Contact Dermatitis
Contact dermatitis is one of the most common occupational and
work-related skin conditions in the United States. The disease can
be either irritant contact dermatitis or ACD. Together, these
conditions have been estimated to cost up to $2 billion annually as
a result of lost work, reduced productivity, medical care and
disability payments. Based on published reports and U.S. insurance
claims data, we estimate that there are more than 2.5 million
people in the United States with ACD, including more than 1 million
people who have chronic ACD. Since primary care physicians do not
always distinguish between irritant and allergic contact
dermatitis, a potentially larger undiagnosed patient population may
also be present.
ACD is caused by an allergen interacting with skin and usually
occurs on areas of the body that have been directly exposed to the
environment, with a high prevalence on the hands and face. Common
allergens associated with ACD include plants, metals, plastics and
resins, rubber additives, dyes, biocides, and various cosmetics.
The disease is characterized by inflammation, erythema (redness),
pruritus (itchiness), and blistering of the skin. Inflammation can
vary from mild irritation and redness to open sores, depending on
the type of irritant, the body part affected and the degree of
sensitivity. ACD can become chronic if not treated or if the
causative allergen is not removed. In many chronic cases, the
causative allergen is unknown or difficult to avoid (as an example,
the allergen is present in the workplace).
The immune mechanisms involved in ACD are well documented. During
the initial contact with the offending allergen, the immune system
is sensitized. Upon subsequent contact, a delayed-type
hypersensitivity reaction (Type IV) occurs at the point of contact
between the skin and the allergen. As a cell-mediated response, the
immune reaction primarily involves the interaction of T cells with
antigens rather than an antibody response. More specifically, ACD
involves an exogenous substance binding a cell surface protein to
form a hapten that is recognized as a foreign antigen by the immune
system. Haptens are known to signal through toll-like receptors, a
family of receptors involved in the innate immune system
recognizing pathogens, leading to the induction of pro-inflammatory
cytokines such as interleukin (IL)-1b. EB01 has been shown in
preclinical studies to inhibit the production of pro-inflammatory
cytokines induced via toll-like receptor signaling (IL-1b, IL-6,
IL-8, MIP-1a, and TNFa), suggesting that EB01 may address the
underlying disease mechanism of ACD.
Current Treatments
Generally, dermatologists view chronic ACD from both a duration and
recurrence perspective, considering how often and how long symptoms
persist. Chronic disease affects patients over a prolonged period,
typically greater than six months or even years. These chronic
patients have either frequent intermittent exposure or continuous
exposure. Since inflammation in ACD is driven by external exposure
to an allergen, the severity of ACD does not necessarily correlate
with body surface area, as is often the case with other
dermatological diseases.
Current treatment plans begin by attempting to identify and remove
exposure to the allergen. However, the offending allergen(s) is
frequently not identified, and even when it is, avoiding exposure
is often not possible (e.g., present in the workplace), according
to our market research. To our knowledge, there are no drug
treatment options specifically indicated for ACD. As such,
physicians must utilize agents approved for other dermatological
conditions. Topical corticosteroids are the most commonly used
therapeutic intervention for ACD but cannot be used continuously
since they have well-known side-effects including skin thinning,
stretch marks, acne, testicular atrophy, nosebleeds, stinging,
burning and dryness. Other topical treatments for ACD include
immunomodulators such as topical calcineurin inhibitors. However,
these are less efficacious than topical corticosteroids and have an
FDA “black box warning” for risk of malignancies.
Systemic corticosteroids can be used for acute control of severe
cases of ACD but have safety concerns including
hypothalamic-pituitary-adrenal axis suppression, growth suppression
and loss of bone-density, thereby limiting the utility of steroids
for treating chronic disease. Finally, patients may be treated with
systemic immunomodulators, which have a series of “black box
warnings” and associated safety issues. Systemic therapies
also need to be tapered off each time the physician wants to patch
test allergens to identify the source of a patient’s
ACD.
EB01
Overview and Status
EB01 is a topical vanishing cream containing
a novel, non-steroidal anti-inflammatory compound. EB01 exerts its
anti-inflammatory activity through the inhibition of certain
pro-inflammatory enzymes known as secretory phospholipase 2, or
sPLA2. These enzymes are secreted by immune cells
upon their activation and produce arachidonic acid via phospholipid
hydrolysis, which, in turn, initiates a broad inflammatory cascade.
The sPLA2 enzyme family plays a key role in
initiating inflammation associated with many diseases, and we
believe that targeting the sPLA2 enzyme family with enzyme inhibitors will
have a superior anti-inflammatory therapeutic effect because the
inflammatory process will be inhibited at its inception rather than
after inflammation has occurred.
In October 2019, we initiated patient enrollment for a multi-center
Phase 2B clinical study evaluating EB01 as a monotherapy for
patients with moderate to severe chronic ACD. The double-blind,
vehicle-controlled study will primarily evaluate the safety and
efficacy of EB01 in ACD patients. Investigators will also evaluate
symptom reduction, quality of life and dose-relationships among
various strengths of EB01 cream as secondary and exploratory
measures. We plan to perform a blinded interim analysis following
the completion of the first cohort to determine the total number of
patients for the second part of the study. The sample-size adaptive
protocol contemplates up to 166 total subjects.
In April 2020, we filed a protocol amendment with the FDA. The
amendment provides for, among other changes, a reduction in the
number of in-person office visits, allowances for remote telehealth
appointments and other procedural updates to simplify enrollment
and patient care during the COVID-19 pandemic. The pandemic has
generally resulted in slower than expected enrollment due in part
to temporary closures of investigational sites and the scheduling
of fewer office visits by physicians for social distancing
purposes. In November 2020, we completed enrollment of more than
50% of the patients planned for the first part of a study. While
enrollment is now steady and ongoing, due to the changing nature of
the pandemic and potential future closures of clinical sites, we
are unable to predict with certainly the timing for the interim
analysis or the completion of the study.
Previous Results
EB01 has demonstrated anti-inflammatory
activity in a variety of in vitro
and in vivo
preclinical pharmacology models.
In addition, EB01 has demonstrated efficacy for the treatment of
ACD in two previous clinical trials.
A variety of in vitro
and in vivo preclinical pharmacology models were used to
assess the anti-inflammatory activity of EB01. Using a model for
hapten signaling indicative of ACD, lipopolysaccharide-stimulated
peripheral blood mononuclear cells were treated with EB01 and shown
to inhibit pro-inflammatory cytokines including IL-1b, IL-6, IL-8,
MIP-1a, and TNFa at the protein and mRNA expression levels.
Additionally, the safety of EB01 has been established in several
Good Laboratory Practice toxicology studies, including an
eight-week study involving topical application of 2.0% EB01 cream
to minipigs and a 6-week continuous infusion study in rats.
Overall, EB01 was well-tolerated and systemic exposure was
negligible (below the limit of detection). No genotoxicity has been
demonstrated in bacterial reverse mutation and micronucleus
testing.
Clinical experience with EB01 includes five clinical studies
involving a total of 176 subjects. No serious adverse reactions
were encountered during these clinical studies. Healthy volunteers
were treated with EB01 under occlusion. EB01 was classified as a
weak sensitizer by maximization assay (Grade 1) and is, therefore,
considered safe to use under any conditions. EB01 has demonstrated
efficacy for the treatment of ACD in two separate clinical trials.
Both studies were double-blind, vehicle-controlled bilateral
comparison studies to assess the safety, tolerability and efficacy
of EB01 cream applied twice daily for the treatment of ACD of the
hand and forearm as determined by the Contact Dermatitis Severity
Index (CDSI), a physician’s visual assessment. The CDSI is a
composite endpoint, which grades each symptom of the disease
(dryness, scaling, redness, pruritus, and fissures) scored from 0
(none) to 3 (severe), with a maximum severity score of 15. A
diagnosis of ACD was confirmed by a positive patch test deemed to
be clinically relevant by the investigator.
The first study (n=11) was a double-blind, placebo-controlled
clinical study to assess the safety and efficacy of topical 1.0%
EB01 cream for the treatment of ACD. Subjects selected for inclusion had
bilateral ACD. Prior to
randomization, subjects were patch tested. Patch tests were applied
to the upper part of each subjects’ back for 2 days and were
read on Days 2 and 4. Only “++” reactions were
considered clinically relevant and positive for the study. The
study was bilateral in design with one lesion treated with 1.0%
EB01 cream twice daily, while a comparable lesion was treated with
placebo cream. Disease severity was assessed before treatment (Day
0) and at Day 30 by the investigator using the
CDSI. For each
individual patient, the change in disease score in the drug-treated
hand was compared to that in the placebo-treated hand, thus making
the latter an internal control for each
patient. The mean
change from baseline for 1.0% EB01 cream treated lesions was 69.9%,
compared to 36.5% in the placebo cream lesions (p
= 0.0024). No
serious adverse events were reported.
A second, larger (n=30)
bilateral study was conducted to assess 2.0% EB01 cream applied
twice daily for 21 consecutive days in connection with the
treatment of ACD. To be included in the study, patients had to have
bilateral ACD with a CDSI score of at least 10 on each side, with
no more than a 1-point difference between lesions. At Day 21,
EB01-treated lesions had a mean improvement from baseline of 56%,
compared to 24% for those treated with placebo cream (p <
0.001). Efficacy of the 2.0% EB01 cream was maintained through Day
42 (21-days after ending treatment) with a 49% decrease in total
CDSI score for 2.0% EB01 cream-treated hands, compared to 15% in
the vehicle-treated hands (p < 0.001). Within the total CDSI
score, EB01 demonstrated statistically significant reductions for
each of the individual CDSI components (dryness, scaling, redness,
pruritus, and fissures).
Hemorrhoids Disease
Hemorrhoids disease (HD) is a common disorder, characterized by
itching, inflammation, pain, tenderness, bleeding and difficulty
defecating. According to National Institutes of Health reports, HD
affects approximately 5% of the U.S. adult population, or
approximately 12.5 million adults in the U.S. Almost half of
individuals 50 years and older have experienced symptomatic
hemorrhoids. Despite the high prevalence of hemorrhoids, we are not
aware of any prescription drugs with an approved New Drug
Application for the treatment of hemorrhoids. While there are
commonly used prescription and over-the-counter products for HD,
none has been approved by the FDA through the NDA process because
they entered the market prior to 1962. The mechanism of action of
these treatments is either general, such as steroids, or unknown,
in the case of herbal remedies, and we are not aware of any reports
published in medical journals on the efficacy of safety of any
product currently marketed in the U.S. As a result of these
factors, we believe that HD remains a significant unmet medical
need and market opportunity.
Confusion often arises because the term hemorrhoid has been used to
refer to both normal anatomic structures and pathologic structures.
Hemorrhoids are cushions of fibromuscular tissue that line the anal
canal. With HD, the muscle fibers that anchor the cushions become
attenuated, the hemorrhoids slide, become congested, bleed, and
eventually prolapse or protrude into the anal canal. The two types
of hemorrhoids, external and internal, refer to their location.
Internal hemorrhoids are typically classified as first degree
(grade I) – hemorrhoids bleed but do not protrude; second
degree (grade II) – hemorrhoids protrude but reduce on their
own; third degree (grade III) – hemorrhoids protrude and
require manual re-insertion; and fourth degree (grade IV) –
hemorrhoids are permanently prolapsed and cannot be
re-inserted.
The treatment of HD typically begins with conservative therapy
consisting of diet and lifestyle modification, fiber supplements,
sitz baths and stool softeners. In addition to this conservative
therapy, physicians may prescribe topical steroids and analgesics.
Because of the lack of effective prescription products, most
hemorrhoid patients will use over-the-counter preparations or the
prescription drugs available, which are similar to the
over-the-counter treatment, but formulated with a higher dose.
Based on public filings and reports, we estimate that as many as
4.0 million prescriptions are written and more than 20 million
over-the-counter units are sold each year in the U.S. for the
treatment of HD. Alternatives are invasive procedures, including
rubber band ligation, the injection of a sclerosing agent,
electrocoagulation, light therapy and
hemorrhoidectomy.
EB02
Overview and Status
Our
EB02 drug candidate represents a potential extension of our sPLA2
anti-inflammatory technology. Based on our analysis of clinical
data in dermatitis, we believe that EB02, which is currently
formulated as a cream, may be effective in treating the erythema,
swelling and exudation associated with HD. Specifically, sPLA2 has
been demonstrated to be a mediator of processes that characterize
hemorrhoidal pathophysiology, including inflammation and micro-
vascularization.
In September 2019, we received approval from Health Canada to begin
a clinical study of EB02 as a potential treatment for patients with
grade I-III internal hemorrhoids. Health Canada reviewed our
clinical trial application (CTA) and approved it by issuing a "no
objection letter," a standard guidance document that allows us to
proceed with our study. We believe this approval represents a
significant milestone in our goal of demonstrating the broad
potential of our novel non-steroidal anti-inflammatory
technology.
Our
exploratory Phase 2a study is designed to assess the safety and
efficacy of EB02 among hemorrhoid patients at investigational
centers in Canada. The study plan includes up to 48 subjects in a
randomized, double-blind, vehicle-controlled design. Should the
initial results be encouraging, we plan to transition from a proof
of concept study to a Phase 2 study of up to 80 to 400 subjects. In
light of our focus on the development of EB05, we are currently
evaluating the timing for the initiation of this planned study of
EB02.
Other Product Candidates
We are
also seeking to advance additional product candidates, including
EB06, which is an monoclonal antibody candidate that binds
specifically and selectively to chemokine ligand 10 (CXCL10) and
inhibits the interaction of CXCL10 with its receptor. In addition,
we plan to continue to identify, evaluate and potentially obtain
rights to and develop additional clinical assets across various
stages of development, focusing primarily on inflammatory and
immune-related diseases.
Intellectual Property and Key Licenses
We
have an exclusive license from Yissum Research
Development Company, the technology transfer company of Hebrew
University of Jerusalem Ltd. (Yissum), for patents and patent
applications that cover our product candidates EB01 and EB02 in the
United States, Canada, Australia and various countries in Europe.
Method of use patents, for which we hold an inbound license
from Yissum and an affiliate of Yissum, have been issued for
use in dermatologic and gastrointestinal conditions and infections
that will expire in 2024. We expect to seek patent term extension
in the United States related to time under IND, which could add up
to three to five years of additional protection. Additional patents
subject to the license agreement have been filed
by Yissum which we believe, if issued, could potentially
prevent generic substitution until after 2033.
We
also hold an exclusive license from NovImmune SA, for patents and
patent applications that cover our product candidates EB05 and EB06
in the United States, Canada and various other countries.
Composition of matter patents, for which we hold an inbound license
from NovImmune, have been issued that will expire as late as 2033
and 2028, respectively. We expect to seek patent term extension in
the United States related to time under IND, which could extend
protection. We have also filed additional method of use patent
applications which we believe, if issued, could potentially prevent
biosimilar substitution until as late as 2041.
In the
event we are successful in commercializing a new drug candidate, we
believe we would be eligible for data/market exclusivity, in
addition to exclusivity rights granted through patent protection.
We would be eligible for up to five years of exclusivity for EB01
and EB02 and up to twelve years of exclusivity for EB05 or EB06
after approval in the United States, and eight years of exclusivity
after approval in Canada and ten years of exclusivity after
approval in the European Union in any case.
We
expect patents and other proprietary intellectual property rights
to be an essential element of our business. We intend to protect
our proprietary positions by, among other methods, filing U.S. and
foreign patent applications related to our proprietary technology,
inventions, and improvements. We also rely on trade secrets,
know-how, continuing technological innovation and other
in-licensing opportunities to develop and maintain our proprietary
position. Our success will depend, in part, on our ability to
obtain and maintain proprietary protection for our product
candidates, technology, and know-how, to operate without infringing
on the proprietary rights of others, and to prevent others from
infringing our proprietary rights.
License Agreement with NovImmune SA
On
April 17, 2020, our wholly-owned subsidiary Edesa Biotech Research,
Inc. entered into an exclusive license agreement with NovImmune SA,
which operates under the brand Light Chain Bioscience, whereby we
obtained exclusive rights throughout the world to certain know-how,
patents and data relating to the monoclonal antibodies targeting
TLR4 and CXCL10 (the “Constructs”). Edesa will use the
exclusive rights to develop products containing these Constructs
(the “Licensed Products”) for therapeutic, prophylactic
and diagnostic applications in humans and animals. Unless earlier
terminated, the term of the license agreement will remain in effect
for twenty-five years from the date of first commercial sale of
Licensed Products. Subsequently, the license agreement will
automatically renew for five (5) year periods unless either party
terminates the agreement in accordance with its terms.
Under the license agreement, we are exclusively responsible, at our
expense, for the research, development manufacture, marketing,
distribution and commercialization of the Constructs and Licensed
Products and to obtain all necessary licenses and rights. Edesa is
required to use commercially reasonable efforts to develop and
commercialize the Constructs in accordance with the terms of a
development plan established by the parties. In exchange for the
exclusive rights to develop and commercialize the Constructs, we
issued to NovImmune $2.5 million of newly designated Series A-1
Convertible Preferred Shares pursuant to the terms of a securities
purchase agreement entered into between the parties concurrently
with the license agreement. In addition, Edesa is committed to
payments of various amounts to NovImmune upon meeting certain
development, approval and commercialization milestones as outlined
in the license agreement up to an aggregate amount of $356 million.
We also have a commitment to pay NovImmune a royalty based on net
sales of Licensed Products in countries where Edesa directly
commercializes Licensed Products and a percentage of sublicensing
revenue received by Edesa in the countries where Edesa does not
directly commercialize Licensed Products.
The license agreement provides that Light Chain will remain the
exclusive owner of existing intellectual property in the Constructs
and that Edesa will be the exclusive owner of all intellectual
property resulting from the exploitation of the Constructs pursuant
to the license. Subject to certain limitations, Edesa is
responsible for prosecuting, maintaining and enforcing all
intellectual property relating to the Constructs. During the term
of the agreement, Edesa also has the option to purchase the
licensed patents and know-how at a price to be negotiated by the
parties. If Edesa defaults or fails to perform any of the terms,
covenants, provisions or its obligations under the license
agreement, Light Chain has the option to terminate the license
agreement, subject to providing Edesa an opportunity to cure such
default. The license agreement is also terminable by Light Chain
upon the occurrence of certain bankruptcy related events pertaining
to Edesa. In connection with the license agreement and pursuant to
a purchase agreement entered into by the parties on April 17, 2020,
we acquired from NovImmune its inventory of the TLR4 antibody for
an aggregate purchase price of $5.0 million, payable in two
installments in 2021 and 2022.
License and Development Agreement with Pendopharm
On
August 27, 2017, our wholly owned subsidiary, Edesa Biotech
Research, Inc. entered into an exclusive license and development
agreement with Pendopharm, a division of Pharmascience Inc.
Pursuant to the license and development agreement, we granted to
Pendopharm an exclusive license throughout Canada to certain
know-how, patents and data for the sole purpose of obtaining
regulatory approval for certain pharmaceutical products to allow
Pendopharm to distribute, market and sell the licensed products for
human therapeutic use in certain gastrointestinal conditions. If
Pendopharm elects not to seek regulatory approval of the applicable
product, the applicable product will be removed from the license
rights granted to Pendopharm and will revert to us. If Pendopharm
elects to seek regulatory approval in Canada for the sale and
marketing of the applicable product, Pendopharm will be responsible
for obtaining regulatory approval for the applicable licensed
product in Canada. In exchange for the exclusive rights to market,
import, distribute, and sell the pharmaceutical products,
Pendopharm is required to pay us a royalty in respect of aggregate
annual net sales for each pharmaceutical product sold in Canada.
Unless earlier terminated, the term of the license and development
agreement will expire, on a licensed product by licensed product
basis, on the later to occur of (i) the date that is 13 years after
the first commercial sale of the licensed product in Canada; (ii)
the date of expiry of the last valid licensed patent in Canada
relating to the licensed product; or (iii) the date of expiry of
any period of exclusivity granted to the licensed product by a
regulatory authority in Canada. The license and development
agreement shall also terminate upon the termination of certain
license agreements that Edesa has with third parties. Pendopharm
also has the right to terminate the license and development
agreement for any reason upon 120 days notice to us.
License Agreement with Yissum
On June 29, 2016, our wholly owned
subsidiary, Edesa Biotech Research, Inc., entered into an exclusive
license agreement with Yissum,
which agreement was subsequently amended on each of April 3, 2017
and May 7, 2017. Pursuant to the license agreement as amended,
we obtained exclusive
rights throughout the world to certain know-how, patents and data
relating to a pharmaceutical product. We will use the exclusive
rights to develop the product for therapeutic, prophylactic and
diagnostic uses in topical dermal applications and anorectal
applications. Unless earlier terminated, the term of the license
agreement will expire on a country by country basis on the later of
(i) the date of expiry of the last valid licensed patent in such
country; (ii) the date of expiry of any period of exclusivity
granted to a product by a regulatory authority in such country or
(iii) the date that is 15 years after the first commercial sale of
a product in such country.
Under the license agreement, we are exclusively responsible, at our
expense, for the development of the product, including conducting
clinical trials and seeking regulatory approval for the product,
and once regulatory approval has been obtained, for the
commercialization of the product. We are required to use our
commercially reasonable efforts to develop and commercialize the
product in accordance with the terms of a development plan
established by the parties. Subject to certain conditions, we are
permitted to engage third parties to perform our activities or
obligations under the agreement. In exchange for the exclusive
rights to develop and commercialize the product topical dermal
applications and anorectal applications, we are committed to
payments of various amounts to Yissum upon meeting certain
milestones outlined in the license agreement up to an aggregate
amount of $18.6 million. In addition, upon divestiture of
substantially all of our assets, we are obligated to pay Yissum a
percentage of the valuation of the licensed technology sold as
determined by an external objective expert. We also have a
commitment to pay Yissum a royalty based on net sales of the
product in countries where we, or an affiliate of ours, directly
commercializes the product and a percentage of sublicensing revenue
received by us and our affiliates in the countries where we do not
directly commercialize the product.
The license agreement provides that Yissum shall remain the
exclusive owner of the licensed technology and that we are
responsible for preparing, filing, prosecuting and maintaining the
patents on the licensed technology in Yissum’s name.
Notwithstanding the foregoing, we will be the exclusive owner of
all patents and other intellectual property that is made by or on
our behalf after the date of the agreement, including all
improvements to the licensed technology. If we default or fail to
perform any of the terms, covenants, provisions or our obligations
under the license agreement, Yissum has the option to terminate the
license agreement, subject to providing us with an opportunity to
cure such default. We have the right to terminate the agreement if
we determine that the development and commercialization of the
product is no longer commercially viable. Subject to certain
exceptions, we have undertaken to indemnify Yissum against any
liability, including product liability, damage, loss or expense
derived from the use, development, manufacture, marketing, sale or
sublicensing of the licensed product and technology.
Manufacturing and Marketing
We rely, and expect to continue to rely for the foreseeable future,
on third party contract manufacturing organizations, or CMOs, to
produce both our synthetic chemical and biological product
candidates for clinical testing, as well as for commercial
manufacture if our product candidates receive marketing approval.
We believe that this strategy will enable us to direct operational
and financial resources to the development of our product
candidates rather than diverting resources to establishing
manufacturing infrastructure. Our arrangements with our
manufacturers are subject to industry-standard terms and conditions
and manufacturing is performed on an as-requested basis. We believe
there is sufficient supplies of raw materials and manufacturing
capacity with our current manufacturers, as well as others, to
service our current and future product needs. We do not have
current plans to establish laboratories or manufacturing facilities
for significant clinical production.
Because we are focused on the discovery and development of drugs,
we do not have any marketing or distribution capabilities, nor are
we at a stage where we would have any customers for our
investigational medicines. If we receive marketing approval in the
United States, Canada or Europe for a product candidate, we plan to
build the capabilities to commercialize the product candidate in
the applicable region with our own focused, specialized sales
force. Outside of the United States and Canada, we plan to
selectively utilize collaboration, distribution or other marketing
arrangements with third parties to commercialize our product
candidates. Also, we intend to selectively seek licensing,
collaboration or similar arrangements to assist us in furthering
the development or commercialization of product candidates
targeting large primary care markets that must be served by large
sales and marketing organizations.
Competition
The
pharmaceutical and biotechnology industry is highly competitive,
and the development and commercialization of new drugs is
influenced by rapid technological developments and innovation. We
face competition from companies developing and commercializing
products that will be competitive with our drug candidates,
including large pharmaceutical and smaller biotechnology companies,
many of which have greater financial and commercial resources than
we do. For our EB01 and EB02 product candidates, our potential
competitors include Aclaris Therapeutics, Inc., Brickell Biotech,
Inc., Citius Pharmaceuticals Inc., Dermavant Sciences, Inc. and Leo
Pharma A/S. For COVID-19, there are hundreds of competing therapies
under evaluation, including prophylactic vaccines for the SARS-Cov2
virus, experimental stem cell therapies and repurposed commercial
drugs. Our potential competitors include, among others: Aqualung
Therapeutics Corporation, Athersys, Inc., Caladrius Biosciences,
Inc., Enzychem Lifesciences Corp., Merck & Co., Inc., Mesoblast
Limited, Regeneron Pharmaceuticals, Inc. and Roche Holding AG. Some
of the competing product development programs may be based on
scientific approaches that are similar to our approach, and others
may be based on entirely different approaches. Potential
competitors also include new entrants to the market, academic
institutions, government agencies and other public and private
research organizations that conduct research, seek patent
protection and establish collaborative arrangements for research,
development, manufacturing and commercialization of products
similar to ours or that otherwise target indications that we are
pursuing. Key factors affecting the success of any approved product
will be its efficacy, safety profile, drug interactions, method of
administration, pricing, reimbursement and level of promotional
activity relative to those of competing drugs. We believe that our
product candidates will compete favorably with respect to such
factors. However, we may not be able to maintain our competitive
position against current and potential competitors.
Government Regulation
We plan to conduct clinical studies and seek approvals for our
product candidates in the United States, Canada and other
jurisdictions. Therefore, we currently are, and may in the future
be, subject to a variety of national and regional regulations
governing clinical trials as well as commercial sales and
distribution of our products, if approved.
To
conduct clinical trials for our product candidates, we rely on
third parties, such as contract research organizations, medical
institutions, and clinical investigators. Although we have entered
into agreements with these third parties, we continue to be
responsible for confirming that each of our clinical trials is
conducted in accordance with our investigational plan or research
protocol, as well as International Conference on Harmonization Good
Clinical Practices, or GCP, which include guidelines for
conducting, recording and reporting the results of clinical
trials.
The
FDA in the United States, Health Canada in Canada, the European
Medicines Agency (EMA) in the European Union and comparable
regulatory agencies in foreign countries impose substantial
requirements on the clinical development, manufacture and marketing
of pharmaceutical products and product candidates. These agencies
and other federal, state, provincial and local entities regulate
research and development activities and the testing, manufacture,
packaging, importing, distribution, quality control, safety,
effectiveness, labeling, storage, record-keeping, approval and
promotion of our products and product candidates. All of our
product candidates will require regulatory approval before
commercialization. In particular, therapeutic product candidates
for human use are subject to rigorous preclinical and clinical
testing and other statutory and regulatory requirements of the
United States, Canada, the EU and foreign countries. Obtaining
these marketing approvals and subsequently complying with ongoing
statutory and regulatory requirements require substantial time,
effort and financial resources.
United States
In the
United States, the FDA regulates drugs under the federal Food, Drug
and Cosmetic Act as well as the Public Health Service (PHS) Act for
biological drugs. The process required by the FDA before our
product candidates may be marketed in the United States generally
involves the following:
●
Pre-clinical testing. Drug developers
complete extensive pre-clinical laboratory tests, animal studies
and formulation studies, performed in accordance with the
FDA’s Good Laboratory Practice regulations and other
applicable requirements. These studies typically assess efficacy,
toxicology and pharmacokinetics.
●
Submission to the FDA of an Investigational
New Drug application (IND), which must become effective before
human clinical trials may begin. As part of an IND
application to the FDA, trial sponsors submit the results of
pre-clinical tests, together with manufacturing information and
analytical data. The IND automatically becomes effective 30-days
after receipt by the FDA, unless the FDA, within the 30-day time
frame, has questions or concerns about the proposed study. In such
a case, the IND sponsor and the FDA must resolve any outstanding
items before the clinical trial can begin. A separate submission to
an existing IND must also be made for each successive phase of a
clinical trial conducted during product development.
●
Approval by a central or institutional review
board (IRB), or ethics committee at each clinical trial site before
each trial may be initiated. An IRB is charged with
protecting the welfare and rights of trial participants and
considers such items as whether the risks to individuals
participating in the clinical trials are minimized and are
reasonable in relation to anticipated benefits. The IRB also
approves the informed consent form that must be provided to each
clinical trial subject or his or her legal representative and must
monitor the clinical trial until completion. There are also
requirements governing the reporting of ongoing clinical trials and
completed clinical trial results to public registries.
●
Multiple Phases of Human
Clinical Trials. Drug
developers conduct adequate and well-controlled human clinical
trials that establish the safety and efficacy of the product
candidate for the intended use, typically in the following three
stages, which are often sequential but may
overlap:
o
Phase 1: The clinical trials are initially conducted in a limited
population to test the product candidate for safety, dose
tolerance, absorption, metabolism, distribution and excretion in
healthy humans or, on occasion, in patients, such as cancer
patients. Phase 1 clinical trials can be designed to evaluate the
impact of the product candidate in combination with currently
approved drugs.
o
Phase 2: These clinical trials are generally conducted in a limited
patient population to identify possible adverse effects and safety
risks, to determine the efficacy of the product candidate for
specific targeted indications and to determine dose tolerance and
optimal dosage. Multiple Phase 2 clinical trials may be conducted
by the sponsor to obtain information before beginning a larger and
more expensive Phase 3 clinical trial.
o
Phase 3: These clinical trials are commonly referred to as pivotal
clinical trials. If the Phase 2 clinical trials demonstrate that a
dose range of the product candidate is effective and has an
acceptable safety profile, Phase 3 clinical trials are then
undertaken in large patient populations to further evaluate dosage,
to provide substantial evidence of clinical efficacy and to further
test for safety in an expanded and diverse patient population at
multiple, geographically dispersed clinical trial
sites.
●
Manufacturing Facilities. Satisfactory
completion of an FDA pre-approval inspection of the manufacturing
facility or facilities where the drug is produced to assess
compliance with Current Good Manufacturing Practice, or cGMP,
requirements to assure that the facilities, methods and controls
are adequate to preserve the drug’s identity, strength,
quality and purity.
●
New Drug Application (NDA) or Biologics
License Application (BLA). The results of the nonclinical
studies and clinical trials, together with other detailed
information, including extensive manufacturing information and
information on the composition of the drug and proposed labeling,
are submitted to the FDA in the form of an NDA or BLA requesting
approval to market the drug for one or more specified indications.
The FDA reviews an application to determine, among other things,
whether a drug is safe and effective for its intended use and
whether the product is being manufactured in accordance with cGMP
to assure and preserve the product's identity, strength, quality
and purity. FDA approval of an NDA or BLA must be obtained before a
drug may be offered for sale in the United States. The FDA may deny
approval of an NDA or BLA if the applicable regulatory criteria are
not satisfied, or it may require additional clinical data. Even if
such data are submitted, the FDA may ultimately decide that the
application does not satisfy the criteria for approval. Data from
clinical trials are not always conclusive and the FDA may interpret
data differently than we or our collaborators do. Once issued, the
FDA may withdraw a drug approval if ongoing regulatory requirements
are not met or if safety problems occur after the drug reaches the
market. In addition, the FDA may require further testing, including
Phase 4 clinical trials (post-marketing), and surveillance programs
to monitor the effect of approved drugs which have been
commercialized. The FDA has the power to prevent or limit further
marketing of a drug based on the results of these post-marketing
programs. Drugs may be marketed only for the approved indications
and in accordance with the provisions of the approved label.
Further, if there are any modifications to a drug, including
changes in indications, labeling or manufacturing processes or
facilities, we may be required to submit and obtain FDA approval of
a new NDA or BLA or a supplement, which may require us to develop
additional data or conduct additional pre-clinical studies and
clinical trials. In addition, under the Pediatric Research Equity
Act, or PREA, an NDA or supplement to an NDA must contain data to
assess the safety and efficacy of the drug for the claimed
indications in all relevant pediatric subpopulations and to support
dosing and administration for each pediatric subpopulation for
which the product is safe and effective. The FDA may grant
deferrals for submission of pediatric data or full or partial
waivers.
Satisfaction of
FDA regulations and requirements or similar requirements of state,
local and foreign regulatory agencies typically take several years,
and the actual time required may vary substantially based upon the
type, complexity and novelty of the product or disease. Typically,
if a product candidate is intended to treat a chronic disease, as
is the case with some of our product candidates, safety and
efficacy data must be gathered over an extended
period.
Other regulatory requirements
Any products manufactured or distributed by us or our collaborators
(pursuant to FDA approval) are subject to continuing regulation by
the FDA, including recordkeeping requirements and reporting of
adverse experiences associated with the drug. Drug manufacturers
and their subcontractors are required to register their
establishments with the FDA and certain state agencies and are
subject to periodic unannounced inspections by the FDA and certain
state agencies for compliance with ongoing regulatory requirements,
including cGMP, which impose certain procedural and documentation
requirements upon us and our third-party manufacturers. Failure to
comply with the statutory and regulatory requirements can subject a
manufacturer to possible legal or regulatory action, such as
warning letters, suspension of manufacturing, seizure of product,
injunctive action or possible civil penalties.
The FDA closely regulates the post-approval marketing and promotion
of drugs, including standards and regulations for
direct-to-consumer advertising, off-label promotion,
industry-sponsored scientific and educational activities and
promotional activities involving the Internet. A company can make
only those claims relating to safety and efficacy that are approved
by the FDA. Failure to comply with these requirements can result in
adverse publicity, warning letters, corrective advertising and
potential civil and criminal penalties. Physicians may prescribe
legally available drugs for uses that are not described in the
drug’s labeling and that differ from those tested by us and
approved by the FDA. Such off-label uses are common across medical
specialties. Physicians may believe that such off-label uses are
the best treatment for many patients in varied circumstances. The
FDA does not regulate the behavior of physicians in their choice of
treatments. The FDA does, however, impose stringent restrictions on
manufacturers’ communications regarding off-label
use.
The federal anti-kickback statute prohibits, among other things,
persons from knowingly and willfully soliciting, offering,
receiving or paying remuneration, directly or indirectly, in cash
or in kind, to induce or reward either the referral of an
individual for, or the purchase, order or recommendation of, any
good or service, for which payment may be made, in whole or in
part, under a federal healthcare program such as Medicare and
Medicaid. This statute has been broadly interpreted to apply to
manufacturer arrangements with prescribers, purchasers and pharmacy
benefit managers, among others. Several other countries, including
the United Kingdom, have enacted similar anti-kickback laws and
regulations.
The federal Health Insurance Portability and Accountability Act of
1996, or HIPAA, imposes criminal and civil liability for executing
a scheme to defraud any healthcare benefit program or for knowingly
and willfully falsifying, concealing or covering up a material fact
or making any materially false statement in connection with the
delivery of or payment for healthcare benefits, items or services.
HIPAA, as amended by the Health Information Technology for Economic
and Clinical Health Act, or HITECH Act, and its implementing
regulations, also imposes obligations, including mandatory
contractual terms, with respect to safeguarding the privacy,
security and transmission of individually identifiable health
information.
The federal Physician Payments Sunshine Act requirements under the
Patient Protection and Affordable Care Act of 2010, as amended by
the Health Care and Education Reconciliation Act of 2010, referred
to together as the Affordable Care Act, require manufacturers of
FDA-approved drugs, devices, biologics and medical supplies covered
by Medicare or Medicaid to report to the Department of Health and
Human Services information related to payments and other transfers
of value made to or at the request of covered recipients, such as
physicians and teaching hospitals, and physician ownership and
investment interests in such manufacturers. Among other payments,
the law requires payments made to physicians and teaching hospitals
for clinical trials be disclosed.
Analogous state laws and regulations, such as state anti-kickback
and false claims laws, may apply to future potential sales or
marketing arrangements and claims involving healthcare items or
services reimbursed by nongovernmental third-party payors,
including private insurers. Some state laws require pharmaceutical
companies to comply with the pharmaceutical industry’s
voluntary compliance guidelines, or the relevant compliance
guidance promulgated by the federal government, in addition to
requiring drug manufacturers to report information related to
payments to physicians and other health care providers or marketing
expenditures to the extent that those laws impose requirements that
are more stringent than the Physician Payments Sunshine Act. State
and foreign laws also govern the privacy and security of health
information in some circumstances, many of which differ from each
other in significant ways and often are not preempted by HIPAA,
thus complicating compliance efforts.
Canada
Health
Canada is the Canadian federal authority that regulates, evaluates
and monitors the safety, effectiveness, and quality of drugs,
medical devices, and other therapeutic products available to
Canadians. Health Canada’s regulatory process for review,
approval and regulatory oversight of products is similar to the
regulatory process conducted by the FDA. To initiate clinical
testing of a drug candidate in human subjects in Canada, a Clinical
Trial Application (CTA) must be filed with and approved by Health
Canada. In addition, all federally regulated trials must be
approved and monitored by research ethics boards. The review boards
study and approve study-related documents and monitor trial
data.
Prior
to being given market authorization for a drug product, a
manufacturer must present substantive scientific evidence of a
product’s safety, efficacy and quality as required by the
Food and Drugs Act (Canada) and its associated regulations,
including the Food and Drug Regulations. This information is
usually submitted in the form of a New Drug Submission (NDS).
Health Canada reviews the submitted information, sometimes using
external consultants and advisory committees, to evaluate the
potential benefits and risks of a drug. If after of the review, the
conclusion is that the patient benefits outweigh the risks
associated with the drug, the drug is issued a Drug Identification
Number (DIN), followed by a Notice of Compliance (NOC), which
permits the market authorization holder (i.e., the NOC and DIN
holder) to market the drug in Canada. Drugs granted an NOC may be
subject to additional postmarket surveillance and reporting
requirements.
All establishments engaged in the fabrication, packaging/labeling,
importation, distribution, and wholesale of drugs and operation of
a testing laboratory relating to drugs are required to hold a Drug
Establishment License to conduct one or more of the licensed
activities unless expressly exempted under the Food and Drug
Regulations. The basis for the issuance of a Drug Establishment
License is to ensure the facility complies with cGMP as stipulated
in the Food and Drug Regulations and as determined by cGMP
inspection conducted by Health Canada. An importer of
pharmaceutical products manufactured at foreign sites must also be
able to demonstrate that the foreign sites comply with cGMP, and
such foreign sites are included on the importer’s Drug
Establishment License.
Regulatory obligations and oversight continue following the initial
market approval of a pharmaceutical product. For example, every
market authorization holder must report any new information
received concerning adverse drug reactions, including timely
reporting of serious adverse drug reactions that occur in Canada
and any serious unexpected adverse drug reactions that occur
outside of Canada. The market authorization holder must also notify
Health Canada of any new safety and efficacy issues that it becomes
aware of after the launch of a product.
Employees
As of December 2, 2020, we have 12 full-time employees: five
employees are primarily engaged in research and development, and
seven employees are engaged in management, administration, business
development and finance. All employees are located in Canada or the
U.S. None of our employees are members of any labor
unions.
Certain factors may have
a material adverse effect on our business, prospects, financial
condition and results of operations. You should carefully consider
the risks and uncertainties described below together with all of
the other information contained in this Annual Report on Form 10-K,
including our financial statements and the related notes, before
deciding to invest in our common shares. The risks and
uncertainties described below are not the only ones we face.
Additional risks and uncertainties not presently known to us or
that we currently believe to be immaterial may also adversely
affect our business. If any of the following risks actually occurs,
our business, financial condition, results of operations and future
prospects could be materially and adversely
affected.
Risks Related to Our Business
We have incurred significant losses since our inception and expect
to continue to incur losses and may never generate profits from
operations or maintain profitability.
Since
inception, we have incurred significant operating losses. As of
September 30, 2020, we have an accumulated deficit of $13.1
million. We have historically financed operations primarily through
issuances of common shares, the exercise of common share purchase
warrants, convertible preferred shares, convertible loans,
government grants and tax incentives. We have devoted substantially
all of our efforts to research and development, including clinical
trials, and have not completed the development of any of our drug
candidates.
We expect to continue to incur significant expenses and operating
losses for the foreseeable future as we continue the development
of, and seek marketing approvals for our product candidates,
prepare for and begin the commercialization of any approved
products, and add infrastructure and personnel to support our
product development efforts and operations as a public company in
the United States and Canada. The net losses we incur may fluctuate
significantly from quarter to quarter and year to
year.
Based on our current plans, we do not expect to generate
significant revenue unless and until we or a current or potential
future licensee obtains marketing approval for, and commercializes,
one or more of our product candidates, which may require several
years. Neither we nor a licensee may ever succeed in obtaining
marketing approval for, or commercializing our product candidates
and, even if marketing approval is obtained, we may never generate
revenues that are significant enough to generate profits from
operations.
We will need substantial additional funding to finance our
operations through regulatory approval of one or more of our
product candidates. If we are unable to raise capital when needed,
we could be forced to delay, reduce or eliminate our product
development programs or commercialization efforts.
We expect our research and development expenses to increase
substantially in the future, particularly if we advance any drug
candidates beyond Phase 2 clinical development or expand the number
of drug candidates in clinical studies. In addition, if we obtain
marketing approval for any of our product candidates that are not
then subject to licensing, collaboration or similar arrangements
with third parties, we expect to incur significant
commercialization expenses related to product sales, marketing,
distribution and manufacturing. If we are unable to raise capital
when needed, or on attractive terms, we could be forced to delay,
reduce or eliminate research and development programs or future
commercialization efforts.
We depend heavily on the success of our drug product candidates. If
we are unable to obtain regulatory approval or commercialize one or
more of these experimental treatments, or experience significant
delays in doing so, our business will be materially
harmed.
Our ability to generate product revenues, which may not occur for
multiple years, if at all, will depend heavily on the successful
development and commercialization of our drug product candidates.
The success of our product candidates will depend on a number of
factors, including the following:
●
our ability to obtain additional capital from potential future
licensing, collaboration or similar arrangements or from any future
offering of our debt or equity securities;
●
our ability to identify and enter into potential future licenses or
other collaboration arrangements with third parties and the terms
of the arrangements;
●
our timing to obtain applicable regulatory approvals;
●
successful completion of clinical development;
●
the ability to provide acceptable evidence demonstrating a product
candidates’ safety and efficacy;
●
receipt of marketing approvals from applicable regulatory
authorities and similar foreign regulatory
authorities;
●
the availability of raw materials to produce our product
candidates;
●
obtaining and maintaining commercial manufacturing arrangements
with third-party manufacturers or establishing commercial-scale
manufacturing capabilities;
●
obtaining and maintaining patent and trade secret protection and
regulatory exclusivity;
●
establishing sales, marketing and distribution
capabilities;
●
generating commercial sales of the product candidate, if and when
approved, whether alone or in collaboration with
others;
●
acceptance of the product candidate, if and when approved, by
patients, the medical community and third-party
payors;
●
effectively competing with other therapies; and
●
maintaining an acceptable safety profile of the product candidate
following approval.
If we do not achieve one or more of these factors in a timely
manner or at all, we could experience significant delays or an
inability to successfully commercialize any of our product
candidates, which would materially harm our business. Many of these
factors are beyond our control. Accordingly, we may never be able
to generate revenues through the license or sale of any of our
product candidates.
Public health threats could have an adverse effect on our
operations and financial results.
Public health threats could adversely affect our ongoing or planned
research and development activities, particularly SARS-CoV-2 (which
causes the disease now called COVID-19). The outbreak of COVID-19
has severely impacted global economic activity and caused
significant volatility and negative pressure in financial markets.
The global impact of the outbreak has been rapidly evolving and
many countries, including the United States, have reacted by
instituting quarantines, mandating business and school closures and
restricting travel. As a result, the COVID-19 pandemic is
negatively impacting almost every industry directly or indirectly.
We cannot presently predict the scope and severity of any potential
business shutdowns or disruptions, but if we or any of the third
parties with whom we engage, including the suppliers, clinical
trial sites, regulators and other third parties with whom we
conduct business, were to experience shutdowns or other business
disruptions, our ability to conduct our business in the manner and
on the timelines presently planned could be materially and
negatively impacted. Global epidemics, such as the coronavirus,
could also negatively affect site activation, as well as
recruitment and retention, at sites in a region or city whose
health care system becomes overwhelmed due to the illness, which
could have a material adverse effect on our business and our
results of operation and financial condition.
Our limited
operating history may make it difficult for you to evaluate the
success of our business to date and to assess our future
viability.
Our primarily operating entity, Edesa Biotech Research, Inc. was
formed in July 2015. To date, our operations have been limited to
organization and staffing, developing and securing our technology,
entering into licensing arrangements, raising capital and
undertaking preclinical studies and clinical trials of our product
candidates. We have not yet demonstrated our ability to
successfully complete development of any product candidate, obtain
marketing approval, manufacture a commercial scale product, or
arrange for a third-party to do so on our behalf, or conduct sales
and marketing activities necessary for successful product
commercialization. Assuming we obtain marketing approval for any of
our product candidates, we will need to transition from a company
with a research and development focus to a company capable of
supporting commercial activities. We may encounter unforeseen
expenses, difficulties, complications and delays and may not be
successful in such a transition. Any predictions made about our
future success or viability may not be as accurate as they could be
if we had a longer operating history.
We may not be successful in our efforts to identify and acquire or
in-license additional product candidates.
Part of our strategy involves diversifying our product development
risk by identifying and acquiring or in-licensing novel product
candidates. We may fail to identify and acquire or in-license
promising product candidates. The competition to acquire or
in-license promising product candidates is fierce, especially from
large multinational companies that have greater resources and
experience than we have. If we are unable to identify and acquire
or in-license suitable product candidates, we will be unable to
diversify our product risk. We believe that any such failure could
have a significant negative impact on our prospects because the
risk of failure of any particular development program in the
pharmaceutical field is high.
We may expend our limited resources to pursue a particular product
candidate and fail to capitalize on product candidates that may be
more profitable or for which there is a greater likelihood of
success.
Because we have limited financial and managerial resources, we
focus on specific product candidates. As a result, we may forego or
delay pursuit of opportunities with other product candidates that
later could prove to have greater commercial potential. Our
resource allocation decisions may cause us to fail to capitalize on
viable commercial products or profitable market opportunities. If
we do not accurately evaluate the commercial potential or target
market for a particular product candidate, our business may be
negatively impacted.
Our future success depends on our ability to retain key executives
and to attract, retain and motivate qualified
personnel.
We are highly dependent on Dr. Pardeep
Nijhawan, our Chief Executive Officer and Secretary; and Michael
Brooks, our President; as well as other principal members of our
management and scientific teams. Although we have employment
agreements with each of our executive officers, these agreements do
not prevent our executives from terminating their employment with
the company at any time. The unplanned loss of the services of any
of these persons could materially impact the achievement of our
research, development, financial and commercialization objectives.
Recruiting and retaining qualified personnel, including in the
United States and Canada, will also be critical to our success. We
may not be able to attract and retain these personnel on acceptable
terms given the competition among numerous biotechnology and
pharmaceutical companies for similar personnel. In addition, we
rely on consultants and advisors, including scientific and clinical
advisors, to assist us in formulating our research and development
and commercialization strategy. Our consultants and advisors may
have commitments with other entities that may limit their
availability to us.
We expect to expand our capabilities, and as a result, we may
encounter difficulties in managing our growth, which could disrupt
our operations.
We expect to experience growth in the number of our employees and
the scope of our operations, particularly in the areas of drug
development, regulatory affairs, finance and administration and,
potentially, sales and marketing. To manage our anticipated future
growth, we must continue to implement and improve our managerial,
operational and financial systems, expand our facilities and
continue to recruit and train additional qualified personnel. We
may not be able to effectively manage the expansion of our
operations or recruit and train additional qualified personnel. The
physical expansion of our operations may lead to significant costs
and may divert our management and business development resources.
Any inability to manage growth could delay the execution of our
business plans or disrupt our operations.
We are exposed to risks related to currency exchange
rates.
We conduct a significant portion of our operations outside of the
United States. Because our financial statements are presented in
U.S. dollars, changes in currency exchange rates have had and could
have in the future a significant effect on our operating results
when our operating results are translated into U.S.
dollars.
We are subject to anti-corruption laws, as well as export control
laws, customs laws, sanctions laws and other laws governing our
operations. If we fail to comply with these laws, it could be
subject to civil or criminal penalties, other remedial measures and
legal expenses, which could adversely affect our business, results
of operations and financial condition.
Our operations are subject to anti-corruption laws, including the
U.S. Foreign Corrupt Practices Act, or the FCPA, and other
anti-corruption laws that apply in countries where we do business
and may do business in the future. The FCPA and these other laws
generally prohibit us, our officers, and our employees and
intermediaries from bribing, being bribed or making other
prohibited payments to government officials or other persons to
obtain or retain business or gain some other business advantage. We
may in the future operate in jurisdictions that pose a high risk of
potential FCPA violations, and we may participate in collaborations
and relationships with third parties whose actions could
potentially subject us to liability under the FCPA or local
anti-corruption laws. We are also subject to other laws and
regulations governing our international operations, including
regulations administered by the government of the United States and
authorities in the European Union, including applicable export
control regulations, economic sanctions on countries and persons,
customs requirements and currency exchange regulations,
collectively referred to as the Trade Control laws. There is no
assurance that we will be completely effective in ensuring our
compliance with all applicable anti-corruption laws, including the
FCPA or other legal requirements, including Trade Control laws. If
we are not in compliance with the FCPA and other anti-corruption
laws or Trade Control laws, we may be subject to criminal and civil
penalties, disgorgement and other sanctions and remedial measures,
and legal expenses, which could have an adverse impact on our
business, financial condition, results of operations and liquidity.
Likewise, any investigation of any potential violations of the
FCPA, other anti-corruption laws or Trade Control laws by U.S. or
other authorities could also have an adverse impact on our
reputation, our business, results of operations and financial
condition.
Our employees, principal investigators, consultants and commercial
partners may engage in misconduct or other improper activities,
including noncompliance with regulatory standards and requirements
and insider trading, which could cause significant liability for us
and harm our reputation.
We are exposed to the risk of fraud or other misconduct by our
employees, principal investigators, consultants and collaborators,
including intentional failures to comply with FDA or Office of
Inspector General regulations or similar regulations of comparable
non-U.S. regulatory authorities, provide accurate information to
the FDA or comparable non-U.S. regulatory authorities, comply with
manufacturing standards we have established, comply with federal
and state healthcare fraud and abuse laws and regulations and
similar laws and regulations established and enforced by comparable
non-U.S. regulatory authorities, report financial information or
data accurately or disclose unauthorized activities to us.
Misconduct by these parties could also involve the improper use of
information obtained in the course of clinical trials, which could
result in regulatory sanctions and serious harm to our reputation.
It is not always possible to identify and deter misconduct, and the
precautions we take to detect and prevent this activity may not be
effective in controlling unknown or unmanaged risks or losses or in
protecting us from governmental investigations or other actions or
lawsuits stemming from a failure to be in compliance with such
laws, standards or regulations. If any such actions are instituted
against us, and we are not successful in defending ourselves or
asserting our rights, those actions could have a significant impact
on our business and results of operations, including the imposition
of significant fines or other sanctions.
We rely significantly on information technology and any failure,
inadequacy, interruption or security lapse of that technology,
including any cyber security incidents, could harm our ability to
operate our business effectively.
Despite the implementation of security measures, our internal
computer systems and those of third parties with which we contract
are vulnerable to damage from cyber-attacks, computer viruses,
unauthorized access, natural disasters, terrorism, war and
telecommunication and electrical failures. System failures,
accidents or security breaches could cause interruptions in our
operations, and could result in a material disruption of ours
clinical and commercialization activities and business operations,
in addition to possibly requiring substantial expenditures of
resources to remedy. The loss of clinical trial data could result
in delays in our regulatory approval efforts and significantly
increase our costs to recover or reproduce the data. To the extent
that any disruption or security breach were to result in a loss of,
or damage to, our data or applications, or inappropriate disclosure
of confidential or proprietary information, we could incur
liability and our product research, development and
commercialization efforts could be delayed.
The wind down of our Stellar subsidiary’s legacy business may
not deliver the expected results or may create unexpected
liabilities.
Following the business combination completed in June 2019, we
refocused our business on the development of innovative
therapeutics for inflammatory and immune-related diseases. Since
then, we have implemented plans to sell off or wind down the
principal assets and operations of our Stellar subsidiary’s
legacy business, which includes product inventory. We cannot be
sure that the sale and wind down of Stellar’s operations will
eliminate costs related to the legacy business; or result in any
unplanned expenditures or unknown, contingent or other liabilities,
including litigation arising in connection with legacy operations
or sales of Stellar’s product inventory. If our plans do not
achieve the expected results, our business and results of
operations will be adversely impacted.
Risks Related to Clinical Development, Regulatory Approval and
Commercialization
If clinical trials of our product candidates fail to demonstrate
safety and efficacy to the satisfaction of the FDA, Health Canada
(HC) or the European Medicines Agency (EMA), or do not otherwise
produce favorable results, we may incur additional costs or
experience delays in completing, or ultimately be unable to
complete, the development and commercialization our product
candidates.
In connection with obtaining marketing approval from regulatory
authorities for the sale of any product candidate, we must complete
preclinical development and then conduct extensive clinical trials
to demonstrate the safety and efficacy of our product candidates in
humans. Clinical trials are expensive, difficult to design and
implement, can take many years to complete and are uncertain as to
outcome. A failure of one or more clinical trials can occur at any
stage of testing. The outcome of preclinical testing and early
clinical trials may not be predictive of the success of later
clinical trials. In particular, the small number of subjects and
patients in early clinical trials of our product candidates may
make the results of these clinical trials less predictive of the
outcome of later clinical trials. The design of a clinical trial
can determine whether our results will support approval of a
product, and flaws in the design of a clinical trial may not become
apparent until the clinical trial is well advanced or completed.
There is no assurance that we will be able to design and execute a
clinical trial to support marketing approval. Moreover, preclinical
and clinical data are often susceptible to varying 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 of their products.
Positive results in pre-clinical studies of a product candidate may
not be predictive of similar results in humans during clinical
trials, and promising results from early clinical trials of a
product candidate may not be replicated in later clinical trials. A
number of companies in the pharmaceutical and biotechnology
industries have suffered significant setbacks in late-stage
clinical trials even after achieving promising results in
early-stage development. Accordingly, the results from completed
pre-clinical studies and clinical trials for our product candidates
may not be predictive of the results we may obtain in later stage
trials or studies. Pre-clinical studies or clinical trials may
produce negative or inconclusive results, and we may decide, or
regulators may require us, to conduct additional pre-clinical
studies or clinical trials, or to discontinue clinical trials
altogether. Ultimately, we may be unable to complete the
development and commercialization of any of our product
candidates.
Interim results, top-line, initial data may not accurately reflect
the complete results of a particular study or trial.
We may publicly disclose interim, top-line or initial data from
time to time that is based on a preliminary analysis of
then-available efficacy and safety data, and the results and
related findings and conclusions are subject to change following a
more comprehensive review of the data related to the particular
study or trial. We also make assumptions, estimates, calculations
and conclusions as part of our analyses of data, and we may not
have received or had the opportunity to fully evaluate all data.
Interim, top-line and initial data should be viewed with caution
until the final data are available. In addition, the information we
may publicly disclose regarding a particular preclinical or
clinical study is based on what is typically extensive information,
and you or others may not agree with what we determine is the
material or otherwise appropriate information to include in our
disclosure, and any information we determine not to disclose may
ultimately be deemed significant with respect to future decisions,
conclusions, views, activities or otherwise regarding a particular
drug, drug candidate or our business. If the interim, top-line or
initial data that we report differ from actual results, or if
others, including regulatory authorities, disagree with the
conclusions reached, our ability to obtain approval for, and
commercialize, our product candidates may be harmed or delayed,
which could harm our business, financial condition, operating
results or prospects.
If clinical trials for our product candidates are prolonged or
delayed, we may be unable to commercialize our product candidates
on a timely basis, which would require us to incur additional costs
and delay our receipt of any revenue from potential product
sales.
We cannot predict whether we will encounter problems with any of
our ongoing or planned clinical trials that will cause us or any
regulatory authority to delay or suspend those clinical trials. A
number of events, including any of the following, could delay the
completion of our ongoing and planned clinical trials and
negatively impact our ability to obtain regulatory approval for,
and to market and sell, a particular product
candidate:
●
conditions imposed by the FDA or any foreign regulatory authority
regarding the scope or design of our clinical trials;
●
delays in obtaining, or the inability to obtain, required approvals
from institutional review boards, or IRBs, or other reviewing
entities at clinical sites selected for participation in our
clinical trials;
●
insufficient supply or deficient quality of product candidates
supply or materials to produce our product candidates or other
materials necessary to conduct our clinical trials;
●
delays in obtaining regulatory agreement for the conduct of the
clinical trials;
●
lower than anticipated enrollment and retention rate of subjects in
clinical trials for a variety of reasons, including size of patient
population, nature of trial protocol, the availability of approved
effective treatments for the relevant disease and competition from
other clinical trial programs for similar indications;
●
serious and unexpected drug-related side effects experienced by
patients in clinical trials;
●
failure of third-party contractors to meet their contractual
obligations in a timely manner;
●
pre-clinical or clinical trials may produce negative or
inconclusive results, which may require us or any potential future
collaborators to conduct additional pre-clinical or clinical
testing or to abandon projects that we expect to be
promising;
●
even if pre-clinical or clinical trial results are positive, the
FDA or foreign regulatory authorities could nonetheless require
unanticipated additional clinical trials;
●
regulators or institutional review boards may suspend or terminate
clinical research for various reasons, including noncompliance with
regulatory requirements;
●
product candidates may not have the desired effects;
and
●
the lack of adequate funding to continue clinical
trials.
Additionally, changes in standard of care or regulatory
requirements and guidance may occur and we may need to amend
clinical trial protocols to reflect these changes. Such amendments
may require us to resubmit our clinical trial protocols to IRBs for
re-examination, which may impact the cost, timing or successful
completion of a clinical trial. Such changes may also require us to
reassess the viability of the program in question.
We do not know whether our clinical trials will begin as planned,
will need to be restructured or will be completed on schedule, if
at all. Delays in clinical trials will result in increased
development costs for our product candidates. In addition, if we
experience delays in completion of, or if we terminate, any of our
clinical trials, the commercial prospects for our product
candidates may be affected and our ability to generate product
revenues will be delayed. Furthermore, 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 a product candidate.
The clinical trial designs, endpoints and outcomes that will be
required to obtain marketing approval for our drug candidates are
uncertain. We may never receive marketing approval for our drug
candidates.
To our knowledge, there are currently no FDA-approved drug
treatment options specifically approved for many of the disease
indications we are targeting with our drug candidates. Accordingly,
there may not be well-established development paths and outcomes.
The FDA, Health Canada or any other regulatory authority outside of
the United States may determine that the designs or endpoints of
any trial that we conduct, or that the outcome shown on any
particular endpoint in any trial that we conduct, are not
sufficient to establish a clinically meaningful benefit for our
drug candidates, or otherwise, to support approval, even if the
primary endpoint(s) of the trial is met with statistical
significance. If this occurs, our business could be materially
harmed. Moreover, if the regulatory authorities require us to
conduct additional clinical trials beyond the ones that we
currently contemplate, our finances and results from operations
will be adversely impacted. If our clinical studies meet their
respective primary endpoints, we plan to request an end of Phase 2
meeting with the regulators and/or seek marketing approval. We
cannot predict whether each of these regulatory agencies will agree
that our study data and information will be sufficient to meet the
requirements for filing a marketing application or the standards
for approval. If the regulatory agencies determine that more data
and information are needed, it could delay and/or negatively impact
our ability to obtain regulatory approval to market and sell a
particular product candidate.
If the commercial opportunity in chronic ACD or COVID-19-induced
ARDS is smaller than we anticipate, our future revenue from EB01 or
EB05, as applicable, will be adversely affected and our business
will suffer.
It is critical to our ability to grow and become profitable that we
successfully identify patients with chronic ACD or COVID-19-induced
ARDS. Our projections of the number of people who have these
conditions as well as the subset who have the potential to benefit
from treatment with EB01 or EB05, are based on a variety of
sources, including third-party estimates and analyses in the
scientific literature, and may prove to be incorrect. Further, new
information may emerge that changes our estimate of the prevalence
of these diseases or the number of patient candidates for these
drug candidates. The effort to identify patients for our other
potential target indications is at an early stage, and we cannot
accurately predict the number of patients for whom treatment might
be possible. Additionally, the potentially addressable patient
population for our drug candidates may be limited or may not be
amenable to treatment with our drug candidates, and new patients
may become increasingly difficult to identify or access. If the
commercial opportunity for these conditions is smaller than we
anticipate, our future financial performance may be adversely
impacted.
While we have chosen to test our product candidates in specific
clinical indications based in part on our understanding of their
mechanisms of action, our understanding may be incorrect or
incomplete and, therefore, our product candidates may not be
effective against the diseases tested in our clinical
trials.
Our rationale for selecting the particular therapeutic indications
for each of our product candidates is based in part on our
understanding of the mechanism of action of these product
candidates. However, our understanding of the product
candidates’ mechanism of action may be incomplete or
incorrect, or the mechanism may not be clinically relevant to the
diseases treated. In such cases, our product candidates may prove
to be ineffective in the clinical trials for treating those
diseases, and adverse clinical trial results would likely
negatively impact our business and results from
operations.
A successful
sPLA2 drug has not been developed to date
and we can provide no assurances that we will be successful or that
there will be no adverse side effects.
Our sPLA2 product candidates employ a novel
mechanism of action. To our knowledge no drug companies have
successfully commercialized an sPLA2 inhibitor and as a result the efficacy
and long-term side effects are not known. There is no guarantee
that we will successfully develop and/or commercialize an
sPLA2 inhibitor and/or that our product
candidates will have no adverse side effects.
Even if one of our product candidates receives marketing approval,
it may fail to achieve the degree of market acceptance by
physicians, patients, third-party payors and others in the medical
community necessary for commercial success.
If any product candidate receives marketing approval, the approved
product may nonetheless fail to gain sufficient market acceptance
by physicians, patients, third-party payors and others in the
medical community. If an approved product does not achieve an
adequate level of acceptance, we may not generate significant
product revenues or any profits from operations. Our ability to
negotiate, secure and maintain third-party coverage and
reimbursement for our product candidates may be affected by
political, economic and regulatory developments in the United
States, Canada, the European Union and other jurisdictions.
Governments continue to impose cost containment measures, and
third-party payors are increasingly challenging prices charged for
medicines and examining their cost effectiveness, in addition to
their safety and efficacy. These and other similar developments
could significantly limit the degree of market acceptance of any of
our future product candidates that receive marketing
approval.
If we are
unable to establish sales and marketing capabilities or enter into
agreements with third parties to market and any of our other
current or future product candidates, we may not be successful in
commercializing the applicable product candidate if it receives
marketing approval.
We do not have a sales or marketing infrastructure and have no
experience as a company in the sale or marketing of pharmaceutical
products. To achieve commercial success for any approved product,
we must either develop a sales and marketing organization or
outsource these functions to third parties. There are risks
involved with establishing our own sales and marketing capabilities
and entering into arrangements with third parties to perform these
services. For example, recruiting and training a sales force is
expensive and time consuming and could delay any product launch. If
the commercial launch of a product candidate for which we recruit a
sales force and establish marketing capabilities is delayed or does
not occur for any reason, we would have prematurely or
unnecessarily incurred these commercialization expenses. This may
be costly, and our investment would be lost if we cannot retain or
reposition our sales and marketing personnel. If we enter into
arrangements with third parties to perform sales and marketing
services, our product revenues or the profitability of these
product revenues to us could be lower than if we were to market and
sell any products that we develop ourselves. In addition, we may
not be successful in entering into arrangements with third parties
to sell and market our product candidates or may be unable to do so
on terms that are acceptable to us. We likely will have little
control over such third parties, and any of them may fail to devote
the necessary resources and attention to sell and market our
products effectively. If we do not establish sales and marketing
capabilities successfully, either on our own or in collaboration
with third parties, we will not be successful in commercializing
our product candidates.
We face substantial competition, which may result in others
discovering, developing or commercializing products to treat our
target indications or markets before or more successfully than we
do.
The development and commercialization of new drug products is
highly competitive. We face competition with respect to our current
product candidates and any products we may seek to develop or
commercialize in the future from major pharmaceutical companies,
specialty pharmaceutical companies and biotechnology companies
worldwide. Competitors may also include academic institutions,
government agencies and other public and private research
organizations that conduct research, seek patent protection and
establish collaborative arrangements for research, development,
manufacturing and commercialization. Many of our competitors have
significantly greater financial resources and expertise in research
and development, manufacturing, preclinical testing, conducting
clinical trials, obtaining approvals from regulatory authorities
and marketing approved products than we do. Mergers and
acquisitions in the pharmaceutical and biotechnology industries may
result in even more resources being concentrated among a smaller
number of our competitors. Our commercial opportunities could be
reduced or eliminated if our competitors develop and commercialize
products that are more effective, safer, have fewer or less severe
side effects, are approved for broader indications or patient
populations, or are more convenient or less expensive than any
products that we develop and commercializes. Our competitors may
also obtain marketing approval for their products more rapidly than
we may obtain approval for our products, which could result in our
competitors establishing a strong market position before we are
able to enter the market. If approved, our product candidates will
compete for a share of the existing market with numerous other
products being used to treat ACD, ARDS, or any other indications
for which we may receive government approval.
Even if we are able to commercialize one of our product candidates,
the product may become subject to unfavorable pricing regulations,
third- party reimbursement practices or healthcare reform
initiatives, which would harm our business.
The regulations that govern marketing approvals, pricing, coverage
and reimbursement for new drug products vary widely from country to
country. Current and future legislation may significantly change
the approval requirements in ways that could involve additional
costs and cause delays in obtaining approvals. Some countries
require approval of the sale price of a drug before it can be
marketed. In many countries, the pricing review period begins after
marketing or product licensing approval is granted and, in some
markets, prescription pharmaceutical pricing remains subject to
continuing governmental control even after initial approval is
granted. As a result, we might obtain marketing approval for a
product in a particular country, but then be subject to price
regulations that delay our commercial launch of the product,
possibly for lengthy time periods, and negatively impact the
revenues we are able to generate from the sale of the product in
that country. Adverse pricing limitations may hinder our ability to
recoup our investment in one or more product candidates, even if
our product candidates obtain marketing approval.
Our ability to commercialize EB01, EB05 or any other product
candidate successfully also will depend in part on the extent to
which coverage and adequate reimbursement for these products and
related treatments will be available from government health
administration authorities, private health insurers and other
organizations. Government authorities and other third-party payors,
such as private health insurers and health maintenance
organizations, decide which medications they will pay for and
establish reimbursement levels. Our inability to promptly obtain
coverage and adequate reimbursement rates from both
government-funded and private payors for any approved products that
we develop could have a material adverse effect on our operating
results, our ability to raise capital needed to commercialize
products and our overall financial condition.
Product liability lawsuits against us could cause us to incur
substantial liabilities and to limit commercialization of any
products that we may develop.
We face an inherent risk of product liability exposure related to
the testing of our product candidates in human clinical trials and
will face an even greater risk if we commercially sell any products
that we may develop. If we cannot successfully defend ourselves
against claims that our product candidates or products caused
injuries, we will incur substantial liabilities. We have separate
liability insurance policies that cover each of our ongoing
clinical trials, which provide coverage in varying amounts. The
amount of insurance that we currently hold may not be adequate to
cover all liabilities that we may incur. We will need to increase
our insurance coverage when and if we begin conducting more
expansive clinical development of our product candidates. Insurance
coverage is increasingly expensive. We may not be able to maintain
insurance coverage at a reasonable cost or in an amount adequate to
satisfy any liability that may arise.
We will be dependent on third parties for the synthesis,
formulation, and manufacturing, including optimization, technology
transfers and scaling up of clinical scale quantities of all of our
product candidates.
We have no direct experience in synthesizing, formulating and
manufacturing any of our product candidates, and currently lack the
resources or capability to synthesize, formulate and manufacture
any of our product candidates on a clinical or commercial scale. As
a result, we will be dependent on third parties for the synthesis,
formulation, and manufacturing, including optimization, technology
transfers and scaling up of clinical scale quantities of all our
product candidates. We believe that this strategy will enable us to
direct operational and financial resources to the development of
our product candidates rather than diverting resources to
establishing manufacturing infrastructure; however our use of third
parties to manufacture our product candidates may increase the risk
that we will not have sufficient quantities of our product
candidates or products or such quantities at an acceptable cost,
which could delay, prevent or impair our development or
commercialization efforts.
We do not currently have any agreements with third-party
manufacturers for the long-term clinical or commercial supply of
any of our product candidates and may in the future be unable to
scale-up and/or conclude agreements for commercial supply with
commercial third-party manufacturers on acceptable terms, or at
all. Even if we are able to establish and maintain arrangements
with third-party manufacturers, they may encounter difficulties in
achieving volume production, laboratory testing, quality control or
quality assurance or suffer shortages of qualified personnel, any
of which could result in our inability to manufacture sufficient
quantities to meet clinical timelines for a particular product
candidate, to obtain marketing approval for the product candidate
or to commercialize the product candidate. We may compete with
other companies for access to manufacturing facilities. There are a
limited number of manufacturers that operate under cGMP regulations
and that might be capable of manufacturing for us.
If the third parties that we contract to
manufacture product for our preclinical tests and clinical trials
cease to continue to do so for any reason or if we elect to change
suppliers, we likely would experience delays in advancing these
clinical trials while we identify and qualify replacement suppliers
and we may be unable to obtain replacement suppliers on terms that
are favorable to us. In addition, if we are not able to obtain
adequate supplies of our product candidates or the drug substances
used to manufacture them, it will be more difficult for us to
develop our product candidates and compete effectively. Our current
and anticipated future dependence upon others for the manufacture
of our product candidates may adversely affect our future profit
margins and our ability to develop product candidates and
commercialize any products that receive marketing approval on a
timely and competitive basis.
The manufacturing of our monoclonal antibody candidates is complex
and subject to a multitude of risks. These manufacturing
risks could substantially increase our costs and limit supply of
these drug candidates for clinical development, and
commercialization.
The manufacture of our monoclonal antibody candidates requires
processing steps that are more complex than those required for most
small molecule drugs As a result of the complexities in
manufacturing biologics, the cost to manufacture biologics in
general, and our cell product candidates in particular, is
generally higher than traditional small molecule chemical
compounds, and the manufacturing processes are less reliable and
are more difficult to reproduce. Although we are working
with third parties to develop reproducible and commercially viable
manufacturing processes for our product candidates, doing so is a
difficult and uncertain task, and there are risks associated with
scaling to the level required for advanced clinical trials or
commercialization, including, among others, cost overruns,
potential problems with process scale-out, process reproducibility,
stability issues, lot consistency, and timely availability of
reagents or raw materials.
We may make changes as we continue to evolve the manufacturing
processes for our product candidates for advanced clinical trials
and commercialization, and we cannot be sure that even minor
changes in these processes will not cause our product candidates to
perform differently and affect the results of our ongoing clinical
trials, future clinical trials, or the performance of the product
once commercialized. In some circumstances, changes in
manufacturing operations, including to our protocols,
processes, materials or facilities used, may require us to
perform additional preclinical or comparability studies, or to
collect additional clinical data from patients prior to undertaking
additional clinical studies or filing for regulatory approval for a
product candidate. These requirements may lead to delays in our
clinical development and commercialization plans for our product
candidates, and may increase our development costs
substantially.
We may also decide to transfer certain manufacturing process
know-how and certain intermediates to other contract manufacturing
organizations. Transferring manufacturing testing and processes and
know-how is complex and involves review and incorporation of both
documented and undocumented processes that may have evolved over
time. We and any CMOs or third parties that we engage for
manufacturing our product candidates will need to conduct
significant development work to transfer these processes and
manufacture each of our product candidates for clinical trials and
commercialization. In addition, we may be required to
demonstrate the comparability of material generated by any CMO or
third parties that we engage for manufacturing our product
candidates with material previously produced and used in testing.
The inability to manufacture comparable drug product by us or our
CMO could delay the continued development of our product
candidates.
We rely on third parties to conduct our clinical trials and those
third parties may not perform satisfactorily, including failing to
meet deadlines for the completion of such clinical
trials.
We do not independently conduct clinical trials for our product
candidates. We rely on third parties, such as contract research
organizations, clinical data management organizations, medical
institutions, drug distributers, clinical investigators and
government agencies, to perform this function. Any of these third
parties may terminate their engagements with us at any time. If we
need to enter into alternative arrangements, it would delay our
product development activities. If these third parties do not
successfully carry out their contractual duties, meet expected
deadlines or conduct our clinical trials in accordance with
regulatory requirements or our stated protocols, we will not be
able to obtain, or may be delayed in obtaining, marketing approvals
for our product candidates and will not be able to, or may be
delayed in our efforts to, successfully commercialize our product
candidates. Our product development costs will increase if we
experience delays in testing or obtaining marketing
approvals.
Our reliance on these third parties for clinical development
activities reduces our control over these activities but does not
relieve us of our responsibilities. For example, we remain
responsible for ensuring that each of our clinical trials is
conducted in accordance with the general investigational plan and
protocols for the clinical trial. Moreover, the FDA and foreign
regulatory authorities require us to comply with standards,
commonly referred to as Good Clinical Practice, or GCP, for
conducting, recording and reporting the results of clinical trials
to assure that data and reported results are credible and accurate
and that the rights, integrity of data and confidentiality of
clinical trial participants are protected.
If we are not able to establish additional collaborations, we may
have to alter our development and commercialization
plans.
We may decide to collaborate with pharmaceutical and biotechnology
companies for the development and potential commercialization of
our product candidates. Collaborations are complex and
time-consuming to negotiate and document and we face significant
competition in seeking appropriate collaborators. In addition,
there have been a significant number of business combinations among
large pharmaceutical companies that have resulted in a reduced
number of potential future collaborators. We may not be able to
negotiate collaborations on a timely basis, on acceptable terms, or
at all. If we are unable to do so, we may have to curtail the
development of a product candidate, reduce or delay our development
program or one or more of our other development programs, delay our
potential commercialization or reduce the scope of any sales or
marketing activities, or increase our expenditures and undertake
development or commercialization activities at our own expense. If
we elect to increase our expenditures to fund development or
commercialization activities on our own, we would likely need to
obtain additional capital, which may not be available to us on
acceptable terms, or at all. If we do not have sufficient funds, we
may not be able to further develop our product candidates or bring
them to market and generate product revenue.
Even if we complete the necessary clinical trials, the marketing
approval process is expensive, time consuming and uncertain and may
prevent us from obtaining approvals for the commercialization of
some or all of our product candidates. If we are not able to
obtain, or if there are delays in obtaining, required marketing
approvals, we will not be able to commercialize our product
candidates, and our ability to generate revenue will be materially
impaired.
Our product candidates and the activities associated with their
development and commercialization, including their design, testing,
manufacture, safety, efficacy, recordkeeping, labeling, storage,
approval, advertising, promotion, sale and distribution, are
subject to comprehensive regulation by the FDA, Health Canada and
by comparable authorities in other countries. Failure to obtain
marketing approval for a product candidate will prevent us from
commercializing the product candidate. We have not received
approval to market EB01, EB05 or any other Edesa product candidate
from regulatory authorities in any jurisdiction.
We have only limited experience in filing and supporting the
applications necessary to obtain marketing approvals for product
candidates and expect to rely on third-party contract research
organizations to assist us in this process. Securing marketing
approval requires the submission of extensive preclinical and
clinical data and supporting information to regulatory authorities
for each therapeutic indication to establish the product
candidate’s safety and effectiveness. Securing marketing
approval also requires the submission of information about the
product manufacturing process to, and inspection of manufacturing
facilities by, the regulatory authorities. Regulatory authorities
may determine that EB01, EB05 or any of our other product
candidates is not effective, is only moderately effective or has
undesirable or unintended side effects, toxicities, safety profiles
or other characteristics that preclude us from obtaining marketing
approval or that prevent or limit commercial use.
Regulatory authorities have substantial discretion in the approval
process and may refuse to accept any application or may decide that
our data are insufficient for approval and require additional
preclinical studies, clinical trials or other trials. In addition,
varying interpretations of the data obtained from preclinical and
clinical testing could delay, limit or prevent marketing approval
of a product candidate. Any marketing approval we ultimately obtain
may be limited or subject to restrictions or post-approval
commitments that render the approved product not commercially
viable. If we experience delays in obtaining approval or if we fail
to obtain approval of our product candidates, the commercial
prospects for our product candidates may be harmed and our ability
to generate revenues will be materially impaired.
Even if we obtain marketing approval for our product candidates,
the terms of approvals and ongoing regulation of our products may
limit how we manufacture and market our products, and compliance
with such requirements may involve substantial resources, which
could materially impair our ability to generate
revenue.
Even if marketing approval of a product candidate is granted, an
approved product and our manufacturer and marketer are subject to
ongoing review and extensive regulation, including the possible
requirement to implement a risk evaluation and mitigation strategy
or to conduct costly post-marketing studies or clinical trials and
surveillance to monitor the safety or efficacy of the product. We
must also comply with requirements concerning advertising and
promotion for any of our product candidates for which we obtain
marketing approval. Promotional communications with respect to
prescription drugs are subject to a variety of legal and regulatory
restrictions and must be consistent with the information in the
product’s approved labeling. Thus, we will not be able to
promote any products we develop for indications or uses for which
they are not approved. In addition, manufacturers of approved
products and those manufacturers’ facilities are required to
ensure that quality control and manufacturing procedures conform to
cGMP, which include requirements relating to quality control,
quality assurance and documentation. Accordingly, assuming we
receive marketing approval for one or more of our product
candidates, we and our contract manufacturers will continue to
expend time, money and effort in all areas of regulatory
compliance, including manufacturing, production, product
surveillance and quality control. If we are not able to comply with
post-approval regulatory requirements, we could have the marketing
approvals for our products withdrawn by regulatory authorities and
our ability to market any future products could be limited, which
could adversely affect our ability to achieve or sustain
profitability. Thus, the cost of compliance with post-approval
regulations may have a negative effect on our operating results and
financial condition.
Our relationships with customers, healthcare providers and
professionals and third-party payors will be subject to applicable
anti-kickback, fraud and abuse and other healthcare laws and
regulations, which could expose us to criminal sanctions, civil
penalties, contractual damages, reputational harm and diminished
profits and future earnings.
Healthcare providers, physicians and third-party payors play a
primary role in the recommendation and prescription of any product
candidate for which we may obtain marketing approval. Our future
arrangements with customers, healthcare providers and
professionals, and third-party payors may expose us to broadly
applicable federal anti-kickback, federal and state fraud and abuse
and other healthcare laws and regulations that may constrain the
business or financial arrangements and relationships through which
we market, sell and distribute any product candidate for which we
obtain marketing approval.
Efforts to ensure that our business arrangements with third parties
will comply with applicable healthcare laws and regulations will
involve substantial costs. It is possible that governmental
authorities will conclude that our business practices may not
comply with current or future statutes, regulations or case law
involving applicable fraud and abuse or other healthcare laws and
regulations. If our operations are found to be in violation of any
of these laws or any other governmental regulations that may apply
to us, we may be subject to significant civil, criminal and
administrative penalties, damages, fines, exclusion from government
funded healthcare programs, such as Medicare and Medicaid, and the
curtailment or restructuring of our operations. Violation of
certain of these laws could also result in exclusion, suspension
and debarment from government funded healthcare programs.
Exclusion, suspension or debarment would significantly impact our
ability to commercialize, sell or distribute any product candidate
for which we obtain regulatory approval. If any of the physicians
or other providers or entities with whom we expect to do business
are found to be not in compliance with applicable laws, they may be
subject to criminal, civil or administrative sanctions, including
exclusions from government funded healthcare programs.
Use of social media platforms presents new risks.
We believe that our potential patient
population is active on social media. Social media practices in the
pharmaceutical and biotechnology industries are evolving, which
creates uncertainty and risk of noncompliance with regulations
applicable to our business. For example, patients may use social
media platforms to comment on the effectiveness of, or adverse
experiences with, a product candidate, which could result in
reporting obligations. In addition, there is a risk of
inappropriate disclosure of sensitive information or negative or
inaccurate posts or comments about us or our product candidates on
any social networking website. If any of these events were to occur
or we otherwise fail to comply with applicable regulations, we
could incur liability, face restrictive regulatory actions or incur
other harm to our business.
Risks Related to Our Intellectual Property
We are dependent on license relationships with third parties for
our key drug development programs.
In 2016, we entered into an exclusive license agreement with Yissum
Research Development Company of the Hebrew University of Jerusalem
to obtain exclusive rights to certain know-how, patents and data
relating to a pharmaceutical product. We are using the exclusive
rights to develop the product for therapeutic, prophylactic and
diagnostic uses in topical dermal applications and anorectal
applications, including for the development of EB01 to treat ACD
and EB02 to treat HD. Concurrently, we also entered into a
consulting agreement with an individual associated with Yissum for
the development of the product. If we default or fail to perform
any of the terms, covenants, provisions or our obligations under
the License Agreement, Yissum has the option to terminate the
License Agreement, subject to advance notice to cure such default.
Any termination of this license agreement would have a materially
adverse impact on our business and results from
operations.
In April 2020, we entered into an exclusive license agreement with
NovImmune SA to obtain exclusive rights throughout the world to
certain know-how, patents and data relating to the monoclonal
antibodies targeting TLR4 and CXCL10. We are using these rights to
develop EB05 as a potential treatment for ARDS resulting from
COVID-19. If we default or fail to perform any of the terms,
covenants, provisions or our obligations under the License
Agreement, NovImmune has the option to terminate the License
Agreement, subject to advance notice to cure such default. Any
termination of this license agreement would have a materially
adverse impact on our business and results from
operations.
If we are unable to obtain and maintain patent protection for our
licensed technology and products, or if the scope of the patent
protection is not sufficiently broad, our competitors could develop
and commercialize technology and products similar or identical to
ours, and our ability to successfully commercialize our licensed
technology and products may be adversely affected.
Our success will partially depend on our ability to obtain and
maintain patent protection in the United States and other countries
with respect to our proprietary technology and products. We intend
to protect our proprietary position by filing patent applications
in the United States, in Europe and in certain additional
jurisdictions related to our novel technologies and product
candidates that are important to our business. This 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 or in a timely manner. It is also possible that we
will fail to identify patentable aspects of our research and
development output before it is too late to obtain patent
protection. Moreover, if we license technology or product
candidates from third parties in the future, these license
agreements may not permit us to control the preparation, filing and
prosecution of patent applications, or to maintain or enforce the
patents, covering the licensed technology or product candidates.
These agreements could also give our licensors the right to enforce
the licensed patents without our involvement, or to decide not to
enforce the patents at all. Therefore, in these circumstances,
these patents and applications may not be prosecuted or enforced in
a manner consistent with the best interests of our
business.
The patent position of biotechnology and pharmaceutical companies
generally is highly uncertain, involves complex legal and factual
questions and has been the subject of much litigation. As a result,
the issuance, scope, validity, enforceability and commercial value
of any patents issued to us will likely be highly uncertain. Patent
applications that we file 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 also diminish the value of patents issued to us,
narrow the scope of our patent protection or make enforcement more
difficult or uncertain.
We may become involved in lawsuits or other enforcement proceedings
to protect or enforce our patents or other intellectual property,
which could be expensive, time consuming and potentially
unsuccessful.
Competitors may infringe our patents, trademarks, copyrights or
other intellectual property. To counter infringement or
unauthorized use, we may be required to file claims, which can be
expensive and time consuming to prosecute. 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 patent and other intellectual
property rights are invalid or unenforceable, including for
antitrust reasons. As a result, in a patent infringement
proceeding, a court or administrative body may decide that a patent
of ours is invalid or unenforceable, in whole or in part, or may
construe the patent’s claims narrowly and so refuse to stop
the other party from using the technology at issue on the grounds
that our patents do not cover the competitor technology in
question. Even if we are successful in a patent infringement
action, the unsuccessful party may subsequently raise antitrust
issues and bring a follow-on action thereon. Antitrust issues may
also provide a bar to settlement or constrain the permissible
settlement terms.
Third parties may initiate legal proceedings alleging that we are
infringing their intellectual property rights, the outcome of which
would be uncertain and could have a material adverse effect on the
success of our business.
Our commercial success depends upon our
ability and the ability of our collaborators to develop,
manufacture, market and sell our product candidates and use our
proprietary technologies without infringing the intellectual
property and other proprietary rights of third parties. There is
considerable intellectual property litigation in the biotechnology
and pharmaceutical industries, and 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 interference,
derivation, inter
partes review,
reexamination, reissue or post-grant review proceedings before the
USPTO. The risks of being involved in such litigation and office
proceedings may also increase as our product candidates approach
commercialization, and as our business gains greater visibility
operating as a publicly traded company in the United States. Third
parties may assert infringement claims against us based on existing
or future intellectual property rights and to restrict our freedom
to operate. Third parties may also seek injunctive relief against
us, whereby they would attempt to prevent us from practicing our
technologies altogether pending outcome of any litigation against
us. We may not be aware of all such intellectual property rights
potentially relating to our product candidates prior to their
assertion against us. For example, we have not conducted an
in-depth freedom-to-operate search or analysis of any of our
product candidates. Any freedom-to-operate search or analysis
previously conducted may not have uncovered all relevant patents
and pending patent applications, and there may be pending or future
patent applications that, if issued, would block us from
commercializing any of our product candidates. Thus, we do not know
with certainty whether our product candidates or our
commercialization thereof, does not and will not infringe any third
party’s intellectual property.
If we are found to infringe a third party’s intellectual
property rights, to avoid or settle litigation, we could be
required to obtain a license to enable us to continue developing
and marketing our products and technology. 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 nonexclusive, thereby giving our competitors access to the
same technologies as are licensed to us, and could require us to
make substantial payments. Absent a license, 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 or other
intellectual property right. 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.
Intellectual property litigation could cause us to spend
substantial resources and could 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 likely would 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 that could have a substantial adverse effect on the
price of our common shares. Such litigation or proceedings could
substantially increase our operating losses and reduce the
resources available for development, sales, marketing or
distribution activities. We may not have sufficient financial or
other resources to adequately conduct such litigation or
proceedings. 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. Accordingly,
costs and lost management time, as well as uncertainties resulting
from the initiation and continuation of patent litigation or other
proceedings, could have a material adverse effect on our ability to
compete in the marketplace.
If we are unable to protect the confidentiality of our trade
secrets, our business and competitive position would be
harmed.
We partially rely on trade secrets and
know-how, including unpatented know-how, technology and other
proprietary and confidential information, to maintain our
competitive position. We seek to protect these trade secrets, in
part, by entering into nondisclosure and confidentiality agreements
with parties who have access to them, such as our employees,
corporate collaborators, outside scientific collaborators, contract
manufacturers, consultants, advisors and other third parties.
However, we cannot guarantee that we have executed these agreements
with each party that may have or have had access to our trade
secrets or that the agreements we have executed will provide
adequate protection. Any party with whom we have executed such an
agreement may breach that agreement and disclose our proprietary or
confidential information, including our trade secrets, and we may
not be able to obtain adequate remedies for such breaches.
Enforcing a claim that a party illegally disclosed or
misappropriated a trade secret is difficult, expensive and
time-consuming, and the outcome is unpredictable. In addition, some
courts inside and outside the United States are less willing or
unwilling to protect trade secrets. If any of our trade secrets
were to be lawfully obtained or independently developed by a
competitor, we would have no right to prevent them, or those to
whom they communicate it, from using that technology or information
to compete with us. If any of our trade secrets, particularly
unpatented know-how, were to be obtained or independently developed
by a competitor, our competitive position would be
harmed.
Risks Related to Owning Our Securities
The price of our common shares may continue to be
volatile.
Market prices for securities of early stage pharmaceutical,
biotechnology and other life sciences companies have historically
been particularly volatile, and the market price of our common
shares has been subject to significant fluctuations. This
volatility can be exacerbated by low trading volume. Some of the
factors that may cause the market price of our shares to fluctuate
include:
●
sales or potential sales of substantial amounts of our common
shares;
●
announcements about us or our competitors, including funding
announcements, corporate or business updates, updates on
manufacturing of our products, clinical trial results, regulatory
approvals or new product introductions;
●
developments concerning our product manufacturers;
●
litigation and other developments relating to our licensed patents
or other proprietary rights or those of our
competitors;
●
governmental regulation and legislation;
●
change in securities analysts’ estimates of our performance,
or failure to meet analysts’ expectations;
●
the terms and timing of any future collaborative, licensing or
other arrangements that we may establish;
●
Our ability to raise additional capital to carry through with our
development plans and current and future operations;
●
the timing of achievement of, or failure to achieve, our
manufacturing, pre-clinical, clinical, regulatory and other
milestones, such as the commencement of clinical development, the
completion of a clinical trial or the receipt of regulatory
approval;
●
actions taken by regulatory agencies with respect to our product
candidates;
●
uncontemplated problems in the supply of the raw materials used to
produce our product candidates;
●
introductions or announcements of technological innovations or new
products candidates by us, our potential future collaborators, or
our competitors, and the timing of these introductions or
announcements;
●
market conditions for equity investments in general, or the
biotechnology or pharmaceutical industries in
particular;
●
we may have limited or very low trading volume that may increase
the volatility of the market price of our common
shares;
●
actual or anticipated fluctuations in our results of
operations;
●
hedging or arbitrage trading activity that may develop regarding
our common shares;
●
regional or worldwide recession;
●
sales of our common shares by our executive officers, directors and
significant shareholders;
●
changes in accounting principles; and
●
the loss of any of our key scientific or management
personnel.
Moreover, the stock markets in general have experienced substantial
volatility that has often been unrelated to the operating
performance of individual companies. These broad market
fluctuations may also adversely affect the trading price of our
common shares. In the past, following periods of volatility in the
market price of a company’s securities, shareholders have
often instituted class action securities litigation. Such
litigation, if instituted, could result in substantial costs and
diversion of management attention and resources, which could
significantly harm our profitability and reputation.
If we fail to meet all applicable Nasdaq Capital Market
requirements and Nasdaq determines to delist our common shares, the
delisting could adversely affect the market liquidity of our common
shares and the market price of our common shares could
decrease.
Our common shares are listed on The Nasdaq Capital Market. To
maintain our listing, we must meet minimum financial, operating and
other requirements, including requirements for a minimum amount of
capital, a minimum price per share, and active operations. If we
are unable to comply with Nasdaq’s listing standards, Nasdaq
may determine to delist our common shares. If our common shares are
delisted for any reason, it could reduce the value of our common
shares and their liquidity. Delisting could also adversely affect
our ability to obtain financing for the continuation of our
operations, or to use our common shares in acquisitions. Delisting
may also result in the loss of confidence by suppliers, investors
and employees.
Raising additional capital may cause dilution to our investors,
restrict our operations or require us to relinquish rights to our
technologies or product candidates
Until such time, if ever, as we can generate
substantial product revenues, we expect to finance our cash needs
through a combination of equity offerings, licensing, collaboration
or similar arrangements, grants and debt financings. We do not have
any committed external source of funds. To the extent that the we
raise additional capital through the sale of equity or convertible
debt securities, your ownership interest will be diluted, and the
terms of these securities may include liquidation or other
preferences that adversely affect your rights as a holder of our
common shares. Debt financing, if available, may involve agreements
that include covenants limiting or restricting our ability to take
specific actions, such as incurring additional debt, making capital
expenditures or declaring dividends or other distributions. If we
raise additional funds through licensing, collaboration or similar
arrangements, we may have to relinquish valuable rights to our
technologies, future revenue streams, research and development
programs or product candidates or to grant licenses on terms that
may not be favorable to us. If we are unable to raise additional
funds through equity or debt financings or other arrangements when
needed, we may be required to delay, limit, reduce or terminate our
product development or future commercialization efforts or grant
rights to develop and market product candidates that we would
otherwise prefer to develop and market
ourselves.
Failure to maintain effective internal control over financial
reporting in accordance with Section 404 of the Sarbanes-Oxley Act
of 2002 could have a material adverse effect on our share
price.
Section 404 of the
Sarbanes-Oxley Act of 2002 and the related rules and regulations of
the SEC require an annual management assessment of the
effectiveness of our internal control over financial reporting. As
a smaller reporting company as defined in Rule 12b-2 under the
Securities Exchange Act of 1934, as amended, we are currently
exempt from the auditor attestation requirement of Section 404(b).
If we lose this eligibility, we will incur increased personnel and
audit fees in connection with the additional audit requirements. If
we fail to maintain the adequacy of our internal control over
financial reporting, we may not be able to ensure that we can
conclude on an ongoing basis that we have effective internal
control over financial reporting in accordance with Section 404 of
the Sarbanes-Oxley Act of 2002 and the related rules and
regulations of the SEC. If we cannot in the future favorably assess
the effectiveness of our internal control over financial reporting,
investor confidence in the reliability of our financial reports may
be adversely affected, which could have a material adverse effect
on our share price.
The ownership of our common shares is highly concentrated, which
may prevent you and other shareholders from influencing significant
corporate decisions and may result in conflicts of interest that
could cause our common shares price to decline.
The ownership of our common shares is highly concentrated among
insiders and affiliates. Accordingly, these shareholders will have
substantial influence over the outcome of corporate actions
requiring shareholder approval, including the election of
directors, any merger, consolidation or sale of all or
substantially all of the company’s assets or any other
significant corporate transaction. These shareholders may also
delay or prevent a change of control of the company, even if such a
change of control would benefit the other shareholders of the
company. The significant concentration of share ownership may
adversely affect the trading price of our common shares due to
investors’ perception that conflicts of interest may exist or
arise.
We may be deemed a passive foreign investment company, and as a
result, U.S. shareholders may be subject to special taxation rules
that restrict capital gains treatment, unless the shareholders make
a timely tax election to treat the company as a qualified electing
fund.
A special set of U.S. federal income tax rules applies to a foreign
corporation that is deemed a passive foreign investment company
(“PFIC”) for U.S. federal income tax purposes. Based on
our audited financial statements, income tax returns, and relevant
market and shareholder data, we believe that we likely will not be
classified as a PFIC in the September 30, 2020 taxable year. There
can be no assurance, however, that we will not be considered to be
a PFIC for any particular year in the future because PFIC status is
factual in nature, depends upon factors not wholly within our
control, generally cannot be determined until the close of the
taxable year in question, and is determined annually. If we are
deemed to be a PFIC during the current or any future taxable year,
U.S. shareholders would be subject to special taxation rules
related to gain on sale or disposition of our shares and excess
distributions unless they make a timely election to treat our
shares as a qualified electing fund (“QEF election”). A
QEF election cannot be made unless we provide U.S.
shareholders the information and computations needed to report
income and gains pursuant to a QEF election. Without a QEF
election, U.S. shareholders may not be able to use capital gains
tax treatment and may be subject to potentially adverse tax
consequences. Given the complexities of the PFIC and QEF election
rules, U.S. shareholders may need to incur the time and expense of
consulting a tax adviser about these rules.