Overview
Protagenic
Therapeutic, Inc. (together with its subsidiary, “Protagenic,” the “Company,” “we,” “our”
or “us”) is a Delaware corporation specializing in the discovery and development of therapeutics to treat central
nervous system (CNS) disorders. Our mission is to provide safe and effective treatments for mood, anxiety, depression and neurodegenerative
disorders by using novel peptide-base, brain active therapeutics. Our strategy is to develop, test and obtain regulatory approval
for various applications of these brain active therapeutics.
Our
current business model is designed around the further development of these applications, and to obtain the required regulatory
approvals to allow for the commercialization of our neuropeptide-based applications and products (see “Governmental Regulation”
below). If approval is obtained, we expect to begin our sales efforts and anticipate generating revenue through both licensing
and direct sales of our products. We believe that we can establish and subsequently strengthen our market position in the following
ways: (i) working to obtain U.S. Food and Drug Administration (“FDA”) approval of current and future neuropeptide
applications; (ii) investigating foreign markets for the use of our current and future products; (iii) securing relationships
with strong partners in our field; (iv) entering into license agreements, strategic partnerships and joint ventures for our various
applications; and, (v) continuing our current research into improving our processes, reducing costs and developing new and innovative
applications.
We
intend to advance our lead drug candidate, PT00114 through Investigational New Drug (IND)-enabling studies, and enter PT00114
into clinical proof-of-concept studies in Treatment-Resistant Depression (TRD) and/or Post-Traumatic Stress Disorder (PTSD) (anticipated
clinical start: 2019).
Corporate
History
We
are currently a Delaware corporation with one subsidiary named Protagenic Therapeutics Canada (2006) Inc., a corporation formed
in 2006 under the laws of the Province of Ontario, Canada.
We
were previously known as Atrinsic, Inc., a company that was once a reporting company under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), but that, in 2012 and 2013, reorganized under Chapter 11 of the United States Bankruptcy
Code and emerged from bankruptcy. On February 12, 2016, we acquired Protagenic Therapeutics, Inc. through a reverse merger (see
“
Corporate History – The Reverse Business Combination (Merger) Transaction
”). On June 17, 2016,
Protagenic Therapeutics, Inc. (the then wholly-owned subsidiary of Atrinsic, Inc.) was merged with and into Atrinsic, Inc. Atrinsic,
Inc. was the surviving corporation in this merger and changed its name from Atrinsic, Inc. to Protagenic Therapeutics, Inc. (see
“
Corporate History – The Subsidiary Merger
”).
The
Reverse Business Combination (Merger) Transaction
On
February 12, 2016, which we refer to as the Merger Closing Date, we (as Atrinsic, Inc.), Protagenic Therapeutics, Inc. and Protagenic
Acquisition Corp., Atrinsic, Inc.’s wholly-owned subsidiary, entered into a merger agreement and completed the merger contemplated
by the merger agreement. Pursuant to the merger agreement, on the Merger Closing Date, Protagenic Acquisition Corp. merged with
and into Protagenic Therapeutics, Inc., with Protagenic Therapeutics, Inc. remaining as the surviving entity and wholly-owned
subsidiary of Atrinsic, Inc. (the “Merger”)
Simultaneously
with the Merger, on the Merger Closing Date all of the issued and outstanding shares of Protagenic common stock converted, on
a 1-for-1 basis into shares of the Company’s Series B Preferred Stock, par value $0.000001 per share (“Series B Preferred
Stock”). Also on the Merger Closing Date, all of the issued and outstanding options to purchase shares of Protagenic common
stock, and all of the issued and outstanding warrants to purchase shares of Protagenic common stock, converted, on a 1-for-1 basis,
into options (the “New Options”) and new warrants (the “New Warrants”) respectively, to purchase shares
of our Series B Preferred Stock. The New Options are administered under Protagenic’s 2006 Employee, Director and Consultant
Stock Plan (the “2006 Plan”), which the Company assumed and adopted on the Merger Closing Date in connection with
the Merger.
On
the Merger Closing Date, (i) the former Protagenic common stock was exchanged for the right to receive 6,612,838 shares of Series
B Preferred Stock; (ii) New Options to purchase 1,807,744 shares of Series B Preferred Stock granted under the 2006 Plan,
having an average exercise price of approximately $0.87 per share, were issued to optionees pursuant to the assumption of the
2006 Plan; (iii) the holders of options to purchase the common stock of Atrinsic before the Merger (“Predecessor”)
were issued options (“Predecessor Options”) to purchase 17,784 shares of Series B Preferred Stock at $1.25 per share;
(iv) New Warrants to purchase 3,403,367 shares of Series B Preferred Stock at an average exercise price of approximately $1.05
per share were issued to holders of Protagenic warrants; and (v) 2,775,000 shares of Series B Preferred Stock were issued
to investors at a purchase price of $1.25 per share in the Private Offering, as defined below. In addition, warrants (“Predecessor
Warrants”) to purchase 295,945 shares of Series B Preferred Stock at $1.25 per share were issued to Strategic Bio Partners,
LLC, the designee (the “Designee”) of the holders of Predecessor’s debt, in consideration of the cancellation
of debt of $665,000 in principal and $35,000 in interest, and Placement Agent Warrants, as such term is defined below, to purchase
127,346 shares of Series B Preferred Stock were issued to the Placement Agent of the Private Offering. The common stockholders
of Predecessor before the Merger retained 25,867 shares of our common stock, par value $0.000001 per share. In addition, upon
the effectiveness of the Merger, the holders of the Predecessor’s Series A Preferred Stock exchanged all of the issued and
outstanding Series A Preferred Stock for an aggregate of 297,468 shares of Series B Preferred Stock. These shares were issued
to the Designee.
The
Merger was treated as a recapitalization of Protagenic for financial accounting purposes and the historical financial statements
of Protagenic Therapeutics, Inc. are our financial statements as a result of the Merger. The parties to the merger agreement have
agreed to take all actions necessary to ensure the Merger is treated as a “plan of reorganization” under Section 368(a)
of the Internal Revenue Code of 1986, as amended (the “Code”).
2016
Private Placement
Concurrently
with the closing of the Merger, we conducted the first closing of an offering (the “Private Offering”) of our Series
B Preferred Stock. At the first closing, we sold 2,775,000 shares of Series B Preferred Stock at a purchase price of $1.25 per
share, for which we received total gross consideration of $3,468,750. Of this amount, $350,000 consisted of conversion of outstanding
stockholder debt held by Garo H. Armen, our chairman and a member of our board of directors (“Board”), and $150,000
of legal expenses incurred by Strategic Bio Partners LLC, stockholders of the Predecessor, in conjunction with and as allowed
by the merger agreement. On March 2, 2016, we completed the second closing of the Private Offering, at which we issued an additional
913,200 shares of Series B Preferred Stock to accredited investors, for total gross proceeds of $1,141,500. On April 15, 2016,
we completed the final closing of the Private Offering, at which we issued an additional 420,260 shares of Series B Preferred
Stock to accredited investors, for total gross proceeds of $525,325.
We
paid Katalyst Securities LLC, our placement agent (the “Placement Agent”) and its selected dealers for the Private
Offering a commission of 10% of the funds raised in the Private Offering from investors introduced by the Placement Agent and
its selected dealers. In addition, the Placement Agent received $15,000 to reimburse it for its expenses in the Private Offering,
and the Placement Agent and its selected dealers were issued warrants (the “Placement Agent Warrants”) to purchase
127,346 shares of Series B Preferred Stock.The Placement Agent Warrants, which contain a “cashless exercise” provision,
are exercisable for a period of five years from the initial closing of the Private Offering at a price of $1.25 per share.
Pursuant
to a registration statement declared effective by the SEC on February 8, 2017, we registered the shares of common stock underlying
the Series B Preferred Stock and the Placement Agent Warrants issued in the Private Offering for public resale by the selling
stockholders named therein and their assigns. The Company was not required to update and maintain the effectiveness of this registration
statement after February 8, 2018.
Split-Off
Agreements
At
the closing of the Merger we had a 51% interest in MomSpot LLC, and the remaining 49% was held by B.E. Global LLC. Barry Eisenberg
was the sole owner of B.E. Global LLC and was the Chief Executive Officer of MomSpot LLC. Immediately after the closing of the
Merger, we split off our 51% membership interests in MomSpot LLC. The split-off was accomplished through the transfer of all of
our membership interests of MomSpot LLC to B.E. Global LLC.
Immediately
after the closing of the Merger, we split off all of our equity interest in 29 wholly-owned subsidiaries. The split-off was accomplished
through the sale of all equity interests in these wholly-owned subsidiaries to Quintel Holdings, Inc.
Reverse
Stock Split
Our
stockholders voted at a special meeting held on June 17, 2016 in favor of, and we effectuated, a 1-for-15,463.7183 reverse stock
split of our common stock, or the Reverse Split. As a result of the Reverse Split, 400,000,000 shares of common stock were split
into 25,867 shares of common stock. Additionally, as a result of the Reverse Split and in accordance with our certificate of designations
for our Series B Preferred Stock, our Series B Preferred Stock immediately and automatically converted into our common stock on
a 1-for-1 basis other than any Series B Preferred Stock (i) to the extent (but only to the extent) a Series B Preferred Stock
holder would beneficially own greater than 9.99% of our common stock (the “Springing Blocker”) and (ii) such holder
has notified the Company in writing that it wants the Springing Blocker to apply to such holder. On July 27, 2016, 10,146,000
of the Company’s 11,018,766 outstanding shares of Series B Preferred Stock were eligible to immediately convert into 10,146,000
shares of the Company’s common stock with 872,766 shares of Series B Preferred Stock remaining as a result of one holder
exercising the Springing Blocker. As of December 31, 2017, 10,146,000 shares of the Series B Preferred Stock were converted into
10,146,000 shares of common stock on the records of the Company. As of December 31, 2018, 872,766 shares of Series B Preferred
Stock remained outstanding.
Any
Series B Preferred Stock not converted as a result of this provision would automatically convert into common stock as soon as
such conversion would not violate the Springing Blocker. Our Series B Preferred Stock will cease to be designated as a separate
series of our preferred stock when all of such shares have converted into shares of our common stock.
The
Subsidiary Merger
On
June 17, 2016, we merged our wholly-owned subsidiary, Protagenic Therapeutics, Inc., with and into the Company and we changed
our name from Atrinsic, Inc. to Protagenic Therapeutics, Inc. We are the parent company of Protagenic Therapeutics Canada (2006),
Inc., a corporation incorporated in the Province of Ontario.
Mood
and Anxiety Disorders
An
estimated 340 million people worldwide and 40-60 million people in the United States alone suffer from mental disorders including
Major Depressive Disorder, or MDD, including TRD, PTSD, Bipolar Disorder and various Anxiety Disorders. The global sales of anxiolytic
and antidepressant drugs is expected to reach a value of $ 18.3 billion by 2025 according to Grand View Research, Inc. (Jan 23,
2017 Grand View press release). Yet, up to one-half of mood disorder patients are unresponsive to current treatments. Efficacy
of therapy is challenged by non-compliance during the weeks to months required to achieve therapeutic benefit in combination with
daily dosing requirements. Major targets in this space include TRD and PTSD, both indications which are highly resistant to available
therapies.
Approximately
37% of those suffering from a MDD that do not respond to the current antidepressant medications constitute a separate group of
people suffering from TRD. Despite a large patient population and current treatments that leave much room for improvement, the
developmental pipelines are sparse and few novel candidates are in development. The serendipitous discoveries of current drug
classes, and lack of efficacy have led to shrinkage or extinction of many pharma or small biotech neuroscience research programs.
It is in this TRD market that we intend to focus our PT00114 development efforts.
TRD
is the type of MDD that does not respond to standard courses of antidepressant medication. Stress plays a significant role in
this illness that affects as many as half of people diagnosed with depression. Patients suffering with TRD are at greater risk
of hospitalization for their psychiatric illness and are more likely to abuse drugs and alcohol. These patients have a lower long-term
quality of life and are at increased risk of attempting suicide. As a last resort, this disease is currently managed by invasive
treatment, primarily electroconvulsive therapy (ECT). However, the ECT treatment’s side effects and high cost prevent millions
of people from taking advantage of it.
According
to an article titled “Global prevalence of anxiety disorders: a systemic review and meta-regression,” written by AJ
Baxter et al., (published in
Psychological Medicine
in 2013), PTSD affects an estimated 7.7 million adults (3.5%) in the
US, with a disproportionately high prevalence in war veterans. Therapeutic approaches include cognitive therapy in combination
with antidepressants, such as selective serotonin reuptake inhibitors (SSRIs). In addition to the vulnerabilities noted above
for antidepressant-related treatments, PTSD patients often present with co-morbidities such as addictions or dependencies, which
make therapeutic case management difficult.
Protagenic
Research
PT00114
is the first known example of a new class of brain-targeted therapies based on a newly-described and highly conserved family of
neuropeptides that regulate stress-induced mood and addictive behaviors. PT00114 is believed to act via a novel mechanism of action
and is therefore expected to provide an extremely attractive therapeutic and commercial profile, especially for those patients
who are not fully responsive to or compliant with current interventions. Based on preclinical data, we believe that PT00114 is
well differentiated from other drug candidates on the basis of having: Dual activity on stress- and addiction-related pathways
(as present in TRD and PTSD); Blood-brain barrier permeability; Rapid onset of action and long duration of therapeutic effects;
Restoration of normalcy in stress, anxiety and addiction disorders; No adverse effects with little to no accumulation; Good safety
and tolerability profiles; Convenient dosing route and schedule; High potency/low dose; and, Ease of chemical synthesis.
We
believe that optimal cellular energy metabolism is fundamental to the biology of the brain, and clinical manifestation of aberrant
energy metabolism often manifests in debilitating neurological disorders. PT00114’s ability in preclinical models to enhance
glucose mobilization and utilization in the brain, maintain energy homeostasis, inhibit stress-related pathways and protect cells
from oxidative damage suggests potential therapeutic benefits in a range of indications involving both acute and chronic neurological
injury. Potential applications include traumatic brain injury, stroke recovery, and neurodegenerative diseases such as Alzheimer’s
disease, Parkinson’s disease and ALS, among others.
Technology
PT00114
is a synthetic form of the natural peptide sequence TCAP-1.
TCAP-1
was discovered in a genome-wide search for proteins related to corticotropin releasing factor (CRF), a key brain peptide hormone
in stress response. While TCAP-1 counteracts stress, it does so by a non-CRF receptor pathway and unlike direct CRF antagonists
it does not exhibit negative effects in animal models studied to date.
PT00114
inhibits stress and stress (CRF)-induced actions in clinically-relevant gold-standard animal models of anxiety, depression and
addiction at concentrations several magnitudes below current front-line therapeutics. These beneficial effects are maintained
for as long as three weeks after treatment. PT00114 promotes neuronal process development, spine density, axon fasciculation and
branching in neurons.
PT00114
crosses the blood brain barrier and concentrates in regions of the brain associated with the regulation of mood disorders. Preliminary
toxicity assessment (non-GLP) indicates no clear or significant adverse effects, although further toxicity testing is required.
PT00114
is highly soluble and shows excellent stability in several storage conditions. The initial dosage form is intended as a subcutaneous
injection but is also amenable to other routes of administration.
Business
plan / Proposed next steps
The
Company’s business plan calls for the following processes during 2019:
Preclinical
Efficacy Data
Historically,
much of the preclinical efficacy data regarding specific therapeutic benefits of PT00114 had been generated in the lab of our
Chief Technology Officer, Dr. David Lovejoy at the University of Toronto. The Company recognizes that to fully validate its business
proposal, and persuade potential corporate partners of target-disease efficacy, additional preclinical efficacy data from unaffiliated
research organizations would be valuable. Hence, the Company has engaged two contract research organizations (CROs) to conduct
preclinical tests of PT00114 for anxiety and depression, as well as alleviation of drug addictive behavior.
Process
Development and Manufacturing
In
parallel with the Company’s external CRO research studies, the Company is pursuing good manufacturing practices (cGMP) synthesis
of PT00114. The Company obtained enough TCAP in July 2017 to supply its Phase I human clinical trials anticipated to begin in
the second half of 2019. The Company intends to secure at least two supplier relationships for sourcing synthesized human PT00114.
Preclinical
Safety & Toxicology
A
key part of the Company’s preclinical studies for IND readiness is the toxicology testing of PT00114 in two animal species.
Because these toxicology tests will be carried out with a drug concentration that is a multiple of the intended concentration
in the eventual marketable drug, the Company plans to commence its safety and toxicology testing only after receiving a confirmatory
positive result from the latest external CRO efficacy tests. This means toxicology testing could begin as soon as the third quarter
of 2019.
Pursue
Strategic Partnership
The
Company believes it would be to its advantage to secure a collaboration with a pharma/biopharma company with a presence in neurological
and psychiatric diseases and/or addiction. Therefore, it plans to use the preclinical efficacy data generated during 2017 and
the first quarter 2018 as a point of instigation with potential pharma/biopharma corporate partners.
Compile
and File IND
The
most important corporate goal for which the Company is deploying the working capital it raised in 2016 and that which it hopes
to raise in the future is the compilation and submission of an investigational new drug (IND) application to the FDA. This is
a prerequisite to begin Phase I human testing of PT00114 for any indication. The preclinical efficacy data currently being generated
at two external CROs, as well as the toxicology test results that the Company plans to obtain, and a specific plan and protocol
for a Phase I trial, will be among the components of this key regulatory submission anticipated in late 2019.
Initiate
Phase I Clinical Studies
Once
the Company’s IND application has been filed, the next major milestone is anticipated to be an approval by the Company’s
FDA review team that the Phase I trial protocol proposed in the IND application is acceptable to begin. The Company believes that
this may be achieved in the second half of 2019.
Technology
License Agreement
On
July 31, 2005, the Company had entered into a Technology License Agreement (“License Agreement”) with the University
of Toronto (the “University” or “UT”) pursuant to which the University agreed to license to the Company
patent rights and other intellectual property, among other things (the “Technologies”). The Technology License Agreement
was amended on February 18, 2015 and currently does not provide for an expiration date.
Pursuant
to the License Agreement and its amendment, the Company obtained an exclusive worldwide license to make, have made, use, sell
and import products based upon the Technologies, or to sublicense the Technologies in accordance with the terms of the License
Agreement and amendment. In consideration, the Company agreed to pay to the University a royalty payment of 2.5% of net sales
of any product based on the Technologies. If the Company elects to sublicense any rights under the License Agreement and amendment,
the Company agrees to pay to the University 10% of any up-front sub-license fees for any sub-licenses that occurred on or after
September 9, 2006, and, on behalf of the sub-licensee, 2.5% of net sales by the sub-licensee of all products based on the Technologies.
The Company had no sales revenue for the year ended December 31, 2018 and therefore was not subject to paying any royalties.
In
the event the Company fails to provide the University with semi-annual reports on the progress or fails to continue to make reasonable
commercial efforts towards obtaining regulatory approval for products based on the Technologies, the University may convert our
exclusive license into a non-exclusive arrangement. Interest on any amounts owed under the License Agreement and amendment will
be at 3% per annum. All intellectual property rights resulting from the Technologies or improvements thereon will remain the property
of the other inventors and/or Dr. David Lovejoy at the University, and/or the University, as the case may be. The Company has
agreed to pay all out-of- pocket filing, prosecution and maintenance expenses in connection with any patents relating to the Technologies.
In the case of infringement upon any patents relating to the Technologies, the Company may elect, at its own expense, to bring
a cause of action asserting such infringement. In such a case, after deducting any legal expenses the Company may incur, any settlement
proceeds will be subject to the 2.5% royalty payment owed to the University under the License Agreement and amendment.
The
patent applications were made in the name of the Dr. Lovejoy and other inventors, but the Company’s exclusive, worldwide
rights to such patent applications are included in the License Agreement and its amendment with the University. The Company maintains
exclusive licensing agreements and it currently controls the six intellectual patent properties.
Sales
and Marketing
We
currently have no sales, marketing or distribution capabilities. In order to commercially market PT00114 and any product candidates
we develop in the future, we would either need to develop an internal sales team and marketing department or collaborate with
third parties who have sales and marketing capabilities.
Manufacturing
We
currently do not own any manufacturing facilities, nor have we entered into any agreements with contract manufacturer for the
production of PT00114. Currently we synthesize all the PT00114 we use in our development activities.
Competition
The
pharmaceutical and biotechnology industries are highly competitive and characterized by rapidly evolving technology and intense
research and development efforts. We expect to compete with companies, including major international pharmaceutical companies,
and other institutions that have substantially greater financial, research and development, marketing and sales capabilities and
have substantially greater experience in undertaking preclinical and clinical testing of products, obtaining regulatory approvals
and marketing and selling biopharmaceutical products. We will face competition based on, among other things, product efficacy
and safety, the timing and scope of regulatory approvals, product ease of use and price.
Major
depressive disorder patients that do not respond to the current antidepressant medications constitute a separate group of TRD.
Despite a large patient population and current treatments that leave much room for improvement, the developmental pipelines are
sparse and few novel candidates are in development. The serendipitous discoveries of current drug classes, side effects and lack
of efficacy have led to shrinkage or extinction of many pharma or small biotech neuroscience research programs. According to a
May 10, 2016 Zion Research report, the current global depression drug market was valued at approximately $14.5 billion in 2014,
and is expected to generate $16.8 billion by the end of 2020. The pharmaceutical addiction market is very large but has not yet
been quantified because no successful drug has been launched to treat victims. We intend to launch PT00114 into either the TRD,
anti-anxiety, or pharmaceutical addiction markets.
Set
forth below is a discussion of competitive factors for each of the current drug classes commercially available for TRD, and the
competitive advantages that we believe PT00114 may offer. The basis for our beliefs regarding the competitive advantages that
PT00114 may offer over its competitors is our own pre-clinical animal studies. We acknowledge that these beliefs and conclusions
about competitive advantages must be regarded as theoretical until such time as we have human clinical data that supports and
re-affirms the results seen in the pre-clinical animal studies.
Opioid
receptor modulators
Opioid
receptor modulators have the potential to be non-addictive therapeutic drugs for TRD. Competitors include ALKS 5461 (from Alkermes)
is a fixed combination of buprenorphine and samidorphan being developed as a therapy for TRD. Buprenorphine is a mu opioid receptor
partial agonist as well as an antagonist of the kappa-opioid receptor (KOR), while samidorphan is an antagonist of mu opioid receptors
that essentially works to block the buprenorphine from binding to the mu-receptor. The combination of these mechanisms may result
in attenuation of the mu agonist effects of buprenorphine, potentially making this a non-addictive therapy. ALKS 5461 is in phase
III as a once-daily therapy administered as a sublingual tablet. It is well tolerated and treatment effects were evident after
one week of dosing. We believe that our competitive advantage is that PT00114 targets different receptor system therefore it is
not likely to have a clinical overlap with opioid receptor modulators.
Antipsychotics
with antidepressant effects (dopamine receptor modulators
)
Brexpiprazole
(from Otsuka) is a dopamine (D2 receptor) partial stimulator (agonist) approved as an oral adjunctive TRD therapy. Its side effects
include suicidal risk, weight gain and restlessness. Cariprazine (from Gedeon Richter) is an oral dopamine D2 and D3 receptor
antagonist approved for schizophrenia and bipolar disorder in development for TRD. The most common side effects reported were
extrapyramidal symptoms, the urge to move (akathisia), indigestion (dyspepsia), vomiting, drowsiness (somnolence) and restlessness.
We believe that our competitive advantage is that PT00114, due to its low toxicity profile, will be clinically preferable to these
antipsychotic drugs.
Ketamine-like
TRD drugs
Drugs
that act in a mechanism similar to Ketamine, such as Esketamine nasal spray (from Johnson and Johnson) is the S(+) enantiomer
of the drug ketamine acts primarily as a non-competitive NMDA receptor antagonist, but is also a dopamine reuptake inhibitor.
As of December 2017, the Company was awaiting phase III clinical trial results for treatment-resistant depression (TRD). This
class of candidates is generating a lot of excitement but uncertainty due to their use history will be a compounding factor. We
believe that our competitive advantage is that the toxicity profile is likely to be less favorable when compared with PT00114.
NMDA
receptor modulators
The
N-methyl-D-aspartate (or “NMDA”) receptor is a molecule that appears on the surface of neurons. When “activated”
by a drug that binds with it, the NMDA receptor is a potential natural way to counteract TRD. A drug called GLYX 13, an amidated
tetrapeptide (with the amino acid sequence Thr-Pro-Pro-Thr-NH2) is a glycine-site functional partial agonist of the NMDA receptor
discovered at Northwestern University, now being developed by Naurex/Allergan, in Phase III U.S. clinical trials. It will be administered
by intravenous injection and has a rapid onset. Phase II results have shown that GLYX 13 treatment reduces depression scores in
patients with TRD, with no psychotomimetic side effects common to other NMDA receptor modulators. The major peptide candidate
in this group GLYX13 shows a better tolerance profile and even IV dosing once weekly is not a deterrent enough in the clinic so
PT00114 peptide with possible subcutaneous delivery would be a much more preferable clinical option. The development of the tetrapeptide
and entry into the trials demonstrated room and willingness to accept peptide based therapies in TRD. More candidates are expected
to come from this therapeutic class that may present a competitive challenge for PT00114.
Another
of Naurex’s small molecule candidates, NRX-1074, is an orally active therapy based on GLYX13, in preclinical stages. L-4-Chlorokynurenine,
AV-101 (from VistaGen Therapeutics) is a fast acting, orally active small molecule glycine binding site NMDA receptor antagonist.
A NIH-funded phase II trial in major depressive disorder has been initiated in the US. CERC-301 (Cerecor) is an orally-active,
selective NMDA receptor subunit 2B (NR2B) antagonist which is in phase II an adjunctive therapy for TRD.
PT00114’s
Competitive Advantages/Disadvantages
We
believe PT00114 will be able to compete against each of these drugs based on its core advantages:
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PT00114,
once in a patient, had a rapid onset of action (efficacy in animal anxiety and depression models) compared with other TRD
drugs which may take longer to take effect.
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PT00114’s
effects are long lasting and potent (single 1-10 nmole/kg dose lasts up to one week for glucose/insulin blood-based biomarkers)
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PT00114
is rapidly cleared from the patient’s bloodstream (its “half life” is 5-10min if given intravenously (IV),
20-30 minutes if given subcutaneously (SC)
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PT00114
naturally crosses the blood brain barrier, while certain other TRD drugs do not naturally do that and therefore must be given
at higher doses so that any of them make it into the patient’s brain.
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PT00114
is an L-isomer, a naturally modified peptide (by way of pyroGlu, amidation) therefore liver toxicity is not anticipated –
resulting in a potentially superior toxicity profile
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PT00114
is soluble, it can be easily formulated with clinical excipients, and it is stable when lyophilized, making it easy to package
into a drug pill form.
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PT00114
will be manufactured by standard solid phase chemistry, which is less expensive than manufacturing processes required by other
TRD drugs.
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It
counteracts the stress effects associated with corticotropin releasing factor (CRF), a mechanism of action not yet known among
today’s commercially-available TRD drugs.
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It
increases glucose import into brain cells, thus it is potentially effective against diabetes associated depression and anxiety
disorders
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It
increases energy metabolism likely by mitochondrial activation in brain cells
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The
main competitive disadvantage that PT00114 will have relative to other antidepressant drugs is that it will have fewer marketing
resources behind it, assuming that the Company consummates a partnership with a large pharmaceutical company during its commercial
marketing phase. Beyond this marketing resources disadvantage, the Company acknowledges that PT00114 may have efficacy disadvantages
that we are not yet aware of since the drug has not yet been tested in humans. Extrapolating the early results obtained in rodent
studies, PT00114 appears to be more effective and with few or no side effects, but this must be treated as an unknown since no
human studies have yet been performed, and a new competitive disadvantage could be discovered during the clinical trial phase.
Although
we believe PT00114’s advantages will allow it to compete effectively against other antidepressant drugs in the TRD market,
many of our competitors and potential competitors have significantly greater financial resources and expertise in research and
development, manufacturing, preclinical testing, clinical trials, obtaining regulatory approvals and marketing approved products
than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being
concentrated among a smaller number of our competitors. Smaller or early stage companies may also prove to be significant competitors,
particularly through collaborative arrangements with large and established companies. These third parties compete with us in recruiting
and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical
trials, as well as in acquiring technologies complementary to our programs or advantageous to our business.
Intellectual
Property
We
believe that patents, trademarks, copyrights and other proprietary rights are important to our business. We also rely on trade
secrets, know-how, continuing technological innovations and licensing opportunities to develop and maintain our competitive position.
We seek to protect our intellectual property rights by a variety of means, including obtaining patents, maintaining trade secrets
and proprietary know-how, and technological innovation to operate without infringing on the proprietary rights of others and to
prevent others from infringing on our proprietary rights. Our policy is to seek to protect our proprietary position by, among
other methods, actively seeking patent protection in the United States and foreign countries.
As
of December 31, 2018, we have six patents issued by the Governments of the United States, Canada, European Union and Australia
and three patent applications pending worldwide including in the U.S. Some patent applications were made in the name of Dr. David
A.. Lovejoy and inventors, but the Company’s exclusive, worldwide rights to such patent applications are included in the
License Agreement with UT. Other patent applications were made with various Company personnel as inventors and all rights have
either been assigned or are in the process of being assigned from individuals who are legally obligated to assign rights to the
Company.
Our
success will depend in part on our ability to maintain our proprietary position through effective patent claims and their enforcement
against our competitors. Although we believe our patent applications provide a competitive advantage, the patent positions of
companies like ours are generally uncertain and involve complex legal and factual questions. We do not know whether any of our
patent applications will result in the issuance of any patents. Those patents that may be issued in the future or those acquired
by us may be challenged, invalidated or circumvented, and the rights granted under any issued patent may not provide us with proprietary
protection or competitive advantages against competitors with similar technology. In particular, we do not know if competitors
will be able to design variations on our treatment methods to circumvent our current and anticipated patent claims. Furthermore,
competitors may independently develop similar technologies or duplicate any technology developed by us. Because of the extensive
time required for the development, testing and regulatory review of a potential product, it is possible that, before any of our
products can be commercialized or marketed, any related patent claim may expire or remain in force for only a short period following
commercialization, thereby reducing the advantage of the patent.
We
also rely upon trade secrets, confidentiality agreements, proprietary know-how and continuing technological innovation to remain
competitive, especially where we do not believe patent protection is appropriate or obtainable. We continue to seek ways to protect
our proprietary technology and trade secrets, including entering into confidentiality or license agreements with our employees
and consultants, and controlling access to and distribution of our technologies and other proprietary information. While we use
these and other reasonable security measures to protect our trade secrets, our employees or consultants may unintentionally or
willfully disclose our proprietary information to competitors.
Our
commercial success will depend in part on our ability to operate without infringing upon the patents and proprietary rights of
third parties. It is uncertain whether the issuance of any third party patents would require us to alter our products or technology,
obtain licenses or cease certain activities. Our failure to obtain a license to technology that we may require to discover, develop
or commercialize our future products may have a material adverse impact on us. One or more third-party patents or patent applications
may conflict with patent applications to which we have rights. Any such conflict may substantially reduce the coverage of any
rights that may issue from the patent applications to which we have rights. 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
in the USPTO to determine priority of invention.
We
may collaborate in the future with other entities on research, development and commercialization activities. Disputes may arise
about inventorship and corresponding rights in know-how and inventions resulting from the joint creation or use of intellectual
property by us and our subsidiaries, collaborators, partners, licensors and consultants. As a result, we may not be able to maintain
our proprietary position.
As
of December 31, 2018, we controlled the following intellectual property:
Title
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Issue Date
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1. Teneurin C-Terminal
Associated Peptides (TCAP) and
Methods and uses thereof.
Serial # 10/510,959
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United States
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Patent issued
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01/03/2012
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2. Teneurin C-Terminal
Associated Peptides (TCAP) and
Methods and uses thereof.
Serial # 2003221575.
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Australia
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Patent issued
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09/23/2011
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3. Teneurin C-Terminal
Associated Peptides (TCAP) and
Methods and uses thereof.
Serial # 2,482,810.
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Canada
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Patent issued
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06/10/2014
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4. Teneurin C-Terminal
Associated Peptides (TCAP) and
Methods and uses thereof.
Serial # 03717086.7
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European Union. Validated in France, Germany and Great Britain.
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Patent issued
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03/12/2014
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5. A Method for Regulating
Neurite Growth: Application.
Serial # 60/783,821
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United States
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Patent issued
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08/01/2017
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6. Method for Modulating
Glucose Transport Using
Teneurin C-Terminal Associated
Peptide (TCAP). Serial #
62/026,346
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United States
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Pending
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Filed 01/17/2017
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7. Composition, Methods and Uses for
Enhancing Muscle Function Using
Teneurin C-Terminal Associated
Peptide (TCAP). Serial #
62/399,702
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United States
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Pending
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Filed 09/26/2016
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8. Composition, Methods and Uses for
Treating Post-Traumatic Stress Disorder Using
Teneurin C-Terminal Associated
Peptide (TCAP). Serial #
62/571,616
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United States
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Pending
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Filed 10/12/2017
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9. Composition, Methods and Uses for
Treating Opioid Addiction Using
Teneurin C-Terminal Associated
Peptide (TCAP). Serial #
62/642,201
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United States
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Pending
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Filed 03/13/2018
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In
the future we may file additional patent applications based on proprietary formulations and novel compounds.
Governmental
Regulation
Our
technologies are subject to extensive government regulation, principally by the FDA and state and local authorities in the United
States and by comparable agencies in foreign countries. Governmental authorities in the United States extensively regulate the
preclinical and clinical testing, safety, efficacy, research, development, manufacturing, labeling, storage, record-keeping, advertising,
promotion, export, marketing and distribution, among other things, of pharmaceutical products under various federal laws including
the Federal Food, Drug and Cosmetic Act, or FFDCA, and under comparable laws by the states and in most foreign countries.
The
Company has not commenced its FDA approval application process, and does not plan to launch the FDA application process until
2022 or 2023. We cannot commence the FDA application process until we have obtained clinical human data on PT00114 in three phases
of trials, none of which have been initiated. Similarly, the Company will be required to obtain regulatory approval in every country
or region outside the United States into which it plans to sell its drug products. We may seek approval from authorities outside
the United States such as the European Union CE Mark and Japanese Ministry of Health. As of December 31, 2018, the Company has
not launched the approval application process for any region in the world because of its lack of clinical human data on PT00114.
Domestic
Regulation
In
the United States, the FDA, under the FFDCA, the Public Health Service Act and other federal statutes and regulations, subject
pharmaceutical and biologic products to rigorous review. If we do not comply with applicable requirements, we may be fined, the
government may refuse to approve our marketing applications or allow us to manufacture or market our products or product candidates,
and we may be criminally prosecuted. The FDA also has the authority to discontinue or suspend manufacture or distribution, require
a product withdrawal or recall or revoke previously granted marketing authorizations, if we fail to comply with regulatory standards
or if we encounter problems following initial marketing.
FDA
Approval Process
To
obtain approval of a new product from the FDA, we must, among other requirements, submit data demonstrating the product’s
safety and efficacy as well as detailed information on the manufacture and composition of the product candidate. In most cases,
this entails extensive laboratory tests and preclinical and clinical trials. This testing and the preparation of necessary applications
and processing of those applications by the FDA are expensive and typically take many years to complete. The FDA may deny our
applications or may not act quickly or favorably in reviewing these applications, and we may encounter significant difficulties
or costs in our efforts to obtain FDA approvals that could delay or preclude us from marketing any products we may develop. The
FDA also may require post-marketing testing and surveillance to monitor the effects of approved products or place conditions on
any approvals that could restrict the commercial applications of these products. Regulatory authorities may withdraw product approvals
if we fail to comply with regulatory standards or if we encounter problems following initial marketing. With respect to patented
products or technologies, delays imposed by the governmental approval process may materially reduce the period during which we
will have the exclusive right to exploit the products or technologies.
The
process required by the FDA before a new drug or biologic may be marketed in the United States generally involves the following:
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completion
of preclinical laboratory tests or trials and formulation studies;
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submission
to the FDA of an IND for a new drug or biologic, which must be accepted by FDA before human clinical trials may begin;
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performance
of adequate and well-controlled human clinical trials to establish the safety and efficacy of the proposed drug or biologic
for its intended use; and,
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submission
and approval of a New Drug Application, or NDA, for a drug, or a Biologic License Application, or BLA, for a biologic.
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Preclinical
tests include laboratory evaluation of product chemistry formulation and stability, as well as studies to evaluate toxicity. The
results of preclinical testing, together with manufacturing information and analytical data, are submitted to the FDA as part
of an IND application. The FDA requires a 30-day waiting period after the filing of each IND application before clinical trials
may begin, in order to ensure that human research subjects will not be exposed to unreasonable health risks. At any time during
this 30-day period or at any time thereafter, the FDA may halt proposed or ongoing clinical trials, or may authorize trials only
on specified terms. The IND application process may become extremely costly and substantially delay development of our products.
Moreover, positive results of preclinical tests will not necessarily indicate positive results in clinical trials.
The
sponsor typically conducts human clinical trials in three sequential phases, which may overlap. These phases generally include
the following:
Phase
I: The product is usually first introduced into healthy humans or, on occasion, into patients, and is tested for safety, dosage
tolerance, absorption, distribution, excretion and metabolism.
Phase
II: The product is introduced into a limited patient population to:
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assess
its efficacy in specific, targeted indications;
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assess
dosage tolerance and optimal dosage; and
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identify
possible adverse effects and safety risks.
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Phase
III: These are commonly referred to as pivotal studies. If a product is found to have an acceptable safety profile and to be potentially
effective in Phase II clinical trials, new clinical trials will be initiated to further demonstrate clinical efficacy, optimal
dosage and safety within an expanded and diverse patient population at geographically-dispersed clinical study sites.
If
the FDA does ultimately approve the product, it may require post-marketing testing, including potentially expensive Phase IV studies,
to monitor its safety and effectiveness.
Clinical
trials must meet requirements for Institutional Review Board, or IRB, oversight, informed consent and the FDA’s Good Clinical
Practices. Prior to commencement of each clinical trial, the sponsor must submit to the FDA a clinical plan, or protocol, accompanied
by the approval of the committee responsible for overseeing clinical trials at one of the clinical trial sites. The FDA and the
IRB at each institution at which a clinical trial is being performed may order the temporary or permanent discontinuation of a
clinical trial at any time if it believes that the clinical trial is not being conducted in accordance with FDA requirements or
presents an unacceptable risk to the clinical trial patients.
The
sponsor must submit to the FDA the results of the preclinical and clinical trials, together with, among other things, detailed
information on the manufacturing and composition of the product, in the form of an NDA, or, in the case of a biologic, a BLA.
Once the submission has been accepted for filing, the FDA has 180 days to review the application and respond to the applicant.
The review process is often significantly extended by FDA requests for additional information or clarification. The FDA may refer
the BLA to an advisory committee for review, evaluation and recommendation as to whether the application should be approved, but
the FDA is not bound by the recommendation of an advisory committee.
It
is possible that our product candidates will not successfully proceed through this approval process or that the FDA will not approve
them in any specific period of time, or at all. The FDA may deny or delay approval of applications that do not meet applicable
regulatory criteria, or if the FDA determines that the clinical data do not adequately establish the safety and efficacy of the
product. Satisfaction of FDA pre-market approval requirements for a new biologic is a process that may take several years and
the actual time required may vary substantially based upon the type, complexity and novelty of the product or disease. The FDA
reviews these applications and, when and if it decides that adequate data are available to show that the product is both safe
and effective and that other applicable requirements have been met, approves the drug or biologic for marketing. Government regulation
may delay or prevent marketing of potential products for a considerable period of time and impose costly procedures upon our activities.
Success in early stage clinical trials does not assure success in later stage clinical trials. Data obtained from clinical activities
is not always conclusive and may be susceptible to varying interpretations that could delay, limit or prevent regulatory approval.
Upon approval, a product candidate may be marketed only for those indications approved in the BLA or NDA and may be subject to
labeling and promotional requirements or limitations, including warnings, precautions, contraindications and use limitations,
which could materially impact profitability. Once approved, the FDA may withdraw the product approval if compliance with pre-
and post-market regulatory standards is not maintained or if safety, efficacy or other problems occur after the product reaches
the marketplace.
The
FDA may, during its review of an NDA or BLA, ask for additional test data. If the FDA does ultimately approve the product, it
may require post-marketing testing, including potentially expensive Phase IV studies, to monitor the safety and effectiveness
of the product. In addition, the FDA may, in some circumstances, impose restrictions on the use of the product, which may be difficult
and expensive to administer and may require prior approval of promotional materials.
We
have not yet begun the preparation of our IND application to begin Phase I clinical trials. We anticipate doing so in 2H 2019.
We also have not begun to prepare our application for FDA approval which we anticipate will be in 2024 or 2025. The process of
collecting the clinical data needed to complete our IND application is the focus of all of our working capital, and is expected
to consume all of our available capital resources over the next eighteen months. The expenditures necessary to make progress along
our IND program are expected to keep our operations in a cash flow negative state for the entire period from now until and after
our IND application in 2H 2019. To maintain our liquidity, we should endeavor to obtain an influx of cash from a non-revenue source
in mid-2019, from either an up-front payment from a large pharmaceutical partner or an equity financing.
Ongoing
FDA Requirements
Before
approving an NDA or BLA, the FDA will inspect the facilities at which the product is manufactured and will not approve the product
unless the manufacturing facilities are in compliance with the FDA’s current Good Manufacturing Practices, or cGMP, requirements
which govern the manufacture, holding and distribution of a product. Manufacturers of biologics also must comply with the FDA’s
general biological product standards. Following approval, the FDA periodically inspects drug and biologic manufacturing facilities
to ensure continued compliance with the cGMP requirements. Manufacturers must continue to expend time, money and effort in the
areas of production, quality control, record keeping and reporting to ensure full compliance with those requirements. Failure
to comply with these requirements subjects the manufacturer to possible legal or regulatory action, such as suspension of manufacturing,
seizure of product, voluntary recall of product, withdrawal of marketing approval or civil or criminal penalties. Adverse experiences
with the product must be reported to the FDA and could result in the imposition of marketing restrictions through labeling changes
or market removal. Product approvals may be withdrawn if compliance with regulatory requirements is not maintained or if problems
concerning safety or efficacy of the product occur following approval.
The
labeling, advertising, promotion, marketing and distribution of a drug or biologic product also must be in compliance with FDA
and FTC requirements which include, among others, standards and regulations for direct-to-consumer advertising, industry-sponsored
scientific and educational activities, and promotional activities involving the internet. The FDA and FTC have very broad enforcement
authority, and failure to abide by these regulations can result in penalties, including the issuance of a Warning Letter directing
the company to correct deviations from regulatory standards, a requirement that future advertising and promotional materials be
pre-cleared by the FDA and enforcement actions that can include seizures, injunctions and criminal prosecution.
Manufacturers
are also subject to various laws and regulations governing laboratory practices, the experimental use of animals and the use and
disposal of hazardous or potentially hazardous substances in connection with their research. In each of the above areas, the FDA
has broad regulatory and enforcement powers, including the ability to levy fines and civil penalties, suspend or delay issuance
of approvals, seize or recall products and deny or withdraw approvals.
HIPAA
Requirements
Other
federal legislation may affect our ability to obtain certain health information in conjunction with our research activities. The
Health Insurance Portability and Accountability Act of 1996, or HIPAA, mandates, among other things, the adoption of standards
designed to safeguard the privacy and security of individually identifiable health information. In relevant part, the U.S. Department
of Health and Human Services, or HHS, has released two rules mandating the use of new standards with respect to such health information.
The first rule imposes new standards relating to the privacy of individually identifiable health information. These standards
restrict the manner and circumstances under which covered entities may use and disclose protected health information so as to
protect the privacy of that information. The second rule released by HHS establishes minimum standards for the security of electronic
health information. While we do not believe we are directly regulated as a covered entity under HIPAA, the HIPAA standards impose
requirements on covered entities conducting research activities regarding the use and disclosure of individually identifiable
health information collected in the course of conducting the research. As a result, unless they meet these HIPAA requirements,
covered entities conducting clinical trials for us may not be able to share with us any results from clinical trials that include
such health information.
In
addition to the statutes and regulations described above, we are also subject to regulation under the Occupational Safety and
Health Act, the Environmental Protection Act, the Toxic Substances Control Act, the Resource Conservation and Recovery Act and
other present and potential future federal, state and local regulations.
Research
and Development
Our
research and development efforts with respect to the formulations of PT00114 as our first potential product are exclusively conducted
under premises of UT, Ontario, Canada. Much of our scientific research and discovery work is performed by Dr. David A. Lovejoy,
our Chief Science Advisor and Dr. Dalia Barsyte, our Chief Technology Officer. These activities are funded by us under our Sponsored
Research agreements with UT. We intend in the future to raise capital in distinct phases, matched to relevant scientific developments.
The Company has financed completion of its preclinical proof of principle studies and the solidification of its intellectual property
position through private offerings of its securities. In addition, the proceeds of bridge loans from the Company’s Chairman
were used to fund research, development and the general operating activities of the Company. We anticipate that we will require
additional financing through IND-enabling studies, and to support entry into clinical proof-of-concept studies in Treatment-Resistant
Depression (TRD) and/or Post-Traumatic Stress Disorder (PTSD). As we develop new product candidates, we may be required to conduct
additional scientific, preclinical and as well as clinical studies. We currently have no commitments to provide us with any such
additional funding.
We
incurred approximately $881,186 and $717,452 for research and development activities for the years ended December 31, 2018 and
2017, respectively.
The
Company derives income from scientific research and experimental development tax credits/and or refunds issued by the Canada Revenue
Agency for qualified expenditures. The credits are recognized when the refund is issued. The amounts received are reinvested into
the Company’s scientific research, experimental development and operational works conducted in Canada.
Subsidiary
Protagenic
Therapeutics Canada (2006) Inc. (“PTI Canada”) was incorporated in 2006 in the Province on Ontario, Canada. PTI Canada
is a wholly-owned subsidiary of Protagenic. It provides operational support and assistance for the implementation of corporate
and operational activities conducted in Canada. It also oversees and supports research and development activities conducted under
auspices of UT. PTI Canada has three directors: Garo H. Armen (Chairman), Alexander K. Arrow and Vigen Nazarian. PTI Canada also
has one part-time consultant, Robert Ziroyan. PTI Canada also benefits through tax incentive programs provided by the governments
of Canada and the Province of Ontario. We derived income from Canadian research and development tax credits for the years ended
December 31, 2018 and 2017 of $27,130 and $0, respectively.
Employees
We
currently have three part-time employees. We also engage consultants and temporary employees from time to time to provide services
that relate to our research and development activities as well as for general administrative and accounting services. We believe
that our current personnel are capable of meeting our operating requirements in the near term. We expect that as our business
grows we may hire additional personnel to handle the increased demands on our operations, preclinical and clinical activities.
Corporate
and Available Information
Our
principal offices are located at 149 Fifth Avenue, New York, New York 10010. Our web address is
www.protagenic.com
.
We
make available, free of charge through our website, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports
on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934,
as amended, as soon as reasonably practicable after we electronically file or furnish such materials to the Securities and Exchange
Commission, or SEC. In addition, you may read and copy any materials we file with the SEC at its Public Reference Room at 100
F Street, NE, Washington, DC 20549, on official business days during the hours of 10:00 am to 3:00 pm. You may obtain information
on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site,
www.sec.gov
that contains reports, proxy and information statements, and other information that we file electronically with the SEC.