ITEM
1. BUSINESS.
Overview
Biostax,
utilizing the Biostax Development Engine, is a developer and marketer of pharmaceutical, biotechnology and MedTech products that have
a well-defined path to market. Biostax has deep expertise and strong partnerships in the fields of autoimmunity and immune restoration
and is able to deliver solutions for people living with autoimmunity, chronic inflammation, infection, and cancer. The Company is focused
on driving the development and commercialization of proprietary mechanisms to prevent, intercept and improve these diseases at affordable
cost. Current efforts are focused on emerging markets where health challenges are prevalent, treatment expenses often limit availability
for patients, and regulatory approval has already been granted. The Company will also continue to pursue regulatory approval and commercialization
initiatives in the U.S. and other international markets.
Business
Model
Utilizing
the Biostax Development Engine, Biostax intends to advance select and efficient small-scale biotechnology, pharmaceutical and MedTech
programs through subsidiaries, investment vehicles and partnerships utilizing a biotech portfolio hub-and-spoke business model. Products
will be deployed from these programs in targeted U.S. and international markets for initial commercialization.
Biostax
is a therapeutic and health tech agnostic, constantly seeking assets with low acquisition costs and high growth opportunities having
significant clinical and commercial potential. The Company targets small-scale early-stage entrepreneurs, inventors, and universities
interested in forming new companies around their inventions. Biostax creates efficient hyper-focused entities designed specifically to
advance the development of the drugs or technology while providing shared resources and synergies among partners. Flexible deal-structuring
practices enables rapid engagement of time-sensitive opportunities and provides Biostax with multiple options to build the best corporate
structure for the development and commercialization of each product.
The
Company’s growth forecast for the next three years is based on growing several internal and partner programs comprised of:
| ● | An internal Biostax program for the treatment of AIH, NAFLD and NASH. Following
the closing of a license agreement with the TaiwanJ, the Company will be provided the small-molecule JKB-122 that the Company plans to
develop for the purposes of treating Autoimmune Hepatitis (AIH), Nonalcoholic fatty liver disease (NAFLD) and nonalcoholic steatohepatitis
(NASH) (SEE THE LICENSE TRANSACTION) |
| ● | TNIB
International(TNIB, TNI): TNI expects to utilize well-established manufacturing, sales, and distribution
partners in Africa through its wholly owned subsidiary TNIB International (TNI) to attempt
to generate revenues from the sale of Lodonal™ which was approved by NAFDAC
|
| | (https://www.globenewswire.com/news-release/2017/05/22/994647/0/en/Immune-Therapeutics-Announces-NAFDAC-Approval-of-Lodonal-for-the-Treatment-of-HIV-in-Nigeria.html) |
| ● | BiostaxRx:
The Company’s wholly owned subsidiary focused on the treatment of inflammaging and
the building a proprietary inflamaging platform in the U.S. that will sell proprietary products
and be powered by an exclusive telehealth platform |
| | |
| ● | A
Non-binding letter of intent (NBLOI) with a possible license or co-development with for a
late stage Hyperphosphatemia product |
The
primary products that are anticipated to be sold via TNI and BiostaxRx by our Company would include:
| ● | Londonal™
– Received Nigeria’s NAFDAC (National Agency for Food and Drug Administration
and Control) approval to market and distribute Lodonal™ as a treatment for HIV/AIDS
in Nigeria. Lodonal™ is a once-a-day immune system regulator for the management of
human immunodeficiency virus and acquired immune deficiency syndrome (HIV/AIDS). We believe
that this product is the only product with regulatory approval for low dose naltrexone therapy
to be used for treatment of HIV, |
| | |
| ● | JKB-122
– a therapy developed for the purposes of treating Autoimmune Hepatitis (AIH),
Nonalcoholic fatty liver disease (NAFLD) and nonalcoholic steatohepatitis (NASH) that shows
anti-fibrotic, immune modulating, and/or anti-inflammatory effects when used for the treatment
of various diseases. The Company will also be pursuing low-cost, open-label trials in the
United States while simultaneously pursuing regulatory approval in emerging markets |
| | |
| ● | Low
Dose Naltrexone (LDN) – a compound formula that is purported to provide immune-modulating benefits that include cancer,
pain, autoimmune, and anti-aging. |
In
addition to the above products, our Company plans to sell supplements to consumers that further support treatment. The focus will be
to sell supplements that complement the Company’s existing therapies that help HIV, chronic kidney disease, and chronic liver disease.
The Company believes that locally sourced supplements are both affordable, further enhance quality of life to existing patients, and
represent additional market opportunities.
The
Company also will continue to seek assets with low acquisition costs and high growth opportunities that have significant clinical and
commercial potential. The Company targets small-scale, early-stage entrepreneurs, inventors, and universities that are interested in
forming new companies around their inventions. This allows the Company to create efficient, hyper-focused entities that are designed
specifically to advance the development of any acquired drugs or technology, while also providing its collaborators with shared resources.
The Company’s flexible deal-structuring practices enable us to have a rapid engagement into time-sensitive opportunities and provides
it with multiple options to build the best corporate structure for the development and commercialization of each of our anticipated products.
Corporate
History
Immune Therapeutics, Inc. (“the Company”,
“Immune”) was initially incorporated in Florida on December 2, 1993, as Resort Clubs International, Inc. (“Resort Clubs”).
It was formed to manage and market golf course properties in resort markets throughout the United States. Galliano International Ltd.
(“Galliano”) was incorporated in Delaware on May 27, 1998 and began trading in November 1999 through the filing of a 15C-211.
On November 10, 2004, Galliano merged with Resort Clubs. Resort Clubs was the surviving corporation. On August 23, 2010, Resort Clubs
changed its name to pH Environmental Inc. (“pH Environmental”). On April 23, 2012, pH Environmental completed a name change
to TNI BioTech, Inc., and on April 24, 2012, we executed a share exchange agreement for the acquisition of all the outstanding shares
of TNI BioTech IP, Inc. On September 4, 2014, a majority of our shareholders approved an amendment to our Amended and Restated Articles
of Incorporation, as amended, to change our name to Immune Therapeutics, Inc. We filed our name change amendment with the Secretary of
State of Florida on October 27, 2014, changing our name to Immune Therapeutics, Inc. On February 28, 2023, we received a written consent from a majority of our outstanding shareholders to change the name of our Company to
“Biostax Corp.” We plan to file our name change amendment with the Secretary of State of Florida at least twenty calendar
days after the filing of a definitive information statement on Schedule 14C, mailing of the information statement to shareholders on record
as of the date of the filing of the definitive information statement, and after the Financial Industry Regulatory Authority, Inc. processes
our name change.
In December 2013, the Company formed a subsidiary,
Cytocom Inc. (“Cytocom”), to focus on conducting LDN and MENK clinical trials in the United States. The Company also
transferred certain rights to Cytocom, including rights, titles, and interests in or relating to intellectual property, which are further
described in the section of “Intellectual Property – Licensing”. On June 4, 2018, our Company and Cytocom entered
into a stock purchase agreement (the “Stock Agreement”), pursuant to which the Company canceled approximately $4,000,000
of debt it owed to Cytocom in exchange for ten percent (10%) of the issued and outstanding common stock of Cytocom, as calculated on a
fully diluted basis. On April 8, 2019, pursuant to a licensing amendment, which is further described under our “Intellectual
Property – Licensing” we owned 15.57% of the outstanding common shares of Cytocom.
In the third quarter of 2021, Cytocom announced the completion of its merger
with Cleveland BioLabs, Inc. (“CBLI”) which resulted in the Company’s receipt of 1,150,000 common shares of CBLI,
reflecting the Company’s retained minority interest in Cytocom. The merger was completed in July 2021. Subsequent to the merger,
CBLI adopted a new corporate name, Statera BioPharma, Inc., with the ticker symbol “STAB,” effective on September 1, 2021.
Cytocom emerged as a publicly traded entity following the merger with CBLI.
The consolidated financial statements of the Company
include the following inactive subsidiaries: (1) TNI BioTech, Ltd., a BVI company in Tortola, British Virgin Islands incorporated in October
2012 which was set up to market and sell Naltrexone outside the United States, (2) TNI BioTech, LTD, United Kingdom incorporated in August
2013 which was set up as a micro, small or medium-sized enterprise to be able to sell administrative and financial assistance programs
offered by European Medicines Agency, (3) Airmed Biopharma Limited, Dublin Ireland incorporated in March 2014 which was set up to qualify
for tax incentives for Irish holding/headquartered companies to benefit from the network of double tax treaties that reduce withholding
taxes and (4) Airmed Holdings Limited an Irish company domiciled in Bermuda incorporated in March 2014 set up to manage international
distribution.
Our
Market Opportunity
Biostax
will market and sell products it may successfully license or develop through TNIB International in the emerging territories it serves,
and in the U.S. through a subsidiary or other commercial actions to be determined.
TNI
Nigeria,
the most populous country in Africa, is home to one of the largest HIV epidemics in the world and has one of the highest rates of new
infections in sub-Saharan Africa. The total number of people living with HIV in this region is estimated at between 2-3.5 million.
There
is a significant unmet need for NAFLD data from Africa, with some sources citing 13% https://www.cambridge.org/core/journals/global-health-epidemiology-and-genomics/article/nonalcoholic-fatty-liver-disease-in-africa-a-hidden-danger/F545E87E177B63464CC003F181E41C8D
) and the reported prevalence for NAFLD in Africa in the general population is likely to be an underestimate. Globally, people suffering
from NASH and/or NAFLD ranges from approximately 25% for NAFLD (https://www.thelancet.com/journals/langas/article/PIIS2468-1253(22)00165-0/fulltext)
and 1.5-6.45% for NASH. JKB-122 provide effective and highly affordable treatment compared to currently available alternatives. In addition
to Nigeria, the Company also has relationships and opportunities in Equatorial Guinea, Malawi and South Africa which will be further
developed over the next few years.
To
support TNI efforts, Biostax plans to leverage existing relationships in emerging territories to market and sell its products, rapidly onboarding
patients. Multiple manufacturing, distribution and contract sales organizations located in Africa will focus on expanding the customer
base and achieving steady growth. Internal sales efforts may be supported and driven by existing relationships within a few industries
operating in Africa.
BiostaxRx
BiostaxRx
will be a wholly owned subsidiary and plans to utilize a telehealth system focused on inflammaging. The internal business development
team plans to initially target large providers with which the Company has existing relationships. Biostax will support the platform with
exclusive compounders to meet demand and has engaged with a former compounding facility operator who will provide development, leadership,
guidance and oversight.
Research
and Development
The
Company targets small-scale early-stage entrepreneurs, inventors and universities interested in forming new companies around their
inventions and R&D is focused around those early-stage ideas or licensable later-stage assets with a small group of founders at
their core. Biostax empowers these small efficient biotechs that are ultimately responsible for research and development. We plan to
pair our assets, subsidiaries and vehicles with executives, vendors and key opinion leaders (KOLs) having decades of experience, to
create an infrastructure where capital goes significantly further, provide solutions to quickly change strategy and enable our
partners navigate their way to a mutual success.
Competition
The
industry for the treatment of humans is highly competitive and subject to rapid and significant technological changes. We believe that
our technology rights provide our sublicensees with competitive advantages. Our sub-licensees will face potential competition from many
different sources, including large pharmaceutical and biotechnology companies, specialty pharmaceutical and generic drug companies, academic
institutions, government agencies and research institutions.
Many
of our sublicensee’s potential competitors have substantially greater financial, technical, and human resources than we do and
significantly greater experience in the discovery and development of product candidates, obtaining FDA and other regulatory approvals
of products and the commercialization of those products. Accordingly, those competitors may be more successful than our sublicensees’
may be in obtaining FDA approval for drugs and achieving widespread market acceptance. Their competitors’ drugs may be more effective,
or more effectively marketed and sold, than any drug our sublicensees may commercialize and may render their product candidates obsolete
or non-competitive before they can recover the expenses of developing and commercializing any of their product candidates. Further, the
development of new treatment methods for the conditions our sub licensees are targeting could render their drugs non-competitive or obsolete.
The ability of our sublicensees to overcome competitive factors will materially impact the value of our equity holdings in such licensees.
Competitive
Strengths
| ● | By
being therapeutic and health technology agnostic, Biostax strives to build a Company with
comprehensive diversification potentially lowering the overall risk profile of the Company. |
| | |
| ● | Where
Biostax will be diversified across its subsidiaries, the subsidiaries will remain specialized
allowing for greater expertise per subsidiary. The hyper focus and efficiency of these subsidiaries
enables improved scale, increases the ability to attract key specialized talent, and preserves
the original inventor’s entrepreneurial culture. |
| | |
| ● | Biostax
provides operational efficiency to subsidiaries from shared resources and Synergies Among
Partners (SAP). Support to subsidiaries can include governance, manufacturing, financing,
business development, and legal support - functions often lacking in small-scale subsidiaries. |
| | |
| ● | The
Biostax business model allows for flexible deal making and fundraising as subsidiaries are
not bound to the fundraising strategy of the parent Company. A subsidiary could be private
or public and benefit from diverse investment methods, along with debt financing. Biostax
intends to maintain a mix of public and private subsidiaries. |
| | |
| ● | For
investors, the Biostax model provides flexibility. Investors can invest directly in the parent
Company, which allocate investments across its portfolio. They may also choose to invest
directly in a subsidiary Company that they believe may produce the highest returns. |
| | |
| ● | The
Biostax model provides for risk mitigation through a diverse subsidiary structure which potentially
insulates the parent from potential failures with risk mostly consolidated in the subsidiary. |
Due
to Biostax portfolio operational efficiencies, the Company can support more assets across subsidiaries than a traditional biotech model
and potentially provide more “shots on goal” to mitigate the impact of any single failure.
Intellectual
Property
We
believe we have a strong IP position that is continuously growing based on our out-license agreements with Forte Animal Health,
Inc. and in-license agreement with TaiwanJ. Through our license with TawainJ, our patent portfolio includes licensed and assigned
patents covering treatments for organ damage (liver, kidney and lung, rheumatoid arthritis, Crohn’s Disease, ulcerative
colitis, and multiple sclerosis In addition, our portfolio includes patent families covering treatments to trigger a continuous
immune response, treatments of inflammatory and ulcerative disease of the bowel with opioid antagonists, and for combinational
therapies for the treatment of neoplasias using the opioid growth factor receptor.
Our
success depends in part on our ability to operate without infringing on the proprietary rights of others and to prevent others from infringing
our proprietary rights. Our policy is to conduct surveillance of third-party patents and patent application publications periodically
while developing and maintaining protection of our proprietary position by, among other methods, filing or in-licensing US and foreign
patents and applications related to our technology, inventions, and improvements that are important to the development and implementation
of our business.
We
also rely on trademarks, trade secrets, know-how, continuing technological innovation, confidentiality agreements, and invention assignment
agreements to develop and maintain our proprietary position. The confidentiality agreements are designed to protect our proprietary information
and the invention assignment agreements are designed to grant us ownership of technologies that are developed for us by our employees,
consultants, or other third parties. We seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining
physical security of our premises and physical and electronic security of our information technology systems. While we have confidence
in our agreements and security measures, either may be breached, and we may not have adequate remedies. In addition, our trade secrets
may otherwise become known or independently discovered by competitors.
Besides
the specific patents mentioned below under the section “Patents” immediately below, we cannot be sure that patents
will be granted with respect to any of our pending patent applications pending now or filed by us in the future, nor can we be absolutely
certain to what degree, if any, our existing patents or any patents that may be granted to us in the future will be commercially useful
in protecting our commercial products and methods of using and manufacturing the same.
Patents
Our
Company has been granted, assigned, or licensed 28 patents from the United States, Germany, Russia, India, Ireland, the People’s
Republic of China, and the United Kingdom. These patents have been substantially licensed from Statera Biopharma, (previously Cytocom,
Inc.) and TaiwanJ, in license agreements as described below.
On
September 30th 2022, the Company entered into a licensee agreement with TaiwanJ Pharmaceuticals a Taiwan corporation having
a principal place of business 3F-4, No6-1 Sec2 ShenYi Rd, Chubei, Hsinchu, Taiwan (herein referred to as “TPEX” or “Licensor”
for the product JKB-122.
| A. | Patent
applications in relation to the composition of matter. |
Country |
|
Application
No. |
|
Title |
USA |
|
16/966,645 |
|
Pharmaceutical
formulation for a solid dosage form of opioid receptor antagonists |
| B. | Patents
and patent applications in relation to the primary indication of use. |
Multiple
Indications
|
Country |
|
Application
No. |
|
Patent
No. |
|
Patent
Term |
|
Utility
Claim |
Taiwan |
|
092132155 |
|
I275591 |
|
2003/11/17
~
2023/11/16 |
|
Organ
Damage (Liver, Kidney, Lung Damage) |
Taiwan |
|
095146643 |
|
I430992 |
|
2003/11/17
~
2023/11/16 |
|
Rheumatoid
arthritis, Organ damage (Liver or kidney damages), Crohn’s Disease, Ulcerative colitis, Multiple sclerosis |
Hong Kong |
|
14104476.9 |
|
HK1192711
(License
out)
官網資訊專利所有人為
TAIWANJ
PHARMACEUTICALS CO., LTD
(2022/4/20
瀏覽) |
|
2003/05/16
~
2023/05/16 |
|
Organ
Damage (Liver, Kidney, Lung Damages), Liver damage caused by alcohol abuse, hepatitis, cirrhosis, bacterial infection or environment
toxins |
India |
|
3435/DELP/2004 |
|
IN240229
(License
out)
官網沒有從TAIWANJ
讓渡出
去的文件(2022/4/20
瀏覽) |
|
2003/05/16
~
2023/05/16 |
|
Organ
Damage (Liver, Kidney, Lung Damages), Liver damage caused by alcohol abuse, hepatitis, cirrhosis, bacterial infection or environment
toxins |
Japan |
|
20040505341 |
|
JP5438250
(License
out)
官網資訊權利者為タイワ
ンジェファーマシュティカ
ルズ
カンパニー リミテ
ッド(2022/4/20
瀏 覽) |
|
2003/05/16
~
2023/05/16 |
|
Liver and kidney damages
associated with overproduction of TNF-α |
Singapore |
|
2004063871 |
|
SG108388
(License
out)
官網資訊專利所有人為
TAIWANJ
PHARMACEUTICALS CO., LTD
(2022/4/20
瀏覽) |
|
2003/05/16
~
2023/05/16 |
|
Organ
Damage (Liver, Kidney, Lung Damages), Liver damage caused by alcohol abuse, hepatitis, cirrhosis, bacterial infection or environment
toxins |
USA |
|
10/936,431 |
|
US 7,923,454 |
|
2004/09/08
~
2025/01/27 |
|
Organ
Damage (Liver, Kidney, Lung Damages), Rheumatoid arthritis, Crohn’s Disease, Multiple sclerosis |
USA |
|
12/400,344 |
|
US
8,017,622 |
|
2009/03/09
~
2023/05/16 |
|
Crohn’s
Disease, Liver Damage |
USA |
|
13/228,527 |
|
US 9,776,971 |
|
2011/09/09
~
2023/05/16 |
|
Organ
Damage (Liver, Kidney Damages), Crohn’s Disease, Pulmonary fibrosis |
AIH
(Autoimmune Hepatitis) |
Country |
|
Application
No. |
|
Patent
No. & Current Status |
|
Patent
Term |
|
Utility
Claim |
Taiwan |
|
105109186 |
|
TWI612961 |
|
2016/03/24
~
2036/03/24 |
|
Nalmefene,
naltrexone or derivatives thereof for use in treating AILD |
USA |
|
15/078,342 |
|
US
9,757,372 |
|
2016/03/23
~
2036/03/23 |
|
Nalmefene,
naltrexone or derivatives thereof for use in treating AILD |
Australia |
|
20160235093 |
|
AU2016235093 |
|
2016/03/24
~
2036/03/24 |
|
Nalmefene,
naltrexone or derivatives thereof for use in treating AILD |
Canada |
|
2983121 |
|
CA2983121 |
|
2016/03/24
~
2036/03/24 |
|
Nalmefene,
naltrexone or derivatives thereof for use in treating AILD |
EPO |
|
EP16769679.8 |
|
EP3273958
(DE, FR, GB) |
|
2016/03/24
~
2036/03/24 |
|
Nalmefene,
naltrexone or derivatives thereof for use in treating AILD |
|
|
|
|
|
|
|
|
|
Korea |
|
1020177030832 |
|
KR10-2064334
(Licensed out)
官網資訊權利所有人為 타이완제이 파마슈티컬스
컴퍼니
리미티드(2022/4/20 瀏 覽) |
|
2016/03/24
~
2036/03/24 |
|
Nalmefene,
naltrexone or derivatives thereof for use in treating AILD |
|
|
|
|
|
|
|
|
|
Russia |
|
2017137008 |
|
RU2707560 |
|
2016/03/24
~
2036/03/24 |
|
Nalmefene,
naltrexone or derivatives thereof for use in treating AILD |
NASH
(Non-Alcoholic Steatohepatitis), NAFLD (Non-Alcoholic Fatty Liver Disease), ASH (Alcoholic Steatohepatitis) |
Country |
|
Application
No. |
|
Patent
No. & Current Status |
|
Patent
Term |
|
Utility
Claim |
USA |
|
15/492,198 |
|
US
10,045,977 |
|
2017/04/20
~
2037/04/20 |
|
Nalmefene,
naltrexone or derivatives thereof for use in treating NASH, NAFLD or ASH |
Taiwan |
|
106130679 |
|
Undergoing
Examination |
|
— |
|
Nalmefene,
naltrexone or derivatives thereof for use in treating NASH, NAFLD or ASH |
Australia |
|
2017253228 |
|
2017253228 |
|
2017/04/20
~
2037/04/20 |
|
Nalmefene,
naltrexone or derivatives thereof for use in treating NASH, NAFLD or ASH |
Canada |
|
3021788 |
|
3,021,788 |
|
2017/04/20
~
2037/04/20 |
|
Nalmefene,
naltrexone or derivatives thereof for use in treating NASH, NAFLD or ASH |
China |
|
201780024846.0 |
|
Undergoing
Examination
(Licensed out)
官網沒有申請權轉 移 資 訊
(2022/4/20 瀏覽) |
|
— |
|
Nalmefene,
naltrexone or derivatives thereof for use in treating NASH, NAFLD or ASH |
|
|
|
|
|
|
|
|
|
Russia |
|
2018136387 |
|
RU2717677 |
|
2017/04/20
~
2037/04/20 |
|
Nalmefene,
naltrexone or derivatives thereof for use in treating NASH, NAFLD or ASH |
License
with Cytocom Inc. (which is now Statera Biopharma Inc.)
In
December 2013, the Company formed Cytocom as a subsidiary of the Company, and transferred rights, titles and interests to the Company
as follows:
|
(i) |
Patents,
patent applications, and all divisional, continuations and continuations-in-part thereof, together with all reissues, reexaminations,
renewals, and extensions thereof and all rights to obtain such divisional, continuations and continuations-in-part, reissues, reexaminations,
renewals and extensions, and all utility models and statutory invention registrations and any other such analogous rights. |
|
|
|
|
(ii) |
Trademarks,
service marks, Internet domain names, trade dress, trade styles, logos, trade names, services names, brand names, corporate names,
assumed business names and general intangibles and other source identifiers of a like nature, together with the goodwill associated
with any of the foregoing, and all registrations and applications for registrations thereof, together with all renewals and extensions
thereof and all rights to obtain such renewals and extensions. |
|
(iii) |
Copyrights,
mask work rights, database and design rights, moral rights and rights in Internet websites, whether registered or unregistered and
whether published or unpublished, all registrations and recordings thereof and all applications in connection therewith, together
with all renewals, continuations, reversions and extensions thereof and all rights to obtain such renewals, continuations, reversions
and extensions. |
|
|
|
|
(iv) |
Confidential
and proprietary information, including, trade secrets and know-how. |
On
May 1, 2018, the Company entered into an amended and restated licensing agreement (the “Restated Agreement”) with Cytocom
Inc. The Restated Agreement restates the licensing arrangement between the Company and Cytocom and grants the Company distribution and
marketing rights for Lodonal™ and meta enkephalin (MENK) for humans in certain Emerging Markets. In addition, the Company was granted
the rights to distribute and market Lodonal™ and MENK for animal use in the United States. The royalty due to Cytocom was reduced
from 5% to 1% of sales in the Restated Agreement, and the Company no longer would have any ongoing obligations to pay for costs in connection
with the assets of Cytocom. While the Company formalized the agreement in May 1 2018, Penn State University, a licensor that was part
of the group of intellectual property that was to be moved, did not consent the move of their license or payables to Cytocom at the time
of the Restated Agreement.
On
April 8, 2019, the Company signed a second amendment to its licensing agreement (the “Second Amendment”) with Cytocom. The
Second Amendment confirmed that, (as of its effective date December 31, 2018) the Company owned 15.57% of the Cytocom common shares issued
and outstanding on that date. The Company agreed to assume responsibility to repay all accounts payable obligations and accrued liabilities
owed by Cytocom as of the effective date, except those accounts’ payable obligations and accrued liabilities as specified in the
Second Amendment. The Company also assumed the responsibility to repay all notes payable, together with any interest or fees payable
thereon, owed by Cytocom as of the effective date, except those notes’ payable obligations, together with any interest or fees
payable thereon, as specified by the Second Amendment. The parties further agreed that in the event of a change of control of Cytocom,
and at the option of Cytocom, the Company would have the right to purchase outright the Company’s licensing rights to Emerging
Markets for humans under the License Agreement at a price equal to value of those licensing rights as determined by and independent valuator
acceptable to the Company and Cytocom.
On
May 13, 2020, the Company and Cytocom entered into an Amendment to the Second Amendment (“Third Amendment”) that was effective
December 31, 2018. The sublicense provides Cytocom with the Company’s previously licensed rights for LDN and MENK in Emerging Markets.
The original terms for consideration for the sublicense were not finalized until August 12, 2020, at which time Cytocom and the Company
signed a letter agreement in which Cytocom agreed to assume a combination of defaulted notes plus certain other liabilities. Such terms
were amended, and the Company agreed to transfer all the rights, title, and interests to Cytocom in technology licensed from Penn State
Research Foundation (“PSU”) in exchange for Cytocom assuming all past due and future obligations under the PSU license.
While the Company formalized the agreement to assign all outstanding liabilities due to PSU, a vendor of the Company, PSU did not consent
to the assignment of the payables to Cytocom. As of December 31, 2021, the Company had no outstanding accounts payable balances due to
PSU.
On
July 20, 2021, Cytocom and the Company agreed to modify the terms of the original sublicense. The renegotiated terms are presented below.
The assignment of the Notes and associated accrued interest and penalties in default was fully executed in the third quarter of 2020
with the transfer of the notes upon the creditors’ signoff. The Company recognized a gain upon the assignment of these notes in
the third quarter of 2020.
Consideration
for License to Cytocom as of December 31, 2022
Consideration
/ Assumption of: | |
| |
Notes and associated accrued
interest in default | |
$ | 3,302,209 | |
Accounts payable and accruals | |
| 230,000 | |
Past Due Employee
Obligations | |
| 1,110,567 | |
Total anticipated Consideration | |
$ | 4,642,776 | |
Recognized through
December 31, 2020 | |
| (3,302,209 | ) |
To Be Recognized
upon Execution | |
$ | 1,340,567 | |
As
of December 31, 2022, the Notes transaction has not been fully executed. The Notes in default have been assigned and the transfer signed
off by the creditors, but Cytocom still has not completed the assumption of the agreed upon obligations. Until the transaction is completed,
Cytocom (now, Statera Biopharma, Inc.) does not have a clear title and interest to our Company’s technology.
In March
2023, the Company and Cytocom negotiated an amendment to the licensing agreement (“Third License Amendment”) which has been
submitted to the board of directors of Cytocom for approval. The Third License Amendment:
|
● |
Restates the licensing arrangement between the Company and Cytocom and
grants the Company manufacturing, distribution and marketing rights for LDN and MENK in humans for all indications except Crohn’s
Disease (worldwide), and in animals (US only). |
|
● |
Grants the Company the right grant sublicenses to third parties for the
manufacturing, distribution and marketing of these products. |
|
● |
Updates the royalty rates as follows: |
Annual Sales of Royalty Qualifying Licensed Products | |
Royalty Rate | |
<$500,000,000 | |
| 2 | % |
500,000,000 to < $1,000,000,000 | |
| 4 | % |
> $1,000,000,000) | |
| 6 | % |
The Company
anticipates the Third License Amendment to be approved by the boards of directors of both Cytocom and Biostax in April 2023.
License
with Forte Animal Health, Inc.
On
July 8, 2021, the Company signed a license agreement (the “License Agreement”) with Forte Animal Health Inc., a Delaware
corporation (“Forte”) dated February 27, 2020. Forte is a related party to the Company as predominantly all shareholders of Forte are also shareholders of the Company.
Under
the License Agreement, the Company granted Forte an exclusive license to all of its patents, pending patent applications, formulations,
proprietary processes and methods, know-how and other intellectual property rights owned, licensed or controlled by the Company in the
field of animal health.. Milestone payments and royalties are defined in the agreement, with milestone payments being based successful
receiving MUMS designations from the FDA and successfully filing conditional approvals with the FDA and the royalties based on our Company’s
sales of the products during the license period.
The
initial license fee included the assignment of certain Company defaulted notes and other vendor and employee obligations. During the
second quarter of 2022, these debtors associated with the assigned obligations completed the assignment of $3,165,150 in obligations
to Forte. The Company recognized a non-cash gain upon the assignment of these obligations.
In
connection with the license agreement, Forte issued 2,235,000 of its outstanding stock to the Company, representing 15% of the issued
and outstanding shares of Forte. The Company has not recognized a minority interest in the balance sheet as of December 31, 2022, as
Forte is in the start-up phase of its business and has no earnings from operations to date.
Forte
has agreed to make payments to the Company in connection with this agreement as follows:
| ● | Initial
License Fee – payable upon the assignment of certain Company notes payable; |
| ● | Development
Milestone Payments – payable upon the occurrence of the identified events, and payable
as a one-time, non-creditable, non-refundable payments of $100,000. Payments will be earned
by our Company upon: (1) a successful MUMS designation and (2) upon successful conditional
approval. Minor Use and Minor Species (MUMS) Designation is a status similar to “orphan
drug” status for human drugs. It makes the sponsor eligible for incentives to support
the approval or conditional approval of the designated use. However, designation does not
allow the drug to be marketed, sold, promoted or advertised until they are approved or conditionally
approved by the FDA |
| ● | Commercial
Milestone Payments – payable upon reaching the mutually agreed aggregate net sales.
Forte will pay our Company a one-time, non-creditable, non-refundable milestone payment,
which are to be negotiated and addressed in a separate Amendment at a later point in time. |
| ● | Royalties
during the royalty term (generally 15 years from the first sale of a product in a country),
royalties on annual net sales as follows: |
Annual
Sales of Royalty Qualifying Licensed Products | |
Royalty
Rate | |
<$500,000,000 | |
| 2 | % |
500,000,000 to < $1,000,000,000 | |
| 4 | % |
> $1,000,000,000) | |
| 6 | % |
TaiwanJ
Pharmaceuticals Co. Ltd.
On
September 30, 2022, the Company entered into an Intellectual Property License Agreement (the “Agreement”) with TaiwanJ
Pharmaceuticals Co. Ltd., a Taiwanese corporation (“TaiwanJ”), pursuant to which TaiwanJ granted the Company an exclusive,
royalty-bearing license, including the right to grant sublicenses, to commercialize and sell TaiwanJ’s pharmaceutical products
including naltrexone, or any other small molecule composition that either alone or in combination can be formulated and used in humans
to show anti-fibrotic, immune-modulating, and/or anti-inflammatory effects for the treatments of various diseases, (the “Products”).
The
Company also received a non-exclusive worldwide right to make, manufacture, and receive technical manufacturing assistance from TaiwanJ
for the creation of the Products.
The
term of this Agreement is to be perpetual, but termination of the Agreement may occur upon (i) the Company providing sixty (60) days
prior written notice to TaiwanJ of termination, (ii) termination of the agreement for a material breach of the agreement, and failure
to cure that breach within ninety (90) days after receiving notice of such breach, (iii) the dissolution of the Company, or (iv) upon
bankruptcy of either party, upon receiving sixty (60) days’ notice by Registered Mail.
The
Company may grant sublicenses under the Agreement. Upon the granting of any such sublicense, the Company will pay TaiwanJ royalties based
on the stage of development of the Products. The Company will pay a royalty of 30% of the cash proceeds received from any sublicense
if the sublicense occurs before completing a clinical trial, 10% if the sublicence occurs after completing any trial, and 5% if sublicense
occurs after any new drug application (“NDA”) submission.
Pursuant
to the terms of the license in the Agreement, the Company shall adhere to a plan of development and attain certain milestones. As part
of the Development Plan, the Company shall (i) use commercially reasonable efforts and cause its sublicenses to use commercially reasonable
efforts to develop licensed Products, (ii) begin commercial sales of the Products in a country no less than eight (8) months after the
first registration of the Products in that same country, and (iii) following commercialization, the Company must keep the Products reasonably
available to the public.
In
consideration for the license, the Company will provide (i) a non-refundable cash payment of $500,000 within ninety (90) days of September
30, 2022, (ii) a non-refundable cash payment of $500,000 at the earliest of either the National Agency for Food and Drug Administration
and Control (“NAFDAC”) approval for JKB-122 in Africa for any indication, or the enrollment of the first patient in
a Food and Drug Administration (“FDA”) trail for Crohn’s Disease, (iii) 250,000 shares of common stock of the
Company within sixty (60) days of September 30, 2022, (iv) an annual payment of $100,000 each anniversary of the date of the agreement
until the Company gains regulatory approval in Africa, (v) milestone payments (described below), and (vi) royalties on net sales. The
250,000 shares of common stock represent approximately 0.32% of the currently outstanding common stock of the Company.
The
Company will be required to pay one-time payments and issuances of equity for the achievement of each of four milestones in the commercialization
and development of the Products. In addition to the milestone payments, if there is any year that the Company is not required to pay
a Milestone Payment, the Company will pay a royalty percentage payment based on the total net sales due within sixty (60) days after
the end of each calendar quarter (the “Royalty Payment”).
If
the Company fails to make any of the above-described payments upon their designated due date, the payment amount will bear the lower
of (i) 1.5% interest per month or (ii) the maximum rate allowed by law, to be compounded quarterly. The interest will accrue beginning
on the first day after the payment is due.
TaiwanJ
will maintain, protect, and defend all patent-related intellectual property and the Company will reimburse TaiwanJ for any expenses related
to intellectual property patent payments that exclusively benefit the Company. If either the Company or TaiwanJ becomes aware of any
possible or actual infringement of any patent rights, then each party will notify the other, and provide it with details of such an infringement.
On January 19, 2023, the Company’s board of directors voted to issue
an additional 250,000 shares of common stock to TaiwanJ. These shares were issued as a result of the Company’s delay in paying the
required $500,000 up front license agreement fee.
Both
the Company and TaiwanJ are limited in liability to the total amounts paid under this Agreement for any damages arising from negligence,
strict liability, or any other equitable theory. Further, both the Company and TaiwanJ agree to indemnify and hold harmless each other,
and their respective agents, for any claims or costs arising from this Agreement or any sublicenses for any cause of action relating
to any product, process, service made, used, or sold pursuant to this Agreement.
Our
Strategy
Our
Company is focused on driving the development and commercialization of proprietary mechanisms to prevent, intercept, and improve such
diseases at affordable costs. Our current efforts are focused on emerging markets where health challenges are prevalent, treatment expenses
often limit availability for patients, and regulatory approval has previously been granted. We intend to advance select and efficient
small-scale biotechnology, pharmaceutical, and Med Tech programs through subsidiaries, investment vehicles, and partnerships by using
a biotechnology portfolio hub-and-spoke business model. Such products are anticipated to be deployed from these programs in targeted
United States and international markets for initial commercialization.
Employees
As
of December 31, 2022, our Company had 0 full-time employees (excluding our operating subsidiaries described above). None of our employees
are represented by labor unions, and we believe that we have an excellent relationship with our employees.
Regulation
Our
business is subject to significant and diverse regulations governing, among other things, research, operations and product approval.
Regulatory compliance is critical to our ability to operate, our management of potential liabilities, and ultimately, our ability to
sell our products. We also rely on our partners’ compliance with laws and regulations applicable to the products they produce.
We do not independently monitor whether our collaborators comply with applicable laws and regulations. Please see the risk factor entitled
“We do not currently manufacture Low Dose Naltrexone (LDN) and therefore must rely on third-party manufacturing to supply the drug
for clinical trials.”
The
areas of our business that these and other authorities regulate include, among others:
| ● | product
claims and advertising; |
| ● | product
ingredients; and |
| ● | how
we manufacture, package, distribute, import, export, sell and store our products. |
In
addition, our products sold in foreign countries are also subject to regulation under various national, local and international laws
that include provisions governing, among other things, the formulation, manufacturing, packaging, labeling, advertising and distribution
of dietary supplements and over-the-counter drugs.
We
are also subject to a variety of other regulations in the United States, including those relating to taxes, employment, import and export,
and intellectual property.
Food
and Drug Administration
In
the United States, pharmaceuticals and biological products must receive approval from the FDA before being marketed. The FDA approves
drug products other than biological products through its authority under the Federal Food, Drug, and Cosmetic Act, or FDCA, and implementing
regulations. The FDA licenses biological products, or biologics, through its authority under the Public Health Service Act, or PHSA,
and implementing regulations. The development processes for obtaining FDA approval for a non-biological drug product under the FDCA and
for biologic licensure under the PHSA are generally similar but have product-related differences reflected in regulations and in FDA
guidance documents.
The
process required by the FDA before a pharmaceutical product candidate may be marketed generally involves the following:
| ● | Completion
of preclinical laboratory tests and in vivo studies in accordance with applicable
regulatory requirements, which may include the FDA’s current Good Laboratory Practice
regulations and the Animal Welfare Act; |
| ● | Submission
to the FDA of an IND for human clinical testing, which must become effective before human
clinical trials commence; |
| ● | Performance
of adequate and well-controlled human clinical trials according to the FDA’s Good Clinical
Practices, or GCP, regulations, and any additional requirements for the protection of human
research subjects and their health information, to establish the safety and efficacy of the
proposed product candidate for each intended use; |
| ● | Preparation
and submission to the FDA of an application for marketing approval that includes substantial
evidence of safety, purity and potency for a biologic, or of safety and efficacy for a non-biologic
drug, including from results of nonclinical testing and clinical trials; |
| ● | Satisfactory
completion of an FDA inspection of the manufacturing facility or facilities where the product
candidate is produced to assess compliance with cGMP and that the methods and controls are
adequate to assure the product candidate’s identity, safety, strength, quality, potency
and purity; |
| ● | Potential
FDA inspection of the nonclinical and clinical trial sites that generated the data in support
of the application; and |
| ● | FDA
review and approval of the application |
Preclinical
testing
Prior
to testing any product candidate in humans in the United States, a company must develop preclinical data, which generally includes laboratory
evaluation of the product candidate’s chemistry and formulation, as well as toxicological and pharmacological studies in animal
species to assess safety and quality. Certain types of animal studies must be conducted in compliance with the FDA’s Good Laboratory
Practice regulations and the Animal Welfare Act, which is enforced by the Department of Agriculture.
IND
application
Prior
to commencing clinical trials in the United States to evaluate a product candidate’s safety and efficacy, a person or entity must
submit to the FDA, an IND application, which contains preclinical testing results and other data and information that allow the FDA to
evaluate whether there is an adequate basis for testing the drug in humans. If the FDA does not object to the IND application within
30 days of submission, the clinical testing proposed in the IND may begin. Even after the IND has gone into effect and clinical testing
has begun, the FDA may put clinical trials on “clinical hold,” suspending or, in some cases, ending them because of safety
concerns or for other reasons.
Human
clinical trials under an IND
Clinical
trials involve administering the product candidate to healthy volunteers or patients under the supervision of qualified investigators.
Clinical trials must be conducted and monitored in accordance with the FDA’s regulations, such as GCP requirements. Each clinical
trial must also be conducted under a protocol that details, among other things, the study objectives, parameters for monitoring safety,
and the efficacy criteria, if any, to be evaluated. The protocol is submitted to the FDA as part of the IND and reviewed by the agency.
Further, each clinical trial must be reviewed and approved by an Institutional Review Board, or IRB, at or servicing each institution
at which the clinical trial will be conducted. An IRB is charged with protecting the welfare and rights of trial participants and considers,
among other things, whether the risks to individuals participating in the clinical trials are minimized and are reasonable in relation
to anticipated benefits. The sponsor of a clinical trial, the investigators, and IRBs each must comply with requirements and restrictions
that govern, among other things, obtaining informed consent from each study subject, complying with the protocol and investigational
plan, adequately monitoring the clinical trial, and timely reporting adverse events.
The
sponsor of a clinical trial or the sponsor’s designated responsible party may be required to register certain information about
the trial and disclose certain results on government or independent registry websites, such as clinicaltrials.gov.
Human
clinical trials typically are conducted in three sequential phases that may overlap or be combined:
| ● | Phase
1. The product candidate is introduced into a small number of healthy human subjects
and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion
and, if possible, to gain early understanding of its effectiveness. For some product candidates
for severe or life-threatening diseases, especially when the product candidate may be too
inherently toxic to ethically administer to healthy volunteers, the initial human testing
is often conducted in patients with the targeted disease. |
| ● | Phase
2. The product candidate is administered and evaluated in a limited patient population
to identify possible adverse effects and safety risks, to evaluate preliminary efficacy evidence
for specific targeted diseases and to determine dosage tolerance, optimal dosage and dosing
schedule. |
| ● | Phase
3. The product candidate is administered to an expanded patient population with the target
disease or disorder, often at geographically dispersed clinical trial sites, in adequate
and well-controlled clinical trials to generate sufficient data to evaluate the safety and
efficacy of the non-biologic drug, or the safety, purity, and potency of the biologic. These
clinical trials are intended to establish the overall risk/benefit profile of the product
candidate and provide an adequate basis for product labeling. |
| ● | Post-approval
clinical trials, sometimes referred to as Phase 4 clinical trials, may be conducted, or may
be required to be conducted, after initial approval to further assess the risk/benefit profile
of the product and to gain additional experience from treatment of patients in the intended
indication, including for long-term safety follow-up. |
United
States review and approval processes
The
results of the preclinical tests and clinical trials, together with detailed information relating to the product’s CMC and proposed
labeling, among other things, are submitted to the FDA as part of an application requesting approval to market the product for one or
more uses, or indications. When an application is submitted, the FDA makes an initial determination as to whether the application is
sufficiently complete to be accepted for review. If the application is not, the FDA may refuse to accept the application for filing and
request additional information. A refusal to file, which requires resubmission of the application with the requested additional information,
delays review of the application. For gene therapies, selecting patients with applicable genetic defects is often a necessary condition
to effective treatment and may require diagnostic devices that the FDA has cleared or approved prior to or contemporaneously with approval
of the gene therapy.
Under
the Pediatric Research Equity Act, or PREA, certain marketing applications generally must contain data to assess the safety and effectiveness
of the product candidate for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration
for each pediatric subpopulation for which the product candidate is safe and effective. The FDA may grant deferrals for submission of
data or full or partial waivers. Unless otherwise required by regulation, PREA does not apply to any product candidate for an indication
for which orphan designation has been granted.
On
the basis of the marketing application and accompanying information, including the results of the inspection of the manufacturing facilities,
the FDA may issue an approval letter or a complete response letter. An approval letter authorizes commercial marketing of the drug with
specific prescribing information for specific indications. A complete response letter generally outlines the deficiencies in the submission
and may require substantial additional testing or information for the FDA to reconsider the application. If those deficiencies have been
addressed to the FDA’s satisfaction in a resubmission of the application, the FDA may issue an approval letter.
If
a product candidate receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications
for use may otherwise be limited. Further, the FDA may require that certain contraindications, warnings or precautions be included in
the product labeling. The FDA may impose restrictions and conditions on product distribution, prescribing or dispensing in the form of
a Risk Evaluation and Mitigation Strategy, or REMS, or otherwise limit the scope of any approval. In addition, the FDA may require postmarketing
clinical trials designed to further assess the risk/benefit profile of the product and to gain additional experience from treatment of
patients in the intended indication, including for long-term safety follow-up.
Compliance
with cGMP requirements
Drug
and biologics manufacturers must comply with applicable cGMP regulations. Manufacturers and others involved in the manufacture and distribution
of such products also must register their establishments with the FDA and certain state agencies. Both domestic and foreign manufacturing
establishments must register and provide additional information to the FDA upon their initial participation in the manufacturing of drugs.
Establishments may be subject to periodic, unannounced inspections by the FDA and other government authorities to ensure compliance with
cGMP requirements and other laws. Discovery of problems may result in a government entity placing restrictions on a product, manufacturer
or holder of an approved product application and may extend to requiring withdrawal of the product from the market.
Orphan
Drug Designation in the United States
Under
the Orphan Drug Act, the FDA may grant orphan drug designation to drugs and biological products intended to treat a “rare disease
or condition,” which generally is a disease or condition that affects fewer than 200,000 individuals in the United States. Orphan
drug designation must be requested before submitting a marketing application or supplement seeking approval for the orphan indication.
After the FDA grants orphan drug designation, the common identity of the therapeutic agent and its potential orphan use are publicly
disclosed by the FDA.
Orphan
drug designation does not—by itself—convey any advantage in, or shorten the duration of, the regulatory review and approval
process. If a product that has an orphan drug designation subsequently receives the first FDA approval for that drug or biologic for
the indication for which it has been designated, the product is entitled to an orphan exclusivity period in which the FDA may not approve
any other applications to market the same drug or biologic for the same indication for seven years.
Exceptions
to the seven-year exclusivity period may apply in limited circumstances, such as where the sponsor of a different version of the product
is able to demonstrate that its product is clinically superior to the approved orphan drug product. This exclusivity does not prevent
a competitor from obtaining approval to market a different product that treats the same disease or condition, or the same product to
treat a different disease or condition. The FDA can revoke a product’s orphan drug exclusivity under certain circumstances, including
when the holder of the approved orphan drug application is unable to assure the availability of sufficient quantities of the drug to
meet patient needs. Orphan exclusivity operates independently from other regulatory exclusivities and other protections against generic
or biosimilar competition.
A
sponsor of a product application that has received an orphan drug designation is also granted tax incentives for clinical research undertaken
to support the application. In addition, the FDA may coordinate with the sponsor on research study design for an orphan drug and may
exercise its discretion to grant marketing approval on the basis of more limited product safety and efficacy data than would ordinarily
be required, based on the limited size of the applicable patient population. Orphan drug designation does not, however, change the legal
standard required for a product candidate to obtain FDA approval.
Fast
Track Designation
The
FDA has a number of expedited review programs for drugs that are intended for the treatment of a serious or life-threatening condition.
As one example, under the agency’s Fast Track program, the sponsor of a new drug candidate may request the FDA to designate the
product for a specific indication as a Fast Track product concurrent with or after the filing of the IND for the product candidate, if
nonclinical and clinical data demonstrate the product’s potential to address unmet medical needs and the product is intended to
treat a serious condition. The FDA must determine if the product candidate qualifies for Fast Track designation within 60 days after
receipt of the sponsor’s request.
In
addition to other benefits, such as the ability to have more frequent interactions with the FDA, the agency may initiate review of sections
of a Fast Track product’s marketing application before the application is complete. This rolling review is available if the applicant
provides and the FDA approves a schedule for the submission of the remaining information and the applicant pays applicable user fees.
However, the FDA’s review period for a Fast Track application does not begin until the last section of the marketing application
is submitted. In addition, the Fast Track designation may be withdrawn by the FDA if the agency believes that the designation is no longer
supported by data emerging in the clinical trial process.
Post-approval
requirements
Rigorous
and extensive FDA regulation of drugs and biologics continues after approval, including requirements relating to recordkeeping, periodic
reporting, product sampling and distribution, adverse experiences with the product, cGMP, and advertising and promotion. Changes to the
product, manufacturing process, or facility often require prior FDA approval before being implemented and other types of changes to the
approved product, such as adding new indications and additional labeling claims, are also subject to further FDA review and approval.
Additionally, the FDA may require postmarketing studies or clinical trials, changes to a product’s approved labeling, including
the addition of new warnings and contraindications, or the implementation of other risk management measures, including distribution restrictions,
if new safety information emerges. Failure to comply with the applicable requirements may result in administrative, judicial, civil or
criminal actions and adverse publicity. These actions may include FDA’s refusal to approve or delay in approving pending applications
or supplemental applications, withdrawal of approval, clinical hold, suspension or termination of clinical trial, warning or untitled
letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines or other monetary
penalties, refusals of government contracts, mandated corrective advertising or communications with healthcare providers, debarment,
restitution, disgorgement of profits or other civil or criminal penalties.
Foreign
regulation of human therapeutics
In
addition to regulations in the United States, our subsidiaries, such as PGEN Therapeutics and ActoBio, and our collaborators that are
focused on the development of human therapeutic products will be subject to a variety of foreign regulations governing clinical trials
and commercial sales and distribution of the products enabled by our technologies. Whether or not the developer obtains FDA approval
for a product, they must obtain approval by the comparable regulatory authorities of foreign countries or economic areas, such as the
European Union, before they may commence clinical trials or market products in those countries or areas. The approval process and requirements
governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from place to place, and the time
may be longer or shorter than that required for FDA approval.
Anti-Kickback,
False Claims, and Other Marketing and Fraud and Abuse Laws
Healthcare
providers, physicians and others will play a primary role in the recommendation and prescription of any products for which we obtain
marketing approval. Our future arrangements with healthcare providers, patients and third-party payers will expose us to broadly applicable
United States fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and
collaborative partners through which we market, sell and distribute any products for which we obtain marketing approval. Restrictions
under applicable federal and state healthcare laws and regulations are discussed in the “Risk Factors” section below.
Privacy
Laws
In
the United States, we may be subject to data privacy and security laws and regulations by both the federal government and the states
in which we conduct our business. The legislative and regulatory landscape for privacy and data protection continues to evolve, and there
has been an increasing focus on privacy and data protection issues which may affect our business. Numerous federal and state laws and
regulations, including state data breach notification laws, state health information and/or genetic privacy laws and federal and state
consumer protection laws (e.g., Section 5 of the Federal Trade Commission, or FTC, Act and the California Consumer Privacy Act, as amended
by the California Privacy Rights Act, or CCPA), govern the collection, use, disclosure, protection and other processing of health-related
and other personal information. Many of these laws differ from each other in significant ways and may not have the same effect, thus
complicating compliance efforts. Compliance with these laws is difficult, constantly evolving, and time consuming. Federal regulators,
state attorneys general, and plaintiffs’ attorneys, including class action attorneys, have been and will likely continue to be
active in this space.
The
Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes requirements relating to the privacy, security and transmission
of individually identifiable health information. We may obtain health information from third parties, such as research institutions,
that are subject to privacy and security requirements under HIPAA. Although we are not directly subject to HIPAA other than with respect
to providing certain employee benefits, we could potentially be subject to criminal penalties if we, our affiliates, or our agents knowingly
obtain, use, or disclose individually identifiable health information maintained by a HIPAA-covered entity in a manner that is not authorized
or permitted by HIPAA.
In
addition, the CCPA establishes certain requirements for data use and sharing transparency, and provides California residents certain
rights concerning the use, disclosure, and retention of their personal data. The CCPA and its implementing regulations have already been
amended multiple times since their enactment. Similarly, there are a number of legislative proposals in the United States, at both the
federal and state level that could impose new obligations or limitations in areas affecting our business. These laws and regulations
are evolving and subject to interpretation, and may impose limitations on our activities or otherwise adversely affect our business.
The CCPA and evolving legislation may require us, among other things, to update our notices and develop new processes internally and
with our partners. Internationally, laws and regulations in many jurisdictions also apply broadly to the collection, use, storage, disclosure,
protection and other processing of data that identifies or may be used to identify or locate an individual. Please see the risk factor
entitled “Any failure by the Company to comply with existing health care and drug regulations could harm its reputation, operating
results, the quality of the Company’s business strategy and the quality of the Company’s products.”
Environmental
Regulation
Our
facilities and operations, in common with those of similar industries making similar products, are subject to many federal, state, provincial
and local requirements, rules and regulations relating to the protection of the environment and of human health and safety, including
those regulating the discharge of materials into the environment. We continually examine ways to reduce our emissions, minimize waste
and limit our exposure to any liabilities, as well as decrease costs related to environmental compliance. Costs to comply with current
and anticipated environmental requirements, rules and regulations and any estimated capital expenditures for environmental control facilities
are not anticipated to be material when compared with overall costs and capital expenditures. Accordingly, we do not anticipate that
such costs will have a material effect on our financial position, results of operations, cash flows or competitive position.
New
Legislation or Regulation
Legislation
may be introduced which, if passed, would impose substantial new regulatory requirements on our products and pharmaceuticals. We cannot
determine what effect additional domestic or international governmental legislation, regulations, or administrative orders, when and
if promulgated, would have on our business in the future. New legislation or regulations may require the reformulation of certain products
to meet new standards, require the recall or discontinuance of certain products or treatments not capable of reformulation, impose additional
record keeping or require expanded documentation of the properties of certain products, expanded or different labeling or scientific
substantiation.
Available
Information
Current
Reports on Form 8-K, and Quarterly Reports are electronically filed with or furnished to the Securities and Exchange Commission (SEC),
and all such reports and amendments to such reports have been and will be made available, free of charge, through our website (http://www.biostaxcorp.com)
as soon as reasonably practicable after such submission to the SEC. Such reports will remain available on our website for at least 12
months. The contents of our website are not incorporated by reference into this Annual Report on Form 10-K. The public may read and copy
any materials filed by us with the SEC at the SEC’s Public Reference Room at 100 F Street, NW, Washington, D.C. 20549.
ITEM
1A. RISK FACTORS.
An
investment in our securities involves a high degree of risk. You should carefully read and consider all of the risks described below,
together with all of the other information contained or referred to in this report, before making an investment decision with respect
to our securities. If any of the following events occur, our financial condition, business and results of operations (including cash
flows) may be materially adversely affected. In that event, the market price of our shares could decline, and you could lose all or part
of your investment.
Risks
Related to our Business
We
have a limited operating history and are expected to incur significant operating losses during the early stage of our corporate development.
We
have a limited operating history. Our historical financial information consists only of an audit of our financial results at and for
the years ended December 31, 2021 and 2022. There is limited historical financial information upon which to base an evaluation of our
performance. We are an emerging Company, and thus our prospects must be considered in light of the uncertainties, risks, expenses, and
difficulties frequently encountered by companies in their early stages of operation, particularly in the pharmaceutical industry.
Since
inception, we have invested a substantial portion of our time and financial resources in the acquisition and development due to the costs
of continued development until LDN is approved by the FDA and foreign regulatory authorities for sale for the development our most advanced
drug candidate, Low Dose Naltrexone, or Lodonal TM or LDN. We expect that our ability to generate material profits will be limited until
Lodonal is approved by the FDA. We except to continue to incur losses as a result of the costs of continued development until LDN is
approved by the FDA and foreign regulatory authorities for sale for our therapies. Even if regulatory approval is obtained, there is
a risk that we will not be able to generate material sales of LDN, which would cause us to continue to incur losses.
We
may never generate revenue, are not profitable and may never become profitable.
We
expect to incur substantial losses and negative operating cash flow for the foreseeable future, and we may never achieve or maintain
profitability. Even if we are able to launch LDN we expect to incur substantial losses for the foreseeable future and may never become
profitable.
We
may not generate significant revenue from the sale of our products for the foreseeable future. In addition, if approved, we expect to
incur significant costs to commercialize our drug candidates and our drugs may never gain market acceptance. If our drug candidates fail
to demonstrate safety and efficacy in clinical trials, do not gain regulatory approval, or do not achieve market acceptance, we may never
become profitable. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods.
If we are unable to achieve and sustain profitability, the market value of our common stock will likely decline. Because of the numerous
risks and uncertainties associated with developing pharmaceutical products, we are unable to predict the extent of any future losses
or whether we will become profitable.
We
will see losses from our clinical trials conducted either directly or through our licensors for the foreseeable future, and if we or
they fail at one or more of our clinical trials, it could affect the value of the Company’s stock.
We
rely on financings to fund and conduct clinical trials directly or through our licensors needed for NDA submission with respect to LDN.
Any of the following events or factors could have a material adverse effect on our ability to generate revenue from the commercialization
of LDN:
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The
Company or its licensor may be unable to successfully complete the clinical development of LDN; |
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The
Company or its licensor must comply with any possible additional requests and recommendations from the FDA, including additional
clinical trials; |
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The
Company or its licensor may not obtain all necessary approvals from the FDA and similar foreign regulatory agencies; |
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The
Company or its licensor may not commit sufficient resources to the development, regulatory approval, marketing and distribution of
LDN; |
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LDN
must be manufactured in compliance with requirements of the FDA and similar foreign regulatory agencies and in commercial quantities
sufficient to meet market demand; |
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LDN
may not achieve market acceptance by physicians, patients, veterinarians and third party payers; |
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LDN
may not successfully compete against alternative products and therapies; and |
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The
Company or any other pharmaceutical organization may independently develop products that compete with LDN. |
To
obtain approval from the FDA of an NDA for LDN for treatment of humans, The Company or its licensor will need to demonstrate through
evidence of adequate and well-controlled clinical trials that LDN is safe and effective for each proposed indication. However, LDN may
not be approved even though it achieved its specified endpoints in future Phase III clinical trials intended to support an NDA, which
may be conducted by the Company or its licensor. The FDA may disagree with the trial design and the interpretation of data from clinical
trials, may ask the Company or licensor to conduct additional costly and time-consuming clinical trials in order to obtain marketing
approval or approval to enter into an advanced phase of development, or may change the requirements for approval even after it has reviewed
and commented on the design for our future clinical trials. The FDA may also approve LDN for fewer or more limited indications than the
Company or its licensor may request or may grant approval contingent on the performance of costly post-approval clinical trials. In addition,
the FDA may not approve the labeling claims that we believe are necessary or desirable for the successful commercialization of LDN.
The
development of new drugs is a highly risky undertaking which involves a lengthy process, and therefore our drug discovery and development
activities may not result in products that are approved by the applicable regulatory authorities on the time schedule we have planned,
or at all.
Our
drug candidates for treatment of humans are in early stages of drug discovery or clinical trials and are prone to the risks of failure
inherent in drug development. As of the date of this offering, both of our current drug candidates, MENK and LDN have been tested on
human beings. We or our licensor will need to conduct additional clinical trials before we can demonstrate that our drug candidates are
safe and effective to the satisfaction of the FDA and other regulatory authorities. Clinical trials are expensive and uncertain processes
that can take multiple years to complete. We cannot assure you that our ongoing clinical trials or any future clinical trial of any of
our other drug candidates, will be completed on schedule, or at all, or whether our planned clinical trials will start in a timely manner.
The commencement of our planned clinical trials could be substantially delayed or prevented by a number of factors, including:
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delays
or failures in obtaining sufficient quantities of the API and/or drug product; |
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delays
or failures in reaching an agreement on acceptable clinical trial agreement terms or clinical trial protocols with prospective sites
and with the FDA or other foreign regulatory bodies; |
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delays
or failures in obtaining approvals to conduct a clinical trial at a prospective site; |
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the
need to successfully complete, on a timely basis, preclinical safety pharmacology studies (for MENK); |
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the
limited number of, and competition for, suitable sites to conduct the clinical trials; |
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the
limited number of, and competition for, suitable patients for enrollment in the clinical trials; and |
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delays
or failures in obtaining regulatory approval to commence a clinical trial. |
The
completion of clinical trials by us or its licensor could also be substantially delayed or prevented by a number of factors, including:
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slower
than expected rates of patient recruitment and enrollment; |
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failure
of patients to complete the clinical trials; |
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failure
of our third party vendors to timely or adequately perform their contractual obligations relating to the clinical trials; |
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inability
or unwillingness of patients or medical investigators to follow our clinical trial protocols; |
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inability
to monitor patients adequately during or after treatment; |
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termination
of the clinical trials by one or more clinical trial sites; |
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unforeseen
safety issues; |
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lack
of efficacy demonstrated during clinical trial results; |
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lack
of adequate funding to continue the clinical trials; |
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the
need for unexpected discussions with the regulatory agencies regarding the scope or design of our clinical trials or the need to
conduct additional trials; |
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unforeseen
delays by the regulatory agencies after submission of our results; |
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an
unfavorable FDA inspection of our contract manufacturers of APIs or drug products; and/or |
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inspection
of the clinical trial operations or trial sites by regulatory authorities resulting in the imposition of a clinical hold. |
Any
failure or significant delay in completing clinical trials for our licensor’s or our drug candidates will harm the commercial prospects
for our drug candidates and adversely affect our financial results.
Additionally,
changes in regulatory requirements and guidance may occur and we may need to amend clinical trial protocols to reflect these changes.
Amendments may require us to resubmit our clinical trial protocols to regulatory agencies for reexamination, which may impact the costs,
timing or successful completion of a clinical trial. If we experience delays in completion of a clinical trial, or if we terminate any
of our clinical trials, the commercial prospects for our drug candidates may be harmed and our ability to generate product revenues will
be delayed. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may
also ultimately lead to the denial of regulatory approval of a drug candidate.
If
we or our licensor are required to suspend or discontinue clinical trials due to side effects or other safety risks, or if we are required
to conduct studies on the long-term effects associated with the use of our drug candidates, our efforts to commercialize our products
could be delayed or halted.
Our
or our licensor’s clinical trials may be suspended or terminated at any time for a number of safety-related reasons. For example,
administering any drug candidate to humans may produce undesirable side effects. We may voluntarily suspend or terminate our clinical
trials if at any time we believe that our drug candidates present an unacceptable safety risk to the clinical trial patients. In addition,
agencies may order the temporary discontinuation or termination of our clinical trials at any time if they believe that the clinical
trials are not being conducted in accordance with applicable regulatory requirements, including if they present an unacceptable safety
risk to patients. The existence of undesirable side effects resulting from our drug candidates could cause us or regulatory authorities
to interrupt, delay or halt clinical trials of our drug candidates and could result in the regulatory agencies denying further development
or approval of our drug candidates for any or all targeted indications.
Further,
cytokine receptors and opiate growth factor receptors are a novel class of targets. As a result, we may experience unforeseen adverse
side effects with our existing and future drug candidates, including MENK and LDN. As of the date of this registration statement, although
we have not observed harmful side effects in prior studies of LDN or MENK, later trials could reveal such side effects. The pharmacokinetic
profile and results of preclinical studies may not be indicative of results in any clinical trial.
Neither
we nor or our licensor have not conducted studies on the long-term effects associated with the use of our drug candidates. Studies of
long-term effects and chronic dosing (approximately 1 year of dosing); will be required for regulatory approval and may delay introduction
of our therapies or our other drug candidates into the market. Additional studies could also be required at any time after regulatory
approval of any of our drug candidates. Some or all of our drug candidates may prove to be unsafe for human use.
Even
if our or our licensor’s drug candidates do obtain regulatory approval, they may never achieve market acceptance or commercial
success.
Even
if we or our licensor obtain regulatory approval, our drug candidates may not achieve market acceptance among physicians, veterinarians,
patients and/or third-party payers or they may be used only in applications more restricted than we anticipate, and ultimately, may not
be commercially successful. Our treatments, if successfully developed, will compete with a number of traditional products manufactured
and marketed by major pharmaceutical and biotechnology companies. Our treatments may also compete with new products currently under development
by such companies and others. Physicians or veterinarians will prescribe a product only if they determine, based on experience, clinical
data, side effect profiles and other factors, that it is beneficial as compared to other products currently available and in use. Physicians
or veterinarians also will prescribe a product based on their traditional preferences. Market acceptance of our drug candidates for which
we receive approval depend on a number of factors, including:
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the
efficacy and safety of our drug candidates as demonstrated in clinical trials; |
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the
clinical indications for which the drug is approved; |
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acceptance
by physicians or veterinarians, major operators of clinics and patients of the drug as a safe and effective treatment; |
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the
potential and perceived advantages of our drug candidates over alternative treatments; |
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the
safety of drug candidates seen in a broader patient group, including its use outside the approved indications; |
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the
cost of treatment in relation to alternative treatments; |
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the
availability of adequate reimbursement and pricing by third parties and government authorities; |
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relative
convenience and ease of administration; |
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the
prevalence and severity of adverse side effects; and |
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the
effectiveness of our sales and marketing efforts. |
If
our drug candidates that obtain regulatory approval fail to achieve market acceptance or commercial success, the Company’s financial
results will be adversely affected.
Changes
in pharmaceutical and biotechnology industry trends could adversely affect the Company’s operating results.
Industry
trends, economic and political factors that affect pharmaceutical, biotechnology, medical device companies and academic/government entities
sponsoring clinical research directly affect the Company’s business. For example, many companies in such industries and government
organizations have been hiring companies to conduct large development projects. The Company’s operations, financial condition and
growth rate could be materially and adversely affected if these industries reduce outsourcing of such projects. In the past, mergers,
product withdrawals, liability lawsuits and other factors in the pharmaceutical industry have slowed decision making by pharmaceutical
companies and correlating government bodies significantly delaying and/or halting drug development projects. Continuation or increases
in such trends could have an adverse effect on the Company’s business. Additionally, numerous government agencies have undertaken
efforts to control growing healthcare costs through legislation, regulation and voluntary agreements with medical care providers and
pharmaceutical companies. If future regulatory cost-containment efforts limit potential profits derived from new drugs, the Company’s
clients may reduce their drug discovery and development spending. A reduction in drug discovery and development spending could have a
material adverse effect on the Company’s results and operations creating a significant reduction of the Company’s revenue.
We
currently rely on our licensor and third parties to conduct all our clinical trials. If they do not successfully carry out their contractual
duties or meet expected deadlines, we may be unable to obtain regulatory approval for or commercialize any of our drug candidates.
We
currently do not have the ability to independently conduct clinical trials. We rely on medical institutions, clinical investigators,
contract laboratories, collaborative partners and other third parties, such as contract research organizations, to conduct clinical trials
on our drug candidates. The third parties with whom we contract for execution of our clinical trials play a significant role in the conduct
of these trials and the subsequent collection and analysis of data. These third parties are not our employees, and except for contractual
duties and obligations, we have limited ability to control the amount or timing of resources that they devote to our programs. Although
we rely on these third parties to conduct our clinical trials, we remain responsible for ensuring that each of our preclinical studies
and clinical trials is conducted in accordance with its investigational plan and protocol. Moreover, foreign regulatory authorities require
us to comply with regulations and standards, commonly referred to as current Good Clinical Practices (“cGCPs”) for conducting,
monitoring, recording and reporting the results of clinical trials to ensure that the data and results are scientifically credible and
accurate and that the trial subjects are adequately informed of the potential risks of participating in clinical trials.
In
addition, the execution of preclinical studies and clinical trials, and the subsequent compilation and analysis of the data produced,
requires coordination among various parties. In order for these functions to be carried out effectively and efficiently, it is imperative
that these parties communicate and coordinate with one another. Moreover, these third parties may also have relationships with other
commercial entities, some of which may compete with us. In most cases, these third parties may terminate their agreements upon a material
breach by us that is not cured within 30 days by providing us with 30 days’ prior written notice. Many of these agreements may
also be terminated by such third parties under certain other circumstances, including our insolvency or our failure to comply with applicable
laws. In general, these agreements require such third parties to reasonably cooperate with us at our expense for an orderly winding down
of services of such third parties under the agreements. If the third parties conducting our clinical trials do not perform their contractual
duties or obligations, experience work stoppages, do not meet expected deadlines, terminate their agreements with us or need to be replaced,
or if the quality or accuracy of the clinical data they obtain is compromised due to their failure to adhere to our clinical trial protocols
or cGCPs, or for any other reason, we may need to enter into new arrangements with alternative third parties, which could be costly,
and our clinical trials may be extended, delayed or terminated or may need to be repeated, and we may not be able to obtain regulatory
approval for or commercialize the drug candidate being tested in such trials.
If
any of our drug candidates receive marketing approval, and the Company or others later identify undesirable side effects caused by the
drug candidate, our ability to market and derive revenue from the drugs could be compromised.
If
the Company or others identify undesirable side effects caused by one of our drug candidates, any of the following adverse events could
occur:
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regulatory
authorities may withdraw approval of the drug or seize the drug; |
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we
may be required to recall the drug or change the way the drug is administered; |
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additional
restrictions may be imposed on the marketing or the manufacturing processes of the particular drug; |
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we
may be subject to fines, injunctions or the imposition of civil or criminal penalties; |
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regulatory
authorities may require the addition of labeling statements, such as a “black box” warning or a contraindication; |
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we
may be required to create a medication guide outlining the risks of such side effects for distribution to patients; |
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we
could be sued and held liable for harm caused to patients; |
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the
drug may become less competitive; and |
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our
reputation may suffer. |
Any
of these could result in the loss of significant revenues, which would materially and adversely affect our results of operations and
business.
We
may need additional financing and may be unable to raise capital on acceptable terms, or at all, when needed, which could force us to
delay, reduce or eliminate our research and development programs and other operations or commercialization efforts.
We
are advancing multiple drug candidates through discovery and development and will require substantial funds to conduct development, including
preclinical studies and clinical trials, of our drug candidates. Commercialization of any drug candidate will also require substantial
expenditures. To further the development and commercialization efforts of our drug candidates, we may need additional financing to hire
additional employees to co-promote drug candidates or to commercialize drug candidates that may not be covered by our current collaboration
agreements.
We
do not believe that our available cash and cash equivalents will be sufficient to fund our anticipated level of operations for the next
12 months and we will likely need to seek outside sources of funding. Assuming that anticipated investment and revenue does not materialize,
business operations would not be able to continue more than 60 days. We believe we require at least $5 million for our operations over
the next 12 months. Our future financing requirements will depend on many factors, some of which are beyond our control, including:
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the
rate of progress and cost of our clinical trials, preclinical studies and other discovery and research and development activities; |
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the
timing of, and costs involved in, seeking and obtaining regulatory approvals; |
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the
continuation and success of our strategic alliances and future collaboration partners; |
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the
exercise of remaining options under current collaborative agreements; |
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the
costs of preparing, filing, prosecuting, maintaining and enforcing any patent claims and other intellectual property rights, including
litigation costs and the results of such litigation; |
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our
ability to enter into additional collaboration, licensing, government or other arrangements and the terms and timing of such arrangements; |
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potential
acquisition or in-licensing of other products or technologies; and |
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the
technologies or other adverse market developments. |
Future
capital requirements will also depend on the extent to which we acquire or invest in additional complementary businesses, products and
technologies. We currently have no understandings, commitments or agreements relating to any of these types of transactions.
Until
we can generate a sufficient amount of product revenue to finance our cash requirements, which we may never do, we expect to finance
future cash needs primarily through public or private equity offerings, debt financings, government grants and contracts and/or strategic
collaborations. Additional financing may not be available to us when we need it or it may not be available on favorable terms, if at
all. If we are unable to obtain adequate financing when needed, we may have to delay, reduce the scope of or eliminate one or more of
our clinical trials or research and development programs or our commercialization efforts. We may be required to enter into collaborative
partnerships for one or more of our drug candidate programs at an earlier stage of development or on less favorable terms, which may
require us to relinquish rights to some of our drug candidates that we would otherwise have pursued on our own. We may also be required
to pursue strategic alternatives that may affect our business or corporate structure in order to make ourselves more attractive to investors.
In
addition, if the Company or any of its future collaboration partners does not perform in the manner we expect or fulfill its responsibilities
in a timely manner, or at all, the clinical development, regulatory approval, and commercialization efforts related to LDN could be delayed
or terminated. It may be necessary for us to assume the responsibility at our own expense for the development of LDN. In that event,
we would likely be required to seek additional funding.
We
may form additional strategic alliances in the future with respect to our independent programs, and we may not realize any benefits of
such alliances.
We
may form strategic alliances, create joint ventures or collaborations or enter into licensing arrangements with third parties with respect
to our independent programs that we believe will complement or augment our existing business. For example, we plan to find a partner
to co-develop and commercialize MENK and LDN outside North America upon completion of clinical development of LDN for the treatment of
pediatric and adult patients with Crohn’s disease. We face significant competition in seeking appropriate strategic partners. The
negotiation process is time-consuming and complex. Moreover, we may not be successful in our efforts to establish a strategic partnership
or other alternative arrangements for any future product candidates and programs because our research and development pipeline may be
insufficient, our product candidates and programs may be deemed to be at too early a stage of development for collaborative effort and/or
third parties may not view our product candidates and programs as having the requisite potential to demonstrate safety and efficacy.
We cannot be certain that, following a strategic transaction or license, we will achieve the revenues or specific net income that justifies
such transactions. Any delays in entering into new strategic partnership agreements related to our product candidates could also delay
the development and commercialization of our product candidates and reduce their competitiveness even if they reach the market.
We
do not currently manufacture Low Dose Naltrexone (LDN) and therefore must rely on third-party manufacturing to supply the drug for clinical
trials. If one of our suppliers or manufacturers fails to perform adequately or fulfill our needs, we may be required to incur significant
costs and devote significant efforts to find new suppliers or manufacturers, which would cause delays in the development and commercialization
of our drug candidates.
The
manufacture of pharmaceutical products in compliance with cGMPs requires significant expertise and capital investment, including the
development of advanced manufacturing techniques and process controls. Manufacturers of pharmaceutical products often encounter difficulties
in production, including difficulties with production costs and yields, quality control, including stability of the drug candidate and
quality assurance testing, shortages of qualified personnel, as well as compliance with strictly enforced regulatory and cGMP requirements,
other regulatory requirements, and foreign regulations. If our manufacturers were to encounter any of these difficulties or otherwise
fail to comply with their obligations to us or under applicable regulations, our ability to provide study drugs in our preclinical studies
and clinical trials would be jeopardized. Any delay or interruption in the supply of preclinical study or clinical trial materials could
delay the completion of our preclinical studies and clinical trials, increase the costs associated with maintaining our preclinical study
and clinical trial programs and, depending upon the period of delay, require us to commence new trials at significant additional expense
or terminate the studies and trials completely.
All
manufacturers of our drug candidates must comply with cGMP requirements. These requirements include, among other things, quality control,
quality assurance and the maintenance of records and documentation. Manufacturers of our component materials may be unable to comply
with these cGMP requirements and with other regulatory requirements. Regulatory agencies at any time may also implement new standards,
or change their interpretation and enforcement of existing standards for manufacture, packaging or testing of products. We have little
control over our manufacturers’ compliance with these regulations and standards. A failure to comply with these requirements may
result in fines and civil penalties, suspension of production, suspension or delay in product approval, product seizure or recall, or
withdrawal of product approval. If the safety of any product supplied is compromised due to our manufacturers’ failure to adhere
to applicable laws or for other reasons, we may not be able to obtain regulatory approval for or successfully commercialize our products,
and we may be held liable for any injuries sustained as a result. Any of these factors could cause a delay of clinical trials, regulatory
submissions, approvals or commercialization of our drug candidates or entail higher costs or impair our reputation.
We
source the API for LDN from third-party vendors. Another pharmaceutical company manufactures the API for MENK. Our current agreements
with our suppliers provide for the entire supply of the API necessary for additional clinical trials or for full-scale commercialization.
In the event that we and our suppliers cannot agree to the terms and conditions for them to continue to provide some or all of our API
clinical and commercial supply needs, or if any single source supplier terminates the agreement in response to a breach by us, we would
not be able to manufacture the API on a commercial scale until a qualified alternative supplier is identified, which could also delay
the development of, and impair our ability to commercialize, our drug candidates.
Although
alternative sources of supplies exist, the number of third-party suppliers with the necessary manufacturing and regulatory expertise
and facilities are limited, and it could be expensive and take a significant amount of time to arrange for alternative suppliers, which
could have a material adverse effect on our business. New suppliers of any API would be required to qualify under applicable regulatory
requirements and would need to have sufficient rights to the method of manufacturing such ingredients under applicable intellectual property
laws. Obtaining the necessary regulatory approvals or other qualifications under applicable regulatory requirements and ensuring non-infringement
of third-party intellectual property rights could result in a significant interruption of supply and could require the new manufacturer
to bear significant additional costs which may be passed on to us.
We
currently have only a limited distribution organization with no direct sales and marketing staff. If we are unable to develop sales and
marketing and expand distribution capability on our own or through collaborations with marketing partners, we will not be successful
in commercializing our future products.
We
currently have only a limited distribution organization with no sales or marketing staff. If our products are approved for sale in the
United States, we will need to execute a number of sales and marketing agreements, but there can be no assurance that the Company will
be able to sign an agreement to market and distribute our products. To the extent we rely on third parties for marketing and distributing
our approved products, any revenue we receive will depend upon the efforts of third parties, which may not be successful, and are only
partially within our control. Our reliance on third parties makes it likely that our product revenue is likely to be lower than if we
directly marketed or sold our products. If we are unable to enter into arrangements with third parties to commercialize the approved
products on acceptable terms or at all, we may not be able to successfully commercialize our future products or we will have to market
these products ourselves, which will be expensive and require us to build our own sales force, which we do not have experience doing.
We cannot assure you we will be successful in any of these initiatives. If we are not successful in commercializing our future products,
either on our own or through collaborations with one or more third parties, our future product revenue will be materially adversely affected.
We
are dependent on market acceptance of compounding pharmacies and compounded formulations, and physicians may be unwilling to prescribe,
and patients may be unwilling to use, our proprietary LDN compounded formulation.
We
are currently distributing our proprietary LDN formulation for human use through third-party compounding pharmacies and distributors
in Emerging Markets. Our formulation has not undergone the FDA approval process and only limited data, if any, may be available with
respect to the safety and efficiency of our formulation for any particular indication. Some physicians may be hesitant to prescribe,
and some patients may be hesitant to purchase and use, this non-FDA approved compounded formulation. In addition, certain compounding
pharmacies have been the subject of widespread negative media coverage in recent years, and the actions of these pharmacies have resulted
in increased scrutiny of compounding pharmacy activities from regulatory agencies. As a result, physicians may be unwilling to prescribe
a compounded formulation when an FDA-approved alternative is available, even if they believe the compounded formulation to be superior
and less expensive. Other reasons physicians may be unwilling to prescribe or patients may be unwilling to use our proprietary LDN compounded
formulation could include the following, among others: our proprietary formulation is not required to be, and has not been, approved
for marketing and sale by the FDA; there may be limited or no data available with respect to the clinical efficacy or safety of our compounded
formulation the physician is prescribing; and to the extent there is such data available, we are limited in our ability to discuss the
efficacy or safety of our formulation with potential purchasers of our formulation.
We
aim to generate revenue from our proprietary LDN formulation through agreements with compounding pharmacies outside of the United States,
but we may not be successful in our efforts to generate revenue from such formulation.
One
aspect of our business strategy is to enter into other sub-licensing arrangements with compounding pharmacies outside of the U.S., through
which we can generate revenue from the sale of our proprietary LDN formulation. We have limited experience commercializing our formulation
through licensing arrangements with compounding pharmacies. Even if we are successful, we may be unable to generate sufficient revenue
to recover our costs.
We
have minimal experience sub-licensing products to pharmacies and outsourcing facilities and we may not be successful in our efforts to
develop our licensing arrangements. If we elect to sub-license our proprietary LDN formulation to one or more pharmacies or outsourcing
facilities outside of the U.S., we may not be able to enter into licensing agreements when desired, on acceptable terms, or at all. Establishing
licensing or other relationships with pharmacies and outsourcing facilities could be expensive and time consuming, disrupt our other
operations, require significant capital expenditures and distract management and our other employees from other aspects of our business.
Failure
to achieve and maintain effective internal controls could have a material adverse effect on our business.
Effective
internal controls are necessary for us to safeguard our assets and provide reliable financial reports. If we cannot provide reliable
financial reports, our operating results could be harmed. All internal control systems, no matter how well designed, have inherent limitations.
Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation
and presentation.
While
we continue to evaluate and improve our internal controls, we are a small Company with limited staff, and we cannot be certain that the
measures we implement will ensure that we design, undertake and maintain adequate controls over our financial processes and reporting
in the future. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could
harm our operating results or cause us to fail to meet our reporting obligations.
Failure
to achieve and maintain an effective internal control environment could cause investors to lose confidence in our reported financial
information, which could have a material adverse effect on our stock price. In addition, if our efforts to comply with new or changed
laws, regulations, and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to
practice, regulatory authorities may initiate legal proceedings against us and our business may be harmed.
Our
independent registered public accounting firm has identified material weaknesses in our financial reporting process.
In
2019, our independent registered public accounting firm has identified two material weaknesses in our financial reporting process. Specifically,
our independent registered public accounting firm identified material weaknesses with respect to:
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currently
inadequate segregation of duties by management in the financial reporting area; and |
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the
lack of an audit committee to oversee the financial reporting process. |
In
April 2020, the full Board constituted itself as the audit committee and has met subsequently to oversee the Company’s financial
reporting. We intend to remediate this weakness by increasing the size of our accounting staff when we have the financial resources to
do so, and by appointing a separate audit committee with membership that is qualified to oversee the Company’s financial reporting.
However, there can be no assurance that we will be able to successfully implement our plans to remediate the material weaknesses in our
financial reporting process. Our failure to successfully implement our plans to remediate these material weaknesses could cause us to
fail to meet our reporting obligations, to produce timely and reliable financial information, and to effectively prevent fraud. Additionally,
such failure, or other weaknesses that we may experience in our financial reporting process or other internal controls, could cause investors
to lose confidence in our reported financial information, which could have a negative impact on our financial condition and stock price.
We
will need to increase the size of our organization, but we may experience difficulties in managing growth.
We
will need to continue to expand our managerial, operational, financial and other resources in order to manage our operations and clinical
trials, continue our development activities and commercialize our drug candidates. Our current management, personnel systems and facilities
may not be adequate to support this future growth. Our need to effectively execute our growth strategy requires that we:
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manage
our clinical trials effectively, including our clinical trials for LDN which will be conducted at numerous trial sites throughout
the world; |
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manage
our internal development efforts effectively while carrying out our contractual obligations to licensors, contractors, collaborators,
government agencies and other third parties; |
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manage
operations in both regulated and unregulated businesses; |
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continue
to improve our operational, financial and management controls and reporting systems and procedures; and |
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identify,
recruit, maintain, motivate and integrate additional employees. |
If
we are unable to expand our managerial, operational, financial and other resources to the extent required to manage our development and
commercialization activities, our business will be materially adversely affected.
We
face substantial competition. Our competitors may discover, develop or commercialize products faster or more successfully than us.
The
biotechnology and pharmaceutical industries are highly competitive. We face significant competition from companies in the pharmaceutical,
biotechnology and other related markets that are researching and marketing products designed to address inflammatory disorders, HIV/AIDS
and cancer in Emerging Markets. Established pharmaceutical companies that currently sell or are developing drugs in our markets of interest
include, for example; Abbott Laboratories, Glaxo Smith Kline, Pfizer, and ViiV in the field of cancer treatment. Johnson & Johnson,
Merck, Merck Serono, Takeda, Novartis, Pfizer, Reata, Sanofi-Aventis and Teva compete with us in all fields. Many or all of these established
competitors are also involved in research and drug development regarding various OGF receptors. Pharmaceutical and biotechnology companies
which are known to be involved in immunotherapy research and related drug development include Pfizer, Bristol-Myers Squibb, Merck, Takeda,
Sanofi-Aventis, Incyte, and UCB Pharma among others.
Many
of our competitors have greater name recognition and financial, manufacturing, marketing, research and drug development resources than
we do. Additional mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being
concentrated in our competitors. Large pharmaceutical companies in particular have extensive expertise in preclinical and clinical testing
and in obtaining regulatory approvals for drugs. In addition, academic institutions, government agencies, and other public and private
organizations conducting research may seek patent protection with respect to potentially competitive products or technologies. These
organizations may also establish exclusive collaborative or licensing relationships with our competitors, thus giving our competitors
a significant advantage. We may be unable to respond to competitive forces presently in the marketplace, which would severely impact
our business.
We
may be subject to costly product liability claims related to our clinical trials and drug candidates and, if we are unable to obtain
adequate insurance or are required to pay for liabilities resulting from a claim excluded from, or beyond the limits of, our insurance
coverage, a material liability claim could adversely affect our financial condition.
Because
we conduct clinical trials in Emerging Markets with human patients, we face the risk that the use of our drug candidates may result in
adverse side effects to patients and to otherwise healthy volunteers in our clinical trials. We face even greater risks upon any commercialization
of our drug candidates. Although we will maintain product liability insurance for clinical trials, our insurance may be insufficient
to reimburse us for any expenses or losses we may suffer, and we will be required to increase our product liability insurance coverage
for the advanced clinical trials that we plan to initiate. We do not know whether we will be able to continue to obtain product liability
coverage and obtain expanded coverage on acceptable terms, or at all. We may not have sufficient resources to pay for any liabilities
resulting from a claim excluded from, or beyond the limits of, our insurance coverage. There is also a risk that third parties that we
have agreed to indemnify could incur liability. An individual may bring a product liability claim against us if one of our drug candidates,
products or compounded formulations cause, or is claimed to have caused, an injury or is found to be unsuitable for consumer use. Any
product liability claim brought against us, with or without merit, could result in:
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withdrawal
of clinical trial volunteers, investigators, patients or trial sites; |
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the
inability to commercialize our drug candidates; |
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decreased
demand for our drug candidates; |
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regulatory
investigations that could require costly recalls or product modifications; |
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loss
of revenues; |
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substantial
costs of litigation; |
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liabilities
that substantially exceed our product liability insurance, which we would then be required to pay ourselves; |
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an
increase in our product liability insurance rates or the inability to maintain insurance coverage in the future on acceptable terms,
if at all; |
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the
diversion of management’s attention from our business; and |
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damage
to our reputation and the reputation of our products. |
Our
business involves the use of hazardous materials. As a result, we, including our third-party manufacturers, must comply with environmental
laws and regulations, which may be expensive and restrict how we do business.
Our
third-party manufacturers’ activities involve the controlled storage, use and disposal of hazardous materials, including the components
of our pharmaceutical products, test samples and reagents, biological materials and other hazardous compounds. We and our manufacturers
are subject to foreign laws and regulations governing the use, generation, manufacture, storage, handling and disposal of these hazardous
materials. We currently carry no insurance specifically covering environmental claims relating to the use of hazardous materials. Although
we believe that our safety procedures for handling and disposing of these materials and waste products comply with the standards prescribed
by these laws and regulations, we cannot eliminate the risk of accidental injury or contamination from the use, storage, handling or
disposal of hazardous materials. In the event of an accident, applicable authorities may curtail our use of these materials and/or interrupt
our business operations. In addition, if an accident or environmental discharge occurs, or if we discover contamination caused by prior
operations, including by prior owners and operators of properties we acquire, we could be liable for cleanup obligations, damages and
fines. The substantial unexpected costs we may incur could significantly harm our financial condition and results of operations.
Future
financings may adversely affect our stockholders or impose restrictions on our assets or operations, which may harm our business.
If
we raise additional capital by issuing equity securities or convertible debt securities, our existing stockholders’ ownership will
be diluted and the terms of any new equity securities may have preferences over our common stock. If we raise additional capital through
the issuance of debt securities, the debt will have rights senior to the holders of our common stock and may contain covenants that restrict
our operational flexibility or impose liens or other restrictions on our assets. In addition, the terms of future financings may restrict
our ability to raise additional capital, which would delay or prevent the further development or commercialization of our drug candidates.
If
we raise additional funds through collaboration, licensing or other similar arrangements, it may be necessary to relinquish potentially
valuable rights to our current drug candidates, potential products or proprietary technologies, or grant licenses on terms that are not
favorable to us. Additionally, we may consider pursuing strategic opportunity for our business and corporate structure that may make
us a more attractive investment candidate. If adequate funds are not available, our ability to achieve profitability or to respond to
competitive pressures would be significantly limited and we may be required to delay, significantly curtail or eliminate the development
of one or more of our drug candidates.
We
may be adversely affected by the current economic environment.
Our
ability to attract and retain collaboration partners or customers, invest in and grow our business and meet our financial obligations
depends on our operating and financial performance, which, in turn, is subject to numerous factors, including the prevailing economic
conditions and financial, business and other factors beyond our control, such as the rate of unemployment, the number of uninsured persons
in the United States and inflationary pressures. We cannot anticipate all the ways in which the current economic climate and financial
market conditions could adversely impact our business.
We
are exposed to risks associated with reduced profitability and potential financial instability of our collaboration partners or customers,
many of which may be adversely affected by volatile conditions in the financial markets. For example, unemployment and underemployment,
and the resultant loss of insurance, may decrease the demand for healthcare services and pharmaceuticals. If fewer patients are seeking
medical care because they do not have insurance coverage, our collaboration partners or customers may experience reductions in revenues,
profitability and/or cash flow that could lead them to reduce their support of our programs or financing activities. If collaboration
partners or customers are not successful in generating sufficient revenue or are precluded from securing financing, they may not be able
to pay, or may delay payment of, accounts receivable that are owed to us. This, in turn, could adversely affect our financial condition
and liquidity. To the extent economic challenges result in fewer individuals pursuing or being able to afford our products once commercialized,
our business, results of operations, financial condition and cash flows could be adversely affected.
The
effect of the COVID-19 pandemic on our operations, and the operations of our users, partners and content contributors, has had, and is
expected to continue to have an effect on our business, financial condition, cash flows and results of operations.
In
December 2019, a novel coronavirus disease, or COVID-19, was initially reported and on March 11, 2020, the World Health Organization
characterized COVID-19 as a pandemic. COVID-19 has had a widespread and detrimental effect on the global economy as a result of the continued
increase in the number of cases and affected countries and actions by public health and governmental authorities, businesses, other organizations,
and individuals to address the outbreak, including travel bans and restrictions, quarantines, shelter in place, stay at home or total
lock-down orders and business limitations and shutdowns.
Despite
recent developments of vaccines, the duration and severity of COVID-19, mutations and possible additional mutations and the degree of
their impact on our business is uncertain and difficult to predict. The continued spread of the outbreak could result in one or more
of the following conditions that could have a material adverse impact on our business operations and financial condition: delays in drug
testing, delays due to suppliers or other aspects of our drug testing and outsourced manufacturing process. We may also face increased
competition; increased risk in collectability of accounts receivable; lost or reduced productivity due to illness and/or illness of family
members; inability to hire key roles; adverse effects on our strategic partners businesses; and impairment charges. Our inability to
respond to and manage the potential impact of such events effectively could have a material adverse effect on our business, financial
condition, and results of operations.
Our
efforts to help mitigate the negative impact of the outbreak on our business may not be effective, and we may be affected by a protracted
economic downturn. Furthermore, while many governmental authorities around the world have and continue to enact legislation to address
the impact of COVID-19, including measures intended to mitigate some of the more severe anticipated economic effects of the virus, we
may not benefit from such legislation, or such legislation may prove to be ineffective in addressing COVID-19’s impact on our and
our customer’s businesses and operations. Even after the COVID-19 outbreak has subsided, we may continue to experience impacts
to our business as a result of COVID-19’s global economic impact and any recession that has occurred or may occur in the future.
Further, as the COVID-19 situation is unprecedented and continuously evolving, COVID-19 may also affect our operating and financial results
in a manner that is not presently known to us or in a manner that we currently do not consider that may present significant risks to
our operations.
In
addition, the overall uncertainty regarding the economic impact of the COVID-19 pandemic and the impact on our revenue growth, could
impact our cash flows from operations and liquidity. To the extent the COVID-19 pandemic adversely affects our business and financial
results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section.
Our
internal computer systems, or the computer systems of our contractors or consultants, may fail or suffer security breaches, which could
result in a material disruption of our drug development programs.
Despite
the implementation of security measures, our internal computer systems and the computer systems of our contractors and consultants are
vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical
failures. While we have not experienced any such system failure, accident or security breach to date, if such an event were to occur
and cause interruptions in our operations, it could result in a material disruption of our drug development programs. For example, the
loss of clinical trial data from completed or ongoing clinical trials for any of our drug candidates 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 the further development of our drug candidates could be delayed.
Our
current and future operations substantially depend on our management team and our ability to have or recruit other key personnel, the
loss of any of whom could disrupt our business operations.
The
Company’s future success depends on the efforts and abilities of principal members of its senior management and scientific staff
to provide strategic direction, business development, operations management and maintenance of a cohesive and stable work environment.
If we are unable to recruit qualified personnel, or if we lose their services or the services of any other key member of management,
it could be impossible to replace them.
Additionally,
the Company’s ability to maintain, expand and renew existing business with its clients and maximize potential business opportunities
from new clients (in both the drug development and the drug discovery areas) depends on its ability to hire and retain scientists with
necessary skills. The scientists working for the Company must have the ability to lead ahead of continuing changes and trends in drug
discovery and development technologies to create the most innovative products on the market in order to remain competitive within the
drug development industry. The Company faces risks, challenges and competition attracting and retaining experienced scientists and healthcare
providers.
The
Company’s inability to hire qualified personnel may increase the workload for both existing and new personnel. The Company may
not be successful in attracting new healthcare providers, scientists and management or in retaining/motivating existing personnel. The
shortage of experienced healthcare providers and scientists or other factors may lead to increased recruiting, relocation and compensation
costs for the Company. Such increased costs may reduce profit margins or make hiring necessary experts (i.e. healthcare providers or
scientists) impracticable. If the Company is unable to attract or retain any of its key personnel its ability to execute a competitive
and profitable business plan will be adversely affected. Services and products will be less competitive if not obsolete. If competing
companies introduce superior technologies that compete with the Company’s services and products, the Company may not be able to
make the necessary enhancements to its services and products that will maintain a competitive position in the marketplace. The Company’s
competitive position, business, revenues and financial condition will be materially and adversely affected.
Any
failure by the Company to comply with existing health care and drug regulations could harm its reputation, operating results, the quality
of the Company’s business strategy and the quality of the Company’s products.
The
Company has not experienced any failure to comply and has not received any notice or violation of either good clinical practices, laboratory
practices or good manufacturing practices. Any future failure by the Company to comply with existing health care and drug regulations
could result in the termination of ongoing research and/or the disqualification of data for submission to regulatory authorities. Failure
to comply with existing regulations will harm the Company’s reputation, brand name, its prospects for immediate and future work
and its operating results. For example, if the Company fails to verify that informed consent is obtained from patient participants in
connection with a particular clinical trial or grant deviations from the inclusion/exclusion criteria in a study protocol, the data collected
from that trial could be disqualified at which point the Company may be required to conduct the trial again at no further cost to its
client. Furthermore, the issuance of an FDA notice based on a finding of a material violation of good clinical practice, good laboratory
practice or good manufacturing practice requirements could materially and adversely affect the Company.
Proposed
and future legislation or regulation may increase the cost of the Company’s business or limit its service and product offerings.
Authorities
in Emerging Markets may adopt healthcare legislation or regulations that are more burdensome than existing regulations. Possible changes
in regulation could increase the Company’s expenses or limit its ability to offer some of its services or products. For example,
the confidentiality of patient-specific information and the circumstances under which it may be released for inclusion in the Company’s
databases or used in other aspects of business are subject to substantial government regulation. Additional legislation or regulation
governing the possession, use and dissemination of medical record information or other personal health information may require the Company
to implement new security measures requiring substantial expenditures or limiting the ability to offer services and products. These regulations
might also increase costs by creating new privacy requirements for the Company’s business mandating additional privacy procedures
for its clinical research business.
If
we are unable to attract suitable and willing investigators and volunteers for clinical trials and product development, business may
suffer.
Our
clinical research studies rely on the accessibility and participation of physician investigators and volunteer subjects. Investigators
are typically located at hospitals, clinics or other sites and supervise administration of the study drug to patients during the course
of a clinical trial. Volunteer subjects generally include individuals from the locale where the studies are conducted. Our clinical research
development business could be adversely affected if it is unable to attract suitable and willing investigators or volunteers on a consistent
basis.
We
may not obtain government approval for our products and/or uses.
The
development and commercialization of pharmaceutical products are subject to extensive governmental regulation in the United States and
Emerging Markets. Government approvals are required to develop, market and sell potential drug candidates. Obtaining government approval
to develop, market and sell drug candidates is time-consuming and expensive. The clinical trial results for a particular drug candidate
might not satisfy necessary requirements to obtain government approvals. Even if we are successful in obtaining all required approvals
to market and sell a drug candidate, post-approval requirements and the failure to comply with other regulations could result in suspension
or limitation of government approvals.
In
connection with drug discovery activities in Emerging Markets, we and our licensors will be subject to foreign regulatory requirements
governing testing, approval, manufacturing, labeling, marketing and sale of pharmaceutical products. These requirements vary with location.
Even if approval has been obtained by a licensor for a product in the United States, approval in a foreign country must be obtained prior
to marketing the product. The approval process in foreign countries may be more or less rigorous than the United States and the time
required for approval may be longer or shorter. Clinical studies conducted outside of a specific country may not be acceptable. The approval
of a pharmaceutical product in one country does not guarantee approval in another.
Even
if approved, the products that we may develop and market may be later withdrawn from the market or subject to promotional limitations.
We
may not be able to obtain the labeling claims necessary or desirable for the promotion of our treatments if approved. We may also be
required to undertake post-marketing clinical trials. If the results of such post-marketing studies are not satisfactory or if adverse
events or other safety issues arise after approval, regulatory agency in Emerging Markets may withdraw marketing authorization or may
condition continued marketing on commitments from us that may be expensive and/or time consuming to complete. In addition, if we or others
identify adverse side effects after any of our products are on the market, or if manufacturing problems occur, regulatory approval may
be withdrawn and reformulation of our products, additional clinical trials, changes in labeling of our products and additional marketing
applications may be required. Any reformulation or labeling changes may limit the marketability of our products if approved.
We
may seek to grow our business through acquisitions of or investments in new or complementary businesses, products or technologies, and
the failure to manage acquisitions or investments, or the failure to integrate them with our existing business, could have a material
adverse effect on us.
From
time to time we expect to consider opportunities to acquire or make investments in other technologies, products and businesses that may
enhance our capabilities, complement our current products or expand the breadth of our markets or customer base. Potential and completed
acquisitions and strategic investments involve numerous risks, including:
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problems
assimilating the purchased technologies, products or business operations; |
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issues
maintaining uniform standards, procedures, controls and policies; |
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unanticipated
costs associated with acquisitions; |
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diversion
of management’s attention from our core business; |
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adverse
effects on existing business relationships with suppliers and customers; |
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risks
associated with entering new markets in which we have limited or no experience; |
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potential
loss of key employees of acquired businesses; and |
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increased
legal and accounting compliance costs. |
We
have no current commitments with respect to any acquisition or investment. We do not know if we will be able to identify acquisitions
we deem suitable, whether we will be able to successfully complete any such acquisitions on favorable terms or at all, or whether we
will be able to successfully integrate any acquired business, product or technology into our business or retain any key personnel, suppliers
or distributors. Our ability to successfully grow through acquisitions depends upon our ability to identify, negotiate, complete and
integrate suitable target businesses and to obtain any necessary financing. These efforts could be expensive and time-consuming, and
may disrupt our ongoing business and prevent management from focusing on our operations. If we are unable to integrate any acquired businesses,
products or technologies effectively, our business, results of operations and financial condition will be materially adversely affected.
We
may expend our limited resources to pursue a particular opportunity and fail to capitalize on current research and products that may
be more profitable or for which there is a greater likelihood of success.
Because
we have limited financial and managerial resources, we have focused on specific research programs, treatments, and products. As a result,
we may forego or delay pursuit of opportunities with other products or research that later may prove to have greater commercial potential.
Our resource allocation decisions may cause us to fail to capitalize on viable commercial treatments or profitable market opportunities.
Our spending on current and future research and development programs may not yield any commercially viable treatments.
We
are subject to risks associated with our operations in Emerging Markets.
The
Foreign Corrupt Practices Act (“FCPA”) and similar worldwide anti-bribery laws in non-U.S. jurisdictions generally prohibit
companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business.
The FCPA also imposes accounting standards and requirements on publicly traded U.S. corporations and their foreign affiliates which are
intended to prevent the diversion of corporate funds to the payment of bribes and other improper payments, and to prevent the establishment
of “off books” slush funds from which such improper payments can be made. Because of the predominance of government-sponsored
healthcare systems around the world, many of our customer or regulatory relationships outside of the United States are with governmental
entities and are therefore subject to such anti-bribery laws. Our internal control policies and procedures may not always protect us
from reckless or criminal acts committed by our employees or agents. Violations of these laws, or allegations of such violations, could
disrupt our operations, involve significant management distraction and result in a material adverse effect on our business, results of
operations and financial condition. We also could suffer severe penalties, including criminal and civil penalties, disgorgement and other
remedial measures, including further changes or enhancements to our procedures, policies and controls, as well as potential personnel
changes and disciplinary actions.
Furthermore,
we are subject to the export controls and economic embargo rules and regulations of the United States, including, but not limited to,
the Export Administration Regulations and trade sanctions against embargoed countries, which are administered by the Office of Foreign
Assets Control within the Department of the Treasury, as well as the laws and regulations administered by the Department of Commerce.
These regulations limit our ability to market, sell, distribute or otherwise transfer our products or technology to prohibited countries
or persons. A determination that we have failed to comply, whether knowingly or inadvertently, may result in substantial penalties, including
fines and enforcement actions and civil and/or criminal sanctions, the disgorgement of profits, the imposition of a court-appointed monitor,
the denial of export privileges and/or an adverse effect on our reputation.
These
and other factors may have a material adverse effect on our international operations or on our business, results of operations and financial
condition generally.
Our
independent auditors have expressed substantial doubt about our ability to continue as a going concern.
Due
to our net losses, negative cash flow and negative working capital, in their report on our audited financial statements for the years
ended December 31, 2021 and 2022, our independent auditors included an explanatory paragraph regarding substantial doubt about our ability
to continue as a going concern.
We
have incurred substantial losses since inception. Because of these losses, we will require additional working capital to develop our
business operations. We intend to raise additional working capital through private placements, public offerings, bank financing and/or
advances from related parties or shareholder loans.
There
are no assurances that we will be able to achieve a level of revenues adequate to generate sufficient cash flow from operations. To the
extent that funds generated from operations and any private placements, public offerings and/or bank financing are insufficient, we will
have to raise additional working capital. No assurance can be given that additional financing will be available, or, if available, will
be on terms acceptable to us. If adequate working capital is not available, we may not increase our operations.
These
conditions raise substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments
relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might
be necessary should we be unable to continue as a going concern.
Risks
Related to Intellectual Property
Our
inability to adequately protect our intellectual property rights could hurt business.
Our
commercial success will depend in part on obtaining and maintaining intellectual property protection for our products, formulations,
processes, methods and other technologies. We will only be able to protect these technologies and products from unauthorized use by third
parties to the extent that our licensor maintains valid and enforceable intellectual property rights, including patents or other market
exclusionary rights.
The
patent positions of pharmaceutical companies can be highly uncertain and involve complex legal and factual questions for which important
legal principles remain unresolved. No consistent policy regarding the breadth of claims allowed in such companies’ patents has
emerged to date in the United States. The general environment for pharmaceutical patents outside the United States also involves significant
uncertainty. Accordingly, we cannot predict the breadth of claims that may be allowed or enforced, or that the scope of these patent
rights could provide a sufficient degree of future protection that could permit us to gain or keep our competitive advantage with respect
to these products and technologies. For example, we cannot predict:
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the
degree and range of protection any patents will afford us against competitors, including whether third parties will find ways to
make, use, sell, offer to sell or import competitive products without infringing our patents; |
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and when patents will issue; |
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whether
or not others will obtain patents claiming inventions similar to those covered by our patents and patent applications; or |
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whether
we or our licensor will need to initiate litigation or administrative proceedings in connection with patent rights, which may be
costly whether we or the licensor win or lose. |
Some
of the patents we have licensed may be subject to challenge and possibly invalidated or rendered unenforceable by third parties. Changes
in either the patent laws or in the interpretations of patent laws in the United States or other countries may diminish the value of
our intellectual property.
In
addition, others may independently develop similar or alternative products and technologies that may be outside the scope of our intellectual
property. Furthermore, others may have invented technology claimed by our patents before our licensors or we did so, and they may have
filed patents claiming such technology before we did so, weakening our ability to obtain and maintain patent protection for such technology.
Should third parties obtain patent rights to similar products or technology, this may have an adverse effect on our business.
We
may also rely on trade secrets to protect our technology, especially where we do not believe patent protection is appropriate or obtainable.
Trade secrets, however, are difficult to protect. While we believe that we will use reasonable efforts to protect our trade secrets,
our own or our strategic partners’ employees, consultants, contractors or advisors may unintentionally or willfully disclose our
information to competitors. We seek to protect this information, in part, through the use of non-disclosure and confidentiality agreements
with employees, consultants, advisors and others. These agreements may be breached, and we may not have adequate remedies for a breach.
In addition, we cannot ensure that those agreements will provide adequate protection for our trade secrets, know-how or other proprietary
information or prevent their unauthorized use or disclosure.
If
competitors that have greater experience and financial resources learn our trade secrets, the competitors may copy or use our trade secrets
and other proprietary information in the advancement of their products, methods or technologies. If we were to prosecute a claim that
a third party had illegally obtained and was using our trade secrets, it could be expensive and time consuming and the outcome could
be unpredictable. In addition, courts outside the United States are sometimes less willing to protect trade secrets than courts in the
United States. Moreover, if our competitors independently develop equivalent knowledge, we would lack any legal or contractual claim
to prevent them from using such information, and our business could be harmed.
We
may become subject to intellectual property suits that could cause us to incur significant costs or pay significant damages or that could
prohibit us from selling its products.
The
Company’s competitors also seek to obtain patents or other protection of their proprietary rights. Third parties may claim in the
future that the Company’s products infringe upon their proprietary rights. To date, there have been no claims of infringement.
However, in the future, intellectual property claims could force the Company to alter its existing products or withdraw them from the
market or could delay the introduction of new products.
Various
patents have been issued to the Company’s competitors and these competitors may assert that the Company’s products infringe
their patent or other proprietary rights. If those products are found to infringe third-party intellectual property rights, the Company
may be unable to maintain its sub-license to use such technology, and it could incur substantial costs to redesign its products or to
defend legal actions.
The
drug discovery and development industry has a history of patent and other intellectual property litigation; thus, we may be involved
in costly intellectual property lawsuits.
There
has been substantial litigation and other proceedings regarding patent and other intellectual property rights in the pharmaceutical and
biotechnology industries. We may be subject to third party claims in the future that would cause us to incur substantial expenses and,
if successful against us, could cause us to pay substantial damages, including treble damages and attorney’s fees if we are found
to be willfully infringing a third party’s patents. Further, if a patent infringement suit were brought against us, we could be
forced to stop or delay research, development, manufacturing or sales of the product or drug candidate that is the subject of the suit.
As a result of patent infringement claims, or in order to avoid potential claims, we may choose to seek, or be required to seek, a license
from the third party and would most likely be required to pay license fees or royalties or both. These licenses may not be available
on acceptable terms, or at all. Even if we were able to obtain a license, the rights may be nonexclusive, which would give our competitors
access to the same intellectual property. Ultimately, we could be prevented from commercializing a product, or forced to redesign it,
or to cease some aspect of our business operations if, as a result of actual or threatened patent infringement claims, we are unable
to enter into licenses on acceptable terms. This could harm our business significantly.
In
addition to infringement claims against us, if third parties prepare and file patent applications in the United States that also claim
technology to which we have rights, we may have to participate in interference proceedings with the United States Patent and Trademark
Office (“USPTO”) to determine the priority of invention. We may also become involved in similar opposition proceedings in
the European Patent Office regarding our intellectual property rights with respect to our products and technology.
The
failure to obtain or maintain patents, licensing agreements and other intellectual property could impact our ability to compete effectively.
Our
success will depend, in part, on our ability to obtain and maintain patent protection for our drug candidates, preserve our trade secrets,
prevent third parties from infringing upon our licenses proprietary rights and operate without infringing upon the proprietary rights
of others. While the patents we license have been issued, pending patent applications we have filed may not result in issued patents
or may take longer than we expect to result in issued patents. We cannot be certain that patents will be issued as a result of any of
our pending applications, and we cannot be certain that any of our issued patents, whether issued pursuant to our pending applications
or licensed from third parties, will give us adequate protection from competing products.
Composition
of Matter patents on APIs are generally considered to be the strongest form of intellectual property protection for pharmaceutical products,
as they apply without regard to any method of use. Entirely new individual chemical compounds, often referred to as new chemical entities,
are typically entitled to Composition of Matter coverage. However, we cannot be certain that the current law will remain the same, or
that our drug candidates will be considered novel and non-obvious by patent regulators and courts.
In
addition to Composition of Matter patents and patent applications, we also have licensed Method of Use patent applications. This type
of patent protects the use of the product only for the specified method. However, this type of patent does not prevent a competitor from
making and marketing a product that is identical to our product for an indication that is outside the scope of the patented method. Moreover,
even if these competitors do not actively promote their product for our targeted indication, physicians may prescribe these products
“off-label.” Although off-label prescriptions may infringe or contribute to the infringement of Method of Use patents, the
practice is common and such infringement is difficult to prevent or prosecute.
Patent
applications in the United States and most other countries are confidential for a period of time until they are published. The publication
of discoveries in scientific or patent literature typically lags actual discoveries by several months or more. As a result, we cannot
be certain whether the Company or another inventor were the inventors of the issued patents and applications or that the Company or another
inventor were the first to conceive of the inventions covered by such patents and pending patent applications or that the Company or
another inventor were the first to file patent applications covering such inventions.
Others
may obtain issued patents that could prevent us from commercializing our product candidates or require us to obtain licenses requiring
the payment of considerable fees or royalties in order to enable us to conduct our business. As to those patents that we have licensed,
our rights depend on maintaining our obligations to the licensor under the applicable license agreement, and we may be unable to do so.
We
have numerous issued patents and some patent applications pending before the USPTO. The protection may lapse before we manage to obtain
commercial value from the patents, which might result in increased competition and materially affect our position in the market.
We
may be subject to claims that we or our employees or consultants have wrongfully used or disclosed alleged trade secrets of our employees’
or consultants’ former employers or their clients. These claims may be costly to defend and if we do not successfully do so, we
may be required to pay monetary damages and may lose valuable intellectual property rights or personnel.
Many
of our employees were previously employed at universities, biotechnology, or pharmaceutical companies, including our competitors or potential
competitors. Although no claims against us are currently pending, we may be subject to claims that these employees or we have inadvertently
or otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary
to defend against these claims. If we fail in defending such claims, in addition to paying monetary damages, we may lose valuable intellectual
property rights or personnel. A loss of key research personnel or their work product could hamper our ability to commercialize, or prevent
us from commercializing our drug candidates, which could severely harm our business. Even if we are successful in defending against these
claims, litigation could result in substantial costs and be a distraction to management.
Some
of our intellectual property that was discovered through government funded programs may be subject to federal regulation such as “march-in”
rights, certain reporting requirements, and a preference for United States industry. Compliance with such regulations may limit our exclusive
rights, subject us to expenditure of resources with respect to reporting requirements, and limit our ability to contract with foreign
manufacturers.
Some
of our existing drug candidates, including LDN and MENK, and some of the research and development work conducted before we had licensing
rights may have been funded, at least in part, by the U.S. government and therefore would be subject to certain federal regulations.
Under the “march-in” provisions of the Bayh-Dole Act, the government may have the right under limited circumstances to require
the patent owners to grant exclusive, partially exclusive or non-exclusive rights to third parties for intellectual property discovered
through the government-funded program. The government can exercise its march-in rights if it determines that action is necessary because
the patent owner fails to achieve practical application of the new invention or because action is necessary to alleviate health concerns
or address the safety needs of the public. Intellectual property discovered under the government-funded program is also subject to certain
reporting requirements, compliance with which may require us to expend substantial resources. Such intellectual property is also subject
to a preference for U.S. industry, which may limit our ability to contract with foreign product manufacturers for products covered by
such intellectual property. We may apply for additional U.S. government funding, and it is possible that we may discover compounds or
drug candidates as a result of such funding. Intellectual property under such discoveries would be subject to the applicable provisions
of the Bayh-Dole Act.
Risks
Related to Government Regulation
The
regulatory approval process is expensive, time consuming and uncertain and may prevent us or our collaboration partners from obtaining
approvals for the commercialization of some or all of our drug candidates.
The
research, testing, manufacturing, labeling, approval, selling, import, export, marketing and distribution of drug products are subject
to extensive regulation by regulatory authorities in the United States and other countries. Regulations differ from country to country.
Neither we nor our licensor are permitted to market our drug candidates until we receive approval of an NDA from the applicable regulatory
agency. Neither we nor our licensor have submitted an application for or received marketing approval for any of our drug candidates.
Obtaining approval of an NDA can be a lengthy, expensive and uncertain process. In addition, failure to comply with applicable U.S. and
foreign regulatory requirements may subject us to administrative or judicially imposed sanctions, including:
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warning
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civil
and criminal penalties; |
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injunctions; |
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withdrawal
of approved products; |
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product
seizure or detention; |
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product
recalls; |
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total
or partial suspension of production; and |
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refusal
to approve pending NDAs or supplements to approved NDAs. |
Regulatory
approval of an NDA or NDA supplement is not guaranteed, and the approval process is expensive and may take several years. Regulatory
agencies have substantial discretion in the approval process. Despite the time and expense exerted, failure can occur at any stage, and
we could encounter problems that cause us to abandon or repeat clinical trials, or perform additional preclinical studies and clinical
trials. The number of preclinical studies and clinical trials that will be required for approval varies depending on the drug candidate,
the disease or condition that the drug candidate is designed to address, and the regulations applicable to any particular drug candidate.
The regulatory agencies can delay, limit or deny approval of a drug candidate for many reasons, including, but not limited to, the following:
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a
drug candidate may not be deemed safe or effective; |
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regulatory
agency officials may not find the data from preclinical studies and clinical trials sufficient; |
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regulatory
agencies might not approve our or our third party manufacturer’s processes or facilities; or |
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regulatory
agencies may change their approval policies or adopt new regulations. |
If
any of our drug candidates fail to demonstrate safety and efficacy in clinical trials or do not gain regulatory approval, our business
and results of operations will be materially and adversely harmed.
Even
if we receive regulatory approval for a drug candidate, we will be subject to ongoing regulatory obligations and continued regulatory
review which may result in considerable additional expense and subject us to penalties if we fail to comply with applicable regulatory
requirements.
Once
regulatory approval has been granted for us to sell our products, the approved product and its manufacturer are subject to continual
review by regulatory agencies. Any regulatory approval that we or our licensors or our distributors receive for our drug candidates may
be subject to limitations on the indicated uses for which the product may be marketed or contain requirements for potentially costly
post-marketing follow-up studies to monitor the safety and efficacy of the product. In addition, if the regulatory agencies approve any
of our drug candidates, we will be subject to extensive and ongoing regulatory requirements by regulatory agencies with regard to the
labeling, packaging, adverse event reporting, storage, advertising, promotion and recordkeeping for our products. In addition, manufacturers
of our drug products are required to comply with current cGMP regulations which include requirements related to quality control and quality
assurance as well as the corresponding maintenance of records and documentation. Further, regulatory authorities must approve these manufacturing
facilities before they can be used to manufacture our drug products, and these facilities are subject to continual review and periodic
inspections by the regulatory agencies for compliance with cGMP regulations. If we or a regulatory authority discover previously unknown
problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product
is manufactured, a regulatory authority may impose restrictions on that product, the manufacturer or us, including requiring withdrawal
of the product from the market or suspension of manufacturing. If we, our drug candidates or the manufacturing facilities for our drug
candidates fail to comply with regulatory requirements of the regulatory agencies, we could be subject to administrative or judicially
imposed sanctions, including:
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warning
letters; |
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civil
or criminal penalties; |
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injunctions; |
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suspension
of or withdrawal of regulatory approval; |
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suspension
of any ongoing clinical trials; |
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voluntary
or mandatory product recalls and publicity requirements; |
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refusal
to approve pending applications for marketing approval of new drugs or supplements to approved applications filed by us; |
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restrictions
on operations, including costly new manufacturing requirements; or |
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seizure
or detention of our products or import bans. |
The
regulatory requirements and policies may change and additional government regulations may be enacted for which we may also be required
to comply. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative
action, either in the United States or in other countries. If we are not able to maintain regulatory compliance, we will not be permitted
to market our future products and our business will suffer.
The
availability of adequate third-party coverage and reimbursement for newly approved drugs is uncertain, and failure to obtain adequate
coverage and reimbursement from third-party payers could impede our ability to market any future products we may develop and could limit
our ability to generate revenue.
There
is significant uncertainty related to the third-party payor coverage and reimbursement of newly approved drugs. The commercial success
of our future products in both domestic and international markets depends on whether such third-party coverage and reimbursement is available
for our future products. Governmental payers, health maintenance organizations and other third-party payers are increasingly attempting
to manage their healthcare expenditures by limiting both coverage and the level of reimbursement of new drugs and, as a result, they
may not cover or provide adequate reimbursement for our future products. These payers may not view our future products as cost-effective,
and coverage and reimbursement may not be available to our customers or may not be sufficient to allow our future products to be marketed
on a competitive basis. Third-party payers are exerting increasing influence on decisions regarding the use of, and coverage and reimbursement
levels for, particular treatments. Such third-party payers are challenging the prices charged for medical products and services, and
many third-party payers limit or delay coverage and reimbursement for newly approved healthcare products. In particular, third-party
payers may limit the covered indications. Cost-control initiatives could cause us to decrease the price we might establish for products,
which could result in lower than anticipated product revenues. If the prices for our drug candidates decrease or if governmental and
other third-party payers do not provide adequate coverage or reimbursement, our prospects for revenue and profitability will suffer.
Healthcare
policy changes may have a material adverse effect on us.
Our
business may be affected by the efforts of government and third-party payers to contain or reduce the cost of healthcare through various
means. With regard to pharmaceutical products, among other things, legislation in Emerging Markets is expected to expand and increase
industry rebates for drugs covered and make changes to the coverage requirements under that legislation. This adds to the uncertainty
of the legislative changes enacted, and we cannot predict the impact that legislative or regulatory proposals will have on our business,
in particular our access to licensed products for sale.
If
we fail to comply with healthcare regulations, we could face substantial penalties and our business, operations and financial condition
could be adversely affected.
Even
though we do not and will not control referrals of healthcare services or bill directly to government or other third-party payers, certain
healthcare laws and regulations pertaining to fraud and abuse and patients’ rights are and will be applicable to our business.
We could be subject to healthcare fraud and abuse and patient privacy regulation by governments and regulators where we conduct our business.
The regulations that may affect our ability to operate include, without limitation:
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healthcare
anti-kickback statutes in our markets, which prohibit, among other things, any person from knowingly and willfully offering, soliciting,
receiving or providing remuneration, directly or indirectly, to induce either the referral of an individual for an item or service
or the purchasing or ordering of a good or service, for which payment may be made under healthcare programs; |
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false
claims statutes, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented,
false claims, or knowingly using false statements to obtain payment from the federal government, and which may apply to entities
like us which may provide coding and billing advice to customers; |
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criminal
laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare
matters; and |
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statutes
that govern the conduct of certain electronic healthcare transactions and protects the security and privacy of protected health information. |
If
our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us,
we may be subject to penalties, including civil and criminal penalties, damages, fines and the curtailment or restructuring of our operations.
Any penalties, damages, fines, curtailment or restructuring of our operations could adversely affect our ability to operate our business
and our financial results. Any action against us for violation of these laws, even if we successfully defend against it, could cause
us to incur significant legal expenses and divert Management’s attention from the operation of our business. Moreover, achieving
and sustaining compliance with applicable federal and state privacy, security and fraud laws may prove costly.
Regulators
may not accept the results of clinical trials conducted outside of the United States.
It
is possible that regulators in our markets may not accept the results of our clinical trials. We would also need to ensure that trials
are conducted in accordance with local legal and regulatory requirements and all applicable International Conference on Harmonization
of Good Clinical Practice guidelines and any other applicable regulatory requirements for the overall conduct of the clinical investigation.
Risks
Related to our Common Stock
If
our chief executive officer, our other executive officers, and our directors and principal stockholders acquire significant stock ownership,
they may be able to exert control over us and our significant corporate decisions. Our other stockholders will have limited ability to
influence corporate actions or decisions.
This
concentration of ownership may harm the value of our common stock by, among other things:
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delaying,
deferring or preventing a change in control of our Company; |
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impeding
a merger, consolidation, takeover or other business combination involving our company; or |
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causing
us to enter into transactions or agreements that are not in the best interests of all stockholders |
As
a group, at December 31, 2022, our officers, directors and certain related parties owned a majority of the outstanding common stock of
the Company. Our other stockholders will have limited ability to influence corporate actions or decisions.
We
have not paid in the past and do not expect to declare or pay dividends in the foreseeable future.
We
have not paid in the past and do not expect to declare or pay dividends in the foreseeable future, as we anticipate that we will invest
future earnings in the development and growth of our business. Therefore, holders of our common stock will not receive any return on
their investment unless they sell their securities, and holders may be unable to sell their securities on favorable terms or at all.
The
price of our common stock may be volatile, and you may not be able to resell your shares.
An
active and liquid trading market for our common stock may not develop or be sustainable. Shareholders may be unable to sell shares of
common stock at or above their purchase price due to fluctuations in the market price of our common stock. The market price of our common
stock may fluctuate significantly in response to factors, some of which are beyond our control. Factors that could cause volatility in
the market price of our common stock include, but are not limited to:
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results
from, and delays in, clinical trial programs relating to LDN, MENK and other drug candidates; |
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announcements
of regulatory approvals or disapprovals of our drug candidates including LDN and MENK or delays in any regulatory agency review or
approval processes; |
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failure
or discontinuation of any of our research programs; |
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loss
of significant clients or customers; |
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loss
of significant strategic relationships; |
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announcements
relating to future collaborations or our existing collaborations; |
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our
failure to achieve and maintain profitability; |
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changes
in earnings estimates and recommendations by financial analysts; |
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changes
in market valuations of similar companies; |
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wholesalers’
buying patterns; |
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addition
or termination of clinical trials or funding support; |
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regulatory
developments affecting our drug candidates or those of our competitors; |
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the
Company’s sales decrease internationally; |
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variations
in the level of expenses related to our drug candidates or future development programs; |
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ability
to secure new government contracts and allocation of our resources to or away from performing work under government contracts; |
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general
economic conditions in the United States and our markets; |
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acquisitions
and sales of new products, technologies or business; |
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market
conditions in the pharmaceutical, biopharmaceutical and biotechnology sectors; |
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the
issuance of new or changed securities analysts’ reports or recommendations regarding us, our competitors or our industry in
general; |
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actual
and anticipated fluctuations in our quarterly operating results; |
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disputes
concerning our intellectual property or other proprietary rights; |
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introduction
of technological innovations or new products by us or our competitors; |
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manufacturing
issues related to our drug candidates for clinical trials or future products for commercialization; |
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market
acceptance of our future products; |
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deviations
in our operating results from the estimates of analysts; |
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third
party payor coverage and reimbursement policies; |
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new
legislation relating to the sale or pricing of pharmaceuticals; |
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regulatory
actions affecting us or our industry; |
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product
liability claims or other litigation or public concern about the safety of our drug candidates or future drugs; |
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our
ability to obtain and maintain necessary intellectual property licenses including, those relating to LDN, MENK and other drug candidates; |
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the
outcome of any future legal actions to which we are a party; |
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sales
of our common stock by our officers, directors or significant stockholders; |
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frequent,
irregular, under market, or large sales of shares of our common stock by any shareholder; |
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additions
or departures of key personnel; and |
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external
factors, including natural disasters and other crises. |
In
addition, the stock markets in general, and the markets for pharmaceutical, biopharmaceutical and biotechnology stocks in particular,
have experienced extreme volatility that has often been unrelated to the operating performance of the issuer. These broad market fluctuations
may adversely affect the trading price or liquidity of our common stock. In the past, when the market price of a stock has been volatile,
holders of that stock have sometimes instituted securities class action litigation suits against the issuer. If any of our stockholders
were to bring such a lawsuit against us, we could incur substantial costs defending the lawsuit and the attention of our management would
be diverted from the operation of our business.
Future
sales of our common stock or securities convertible or exchangeable for our common stock may depress our stock price.
If
our existing stockholders or holders of our convertible notes, options or warrants sell, or indicate an intention to sell substantial
amounts of our common stock in the public market, the trading price of our common stock could decline. The perception in the market place
that these sales may occur could also cause the trading price of our common stock to decline.
Certain
holders of shares of our common stock, warrants to purchase our common stock, and shares of common stock issuable upon exercise of warrants
will be entitled to rights with respect to the registration of their shares under the Securities Act. Registration of these shares under
the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act, except for shares
purchased by affiliates. In addition, our directors may, and we expect that our executive officers will establish programmed selling
plans under Rule 10b5-1 of the Exchange Act, for the purpose of effecting sales of our common stock. Any sales of securities by these
stockholders, or the perception that those sales may occur, including the entry into such programmed selling plans, could have a material
adverse effect on the trading price of our common stock.
If
we sell shares of our common stock in future financings, common stockholders may experience immediate dilution and, as a result, our
stock price may decline.
We
may from time to time issue additional shares of common stock at a discount from the current trading price of our common stock. As a
result, our common stockholders would experience immediate dilution upon the purchase of any shares of our common stock sold at such
a discount. In addition, as opportunities present themselves, we may enter into financing or similar arrangements in the future, including
the issuance of debt securities, preferred stock or common stock.
Provisions
of our charter documents or Florida law could delay or prevent an acquisition of the Company, even if the acquisition would be beneficial
to our stockholders, and could make it more difficult for stockholders to change management.
Provisions
of our amended and restated articles of incorporation, as amended, and amended and restated bylaws may discourage, delay or prevent a
merger, acquisition or other change in control that stockholders may consider favorable, including transactions in which stockholders
might otherwise receive a premium for their shares. In addition, these provisions may frustrate or prevent any attempt by our stockholders
to replace or remove our current management by making it more difficult to replace or remove our board of directors.
We
do not anticipate paying any cash dividends on our capital stock in the foreseeable future, therefore capital appreciation, if any, of
our common stock will be our shareholders sole source of gain for the foreseeable future.
We
have never declared or paid cash dividends on our capital stock. We do not anticipate paying any cash dividends on our capital stock
in the foreseeable future. We currently intend to retain all available funds and any future earnings to fund the development and growth
of our business. As a result, capital appreciation, if any, of the common stock will be our shareholders sole source of gain for the
foreseeable future.
If
securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price
and trading volume could decline.
The
trading market for our common stock will depend, in part, on the research and reports that securities or industry analysts publish about
us or our business. Securities and industry analysts do not currently, and may never, publish research on our Company. If no securities
or industry analysts commence coverage of our Company, the trading price for our stock would likely be negatively impacted. In the event
securities or industry analysts initiate coverage, if one or more of the analysts who cover us downgrade our stock or publish inaccurate
or unfavorable research about our business, our stock price would likely decline. In addition, if our operating results fail to meet
the forecast of analysts, our stock price would likely decline. If one or more of these analysts cease coverage of our Company or fail
to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline.
Our
board of directors is authorized to issue and designate shares of our preferred stock in additional series without stockholder approval.
Our
amended and restated articles of incorporation, as amended, authorize our board of directors, without the approval of our stockholders,
to issue shares of our preferred stock, subject to limitations prescribed by applicable law, rules and regulations and the provisions
of our amended and restated articles of incorporation, as amended, as shares of preferred stock in series, and to establish from time
to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares
of each such series and the qualifications, limitations or restrictions thereof. The powers, preferences and rights of these additional
series of preferred stock may be senior to or on parity with our common stock, which may reduce its value. We do not currently have any
class of preferred stock authorized.
Our
shares may be subject to the “penny stock” rules, which may subject you to restrictions on marketability and limit your ability
to sell your shares.
Broker-dealer
practices in connection with transactions in “Penny Stocks” are regulated by certain penny stock rules adopted by the SEC.
Penny stocks generally are equity securities with a price of less than $5.00 per share (other than securities registered on certain national
securities exchanges or quoted on the NASDAQ system). The penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks
and the risk associated with the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations
for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing
the market value of each penny stock held in the customer’s account. In addition, the penny stock rules generally require that
prior to a transaction in a penny stock, the broker-dealer must make a written determination that the penny stock is a suitable investment
for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the
effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules. The
Company’s securities may be subject to the penny stock rules, and investors may find it more difficult to sell their securities.
An
active and visible trading market for our common stock may not develop.
We
cannot predict whether an active market for our common stock will develop in the future. In the absence of an active trading market:
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Investors
may have difficulty buying and selling or obtaining market quotations; |
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Market
visibility for our common stock may be limited; and |
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A
lack of visibility for our common stock may have a depressive effect on the market price for our common stock |
Our
common stock is currently quoted on the OTC Market under the trading symbol “IMUN”. The OTC Market is unorganized, inter-dealers,
over-the-counter markets that provides significantly less liquidity than the New York Stock Exchange or NASDAQ. No assurances can be
given that we will ever obtain a listing for our securities on a senior exchange. The trading price of our common stock is therefore
expected to be subject to significant fluctuations in response to variations in quarterly operating results, changes in analysts’
earnings estimates, announcements of innovations by us or our competitors, general conditions in the industry in which we operate and
other factors. These fluctuations, as well as general economic and market conditions, may have a material or adverse effect on the market
price of our common stock.
We
may not register or qualify our securities with any state agency pursuant to blue sky regulations.
The
holders of our shares of common stock and persons who desire to purchase them in the future should be aware that there may be significant
state law restrictions upon the ability of investors to resell our shares. We currently do not intend to and may not be able to qualify
securities for resale in other states which require shares to be qualified before they can be resold by our shareholders.