BetterLife Pharma Inc. 10-K

Item 1. Business This annual report of Pivot Pharmaceuticals Inc. for the year ended January 31, 2017 contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. To the extent that such statements are not recitations of historical fact, such statements constitute forward looking statements which, by definition involve risks and uncertainties. In particular, statements under the Sections; Description of Business, Management’s Discussion and Analysis of Financial Condition and Results of Operations contain forward looking statements. Where in any forward looking statements, the Company expresses an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation or belief will result or be achieved or accomplished. The following are factors that could cause actual results or events to differ materially from those anticipated, and include but are not limited to: general economic, financial and business conditions; changes in and compliance with governmental regulations; changes in tax laws; and the cost and effects of legal proceedings. You should not rely on forward looking statements in this annual report. This annual report contains forward looking statements that involve risks and uncertainties. We use words such as “anticipates,” “believes,” “plans,” “expects,” “future,” “intends,” and similar expressions to identify these forward-looking statements. Prospective investors should not place undue reliance on these forward looking statements, which apply only as of the date of this annual report. Our actual results could differ materially from those anticipated in these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results. Our financial statements are stated in U.S. Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. In this annual report, unless otherwise specified, all dollar amounts are expressed in US dollars and all references to “common shares” refer to the common shares in our capital stock. As used in this annual report, the terms “we”, “us”, “our” and “our company” mean Pivot Pharmaceuticals Inc., unless otherwise indicated. General Overview We are a development stage pharmaceutical company. We were incorporated in the Province of British Columbia, Canada under the name “649186 B.C. Ltd.”, on June 10, 2002. On September 9, 2003, we changed our name to “Xerxes Health Corp.” and on June 26, 2007, we changed our name to “Neurokine Pharmaceuticals Inc.”. Effective June 4, 2014, we filed with the British Columbia Registrar of Companies a Form 11, Notice of Alteration, wherein we increased our authorized share capital from 500,000,000 common shares without par value to an unlimited number of common shares without par value. The increase of authorized capital was approved by our stockholders at the annual and special meeting held on June 3, 2014. On September 26, 2014, our company held a special meeting of stockholders to approve the removal of our company's Pre-Existing Company Provisions, the cancellation of our current Articles and the adoption of new Articles and to approve a reverse stock split on the basis of up to one new common stock for every 100 old common stock. Effective October 8, 2014, we filed with the British Columbia Registrar of Companies a Form 11, Notice of Alteration, wherein we removed our Pre-Existing Company Provisions. Effective April 7, 2015, we filed with the British Columbia Registrar of Companies a Form 11, Notice of Alteration, wherein we changed our name to "Pivot Pharmaceuticals Inc.". Effective at the opening of trading on April 20, 2015, as approved by FINRA, our company effected a reverse stock split of our issued and outstanding common shares on the basis of 10 old common stock for 1 new common stock. On November 20, 2015, we completed the acquisition of IndUS Pharmaceuticals, Inc. (“IndUS”), a Delaware corporation, pursuant to an Agreement and Plan of Merger and Acquisition Agreement dated as of November 4, 2015 among our company, Pivot Pharma U.S. Inc., our wholly owned subsidiary, IndUS and Sindu Research Laboratories Pvt Ltd. As consideration for the purchase, we issued 4,512,500 shares of common stock on November 23, 2015 and 237,500 shares of common stock on December 4, 2015. We will also be granting 41,833 stock options pursuant to the Agreement and Plan of Merger. As part of the acquisition, we appointed Dr. Pravin Chaturvedi as our new Chief Executive Officer and Director. 3 Table of Contents IndUS is an emerging United States-India cross-border pharmaceutical company located in the Greater Boston area, which is engaged in conducting research and development activities for advancing novel therapeutics in the areas of oncology, infectious diseases and diabetes. Our principal executive office is located at 1275 West 6th Avenue, Vancouver, B.C. Canada V6H 1A6, with another office at 25 Olympia Avenue, Suite K-300, Woburn, MA 01801, USA. Our telephone number is (978) 973-5271. Our Current Business We are a development stage biopharmaceutical company engaged in the development and commercialization of therapeutic pharmaceutical products, focused on the strategy of identifying new therapeutic treatments to address unmet medical needs in women’s health including but not limited to urological and/or gynecological disturbances; and advancing novel anticancer drug candidates to provide new treatment options for metastatic cancers in women that do not have adequate treatment options or have poor response to existing treatment options due to inherent or acquired mutations. Our research and development activities are focused on i) advancing novel drug candidates for the treatment of women’s cancers including, but not limited to metastatic endometrial cancer and triple-negative breast cancer, which have limited treatment options; and ii) leveraging novel drug delivery treatment options to allow ‘targeted’ delivery of drugs to address women’s health needs in urological and/or gynecological indications, and iii) opportunistically in-licensing later-stage drug candidates to augment our drug pipeline. Where appropriate, we intend to depart from these strategies to opportunistically acquire additional novel treatment options to address unmet or under-served medical needs in women’s health. Our business model currently includes the following activities: · identifying novel drug delivery technologies that will allow targeted drug delivery for drugs; · securing and developing intellectual property rights to such products; · conducting appropriate laboratory tests and clinical trials; · advancing novel drug candidates to treat women’s cancers from our acquisition of IndUS to support Investigational New Drug application to allow first-in-human trials; · opportunistically acquiring later-stage drug candidates that provide new treatment options to address unmet medical needs in women’s health in cancer and lower urinary tract symptoms; and · establishing partnerships with large and specialty pharmaceutical companies and/or biotechnology companies to collaboratively develop and/or commercialize our products. One of our areas of focus includes developing therapeutic applications for existing drugs using novel delivery technologies for the treatment of diseases and conditions specific to cancer and/or urological disturbances in women. The diseases and conditions that are the subject of our research and development program include addressing resistant cancers affecting women’s health and developing new treatment options using novel drugs and/or novel delivery approaches to address oncological and urological conditions such as various gynecological and breast cancers as well as lower urinary tract symptoms such as overactive bladder. Our current pipeline addresses the therapeutic areas of cancer and lower urinary tract symptoms (LUTS): · Metastatic endometrial cancer (PVT-005) · Triple-negative breast cancer (PVT-006) PVT-005 and PVT-006 are novel and patented anticancer small molecule drug candidates acquired through the acquisition of IndUS. These molecules are novel DNA damage response inhibitors and belong to the chemical class of pyrrolobenzodiazepine dimers (PBDs). These molecules have shown preclinical activity in cancers that have mutations in their tumor suppression and/or DNA repair abilities and have shown ‘synthetic lethality’ when dosed as monotherapy in such resistant cancers and/or in combination with standard-of-care drugs that are used in chemotherapeutic regimens for such patients. PVT-005 and PVT-006 have shown excellent activity in tumor cells that have genetic or epigenetic mutations in DNA mismatch repair (mlh1, MSH2), tumor suppression functions (p53, PTEN) and/or homologous recombination (HR) functions. They have shown significant synergies with platinum-based drugs such as cisplatin, and other drugs like topoisomerase II and I inhibitors (doxorubicin and camptothecin, respectively) and receptor tyrosine kinase (RTK) inhibitors – all or some of which are part of standard-of-care chemotherapeutic regimens to treat ovarian, breast, colorectal, non-small cell lung and other cancers that affect women’s health. 4 Table of Contents Our research and development strategy is focused on developing novel treatment options to address various unmet medical needs in women’s health, including but not limited to urological issues and breast and gynecological cancers such as metastatic endometrial or triple-negative breast cancer that have inherent or acquired mutations rendering them resistant to existing treatment options and represent orphan drug designation opportunities. Our management has prioritized the development of the two novel and patented anticancer drug candidates (PVT-005 and PVT-006) focused on the treatment of metastatic endometrial cancer and/or basal-like triple-negative breast cancers (BL-TNBC) in women. These two indications affect approximately 50,000 and 40,000 women in the United States, respectively, and potentially represent orphan drug indications, that have limited treatment options. PVT-005 and PVT-006 will be added to standard chemotherapeutic regimens that are used to treat these cancers and as such are intended to augment the regimen and - provide additional benefit to patients that are either refractory or have relapsed following chemotherapy. Furthermore, due to the novel mechanism of action of these novel PBD candidates, the patients are segmented according to their DNA repair mutations, thus potentially allowing a more “personalized” medical treatment option for these patients. We will also evaluate novel drug delivery treatment options to allow more targeted and specific delivery options for its novel anticancer drug portfolio and/or for existing drugs that may be amenable to targeted delivery, thus providing a superior benefit; risk opportunity for these patients. To date, we have concentrated our research and development (R&D) activities on development of our novel anticancer drug candidates (PVT-005 and PVT-006) for the treatment of metastatic endometrial and/or basal-like triple-negative breast cancers. We have outsourced all research and development work to third parties, including clinical trial planning, laboratory services, data management, statistical services and report writing. We anticipate that we will continue to rely on third parties to satisfy our research and development requirements until such time as it becomes cost effective to hire employees to satisfy those requirements. We have not carried on any research and development activities since January 2009 and our ability to continue our research and development activities depends on securing additional financing. Our planned research and development for the next 12 months will focus on development activities for PVT-005 and PVT-006 to support the filing of an Investigational New Drug application to initiate first-in-human clinical trials as well as explore novel delivery and/or new therapeutic options for various drugs to address unmet medical needs in urological and/or gynecological disturbances in women. We will also be required to complete additional steps in order to market and sell any of our products to the public. Our determination of which specific additional steps we will need to complete before any of our products become marketable may vary depending on the results of the clinical trials and studies mentioned above. The following table sets out the various steps we anticipate we must complete in order to carry out our business plan for our planned products. Completion times have been indicated where estimable, as has any progress made to date. Anticipated Steps PVT-005 PVT-006 Intellectual Property Patents issued in the US and other countries on composition of matter, methods of use for treatment of cancers and process of manufacture of the drugs. Patents issued in the US and other countries on composition of matter, methods of use for treatment of cancers and process of manufacture of the drugs. Secure Rights to Drugs Acquired Acquired Pre-Clinical Testing Significant nonclinical toxicity studies required for both drugs Significant nonclinical toxicity studies required for both drugs Secure Investigational New Drug (“IND”) Approval or Equivalent Targeted IND filing in the 2 nd half of 2017 Targeted IND filing in the 2 nd half of 2017 Phase I Clinical Trials Conducted in cancer patients Conducted in cancer patients Phase II Clinical Trials Required in selected cancer patients Required in selected cancer patients Phase III Clinical Trials Required Required Submit New Drug Application or Equivalent and Obtain Marketing Approval Required Required Finance Marketing and Manufacturing of Approved Drug or Secure Marketing and Manufacturing Partner Required Required 5 Table of Contents Our Research and Development Strategy Our experienced management team has implemented a business-minded and cost-conscious approach to product research and development by focusing on development of novel therapies to address unmet needs in women’s health. Our research and development strategy will develop novel delivery options for new and/or existing drugs to address needs in women’s health as well as advance some of its patented and proprietary novel anticancer drugs in gynecological and/or breast cancers through its recent acquisition of IndUS. In order for a drug to be successful, it must be both efficacious and acceptably safe. Before a drug may be commercially marketed, it must be scrutinized and approved by applicable health authorities (such as the Food and Drug Administration (“FDA”) in the United States) in each country or jurisdiction where it is sought to be sold. In pharmaceutical research and development, clinical trials are conducted to allow safety and efficacy data to be collected for new drugs or devices. Health authorities then scrutinize the clinical trial results and determine, based on the results, whether a drug may be sold to the public. Similarly, clinical trials may only take place once satisfactory information has been gathered on the quality of the product and its non-clinical safety, and approval to conduct the trials has been granted by the health authority in the country where the trial is scheduled to take place. Clinical trials involving new drugs are commonly classified into four phases. Each phase of the drug approval process is treated as a separate clinical trial. The drug-development process will normally proceed through all four phases over many years. If the drug successfully passes through Phases I, II and III, it will usually be approved by the national regulatory authority for use in the general population. Phase IV trials are ‘post-approval’ studies. Due to the considerable cost that may be required to complete a full series of clinical trials, the burden of paying for all the necessary people and services is usually borne by the sponsor, who may be the pharmaceutical or biotechnology company that developed the drug that is the subject of the study. Since the diversity of roles may exceed the resources of the sponsor, clinical trials are often managed by outsourced partners such as contract research organizations. Furthermore, approval rates for new drugs at each clinical trial stage are prohibitively low, which may require the sponsor to finance additional trials or abandon the drug under development altogether. Our research and development strategy includes the development of novel anticancer drugs targeting subsets of women’s cancer patients that have metastatic endometrial, triple-negative breast and/or ovarian cancer, to explore the opportunity of securing an orphan drug designation (intended for patient populations <200,000 in the US). Since our anticancer portfolio has novel drugs that will require the conduct of nonclinical and clinical studies for new molecular entities (NMEs); we will also use targeted delivery options for approved (generic) drugs to avoid the higher cost of repeating one or more pre-clinical or clinical, safety, pharmacokinetic or other tests by applying novel drug delivery approaches to get targeted delivery of drugs and get a quicker time to market by leveraging a US regulatory pathway termed 505b2 applications. In doing so, a company may reduce the time required to complete the necessary research and development activities, which can typically take in excess of ten years, by more than half, as well as reduce the corresponding development costs. Our recent acquisition of Greater Boston-based IndUS has provided us with a portfolio of novel, patented and proprietary, novel anticancer drug candidates from multiple chemical classes of molecules referred to as pyrrolobenzodiazepine dimers (PBDs). These molecules have shown excellent anticancer potential during their initial biological testing conducted at the National Cancer Institute in Bethesda, MD. Subsequent to their initial biological evaluation, chemical scale-up and formulation studies were conducted to evaluate their pharmacokinetics in rats and two novel and patented pyrrolobenzodiazepine dimers were prioritized for advancement through preclinical studies to support first-in-human studies. PVT-005 and PVT-006 provide novel treatment options in combination with existing chemotherapeutic regimens to address unmet medical needs in women’s cancers. Our initial focus for PVT-005 is in patients with metastatic endometrial cancer, which harbors microsatellite (genomic) instability in DNA replication and repair pathways that render the cancer resistant to many existing chemotherapy options. It is estimated that approximately 43,000 women in the United States have metastatic endometrial cancer that would become eligible for new therapy options following their initial treatments and PVT-005 will be added to the standard chemotherapeutic regimen(s) that will be used to treat metastatic endometrial cancer. Similarly, PVT-006, a novel and patented pyrrolobenzodiazepine dimer, distinct from PVT-005, has been identified as a lead candidate to address unmet medical needs of women with triple-negative breast cancer. Triple-negative breast cancer is a very aggressive form of breast cancer that affects younger women, predominantly of African-American descent. It is estimated that approximately 170,000 women in the United States have triple-negative breast cancer. Five different molecular subtypes of triple-negative breast cancer have been identified and the basal-like subtype of triple-negative breast cancer (BL-TNBC) affects at least 40,000 women in the United States. PVT-006 is more likely to be effective in combination with existing anticancer agents, in basal-like triple-negative breast cancer subtype due to their mutations in DNA repair and replication pathways, which PVT-006 targets as its mechanism of action. Preclinical safety studies will be conducted over the next 12 months to advance at least one of these candidates to an IND-stage to allow initiation of clinical studies in these highly unmet medical needs in women’s cancer. 6 Table of Contents Our Product Development Initiatives Our product development initiatives will address unmet medical needs in metastatic endometrial, triple-negative breast and/or ovarian cancers. Metastatic Endometrial Cancer Endometrial cancer is the most common gynecological cancer in women and accounts for 6% of the cancers in women. An estimated 43,470 cases of endometrial cancers were diagnosed in 2010 and 7950 deaths were associated with this cancer that year. Endometrial carcinoma is divided into several histological categories based on cell type with endometrioid being the most common, which accounts for 75-80% of the cases. Other aggressive pathological variants with a high risk of metastatic disease include papillary serous carcinoma (<10%), clear cell carcinoma (4%), squamous cell carcinoma (<1%), mixed (10%) and undifferentiated types. Local and distal recurrences continue to remain a high risk for patients after they undergo surgery to remove the primary endometrial carcinoma. Median time to recurrence is 2-3 years with 75-80% of the recurrence being extra-pelvic. A small minority of patients with recurrent or advanced stage disease with solitary metastatic lesions may be amenable to radiation treatment with or without surgery. Prognosis is poor for the remainder of women presenting with metastatic endometrial cancer with a median survival period of only 12 months. The mainstay of treatment for metastatic endometrial carcinoma remains systemic hormonal therapy or cytotoxic chemotherapy. Inactivating mutations of PTEN, a tumor suppressor gene, are found in 40-60% of endometrial cancers. Loss of PTEN function results in constitutive activation of Akt which in turn upregulates mTOR activity resulting in cell proliferation. Hormonal therapy is well tolerated in women with low-grade disease and those who are positive for estrogen receptor (ER+) and progesterone receptor (PR+). Hormonal therapy includes agents such as progestins, which have an anti-estrogenic effect on the endometrium and produce marked changes in the glands and stroma. Within the glandular epithelium of the endometrium, progesterone acts as an antagonist to the estrogen-mediated cell proliferation and also inhibits ER gene expression and increases degradation of ER. Overall response rates following treatment with hormonal therapy using agents like medroxyprogesterone acetate or megestol acetate has been reported to be only 11-16% and progression-free survival (PFS) is only 4-6 months. Low histologic grade coupled with expression of PR and an extended period between initial diagnosis and occurrence of metastatic disease have been shown to have better response rates to progestin therapy. Response rates for PR+ endometrial cancer has been reported to be 37% compared to just 8% for PR-negative (PR-) endometrial carcinoma when treated with hormonal therapy. Selective estrogen receptor modulators (SERMs) may also be used to treat low grade endometrial cancer. Tamoxifen, which is used to both, prevent and treat breast cancer, has been shown to increase the incidence of endometrial cancer. However, combination regimens with tamoxifen and progestins have been shown to have some benefit in low histologic grade endometrial carcinoma. The use of aromatase inhibitors such as anastrazole and letrozole, for the treatment of advanced endometrial cancer in post-menopausal women, has shown poor response rates (<10%) with no correlation to the hormonal status. The use of gonadotropin-releasing hormone (GnRH) agonists such as goserelin acetate also shown poor response rates and were deemed insufficient to treat metastatic endometrial cancer. Cytotoxic chemotherapy is the mainstay for treatment of advanced metastatic endometrial cancer. However, response rates are modest with progression-free survival (PFS) times of 4-6 months and overall survival of only approximately 12 months. The most active classes of chemotherapy agents used for treating metastatic endometrial cancers are anthracyclines (doxorubicin, epirubicin), platinum compounds (cisplatin, carboplatin) and taxanes (paclitaxel, docetaxel) which produce response rates of approximately 20% as single agents. Combination chemotherapy with multiple agents improves overall response rates to 33-57% depending on the combination. Overall survival also improved slightly (approximately 15 months), but systemic gastrointestinal and myelotoxicity (Grade 3 and Grade 4) increased significantly in patients receiving such combination regimens. Inhibitors of mTOR activity such as temsirolimus in combination with inhibitors of epidermal growth factor receptor (EGFR) and anti-angiogenic agents suppressing vascular endothelial growth factor (VEGF) are being evaluated for the treatment of metastatic endometrial cancer. 7 Table of Contents Since novel Pivot compounds such as PVT-005 show “synthetic lethality” with chemotherapy agents such as cisplatin in tumors that have loss of tumor suppressor function in p53 or PTEN, such combinations would provide novel chemotherapy options for the treatment of metastatic endometrial cancers. Triple-Negative Breast Cancers Triple-negative breast cancers (TNBC) are defined as tumors that lack the expression of estrogen receptor (ER), progesterone receptor (PR) and HER2. Approximately 12-17% of women with breast cancer have TNBC, representing approximately 170,000 breast cancer patients. These patients have a relatively poor outcome and cannot be treated with endocrine therapies or agents targeted to epidermal growth factor receptor type 2 (HER2). A close cousin of TNBC is basal-like breast cancer (BLBC) which is characterized by absence or low level expression of ER and absence of HER2 expression. Many tumors may meet the definition of both TNBC and BLBC. Both TNBC and BLBC occur more commonly in young women, particularly Black and Hispanic women, when compared to women from other racial and ethnic backgrounds. Approximately 75% of women with TNBC or BLBC have a mutation in BRCA1, a breast cancer susceptibility gene. Because TNBC is a heterogenous disease, many pathological and immunohistochemical sub-classification systems have been proposed to provide greater homogeneity within TNBC subtypes. Recently five molecular subtypes have been proposed for TNBC to allow improved clinical development strategies to stratify TNBC patients. These include: 1) basal-like TNBC characterized predominantly by mutations in DNA damage repair deficiency and some growth factor pathway expression: 2) mesenchymal-like TNBC (ML-TNBC) with epithelial-to-mesenchymal transition (EMT) and cancer stem cell (CSC) features; 3) immune-associated TNBC (I-TNBC); 4) luminal/apocrine TNBC (LA-TNBC) with androgen receptor (AR) overexpression; and 5) HER2-enriched TNBC (HER2e-TNBC). The predominant grouping of TNBC is basal-like (BL-TNBC) which constitutes between 25-80% of all TNBC. Within the basal-like subtype, there are two subgroups and basal-like 1 (BL1-TNBC) is enriched in cell cycle related genes and DNA-damage repair pathways. Nearly 25% of breast cancers harbor a mutation in DNA repair, mainly in homologous recombination (HR) when double-stranded (DS) breakage occurs – which appears similar to the genetic deficiencies of BRCA1 or BRCA2 mutation carriers. Alterations in DNA-damage response or repair mechanisms usually lead to genomic (microsatellite) instability and carcinogenesis. In addition to DNA-damage response deficiencies, 85% of BL-TNBC patients have mutations in p53 which results in a loss of tumor suppression. Since TNBC are aggressive tumors, chemotherapy regimens include targeting DNA repair complex (like platinum agents and taxanes), p53 (like taxanes), cell proliferation (like anthracyclines) and targeted therapy. BL-TNBC appears to have good response rates to chemotherapy regimens containing platinum agents (such as cisplatin and carboplatin). In addition to administration in the adjuvant setting (after surgery), several studies have evaluated the combination chemotherapeutic regimens in neoadjuvant setting. For instance, cisplatin as a single agent in the neoadjuvant setting gives a pathological response rate of nearly 22%; which improves to 28% when cisplatin is administered in combination with paclitaxel; and further improves to 65% when a triple combination of cisplatin:paclitaxel;epirubicin is administered to TNBC patients in the neoadjuvant setting. However, response rates in metastatic TNBC are lower for single- or double agent chemotherapy in TNBC, and it remains a high unmet medical need. Given the molecular subtype of BL-TNBC, using agents that target DNA-damage repair deficiencies appears to be a good strategy to combine novel drugs with platinum containing regimens to improve response rates. For instance, combination of platinum drugs with novel agents targeting poly-ADP ribose polymerase (PARP), have been evaluated in TNBC patients. Chemotherapy regimens combining novel pyrrolobenzodiazepine dimers (PBDs) from Pivot (PVT-006) with cisplatin or carboplatin to target BL-TNBC will offer novel therapeutic regimens to improve response rates and progression-free survival (PFS) in metastatic BL-TNBC patients. 8 Table of Contents Metastatic Ovarian Cancer Ovarian cancer is the most lethal gynecological cancers and is the fifth leading cause of deaths in women in the United States. It is usually diagnosed at a late stage and has a 5-year survival rate of approximately 30%. The majority of ovarian cancers are diagnosed after they have spread into the peritoneal cavity and the major cause of ovarian cancer-associated mortality is believed to be due to therapy-resistant metastatic disease. It is estimated that 21,290 new cases of ovarian cancer were diagnosed in 2015 and 14,180 ovarian cancer patients died that year. Current treatment strategies for advanced ovarian cancer consist of aggressive surgery (referred to as cytoreduction or tumor debulking). In order to clear the tumor from the pelvis, the surgery often involves en bloc resection of the ovarian tumor, reproductive organs and the sigmoid colon, and primary bowel reanastamoses. The surgical goal is to remove as much tumor burden as possible, since cytoreduction has been associated with improved survival. Post-operatively, most ovarian cancer patients will receive chemotherapy with platinum- (usually carboplatin) and taxane- (usually paclitaxel) containing regimens. While these agents are administered intravenously, there is some evidence that administration of these regimens through the intraperitoneal route improves overall survival benefit in such patients. The World Health Organization (WHO) has categorized ovarian cancers into four subtypes based on their histology: 1) serous-papillary ovarian carcinoma which resembles the papillary architecture of the fallopian tubes; 2) endometrioid carcinoma which is often associated with endometriosis and resembles endometrioid carcinoma of the uterus; 3) mucinous carcinoma resemble either the endocervical glands or gastrointestinal epithelium; and 4) clear cell carcinoma of the ovary which is a rare subtype and shares morphological features of both, serous and endometrioid carcinomas. In the last few years, there have been some more genetic insights into various ovarian cancers and two molecular subtypes of ovarian cancers have been identified. Type 1 ovarian cancers affect younger patients and are comprised of low-grade serous-papillary and endometrioid carcinomas and have low grade resistance to carboplatin-taxol chemotherapy regimen, but have indolent disease and tend to have a median survival of 82 months. Type 2 ovarian cancer is most prevalent in post-menopausal women, and it is initially very sensitive to platinum-containing chemotherapy regimens, but median survival is only 30 months. Type 1 serous-papillary ovarian tumors typically have mutations in BRAF, KRAS, ERBB2 and have microsatellite (genomic) instability. Type 1 endometrioid, mucinous and clear cell ovarian cancers have similar mutations to the serous-papillary ovarian carcinoma and in addition have additional mutations in b -catenin and PTEN. The most frequent (50-80%) mutations in high-grade (Type 2) serous ovarian cancers involve the tumor suppressor gene, p53. Other important genetic changes in high-grade serous tumors include changes in BRCA1 and BRCA2 and amplification of AKT2 serine/threonine kinase and PI3K mutations. The biological behavior of ovarian carcinomas and its confinement to the peritoneal cavity provides us with an opportunity to develop novel chemotherapeutic combination regimens using novel Pivot pyrrolobenzodiazepine dimers (PBDs) in combination with carboplatin and paclitaxel, especially via the intraperitoneal route to minimize systemic toxicity. Furthermore, due to the genetic similarity of abdominal ovarian cancers, it provides us an opportunity to shrink all types of metastatic ovarian tumors with such novel combination regimens. Clinical Trial Phases The following section describes the most common phases of clinical drug trials with reference to the clinical trial requirements that we anticipate will be required for each of our planned products. 9 Table of Contents Pre-Clinical Trials Pre-clinical trials involve in vitro (test tube) and in vivo (animal) experiments using wide-ranging doses of the study drug to obtain preliminary efficacy, toxicity and pharmacokinetic information. Such tests assist pharmaceutical companies in deciding whether a drug candidate possesses scientific merit for further development as an investigational new drug. In addition, formulation and dosage regimen work studies will need to be conducted. Phase 0 Phase 0 is a recent designation for exploratory, first-in-human trials conducted in accordance with the FDA’s 2006 Guidance on Exploratory Investigational New Drug. These trials are generally used for novel anticancer drugs. Distinctive features of Phase 0 trials include the administration of single subtherapeutic doses (doses not intended to treat diseases) of the study drug to a small number of subjects (10-15) to gather preliminary data on the agent’s pharmacokinetics and pharmacodynamics. Phase I Phase I trials are the first stage of drug testing in human subjects. Normally, a small group of healthy volunteers (20-50) will be selected. This phase includes trials designed to assess the safety, tolerability and effects of the drug in relation to the human body, including how it is absorbed, distributed, metabolized and eliminated by the body. These trials are often conducted in an inpatient clinic, where the subject can be observed by full-time staff. The subject who receives the drug is usually observed until several half-lives of the drug have passed. Phase I trials also normally include dose-ranging (or dose escalation) studies so that the appropriate dose for therapeutic use can be found. The tested range of doses will usually be a fraction of any dose that causes harm in animal testing. Phase I trials most often include healthy volunteers; however, real patients are used in some circumstances, such as when patients have an end-stage disease and lack other treatment options. This exception to the rule most often occurs in oncology (cancer) and HIV drug trials. Volunteers are paid an inconvenience fee for the time they spend in the volunteer center. Pay ranges from a small amount of money for a short period of residence to a larger amount of up to approximately $6,000 depending on the length of the volunteer’s participation in the trial. Phase II Once the initial safety of a study drug has been confirmed in Phase I trials, Phase II trials are performed on larger groups (20-300) and are designed to assess how well the drug works, as well as to continue Phase I safety assessments using a larger group of volunteers and patients. When the development process for a new drug fails, this usually occurs during Phase II trials when the drug is discovered not to work as planned or to have toxic effects. Phase II studies are sometimes divided into Phase IIA and Phase IIB. Phase IIA is specifically designed to assess dosing requirements (how much of the drug should be given), while Phase IIB is specifically designed to study efficacy (how well the drug works at the prescribed dose(s)). Some trials combine Phase I and Phase II, and test both efficacy and toxicity. All of our planned anticancer products will need to undergo Phase II clinical trials. Completion of these trials is subject to our ability to obtain adequate financing. 10 Table of Contents We anticipate initiating and completing at least one Phase II trial of either PVT-005 or PVT-006 at a cost of approximately $8.4 million over a 12 month period. It is our goal to begin our trial six months after the completion of the required financing; however, we will not establish a firm start date until we raise sufficient financing, which there is no guarantee that we will be able to do. The trial protocol for our Phase II trial has been developed with input from our clinical advisors. Phase III Phase III studies are randomized controlled multi-center trials on large patient groups (300-3,000 or more, depending upon the disease or medical condition studied), and are intended to definitively assess the effectiveness of the drug as compared to the current “gold standard” treatment. Because of their size and comparatively long duration, Phase III trials are the most expensive, time-consuming and difficult trials to design and run, especially in therapies for chronic medical conditions. It is common practice that certain Phase III trials may continue while a regulatory submission is pending at the appropriate regulatory agency. This allows patients to continue to receive possibly lifesaving drugs until the drug can be obtained commercially. Other reasons for performing additional trials at this stage may include “label expansion” (to show the drug is suitable for additional types of patients/diseases beyond the original use for which the drug was approved for marketing), obtaining additional safety data, or to support marketing claims for the drug. Studies in this phase are categorized by some companies as “Phase IIIB studies”. While not required in all cases, it is typically expected that at least two successful Phase III trials will be necessary to demonstrate a drug’s safety and efficacy in order to obtain approval from appropriate regulatory agencies, such as the FDA in the United States, the Therapeutic Goods Administration in Australia or the European Medicines Agency in the European Union, for example. Once a drug has proved satisfactory after Phase III trials, the trial results are usually combined into a large document containing a comprehensive description of the methods and results of human and animal studies, manufacturing procedures, formulation details and shelf life. This collection of information makes up the regulatory submission that is provided for review to the appropriate regulatory authorities in different countries. They review each submission, and, it is hoped, give sponsors approval to market the particular drug. Most drugs undergoing Phase III clinical trials can be marketed under FDA norms with proper recommendations and guidelines, but the drugs must be recalled immediately from the market if any adverse effects are reported. While most pharmaceutical companies refrain from this practice, it is not abnormal to see many drugs undergoing Phase III clinical trials in the market. We anticipate that all of our current planned products will require us to undertake the conduct of Phase III clinical trials; however, we lack sufficient information to estimate the costs or timeframe required to complete any Phase III clinical trials at this time. Our ability to pursue Phase III trials will be subject to our ability to obtain adequate financing and successfully complete earlier trials phases for the products in question. Phase IV A Phase IV trial is also known as a post-marketing surveillance trial. Phase IV trials involve safety surveillance (pharmacovigilance) and ongoing technical support of a drug after it receives permission to be sold. Phase IV studies may be required by regulatory authorities or may be undertaken by a sponsoring company for competitive or other reasons (for example, the drug may not have been tested for interactions with other drugs, or on certain population groups such as pregnant women, who are unlikely to subject themselves to trials). The safety surveillance is designed to detect any rare or long-term adverse effects over a much larger patient population and longer time period than was possible during the Phase I through III clinical trials. Harmful effects discovered by Phase IV trials may result in a drug no longer being sold or being restricted to certain uses. We are unable to accurately anticipate at this time whether our current planned products will require us to undertake Phase IV clinical trials. Similarly, we are unable to accurately anticipate at this time what the costs or timeframe to complete those trials might be. Our ability to pursue any Phase IV trials which may be required of us or which we may undertake voluntarily will be subject to our ability to adequately finance those trials and to successfully complete Phase III trials. 11 Table of Contents Markets for Our Planned Products Estimated Sales Metastatic Endometrial Cancer (PVT-005) > $250MM Triple-negative breast cancer (PVT-006) > $300MM Sales are conservatively estimated for US only, using the estimates of incidence and prevalence of the oncology indication, and assuming modest pricing and market penetration. Research and Development We have not spent any amount on research and development expenses for the last two fiscal years. From our inception on June 10, 2002 to January 31, 2017 we spent $282,715 on research and development activities. We anticipate that we will incur approximately $8.4 million in research and development expenses over the next 12 months; however this may change if we are unsuccessful in obtaining sufficient additional financing. Intellectual Property We own the common law trademark rights in our corporate name and logo as well as the trademark for “INDUS PHARMACEUTICALS”. With the exception of the trademark for IndUS, we have not registered any of our trademark rights for protection. We have also secured exclusive worldwide licensing rights and title in and to the following patents through our acquisition of IndUS Pharmaceuticals: · United States Patent Application No. 09/822782 (filed on March 30, 2001) and Patent No. 6362331 for the process for the preparation of antitumor agents. · United States Patent Application No. 10/396103 (filed on March 25, 2003) and Patent No. 6683073 for pyrimidine linked pyrrolo[2,1-C][1,4] benzodiazepines as potential antitumor agents. · United States Patent Application No. 10/396129 (filed on March 25, 2003) and Patent No. 6800622 for pyrene-linked pyrrolo[2,1-C][1,4] benzodiazepine hybrids useful as anti-cancer agents. · United States Patent Application No. 10/401782 (filed on March 31, 2003) and Patent No. 6884799 for non-crossed linking pyrrolo [2,1-C][1,4] benzodiazepine and process thereof. · United States Patent Application No. 10/401754 (filed on March 31, 2003) and Patent No. 7015215 for pyrrolo[2,1-C][1,4] benzodiazepines compounds and process thereof. Manufacturing We have limited experience in, and do not own facilities for, manufacturing any products or product candidates. We utilize contract manufacturers to produce clinical supplies of our products and our investigational drugs are not commercially available (PVT-005 and PVT-006). Although we intend to continue to rely on contract manufacturers to produce our products for both clinical and commercial supplies, we will oversee the production of those products and do not anticipate relying on any particular contract manufacturer exclusively. If we obtain FDA approval or marketing application approval outside the United States for any of our product candidates, we plan to rely on contract manufacturers to produce sufficient quantities for large-scale commercialization. These contract manufacturers will be subject to extensive government regulations. Regulatory authorities in the markets that we intend to serve require that drugs be manufactured, packaged and labeled in conformity with current Good Manufacturing Practices (GMP) as set by the FDA. In this regard, we plan to engage only contract manufacturers who have the capability to manufacture drug products in compliance with current Good Manufacturing Practices in bulk quantities for commercialization. We also intend to safeguard our intellectual property when working with contract manufacturers by working only with manufacturers who in our estimation have a strong track record of safeguarding confidential information and who are willing to enter into agreements with us that impose upon them strict intellectual property protection measures. 12 Table of Contents Sales, Marketing and Distribution We currently have no sales or distribution capabilities and limited marketing capabilities. In order to commercialize our products, we must develop sales, marketing and distribution capabilities or make arrangements with other parties to perform these services for us. Upon marketing approval of PVT-005 and/or PVT-006 (or any of our anticancer products) from the FDA or other regulatory authorities, we plan to build our own U.S. oncology sales force to market our products directly to oncology centers and physicians in the United States focused in medical oncology. We believe that we can best serve this market with a focused, specialty sales force. Outside of the United States, and subject to obtaining marketing approval in the applicable countries, we intend to engage sales, marketing and distribution partners in Canada, Europe, Asia and Latin America. Competition If any of our products receive marketing approval, they may compete against, and may be used in combination with, well-established products that are currently used for the treatment of their respective indications. By the time we are able to commercialize a product candidate, the competition and potential competition may be greater and more direct. Several companies are focusing on new compounds, most of which are in pre-clinical or early phases of development. We expect to compete with others on, among other things, the safety and efficacy of our products. Competing successfully will depend on our continued ability to attract and retain skilled and experienced personnel; to identify, secure the rights to and develop pharmaceutical products and compounds; and to exploit these products and compounds commercially before others are able to develop competing products. In addition, our ability to compete may be affected because insurers and other third-party payors in some cases seek to encourage the use of generic products making branded products less attractive to buyers from a cost perspective. Patents and Proprietary Rights Our success will depend in part on our ability to protect our products and product candidates by obtaining and maintaining a strong proprietary position both in the United States and in other countries. To develop and maintain our proprietary position, we will rely on patent protection, regulatory protection, trade secrets, know-how, continuing technological innovations and licensing opportunities. It is our policy to require our employees, consultants, contractors, or scientific and other advisors, to execute confidentiality agreements upon the commencement of employment or consulting relationships with us. These agreements provide that all confidential information developed or made known to the individual during the course of the individual’s relationship with us is to be kept confidential and not disclosed to third parties except in specific circumstances. These agreements provide that all inventions related to our business that are conceived by the individual during the course of our relationship shall be our exclusive property. There can be no assurance, however, that these agreements will provide meaningful protection or adequate remedies for our trade secrets in the event of unauthorized use or disclosure of such information. Subsidiaries We own 100% of the outstanding common stock of IndUS Pharmaceuticals, Inc. 13 Table of Contents Employees and Consultants As of April 28, 2017, we have employment contracts with our chief executive officer, chief business officer and chief financial officer. We currently engage independent contractors in the areas of legal and auditing services. We plan to engage independent contractors in the areas of preclinical toxicity studies and clinical trial execution and data management. Government Regulations In this section and throughout this annual report, the term “FDA” means the United States Food and Drug Administration. Our current and future operations and research and development activities are or will be subject to various laws and regulations in the countries in which we conduct or plan to conduct our business, including but not limited to the United States, Canada, India, United Kingdom and potentially other member countries from the European Union. These laws and regulations govern the research, development, sale and marketing of pharmaceuticals, taxes, labor standards, occupational health and safety, toxic substances, chemical products and materials, waste management and other matters relating to the pharmaceutical industry. We may require permits, registrations or other authorizations to maintain our operations and to carry out our future research and development activities, and these permits, registrations or authorizations will be subject to revocation, modification and renewal. Governmental authorities have the power to enforce compliance with lease conditions, regulatory requirements and the provisions of required permits, registrations or other authorizations, and violators may be subject to civil and criminal penalties including fines, injunctions, or both. The failure to obtain or maintain a required permit may also result in the imposition of civil and criminal penalties, and third parties may have the right to sue to enforce compliance. We expect to be able to comply with all applicable laws and regulations and do not believe that such compliance will have a material adverse effect on our competitive position. We have obtained and intend to obtain all permits, licenses and approvals required by all applicable regulatory agencies to maintain our current operations and to carry out our future research and development activities. We are not aware of any material violations of permits, licenses or approvals issued with respect to our operations, and we believe that we will continue to comply with all applicable laws and regulations. Pharmaceutical Regulatory Regimes Regulation by governmental authorities in the United States and other countries is a significant factor in the development, manufacture and marketing of pharmaceuticals. All of our product candidates will require regulatory approval by governmental agencies prior to commercialization. In particular, our drug candidates are subject to rigorous pre-clinical testing and subsequent clinical trials and other premarketing approval requirements of the FDA and regulatory authorities in other countries. Various federal, state and foreign statutes and regulations govern or affect the manufacturing, safety, labeling, stability, record-keeping and marketing of pharmaceutical products. The lengthy process of seeking required approvals and the continuing need for compliance with applicable statutes and regulations require the expenditure of substantial resources. When we obtain regulatory approval for any of our product candidates, the approval may be limited in scope, which may significantly limit the indicated uses for which our product candidates may be marketed, promoted and advertised. Further, approved pharmaceuticals and manufacturers are subject to ongoing review and previously unknown problems may be discovered that may result in restrictions on the manufacture, sale or use of approved pharmaceuticals or their withdrawal from the market. 14 Table of Contents Pre-Clinical Studies Before testing any compounds with potential therapeutic value in human subjects in the United States, stringent governmental requirements for pre-clinical data must be satisfied. Pre-clinical testing includes both in vitro and in vivo laboratory evaluation and characterization of the safety and efficacy of a drug and its formulation. Pre-clinical testing results obtained from these studies, including tests in several animal species, are submitted to the FDA as part of an Investigational New Drug Application and are reviewed by the FDA prior to the commencement of human clinical trials. These pre-clinical data must provide an adequate basis for evaluating both the safety and the scientific rationale for initial trials in human volunteers. Clinical Trials If a company wants to conduct clinical trials in the United States to test a new drug in humans, an Investigational New Drug (IND) Application must be prepared and submitted to the FDA. The IND Application becomes effective, if not rejected or put on clinical hold by the FDA, within 30 days of filing the application. In addition, an Institutional Review Board must review and approve the trial protocol and monitor the trial on an ongoing basis. The FDA may, at any time during the 30-day review period or at any time thereafter, impose a clinical hold on proposed or ongoing clinical trials. If the FDA imposes a clinical hold, clinical trials may commence or recommence without FDA authorization, and then only under terms authorized by the FDA. The IND Application process can result in substantial delay and expense. New Drug Application After completion of clinical trials, if there is substantial evidence that the drug is both safe and effective, a New Drug Application (NDA) is prepared and submitted for the FDA to review. The New Drug Application must contain all of the essential information on the drug gathered to that date, including data from pre-clinical studies and clinical trials, and the content and format of a New Drug Application must conform with all FDA regulations and guidelines. Accordingly, the preparation and submission of a New Drug Application is an expensive and major undertaking for a sponsor. The FDA reviews all New Drug Applications submitted before it accepts them for filing and may request additional information from the sponsor rather than accepting a New Drug Application for filing. In such an event, the New Drug Application must be submitted with the additional information and, again, is subject to review before filing. Once the submission is accepted for filing, the FDA begins an in-depth review of the New Drug Application. By law, the FDA has 180 days in which to review the New Drug Application and respond to the applicant. The review process is often significantly extended by the FDA through requests for additional information and clarification. The FDA may refer the application to an appropriate advisory committee, typically a panel of clinicians, for review, evaluation and a recommendation as to whether the application should be approved and the scope of any approval. The FDA is not bound by the recommendation, but gives great weight to it. If the FDA evaluations of both the New Drug Application and the manufacturing facilities are favorable, the FDA may issue either an approval letter or an approvable letter, which usually contains a number of conditions that must be satisfied in order to secure final approval. If the FDA’s evaluation of the New Drug Application submission or manufacturing facility is not favorable, the FDA may refuse to approve the New Drug Application or issue a not approvable letter. Fast Track Designation and Priority Review The FDA’s fast track program is intended to facilitate the development and expedite the review of drugs that are intended for the treatment of a serious or life-threatening condition for which there is no effective treatment and which demonstrate the potential to address unmet medical needs for their condition. Under the fast track program, the sponsor of a new drug may request the FDA to designate the drug for a specific indication as a fast track product at any time during the clinical development of the product. The FDA must determine if the product qualifies for fast track designation within 60 days of receipt of the sponsor’s request. For a product candidate where fast track designation is obtained, the FDA may initiate review of sections of a New Drug Application before the application is complete. This rolling review is available if the applicant provides a schedule for the submission of the remaining information and pays applicable user fees. However, the time period specified in the Prescription Drug User Fees Act, which governs the time period goals the FDA has committed to reviewing a New Drug Application, does not begin until the complete application is submitted. Additionally, the fast track designation may be withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging in the clinical trial process. 15 Table of Contents In some cases, the FDA may designate a product for priority review. A product is eligible for priority review, or review within a targeted six-month time frame from the time a New Drug Application is accepted for filing, if the product provides a significant improvement compared to marketed products in the treatment, diagnosis or prevention of a disease. A fast-track designated product generally meets the FDA’s criteria for priority review. We cannot guarantee that any of our products will receive a priority review designation, or if a priority designation is received, that review or approval will be faster than conventional FDA procedures. When appropriate, we intend to seek fast track designations for our products. We cannot predict the ultimate impact, if any, of the fast track process on the timing or likelihood of FDA approval on any of our potential products. Importantly, fast track designation does not result in the elimination or waiver of any pre-clinical or clinical trial requirements. Orphan Drug Designation The FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition that affects fewer than 200,000 individuals in the United States. Orphan drug designation must be requested before submitting a New Drug Application. If the FDA grants orphan drug designation, the generic identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process. If a product that has orphan drug designation subsequently receives FDA approval for the indication for which it has such designation, the product is entitled to orphan exclusivity, which means the FDA may not approve any other applications to market the same drug for the same indication, except in very limited circumstances, for up to seven years after receiving FDA approval. When appropriate, we intend to seek orphan status for certain indications that may be treated with our products. It is our intent to file for orphan disease status for our novel pyrrolobenzodiazepine dimer (PBD) drugs that are intended to treat metastatic endometrial, ovarian and/or triple-negative breast cancers. We cannot predict the ultimate impact, if any, of orphan status on the timing or likelihood of FDA approval on any of our products. The Hatch-Waxman Act Under the Drug Price Competition and Patent Term Restoration Act of 1984, known as the Hatch-Waxman Act, newly approved drugs may benefit from a statutory period of non-patent marketing exclusivity in the United States. The Hatch-Waxman Act provides five years of marketing exclusivity to the first applicant to gain approval of a New Drug Application under Section 505(b) of the Food, Drug and Cosmetic Act for a new chemical entity. A drug qualifies as a new chemical entity if the FDA has not previously approved any other drug containing the same active ingredient. The Hatch-Waxman Act provides data exclusivity by prohibiting abbreviated New Drug Applications, and the submission of section 505(b)(2) applications, which are marketing applications where the applicant does not own or have a legal right of reference to all the data required for approval, by another company for another version of such drug during the exclusive period. Protection under the Hatch-Waxman Act will not prevent the filing or approval of a full New Drug Application for the same active ingredient, although the applicant would be required to conduct its own adequate and well-controlled clinical trials to demonstrate safety and effectiveness. Other Regulatory Requirements Any products we manufacture or distribute under FDA approvals are subject to pervasive and continuing regulation by the FDA, including record-keeping requirements and reporting of adverse experiences with the products. Drug manufacturers and their subcontractors are required to register with the FDA and, where appropriate, state agencies, and are subject to periodic unannounced inspections by the FDA and state agencies for compliance with current Good Manufacturing Practices, or cGMP, regulations which impose procedural and documentation requirements upon us and each third-party manufacturer we utilize. The FDA closely regulates the marketing and promotion of drugs. A company can make only those claims relating to safety and efficacy that are approved by the FDA. Failure to comply with these requirements can result in adverse publicity, warning letters, corrective advertising and potential civil and criminal penalties. Physicians may prescribe legally available drugs for uses that are not described in the product’s labeling and that differ from those tested by us and approved by the FDA. Such off-label uses are common across medical specialties. Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA does, however, restrict manufacturers from communicating on the subject of off-label use. 16 Table of Contents The FDA’s policies may change and additional government regulations may be enacted which could prevent or delay regulatory approval of our programs or our future product candidates, or such approval of new indications for our future products. We cannot predict the likelihood, nature or extent of adverse governmental regulations that might arise from future legislative or administrative action, either in the United States or abroad European Union. Clinical Trials Similar to the United States, the various phases of pre-clinical and clinical research in the European Union are subject to significant regulatory controls. The regulatory controls on clinical research in the European Union are now largely harmonized following the implementation of the Clinical Trials Directive 2001/20/EC, or CTD. Compliance with the national implementations of the CTD has been mandatory since May 1, 2004. However, variations in member state regimes continue to exist, particularly in the small number of member states that have yet to implement the CTD fully. All member states currently require regulatory and independent ethics committee approval of interventional clinical trials. European regulators and ethics committees also require the submission of adverse event reports during a study and a copy of the final study report. Marketing Authorization In the European Union, approval of new medicinal products can be obtained through the mutual recognition procedure or the centralized procedure. The mutual recognition procedure entails initial assessment by the national authorities of a single member state and subsequent review by national authorities in other member states based on the initial assessment. The centralized procedure requires the submission of a single Marketing Authorization Application (a “MAA”) to the European Medicines Agency (the “EMA”) leading to an approval that is valid in all European Union member states. It is required for certain medicinal products, such as biotechnology products and certain new chemical entities, and is optional, or available at the EMA’s discretion, for other new chemical entities or innovative medicinal products with novel characteristics. Under the centralized procedure, a MAA is submitted to the EMA. Two European Union member states are appointed to conduct an initial evaluation of each MAA. These countries each prepare an assessment report, which are then used as the basis of a scientific opinion of the Committee for Medicinal Products for Human Use. If this opinion is favorable, it is sent to the European Commission which drafts a decision. After consulting with the member states, the European Commission adopts a decision and grants a marketing authorization, which is valid throughout the European Union and confers the same rights and obligations in each of the member states as a marketing authorization granted by that member state. The European Union expanded its membership by ten states in May 2004. Two more countries joined on January 1, 2007. Several other European countries outside of the European Union, particularly those intending to accede to the European Union, accept European Union review and approval as a basis for their own national approval. Advertising In the European Union, the promotion of prescription medicines is subject to intense regulation and control, including a prohibition on direct-to-consumer advertising. Some jurisdictions require that all promotional materials for prescription medicines be subjected to either prior internal or regulatory review or approval. 17 Table of Contents Data Exclusivity For an MAA filed after October 30, 2005, European Union regulators offer eight years of data exclusivity during which generic drug manufacturers cannot file abridged applications. This is followed by two years of market exclusivity during which generic MAAs may be reviewed and approved but during which generic drug manufacturers cannot launch products. The manner in which these new exclusivity provisions will be applied in practice remains far from clear and there can be no assurance that our programs or our other current or future product candidates will qualify for such exclusivity. Other Regulatory Requirements If a marketing authorization is granted for our products in the European Union, the holder of the marketing authorization will be subject to ongoing regulatory obligations. A holder of a marketing authorization for our products is legally obliged to fulfill a number of obligations by virtue of its status as a Marketing Authorization Holder (a “MAH”). While the associated legal responsibility and liability cannot be delegated, the MAH can delegate the performance of related tasks to third parties, provided that this delegation is appropriately documented. A MAH can therefore either ensure that it has adequate resources, policies and procedures to fulfill its responsibilities, or can delegate the performance of some or all of its obligations to others, such as distributors or marketing partners. The obligations of a MAH include: · Manufacturing and Batch Release: MAHs should guarantee that all manufacturing operations comply with relevant laws and regulations, applicable good manufacturing practices, the product specifications and manufacturing conditions set out in the marketing authorization and that each batch of product is subject to appropriate release formalities. · Pharmacovigilance: MAHs are obliged to monitor the safety of products post-approval and to submit to the regulators safety reports on an expedited and periodic basis. There is an obligation to notify regulators of any other information that may affect the risk benefit ratio for the product. · Advertising and Promotion: MAHs remain responsible for all advertising and promotion of their products in the relevant jurisdiction, including promotional activities by other companies or individuals on their behalf. Some jurisdictions require that a MAH subject all promotional materials to either prior internal or regulatory review and approval. · Medical Affairs/Scientific Service: MAHs are required to have a function responsible for disseminating scientific and medical information on their medicinal products, predominantly to healthcare professionals, but also to regulators and patients. · Legal Representation and Distributor Issues: MAHs are responsible for regulatory actions or inactions of their distributors and agents, including the failure of distributors to provide a MAH with safety data within a timeframe that allows the MAH to fulfill its reporting obligations. · Preparation, Filing and Maintenance of the Application and Subsequent Marketing Authorization: MAHs have general obligations to maintain appropriate records, to comply with the marketing authorization’s terms and conditions, to submit renewal applications and to pay all appropriate fees to the authorities. There are also general reporting obligations, such as an obligation to inform regulators of any information that may lead to the modification of the marketing authorization dossier or product labeling, and of any action to suspend, revoke or withdraw an approval or to prohibit or suspend the marketing of a product. We may hold marketing authorizations for our products in our own name, or appoint an affiliate or a collaboration partner to hold the marketing authorization on our behalf. Any failure by a MAH to comply with these obligations may result in regulatory action against the MAH and its approvals and ultimately threaten our ability to commercialize our products. 18 Table of Contents Approvals Outside of the United States and the European Union We will also be subject to a wide variety of foreign regulations governing the development, manufacture and marketing of our products. Whether or not FDA approval or European marketing authorization has been obtained, approval of a product by the comparable regulatory authorities of other foreign countries must still be obtained prior to manufacturing or marketing the product in those countries. The approval process varies from country to country and the time needed to secure approval may be longer or shorter than that required for FDA approval or a European marketing authorization. We cannot assure you that clinical trials conducted in one country will be accepted by other countries or that approval in one country will result in approval in any other country. Third-Party Reimbursement and Pricing Controls General : In the United States and elsewhere, patients’ access to pharmaceutical products depends in significant part on the coverage and reimbursement of a product or service by third-party payors, such as government programs, private insurance plans and employers. Third-party payors increasingly are challenging the prices charged for medical products and services. It will be time consuming and expensive for us to go through the process of seeking reimbursement from Medicare, Medicaid and private payors. We may be unable to achieve reimbursement from some payors because they may not consider our products to be “reasonable and necessary” or cost-effective. Furthermore, it is possible that even if payors are willing to reimburse patients for our products, the reimbursement levels may not be sufficient to allow us to sell our products on a competitive and profitable basis. In many foreign markets, including the countries in the European Union, the pricing of pharmaceutical products is subject to direct governmental control and to drug reimbursement programs with varying price control mechanisms. In the European Union, governments influence the price of pharmaceutical products through their pricing and reimbursement rules and the control of national health care systems that fund a large part of the cost of such products to consumers. The approach taken varies from member state to member state: some jurisdictions operate positive and/or negative list systems under which products may only be marketed once a reimbursement price has been agreed, and other member states allow companies to fix their own prices for medicines, but monitor and control company profits. The downward pressure on health care costs in general, particularly prescription drugs, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products, as exemplified by the National Institute for Clinical Excellence in the United Kingdom which evaluates the data supporting new medicines and passes reimbursement recommendations to the government. In addition, in some countries cross-border imports from low-priced markets (parallel imports) exert a commercial pressure on pricing within a country. In the United States, there have been, and we expect that there will continue to be, a number of federal and state proposals to implement means by which the government can negotiate lower drug prices for Medicare and Medicaid beneficiaries. While we cannot predict whether such legislative bills will become law, their enactment could have a material adverse effect on our business, financial condition and results of operations. Medicare : In the following section, all references to “CMS” refer to the Center for Medicare and Medicaid Services. We expect that in the United States, some or a majority of the patients who are treated with our products will be Medicare beneficiaries. The CMS is the agency within the Department of Health and Human Services that administers both Medicare and Medicaid. Two aspects of Medicare reimbursement will be relevant to our products: the availability of reimbursement for physician services for administration of our products and the availability of reimbursement for our products themselves. 19 Table of Contents The CMS has asserted the authority of Medicare not to cover particular products or services if it determines that they are not “reasonable and necessary” for Medicare beneficiaries. The CMS may create a national coverage determination (a “NCD”) for a product, which establishes on a nationwide basis the indications that will be covered and the frequency limits for administration of the product. However, for most new drugs that are eligible for payment, the CMS does not create a NCD. We do not know whether we will seek or obtain a NCD for any of our current or potential products or whether any NCD we obtain will contain favorable coverage terms. As mentioned above, if Medicare coverage for our products is available, the CMS may decide to provide reimbursement through one of two avenues: Part B coverage for physician-administered drugs, or Part D coverage for outpatient prescription drugs. Under Part B coverage, Medicare reimburses purchasers of drugs that meet three statutory requirements: · the product is reasonable and necessary; · the product is not usually self-administered and as such is incidental to a physician’s service in the office setting; and · the administering physician bills Medicate directly for the product. If there is not a national coverage decision, the local Medicare contractors that are responsible for administering the Part B program on a regional basis may have the discretion to decline coverage and reimbursement for a drug or to issue a local coverage decision (an “LCD”). These policies can include both coverage criteria for the drug and frequency limits for the administration of the drug. The local contractors in different areas of the country may determine that our products should be treated like most topical patches and may deny coverage under Part B or, even if they allow coverage, may establish varying coverage criteria and frequency limits for any product. Furthermore, obtaining LCDs in the various regions can be a time-consuming and expensive process. Medicare payment for physician services related to the administration of any of our products, if any, will most likely be determined according to a prospectively set payment rate, determined by a procedure code established by the American Medical Association. These codes, called Current Procedural Terminology (“CPT”) codes, describe the procedure performed and can be specific or more general in nature. We believe that although there are existing CPT codes that could be used, a specific code for the administration of each of our products would be preferable. We plan to apply for a specific CPT code. If, at launch, a specific CPT code is not available, local Medicare contractors will advise which existing CPT code should be used for services related to the administration of our products. The CMS has been considering changes to Medicare reimbursement that could result in lower payments for physician-administered drugs, and Congress may also consider legislation that would mandate lower reimbursement levels. A reduction in reimbursement levels could materially and adversely affect our revenue. The CMS may determine that any of our products do not qualify for Part B coverage and should instead be covered under the Part D outpatient prescription drug benefit. Because, unlike Part B, Part D coverage reimburses patients only for the drug itself and does not provide reimbursement for the physician’s administration services (though a physician can bill for service under Part B and it is possible that the CMS will provide such coverage for the administration of any of our products, even if the product in question is covered under Part D), physicians may not consider our products as attractive a treatment option if they are reimbursed under Part D instead of Part B. In addition, under Part D, there are multiple types of plans and numerous plan sponsors, each with its own formulary and product access requirements. While the CMS evaluates Part D plans’ proposed formularies for potentially discriminatory practices, the plans have considerable discretion in establishing formularies, establishing tiered co-pay structures and placing prior authorization and other restrictions on the use of specific products. Moreover, Part D plan sponsors are permitted and encouraged to negotiate rebates with manufacturers. Revenue for our products will be substantially affected by their respective formulary status on Part D plans and the rebates that Part D plan sponsors are able to negotiate. Medicaid: Most State Medicaid programs have established preferred drug lists, and the process, criteria and timeframe for obtaining placement on the preferred drug list vary from state to state. A federal law establishes minimum rebates that a manufacturer must pay for Medicaid utilization of a product, and many states have established supplemental rebate programs as a condition for including a drug product on a preferred drug list. Submitting a preferred drug list application to each state will be a time-consuming and expensive process, and it is not clear how many or which state programs will accept the applications. Review times for these applications can vary from weeks to 14 months or more. 20 Table of Contents Private Insurance Reimbursement: Commercial insurers usually offer two types of benefits: medical benefits and pharmacy benefits. In most private insurance plans, physician-administered drugs are provided under the medical benefit. If private insurers decide to cover any of our products, they will reimburse for the drug(s) and its administration in a variety of ways, depending on the insurance plan’s revenue targets, employer and benefit manager input and the contract negotiated with their physicians. Like Medicare and Medicaid, commercial insurers have the authority to place coverage and utilization limits on physician-administered drugs. Many private insurers tend to adopt reimbursement methodologies for a product similar to those adopted by Medicare. Revenue for our products may be materially and adversely affected if private payors make unfavorable reimbursement decisions or delay making favorable reimbursement decisions. REPORTS TO SECURITY HOLDERS We are required to file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission and our filings are available to the public over the internet at the Securities and Exchange Commission’s website at http://www.sec.gov. The public may read and copy any materials filed by us with the Securities and Exchange Commission at the Securities and Exchange Commission’s Public Reference Room at 100 F Street N.E. Washington D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the Securities and Exchange Commission at 1-800-732-0330. The SEC also maintains an Internet site that contains reports, proxy and formation statements, and other information regarding issuers that file electronically with the SEC, at http://www.sec.gov .