Item 1. Business
Item 1. Business
We are a clinical stage biopharmaceutical company
in the process of developing Apitox, an intradermally administered bee venom-based toxin. Our focus is primarily on developing innovative
therapies that address inflammation and pain management symptoms associated with knee OA and, to a lesser extent, MS. Apitox is currently
marketed and sold by Apimeds Inc. (“Apimeds Korea”) in South Korea as “Apitoxin” for the treatment of OA. Apimeds
US is not associated with the market, sale and revenues generated from Apitoxin in South Korea, and Apitoxin has not yet been approved
by the FDA for any indication.
Apitox is a purified, pharmaceutical grade venom
(bee venom), of the Apis mellifera, or western honeybee, which is classified by the FDA as an active pharmaceutical ingredient
(“API”). Bee venom has been used in Asia and Europe to treat pain for hundreds of years. While not FDA approved in a
controlled, prescription based biologic environment for defined indications, the use of bee venom has been FDA approved as a “under
the skin injection” to reduce the allergic reactions to bee stings. Apimeds Korea has developed a proprietary method and process
for turning extracted bee venom into a lyophilized powder for reconstitution prior to intradermal dose injections, which they sell in
South Korea as Apitoxin. We intend to use a similar process with respect to Apitox, pursuant to the Business Agreement, which gives us
a license to utilize all prior clinical development data associated with Apitoxin. The advancement of extracted bee venom for treatment
of inflammatory conditions, including but not limited to knee OA and MS is speculative but based on direction provided by prior clinical
data.
Apimeds Korea successfully completed Phase I,
Phase II, and Phase III trials in OA in 2003, at which point Apitoxin was approved by the Korean Ministry of Food and Drug Safety (“MFDA”)
to treat pain and mobility in patients with OA. Since 2003, a post-marketing/approval safety study in South Korea followed 3,194 patients
from 2003 through 2009, with no serious adverse events. The purpose of a Phase I trial is to test to determine whether a new
treatment is safe and look for the best way to give the treatment. Phase II trials test to determine whether a condition or disease
responds to the new treatment. Phase III trials test to determine whether a new treatment is better than a standard treatment.
In 2013, the first of two required U.S. Phase
III clinical trials was authorized to enroll patients to study the use of Apitoxin to study the same indication as approved in South Korea
in 2023 — treatment of pain and lack of mobility in patients with OA (the “Apimeds Korea Phase III OA Trial”).
The Apimeds Korea Phase III OA Trial (330 patients) was completed in 2018, and displayed no serious adverse events.
Based on the results from the Apimeds Korea Phase
III OA Trial, which demonstrated therapeutic (statistical and clinically significant improvements in all outcome measures of pain, physical
function, and disease assessment) effect compared to the placebo group, but in combination with prior development by Apimeds Korea, did
not meet the FDA’s standards for approval, as the study population was too small and the methods for handling missing data were
inadequate, resulting in a study that did not demonstrate a significant treatment effect. We will be pursuing a second Phase III trial
to meet agreed upon FDA standards. Based on results from the Apimeds Korea Phase III OA Trial, we have evaluated the most appropriate
population, defined as advanced knee OA patients, which will range from defined grade 2, 3 and 4 within this treatment group, to continue
to progress our own Phase III trial. Pursuant to our previous correspondence with the FDA, we have designed and will implement our Phase
III trial to best address our patient population, appropriate dosing, and the most effective way to evaluate Apitox in meeting the patient
population’s needs.
We believe the progress we are making in clinical
trials provides us support in our belief in the potential of Apitox to be an innovative therapy. We aim to treat the inflammation and
pain management symptoms associated with knee OA and to help manage the devastating symptoms of this disease. In the future, we also aim
to leverage our research in knee OA to investigate how Apitox may be used to treat similar symptoms associated with MS.
Treatment of OA
OA is typically treated with painkillers known
as non-steroidal anti-inflammatory drugs (NSAIDs). These medications have an anti-inflammatory and pain-relieving effect. These medications
include ibuprofen (Motrin, Advil) naproxen (Aleve) and diclofenac (Voltaren and others). All of these medications work by blocking enzymes
that cause pain and swelling. The problem is that some of those enzymes also help blood to clot and protect the lining of your stomach.
Without them, you can bruise easily, develop ulcers and may even bleed in your intestines. NSAIDs also increase your chance of heart attack,
stroke and heart failure. The risk increases the longer you use them and the more you take. We believe Apitox could be a successful alternative
to NSAIDs in the treatment of the inflammation and pain management symptoms associated with OA without the harmful side effects.
1
According to MedicalNewsToday, OA is the most
common form of arthritis, affecting around 500 million people worldwide, or around 7% of the global population. Currently, in the
United States, over 32 million people suffer from OA. As the 15 th highest cause of years lived
with disability (YLDs) worldwide, the burden OA poses to individuals is substantial, characterized by pain, activity limitations, and
reduced quality of life. The economic impact of OA, which includes direct and indirect (time) costs, is also substantial, ranging
from 1 to 2.5% of gross national product (GNP) in countries with established market economies, like the United States. Though trends
in OA prevalence vary by geography, the prevalence of OA is projected to rise in regions with established market economies such as North
America and Europe, where populations are aging and the prevalence of obesity is rising.
While OA can occur in any joint, it occurs most
frequently in the knee, which, according to ScienceDirect, currently accounts for 365 million cases worldwide and 61% of YLDs lost
due to OA, followed by the hand.
Our current efforts are focused on the development
of Apitox in the United States for the treatment of inflammation and pain management relating to OA in the knee.
Treatment of MS
Additionally, we believe the previous clinical
trial success of Apimeds Korea with respect to the use of Apitoxin to treat symptoms associated with knee OA, and pending the success
of our anticipated Phase III trial in knee OA, we will be in a position to further explore the use of Apitox as a potential treatment
for the symptoms of MS. MS is a chronic disease of the central nervous system. It is an autoimmune condition that is characterized
by the body’s own immune cells (macrophages and lymphocytes) attacking the myelin that coats nerve cells, which can lead to
inflammation throughout the central nervous system. MS is an unpredictable disease that affects people differently. Some people with MS
may have only mild symptoms. Others may lose their ability to see clearly, write, speak, or walk when communication between the brain
and other parts of the body becomes disrupted.
MS is the most common progressive neurologic disease
of young adults worldwide. A study funded by the National MS Society estimates that nearly one million individuals are currently
affected by this disease in the United States. The total economic burden of MS in the United States is estimated to be $85.4 billion,
with $63.3 billion in direct medical costs and $22.1 billion in indirect and nonmedical costs. MS typically affects patients
at a young age, resulting in a greater loss of productivity and quality of life.
Beta interferon drugs are among the most common
medications used to treat MS. Interferons are signaling molecules that regulate immune cells. Potential side effects of these drugs
include flu-like symptoms (which usually fade with continued therapy), depression, or elevation of liver enzymes.
Pain from MS can be felt in different
parts of the body. Trigeminal neuralgia (facial pain) is treated with anticonvulsant or antispasmodic drugs, or less commonly, painkillers.
Central pain, a syndrome caused by damage to the brain and/or spinal cord, can be treated with gabapentin and nortriptyline. Treatments
for chronic back or other musculoskeletal pain may include heat, massage, ultrasound, and physical therapy.
OA and the Current Standard of Care
OA is a degenerative joint disease in which
the tissues in the joint break down over time. It is the most common type of arthritis and is more common in older people. People with
osteoarthritis usually have joint pain and, after rest or inactivity, stiffness for a short period of time.
There are four stages of OA: (1) Minor — minor
wear-and-tear in the joints and little to no pain in the affected area, (2) Mild — more noticeable bone spurs, the
affected area feels stiff after sedentary periods and patients may need a brace, (3) Moderate — cartilage in the
affected area begins to erode, the joint becomes inflamed and causes discomfort during normal activities, and (4) Severe — the
patient is in a lot of pain, the cartilage is almost completely gone leading to an inflammatory response from the joint, and overgrowth
of bony spurs may cause severe pain.
2
With the progression of OA of the knee, there
is obvious joint inflammation which causes frequent pain when walking, running, squatting, extending or kneeling. Along with joint stiffness
after sitting for long or when waking up in the morning, there may be popping or snapping sounds when walking.
The data from the Apimeds Korea Phase III OA Trial
suggest that Apitox would have the most potential in treating OA in stages 3 and 4.
MS and the Current Standard of Care
MS is increasingly recognized as a neurodegenerative
disease triggered by an inflammatory attack of the central nervous system. There is no cure for multiple sclerosis. Treatment typically
focuses on speeding recovery from attacks, reducing new radiographic and clinical relapses, slowing the progression of the disease,
and managing MS symptoms.
MS is unpredictable and can vary substantially
from person to person. MS is divided into four types: clinically isolated syndrome (CIS), relapsing-remitting MS (RRMS), secondary
progressive MS (SPMS) and primary progressive MS (PPMS).
CIS refers to a first episode of neurologic symptoms
caused by inflammation and demyelination in the central nervous system.
RRMS, the most common disease course, shows clearly
defined attacks of new or increasing neurologic symptoms. These attacks are also called relapses or exacerbations. They are followed
by periods of partial or complete recovery, or remission. In remissions, all symptoms may disappear or some symptoms may continue and
become permanent. However, during those periods, the disease does not seem to progress.
SPMS follows the initial relapsing-remitting course.
Some people diagnosed with RRMS eventually go on to have a secondary progressive course, in which neurologic function worsens progressively
or disability accumulates over time.
With PPMS, neurologic function worsens or disability
accumulates as soon as symptoms appear, without early relapses or remissions. PPMS can be further characterized as either active (with
an occasional relapse and/or evidence of new MRI activity over a specified period of time) or not active, as well as with progression
(evidence of disability accrual over time, with or without relapse or new MRI activity) or without progression.
Patients with MS tend to be more educated about
their disease and better organized than patients with other diseases, resulting in patients that are aggressive in their approach to treatment.
This is due to MS impacting otherwise healthy people in the prime of their lives.
MS treatment has undergone significant evolution
in the last ten years with the development and approval of certain new drugs, including several oral agents such as Ocrevus, in the
United States. These new agents not only give patients additional treatment options, but also have improved the efficacy and safety
of treatment for MS overall. In general, these drugs are “disease modifying agents,” intended to slow down the immune mediated
damage to the myelin sheaths that underlie symptoms in MS. However, they often do not adequately address the symptoms that MS patients
experience such as walking problems, bladder control, dizziness, and especially pain. A 2022 study estimated that the average cost of
treatment for patients with MS is approximately $88,000 annually. The out-of-pocket expense for patients can be significantly reduced
through certain insurance plans. However, we believe there is the ability for Apitox to be positioned as an important and cost-effective
therapy.
We believe the data from the Apimeds Korea Phase III
OA Trial suggest that Apitox may have the potential as an adjunctive therapy for all four types of MS. We intend to Apitox as a potential
adjunctive therapy through non-registered corporate sponsorship studies to begin determining the appropriate MS patient populations.
Market Opportunity
We believe there is a significant market opportunity
in the United States for Apitox in the treatment of certain symptoms of knee OA and eventually MS. According to Precedence Research
the osteoarthritis therapeutics market size accounted for $8.28 billion in 2022 and it is expected to hit around $20.24 billion
by 2032, expanding at a CAGR of 9.4% from 2023 to 2032. Although OA can damage any joint, the disorder most commonly affects joints in
your hands, knees, hips and spine. OA symptoms can usually be managed, although the damage to joints can’t be reversed. Apitox
has certain anti-inflammatory properties, which we believe give it significant potential to help treat the symptoms of certain chronic
diseases that involve difficult to control pain and inflammation.
3
According to Pharmaceutical Technology the MS
market size in the United States accounted for $10.73 billion in 2022 and is expected to hit $24.4 billion by 2030, expanding
at a CAGR of 10.32%. Starting in the first quarter of 2025, we intend to begin the early prosecution of appropriate MS patient populations
through non-registered corporate sponsorship studies. Subject to FDA approval, our development of Apitox in the United States will
in the near term, have two distinct focuses (i) the treatment of the certain symptoms of knee OA and (ii) the quality of life
issues surrounding knee OA, such as pain and lack of mobility.
Living with a chronic disease is challenging,
as it interferes with physical, mental, and social functions and thus greatly affects a person’s quality of life. Indeed, chronically
ill patients are facing major struggles such as higher expenditures, social isolation and loneliness, disabilities, fatigue, pain/discomfort,
feelings of distress, anger, hopelessness, frustration, anxiety, and depression. There is the general assumption that symptom reduction
increases a patient’s quality of life. Our approach with Apitox centers around this concept — effectively treating
certain symptoms of the patient’s disease, thus improving their overall quality of life. Bee venom has been shown to have anti-inflammatory
effects. At low doses, bee venom can suppress inflammatory cytokines such as interleukin-6 (IL-6), IL-8, interferon-γ (IFN-γ),
and tumor necrosis factor-α (TNF-α). A decrease in the signaling pathways responsible for the activation of inflammatory cytokines,
such as nuclear factor-kappa B (NF-κB), extracellular signal-regulated kinases (ERK1/2) and protein kinase Akt, and porphyromonas
gingivalis lipopolysaccharide (PgLPS)-treated human keratinocytes has been associated with treatments involving bee venom. We believe
the driver of pain in the highest category of OA is correlated to the key inflammatory elements treated by bee venom, meaning the evaluation
of our Phase III data may lead to a small indication for narcotic use reduction in the treatment of stage 4 OA.
Our Product Candidate
Apitox is purified honeybee (Apis mellifera) venom
manufactured as a lyophilized powder for reconstitution in 0.5% preservative-free lidocaine (lmg/mg) prior to intradermal dose injections
that are administered up to 1,500 micrograms per weekly visit. The biologically active components include melittin (40-50%), apamin (2-3%),
mast cell degranulating (“MCD”) peptide (Peptide 401,2-3%), phospholipase A2 (10-15%), hyaluronidase (1.5-2%) and other components
in small amounts, including dopamine and norepinephrine. According to a publication entitled “ Pharmacological effects and mechanisms
of bee venom and its main components: Recent progress and perspective ” by Shi et al., certain components of honeybee venom have
been found to have both anti-inflammatory and analgesic effects. The anti-inflammatory and analgesic effects are attributed to the presence
of Peptide 401, adolapin and other components that inhibit prostaglandin synthesis. The hormone-stimulating effects are attributed to
the presence of melittin, cardiopep and other components that stimulate the pituitary-adrenal axis to produce cortisol. Results from an
animal study entitled “ Effect of bee venom and melittin on plasma cortisol in the unanesthetized monkey ” published
by Vick et al., indicate that melittin appears to stimulate the production of cortisol from the adrenal gland. The immune-modulating effects,
especially as it pertains to MS, are suggested to be mediated by CD4+CD2S+Foxp3+ regulatory T cells (Tregs) that are influenced by phospholipase
A2. While the exact mechanism of action of Apitox is not fully understood, research such as the publication entitled “ Therapeutic
Use of Bee Venom and Potential Applications in Veterinary Medicine ” by Bava et al., suggests that certain components in Apitox
may ameliorate immune-inflammatory responses associated with MS. Such studies suggested that treatments with melittin prevent inflammatory
cytokine expression and produces anti-inflammatory effects. The proposed indication for Apitox is to provide add-on therapy for the signs
and symptoms of MS in patients whose condition is relapsing-remitting (RRMS), primary-progressive (PPMS) or secondary progressive (SPMS).
4
Clinical Development History
Founded in 1989, Apimeds Korea pursued a traditional
drug development process in South Korea for Apis mellifera, the bee venom API for Apitoxin. Apimeds Korea completed a formal preclinical
study to validate dosing and safety for human administration with a focus on antigenicity and toxicology in 1993.
A Phase I trial was completed in 1994, studying
the toxicity and safety of Apitoxin in 20 healthy subjects. The purpose of the Phase I trial was to determine if therapeutic doses of
Apitoxin was safe and to identify possible side-effects, if any. Injections of Apitoxin were given two to three times a week, for a total
of 12 sessions spanning over four to six weeks. Laboratory and physical examination of the subjects included (i) serum cortisol levels
(to see if Apitoxin stimulated the release of cortisol), (ii) serum ionized calcium level (to determine if Apitoxin decreased the serum
calcium level), (iii) urinalysis, (iv) hematology and blood chemistry, and (v) vital signs. The Phase I trial demonstrated that there
were no significant changes pre- and post-testing of the serum cortisol levels, serum ionized calcium levels, hematology, blood chemistry,
urinalysis, and vital signs after the subjects were injected with Apitoxin according to the protocol. There were no significant physiological
changes in the clinical evaluations of the subjects and localized itching was the most frequent side effect and was managed with ice packs
or external anti-itching gels. No severe side effects or aftereffects were observed. The Phase I trial indicated that Apitox is safe for
humans when applied in therapeutic doses.
The Phase I trial was followed by a Phase II trial
in 101 subjects to determine the efficacy of Apitoxin at various dose levels. This was a randomized active-controlled clinical trial with
three groups receiving the study drug at various dose levels and one group receiving the control drug (nabumetone) for a six-week period.
Patients received twice weekly injections of Apitox intradermally at dosages titrated to a maximum of 0.7 mg (Group A), 1.5 mg (Group
B), and 2.0 mg (Group C) for a period of six weeks. Control group patients (Group D) received 1,000 mg of nabumetone orally each day for
the same six-week period. There were 25, 26, 25 and 25 patients assigned to Groups A, B, C and D, respectively. Efficacy of treatment
was evaluated by the physician investigators using a 4-point Likert-like symptom severity rating scale developed by the authors to assess
Pain, Disability and Physical Signs. A similar 5-point scale was used for patient self-evaluation. Safety of the Apitoxin injection was
evaluated by patient reaction, hematologic examination, and laboratory chemistry analysis of blood and urine. Efficacy data was reported
for the 81 patients who completed the study. While there were no significant differences in symptom severity scores among the four groups
at baseline, symptom scores were significantly better in the bee venom injection groups than in the control group at six weeks and 10
weeks after the start of treatment (p<0.01). A treatment was considered effective if there was a 20% improvement from baseline in symptom
scores after 6 weeks of treatment. Based on this definition, therapy demonstrated overall efficacy in 70.0% of patients in Group A, 85.7%
in Group B, 90.0% in Group C, and 61.9% in Group D (drug control). Overall efficacy was significantly greater in treatment Groups
B and C combined than in the nabumetone-treated control group D (p<0.0177). Importantly, efficacy of treatment among all patients treated
with Apitoxin injection was greater than among nabumetone-treated patients for each category assessed: Pain: 85.2% versus 76.2%; Disability:
77.0% versus 71.4%; and Physical Signs: 62.3% vs. 23.8%. It is also noteworthy that, unlike the drug control group, the Apitoxin injection
groups continued to demonstrate improved symptom scores at four weeks after the last treatment (10 weeks). There were no significant changes
in vital signs or results of laboratory examinations of any patient in this clinical trial. Localized itching was experienced by all patients
who received Apitox injections. Itching at the injection site generally lasted for two to three weeks; several patients had this reaction
for a longer period. This Phase II study showed that Apitoxin was significantly more effective than the control drug, nabumetone, in the
treatment of knee and spinal osteoarthritis patients. It clearly showed that improvement in pain, disability and physical signs was greater
in the bee venom injection groups than in the nabumetone control group. No significant side effects developed at the therapeutic doses
studied. However, research should be continued to minimize itching and pain at bee venom injection sites, and possible allergic reaction
should always be considered with treatment at high doses.
5
In 2002, a formal Phase III double-blind, placebo-controlled
trial was completed with 407 subjects (311 of which obeyed the trial protocol and completed the clinical study). The purpose of the Phase
III trial was conducted to verify the efficacy and safety of the medicine resulting from the prior Phase I and Phase II trials. The therapeutic
course treatment included a total of 12 injections over a period of 6 weeks. Final evaluations were completed in the 8 th week,
following two weeks of no injections. During the trial period, laboratory tests were carried out three times (before injection, in the
second week, in the sixth week), and the efficacy evaluation was performed four times (before injection, in the second week, in the sixth
week, and in the eighth week). Safety of the Apitoxin injection was evaluated by, hematologic examination, measurement of cortisol and
calcium levels, and laboratory chemistry analysis of blood and urine. The primary efficacy variable for the trial was the ratio of the
subjects who showed more than 20% improvement in the total points of test items for efficacy evaluation 6 weeks after injection, compared
with the total points before injection of the medicine (the “improvement rate”). Data obtained from subjects of the clinical
test were analyzed by two methods, ITT (Intention to Treat) analysis and PP (Per Protocol) Among 310 subjects who participated in the
efficacy evaluation, 153 and 157 patients belonged to the Apitoxin group and the nabumetone group, respectively. For the Apitoxin group,
the ratio of the subjects who showed more than 20% improvement in the total points was 48.70% (75/154 subjects, 95% confidence interval
(“CI”): 40.8~56.6%), while for the nabumetone group, it was 46.15% (72/156 subjects, 95% CI: 38.3~54.0%), indicating that
the improvement rate in the Apitoxin group was greater than in the nabumetone group; however, there was no statistical significance. (p=0.6533).
Among a total of 407 subjects (Apitoxin group: 204; Nabumetone group: 203), 38.24% (78/204) of the Apitoxin group showed more than 20%
improvement during the 6 th week of injection, while 38.42% of the Nabumetone group improved by more than 20%, indicating that
the two groups showed similar improvement rate (p=0.9688). The second efficacy variable was the improvement rate during the 8 th
week (2 weeks after the completion of the final injection). According to results from comparing the total points of efficacy evaluation
items during the second week after completion of injection (during the 8 th week after injection) with the total points before
injection, 58.44% (90/154) of the Apitoxin group showed a higher improvement rate than during the 6 th week (48.70%), while
42.95% (67/156) of the Nabumetone group showed lower improvement rate than during the 6 th week (46.15%). There was statistical
difference in total point of efficacy evaluation items between the two groups (p=0.0064). These results suggest that even after treatment
stops, the efficacy of Apitoxin continues. With respect to safety, among a total of 407 subjects who participated in the safety evaluation,
69 (33.82%) of the Apitoxin group showed an adverse event, while 59 (29.06%) of the Nabumetone indicated adverse event. These results
indicate that the Apitoxin group had an elevated adverse event rate than the Nabumetone group, but there was no statistically significant
difference between the two groups (p=0.3526).
In May 2003, MFDA granted approval for the
use of Apitoxin in the treatment of pain and mobility in patients with OA. A post-marketing/approval safety study in South Korea
followed 3,194 patients from 2003 through 2009, with no serious adverse events or negative safety signals.
In 2013, preliminary Phase III clinical trials
were authorized to enroll patients by the FDA to study the same indication approved in South Korea — treatment of pain
and lack of mobility in patients with OA. The results of the preliminary Phase III clinical trial indicated statistical and clinically
significant improvements in all outcome measures of pain, physical function, and disease assessment in the study group. The study group
included 330 patients with diagnosed osteoarthritis of the knee. The subjects were evaluated for relief of pain using Western Ontario
and McMaster Osteoarthritis Index (WOMAC) and physician and patient global assessments. The primary efficacy measure was relief of pain
and inflammation over a 12-week treatment period after randomization into the trial. The secondary efficacy measure was improvement of
mobility. Treatment effect will be compared in a 2-1 Apitox vs active control. Compared with the placebo group (histamine), subjects in
the Apitox group who received a maximum dose (1500 micrograms) at each weekly visit over 12 weeks showed a significantly more improvement
in all outcome measures (WOMAC pain, WOMAC physical function, visual analog scale (“VAS”) pain, patient and physician global
assessments of OA). Further, post hoc analyses showed that a statistically significant greater percentage of Apitox-treated subjects had
at least a 40% and 60% reduction in WOMAC pain as compared to placebo-treated subjects. Sensitivity analyses confirmed the validity of
the statistical methods and population definitions. The improvements in pain endpoints were highly significant for both the modified intention
to treat and per protocol populations and the improvement was sustained during the four weeks following Apitox treatment.
Except for an expected higher incidence of injection
site reactions (<5%) in the Apitox group, the overall safety profiles were comparable between the treatment groups. A serious adverse
event of the anaphylactic reaction occurred in an Apitox-treated subject because of a quick injection rate. However, the subject was treated,
and the event was resolved within one day. The incidence of adverse events overall was similar between the Apitox and Placebo groups (49.0%
and 46.3%, respectively), and there were no clinically meaningful changes, within and between groups, in laboratory parameters, vital
signs, physical examination, or electrocardiogram results.
6
During Apimeds Korea meetings with the FDA, the
FDA highlighted concerns regarding the opioid crisis. As Apitoxin has been previously approved in South Korea, we believe Apitox could
be a viable treatment option within the United States after additional clinical investigation, including our anticipated Phase III
trial. Initially, Apimeds Korea elected not to pursue the OA indication in the United States based on its evaluation of potential
market adoption and the existing competitive environment for OA. Based on results from the Apimeds Korea Phase III OA Trial and correspondence
with the FDA, we believe we are now in a position to continue to advance our Phase III trial for knee OA.
We intend to conduct an additional Phase III
trial in knee OA. Based on our previous correspondence with the FDA, we have started to design and will implement our Phase III trial
to best address our patient population of patients with grade 2, 3 and 4 knee OA, appropriate dosing, and the most effective way to evaluate
Apitox in meeting a patient’s needs. This trial will be an update to the plan of execution based on review of data, discussions
with former principal investigators from Apimeds Korea. Upon successful completion and FDA clearance of our Phase III trial in knee OA,
we will be positioned to submit a BLA.
We intend that the purpose of this trial will
be to evaluate the effectiveness of Apitox in the treatment of grade 2, 3 and 4 OA of the knee. The trial will be designed with a specific
focus on the identified subgroup from which we see the highest degree of benefit.
The following table summarizes the preliminary
clinical trial activity by Apimeds Korea with respect to Apitoxin:
Preliminary Clinical Data in MS Patients
The United States data from the literature
on bee venom studies in MS patients, Table A (Hauser et al. 2001) below, showed clinically significant improvements in disability symptoms
following treatment.
In Table A, results were categorized into the
following groups: dramatic disability improvement (>12 points on the Related Observable Symptom Scale (“ROSS”), good improvement
(7-12 points on ROSS), minimal improvement (<7 points on ROSS), no improvement (<2 points on ROSS), and negative (any total negative
response on ROSS). Descriptive analysis of the ROSS clinical outcomes showed that more than 68% of MS patients showed some kind of positive
improvement in disability (dramatic, good or minimal) and 58% demonstrated a marked improvement (dramatic or good).
Table A. Summary of Patient Disability
Improvement to Bee Venom Treatment Using ROSS
N
% of
Participants
Follow-up Survey
(% improvement)
Related Observable
Symptoms Scale
(points improvement)
Dramatic
15
29.4
%
>30%, or
>12 points
Good
15
29.4
%
10 – 29%, or
7 – 12 points
Minimal
5
9.8
%
<10%, or
< 7 points
None
15
29.4
%
<2%, or
< 2 points
Negative
1
2.0
%
Any total negative response
Any total negative response
7
After 1 year of bee-venom injections, 68.6 percent
of participants showed improvement. N = number of participants.
Apimeds Korea used data from its first Phase III
clinical trial for OA and peer reviewed publications, including those referenced in Table A above and formal Phase I (the “Castro
Phase I Trial”) and Phase II (the “Wesselius Phase II Trial”) publications specific to MS, to support its submission
in 2014 of its Investigational New Drug Application (“IND”) 122804 (A Phase III, Multi-Center, Randomized, Double-Blind,
Placebo-Controlled, Parallel Group Study to Evaluate the Safety and Efficacy of Apitox Add-on Therapy for Improving Disability and Quality
of Life in Patients with Multiple Sclerosis).
Castro Phase I Trial
The Castro Phase I Trial involved a total of nine
bee venom nonallergic patients with progressive forms of MS, who were 21–55 years of age with no other illnesses. The subjects distributed
across four groups (A, B, C, and D) and followed a structured 1-year immunization schedule. Hyperreactivity to bee venom was evaluated
by questionnaire, physical examination, and a battery of hematologic, metabolic, and immunologic tests. Responses to therapy were evaluated
by questionnaire, functional neurological tests, and changes in measurement of somatosensory-evoked potentials. While no serious adverse
allergic reactions were observed in any of the subjects, four experienced worsening of neurological symptoms, requiring their discontinuation
in the study. The observed negative effects could not be conclusively attributed to adverse reactions arising from the administered therapy.
Of the remaining five subjects, three reported subjective amelioration of symptoms and two exhibited objective improvement. Despite suggesting
safety in this preliminary study, the small sample size precluded definitive conclusions regarding the efficacy of the treatment for MS.
Larger and more carefully conducted multicenter studies were required to establish efficacy.
Wesselius Phase II Trial
The Wesselius Phase II Trial involved a randomized
crossover study of 26 patients diagnosed with relapsing-remitting or relapsing secondary progressive MS. Participants were assigned to
24 weeks of medically supervised bee sting therapy, or a control period of 24 weeks of no treatment. Live bees (up to a maximum of 20)
were used to administer bee venom three times per week. The primary outcome was the cumulative number of new gadolinium-enhancing lesions
on T1-weighted MRI of the brain. Secondary outcomes were lesion load on T2*-weighted MRI, relapse rate, disability (Expanded Disability
Status Scale, Multiple Sclerosis Functional Composite, Guy’s Neurologic Disability Scale), fatigue (Abbreviated Fatigue Questionnaire,
Fatigue Impact Scale), and health-related quality of life (Medical Outcomes Study 36-Item Short Form General Health Survey). The results
of the Wesselous Phase II Trial indicated that during bee sting therapy, there was no significant reduction in the cumulative number of
new gadolinium-enhancing lesions. The T2*-weighted lesion load further progressed, and there was no significant reduction in relapse rate.
There was no improvement of disability, fatigue, and quality of life. Bee sting therapy was well tolerated, and there were no serious
adverse events. In this trial, treatment with bee venom in patients with relapsing multiple sclerosis did not reduce disease activity,
disability, or fatigue and did not improve quality of life measured using gadolinium-enhancing MRI.
From June 2014 to June 2018, Apimeds
Korea corresponded with the FDA and there were no clinical holds at that time. Sponsorship of IND 122804 was transferred from Apimeds
Korea to us in October 2020. On September 21, 2021, we responded to customary non-clinical hold comments from the FDA. In
November 2021, we received a customary clinical hold from the FDA due to the retirement of the former principal investigator. We
have subsequently updated the FDA with a new principal investigator via our Chief Medical Officer, Dr. Christopher Kim. In February
2023, the FDA removed the clinical hold and concluded it may be initiated. We have subsequently made the strategic decision to focus our
efforts and capital on our Phase III trial in knee OA, and instead focus our MS efforts on the early prosecution of appropriate MS patient
populations through non-registered corporate sponsorship studies.
Our Commercialization Strategy
We are dedicated to the effective implementation
of regulatory, clinical and legal strategies to create value in Apitox. The effective execution of this strategy will provide us the opportunity
to evaluate and potentially acquire other assets that fit within our space for development.
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Manufacturing
We intend to continue to engage a third-party
manufacturer, Piramal Pharma Solutions, in Lexington, Kentucky to support our Phase III trial and, if Apitox is approved by the FDA,
commercial manufacturing. This manufacturer has dedicated experience in development and technology transfer of sterile dose formulations,
including liquid and lyophilized formulations.
Research and Development
We are currently engaged exclusively in the clinical
development of Apitox for continued use in knee OA through a Phase III trial in knee OA and potential use for MS through the early prosecution
of appropriate patient populations through non-registered corporate sponsorship studies.
Sales and Marketing
The healthcare providers associated with the treatment
of inflammation and pain management symptoms associated with OA and MS are not limited to one specialist but involve a comprehensive team
of providers focused on slowing the progression of the disease along with the physical, emotional and day-to-day management of the
condition. Each of these providers represents a potential customer for Apitox.
Apitoxin, which will be known as Apitox in the
United States, has established technological credibility through its preclinical testing, Phase I, Phase II and preliminary
Phase III clinical studies completed by Apimeds Korea. Apimeds Korea received regulatory approval for Apitoxin by the MFDA in South
Korea, as well as long-term safety data from treatment of patients in Korea from 2003 to 2009. There were no serious adverse events from
over 3,000 patients monitored, and Apitoxin has been approved and marketed in South Korea for OA since 2003. We update the FDA annually
on safety data generated by Apimeds Korea from South Korea.
We aim to obtain FDA approval for Apitox in the
United States market for treatment of inflammation and pain management symptoms associated with knee OA, and eventually MS, and expand
the indication portfolio in the autoimmune market with a strategic marketing partner. The marketing partner strategy is common in the
pharmaceutical marketplace, as the infrastructure, overhead, and barriers to entry dilute the focus and can rapidly erode the financial
well-being of small, product development-based companies such as us. By identifying the strategic marketing partner at an early stage,
the companies can deliver a final product, or family of products, in a form factor or variety of form factors over time, that specifically
suit the target market. We believe that Apitox represents a significant opportunity as a platform technology, with numerous product-line
extensions, and the potential for new, ancillary products such as delivery devices.
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Reimbursement Strategy
Apimeds expects to apply to the Centers for Medicare
and Medicaid Studies (“CMS”) for temporary generic reimbursement codes 12 to 18 months prior to a BLA approval. Temporary
codes are used until manufacturers apply for, and receive, permanent codes, which identify the drug and its therapeutic class. Permanent
codes are issued by CMS on a rolling quarterly basis.
We will engage third party contractors to assist
the us with reimbursement, coding and policy development prior to, during and at the time of approval of Apitox. We will look for a contractor
to provide the following services to us:
● Coding Assessment and Strategy/Execution — CPT
Review of Apitox Administration by Multiple Intradermal Injections . Assess the landscape to ensure a clear understanding of the key
dynamics and analyze relevant proxies and precedent. Further assess relevant drug administration codes and whether appropriate codes
exist.
● Medical Coverage Policy Analysis — Provide
a framework and set expectations for Medicare’s anticipated coverage approach to Apitox, specifically in the context of intra articular
hyaluronic acid use agent coverage policies and implications of their efficacy uncertainty.
● Medicare Local Coverage Analysis and Implications — Given
the significance of Medicare policy standards, local and national Medicare policies often shape payer and provider perceptions and decisions.
As complex statutory and regulatory guidance shape Medicare decision-making, ADVI analyzes, investigates, and synthesize Medicare policies
that could affect access (coverage, coding and reimbursement) for Apitox.
● Medicaid and Commercial Coverage Analysis and Implications — Analyze
available medical policies for five large state Medicaid agencies (based on population and geographic variation) and major commercial
payers (where publicly available).
● Payer Policy Internal Expert Interviews — Conduct
payer interviews with relevant Medicare, Medicaid and commercial policy advisors.
● HCPCS Coding and Payment Assessment — Assess
the coding and reimbursement landscape to ensure Apimeds has a clear understanding of the key dynamics with the HCPCS application process
and the Medicare Hospital Outpatient Prospective Payment System (OPPS) pass-through status application process. Through this assessment,
identify the areas of concern, expectations, timing, timelines, and processes associated. This is especially relevant given the 2020
implementation of a new HCPCS review process.
● Address key Part B/medical benefit implications to Apitox
in the following fields:
● HCPCS and OPPS application timelines (and potential evolution
leading to launch).
● Coding/access implications prior to code assignment (e.g.,
NOC/miscellaneous codes), review the merits/risks of Q-code.
● further review the application processes, expectations, case
examples, timelines, and hurdles that APUS may face across settings of care, payers, and with CMS,
● Case examples, timelines, and hurdles across settings of care
with payers and CMS,
● Review of reimbursement implications; and
● Methodologies (ASP, WAC, AWP), role of sequestration, 340B,
patient financial burden
● Develop Payer (with Emphasis on Medicare) Launch Recommendations — Based
on the above primary and secondary research, synthesize the discussions and summarize the overall findings of the payer survey, highlighting
themes, and provide recommendations and considerations for optimizing market access, given the current and evolving reimbursement landscape.
This section will include payer (emphasis on Medicare) launch strategy recommendations (including timeline) and a local/national Medicare
engagement strategy.
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Competition
We compete in an industry characterized by rapidly
advancing technologies, intense competition, a changing regulatory and legislative landscape and a strong emphasis on the benefits of
intellectual property protection and regulatory exclusivities.
Like any biopharmaceutical company, we face competition
from multiple sources, including large or established pharmaceutical, biotechnology, and wellness companies, academic research institutions,
government agencies, and private institutions. We believe our drug candidate will prevail amid the competitive landscape through its efficacy,
safety, administration methods, cost, public and institutional demand, intellectual property portfolio, and treatment of the root cause
of many age-associated diseases.
Many of our competitors, either alone or with
strategic partners, have substantially greater financial, technical, and human resources than we do. Accordingly, our competitors may
be more successful in obtaining approval for treatments and achieving widespread market acceptance, rendering our treatments obsolete
or non-competitive. Accelerated merger and acquisition activity in the biotechnology and biopharmaceutical industries may result
in even more resources concentrated among a smaller number of our competitors. These companies also compete with us in recruiting and
retaining qualified scientific and management personnel, establishing clinical study sites, patient registration for clinical studies,
and acquiring technologies complementary to, or necessary for, our programs. Smaller or early-stage companies may also prove to be significant
competitors, particularly through collaborative arrangements with large and established companies. Our commercial opportunity could be
substantially limited in the event that our competitors develop and commercialize products that are more effective, safer, more tolerable,
more convenient, or less expensive than our comparable products. In geographies that are critical to our commercial success, competitors
may also obtain regulatory approvals before us, resulting in our competitors building a strong market position in advance of our products’
entry. We believe the factors determining the success of our programs will be the efficacy, safety, and convenience of our drug candidates.
Additionally, consumer preference for branded,
generic or private label products sold by competitors could adversely impact our financial performance. Our competitors, which differ
within individual geographic markets, include large-scale retailers, smaller high-growth companies (which often operate on a regional
basis and offer aggressive competition), multinational corporations moving into or expanding their presence in the consumer healthcare
market, and “private-label” products sold by retailers.
Our aim is to reduce the use of NSAIDS and opioid
use as it relates to the pain management associated with OA. We believe that if approved by the FDA, Apitox may be a non-addictive
option to patients experiencing debilitating pain.
Business Agreement
On August 2, 2021, we entered into an agreement
with Apimeds Korea, a principal stockholder of the Company (the “Business Agreement”). Pursuant to the Business Agreement,
Apimeds Korea granted to the Company a sublicensable, royalty-bearing license to utilize all prior clinical development data associated
with Apitoxin, Apitox, and all related names, advance clinical research, develop, manufacture and commercialize and sell Apitox in the
United States. In exchange for this license, the Company will pay Apimeds Korea a perpetual royalty of 5% of the Company’s
earnings before interest and taxes (as determined consistent with GAAP, derived from the sale or license of Apitox, less any shipping,
handling, and insurance charges, credits (arising from returns or other adjustments), discounts, rebates, or allowances of any kind (if
any). The Business Agreement can be terminated by mutual written agreement by the parties and will automatically terminate upon the bankruptcy
or dissolution of the Company.
Assignment Agreement
On October 12, 2021, we entered into an intellectual
property assignment agreement (the “Assignment Agreement”), which was effective as of May 12, 2020, with Apimeds Korea
and Dr. Christopher Kim, the Company’s Chairman and Chief Medical Officer and the founder of Apimeds Korea. During Dr. Kim’s
engagement with Apimeds Korea, he contributed to the development of the intellectual property as it relates to Apitoxin, which will be
marketed in the United States as Apitox (the “Assigned IP”).
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Pursuant to the Assignment Agreement, Dr. Kim
sold, transferred, and conveyed all his rights, title and interest in the Assigned IP to Apimeds Korea. Dr. Kim retained no right
to use the Assigned IP. Additionally, the Assignment Agreement acknowledged that the Assigned IP was licensed to us to use via the
Business Agreement.
Intellectual Property
Apitox’s API is bee venom, a natural, non-synthetic
compound that is not patentable, so we rely principally on trade secrets to protect our rights to Apitox, particularly the method and
process of manufacturing Apitox.
Supplier
We purchase venom from our United States
supplier, Apico, Inc. (“Apico”), via a letter agreement. Pursuant to the letter agreement, Apico agreed that for a period
of ten years, or until November 3, 2031 it would not supply Apis Mellifea venom for pharmaceutical use for any buyer
other than us; provided that Apico may also supply Apimeds Korea for its use outside of the United States. The letter agreement
excludes customers using venom for immunology, cosmetic or any other “non-pharmaceutical” use. The letter agreement may be
terminated upon mutual written consent of both Apico and the Company.
Apico has developed and practices a proprietary
method of harvesting venom. It operates under and is certified in current good manufacturing practice regulations enforced by the FDA
and has an active and current Drug Master File (“DMF”) with the FDA. DMF’s are submissions to the FDA used to provide
confidential, detailed information about facilities, processes, or articles used in the manufacturing, processing, packaging, and storing
of human drug products. We have an exclusive relationship with our supplier for pharmaceutical use in the United States and they
are not permitted to sell to any other party for pharmaceutical use.
Apimeds Korea has a number of proprietary analytical
methods for the classification and identification of specific pharmacologically active fractions of its venom, along with numerous manufacturing
processes from filtration, vial filing and lyophilization required to produce Apitoxin. Apitoxin is the only approved and commercially
available therapeutic product containing purified and sterile bee venom that is registered as an API in South Korea. The proprietary methods
developed and practiced for the commercial manufacturing of Apitoxin include dilution, filtering, vial staging and lyophilization parameters
and cycles.
We plan to file Apitox as a BLA with the Centers
for Biologics and Research of the FDA following the successful completion of our Phase III trial for knee OA. The FDA provides 12-year
market exclusivity at the time of approval of a BLA, with the potential for a six-month extension upon approval for pediatric use. If
the BLA is approved, the 12-year period would be retroactive to the date of the application.
We intend to file a U.S. trademark application
for “Apitox”.
Regulatory Environment
Government Regulation and Product Approval
In the United States, biological products
are subject to regulation under the Federal Food, Drug, and Cosmetic Act (the “FDCA”), and the Public Health Service Act (the
“PHSA”), and other federal, state, and local statutes and regulations. Both the FDCA and PHSA and their corresponding regulations
govern, among other things, the research, development, clinical trials, testing, manufacturing, quality control, safety, purity and potency
(efficacy), labeling, packaging, storage, record keeping, distribution, reporting, marketing, promotion, advertising, post-approval monitoring,
and post-approval reporting involving biological products. Along with third-party contractors, we will be required to navigate the various
preclinical and clinical regulatory obligations and the commercial approval requirements of the governing regulatory agencies of the countries
in which we wish to conduct studies or seek approval or licensure of our product candidate. The processes for obtaining regulatory approvals
in the United States, along with subsequent compliance with applicable laws and regulations and other regulatory authorities, require
the expenditure of substantial time and financial resources.
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Government policies may change, and additional
government regulations may be enacted that could prevent or delay further development or regulatory approval of any product candidates,
product or manufacturing changes, additional disease indications or label changes. We cannot predict the likelihood, nature or extent
of government regulation that might arise from future legislative or administrative action.
Review and Approval for Licensing Biologics
in the United States
In the United States, FDA regulates our current
product candidate as a biological product, or biologics, under the FDCA, the PHSA, and associated implementing regulations. Biologics,
like other drugs, are used for the diagnosis, cure, mitigation, treatment, or prevention of disease in humans. In contrast to low molecular
weight drugs, which have a well-defined structure and can be thoroughly characterized, biologics are generally derived from living material
(human, animal, or microorganism), are complex in structure, and thus are usually not fully characterized.
Biologics are also subject to other federal, state,
and local statutes and regulations. The failure to comply with applicable statutory and regulatory requirements at any time during the
product development process, approval process, or after approval may subject a sponsor or applicant to administrative or judicial enforcement
actions. These actions could include the suspension or termination of clinical trials by FDA, FDA’s refusal to approve pending applications
or supplemental applications, withdrawal of an approval, issuance of warning or untitled letters, product recalls, product seizures, total
or partial suspension of production or distribution, import detention, injunctions, fines, refusals of government contracts, restitution,
disgorgement of profits, or civil or criminal investigations and penalties brought by FDA, the Department of Justice (“DOJ”),
and other governmental entities.
An applicant seeking approval to market and distribute
a biologic in the United States must typically undertake the following:
● completion of non-clinical laboratory tests and studies performed
in accordance with FDA’s good laboratory practice (“GLP”) regulations;
● manufacture, labeling and distribution of investigational
drugs in compliance with FDA’s current good manufacturing practice (“cGMP”) requirements;
● submission to FDA of an investigational new drug application
(“IND”), which must become effective before clinical trials may begin and must be updated annually and when significant changes
are made;
● approval by an independent institutional review board (“IRB”)
for each clinical site before each clinical trial may be initiated;
● performance of adequate and well-controlled human clinical
trials in accordance with FDA’s Good Clinical Practices (“GCP”) to establish the safety, purity, and potency of the
proposed biological product candidate for its intended purpose;
● after completion of all pivotal clinical trials, preparation
of and submission to FDA of a BLA requesting marketing approval, which includes providing sufficient evidence to establish the efficacy,
safety, purity, and potency of the proposed biological product for its intended use, including from results of nonclinical testing and
clinical trials;
● satisfactory completion of an FDA advisory committee review,
when appropriate, as may be requested by FDA to assist with its review;
● satisfactory completion of one or more FDA inspections of
the manufacturing facility or facilities at which the proposed product, or certain components thereof, are produced to assess compliance
with cGMP and data integrity requirements to assure that the facilities, methods, and controls are adequate to preserve the biological
product’s identity, strength, quality, and purity and, if applicable, FDA’s good tissue practice (“GTP”) requirements
for human cellular and tissue products;
● satisfactory completion of FDA inspections of selected clinical
investigation sites to assure compliance with GCP requirements and the integrity of the clinical data;
● satisfactory completion of an FDA sponsor GCP inspection,
often conducted at the applicant’s headquarters facility;
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● payment of user fees (unless there is a waiver, exemption,
or reduction) under the Prescription Drug User Fee Act (“PDUFA”) for the relevant year;
● FDA’s review and approval of the BLA to permit commercial
marketing of the licensed biologic for particular indications for use in the United States;
● compliance with post-approval requirements, including the
potential requirements to implement a risk evaluation and mitigation strategy (“REMS”), to report adverse events and biological
product deviations, and to complete any post-approval studies; and
● completion of any post-approval clinical studies required
by FDA, such as confirmatory trials or pediatric studies.
From time to time, legislation is drafted, introduced,
and passed in Congress that could significantly change the statutory provisions governing the testing, approval, manufacturing, and marketing
of biological products regulated by FDA. In addition to new legislation, FDA regulations, guidance documents, and policies are often
revised or interpreted by the agency in ways that may significantly affect the regulation of biological products in the United States.
It is impossible to predict whether further legislative changes will be enacted or whether FDA regulations, guidance, policies, or interpretations
will change, and the effects of any such changes.
Preclinical and Clinical Development
Before an applicant can begin testing the potential
product candidate in human subjects, the applicant must first conduct preclinical studies. Preclinical studies may include laboratory
evaluations of product chemistry, toxicity, and formulation, as well as in vitro and animal studies to assess the potential safety and
activity of the drug for initial testing in humans and to establish a rationale for therapeutic use. Preclinical studies are subject to
federal regulations and requirements, including GLP regulations, which govern the conduct of animal studies designed to test a product’s
safety. None of our preclinical studies to date have been animal studies. The results of an applicant’s preclinical studies are
submitted to FDA as part of an IND.
An IND is a request for authorization from FDA
to administer an investigational new drug product to humans. An IND is an exemption from the FDCA that allows an unapproved drug to be
shipped in interstate commerce for use in a clinical trial. Such authorization must be secured prior to interstate shipment and administration
of a biological drug that is not subject of an approved BLA. In support of an IND, applicants must submit a protocol for each clinical
trial, which details, among other things, the objectives of the trial, the parameters to be used in monitoring safety and the effectiveness
criteria to be evaluated. A separate submission to the existing IND must be made for each successive clinical trial conducted during product
development and for any subsequent protocol amendments.
Human clinical trials may not begin until an IND
is effective. The IND automatically becomes effective 30 days after receipt by FDA, unless FDA raises safety concerns or questions
about the proposed clinical trial within the 30-day time period. In such a case, FDA may place the IND on clinical hold and the IND sponsor
must resolve any of FDA’s outstanding concerns or questions before the clinical trial can begin. Submission of an IND therefore
may or may not result in regulatory authorization to begin a clinical trial.
FDA may also place a clinical hold or partial
clinical hold on a clinical trial following commencement of the trial under an IND. A clinical hold is an order issued by FDA to
the sponsor to delay a proposed clinical investigation or to suspend an ongoing investigation. A partial clinical hold is a delay or suspension
of only part of the clinical work requested under the IND. For example, under a partial clinical hold, FDA may instruct a sponsor
not to enroll any new patients into a study but permit the previously enrolled patients to continue in the study. No more than 30 days
after imposition of a clinical hold or partial clinical hold, FDA will provide the sponsor a written explanation of the basis for the
hold. Following issuance of a clinical hold or partial clinical hold, an investigation may only resume after the FDA has notified the
sponsor that the investigation may proceed. FDA will base that determination on information provided by the sponsor addressing the deficiencies
previously cited or otherwise satisfying FDA that the investigation can proceed.
Clinical trials involve the administration of
the investigational product to human subjects under the supervision of qualified investigators in accordance with GCP regulations, which
include the requirement that all research subjects provide their informed consent for their participation in any clinical trial. If a
sponsor chooses to conduct a foreign clinical study under an IND, all FDA IND requirements must be met unless waived. When the foreign
clinical study is not conducted under an IND, the sponsor must ensure that the study complies with GCP regulations in order to use the
study as support for an IND or application for marketing approval, including review and approval by an IRB and informed consent from subjects.
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Furthermore, an independent IRB for all sites
participating in a clinical trial must review and approve the plan for any clinical trial and its informed consent form before the clinical
trial begins at each site and must monitor the trial until completed. Regulatory authorities, the IRB, or the sponsor may suspend a clinical
trial at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable health risk or that the
trial is unlikely to meet its stated objectives.
Some trials also include oversight by an independent
group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board (“DSMB”). DSMBs
review unblinded study data at pre-specified times during the course of the study. If the DSMB determines that there is an unacceptable
safety risk for subjects or other grounds, such as no demonstration of efficacy, the DSMB can make a recommendation to the sponsor to
modify or stop the trial.
Other grounds for a sponsor’s decision to
suspend or terminate a study may be made based on evolving business objectives or the competitive climate.
For purposes of BLA approval, clinical trials
are typically conducted in the following sequential phases:
● Phase 1: The investigational product is initially introduced into a small group of
healthy human subjects or patients with the target disease or condition. These trials are designed to test the safety, dosage
tolerance, absorption, metabolism and distribution of the investigational product in humans and the side effects associated with
increasing doses. These trials may also yield early evidence of effectiveness.
● Phase 2: The investigational
product is administered to a slightly larger patient population with a specified disease or condition to evaluate the preliminary efficacy,
optimal dosages, and dosing schedule and to identify possible adverse side effects and safety risks. Multiple Phase 2 clinical trials
may be conducted to obtain information prior to beginning larger and more expensive Phase III clinical trials.
● Phase 3: The investigational
product is administered to an expanded patient population to further evaluate dosage, to provide statistically significant evidence of
clinical efficacy and to further test for safety, generally at multiple geographically dispersed clinical trial sites. These clinical
trials are intended to generate sufficient data to statistically demonstrate the efficacy and safety of the product, to establish the
overall risk/benefit ratio of the investigational product, and to provide an adequate basis for product approval by FDA.
These phases may overlap or be combined. In some
cases, FDA may require, or companies may voluntarily pursue, additional clinical trials after a product are approved to gain more information
about the product, referred to as Phase 4 trials. Post-approval trials are conducted following initial approval, often to develop
additional data and information relating to the use of the product in new indications.
Progress reports detailing the results of the
clinical trials must be submitted at least annually to FDA. In addition, IND safety reports must be submitted to FDA for any of the
following: serious and unexpected suspected adverse reactions in study subjects; findings from epidemiological studies, pooled analysis
of multiple studies, animal or in vitro testing, or other clinical studies, whether or not conducted under an IND, and whether or not
conducted by the sponsor, that suggest a significant risk in humans exposed to the drug; and any clinically important increase in the
rate of a serious suspected adverse reaction over such rate listed in the protocol or investigator brochure.
A sponsor’s planned clinical trials may
not be completed successfully within any specified period, or at all. Furthermore, the FDA or the sponsor may suspend or terminate a clinical
trial at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk.
Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution, or an institution it represents, if the clinical
trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious
harm to patients. FDA will typically inspect one or more clinical sites to assure compliance with GCP and the integrity of the clinical
data submitted.
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During clinical development, the sponsor often
refines the indication and endpoints on which the BLA will be based. For endpoints based on patient-reported outcomes (“PROs”),
the process typically is an iterative one. FDA has issued guidance on the framework it uses to evaluate PRO instruments. Although the
agency may offer advice on optimizing PRO instruments during the clinical development process, FDA usually reserves final judgment until
it reviews the BLA.
Concurrent with clinical trials, companies often
complete additional animal studies, and develop additional information about the chemistry and physical characteristics of the drug and
finalize a process for manufacturing the product in commercial quantities in accordance with cGMP. The manufacturing process must
be capable of consistently producing quality batches of the drug candidate and, among other things, must develop methods for testing the
identity, strength, quality, purity and potency of the final drug. Additionally, appropriate packaging must be selected and tested, and
stability studies must be conducted to demonstrate that the drug candidate does not undergo unacceptable deterioration over its shelf
life.
BLA Submission and Review
Assuming successful completion of all required
clinical testing in accordance with all applicable regulatory requirements, an applicant may submit a BLA requesting licensing to market
the biologic for one or more indications in the United States. The BLA must include the results of nonclinical studies and clinical
trials; detailed information on the product’s chemistry, manufacture, controls; and proposed labeling. Under the PDUFA, a BLA submission
is subject to an application user fee, unless a waiver, reduction, or exemption applies.
FDA will initially review the BLA for completeness
before accepting it for filing. Under FDA’s procedures, the agency has 60 days from its receipt of a BLA to determine whether
the application will be accepted for filing and substantive review. If the agency determines that the application does not meet this initial
threshold standard, FDA may refuse to file the application and request additional information, in which case the application must be resubmitted
with the requested information and review of the application delayed.
After the BLA is accepted for filing, FDA reviews
the BLA to determine, among other things, whether a product is safe, pure, and potent and if the facility in which it is manufactured,
processed, packed, or held meets standards designed to assure the product’s continued identity, strength, quality, safety, purity,
and potency. To ensure cGMP, GLP, GCP, GTP, and other regulatory compliance, an applicant must incur significant expenditure of time,
money, and effort in the areas of training, record keeping, production and quality control. In addition, FDA expects that all data be
reliable and accurate, and requires sponsors to implement meaningful and effective strategies to manage data integrity risks. Data integrity
is an important component of the sponsor’s responsibility to ensure the safety, efficacy and quality of its product or products.
For cellular products, FDA will not approve the
product if the manufacturer is not in compliance with the GTPs, to the extent applicable. GTPs are FDA regulations and guidance documents
that govern the methods used in, and the facilities and controls used for, the manufacture of human cells, tissue, and cellular and tissue-based
products (“HCT/Ps”), which are human cells or tissue intended for implantation, transplant, infusion, or transfer into a human
recipient. The primary intent of the GTP requirements is to ensure that cell and tissue-based products are manufactured in a manner designed
to prevent the introduction, transmission and spread of communicable disease. FDA regulations also specify how HCT/P establishments must
register and list their HCT/Ps with FDA and how they must evaluate donors through screening and testing, where applicable.
If the FDA determines that the application, manufacturing
process or manufacturing facilities are not acceptable, it will outline the deficiencies in the submission and often will request additional
testing or information. Notwithstanding the submission of any requested additional information, FDA ultimately may decide that the application
does not satisfy the regulatory criteria for approval.
The performance goals and policies implemented
by FDA under the PDUFA generally provide for FDA action on an original BLA within 10 months of filing, which (as discussed above)
typically occurs within 60 days of submission, but that deadline is extended in certain circumstances. Furthermore, the review process
is often significantly extended by FDA’s requests for additional information or clarification.
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FDA may refer applications for novel products
or products that present difficult questions of safety or efficacy to an advisory committee. Typically, an advisory committee consists
of a panel that includes clinicians and other experts who will review, evaluate, and provide a recommendation as to whether the application
should be approved and, if so, under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers
such recommendations carefully when making decisions and usually has followed such recommendations.
After FDA evaluates a BLA and conducts inspections
of manufacturing facilities where the investigational product and/or its components will be produced, FDA may issue an approval letter
or a Complete Response Letter (“CRL”). An approval letter authorizes commercial marketing of the biological with specific
prescribing information for specific indications. A CRL will describe all of the deficiencies that FDA has identified in the BLA, except
that where FDA determines that the data supporting the application are inadequate to support approval, FDA may issue the CRL without first
conducting required inspections, testing submitted product lots and/or reviewing proposed labeling. If and when the deficiencies have
been addressed to FDA’s satisfaction in a resubmission of the BLA, FDA will issue an approval letter. In issuing the CRL, the FDA
may recommend actions that the applicant might take to place the BLA in condition for approval, including requests for additional data,
information, or clarification. FDA may delay or refuse approval of a BLA if applicable regulatory criteria are not satisfied and may require
additional testing or information and/or require new clinical trials. Even with submission of this additional information, FDA ultimately
may decide that the application does not satisfy the regulatory criteria for approval.
During the approval process, FDA will determine
whether a REMS is necessary to help ensure the benefits outweigh the risks of the biologic. A REMS is a safety strategy to manage a known
or potential serious risk associated with a product and to enable patients to have continued access to such medicines by managing their
safe use, and could include medication guides, physician communication plans or elements to assure safe use, such as restricted distribution
methods, patient registries and other risk minimization tools. If FDA concludes that a REMS is needed, the BLA sponsor must submit a proposed
REMS and FDA will not approve the BLA without a REMS that the agency has determined is acceptable.
If the FDA approves a product, it may limit the
approved indications for use for the product, or require that contraindications, warnings, or precautions be included in the product labeling.
FDA may also require that post-approval studies, including Phase 4 clinical trials, be conducted to further assess the drug’s
safety after approval. FDA may prevent or limit further marketing of a product based on the results of post-market studies or surveillance
programs.
FDA may also require testing and surveillance
programs to monitor the product after commercialization. For biologics, such testing may include official lot release, which requires
the manufacturer to perform certain tests on each lot of the product before it is released for distribution. The manufacturer then typically
must submit samples of each lot of products to the FDA, together with a release protocol showing a summary of the history of manufacture
of the lot and the results of all of the manufacturer’s tests performed on the lot. The FDA may also perform certain confirmatory
tests on lots of some products itself, before releasing the lots for distribution by the manufacturer.
In general, an approved BLA only allows the sponsor
to market the biologic as approved, without modification. If, for example, a sponsor modifies an approved T cell product to target different
peptides or in our case to target another HLA type, the sponsor would be required to either file a supplemental BLA with FDA or receive
FDA approval for a comparability protocol in order to implement this change into the final product.
The FDA may withdraw the product approval if compliance
with pre- and post-marketing requirements is not maintained or if problems occur after the product reaches the marketplace.
Post-Approval Requirements
Any products manufactured or distributed pursuant
to FDA approvals are subject to pervasive and continuing regulation by FDA, including, among other things, requirements relating to recordkeeping,
periodic reporting, reporting of certain deviations and adverse experiences, product sampling and distribution, and advertising and promotion
of the product. After approval, many types of changes to the approved product, such as adding new indications, manufacturing changes and
additional labeling claims, are often subject to further testing requirements and FDA review and approval, depending on the nature of
the post-approval change. There also are continuing user fee requirements, under which FDA assesses an annual program fee for each product
identified in an approved BLA. Biologic manufacturers and their third-party contractors are required to register their facilities
with the FDA and certain state agencies. These facilities are subject to routine and periodic unannounced inspections by FDA and certain
state agencies for compliance with cGMP, post-marketing safety reporting and data integrity requirements, which impose certain procedural
and documentation requirements to assure quality of manufacturing and product. FDA has increasingly observed cGMP violations involving
data integrity during site inspections and is a significant focus of its oversight. Requirements with respect to data integrity include,
among other things, controls ensuring complete and secure data; activities documented at the time of performance; audit trail functionality;
authorized access and limitations; validated computer systems; and review of records for accuracy, completeness, and compliance with established
standards.
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Post-approval changes to the manufacturing process
are strictly regulated, and, depending on the significance of the change, may require FDA approval before being implemented. FDA regulations
also require investigation and correction of any deviations from cGMP and impose reporting requirements upon the sponsor and any third-party
manufacturers that the sponsor may use. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production
and quality control to maintain compliance with cGMP, data integrity, pharmacovigilance, and other aspects of regulatory compliance.
The FDA may withdraw the approval if compliance
with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery
of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing
processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information;
imposition of post-approval studies to assess new safety risks; or imposition of distribution or other restrictions under a REMS. Other
potential consequences include, for example:
● restrictions on the marketing or manufacturing of a product,
complete withdrawal of the product from the market, or product recalls;
● fines, warning or untitled letters, or holds on post-approval
clinical studies;
● refusal of FDA to approve pending applications or supplements
to approved applications, or suspension or revocation of existing product approvals;
● product seizure or detention, or refusal of FDA to permit
the import or export of products; or
● permanent injunctions and consent decrees, including the
imposition of civil or criminal penalties.
FDA strictly regulates the marketing, labeling,
advertising, and promotion of prescription drug products placed on the market. A company can make only those claims relating to safety
and efficacy, purity and potency that are approved by the FDA and in accordance with the provisions of the approved labeling. FDA’s
regulation includes, among other things, standards and regulations for direct-to-consumer advertising, communications regarding unapproved
uses, industry-sponsored scientific and educational activities and promotional activities involving the Internet and social media. Promotional
claims relating to a product’s safety or effectiveness are prohibited before the drug is approved. After approval, a product generally
may not be promoted for uses that are not approved by FDA, as reflected in the product’s prescribing information. In the United States,
healthcare professionals are generally permitted to prescribe drugs for such uses not described in the drug’s labeling, known as
off-label uses, because FDA does not regulate the practice of medicine. However, FDA regulations impose rigorous restrictions on manufacturers’
communications and prohibit the promotion of off-label uses. It may be permissible, under very specific, narrow conditions, for a manufacturer
to engage in non-promotional, non-misleading communication regarding off-label information, such as distributing scientific or medical
journal information.
If a company is found to have promoted off-label
uses, it may become subject to adverse public relations and administrative and judicial enforcement by FDA, the DOJ, or the Office of
the Inspector General of the Department of Health and Human Services (“HHS”), as well as other federal and state authorities.
This could subject a company to a range of penalties that could have a significant commercial impact, including civil, administrative,
and criminal fines, penalties, and agreements that materially restrict the manner in which a company promotes or distributes products.
The federal government has levied large civil, administrative, and criminal fines and penalties against companies for alleged improper
promotion and has also requested that companies enter into Corporate Integrity Agreements and Consent Decrees of Permanent Injunction
under which specified promotional conduct is changed or curtailed.
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The distribution of prescription drugs and biologics
are subject to the Drug Supply Chain Security Act (“DSCSA”), which requires manufacturers and other stakeholders to comply
with product identification, tracing, verification, detection and response, notification, and licensing requirements. In addition, the
Prescription Drug Marketing Act and its implementing regulations and state laws limit the distribution of prescription pharmaceutical
product samples, and the DSCSA imposes requirements to ensure accountability in distribution and to identify and remove prescription drug
and biological products that may be counterfeit, stolen, contaminated, or otherwise harmful from the market.
Expedited Development and Review Programs
FDA offers a number of expedited development and
review programs for qualifying product candidates. The fast-track program is intended to expedite or facilitate the process of reviewing
new products that meet certain criteria. Specifically, new products are eligible for fast-track designation if they are intended to treat
a serious or life-threatening disease or condition and demonstrate the potential to address unmet medical needs for the disease or condition.
A product intended to treat a serious or life-threatening disease or condition may also be eligible for breakthrough therapy designation
to expedite its development and review. Any marketing application for a biologic submitted to FDA for approval, including a product with
a fast-track designation and/or breakthrough therapy designation, may be eligible for other types of FDA programs intended to expedite
FDA review and approval process, such as priority review and accelerated approval. FDA also may grant accelerated approval to certain
products studied for their safety and effectiveness in treating serious or life-threatening diseases or conditions.
The RMAT designation, which we are currently planning
to seek for some of our therapies, is intended to facilitate an efficient development program for, and expedite review of, any drug that
meets the following criteria: (1) the drug is a cell therapy, therapeutic tissue engineering product, human cell and tissue product,
or any combination product using such therapies or products, with limited exceptions; (2) the drug is intended to treat, modify,
reverse, or cure a serious or life-threatening disease or condition; and (3) preliminary clinical evidence indicates that the drug
has the potential to address unmet medical needs for such a disease or condition. Like breakthrough therapy designation, RMAT designation
provides potential benefits that include more frequent meetings with FDA to discuss the development plan for the product candidate and
eligibility for rolling review and priority review. Products granted RMAT designation may also be eligible for accelerated approval on
the basis of a surrogate or intermediate endpoint reasonably likely to predict long-term clinical benefit, or reliance upon data obtained
from a meaningful number of sites (including through expansion to additional sites) so as to remove any likelihood of site-specific or
investigator-specific bias on the evidence of effectiveness. Once approved, when appropriate, FDA can permit fulfillment of post-approval
requirements for RMATs receiving accelerated approval through the submission of clinical evidence, clinical studies, patient registries,
or other sources of real-world evidence such as electronic health records; through the collection of larger confirmatory datasets; or
through post-approval monitoring of all patients treated with the therapy prior to approval.
Fast track designation, breakthrough therapy designation,
priority review, accelerated approval, and RMAT designation do not change the standards for approval but may expedite the development
or approval process.
Patent Term Restoration and Marketing Exclusivity
After approval, owners of relevant drug or biological
product patents may apply for up to a five year term patent extension to restore a portion of patent term lost during product development
and FDA review of a BLA if approval of the application is the first permitted commercial marketing or use of a drug or biologic containing
the active ingredient under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman
Act. The allowable patent term extension is calculated as one-half of the product’s testing phase, which is the time between the
effective date of an IND and initial BLA submission, and all of the approval phase, which is the time between BLA submission and approval,
up to a maximum of five years. The time can be shortened if the FDA determines that the applicant did not pursue approval with due
diligence. The total patent term after the extension may not exceed 14 years from the date of FDA approval of the product. Only one
patent claiming each approved product is eligible for restoration and the patent holder must apply for restoration within 60 days
of approval, even if the product cannot be commercially marketed at that time. The USPTO, in consultation with FDA, reviews and approves
the application for patent term restoration.
For patents that might expire during the BLA application
phase, the patent owner may request an interim patent extension. An interim patent extension increases the patent term by one year and
may be renewed up to four times. For each interim patent extension granted, the post-approval patent extension is reduced by one year.
The director of the USPTO must determine that approval of the product candidate covered by the patent for which a patent extension is
being sought is likely. Interim patent extensions are not available for a product candidate for which a BLA has not been submitted.
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Biosimilars and Marketing Exclusivities
The Biologics Price Competition and Innovation
Act (“BPCIA”) created an abbreviated approval pathway for biological product candidates shown to be highly similar to or interchangeable
with an FDA licensed biological product. A biological product on which another biological product candidate’s BLA relies to establish
bio similarity is known as a reference product. Bio similarity sufficient to reference a prior FDA-approved product requires that there
be no differences in conditions of use, route of administration, dosage form and strength, and no clinically meaningful differences between
the biological product candidate and the reference product in terms of safety, purity, and potency. Bio similarity must be shown through
analytical trials, animal trials and at least one clinical trial, unless the Secretary of HHS waives a required element. A biosimilar
product candidate may be deemed interchangeable with a prior approved product if it meets the higher hurdle of demonstrating that it can
be expected to produce the same clinical results as the reference product and, for products administered multiple times, the biological
product candidate and the reference biologic may be switched after one has been previously administered without increasing safety risks
or risks of diminished efficacy relative to exclusive use of the reference biologic. Complexities associated with the larger, and often
more complex, structures of biologics, as well as the process by which such products are manufactured, pose significant hurdles to implementation
of the abbreviated approval pathway that are still being resolved by FDA.
A reference biologic is granted 12 years
of exclusivity from the time of first licensure of the reference product, and no application for a biosimilar can be submitted for four years
from the date of licensure of the reference product. The first biological product candidate submitted under the abbreviated approval pathway
that is determined to be interchangeable with the reference product has exclusivity against a finding of interchangeability for other
biologics for the same condition of use for the lesser of (i) one year after first commercial marketing of the first interchangeable
biosimilar, (ii) 18 months after the first interchangeable biosimilar is approved if there is no patent challenge, (iii) 18 months
after resolution of a lawsuit over the patents of the reference biologic in favor of the first interchangeable biosimilar applicant, or
(iv) 42 months after the first interchangeable biosimilar’s application has been approved if a patent lawsuit is ongoing
within the 42 month period. At this time, it is unclear whether products deemed “interchangeable” by FDA will, in fact, be
readily substituted by pharmacies, which are governed by state pharmacy laws and regulations.
Healthcare Regulation
Coverage, Pricing, and Reimbursement
Our ability to successfully commercialize any
products for which we receive regulatory approval for commercial sale will depend, in part, on the extent to which third-party payors
provide coverage and establish adequate reimbursement levels for such products, and significant uncertainty exists as to the coverage
and reimbursement status of any products for which may we obtain regulatory approval. In the United States, third-party payors include
federal and state health care programs, private managed care providers, health insurers and other organizations. The process for determining
whether a third-party payor will provide coverage for a product may be separate from the process for setting the price of a product or
for establishing the reimbursement rate that such a payor will pay for the product. Third-party payors may limit coverage to specific
products on an approved list, also known as a formulary, which might not include all of the FDA-approved products for a particular indication.
Third-party payors are increasingly challenging the price, examining the medical necessity, and reviewing the cost-effectiveness of medical
products, therapies, and services, in addition to questioning their safety and efficacy. We may need to conduct expensive pharmaco-economic
studies in order to demonstrate the medical necessity and cost-effectiveness of our products, in addition to the costs required to obtain
the FDA approvals. Our product candidates may not be considered medically necessary or cost-effective. A payor’s decision to provide
coverage for a product does not imply that an adequate reimbursement rate will be approved. Further, one payor’s determination to
provide coverage for a product does not assure that other payors will also provide coverage for the product. Adequate third-party reimbursement
may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development.
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The marketability of any product candidates for
which we receive regulatory approval for commercial sale may suffer if the government and third-party payors fail to provide adequate
coverage and reimbursement. In addition, emphasis on managed care in the United States has increased and we expect will continue
to increase the pressure on healthcare pricing. Coverage policies and third-party reimbursement rates may change at any time. Even if
favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable
coverage policies and reimbursement rates may be implemented in the future.
Other Healthcare Laws and Compliance
Requirements
Although we currently do not have any commercialized
products, our current and future business operations may be subject to additional healthcare regulation and enforcement by the federal
government and by authorities in the states and foreign jurisdictions in which we conduct our business. Such laws include, without limitation,
state and federal anti-kickback, fraud and abuse, false claims, privacy and security, price reporting and physician sunshine laws. Some
of our pre-commercial activities are subject to some of these laws.
The federal Anti-Kickback Statute makes it illegal
for any person or entity, including a prescription drug manufacturer or a party acting on its behalf to knowingly and willfully, directly
or indirectly, solicit, receive, offer, or pay any remuneration in cash or in kind that is intended to induce or reward the referral of
business, including the purchase, order, or lease of any item or service for which payment may be made under a federal healthcare program,
such as Medicare or Medicaid. The term “remuneration” has been broadly interpreted to include anything of value. The Anti-Kickback
Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on one hand and prescribers, purchasers, formulary
managers and beneficiaries on the other.
Although there are a number of statutory exceptions
and regulatory safe harbors protecting some common activities from prosecution, the exceptions and safe harbors are drawn narrowly. Practices
that involve remuneration that may be alleged to be intended to induce prescribing, purchases or recommendations may be subject to scrutiny
if they do not qualify for an exception or safe harbor. Failure to meet all of the requirements of a particular applicable statutory exception
or regulatory safe harbor does not make the conduct per se illegal under the Anti-Kickback Statute. Instead, the legality of the arrangement
will be evaluated on a case-by-case basis based on a cumulative review of all its facts and circumstances. Several courts have found that
the Anti-Kickback Statute may be violated if any one purpose of an arrangement involving remuneration is to induce referrals of federal
healthcare program business. In addition, liability may be established without actual knowledge of the statute or specific intent to violate
it. Violations of this law are punishable by up to ten years in prison, and can also result in criminal fines, civil money penalties
and exclusion from participation in federal healthcare programs.
Moreover, a claim including items or services
resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil
False Claims Act.
The federal civil False Claims Act prohibits,
among other things, individuals or entities from knowingly presenting, or causing to be presented, a false or fraudulent claim for payment
of government funds or knowingly making, using, or causing to be made or used, a false record or statement material to an obligation to
pay money to the government or knowingly concealing or knowingly and improperly avoiding, decreasing, or concealing an obligation to pay
money to the federal government. Persons and entities can be held liable under these laws if they are deemed to “cause” the
submission of false or fraudulent claims by, for example, providing inaccurate billing or coding information to customers or promoting
a product off-label. Many pharmaceutical and other healthcare companies have been investigated and have reached substantial financial
settlements with the federal government under the civil False Claims Act for a variety of alleged improper marketing activities, including:
providing free product to customers with the expectation that the customers would bill federal programs for the product; providing sham
consulting fees, grants, free travel and other benefits to physicians to induce them to prescribe the company’s products; and inflating
prices reported to private price publication services, which are used to set drug payment rates under government healthcare programs.
Penalties for federal civil False Claims Act violations may include up to three times the actual damages sustained by the government,
plus mandatory civil penalties of between $13,508 and $27,018 for each separate false claim, and the potential for exclusion from participation
in federal healthcare programs. In addition, although the federal False Claims Act is a civil statute, False Claims Act violations may
also implicate various federal criminal statutes.
The healthcare fraud provisions of the Health
Insurance Portability and Accountability Act (“HIPAA”) prohibit knowingly and willfully executing, or attempting to execute,
a scheme to defraud any healthcare benefit program, including private third-party payors, knowingly and willfully embezzling or stealing
from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully
falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection
with the delivery of or payment for healthcare benefits, items or services. Like the federal Anti-Kickback Statute, a person or entity
does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.
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Many states have analogous laws and regulations,
such as: state anti-kickback and false claims laws that may apply to sales or marketing arrangements and claims involving healthcare items
or services reimbursed by non-governmental third-party payors, including private insurers; laws that require pharmaceutical companies
to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by
the federal government or otherwise restrict payments that may be made to certain healthcare providers; laws that require drug manufacturers
to report information related to clinical trials or information related to payments and other transfers of value to physicians and other
healthcare providers or marketing expenditures; laws that restrict the ability of manufacturers to offer co-pay support to patients for
certain prescription drugs; and laws and local ordinances that require identification or licensing of sales representatives.
HIPAA, as amended by the Health Information Technology
for Economic and Clinical Health Act (“HITECH”), and their implementing regulations, mandates, among other things, the adoption
of uniform standards for the electronic exchange of information in common healthcare transactions, as well as standards relating to the
privacy and security of individually identifiable health information, which require the adoption of administrative, physical and technical
safeguards to protect such information. Among other things, HITECH makes HIPAA’s security standards directly applicable to business
associates, defined as independent contractors or agents of covered entities that create, receive, or obtain protected health information
in connection with providing a service for or on behalf of a covered entity. HITECH also increased the civil and criminal penalties that
may be imposed against covered entities and business associates and gave state attorneys general new authority to file civil actions for
damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorney’s fees and costs associated with pursuing
federal civil actions. In addition, certain state laws govern the privacy and security of health information in certain circumstances,
some of which are more stringent than HIPAA and many of which differ from each other in significant ways and may not have the same effect,
thus complicating compliance efforts. Failure to comply with these laws, where applicable, can result in the imposition of significant
civil and/or criminal penalties.
The U.S. federal Physician Payment Sunshine
Act, implemented as the Open Payments Program, requires manufacturers of drugs, devices, biologics, and medical supplies for which payment
is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to
CMS information related to direct or indirect payments and other transfers of value to physicians and teaching hospitals (and certain
other practitioners as of 2022), as well as ownership and investment interests held in the company by physicians and their immediate family
members.
Because we intend to commercialize products that
could be reimbursed under a federal health care program and other governmental healthcare programs, we intend to develop a comprehensive
compliance program that establishes internal control to facilitate adherence to the rules and program requirements to which we will or
may become subject. Although the development and implementation of compliance programs designed to establish internal control and facilitate
compliance can mitigate the risk of investigation, prosecution, and penalties assessed for violations of these laws, the risks cannot
be entirely eliminated.
If our operations are found to be in violation
of any of such laws or any other governmental regulations that apply to us, we may be subject to penalties, including, without limitation,
administrative, civil and criminal penalties, damages, fines, disgorgement, contractual damages, reputational harm, diminished profits
and future earnings, the curtailment or restructuring of our operations, exclusion from participation in federal and state healthcare
programs and individual imprisonment, any of which could adversely affect our ability to operate our business and our financial results
Health Care Reform
In the United States and some foreign jurisdictions,
there have been, and continue to be, legislative and regulatory changes and proposed changes regarding the healthcare system that could
prevent or delay marketing approval of product candidates, restrict or regulate post-approval activities, and affect the ability to profitably
sell product candidates for which marketing approval is obtained. Among policy makers and payors in the United States and elsewhere,
there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving
quality and/or expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and
has been significantly affected by major legislative initiatives.
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For example, the Affordable Care Act (“ACA”)
substantially changed the way healthcare is financed by both the government and private insurers, and significantly impacts the U.S. pharmaceutical
industry. The ACA contains provisions that may reduce the profitability of drug products through increased rebates for drugs reimbursed
by Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, mandatory discounts for certain Medicare Part D
beneficiaries, and annual fees based on pharmaceutical companies’ share of sales to federal health care programs. The ACA made several
changes to the Medicaid Drug Rebate Program, including increasing pharmaceutical manufacturers’ rebate liability by raising the
minimum basic Medicaid rebate. The ACA also expanded the universe of Medicaid utilization subject to drug rebates by requiring pharmaceutical
manufacturers to pay rebates on Medicaid managed care utilization and by enlarging the population potentially eligible for Medicaid drug
benefits.
There have been judicial challenges to certain
aspects of the ACA, as well as efforts by Congress to modify, and by agencies to alter the implementation of, certain aspects of the ACA. For
example, Congress eliminated the tax penalty for failure to comply with the ACA’s individual mandate to carry health insurance.
Further, the Bipartisan Budget Act of 2018, among other things, amended the ACA to increase from 50 percent to 70 percent the
point-of-sale discount that is owed by pharmaceutical manufacturers who participate in Medicare Part D to close the coverage gap
in most Medicare drug plans, commonly referred to as the donut hole.
It is possible that the ACA, as currently enacted
or as may be amended in the future, as well as other healthcare reform measures, including those that may be adopted in the future, may
result in more rigorous coverage criteria, and less favorable payment methodologies, or other downward pressure on coverage and payment
and the price that we receive for any approved product. Any reduction in reimbursement or restriction on coverage under Medicare or other
federal health care programs may result in a similar reduction or restriction by private payors.
Other legislative changes have been proposed and
adopted in the U.S. since the ACA was enacted. For example, the Inflation Reduction Act introduces several changes to the Medicare
Part D benefit, including a limit on annual out-of-pocket costs and a change in manufacturer liability under the program which could
negatively affect the profitability of our product candidates. The IRA sunsets the current Part D coverage gap discount program starting
in 2025 and replaces it with a new manufacturer discount program. Failure to pay a discount under this new program will be subject to
a civil monetary penalty. In addition, the IRA establishes a Medicare Part B inflation rebate scheme effective January 2023
and a Medicare Part D inflation rebate scheme effective October 2022, under which, generally speaking, manufacturers will owe
rebates if the price of a Part B or Part D drug increases faster than the pace of inflation. Failure to timely pay a Part B
or D inflation rebate is subject to a civil monetary penalty. The IRA also creates a drug price negotiation program under which the prices
for Medicare units of certain high Medicare spend drugs and biologicals without generic or biosimilar competition will be capped by reference
to, among other things, a specified non-federal average manufacturer price starting in 2026. Failure to comply with requirements under
the drug price negotiation program is subject to an excise tax and/or a civil monetary penalty. Congress continues to examine various
policy proposals that may result in pressure on the prices of prescription drugs with respect to the government health benefit programs
and otherwise. The IRA or other legislative changes could impact the market conditions for our product candidates.
In general, there has been heightened governmental
scrutiny over the manner in which drug manufacturers set prices for their commercial products, which has resulted in several Congressional
inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug product
pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies
for drug products. At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control
pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain
product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other
countries and bulk purchasing.
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Drug Pedigree Laws
State and federal governments have proposed or
enacted various drug pedigree laws which can require the tracking of all transactions involving prescription drugs from the manufacturer
to the pharmacy (or other dispensing) level. Companies are required to maintain records documenting the chain of custody of prescription
drug products beginning with the purchase of such products from the manufacturer. Compliance with these pedigree laws requires implementation
of extensive tracking systems as well as heightened documentation and coordination with customers and manufacturers. While we fully intend
to comply with these laws, there is uncertainty about future changes in legislation and government enforcement of these laws. Failure
to comply could result in fines or penalties, as well as loss of business that could have a material adverse effect on our financial results.
Federal Regulation of Patent Litigation Settlements and Authorized
Generic Arrangements
As part of the Medicare Prescription Drug, Improvement,
and Modernization Act of 2003, companies are required to file with the U.S. Federal Trade Commission (“FTC”)
and the U.S. Department of Justice certain types of agreements entered into between brand and generic pharmaceutical companies related
to the settlement of patent litigation or manufacture, marketing and sale of generic versions of branded drugs. This requirement could
affect the manner in which generic drug manufacturers resolve intellectual property litigation and other disputes with brand pharmaceutical
companies and could result generally in an increase in private-party litigation against pharmaceutical companies or additional investigations
or proceedings by the FTC or other governmental authorities.
Other
The U.S. federal government, various states
and localities have laws regulating the manufacture and distribution of pharmaceuticals, as well as regulations dealing with the substitution
of generic drugs for branded drugs. Our operations are also subject to regulation, licensing requirements and inspection by the states
and localities in which our operations are located or in which we conduct business.
Certain of our activities are also subject to
FTC enforcement actions. The FTC enforces a variety of antitrust and consumer protection laws designed to ensure that the nation’s
markets function competitively, are vigorous, efficient and free of undue restrictions. Federal, state, local and foreign laws of general
applicability, such as laws regulating working conditions, also govern us.
In addition, we are subject to numerous and increasingly
stringent federal, state and local environmental laws and regulations concerning, among other things, the generation, handling, storage,
transportation, treatment and disposal of toxic and hazardous substances, the discharge of pollutants into the air and water and the cleanup
of contamination. We are required to maintain and comply with environmental permits and controls for some of our operations, and these
permits are subject to modification, renewal and revocation by the issuing authorities. Our environmental capital expenditures and costs
for environmental compliance may increase in the future as a result of changes in environmental laws and regulations or increased manufacturing
activities at any of our facilities. We could incur significant costs or liabilities as a result of any failure to comply with environmental
laws, including fines, penalties, third-party claims and the costs of undertaking a clean-up at a current or former site or at a site
to which our wastes were transported. In addition, we have grown in part by acquisition, and our diligence may not have identified environmental
impacts from historical operations at sites we have acquired in the past or may acquire in the future.
Employees
As of the date of this Annual Report, we have two full time employees.
We have no part-time employees and we engage one consultant. We believe that we maintain good relations with our employees.
Item 1A. Risk Factors
As a smaller reporting company, as defined in
Rule 12b-2 of the Exchange Act, we are not required to provide the information required by this Item.