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Item 1. Business

2021-03-12 compared with 2020-03-09 · 593 added, 618 removed, 329 unchanged (79% of the section changed)

BTI is a clinical stage biopharmaceutical company utilizing artificial intelligence to identify improved therapies in neuroscience and immuno-oncology.

BTI's drug re-innovation approach leverages existing approved drugs and/or clinically validated product candidates together with big data and proprietary machine learning algorithms to identify new therapeutic indices.

BTI's two most advanced clinical development programs are BXCL501, a sublingual thin film formulation designed for acute treatment of agitation resulting from neuropsychiatric disorders, and BXCL701, an orally administered systemic innate immunity activator designed for treatment of a rare form of prostate cancer, pancreatic cancer and advanced solid cancers in combination with other immuno-oncology agents.

The Company’s primary activities have been clinical and pre-clinical research and development of its two most advanced programs:

BXCL501, a sublingual thin film formulation of dexmedetomidine, or Dex, designed for acute treatment of agitation resulting from neurological and psychiatric disorders, and BXCL701, an immuno-oncology agent designed for treatment of a rare form of prostate cancer and for treatment of pancreatic cancer and other solid tumors.

We intend to develop first‑in‑class, high value therapeutics by leveraging EvolverAI, a research and development engine created and owned by our parent, BioXcel.

We believe the combination of our therapeutic area expertise and our ability to generate product candidates through our exclusive collaborative relationship with our parent company, BioXcel Corporation in the areas of neuroscience and immuno‑oncology gives us a significant competitive advantage.

EvolverAI was developed over the last decade and integrates millions of fragmented data points using artificial intelligence, or AI and proprietary machine learning algorithms.

After evaluating multiple product candidates using EvolverAI, we selected our lead programs because our analysis indicated these drugs may have utility in new therapeutic indices where there is substantial unmet medical needs and limited competition.

By focusing on clinical candidates with relevant human data, we believe our approach will help us design more efficient clinical trials, thereby accelerating our product candidates’

time to market.

We retain global development and commercialization rights to these two programs.

We operate in a single segment.

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker in making decisions regarding resource allocation and assessing performance.

To date, our chief operating decision maker has made such decisions and assessed performance at the company level as one segment.

We are a clinical stage biopharmaceutical company utilizing artificial intelligence approaches to develop transformative medicines in neuroscience and immuno-oncology.

Our drug re-innovation approach leverages existing approved drugs and/or clinically validated product candidates together with big data and proprietary machine learning algorithms to identify new therapeutic indices.

We believe that this differentiated approach has the potential to reduce the cost and time of drug development in diseases with a substantial unmet medical need.

Our two most advanced clinical development programs are BXCL501, an investigational, proprietary, orally dissolving, sublingual thin film formulation of the adrenergic receptor agonist dexmedetomidine , or Dex, for the treatment of agitation resulting from neuropsychiatric disorders, and BXCL701, an investigational orally administered systemic innate immune activator for the treatment of a rare form of prostate cancer and advanced solid tumors that are refractory or treatment naïve to checkpoint inhibitors.

Impact of COVID-19 Pandemic

During the first quarter ended March 31, 2020, and continuing through December 31, 2020, the novel coronavirus disease, or COVID-19, was declared a pandemic and spread to multiple regions across the globe, including the United States and Europe.

The outbreak and government measures taken in response have had a significant impact, both direct and indirect, on businesses and commerce, as worker shortages have occurred;

supply chains have been disrupted;

facilities and production have been suspended;

and demand for certain goods and services, such as medical services and supplies, has spiked, while demand for other goods and services, such as travel, has fallen.

Throughout 2020, we took steps in line with guidance from the U.S.

Centers for Disease Control and Prevention , or CDC and the State of Connecticut to protect the health and safety of our employees and the community.

In particular, we implemented a work-from-home policy for all employees and have restricted on-site activities to certain chemical, manufacturing and control , or CMC , and clinical trial activities.

We continue to assess the impact of the COVID-19 pandemic to best mitigate risk and continue the operations of our business.

Beginning late in the second quarter of 2020, we began to slowly bring our staff, in very limited numbers, back to our office.

Our office is currently open to employees on a voluntary basis with a maximum number of 25% of employees present at any given time , which is aligned to state guidelines.

We have also implemented protocols as required under the State of Connecticut’s Reopen program and have limited travel.

We have taken steps to protect our workforce and have instituted strict work rules to protect our employees.

To date, our remote working arrangements have not significantly affected our ability to maintain critical business operations.

We continue to work closely with our clinical sites to monitor the potential impact of the evolving COVID-19 pandemic.

We remain committed to our clinical programs and development plans.

Through December 31, 2020, we have not experienced any significant delays to our ongoing or planned clinical trials, except for challenges in accessing elderly care facilities;

however, this could rapidly change.

Our Clinical Programs

The following table summarizes our lead development programs:

The following is a summary of the status of our clinical development programs as of the date of this Annual Report on Form 10-K.

Our goal is to become a leader in the field of neuroscience and immuno-oncology.

The key elements to achieving this goal are to:

Advance BXCL501, a sublingual thin film formulation of Dex, a selective α

2a adrenergic receptor agonist, designed for acute treatment of agitation, to approval through the Section 505(b)(2) pathway.

● Advance BXCL501, a proprietary, orally dissolving thin film formulation of dexmedetomidine, or Dex, a selective α 2a adrenergic receptor agonist, designed for acute treatment of agitation, and opioid withdrawal symptoms towards approval through the Section 505(b)(2) pathway.

The Company believes that BXCL501 may directly target a causal agitation mechanism.

● Neurological and Psychiatric Disorders.

We believe that BXCL501, if approved, has the potential to become the standard of care for the acute treatment of agitation arising from diseases such as schizophrenia, bipolar disorder, dementia, and other indications.

We believe that BXCL501 , if approved, has the potential to become the standard of care for the acute treatment of agitation arising from diseases such as:

◾ Schizophrenia and bipolar disorder (SERENITY TRIAL);

◾ Dementia (TRANQUILITY TRIAL);

◾ Opioid withdrawal (RELEASE TRIAL);

◾ Delirium (PLACIDITY TRIAL);

◾ Post-traumatic stress disorder in collaboration with the VA Connecticut Healthcare System and the Yale University Medical School;

◾ other neuropsychiatric indications.

● Additional Indications.

We recently announced plans to evaluate BXCL501 in opioid withdrawal and we may also plan to evaluate additional indications for acute treatment of agitation resulting from delirium, alcohol withdrawal and post-traumatic stress disorder, or PTSD.

Dex has been shown to significantly reduce agitation in elderly patients experiencing post-surgical induced delirium who did not respond to treatment with haloperidol, a potent major tranquilizer and antipsychotic that is used to treat symptoms for schizophrenia.

We also plan to evaluate BXCL501 for several additional indications including neuro psychiatric and neuro degenerative disorders.

In addition, we plan to evaluate BXCL501 in chronic agitation in dementia either as a single agent or a combination product with another agent.

● Agitation Franchise Expansion.

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We are exploring the use of wearable digital device technology, such as the Apple watch, with the goal of the prevention and treatment of agitation, including, if approved, the administration of BXCL501 prior to the onset of agitation.

Additionally, we are considering a combination approach of BXCL501 and another agent for the treatment of chronic agitation.

For severe agitation, a single use intramuscular, or IM, injection called KalmPen™

is under development.

Complete BXCL701 Phase 2 trials to evaluate its potential for the first-line treatment of treatment-emergent neuroendocrine prostate cancer, or tNEPC, and for the second-line treatment of pancreatic cancer.

tNEPC (Orphan Segment of Prostate Cancer).

For severe agitation, a single use intramuscular, or IM, injection called KalmPen™ is under development.

● Complete BXCL701 Phase 2 trials to evaluate its potential for the treatment of castrate resistant cancer (CRPC), including the neuroendocrine (NEPC) variety.

● NEPC (Orphan Segment of Prostate Cancer and Castrate Resistant Prostate Cancer).

BXCL701 was previously studied in multiple clinical trials and demonstrated single agent anti-tumor activity in melanoma, an immune-sensitive tumor.

Food and Drug Administration, or FDA, authorized our investigational new drug application, or IND, allowing us to initiate a Phase 2 trial evaluating BXCL701 in combination with Pembrolizumab (KEYTRUDA®) in tNEPC, and this trial opened to accrual in February 2019 and continues enrolling patients.

Pancreatic Cancer.

Preclinical data suggests that fibroblast activation protein positive, or FAP, contribute to checkpoint inhibitor resistance, and immunosuppression more generally in pancreatic cancer.

We believe these data provide a strong rationale for combining BXCL701 with a checkpoint inhibitor such as avelumab (Bavencio) or nivolumab (Opdivo).

Furthermore, we have observed synergy between BXCL 701 and Bempegaldesleukin (Nektar’s pegylated IL2), a CD122 based agonist of IL-2, in a preclinical pancreatic model.

BXCL701 has been granted orphan drug designation by the FDA for the treatment of pancreatic cancer.

In April 2020, we announced the initiation of the Phase 2 efficacy portion of the Phase 1b/2 trial evaluating BXCL701 in combination with KEYTRUDA® (pembrolizumab, a PD-1 inhibitor) for NEPC.

In addition to the efficacy cohort in NEPC patients, in August 2020, we opened a separate cohort for CRPC patients who have failed taxane-based chemotherapy and up to two lines of second-generation androgen pathway blockers.

Top line results from this trial are expected in mid-2021.

● Basket Trial.

BXCL701 is being evaluated in an open-label phase 2 basket trial led by MD Anderson.

The investigator led study is designed to evaluate the response rate of orally administered BXCL701, combined with Pembrolizumab (KEYTRUDA®) in patients with advanced solid cancers.

The study will evaluate both patients who are naïve to checkpoint therapy and those who are refractory to checkpoint therapy.

The investigator led study is designed to evaluate the response rate of orally administered BXCL701, combined with Pembrolizumab (KEYTRUDA®) in patients with advanced solid cancers.

The study will evaluate both patients who are naïve to checkpoint therapy and those who are refractory to checkpoint therapy.

Top line results from the basket trial are also expected in mid-2021.

● Soft Tissue Sarcoma.

On January 26, 2021, the FDA granted BXCL701 orphan designation for the treatment of soft tissue sarcoma .

● Topline Results .

Topline results from two ongoing trials with BXCL701 in aggressive forms of prostate cancer and advanced solid tumors are expected in mid-2021.

● Potential for Expedited Review Programs.

Given that these indications represent high unmet medical needs with few treatment options, we intend to pursue breakthrough therapy designation and accelerated approval for tNEPC and pancreatic cancer.

Given that these indications represent high unmet medical needs with few treatment options, we intend to pursue breakthrough therapy designation and accelerated approval for NEPC.

● Additional Indications.

We believe BXCL701 may be active at multiple stages of the cancer immunity cycle and therefore we believe BXCL701 offers a “pipeline in a product”

platform given its potential for evaluation across other cancers.

BXCL701 was granted an orphan drug designation for the treatment of acute myeloid leukemia in September 2019, its third orphan drug designation in addition to pancreatic cancer and melanoma.

We believe existing preclinical evidence supports the combination of BXCL701 with checkpoint inhibitors and/or agents that act on “co-stimulatory”

pathways within immune effector cells.

Moreover, we believe agents that stimulate antibody dependent cell mediated cytotoxicity, (ADCC) or cell-based therapies such as chimeric antigen receptor T cell (CAR T) therapy, oncolytic viruses or therapeutic vaccines all represent potential combination with BXCL701.

We believe BXCL701 may be active at multiple stages of the cancer immunity cycle and therefore, we believe BXCL701 offers a “pipeline in a product” platform given its potential for evaluation across other cancers.

BXCL701 was granted an orphan drug designation for the treatment of acute myeloid leukemia in September 2019, its fourth orphan drug designation in addition to pancreatic cancer, melanoma, and soft tissue sarcoma.

We believe existing preclinical evidence supports the combination of BXCL701 with checkpoint inhibitors and/or agents that act on “co-stimulatory” pathways within immune effector cells.

Moreover, we believe agents that stimulate antibody-dependent cell mediated cytotoxicity, or ADCC , or cell-based therapies such as chimeric antigen receptor T cell , or CAR T , therapy, oncolytic viruses or therapeutic vaccines all represent potential combination with BXCL701.

● Identify biomarkers to select patients who we believe have the highest likelihood to respond to our product candidates.

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We believe that our ability to identify patient subsets most likely to respond to our product candidates will increase the clinical benefit to patients and improve the probability of success of our clinical trials.

The indications for our lead product candidate BXCL701 were chosen in part because they are known to overexpress dipeptidyl peptidase, or DPP 8/9, and FAP.

The indications for our lead product candidate BXCL701 were chosen in part because they are known to overexpress dipeptidyl peptidase, or DPP 8/9, and fibroblast activation protein, or FAP.

Our planned proof-of-concept clinical trial of BXCL701 will retrospectively examine biomarkers related to its molecular and cellular targets to identify those that may correlate with clinical efficacy and increase our likelihood of success.

● Enhance our R&D pipeline by leveraging our therapeutic area expertise with EvolverAI to identify, develop and commercialize new product candidates in neuroscience and immuno- oncology.

In addition to our leading clinical programs and our emerging and future pipeline, we intend to select our next clinical program during 2020.

In addition to our leading clinical programs and our emerging and future pipeline, we have identified several potential product candidates and intend to select our next clinical program from among such candidates.

We have established translational and development expertise, which we believe will help us advance the present and future product candidates in these fields.

opportunistically in‑license additional product candidates identified through our AI platform approach within our core areas of expertise.

We may also opportunistically in-license additional product candidates identified through our AI platform approach within our core areas of expertise.

● Maximize the commercial potential of our product candidates .

We have worldwide development and commercialization rights to our BXCL501 and BXCL701.

We have worldwide development and commercialization rights to BXCL501 and BXCL701.

If BXCL501 and BXCL701 are approved in the United States, we would consider building a specialty sales force in the United States and/or collaborate with third parties to maximize the potential of our product candidates.

We are currently taking the early steps towards developing a specialty sales force for BXCL501 in anticipation of potential commercialization.

Furthermore, we intend to commercialize BXCL501 and BXCL701, if approved, outside the United States through collaborations with third parties.

Our Novel Drug Re-Innovation Approach

We intend to develop first-in-class, high value therapeutics by leveraging EvolverAI, a research and development engine created and owned by our parent, BioXcel.

We believe the combination of our therapeutic area expertise and our ability to generate product candidates through our exclusive collaborative relationship with our parent company, BioXcel Corporation in the areas of neuroscience and immune-oncology gives us a significant competitive advantage.

EvolverAI was developed over the last decade and integrates millions of fragmented data points using artificial intelligence, or AI and proprietary machine learning algorithms.

By focusing on clinical candidates with relevant human data, we believe our approach will help us design more efficient clinical trials, thereby accelerating our product candidates’ time to market.

We retain global development and commercialization rights to these two programs.

Our AI-based discovery and development process is the foundation of our drug re-innovation model for identifying the next wave of medicines.

Our therapeutic area experts have over 60 years of experience across the drug discovery and development value chain.

Our therapeutic area experts have over 150 years of combined experience across the drug discovery and development value chain.

We believe EvolverAI is a novel method of finding potential product candidates because it combines the comprehensiveness and efficiency of machine learning and big data analytics with the expertise and intuition of human experience in drug development.

We believe the combination of our therapeutic area expertise and our ability to generate therapeutic candidates in neuroscience and immuno‑oncology through our exclusive collaborative relationship in those areas with BioXcel give us a significant competitive advantage.

We believe the combination of our therapeutic area expertise and our ability to generate therapeutic candidates in neuroscience and immuno-oncology through our exclusive collaborative relationship in those areas with BioXcel gives us a significant competitive advantage.

The pharmacological space spans more than 27,000 active pharmaceutical agents, and only approximately 4,000 are approved and marketed drugs benefiting patients.

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Furthermore, many serious diseases continue to go unaddressed due to limitations of the current drug discovery paradigm.

The recent advent of numerous ‘omics’

technologies (genomics, proteomics) and rapid advances in science and medicine are generating terabytes of valuable unexploited knowledge that is widely distributed in multiple big data lakes with several orders of complexity and variety.

Much of this data is not being systematically applied to the development of next generation therapeutics, thus preventing the optimization of drug development utilizing the understanding of technology, science, medicine, markets and commercial opportunities.

The recent advent of numerous ‘omics’ technologies (genomics, proteomics) and rapid advances in science and medicine are generating terabytes of valuable unexploited knowledge that is widely distributed in multiple big data lakes with several orders of complexity and variety.

medicine, markets, and commercial opportunities.

The efficient and intuitive use of big data remains a bottleneck and a challenge to the pharmaceutical industry.

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We believe that only EvolverAI allows a comprehensive and unbiased evaluation of the complete pharmacological space.

We believe our drug re-innovation model and exclusive collaborative relationship with BioXcel has the potential to reduce the cost and time of drug development, help us design more efficient trials and accelerate our product candidates’

time to market.

This assumption is based on capitalizing product candidates with substantial clinical data and mitigated risk due to well-defined safety profiles, known PK/PD properties, and an established manufacturing and regulatory path.

Our approach is illustrated below:

BXCL501 Sublingual Thin Film, α

2a Adrenergic Receptor Agonist, for Acute Treatment of Agitation

BXCL501 is an investigational sublingual thin film formulation of Dex designed for acute treatment of agitation in neurodegenerative and psychiatric disorders.

Dex has been well tolerated, having been prescribed to millions of patients as the sedative anesthetic Precedex and has been studied in over 130 clinical trials.

BXCL501 is designed to be a noninvasive, easy to administer sublingual agent and to have a rapid onset of action, which we believe is critical for the acute treatment of agitation.

We estimate that 9 .4 million patients experience agitation in the United States with up to 18.9 million at risk.

These patients suffer from various neuropsychiatric disorders including schizophrenia, bipolar disorder, dementia, delirium, and opioid withdrawal.

Agitation episodes that we believe could be addressed by BXCL501 can occur multiple times a year.

The current treatment options for acute treatment of agitation utilize antipsychotics and benzodiazepines, which have suboptimal safety and compliance issues.

Antipsychotics have a black box warning for use in the elderly and can produce acute debilitating side effects and should only be considered for IM delivery in highly aggressive patients requiring restraint.

Benzodiazepines are predominantly in pill form, which require swallowing and can produce excessive sedation.

We have designed and are implementing a clinical development

program that takes advantage of the 505(b)(2) New Drug Application, or NDA, regulatory pathway and leverages the existing clinical and safety dataset of intravenous, or IV, formulation of Dex.

We continue to integrate and evolve our neuroscience AI machine learning and drug development platform, focusing on symptoms resulting from stress-related behaviors.

The combination of Evolver AI and this platform has led to the identification and rapid development of BXCL501 as well as advancing other potential indications leading to the submission of our first NDA.

We are continuing to leverage our platform to identify and develop new neuroscience programs.

BXCL501 Neuroscience Program

BXCL501 is an investigational, proprietary, orally dissolving, thin film formulation of dexmedetomidine (Dex), a selective alpha-2a receptor agonist, targeting symptoms from stress-related behaviors such as agitation and opioid withdrawal symptoms.

BXCL501 is our most advanced neuroscience clinical program, currently being developed for the acute treatment of agitation related to schizophrenia, bipolar disorders, dementia, delirium, and opioid withdrawal symptoms.

As a selective adrenergic agent with a sublingual or buccal route of administration, BXCL501 is designed to be easy to administer and has shown a rapid onset of action in multiple clinical trials, including clinical trials studying patients with schizophrenia, bipolar disorders, and dementia.

We believe the results from these studies suggest that BXCL501 has the potential to generate a calming effect without producing excessive sedation.

We believe that BXCL501 is highly differentiated from antipsychotics currently used as a standard of care for the treatment of agitation, which often produce unwanted side effects such as excessive sedation and extra-pyramidal motor effects.

Managing patient agitation in neuropsychiatric and neurodegenerative disorders represents a significant challenge for physicians and caregivers.

We believe that BXCL501 has the potential to address these challenges while providing an efficient treatment regimen for patients.

Agitation Overview and Market Opportunity

Psycho Agitation is a common symptom of neurological and psychiatric disorders that currently can only be addressed with invasive treatments in institutional facilities.

Agitation in patients with neuropsychiatric diseases (psychomotor agitation) is a serious medical condition.

Agitation is characterized by feelings of unease, excessive talking and/or unintentional and purposeless motions, such as wringing of the hands or pacing.

People experiencing agitation may also express excitement, hostility, poor impulse control, tension, uncooperativeness, and sometimes disruptive behavior, which could lead to aggression and violence.

Often symptoms of agitation are observed with anxiety or aggressive behavior.

In many cases, people develop agitation when treatment for their underlying disorder is not working well.

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With the agitation issues associated with schizophrenia and bipolar disease coupled with a fast-growing elderly population, the difficulties and expenses of acute treatment of agitation are expected to grow significantly.

Based on our market research, we estimate that in 2016 the total direct financial cost of all aspects of care for agitation in AD was approximately $40 billion.

Management believes that in the near future, the total direct financial cost of all aspects of care for agitation across schizophrenia and bipolar disorder will exceed the costs associated with agitation in AD.

Below are estimated statistics associated with BTI’s initial indications targeting agitation in AD, schizophrenia and bipolar disease.

Based on our market research, we estimate that in 2016 the total direct financial cost of all aspects of care for agitation in Alzheimer’s Disease, or AD , was approximately $40 billion.

Below are estimated statistics associated with BTI’s initial indications targeting agitation in Schizophrenia , Bipolar Disease and Dementia.

Market for Treating Agitation

Schizophrenia & Bipolar Disorder

Patients at Risk of Agitation

Disease Prevalence

Patients Experiencing Agitation

~3,000,000 (40%)

~4,000,000 (70%)

Percent Treatable by BXCL501

Addressable Market

Estimated Annual Doses per Patient

Potential Addressable Annual Usage

* - Internal company estimates

# - Episodes increase in frequency as dementia progresses

Limitations of Current Treatments for Agitation

Despite observed suboptimal safety and side effect profile, antipsychotics are currently used off‑label to treat agitation in dementia as well as delirium and are currently the standard of care for the acute treatment of agitation in schizophrenia and bipolar disease.

IM delivered antipsychotics, such as haloperidol and risperidone, are used extensively in this setting but are invasive and often require patient restraint.

1 Schizophrenia:

Wu et al., 2006;

Bipolar Disorder:

Merikangas et al., 2007

2 Herbert et al., 2013

* - current internal Company estimates

Treatments for Agitation

Antipsychotics, the current standard of care for acute treatment of agitation in schizophrenia and bipolar disorder, are also used off-label to treat agitation in dementia as well as delirium.

Side effects of these medications include movement disorders, including akathisia and extrapyramidal symptoms.

One of the serious limitations of these drugs is that they can sedate the patient and do not permit verbal interaction with the hospital staff to continue.

Intramuscular (“IM ”) delivered antipsychotics, such as haloperidol andolanzapine, are used extensively in this setting but are invasive and often require patient restraint.

This type of treatment dehumanizes patients and can cause trauma that could have long-term impact on the individual.

Furthermore, these treatments include a black box warning for use in elderly patients.

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Side effects of these agents include sedation, amnesia, confusion, and a paradoxical response.

They can intensify cognitive slowing, cause dependence and can contribute to increased risk of falls and fractures.

They can intensify cognitive slowing, cause dependence, and can contribute to an increased risk of falls and fractures.

In addition, long-term use of benzodiazepines has been found to be habit-forming and can cause addiction.

Non-adherence with oral agents can also be problematic as patients may attempt to spit out these medications.

We believe that based on the current method of administration of oral medicine for agitation, the sublingual thin film offers compliance advantages as it will prevent patients from avoiding treatment.

We believe that based on the current method of administration of oral medicine for agitation, the orally-dissolving, mucoadhesive thin film offers compliance advantages as it will prevent patients from avoiding treatment.

There is precedent for FDA approval of a non-invasive therapy for the acute treatment of agitation.

In 2012, Adasuve, an inhaled version of the antipsychotic loxapine, became the first approved non‑invasive acute treatment for agitation in patients with schizophrenia and bipolar disease.

The number of hospitals and pharmacies that can administer Adasuve is limited due to a risk of management program, and Adasuve also has a high incidence of side effects.

In 2012, Adasuve, an inhaled version of the antipsychotic loxapine, became the first approved non-invasive acute treatment for agitation in patients with schizophrenia and bipolar 1 disorder.

The use of Adasuve has been limited due to a risk management program and the risk of bronchospasm.

Adasuve also has a high incidence of side effects.

Upon launch, Adasuve was priced at $145 per dose.

The sublingual route of administration is becoming an accepted alternative to oral administration of drug delivery to the central nervous system, or CNS when rapid onset or more controlled delivery is required.

The sublingual or buccal route of administration is an accepted alternative to oral administration of drug delivery to the central nervous system, or CNS, when rapid onset or more controlled delivery is required.

Currently, there are six products that are approved for thin-film administration.

For example, BioDelivery Sciences International, Inc., a commercial-stage specialty pharmaceutical company dedicated to patients living with chronic conditions, has developed a buccal film formulation of buprenorphine for chronic pain management and of buprenorphine and naloxone for opioid dependence.

We have developed BXCL501 as a differentiated sublingual thin film dosage form of Dex, which we believe, if approved, may offer benefits such as ease of use and quick absorption for rapid therapeutic effects.

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It is also used in the intensive care setting for sedation of non-intubated patients prior to and/or during surgical and other invasive procedures.

Dex, launched in the United States as Precedex in 1999, is a selective α2a adrenergic receptor agonist that has a strong safety record and has been studied in over 130 clinical trials to date.

It has also been launched in the European Union and multiple other countries under the trade name Dexdor as a sedative for intensive care patients.

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Throughout 2018 and 2019 we completed four clinical trials and announced the results from several proof-of-concept Phase 1 studies of intravenous, or IV, Dex for acute treatment of agitation.

In June 2018, we announced positive results from a phase 1b trial evaluating IV Dex in healthy middle-aged and elderly participants.

This initial study enrolled 16 healthy volunteers aged 55-75.

The primary endpoint of the study was the dose and drug exposure levels required to produce mild sedation, which served as a surrogate endpoint for treating agitation using the Richmond Agitation- Sedation Scale, or RASS, score.

The goal of the healthy volunteer study, which was met, was to achieve mild sedation without any clinically meaningful cardiovascular side effects.

● Data from our four IV Dex studies in healthy volunteers, schizophrenia patients, SDAT patients, and opioid withdrawal patients was used to determine the optimal dose of BXCL501.

The goal of the healthy volunteer studies, which was met, was to achieve mild sedation without any clinically meaningful cardiovascular side effects.

The IV formulation of Dex achieved mild sedation or a RASS score of -1 in patients at a Dex exposure level without producing any clinically meaningful effects on blood pressure and/or heart rate.

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The mild sedative effects of the IV formulation of Dex persisted for ninety to one hundred and twenty minutes, a clinically relevant duration.

The study also found that the IV formulation of Dex was well tolerated and the results supported further clinical evaluation of dexmedetomidine in acute treatment of agitation resulting

from neuropsychiatric disorders including schizophrenia and Senile Dementia of the Alzheimer’s Type, or SDAT.

The study also found that the IV formulation of Dex was well tolerated, and the results supported further clinical evaluation of dexmedetomidine in acute treatment of agitation resulting from neuropsychiatric disorders including schizophrenia and Senile Dementia of the Alzheimer’s Type, or SDAT.

● In November 2018, we announced positive results from a Phase 1b study evaluating IV Dex for acute treatment of agitation in patients suffering from schizophrenia.

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Additionally, the drug was well tolerated without any clinically meaningful adverse effects on blood pressure and/or heart rate.

As a secondary endpoint, nine out of ten patients in the treatment arm had agitation reduced to a minimum as measured by a PEC score of 7 or below (“PEC”

Positive and Negative Symptom Scale - Excitatory Component is a five item scale that measures symptoms of agitation with each item rated from 1 Absent to 7 Extreme) in contrast with 0 out of 4 of the placebo patients.

As a secondary endpoint, nine out of ten patients in the treatment arm had agitation reduced to a minimum as measured by a Positive and Negative Symptom Scale - Excitatory Component , or PEC, score of 7 or below in contrast with 0 out of 4 of the placebo patients.

PEC is a five item scale that measures symptoms of agitation with each item rated from 1 -Absent to 7 -Extreme.

● In January 2019, we announced positive results from a Phase 1 study evaluating IV Dex for acute treatment of agitation in patients suffering from SDAT.

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● In February 2019, we announced positive proof of concept data from a Phase 1b study of IV Dex in patients suffering from opioid withdrawal symptoms.

The study provided evidence supporting further evaluation of BXCL501’s selective alpha-2a adrenergic receptor mechanism application in opioid withdrawal symptoms, in addition to acute treatment of agitation in schizophrenia, bipolar disorder and dementia.

The study enrolled total of fourteen patients with opioid dependence.

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BXCL501 Clinical Trials

In December 2018, the FDA accepted our IND application for BXCL501, authorizing us to initiate a first-in-human pharmacokinetic (bioavailability) and safety study in healthy volunteers.

Following the IND acceptance, on December 27, 2018, we announced that the FDA had granted us Fast Track Designation for BXCL501 for the treatment of acute agitation.

FDA’s Fast Track program is designed to provide certain benefits for new drugs that treat serious or life-threatening conditions and demonstrate the potential to address unmet medical needs.

The designation provides the opportunity for more frequent meetings with the FDA over the course of development and allows for the potential of rolling submission of individual sections of an NDA for review.

If supported by clinical data, this designation allows for the potential of priority review.

In December 2018, we dosed multiple patient cohorts in our Phase 1 pharmacokinetic (bioavailability) and safety study of BXCL501.

In May 2019, we announced positive top line data from the Phase 1 pharmacokinetic, or PK, (bioavailability) and safety study of BXCL501.

Administration of BXCL501 achieved targeted exposure levels that were observed to be therapeutic in our prior IV Dex study.

The IND-opening Phase 1 study was a double-blinded placebo-controlled, single-dose, dose-escalation study of BXCL501 that enrolled 42 adult volunteers across various dosing groups.

The primary endpoints of the study were PK and safety, while secondary endpoints included assessment of pharmacodynamics, or PD, and the relationship between BXCL501 concentrations and PD endpoints.

Findings from the study indicated that BXCL501 rapidly achieved exposure levels consistent with the levels observed in IV Dex study in schizophrenia patients that we announced in November 2018.

Results from the Phase 1 study also showed dose-proportional PK consistent with the IV Dex study with PD activity lasting 4 to 6 hours, which we believe are clinically favorable features.

Additionally, clinical data from the study indicates BXCL501 was well tolerated.

There were no serious adverse events.

The most common adverse event was drowsiness, observed at rates similar to placebo.

All adverse events were mild to moderate and transient.

There was no clear sedative effect in comparison with placebo.

Cardiovascular changes were not clinically meaningful.

A maximum tolerated dose was not reached.

PK data from the study are illustrated below.

In July 2019, we announced positive top-line results from our Phase 1b, randomized, double-blind, placebo-controlled, multi-center, U.S.

trial, evaluating multiple doses of BXCL501 for acute treatment of agitation in 135 patients with schizophrenia.

BXCL501 met the trial’s primary endpoint of showing a statistically significant mean reduction in PEC score at two hours compared to placebo, with rapid and durable reductions in PEC score maintained for 4 to 6 hours.

A reduction in the PEC score for agitation was observed with rapid calming without excessive sedation at two hours and at earlier time-points.

The 80 mcg, 120 mcg and 180 mcg doses of BXCL501 showed reductions of PEC scores of -7.1, -9.2 and -10.8, respectively, compared to -4.5 for placebo at two hours.

The results for these three doses were statistically significant in patients treated compared to placebo (80 mcg;

p=0.0152), (120 mcg;

p=0.0003), and (180 mcg;

p<0.0001) with clinically meaningful, rapid and durable reductions in PEC score.

We also observed clinically meaningful but not statistically significant reductions in PEC scores of -6.0 following 60 mcg at two hours (p=0.1227).

The secondary evaluations included assessment using the Agitation-Calmness Evaluation Scale, or ACES, which evaluated the potential calming effects of BXCL501.

The ACES assessment was consistent with the analysis of the primary endpoint, and met statistical significance for calming as measured by ACES at two hours compared to placebo in the three highest doses evaluated (80mcg;

p=0.0156), (120 mcg;

p=0.0005) and (180 mcg;

BXCL501 was well-tolerated with no serious or severe adverse events across the entire dose range;

the most common treatment-related adverse events were mild somnolence and dry mouth.

Results from the primary and secondary endpoints are outlined below.

On August 20, 2019, we announced that the U.S.

Department of Defense’s Congressionally Directed Medical Research Program awarded a planning grant as a part of its Alcohol and Substance Abuse Disorders Research Program related to the development of BXCL501.

The grant is expected to support the development of a clinical study to evaluate the use of BXCL501 for the treatment of alcohol and substance use disorders, particularly related to post-traumatic stress disorder and traumatic brain injury.

In September 2019, we announced plans to investigate the development of using wearable digital device technology such as the Apple Watch, with the goal of enhancing the prevention and treatment of agitation including, if approved, the administration of BXCL501 prior to the onset of agitation.

We plan to conduct a feasibility study with potential applications in commercially available wearable digital devices to measure nervous and motor system activity relevant to both agitation and the mechanism of action of BXCL501.

This study is expected be conducted in collaboration with both clinical investigators and a third-party digital solutions provider.

In December 2019, we announced our plans to initiate our pivotal Phase 3 studies following an end-of-Phase 2 meeting with the FDA.

We reached a general consensus with the FDA regarding the key elements of the designs for our SERENITY (Sub-Lingual DExmedetomidine in Agitation Associated With SchizophRENIa and Bipolar Disorder STudY) program, two Phase 3 studies of BXCL501 for the acute treatment of agitation in patients with schizophrenia and bipolar disorder.

In December 2019, we also announced initiation of our SERENITY program, with topline data from both Phase 3 trials expected in mid-2020.

The SERENITY studies are randomized, double-blinded, placebo-controlled, adaptive trials of up to 750 patients 18 to 75 years of age.

SERENITY I will enroll patients with agitation associated with schizophrenia, with each arm receiving either BXCL501 at 120 micrograms, 180 micrograms or a placebo.

SERENITY II will evaluate patients with agitation associated with bipolar disorder, also with each of three arms receiving either BXCL501 at 120 micrograms, 180 micrograms or a placebo.

The primary endpoint of the trials is reducing acute agitation measured by the Positive and Negative Syndrome Scale, examining the Excited Component, or PEC change from baseline compared to placebo.

A key secondary endpoint includes determining the earliest time where an effect on agitation is apparent as measured by the change from baseline in PEC total score.

Topline data from both of these Phase 3 trials are expected in mid-2020.

In January 2020, we announced that the first patient had been enrolled in a Phase 1b/2 trial of BXCL501 for the acute treatment of agitation in patients with dementia.

Topline data from this trial are expected in mid-2020.

In February 2020, we announced FDA clearance of our investigational new drug application, or IND, for BXCL501 for the treatment of opioid withdrawal symptoms.

We are preparing to initiate a Phase 1b/2 clinical trial.

In February 2020, we also announced the initiation of an investigator sponsored clinical trial designed to evaluate the safety and efficacy of BXCL501 and measure biomarkers associated with agitation in patients with schizophrenia and their response to treatment with BXCL501.

The trial is designed to identify biomarkers, such as skin conductance response, heart rate variability, and blood pressure, that can potentially be used as an initial signal for treatment and expand the BXCL501 development program to evaluate new chronic disease indications.

We are continuing to evaluate development plans for BXCL501 as a potential treatment for acute agitation in hyperactive delirium and for chronic agitation, as well as developing a single-use intramuscular injection for severe agitation.

Treatment of agitation remains a significant global healthcare challenge in patients with drug and alcohol withdrawal, delirium and post-traumatic stress disorder, as the currently available treatment options are suboptimal, invasive, difficult to administer and often pose safety issues.

SERENITY I and SERENITY II

In July 2020, we announced topline results from the SERENITY I and II pivotal trials, which showed that treatment with BXCL501 was well-tolerated and resulted in clinically meaningful reductions in agitation in schizophrenia and bipolar disorder 1 and 2 patients.

In October 2020, we held a pre-New Drug Application (“NDA”) meeting with the U.S.

Food and Drug Administration (“FDA”) to discuss the content and format of our anticipated NDA submission.

The FDA also agreed to a rolling review of our NDA, allowing us to submit completed sections of the application early.

On March 5, 2021, we completed the rolling submission of our NDA to the FDA.

The FDA has a 60-day filing review period to determine whether the NDA is complete and acceptable for filing.

In January 2021, we announced topline results from the TRANQUILITY trial, a phase 1b/2 randomized, placebo-controlled, adaptive ascending dose-finding study that enrolled 54 patients with agitation related to dementia.

Patients received BXCL501 at either 30mcg (n=16), 60mcg (n=20), 90mcg (n=4) or placebo (n=14).

Overall, BXCL501 was well tolerated and demonstrated statistically significant, clinically meaningful, rapid, and durable reductions in agitation with the 60 mcg dose as measured by multiple scales.

The trial’s primary endpoint was to evaluate safety and tolerability.

During the study, BXCL501 was well-tolerated and no severe or serious adverse events were reported.

The most common adverse event was somnolence characterized as either mild (55% for 60 mcg, 50% for 30 mcg and 7.1% for placebo) or moderate (5% for 60 mcg and 0% for both 30 mcg and placebo), followed by hypotension (10%, 0%, 0%), orthostatic hypotension (5%, 6.3%, 0%) and dizziness (5%, 6.3% and 0%).

There were no reported cases of syncope or falls in any of the patients studied.

Higher exposure levels of BXCL501 were observed in this elderly patient population compared to earlier trials.

The trial met its secondary efficacy endpoints with the 60 mcg dose compared to placebo in all three agitation scales:

the Pittsburg Agitation Scale , or PAS, and the Modified Cohen -Mansfield Inventory , or Mod-CMAI.

Treatment with BXCL501 demonstrated statistically significant and clinically meaningful reductions in total scores at two hours post-dosing (PEC p=0.0011;

PAS p<0.0001;

Mod-CMAI p<0.001;

PEC response rate = 70%), numerical separation from placebo in PEC total score as early as 30 minutes with statistically significant reductions on both PEC and PAS at 60 minutes lasting 8 hours after treatment.

Additional statistically significant reductions with the 60 mcg dose compared to placebo at the 2 hours post-dosing were observed with the Agitation and Calmness Scale (ACES p=0.0006) and Clinical Global Impression-Improvement Scale (CGI p<0.0001, 90% responder rate).

The 30 mcg dose cohort showed numerical improvements across all scales.

On March 3, 2021, we announced that following a routine quality control review of the Company’s TRANQUILITY study data, the Company discovered that two patients were mis-categorized within the 30 mcg cohort at the clinical site.

After moving the two patients into their appropriate placebo and 30 mcg groups, the data from the 30

mcg cohort were re-analyzed, resulting in the 30 mcg dose crossing over to statistical significance at the two hour time point, as measured by PEC:

and Mod-CMAI:

The Company also announced that it has initiated a 46 patient (1:1 randomization) multicenter, placebo-controlled TRANQUILITY expansion study investigating a 40 mcg dose cohort of BXCL501.

PK/PD modeling of BXCL501 data from the TRANQUILITY trial was supportive of evaluating the efficacy of a 40 mcg dose.

Results are expected to provide additional insights to support the Company’s clinical development strategy directed at all segments of the dementia market.

With the positive results from TRANQUILITY, we have been advancing the BXCL 501 dementia clinical program in close consultation with the FDA.

An end of Phase 2 meeting has been scheduled with the FDA in the second quarter of 2021, following which the Company plans to finalize study design, dosing, and endpoints for its pivotal Phase 3 program, which is expected to begin in the second half of 2021.

In August 2020, we announced that the third dose cohort (90 mcg twice a day, 12 hours apart).

was enrolling in the RELEASE trial.

This is a multicenter, randomized, double-blind, placebo-controlled, ascending dose Phase 1b/2 trial designed to evaluate the safety, pharmacokinetics, tolerability, and efficacy of BXCL501 in patients experiencing symptoms of opioid withdrawal.

We expect to report topline results from the study in the first quarter of 2021.

In October 2020, we announced that we had received authorization to proceed under our IND Application from the FDA for treatment of patients with agitation associated with delirium in intensive care units, including patients with COVID-19 and on February 25, 2021, we announced the initiation of the Phase 2 PLACIDITY trial of BXCL501.

This program is intended to provide a potential synergy with the medical and commercial infrastructure being developed to support our first two indications.

The PLACIDITY trial is a multicenter, randomized, double-blind, placebo-controlled, ascending dose-finding, adaptive Phase 2 study designed to evaluate the safety, efficacy, and pharmacokinetics of BXCL501 in intensive care unit adult patients experiencing delirium related agitation, including COVID-19 patients.

Approximately 20 patients will be randomized into each sequential ascending dose cohort of BXCL501 (starting doses of 120 ug, 180 ug, 240 ug, or 300 ug), or matching placebos to determine an optimal starting dose that could effectively and safely reduce agitation.

Elderly delirium patients (65 years or older) in these cohorts will receive half the dose.

The primary endpoint is the reduction in agitation measured by at least a 2-point drop in the Richmond Agitation Sedation Scale (“RASS”) at two hours post BXCL501 administration.

The secondary endpoint is the earliest time at which a 2-point drop is seen in RASS after BXCL501 administration.

An exploratory endpoint of this trial will be to determine the overall clinical improvement after drug administration using the Clinical Global Impression – Improvement Scale (“CGI-I”).

Topline data is expected in the first quarter of 2022.

Agitation associated with delirium is a serious condition that affects patients in many hospital settings:

ICUs, surgical & medical wards, and emergency departments.

Currently, there are no FDA-approved medications for delirium or agitation associated with delirium.

BioXcel and its collaborators, the VA Connecticut Healthcare System and the Yale University Medical School, were awarded a grant by the U.S.

Department of Defense’s (“DOD”) Congressionally Directed Medical Research Programs (“CDMRP”) to evaluate BXCL501 in patients suffering from post-traumatic stress disorder (“PTSD”) related to alcohol and substance abuse disorder (“ASUD”).

This will be the first time the Company is investigating BXCL501 as a potential chronic treatment.

Additional Opportunities

We are also continuing our development of BXCL501, exploring this candidate as a potential treatment option for chronic agitation associated with dementia.

We are also developing a single-use intramuscular injection for patients with severe agitation (non-cooperative).

Relative Bioavailability Study

In the third quarter of 2020, we analyzed the data from a cross-over study in healthy volunteers comparing the bioavailability of BXCL501 administered sublingually with the film placed drug-side down under the tongue, compared to the film placed drug-side up under the tongue, and administered buccally (placed between the lower lip and gum).

Results of this study showed that:

● consistent with previously reported data, BXCL501 was rapidly absorbed into the systemic circulation following drug side down or drug side up sublingual administration or buccal administration of the BXCL501 film;

● administering BXCL501 sublingually was shown to be bioequivalent to administering BXCL501 buccally;

● administering BXCL501 with the drug side up under the tongue was shown to be bioequivalent to administering BXCL501 drug side down under the tongue;

● subjects were able to drink water starting at 15 minutes following sublingual BXCL501 administration without affecting bioavailability in the subject.

Other Neuropsychiatric /Neurodegenerative Indications

Given the differentiated design features of BXCL501 and its selective mechanism of action, we believe that BXCL501 has the potential for broad applicability across several indications where agitation is a symptom of a condition or underlying disease.

Schizophrenia and bipolar disorder were chosen as our lead indications.

Dementia was chosen based on high unmet medical need and lack of a safe and well-tolerated standard of care for acute treatment of agitation in elderly patients suffering from acute dementia.

Schizophrenia and bipolar disorder were also chosen because of the high incidence of agitation in the emergency room and psychiatric outpatient setting resulting from agitation due to residual psychosis or hypo/mania and the need for a noninvasive rapidly acting agent in this setting.

There are additional neurological and psychiatric disorders as well as medical conditions where agitation is a symptom that requires treatment.

A brief description of potential indications that we could pursue in the future with BXCL501 is summarized below.

We will determine the timing and prioritization of additional indications as warranted by emerging data.

Opioid Withdrawal Syndrome.

The burden of treating the current ongoing epidemic of heroin and opiate dependence remains a major priority for federal and state public health services and private healthcare industry.

Opioid withdrawal is characterized by physiological symptoms of activation of various bodily functions clinically measured using opioid withdrawal symptom scales (e.g.

Currently preferred options for treatment of acute opioid withdrawal include Medication Assisted Treatment, or MAT, which substitutes opiates with lesser abuse potential drugs such as methadone or buprenorphine.

Recently lofexidine (Lucemyra ®

), with a similar mechanism of action to Dex, was approved for the treatment of symptoms associated with acute opioid withdrawal.

We believe Dex may similarly treat symptoms of acute opioid withdrawal similar mechanism of action by reducing withdrawal symptoms.

We believe that the intrinsic properties of Dex delivered via BXCL501, if successfully developed and approved could provide advantages to patients, providers and payers over other currently available non-opioid interventions for acute opioid withdrawal for individuals suffering from opioid use disorder .

We announced results from our Phase 1b study of IV Dex in patients suffering from opioid withdrawal symptoms in February 2019.

The positive data from this Phase 1b trial provided evidence supporting the expansion of the BXCL501 development programs beyond the company’s current focus for acute treatment of agitation in neuropsychiatric indications.

The study provided evidence supporting further evaluation of BXCL501’s selective alpha-2a adrenergic receptor mechanism in opioid withdrawal symptoms, in addition to the acute treatment of agitation in schizophrenia, bipolar disorder and dementia.

Opioid addiction is

difficult to overcome largely because of the severe symptoms associated with withdrawal, an area in need of more effective non-opioid treatment options.

This unmet need in conjunction with our positive IV Dex study allowed us to begin preparing for a Phase 1b/2 study to evaluate BXCL501 in patients experiencing symptoms of opioid withdrawal.

On February 5, 2020, we announced FDA clearance of our IND application for BXCL501 for the treatment of opioid withdrawal symptoms.

We are preparing to initiate a Phase 1b/2 clinical trial.

There are a number of studies which suggest that Dex can either prevent or mitigate agitation resulting from delirium based on information in an article published in the International Journal of Scientific Reports in 2017 by Zhang et al.

We believe BXCL501, if approved, could be used in non‑surgical medical situations where hyperactive delirium is an outcome.

We also believe BXCL501 would potentially be of high value in elderly patients in many medical situations outside of the ICU, such as the hospital floor and nursing homes.

As a result of the delirium studies mentioned in the clinical section above, there is a defined therapeutic index in elderly patients which we believe may allow us to directly initiate a proof-of-concept clinical trial, without conducting separate evaluations of the IV formulation of Dex, potentially followed by a registrational trial with BXCL501.

The company is currently establishing a strategic development plan to study BXCL501 in hyperactive delirium.

Alcohol Withdrawal Syndrome.

Acute alcohol withdrawal remains a widespread problem in hospitalized patients.

Benzodiazepines remain the primary treatment for alcohol therapy to help control hyperadrenergic output in patients resulting in withdrawal.

These patients are at increased risk of experiencing respiratory depression from benzodiazepine therapy.

Based on information in an article published in The American Journal of Drug and Alcohol Abuse in 2015 by Wong et al., in clinical trials, IV administration of Dex has shown potential for treating alcohol withdrawal syndrome.

We believe that performing a controlled clinical trial with BXCL501 in this population would be a logical next step to develop this product candidate.

In August 2019, we announced the award of a grant by the U.S.

Department of Defense’s Congressionally Directed Medical Research Programs to evaluate the use of BXCL501 for treatment of alcohol and substance use disorders, or ASUD, related to PTSD and traumatic brain injury.

Further planning is currently underway

Hyperarousal in PTSD.

Hyperarousal is a primary symptom of post‑traumatic stress disorder, or PTSD.

It occurs when a patient becomes hyperaroused which could be as a result of a trigger or another event leading to recollection and re-experiencing or thinking about their trauma.

Even though real danger may not be present, their body acts as if there is present danger, causing lasting stress after a traumatic event.

The symptoms of hyperarousal include irritability, anger and angry outbursts, constant anxiety, restlessness and sleeping problems.

We believe that BXCL501 has the potential to reduce symptoms which lead to agitation as well to produce a more natural sleep if taken before bedtime.

BXCL701, DPP 8/9 and FAP Inhibitor for the Treatment of tNEPC and Pancreatic Cancer

BXCL701 is a highly potent, oral small molecule immuno‑modulator that is designed to both stimulate the innate immune system and inhibit immune evasion by inhibiting dipeptidyl peptidase, or DPP, 8/9 and fibroblast activation protein, or FAP.

tNEPC and pancreatic cancer were selected as our lead indications after evaluating more than 100 different cancer types.

These two indications are in the top three cancers that overexpressed or amplified DPP 8/9 and FAP.

Data in the literature points to a functional role for DPP 8/9 in the biology of tNEPC.

Moreover, in a number of animal models, notably pancreatic cancer, BXCL701 showed combinatorial activity with checkpoint inhibitors and other combination partners.

Administration of these triple combinations resulted in complete regression with the generation of functional T-cell memory in selected animal models.

Specifically, DPP8 and DPP9 have been shown recently to behave as “immuno‑checkpoints,”

as their inhibition results in a potent pro‑inflammatory, anti‑tumor activity by way of the induction of pyroptosis in macrophages.

Pyroptosis results in induction of a number of cytokines, notably the pro-inflammatory cytokines IL-1β

This cytokine induction is believed to result in the downstream stimulation of multiple tumor‑killing immune cells.

Our preclinical data supports this hypothesis, as cancer models with a high density

of macrophages have responded robustly to BXCL701 containing combination therapy, while models with lower density of macrophages did not respond robustly to BXCL701 containing combination therapy.

Taken together we believe that BXCL701 may activate an important component of the innate immune system thereby functionally inflaming the tumor microenvironment.

Induction of an innate immune response within the tumor provides a host of pro-immune signals which drive subsequent stimulation and recruitment of the adaptive immune system.

There are additional neurological and psychiatric disorders where agitation is a symptom that requires treatment.

We are also exploring the potential of BXCL501 in Depression Related Agitation, Anxiety Disorders and Traumatic Brain Injury.

BXCL701, DPP 8/9 and FAP Inhibitor for the Treatment of NEPC

BXCL701 is a potential first-in-class, oral, small-molecule immunomodulator designed to stimulate both the innate and acquired immune systems by inhibiting DPP 8/9.

DPP 8/9 behave as "checkpoints"

of the innate immune system.

We believe that BXCL701 , if successfully developed and approved, may establish a differentiated immuno-oncology platform by modulating multiple steps in the cancer immunity cycle and, when combined with checkpoint inhibitors and/or immune activating agents, may be able to convert immuno-resistant tumors to immuno-sensitive tumors (“cold” to “hot” tumors).

Clinically, BXCL701 has been evaluated in more than 700 healthy subjects and cancer patients across multiple clinical trials, which provided evidence regarding tolerability, proof of mechanism, and single agent anti-tumor activity.

In the latter case, single agent activity was seen in melanoma patients, an immuno sensitive tumor.

In the latter case, single agent activity was seen in melanoma patients, an immune sensitive tumor.

While providing evidence regarding the safety profile of the drug, these clinical studies also identified a maximum tolerated and recommended Phase 2 dose to use in future clinical trials.

BXCL701 is in development for the treatment of tNEPC, a segment of prostate cancer patients that have progressed on second generation androgen inhibitors (Zytiga and Xtandi).

Approximately one in four patients treated with Zytiga and Xtandi are expected to develop tNEPC based on current clinical literature.

BXCL701 is in development for the treatment of Castrate Resistant Prostate Cancer, including the highly aggressive Neuro-endocrine variant NEPC, a segment of prostate cancer patients that have progressed on second generation androgen inhibitors (Zytiga and Xtandi).

Approximately one in four patients treated with Zytiga and Xtandi are expected to develop NEPC based on current clinical literature.

The combined global sales of Zytiga and Xtandi, which are only approved for prostate cancer treatment, were over $7 billion in 2018, and we believe such sales number gives a perspective of the potential market for BXCL701 in this indication.

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market in 2019, and we, therefore, expect the number of patients with access to androgen inhibitor therapy to increase.

In pancreatic cancer, we estimate that approximately 20,000 patients annually would be eligible for treatment with BXCL701, if approved, as about 50% of pancreatic cancer patients can receive second-line therapy based on information in an article published in the Annals of Oncology in 2013 by Rahma et al.

Neuroendocrine-Prostrate Cancer Overview and Market Opportunity

Prostate Cancer Overview and Market Opportunity

Prostate cancer is the most common malignancy and is the second leading cause of cancer death in men in the United States.

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While the five-year survival rate of local and regional prostate cancer is almost 100%, more aggressive forms of the disease such as metastatic prostate cancer have a five-year survival rate of approximately 30%.

These aggressive forms of prostate cancer can initially be treated with androgen deprivation therapy, or ADT, however, almost all patients experience a recurrence in tumor growth which results in the patient having castrate resistant prostate cancer, or CRPC.

These aggressive forms of prostate cancer can initially be treated with androgen deprivation therapy, or ADT.

However, almost all patients experience a recurrence in tumor growth, which results in the patient having castrate resistant prostate cancer, or CRPC.

An estimated 180,000 men in the United States are eligible for treatment with the second-generation anti-androgen drugs Zytiga and Xtandi.

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Unfortunately, virtually all the patients who respond to Zytiga and Xtandi are expected to progress to even more aggressive forms of prostate cancer requiring further treatment.

About one in four of the progressing patients will develop very aggressive, androgen receptor, or AR‑independent tumors, or tNEPC, for which there is no effective treatment based on information in an article published in the Journal of the National Comprehensive Cancer Network in 2014 by Agarwal et.

About one in four of the progressing patients will develop very aggressive, androgen receptor, or AR-independent tumors, or NEPC, for which there is no effective treatment based on information in an article published in the Journal of the National Comprehensive Cancer Network in 2014 by Agarwal et.

and an article published by Journal of Clinical Oncology in 2014 by Wang et.

tNEPC specifically displays neuroendocrine differentiation, either pathologically with the presence of the typical neuroendocrine small cells, or molecularly by expressing neuroendocrine markers.

BXCL701 is designed to target this

tumor segment because tNEPC has specific biology that we believe is addressable by the mechanism of action of BXCL701.

NEPC specifically displays neuroendocrine differentiation, either pathologically with the presence of the typical neuroendocrine small cells, or molecularly by expressing neuroendocrine markers.

Large market Opportunity:

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~180,000 (6%)

Patients progressing to tNEPC

Limitations of Current Treatments for tNEPC

There is no approved therapy for tNEPC.

tNEPC patients are treated off‑label with cytotoxic chemotherapies, such as platinum‑based regimens.

Patients progressing to NEPC

Limitations of Current Treatments for CRPC

Despite demonstrated benefit of immunotherapies targeting PD-1—such as pembrolizumab—on clinical outcomes in many solid tumors, mCRPC remains largely resistant to such therapies with single-agent response rates of around 6%.

Further exploration has been focused on combination therapies.

There is no approved therapy for NEPC.

NEPC patients are treated off-label with cytotoxic chemotherapies, such as platinum-based regimens.

These treatments have poor efficacy due to their short duration of response and substantial toxicity.

While the immuno‑oncology field has made several advances in the treatment of solid tumors several trials of immuno‑oncology agents in patients with prostate cancer, and specifically tNEPC, have shown limited or no anti‑tumor activity.

We believe BXCL701, if approved, has the potential to be first‑in‑class therapy in tNEPC given its potential to convert immuno‑resistant tumors to immuno‑sensitive tumors (“cold”

to “hot”

Our Solution:

BXCL701, A Potential First‑in‑Class, Oral, Small Molecule Inhibitor of DPP 8/9 and FAP

We are not aware of any clinical stage competitors of BXCL701 in the DPP inhibitor class.

The product candidate is designed to address the various ways by which DPP 8/9 and FAP play a role in the biology of tNEPC and pancreatic cancer.

Specifically, BXCL701 is designed to directly affect tNEPC tumor cell survival and metastases but also modulate anti-cancer immunity against tNEPC and pancreatic cancer as described below.

Immuno‑mediated Activity Against tNEPC.

We believe BXCL701 may modulate the immune system in multiple ways based on information in an article published by Nature Chemical Biology in 2017 by Okondo et al.

and an article published in PLOS One in 2013 by Walsh et al., several of which are relevant to its potential to treat tNEPC, including:

stimulating the activation of multiple immune cell types

stimulating tumor cell killing by inducing the priming, migration and cytotoxicity of T‑cells and the formation of memory T‑cells

stimulating tumor cell killing by inducing the proliferation and activation of neutrophils

inhibiting the immune suppressive FAP+ CAF and Myeloid derived suppressor cell, or MDSC and delaying or preventing tNEPC development

synergistically increasing checkpoint inhibitor anti‑tumor activity.

Inhibiting tNEPC Growth Factor NPY.

tNEPC is believed to be caused by neuroendocrine cells in the prostate that overexpress NPY.

NPY activates the specific G protein‑coupled receptor Y1‑R, which then selectively stimulates growth of AR‑independent, tNEPC‑like cancer cells, while reducing growth in AR‑dependent cells.

NPY is a substrate of DPP 8/9, which cleaves it into biologically active forms.

DPP 8/9 inhibition in tumor cells decreases the number of viable tumor cells by reducing NPY cleavage.

Inhibiting the Formation of tNEPC‑type (Osteoclastic) Bone Metastasis.

Prostate cancer is characterized by the presence of bone‑forming (osteoblastic) metastasis.

In contrast, tNEPC is associated with bone‑lysing (osteoclastic) metastasis.

BXCL701 is designed to block the bone destruction by osteoclasts through the inhibition of osteoclast differentiation.

In an animal model that recapitulated the formation of osteolytic metastasis of tNEPC, BXCL701 was observed to reduce osteoclast activity, bone resorption and tumor burden based on information in an article published in the British Journal of Haematology in 2009 by Pennisi et al.

BXCL 701 for the Treatment of Pancreatic Cancer

Pancreatic Cancer Overview and Market Opportunity

Pancreatic adenocarcinoma, more commonly referred as pancreatic cancer, represents one of the highest unmet needs in oncology.

The American Cancer Society estimates that in 2020 there will be approximately 57,600 new diagnoses and 47,000 deaths.

Pancreatic cancer has a median five‑year survival rate of only about 9% for all stages combined.

Recently, several new therapies have been developed consisting of new formulations of approved chemotherapies.

However, these new therapies have limited efficacy with relatively short survival advantages, and well‑known toxicities.

It is well understood that the development of new efficacious drugs with manageable toxicity is required to achieve durable responses and increase survival in pancreatic cancer.

Pancreatic cancer is known to be a highly immuno‑resistant tumor.

Multiple attempts to show anti‑tumor activity of immunotherapies including immune checkpoints have failed due to primary resistance mechanisms.

We believe BXCL701 has the potential to address the resistance to immune checkpoint inhibitors (to make “cold”

tumors “hot”) and the combination with Anti-PD-1 inhibitors and other agents, particularly those such as Nektar Therapeutics’

Bempegaldesleukin activate the adaptive immune response, could generate long and profound responses and the survival increase needed to make a true breakthrough in the treatment of pancreatic cancer.

Abraxane, a new formulation of the chemotherapy agent paclitaxel in combination with gemcitabine, is considered to be the standard of care for newly diagnosed pancreatic cancer in U.S.

markets, with annual sales of over $1 billion in 2018.

Onivyde, a liposomal formulation of the chemotherapy agent irinotecan, was recently approved for use in second‑line pancreatic cancer based on a two‑month survival increase (six months vs.

four months) and only 7.7% ORR, with annual sales of approximately $109 million in 2018.

Our initial clinical development plan will target second‑line or later pretreated patients, specifically the 50% or more that remain in good clinical condition after first‑line treatment and thus may receive one or more subsequent lines of chemotherapy.

Therefore, we believe that the potential number of patients treatable with the combination of BXCL701, a check point inhibitor and Nektar 214, if successfully developed and approved, would be approximately 20,000.

Pancreatic cancer is a high unmet medical need, where approved therapies have limited activity and patients have short survival.

As in tNEPC, single agent immune checkpoint inhibition has not shown single agent anti‑tumor activity in pancreatic cancer patients, except in the very small (1-2%) fraction that exhibit MSI-H phenotype, indicating the need to optimize their activity.

Preclinical studies suggest that the combination of DPP8/9 and FAP and immune checkpoint inhibition was active.

BXCL701 has been granted orphan drug designation from the FDA for the treatment of pancreatic cancer.

Large market Opportunity:

Pancreatic Cancer

Pancreatic Cancer Patient Population

Patients Eligible for Second Line Therapy

~37,000 (50%)

Patients progressing to tNEPC

While the immuno-oncology field has made several advances in the treatment of solid tumors, several trials of immuno-oncology agents in patients with prostate cancer, and specifically NEPC, have shown limited or no anti-tumor activity.

BXCL701 ’s potential immunomodulatory mechanism of action may manipulate the tumor micro-environment in such a way to convert a “cold” tumor environment into an inflamed “hot” environment so that prostate cancer can overcome resistance to immunotherapy.

BXCL701 Immuno-Oncology Program

BXCL701 Clinical Trials

In November 2018 we announced that the FDA accepted our IND for BXCL701.

We subsequently initiated a Phase 1b /2 trial evaluating the combination of BXCL701 and pembrolizumab (Keytruda®) in tNEPC patients during the fourth quarter of 2018.

The goal of this single arm, Simon 2-stage open label study is to examine the safety, pharmacokinetics and anti-tumor activity combining of BXCL701 and pembrolizumab in tNEPC patients with the primary efficacy endpoint of objective response rate.

In October 2019 we presented top-line data from the first safety cohort at the 2019 Annual Prostate Cancer Foundation Scientific Retreat.

In this initial cohort (n = 3 patients), the combination of BXCL701 (0.4mg/day) and Keytruda®

showed no serious adverse events or dose limiting toxicities.

Preliminary data from the patient cohorts consisting of 400 mcg of BXCL701 plus Keytruda®

and 600 mcg of BXCL701 along with Keytruda®

has demonstrated on-target side effects consistent with cytokine activation at the highest once-daily dose tested and preliminary PK of BXCL701 are also within expectations.

Of the 6 patients dosed in connection with this trial, the majority of patients remain on treatment, with one patient experiencing acidosis with a fatal outcome.

We are currently enrolling patients in the 600 mcg cohort with a split dose and expect to complete dosing in the first quarter of 2020.

Data as of January 30, 2020 from this open label trial of patient cohorts consisting of 400 mcg of BXCL701 in combination with Keytruda®

and 600 mcg of BXCL701 in combination with Keytruda®

showed on-target adverse events that we believe are consistent with cytokine activation at the highest once-daily dose tested.

BXCL701 also showed preliminary pharmacokinetic results that were within expectations.

Of the 6 patients dosed as of the data cutoff date, the majority of patients remained on treatment.

One patient experienced acidosis with a fatal outcome that was determined by the investigator to be possibly related to BXCL701.

We are currently enrolling patients in the 600 mcg cohort with a split dose and expect to complete dosing in the first quarter of 2020.

Topline data from this trial are expected in the second half of 2020, prior to advancing to the Phase 2 efficacy portion of the trial.

In June 2019, we announced that our Clinical Trial Application was accepted by the U.K.

Medicines and Healthcare products Regulatory Agency for the double combination trial of BXCL701 and Keytruda®

in treatment-related neuroendocrine prostate cancer patients.

We have activated two clinical sites in the U.K.

and are planning to open a third clinical site, subject to approval from local U.K.

This is the first step in our plan to expand our clinical trials globally.

In June 2019, we also announced that the FDA had cleared our IND application to initiate a clinical trial evaluating the triple combination of BXCL701, bempegaldesleukin (produced by Nektar Therapeutics, Inc., or Nektar) and BAVENCIO®

(avelumab, Merck KGaA, Darmstadt, Germany and Pfizer) in pancreatic cancer.

We expect to initiate the trial in the second half of 2020, following Nektar and Pfizer’s safety run-in study of a double combination of Bempegaldesleukin and avelumab, pending the outcome of the double combination arm of the trial.

In December 2019, we announced the expansion of the clinical evaluation of BXCL701 into multiple advanced solid tumors.

The MD Anderson-led Phase 2 open-label basket trial is designed to evaluate the response rate of orally administered BXCL701, combined with KEYTRUDA®

in patients with advanced solid cancers.

The study will evaluate both patients who are naïve to checkpoint therapy and those who are refractory to checkpoint therapy.

MD Anderson has indicated that it expects to initiate this trial in the first half of 2020 with initial data expected in the second half of 2020.

We are continuing to explore additional indications for BXCL701 with synergistic combinations.

Nektar Therapeutics Collaborative Agreement

On September 21, 2018, the Company entered into a Clinical Trial Collaboration Agreement, or the Collaboration Agreement, with Nektar Therapeutics, a Delaware corporation, or Nektar.

Pursuant to the Collaboration Agreement, the Company and Nektar will jointly collaborate to conduct a Phase 1/2 clinical trial evaluating a combination therapy using BXCL701, Bempegaldesleukin, a CD122-biased agonist and a checkpoint inhibitor as a potential therapy for pancreatic cancer and such other clinical trials evaluating the combined therapy as may be mutually agreed upon by the parties, each referred to as a Combined Therapy Trial.

Under the Collaboration Agreement, the parties will split all out-of-pocket costs reasonably incurred from third parties in connection with the performance of a Combined Therapy Trial, including, but not limited to, third party contract research organizations, laboratories, clinical sites and institutional review boards.

Each party will otherwise be responsible for its own internal costs, including internal personnel costs, incurred in connection with each Combined Therapy Trial.

The Company and Nektar will use commercially reasonable efforts to manufacture and supply its compound for each Combined Therapy Trial and will bear the costs related thereto.

The parties have formed a joint development committee to oversee clinical trial design, regulatory strategy, and other activities necessary to conduct and support the Combined Therapy Trials.

The Company will act as sponsor of each Combined Therapy Trial.

Ownership of, and global commercial rights to, BXCL701 remains solely with the Company under the Collaboration Agreement.

Ownership of any patent rights and study data that does not relate exclusively to BXCL701 or Bempegaldesleukin shall be jointly owned by the parties.

Each party granted to the other party a non-exclusive, worldwide, non-transferable and royalty-free research and development license to such licensing party’s patent rights, technology and regulatory documentation to use its compound solely to the extent necessary to discharge its obligations under the Agreement with respect to the conduct of the Combined Therapy Trials.

Subject to termination rights for breach, bankruptcy or a material safety issue/clinical hold, the term of the Collaboration Agreement will continue in effect until completion by all centers or institutions participating in the Combined Therapy Trials, the delivery of study data to both parties and the completion of any then agreed upon protocol, statistical analysis and bioanalysis plan.

On March 4, 2019, the Company announced the addition of Merck KGaA, Darmstadt, Germany, which operates its biopharmaceutical business as EMD Serono in the USA and Canada, and Pfizer to the Nektar clinical collaboration described above to evaluate a novel triple combination therapy in pancreatic cancer.

The collaboration now includes avelumab, BXCL701 and NKTR-214 as a potential combination therapy for pancreatic cancer.

Avelumab is a human anti-programmed death ligand (PD-L1) co-developed and co-commercialized by Merck KGaA Darmstadt, Germany and Pfizer.

Under the collaboration, BTI will continue to be responsible for initiating and managing the clinical program, with Merck KGaA, Darmstadt, Germany and Pfizer supplying avelumab and Nektar supplying NKTR-214.

BTI and Nektar will equally share all development costs.

BXCL701 is currently being evaluated in two combination therapy clinical trials:

In April 2020, we announced the initiation of the Phase 2 efficacy portion of the Phase 1b/2 trial evaluating BXCL701 in combination with KEYTRUDA® (pembrolizumab, a PD-1 inhibitor) for NEPC.

The Phase 1b safety assessment of BXCL701 identified a split dose totaling 0.6 mg per day as the recommended dose when used in combination with KEYTRUDA.

The Phase 1b portion of this trial was presented at the Society for Immunotherapy of Cancer’s, or SITC’s, 35th Anniversary Annual Meeting in 2020, and an efficacy update was recently presented at the ASCO Genitourinary Symposium in February 2021.

Topline results from the trial are expected in mid-2021.

The MD Anderson-led Phase 2 open-label basket trial is designed to evaluate the response rate of orally administered BXCL701, combined with KEYTRUDA, in two arms:

Arm A is enrolling checkpoint naïve patients (where checkpoint therapy is indicated:

“hot tumors”);

and Arm B is enrolling patients who have progressed following checkpoint therapy alone.

As of August 2020, the efficacy bar had been met for both arms, allowing the trial to advance to completion.

Preliminary data were recently presented at the SITC’s, 35th Anniversary Annual Meeting.

Topline results from the trial are expected in mid-2021.

On November 10, 2020, the Company and Nektar terminated the Nektar Collaboration Agreement, pursuant to which the Company and Nektar had agreed to jointly collaborate to conduct a Phase 1/2 clinical trial evaluating a combination therapy using BXCL701, Bempegaldesleukin, a CD122-biased agonist and a checkpoint inhibitor as a potential therapy for pancreatic cancer and such other clinical trials evaluating the combined therapy as mutually agreed by the parties.

The BXCL701 phase of the triple combination study of BXCL701, bempegaldesleukin (NKTR-214, Nektar Therapeutics) and BAVENCIO® (avelumab, Merck KGaA, Darmstadt, Germany and Pfizer) in second line pancreatic cancer was planned to initiate following Nektar and Pfizer’s Phase 1B dose-escalation trial of bempegaldesleukin and avelumab, which was delayed.

As a result, the parties have agreed to discontinue activities on the triple combination study and instead reallocate resources to other studies and development programs.

Other Immuno-oncology Indications

In addition to tNEPC and pancreatic cancer, we plan to leverage our existing preclinical and clinical data to identify other cancer types with high unmet medical need that we believe would benefit from BXCL701’s novel designed mechanism of action.

In addition to CRPC and CPI-refractory tumors, we plan to leverage our existing preclinical and clinical data to identify other cancer types with high unmet medical need that we believe would benefit from BXCL701’s novel potential mechanism of action.

We are prioritizing indications where the immuno-suppressive microenvironment is driven by the potential molecular and cellular targets of BXCL701 and where the single agent activity of approved immune checkpoint inhibitors is limited.

On September 4, 2019 we announced that the FDA granted Orphan Drug Designation for BXCL701 for the treatment of acute myeloid leukemia.

On September 4, 2019, we announced that the FDA granted Orphan Drug Designation for BXCL701 for the treatment of acute myeloid leukemia, and on January 26, 2021, BXCL701 received Orphan Drug Designation for the treatment of Soft Tissue Sarcoma.

In addition, we believe BXCL701, if successfully developed and approved, may provide a platform for combination with immunotherapy modalities that go beyond the currently approved immune checkpoint agents that target the PD-1/PD-L1 axis.

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Neuroscience Program

We are targeting neuroscience disorders where there is high unmet medical need and therefore a requirement for symptom management is a priority (like agitation, seizures, dyskinesias) as well for transformative care for monogenic rare CNS disorders.

We are targeting neuroscience disorders where there is a high unmet medical need, and therefore, a requirement for symptom management is a priority (such as agitation and symptoms resulting from stress-related behaviors) as well for transformative care for monogenic rare CNS disorders.

For symptomatic approaches, our neuroscience program is developing product candidates with a focus on treating symptoms for various neurological and psychiatric disorders.

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This comprehensive map has permitted us to select a potential pipeline of candidates based on our ability to alter the tumor micro-environment and the potential to address relevant unmet medical needs for various tumor types.

Finally, we continually leverage the artificial intelligence platform owned by our parent, to select and prioritize additional development opportunities to expand the current portfolio and broaden the addressable market for our lead programs through identification of new indications.

This includes exploring additional combination therapy approaches to expand BXCL701’s target indications beyond tNEPC and pancreatic cancer.

Finally, we continually leverage the artificial intelligence platform owned by our parent to select and prioritize additional development opportunities to expand the current portfolio and broaden the addressable market for our lead programs through the identification of new indications.

This includes exploring additional combination therapy approaches to expand BXCL701’s target indications beyond NEPC and pancreatic cancer.

The pharmaceutical and biotechnology industries are characterized by rapidly advancing technologies, intense competition, and a strong emphasis on proprietary products.

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Mergers and acquisitions in the pharmaceutical, biotechnology, and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors.

These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and in establishing clinical trial sites and patient registration for clinical trials, as well as in 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.

The key competitive factors affecting the success of all of our product candidates, if approved, are likely to be their efficacy, safety, convenience, price, the effectiveness of companion diagnostics in guiding the use of related therapeutics, if any, the level of generic competition and the availability of reimbursement from government and other third‑party payors.

therapeutics, if any, the level of generic competition and the availability of reimbursement from government and other third-party payors.

Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize medicines that are safer, are more effective, have fewer or less severe side effects, are more convenient or are less expensive than any medicines we may develop.

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Neurological and Psychiatric Disorders

Drugs used for the acute treatment of agitation resulting from psychosis in schizophrenia and mania in bipolar disease are atypical antipsychotics administered IM and often require patient restraint.

Drugs used for the acute treatment of agitation related to schizophrenia and bipolar disorder are antipsychotics frequently administered via IM injection which typically requires patient restraint.

These include IM aripiprazole, olanzapine, ziprasidone and haloperidol.

Oral products include the benzodiazepines, lorazepam and midazolam.

Saphris (sublingual tablet asenapine) is an atypical antipsychotic that has been prescribed for use in children and teens for acute treatment of manic or mixed episodes associated with bipolar disease.

Adasuve (inhaled loxapine) from Alexza is also a non‑invasive treatment.

Oral products include the sublingually administered atypical antipsychotic asenapine as well as the benzodiazepines, lorazepam and midazolam.

The typical antipsychotic Adasuve (loxapine) from Alexza is delivered via inhalation.

Immuno-oncology

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● Major pharmaceutical companies developing multiple immuno- oncology agents:

AstraZeneca PLC, Bristol‑Myers Squibb Company, Celgene Corporation, Merck & Co., Inc., Novartis AG, Pfizer Inc., Roche Holding Ltd.

and Sanofi SA.

AstraZeneca PLC, Bristol-Myers Squibb Company, Celgene Corporation, Merck & Co., Inc., Novartis AG, Pfizer Inc., Roche Holding Ltd., and Sanofi SA.

● Companies developing agents aimed at stimulating the immune response:

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Manufacturing

BioXcel Therapeutics does not have manufacturing facilities.

We do not have manufacturing facilities.

We currently rely on strategic manufacturing partners and expect to continue to rely on third parties for the manufacture of our product candidates for clinical research as well as for eventual, possible commercial manufacturing.

For supply of drug substance and drug product for our BXCL501 clinical program, we have secured manufacturing partners.

We have completed manufacture of phase III clinical supply and registration batches of our proprietary, sublingual thin film product.

For the supply of drug substance and drug product for our BXCL501 clinical program, we have secured manufacturing partners.

We have completed the manufacture of phase III clinical supply and registration batches of our proprietary, sublingual thin film product.

We produce clinical drug product for BXCL701 under exclusivity with the original manufacturers of the active pharmaceutical ingredient, or API, and drug product tablets, respectively.

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We plan to retain our worldwide commercialization rights for some of our key product candidates, while for other product candidates we might consider collaboration opportunities to maximize returns.

While we currently have no sales, marketing or commercial product distribution capabilities and have no experience as a company in commercializing products, we intend to build our own commercialization organization and capabilities over time.

While as a Company we have no experience in commercializing products, we intend to build our own commercialization organization and capabilities over time.

We are considering partnerships, joint ventures, and a variety of business partnerships for the Japanese and European Markets.

We currently plan to retain US rights and are beginning to lay the groundwork for commercialization efforts.

When appropriate, we will decide whether to build a specialty sales force to manage commercialization for these product candidates on our own or in combination with a larger pharmaceutical partner to maximize patient coverage in the United States and to support global expansion, especially as our programs have substantial opportunity for additional follow‑up indications alone or in combinations.

We currently plan to retain US rights and have begun to lay the groundwork for commercialization efforts.

When appropriate, we will decide whether to build a sales force to manage commercialization for these product candidates on our own or in combination with a larger pharmaceutical partner to maximize patient coverage in the United States as well as to support global expansion, especially as our programs have a substantial opportunity for additional follow-up indications alone or in combinations.

As product candidates advance through our pipeline, our commercial plans may change.

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Patent Portfolio

As of February 17, 2020, we have filed applications in the core patent family protecting BXCL501 in the United States, Taiwan and as a pending patent cooperation treaty, or PCT, application.

We have filed applications in the core patent family protecting BXCL501 in the United States, Taiwan and as a pending PCT application.

Following entry into national phase, we intend to file for patent protection in major markets, including but not limited to Europe, Japan, China and Canada.

As of March 10, 2021, our patent portfolio included 6 Patent Cooperation Treaty, or PCT, applications, 8 U.S.

utility applications, 1 issued U.S.

utility patent, 16 U.S.

provisional patent applications, 62 pending non-U.S.

applications, 5 allowed or granted non-U.S.

patents, 2 design patent applications, one of which is a U.S.

design application, and 33 allowed or registered design patents.

10,792,246, directed to our proprietary sublingual thin-film formulation of Dex, was issued on October 6, 2020 and has a term that is set to expire no earlier than 2039.

We plan to list the U.S.

patent in the FDA's Approved Drug Products with Therapeutic Equivalence Evaluations, or Orange Book.

We have filed applications in the core patent family protecting BXCL501 in the United States, Taiwan, and other major markets.

We expect that patents issuing from these applications, if any, will expire no earlier than 2039.

We have also filed applications in three additional patent families that are relevant to BXCL501.

We have applications pending in the United States, Europe and Japan directed to methods of treating insomnia using sublingual Dex.

We have also filed applications in additional patent families that are relevant to BXCL501.

We have applications pending in the

United States, Europe and Japan directed to methods of treating insomnia using sublingual Dex.

We expect that patents issuing from these applications, if any, will expire no earlier than 2035.

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We expect that patents issuing from these applications, if any, will expire no earlier than 2037.

Finally, we have a PCT application directed to intravenous administration of Dex.

We have one U.S.

application and one European application directed to intravenous administration of Dex.

We expect that patents issuing from these applications, if any, will expire no earlier than 2039.

We have multiple patent families filed to protect our BXCL701 program, including our core patent family directed to methods of using BXCL701 with immune checkpoint inhibitors, which is filed in the United States and seventeen other countries.

We continue to file new applications on an ongoing basis, including provisional applications directed to treating mania and dementia.

If patents issue from those cases, we expect them to expire no earlier than 2041 and 2042, respectively.

Any patents issuing from that family should expire no earlier than 2036.

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We expect that patents issuing from these applications, if any, will expire no earlier than 2039.

Finally, we have four provisional applications directed to various dosing regimens and combination therapies.

Finally, we have multiple provisional applications directed to various dosing regimens and combination therapies.

Any patents issuing from those applications are expected to expire between 2039 and 2041 at the earliest.

We have filed patent applications to protect our proprietary drug programs in immuno-oncology, CNS and agitation.

This encompasses our proprietary drug programs in immuno-oncology, CNS and agitation.

These proprietary products and methods of use are covered in three separate PCT applications, four pending national phase applications and three pending United States provisional applications to date.

However, we intend to file national phase patent applications in all other major counties (Europe, Canada, Japan, Australia and China) in the future.

The term of individual patents depends upon the legal term for patents in the countries in which they are obtained.

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The Hatch-Waxman Act permits a patent restoration term of up to five years as compensation for patent term lost during product development and the drug approval regulatory review process.

However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date.

The patent term restoration period is generally one-half the time between the effective date of an IND, and the submission date of a NDA, plus the time between the submission date of an NDA and the approval of that application.

Only one patent applicable to an approved drug is eligible for the extension and the application for extension must be made prior to expiration of the patent.

Only one patent applicable to an approved drug is eligible for the extension, and the application for extension must be made prior to the expiration of the patent.

The United States Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration.

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With respect to both licensed and company owned intellectual property, we cannot guarantee that patents will be granted with respect to any of our pending patent applications or with respect to any patent applications we may file in the future, nor can we be sure that any patents that may be granted to us in the future will be commercially useful in protecting our products, the methods of use, or the manufacture of those products.

Patent and other intellectual property rights in the

pharmaceutical and biotechnology space are evolving and involve many risks and uncertainties.

Patent and other intellectual property rights in the pharmaceutical and biotechnology space are evolving and involve many risks and uncertainties.

For example, third parties may have blocking patents that could be used to prevent us from commercializing our product candidates and practicing our proprietary technology, and the issued patents that we in-license and those that may issue in the future may be challenged, invalidated, or circumvented, which could limit our ability to stop competitors from marketing related products or could limit the term of patent protection that otherwise may exist for our product candidates.

In addition, the scope of the rights granted under any issued patents may not provide us with protection or competitive advantages against competitors with similar technology.

Furthermore, our competitors may independently develop similar technologies that are outside the scope of the rights granted under any issued patents that we own or exclusively in license.

Furthermore, our competitors may independently develop

similar technologies that are outside the scope of the rights granted under any issued patents that we own or exclusively in license.

For these reasons, we may face competition with respect to our product candidates.

Moreover, because of the extensive time required for development, testing, and regulatory review of a potential product, it is possible that, before any particular product candidate can be commercialized, any patent protection for such product may expire or remain in force for only a short period following commercialization, thereby reducing the commercial advantage the patent provides.

Our Relationship with BioXcel Corporation

Our Relationship with BioXcel LLC

We are currently a 37% owned subsidiary of BioXcel , and our pipeline compounds have been identified by applying BioXcel's R&D engine, EvolverAI, for drug re-innovation.

The Company has entered into an Amended and Restated Asset Contribution Agreement, pursuant to which BioXcel agreed to provide its rights, title and interest in BXCL501, BXCL701, BXCL502 and BXCL702, collectively, the “Candidates”

or the BTI Business and all of the assets and liabilities associated to the Company in consideration for (i) 9,480,000 shares of our common stock, (ii) $1 million upon completion of our initial public offering, or IPO, (iii) $500,000 upon the later of the 12 month anniversary of an initial public offering and the first dosing of a patient in the bridging bioavailability/ bioequivalence study for the BXCL501 program, (iv) $500,000 upon the later of the 12 month anniversary of an initial public offering and the first dosing of a patient in the Phase 2 proof-of-concept open label monotherapy or combination trial with Keytruda for the BXCL701 program and (v) a one-time payment of $5,000,000 within 60 days after the achievement of $50,000,000 in cumulative net sales of any product or combination of products resulting from the development and commercialization of any one of the Candidates or a product derived therefrom.

With the completion of the Company’s IPO in March 2018, $1 million was charged to Research and Development costs in connection with (ii) above and was paid on April 5, 2018.

The Company paid $500,000 to BioXcel in connection with (iii) above in April 2019.

In July 2019, the Company completed the first dosing of a patient in the combination trial of BXCL701 with Keytruda, and as a result the Company paid $500,000 to BioXcel in connection with (iv) above in July 2019.

We entered into a Separation and Shared Services Agreement with BioXcel that took effect on June 30, 2017, as amended and restated on November 7, 2017 and March 6, 2020, or the Services Agreement, pursuant to which BioXcel agreed to allow us to continue to use its office space, equipment, services and leased employees based on the agreed upon terms and conditions for a payment of defined monthly and/or hourly fees.

The office space and equipment portion of the Services Agreement ended effectively on April 30, 2018 when the Company moved to new office space to accommodate additional personnel that had been hired.

Services to be provided by BioXcel through its subsidiary in India, were originally expected to decrease through June 30, 2019.

Services provided by BioXcel through its subsidiaries in India and the United States will continue indefinitely, as agreed upon by the parties.

These services are primarily for drug discovery and for chemical, manufacturing and controls cost.

Under the Services Agreement, we have an option, exercisable until December 31, 2020, to enter into a collaborative services agreement with BioXcel pursuant to which BioXcel shall perform product identification and related services for us utilizing EvolverAI.

We entered into the Amended and Restated Asset Contribution Agreement, pursuant to which BioXcel agreed to contribute BioXcel’s rights, title and interest in BXCL501, BXCL701, BXCL502 and BXCL702, and all of the assets and liabilities associated in consideration for (i) 9,480,000 shares of our common stock, (ii) $1 million upon completion of an initial public offering, (iii) $500,000 upon the later of the 12 month anniversary of an initial public offering and the first dosing of a patient in the bridging bioavailability/ bioequivalence study for the BXCL501 program, (iv) $500,000 upon the later of the 12 month anniversary of an initial public offering and the first dosing of a patient in the Phase 2 proof of concept open-label monotherapy or combination trial with Keytruda for the BXCL701 program and (v) a one-time payment of $5 million within 60 days after the achievement of $50 million in cumulative net sales of any product or combination of products resulting from the development and commercialization of any one of the Candidates or a product derived therefrom.

Upon completion of our IPO in March 2018, $1 million was charged to Research and Development costs in connection with (ii) above and was paid on April 5, 2018.

We paid $500,000 to BioXcel in connection with (iii) above in April 2019.

In July 2019, we completed the first dosing of a patient in the combination trial of BXCL701 with Keytruda, and as a result we paid $500,000 to BioXcel in connection with (iv) above in July 2019.

We entered into a Separation and Shared Services Agreement with BioXcel that took effect on June 30, 2017, as amended and restated thereafter, or the Services Agreement, pursuant to which services provided by BioXcel through its subsidiaries in India and the United States will continue indefinitely, as agreed upon by the parties.

These services are primarily for drug discovery, chemical, manufacturing and controls cost and general and administrative support.

Service charges recorded under this agreement were $1.3 million and $862,000 for the years ended December 31, 2020 and 2019, respectively.

Under the Services Agreement, the Company has an option, exercisable until March 12, 2023, to enter into a collaborative services agreement with BioXcel pursuant to which BioXcel shall perform product identification and related services for us utilizing EvolverAI.

The parties are obligated to negotiate the collaborative services agreement in good faith and to incorporate reasonable market-based terms, including consideration for BioXcel reflecting a low, single-digit royalty on net sales and reasonable development and commercialization milestone payments, provided that (i) development milestones shall not exceed $10 million in the aggregate and not be payable prior to proof of concept in humans and (ii) commercialization milestones shall be based on reaching annual net sales levels, be limited to 3% of the applicable net sales level, and not exceed $30 million in the aggregate.

BioXcel shall continue to make such product identification and related services available to us for at least five years from June 30, 2017.

The parties are currently

discussing extending the product identification and related services that BioXcel would provide under the collaborative services agreement, however as of the date hereof we have not reached a definitive agreement.

BioXcel shall continue to make such product identification and related services available to us until at least September 30, 2024.

We paid $9 million in February 2020 for the purchase and subsequent cancellation of 300,000 shares owned by BioXcel, which is more fully discussed in Note 5 to the financial statements included elsewhere in this Annual Report on Form 10-K.

Government Regulation

The FDA and comparable regulatory authorities in state and local jurisdictions and in other countries impose substantial and burdensome requirements upon companies involved in the clinical development, manufacture, marketing and distribution of drugs such as those we are developing.

These agencies and other federal, state and local entities regulate, among other things, the research and development, testing, manufacture, quality control, safety, effectiveness, labeling, packaging, storage, record keeping, approval, advertising and promotion, distribution, post‑approval monitoring and reporting, sampling and export and import of our product candidates.

Government Regulation and Product Approval

Government authorities in the United States, at the federal, state and local level, and other countries extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling,

packaging, storage, record-keeping, promotion, advertising, distribution, marketing and export and import of drug products.

A new drug must be approved by the FDA through the NDA process before it may be legally marketed in the United States.

Government Regulation of Drug Products

In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and its implementing regulations.

The process of obtaining regulatory approvals and the subsequent compliance with applicable federal, state, local and foreign statutes and regulations requires the expenditure of substantial time and financial resources.

Failure to comply with the applicable U.S.

requirements at any time during the product development process, approval process or after approval, may subject an applicant to a variety of administrative or judicial sanctions, such as the FDA’s refusal to approve pending NDAs, withdrawal of an approval, imposition of a clinical hold, issuance of warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement or civil or criminal penalties.

The process required by the FDA before product candidates may be marketed in the United States generally involves the following:

completion of extensive preclinical laboratory tests and preclinical animal studies, all performed in accordance with the FDA’s good laboratory practice, or GLP, requirements and other applicable regulations;

submission to the FDA of an IND which must become effective before human clinical trials may begin and must be updated annually;

approval by an independent institutional review board, or IRB, at each clinical site before each trial may be initiated;

performance of adequate and well‑controlled human clinical trials in accordance with good clinical practice, or GCP, requirements to establish the safety and efficacy of the product candidate for each proposed indication;

submission to the FDA of an NDA after completion of all pivotal clinical trials;

a determination by the FDA within 60 days of its receipt of an NDA file the application for review;

We, along with any third-party contractors, will be required to navigate the various preclinical, clinical and commercial approval requirements of the governing regulatory agencies of the countries in which we wish to conduct studies or seek approval of our products and product candidates.

The process of obtaining regulatory approvals and the subsequent compliance with applicable federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources.

Drug Development Process

In the United States, the FDA regulates drugs under the federal Food, Drug, and Cosmetic Act (“FDCA”), and its implementing regulations.

The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources.

The process required by the FDA before a drug may be marketed in the United States generally involves the following:

● completion of preclinical laboratory tests, animal studies and formulation studies in accordance with FDA’s Good Laboratory Practice requirements and other applicable regulations;

● submission to the FDA of an IND which must become effective before human clinical trials may begin;

● approval by an independent Institutional Review Board (“IRB”), or ethics committee at each clinical site before each trial may be initiated;

● performance of adequate and well-controlled human clinical trials in accordance with good clinical practices (“GCPs”), to establish the safety and efficacy of the proposed drug for its intended use;

● preparation of and submission to the FDA of an NDA after completion of all pivotal trials;

● a determination by the FDA within 60 days of its receipt of an NDA to file the application for review

● satisfactory completion of an FDA advisory committee review, if applicable;

satisfactory completion of an FDA pre‑approval inspection of the manufacturing facilities at which the API and finished drug product are produced and tested to assess compliance with cGMP regulations and to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality, and purity;

satisfactory completion of FDA audits of clinical trial sites to assure compliance with GCPs and the integrity of the clinical data;

payment of user fees and securing FDA approval of the NDA to permit commercial marketing of the product for particular indications for use in the United States;

compliance with any post‑approval requirements, including the potential requirement to implement a Risk Evaluation and Mitigation Strategy, or REMS, and the potential requirement to conduct post‑approval studies.

Preclinical studies include laboratory evaluation of product chemistry, toxicity and formulation, as well as animal studies to assess potential safety and efficacy.

Prior to beginning the first clinical trial with a product candidate in the United States, we must submit an IND to the FDA.

An IND is a request for authorization from the FDA to administer an investigational drug product to humans.

The central focus of an IND submission is on the general investigational plan and the protocol(s) for human studies.

The IND also includes results of preclinical studies and in vitro studies assessing the toxicology, pharmacokinetics, pharmacology, and pharmacodynamic characteristics of the product;

● satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is produced to assess compliance with current Good Manufacturing Practice (“cGMP”) requirements to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity, and of selected clinical investigation sites to assess compliance with GCPs;

● FDA review and approval of the NDA to permit commercial marketing of the product for particular indications for use in the United States.

Prior to beginning the first clinical trial with a product candidate in the United States, a sponsor must submit an IND to the FDA.

An IND is a request for authorization from the FDA to administer an investigational new drug product to humans.

The central focus of an IND submission is on the general investigational plan and the protocol(s) for clinical studies.

The IND also includes results of animal and in vitro studies assessing the toxicology, pharmacokinetics, pharmacology, and pharmacodynamic characteristics of the product;

chemistry, manufacturing, and controls information;

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An IND must become effective before human clinical trials may begin.

An IND will automatically become effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions related to the proposed clinical trials.

In such a case, the IND may be placed on clinical hold and the IND sponsor and the FDA must resolve any outstanding concerns or questions before clinical trials can begin.

Accordingly, submission of an IND may or may not result in the FDA allowing clinical trials to commence.

Clinical trials involve the administration of the new investigational drug to human subjects under the supervision of qualified investigators in accordance with GCPs, which include the requirement that all research subjects provide their informed consent for their participation in any clinical trial.

Clinical trials are conducted under protocols detailing, among other things, the objectives of the study, the parameters to be used in monitoring safety, and the efficacy criteria to be evaluated.

A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND.

The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises safety concerns or questions about the proposed clinical trial.

In such a case, the IND may be placed on clinical hold and the IND sponsor and the FDA must resolve any outstanding concerns or questions before the clinical trial can begin.

Submission of an IND therefore may or may not result in FDA authorization to begin a clinical trial.

Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators in accordance with GCPs, which include the requirement that all research subjects provide their informed consent for their participation in any clinical study.

Clinical trials are conducted under protocols detailing, among other things, the objectives of the study, 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.

Furthermore, an independent IRB for each site proposing to conduct the clinical trial must review and approve the plan for any clinical trial and its informed consent form before the clinical trial begins at that site and must monitor the study 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 studies also include oversight by an independent group of qualified experts organized by the clinical study sponsor, known as a data safety monitoring board, which provides authorization for whether or not a study may move forward at designated check points based on access to certain data from the study and may halt the clinical trial if it determines that there is an unacceptable safety risk for subjects or other grounds, such as no demonstration of efficacy.

There are also requirements governing the reporting of ongoing clinical trials and clinical trial results to public registries.

The clinical investigation of a drug is generally divided into three phases.

Although the phases are usually conducted sequentially, they may overlap or be combined.

The three phases of an investigation ar e as follows:

Phase 1 includes the initial introduction of an investigational new drug into humans.

Phase 1 clinical trials are typically closely monitored and may be conducted in patients with the target disease or condition or in healthy volunteers.

These studies are designed to evaluate the safety, dosage tolerance, metabolism and pharmacologic actions of the investigational drug in humans, the side effects associated with increasing doses, and if possible, to gain early evidence on effectiveness.

Phase 2 includes controlled clinical trials conducted to preliminarily or further evaluate the effectiveness of the investigational drug for a particular indication(s) in patients with the disease or condition under study, to determine dosage tolerance and optimal dosage, and to identify possible adverse

side effects and safety risks associated with the drug.

Depending on its charter, this group may determine whether a trial may move forward at designated check points based on access to certain data from the trial.

The FDA or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk.

Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution 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.

There are also requirements governing the reporting of ongoing clinical studies and clinical study results to public registries.

Human clinical trials are typically conducted in three sequential phases that may overlap or be combined:

The product candidate is initially introduced into healthy human subjects or patients with the target disease or condition.

These studies are designed to test the safety, dosage tolerance, absorption, metabolism and distribution of the investigational product in humans, the side effects associated with increasing doses, and, if possible, to gain early evidence on effectiveness.

The product candidate is administered to a limited 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 3 clinical trials.

Phase 3 clinical trials are generally controlled clinical trials conducted in an expanded patient population generally at geographically dispersed clinical trial sites.

They are performed after preliminary evidence suggesting effectiveness of the drug has been obtained, and are intended to further evaluate dosage, clinical effectiveness and safety, to establish the overall benefit‑risk relationship of the investigational drug product, and to provide an adequate basis for product approval.

A registrational or pivotal study is any clinical study, which is designed to meet regulatory agency requirements for the evaluation of a product candidate’s efficacy and safety such that it can be used to justify the approval of the product.

Generally, registrational or pivotal studies are Phase 3 studies but may also be Phase 2 studies if the trial design provides a well‑controlled and reliable assessment of clinical benefit and risk, particularly in situations where there is an unmet medical need.

Post-approval trials, sometimes referred to as Phase 4 studies, may be conducted after initial marketing approval.

These trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication.

The product candidate 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 establish the overall risk/benefit ratio of the investigational product and to provide an adequate basis for product approval.

In some cases, the FDA may require, or companies may voluntarily pursue, additional clinical trials after a product is approved to gain more information about the product.

These so-called Phase 4 studies, may be conducted after initial marketing approval, and may be used to gain additional experience from the treatment of patients in the intended therapeutic indication.

In certain instances, the FDA may mandate the performance of Phase 4 clinical trials as a condition of approval of an NDA.

The FDA or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk.

In addition, some clinical trials are overseen by an independent group of qualified experts organized by the sponsor, known as a data safety monitoring board or committee.

Depending on its charter, this group may determine whether a trial may move forward at designated check points based on access to certain data from the trial.

During the development of a new drug, sponsors are given opportunities to meet with the FDA at certain points.

Concurrent with clinical trials, companies usually complete additional animal studies and must also 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 requirements.

The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, the manufacturer must develop methods for testing the identity, strength, quality and purity of the final drug.

In addition, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.

IND safety reports must be submitted to the FDA and investigators for serious and unexpected suspected adverse events, findings from other studies suggesting a significant risk to humans exposed to the same or similar drugs, findings from animal or in vitro testing suggesting a significant risk to humans, and any clinically important increased incidence of a serious suspected adverse reaction compared to that listed in the protocol or investigator brochure.

In addition, during the development of a new drug, sponsors are given opportunities to meet with the FDA at certain points.

These points may be prior to submission of an IND, at the end of Phase 2, and before an NDA is submitted.

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Sponsors typically use the meetings at the end of the Phase 2 trial to discuss Phase 2 clinical results and present plans for the pivotal Phase 3 clinical trials that they believe will support approval of the new drug.

While the IND is active and before approval, progress reports summarizing the results of the clinical trials and nonclinical studies performed since the last progress report must be submitted at least annually to the FDA, and written IND safety reports must be submitted to the FDA and investigators for serious and unexpected suspected adverse events, findings from other studies suggesting a significant risk to humans exposed to the same or similar drugs, findings from animal or in vitro testing suggesting a significant risk to humans, and any clinically important increased incidence of a serious suspected adverse reaction compared to that listed in the protocol or investigator brochure.

Review and Approval Process

Assuming successful completion of all required testing in accordance with all applicable regulatory requirements, detailed investigational drug product information is submitted to the FDA in the form of an NDA requesting approval to market the product for one or more indications.

The application includes all relevant data available from pertinent preclinical and clinical trials, including negative or ambiguous results as well as positive findings, together with detailed information relating to the product’s chemistry, manufacturing, controls and proposed labeling, among other things.

Data can come from company‑sponsored clinical trials intended to test the safety and effectiveness of a use of a product, or from a number of alternative sources, including studies initiated by investigators.

To support marketing approval, the data submitted must be sufficient in quality and quantity to establish the safety and effectiveness of the investigational drug product to the satisfaction of the FDA.

Assuming successful completion of all required testing in accordance with all applicable regulatory requirements, the results of product development, preclinical and other non-clinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conducted on the chemistry of the drug, proposed labeling and other relevant information are submitted to the FDA as part of an NDA requesting approval to market the product.

Data can come from company-sponsored clinical studies intended to test the safety and effectiveness of a use of the product, or from a number of alternative sources, including studies initiated by independent investigators.

The submission of an NDA is subject to the payment of substantial user fees;

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Additionally, no user fees are assessed on NDAs for products designated as orphan drugs, unless the product also includes a non-orphan indication.

The FDA reviews an NDA to determine, among other things, whether a product is safe and effective for its intended use and whether its manufacturing is cGMP-compliant to assure and preserve the product’s identity, strength, quality and purity.

Under the Prescription Drug User Fee Act, or PDUFA, guidelines that are currently in effect, the FDA has a goal of ten months from the date of “filing”

of a standard NDA for a new molecular entity to review and act on the submission.

This review typically takes twelve months from the date the NDA is submitted to FDA because the FDA has approximately two months to make a “filing”

The FDA conducts a preliminary review of all NDAs within the first 60 days after submission, before accepting them for filing, to determine whether they are sufficiently complete to permit substantive review The FDA may request additional information rather than accept an NDA for filing.

In this event, the NDA must be resubmitted with the additional information.

The resubmitted application also is subject to review before the FDA accepts it for filing.

Once filed, the FDA reviews an NDA to determine, among other things, whether a product is safe and effective for its intended use and whether its manufacturing is cGMP-compliant to assure and preserve the product’s identity, strength, quality and purity.

Under the Prescription Drug User Fee Act (“PDUFA”), guidelines that are currently in effect, the FDA has a goal of ten months from the filing date to complete a standard review of an NDA for a drug that is a new molecular entity, and of ten months from the date of NDA receipt to complete a standard review of an NDA for a drug that is not a new molecular entity.

The FDA may refer an application for a novel drug to an advisory committee.

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Before approving an NDA, the FDA will typically inspect the facility or facilities where the product is manufactured.

The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications.

Additionally, before approving an NDA, the FDA may inspect one or more clinical trial sites to assure compliance with GCP requirements.

The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP and adequate to assure consistent production of the product within required specifications.

Additionally, before approving a NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCPs.

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, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.

After the FDA evaluates the NDA and conducts inspections of manufacturing facilities where the drug product and/or its API will be produced, it may issue an approval letter or a Complete Response Letter.

An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications.

A Complete Response Letter indicates that the review cycle of the application is complete, and the application is not ready for approval.

A Complete Response Letter may require additional clinical data and/or an additional pivotal Phase 3 clinical trial(s), and/or other significant, expensive and time-consuming requirements related to clinical trials, preclinical studies or manufacturing.

If a Complete Response Letter is issued, the sponsor must resubmit the NDA or, addressing all of the deficiencies identified in the letter, or withdraw the application.

Even if such additional information is submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval.

After the FDA evaluates an NDA and conducts inspections of manufacturing facilities where the investigational product and/or its drug substance will be produced, the FDA may issue an approval letter or a Complete Response Letter (“CRL).

An approval letter authorizes commercial marketing of the product with specific prescribing information for

specific indications.

A CRL will describe all of the deficiencies that the FDA has identified in the NDA, except that where the FDA determines that the data supporting the application are inadequate to support approval, the FDA may issue the CRL without first conducting required inspections and/or reviewing proposed labeling.

In issuing the CRL, the FDA may recommend actions that the applicant might take to place the NDA in condition for approval, including requests for additional information or clarification.

The FDA may delay or refuse approval of an NDA if applicable regulatory criteria are not satisfied, require additional testing or information and/or require post-marketing testing and surveillance to monitor safety or efficacy of a product.

If regulatory approval of a product is granted, such approval will be granted for particular indications and may entail limitations on the indicated uses for which such product may be marketed.

The FDA could also approve the NDA with a REMS plan to mitigate risks.

A REMS plan is a safety strategy to manage a known or potential serious risk associated with a medicine and to enable patients to have continued access to such medicines by managing their safe use, which 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.

The FDA also may condition approval on, among other things, changes to proposed labeling, development of adequate controls and specifications, or a commitment to conduct one or more post market studies or clinical trials.

Such post market testing may include Phase 4 clinical trials and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization.

Regulatory approval of oncology products often requires that patients in clinical trials be followed for long periods to determine the overall survival benefit of the drug.

The FDA may prevent or limit further marketing of a product based on the results of post marketing studies or surveillance programs.

In addition, new government

requirements, including those resulting from new legislation, may be established, or the FDA’s policies may change, which could impact the timeline for regulatory approval or otherwise impact ongoing development programs.

In addition, under the Pediatric Research Equity Act of 2003, or PREA, as amended and reauthorized, certain NDAs or supplements to an NDA must contain data that are adequate to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective.

The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric data requirements.

For example, the FDA may approve the NDA with a Risk Evaluation and Mitigation Strategy (“REMS”) to ensure the benefits of the product outweigh its risks.

A REMS is a safety strategy to manage a known or potential serious risk associated with a medicine 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.

The FDA also may condition approval on, among other things, changes to proposed labeling or the development of adequate controls and specifications.

The FDA may also require one or more Phase 4 post- market studies and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization and may limit further marketing of the product based on the results of these post-marketing studies.

In addition, the Pediatric Research Equity Act (“PREA”), requires a sponsor to conduct pediatric clinical trials for most drugs, for a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration.

Under PREA, original NDAs and supplements must contain a pediatric assessment unless the sponsor has received a deferral or waiver.

The required assessment must evaluate the safety and effectiveness of the product for the claimed indications in all relevant pediatric subpopulations and support dosing and administration for each pediatric subpopulation for which the product is safe and effective.

The sponsor or FDA may request a deferral of pediatric clinical trials for some or all of the pediatric subpopulations.

A deferral may be granted for several reasons, including a finding that the drug is ready for approval for use in adults before pediatric clinical trials are complete or that additional safety or effectiveness data needs to be collected before the pediatric clinical trials begin.

The FDA must send a non-compliance letter to any sponsor that fails to submit the required assessment, keep a deferral current or fails to submit a request for approval of a pediatric formulation.

Regulation of Combination Products in the United States

Certain products are comprised of components, such as drug components and device components, that would normally be subject to different regulatory frameworks by the FDA and frequently regulated by different centers at the FDA.

These products are known as combination products.

Under the FDCA, the FDA is charged with assigning a center with primary jurisdiction, or a lead center, for review of a combination product.

The determination of which center will be the lead center is based on the “primary mode of action” of the combination product.

Thus, if the primary mode of action of a drug-device combination product is attributable to the drug product, the FDA center responsible for premarket review of the drug product would have primary jurisdiction for the combination product.

The FDA has also established the Office of Combination Products to address issues surrounding combination products and provide more certainty to the regulatory review process.

That office serves as a focal point for combination product issues for agency reviewers and industry.

It is also responsible for developing guidance and regulations to clarify the regulation of combination products, and for assignment of the FDA center that has primary jurisdiction for review of combination products where the jurisdiction is unclear or in dispute.

A combination product with a primary mode of action attributable to the drug component generally would be reviewed and approved pursuant to the drug approval processes set forth in the FDCA.

In reviewing the NDA for such a product, however, FDA reviewers would consult with their counterparts in the device center to ensure that the device component of the combination product met applicable requirements regarding safety, effectiveness, durability and performance.

In addition, under FDA regulations, combination products subject to cGMP requirements applicable to both drugs and devices, including the Quality System Regulations (“QSR”) applicable to medical devices.

Expedited Development and Review Programs

The FDA offers a number of expedited development and review programs for qualifying product candidates.

For example, the Fast Track program is intended to expedite or facilitate the process for reviewing new products that 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.

Fast Track designation applies to the combination of the product and the specific indication for which it is being studied.

The sponsor of a fast track product has opportunities for more frequent interactions with the applicable FDA review team during product development and, once an NDA is submitted, the product candidate may be eligible for priority review.

A Fast Track product may also be eligible for rolling review, where the FDA may consider for review sections of the NDA on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the NDA, the FDA agrees to accept sections of the NDA and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the NDA.

A product candidate 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.

A product candidate can receive Breakthrough Therapy designation if preliminary clinical evidence indicates that the product candidate, alone or in combination with one or more other drugs or biologics, may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development.

The designation includes all of the Fast Track program features, as well as more intensive FDA interaction and guidance beginning as early as Phase 1 and an organizational commitment to expedite the development and review of the product candidate, including involvement of senior managers.

Any marketing application for a drug submitted to the FDA for approval, including a product candidate with a Fast Track designation and/or Breakthrough Therapy designation, may be eligible for other types of FDA programs intended to expedite the FDA review and approval process, such as priority review and accelerated approval.

A product candidate is eligible for priority review if it is designed to treat a serious or life-threatening disease or condition, and if approved, would provide a significant improvement in safety or effectiveness compared to available alternatives for such disease or condition.

For new-molecular-entity NDAs, priority review designation means the FDA’s goal is to take action on the marketing application within six months of the 60-day filing date, or with respect to non-new-molecular-entity NDAs, within six months of the NDA receipt date.

Additionally, product candidates studied for their safety and effectiveness in treating serious or life-threatening diseases or conditions may receive accelerated approval upon a determination that the product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments.

As a condition of accelerated approval, the FDA will generally require the sponsor to perform adequate and well-controlled post-marketing clinical studies to verify and describe the anticipated effect on irreversible morbidity or mortality or other clinical benefit.

Products receiving accelerated approval may be subject to expedited withdrawal procedures if the sponsor fails to conduct the required post-marketing studies or if such studies fail to verify the predicted clinical benefit.

In addition, the FDA currently requires as a condition for accelerated approval pre-approval of promotional materials, which could adversely impact the timing of the commercial launch of the product.

Fast Track designation, Breakthrough Therapy designation, priority review, and accelerated approval do not change the standards for approval, but may expedite the development or approval process.

Even if a product candidate qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or decide that the time period for FDA review or approval will not be shortened.

Orphan drug designation and exclusivity

The Orphan Drug Act provides incentives for the development of products intended to treat rare diseases or conditions.

Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the United States and for which there is no reasonable expectation that the cost of developing and making a drug or biological product available in the United States for this type of disease or condition will be recovered from sales of the product.

Under the Orphan Drug Act, the FDA may grant orphan designation to a drug intended to treat a rare disease or condition, defined as a disease or condition with a patient population of fewer than 200,000 individuals in the United

States, or a patient population greater than 200,000 individuals in the United States and when there is no reasonable expectation that the cost of developing and making available the drug in the United States will be recovered from sales in the United States for that drug.

Orphan drug designation must be requested before submitting an NDA.

After the FDA grants orphan drug designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA.

Orphan drug designation, however, does not convey any advantage in or shorten the duration of the regulatory review and approval process.

Orphan drug designation provides manufacturers with research grants, tax credits and eligibility for orphan drug exclusivity.

If a product that has orphan drug designation subsequently receives the first FDA approval of the active moiety for that disease or condition for which it has such designation, the product is entitled to orphan drug exclusivity, which for seven years prohibits the FDA from approving another product with the same active ingredient for the same indication, except in limited circumstances.

If a drug designated as an orphan product receives marketing approval for an indication broader than the orphan drug indication for which it received the designation, it will not be entitled to orphan drug exclusivity.

Orphan drug exclusivity will not bar approval of another product under certain circumstances, including if a subsequent product with the same active ingredient for the same indication is shown to be clinically superior to the approved product on the basis of greater efficacy or safety, or providing a major contribution to patient care, or if the company with orphan drug exclusivity is not able to meet market demand.

Further, the FDA may approve more than one product for the same orphan drug indication or disease as long as the products contain different active ingredients.

Moreover, competitors may receive approval of different products for the indication for which the orphan drug product has exclusivity or obtain approval for the same product but for a different indication for which the orphan drug product has exclusivity.

As a result, even if one of our product candidates receives orphan exclusivity, we may still be subject to competition.

Orphan drug exclusivity also could block the approval of one of our products for seven years if a competitor obtains approval of the same drug or if our product candidate is determined to be contained within the competitor’s product for the same indication or disease.

Expedited development and review programs

The FDA has a fast track designation program that is intended to expedite or facilitate the process for reviewing new drug products that meet certain criteria.

Specifically, new drugs 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.

With regard to a fast track product, the FDA may consider for review sections of the NDA on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the NDA, the FDA agrees to accept sections of the NDA and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the NDA.

Any product submitted to the FDA for approval, including a product with a fast track designation, may also be eligible for other types of FDA programs intended to expedite development and review, such as priority review and accelerated approval.

A product is eligible for priority review if it has the potential to provide safe and effective therapy where no satisfactory alternative therapy exists or a significant improvement in the treatment, diagnosis or prevention of a disease compared to marketed products.

The FDA will attempt to direct additional resources to the evaluation of an application for a new drug designated for priority review in an effort to facilitate the review.

The FDA endeavors to review applications with priority review designations within six months of the filing date as compared to ten months for review of new molecular entity NDAs under its current PDUFA review goals.

In addition, a product may be eligible for accelerated approval.

Drug products intended to treat serious or life-threatening diseases or conditions may be eligible for accelerated approval upon a determination that the product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments.

As a condition of approval, the FDA may require that a sponsor of a drug receiving accelerated approval perform adequate and well-controlled post-marketing clinical trials.

Drugs receiving accelerated approval may be subject to expedited withdrawal procedures if the sponsor fails to perform required post-marketing trials or if such trials fail to verify the predicted clinical benefit.

In addition, the FDA currently requires pre-approval of promotional materials as a condition for accelerated approval, which could adversely impact the timing of the commercial launch of the product.

The Food and Drug Administration Safety and Innovation Act established a category of drugs referred to as “breakthrough therapies”

that may be eligible to receive breakthrough therapy designation.

A sponsor may seek FDA designation of a product candidate as a “breakthrough therapy”

if the product is intended, alone or in combination with one or more other products, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development.

The designation includes all of the fast track program features, as well as more intensive FDA interaction and guidance.

The breakthrough therapy designation is a distinct status from both accelerated approval and priority review, which can also be granted to the same drug if relevant criteria are met.

If a product is designated as breakthrough therapy, the FDA will work to expedite the development and review of such drug.

Fast track designation, breakthrough therapy designation and priority review and do not change the standards for approval but may expedite the development or approval process.

Even if a product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or decide that the time period for FDA review or approval will not be shortened.

We may explore some of these opportunities for our product candidates as appropriate.

After the FDA grants orphan drug designation, the generic identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA.

If a product that has orphan drug designation subsequently receives the first FDA approval for a particular active ingredient for the disease for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications, including a full NDA, to market the same drug for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity or if the FDA finds that the holder of the orphan drug exclusivity has not shown that it can assure the availability of sufficient quantities of the orphan drug to meet the needs of patients with the disease or condition for which the drug was designated.

Orphan drug exclusivity does not prevent the FDA from approving a different drug for the same disease or condition, or the same drug for a different disease or condition.

Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the NDA application user fee.

A designated orphan drug many not receive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation.

In addition, orphan drug exclusive marketing rights in the United States may be lost if the FDA later determines that the request for designation was materially defective or, as noted above, if a second applicant demonstrates that its product is clinically superior to the approved product with orphan exclusivity or the manufacturer of the approved product is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition.

Post-approval Requirements

After regulatory approval of a drug product is obtained, we will be required to comply with a number of post approval requirements.

As a holder of an approved NDA, we would be required to report, among other things, certain adverse reactions and production problems to the FDA, to provide updated safety and efficacy information, and to comply with requirements concerning advertising and promotional labeling for any of our products.

Drug products manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to record-keeping, reporting of adverse experiences, periodic reporting, product sampling and distribution, and advertising and promotion of the product.

After approval, most changes to the approved product, such as adding new indications or other labeling claims, are subject to prior FDA review and approval.

There also are continuing, annual program fees for any marketed products.

Also, quality control and manufacturing procedures must continue to conform to cGMP after approval to ensure and preserve the long term stability of the drug product.

In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and state agencies, and are subject to periodic unannounced inspections by the FDA and these state agencies for compliance with cGMP requirements.

In addition, changes to the manufacturing process are strictly regulated, and, depending on the significance of the change, may require prior FDA approval before being implemented.

FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting and documentation requirements upon us and any third-party manufacturers that we may decide to use.

Accordingly, manufacturers must continue to expend time, money

and effort in the area of production and quality control to maintain compliance with cGMP and other aspects of regulatory compliance.

Drug manufacturers and their subcontractors are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP, which impose certain procedural and documentation requirements upon us and our third-party manufacturers.

Changes to the manufacturing process are strictly regulated, and, depending on the significance of the change, may require prior FDA approval before being implemented.

FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting requirements.

Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain compliance with cGMP and other aspects of regulatory compliance.

The FDA may withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market.

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• fines, warning letters, or untitled letters;

clinical holds on clinical trials;

refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of product approvals;

• clinical holds on clinical studies;

• refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of product approvals;

• product seizure or detention, or refusal to permit the import or export of products;

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• injunctions or the imposition of civil or criminal penalties.

The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market.

Drugs may be promoted only for the approved indications and in accordance with the provisions of the approved label.

The FDA closely regulates the marketing, labeling, advertising and promotion of drug products.

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 label.

The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses.

Failure to comply with these requirements can result in, among other things, adverse publicity, warning letters, corrective advertising and potential civil and criminal penalties.

Physicians may prescribe legally available products 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 prescribe, in their independent professional medical judgment, legally available products for uses that are not described in the product’s labeling and that differ from those tested by us and approved by the FDA.

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 manufacturer’s communications on the subject of off-label use of their products.

Marketing Exclusivity

Market exclusivity provisions under the FDCA also can delay the submission or the approval of certain applications.

The FDCA provides a five‑year period of non‑patent marketing exclusivity within the United States to the first applicant to obtain approval of an NDA for a new chemical entity.

A drug is a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance.

During the exclusivity period, the FDA may not accept for review an abbreviated new drug application, or ANDA, or a 505(b)(2) NDA submitted by another company for another version of such drug where the applicant does not own or have a legal right of reference to all the data required for approval.

However, an application may be submitted after four years if it contains a certification of patent invalidity or non‑infringement.

The FDCA also provides three years of marketing exclusivity for an NDA, 505(b)(2) NDA or supplement to an approved NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example, for new indications, dosages or strengths of an existing drug.

This three‑year exclusivity covers only the modifications associated with the new clinical investigations and does not prohibit the FDA from approving ANDAs for drugs containing the original active pharmaceutical ingredient.

The FDA does, however, restrict manufacturer’s communications on the subject of off-label use of their products.

However, companies may share truthful and not misleading information that is otherwise consistent with a product’s FDA-approved labelling.

Hatch-Waxman Act

Section 505 of the FDCA describes three types of marketing applications that may be submitted to the FDA to request marketing authorization for a new drug.

A Section 505(b)(1) NDA is an application that contains full reports of investigations of safety and efficacy.

A 505(b)(2) NDA is an application that contains full reports of investigations of safety and efficacy but where at least some of the information required for approval comes from investigations that were not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use from the person by or for whom the investigations were conducted.

This regulatory pathway enables the applicant to rely, in part, on the FDA's prior findings of safety and efficacy for an existing product, or published literature, in support of its application.

Section 505(j) establishes an abbreviated approval process for a generic version of approved drug products through the submission of an Abbreviated New Drug Application (“ANDA”).

An ANDA provides for marketing of a generic drug product that has the same active ingredients, dosage form, strength, route of administration, labeling, performance characteristics and intended use, among other things, to a previously approved product.

ANDAs are termed "abbreviated"

because they are generally not required to include preclinical (animal) and clinical (human) data to establish safety and efficacy.

Instead, generic applicants must scientifically demonstrate that their product is bioequivalent to, or performs in the same manner as, the innovator drug through in vitro, in vivo, or other testing.

The generic version must deliver the same amount of active ingredients into a subject's bloodstream in the same amount of time as the innovator drug and can often be substituted by pharmacists under prescriptions written for the reference listed drug.

In seeking approval for a drug through an NDA, applicants are required to list with the FDA each patent with claims that cover the applicant's drug or a method of using the drug.

Upon approval of a drug, each of the patents listed in the application for the drug is then published in the FDA's Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book.

Drugs listed in the Orange Book can, in turn, be cited by potential competitors in support of approval of an ANDA or 505(b)(2) NDA.

Upon submission of an ANDA or a 505(b)(2) NDA, an applicant must certify to the FDA that (1) no patent information on the drug product that is the subject of the application has been submitted to the FDA;

(2) such patent has expired;

(3) the date on which such patent expires;

or (4) such patent is invalid or will not be infringed upon by the manufacture, use or sale of the drug product for which the application is submitted.

Generally, the ANDA or 505(b)(2)

NDA cannot be approved until all listed patents have expired, except where the ANDA or 505(b)(2) NDA applicant challenges a listed patent through the last type of certification, also known as a paragraph IV certification.

If the applicant does not challenge the listed patents or indicates that it is not seeking approval of a patented method of use, the ANDA or 505(b)(2) NDA application will not be approved until all of the listed patents claiming the referenced product have expired.

If the ANDA or 505(b)(2) NDA applicant has provided a Paragraph IV certification to the FDA, the applicant must send notice of the Paragraph IV certification to the NDA and patent holders once the application has been accepted for filing by the FDA.

The NDA and patent holders may then initiate a patent infringement lawsuit in response to the notice of the paragraph IV certification.

If the paragraph IV certification is challenged by an NDA holder or the patent owner(s) asserts a patent challenge to the paragraph IV certification, the FDA may not approve that application until the earlier of 30 months from the receipt of the notice of the paragraph IV certification, the expiration of the patent, when the infringement case concerning each such patent was favorably decided in the applicant's favor or settled, or such shorter or longer period as may be ordered by a court.

This prohibition is generally referred to as the 30-month stay.

In instances where an ANDA or 505(b)(2) NDA applicant files a paragraph IV certification, the NDA holder or patent owner(s) regularly take action to trigger the 30-month stay, recognizing that the related patent litigation may take many months or years to resolve.

Thus, approval of an ANDA or 505(b)(2) NDA could be delayed for a significant period of time depending on the patent certification the applicant makes and the reference drug sponsor's decision to initiate patent litigation.

The Hatch-Waxman Act establishes periods of regulatory exclusivity for certain approved drug products, during which the FDA cannot approve (or in some cases accept) an ANDA or 505(b)(2) application that relies on the branded reference drug.

For example, the holder of an NDA, including a 505(b)(2) NDA, may obtain five years of exclusivity upon approval of a new drug containing new chemical entities that have not been previously approved by the FDA.

A drug is a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the therapeutic activity of the drug substance.

During the exclusivity period, the FDA may not accept for review an ANDA or a 505(b)(2) NDA submitted by another company that contains the previously approved active moiety.

However, an ANDA or 505(b)(2) NDA may be submitted after four years if it contains a certification of patent invalidity or non-infringement.

The Hatch-Waxman Act also provides three years of marketing exclusivity to the holder of an NDA (including a 505(b)(2) NDA) for a particular condition of approval, or change to a marketed product, such as a new formulation for a previously approved product, if one or more new clinical studies (other than bioavailability or bioequivalence studies) was essential to the approval of the application and was conducted/sponsored by the applicant.

This three-year exclusivity period protects against FDA approval of ANDAs and 505(b)(2) NDAs for the condition of the new drug's approval.

As a general matter, the three year exclusivity does not prohibit the FDA from approving ANDAs or 505(b)(2) NDAs for generic versions of the original, unmodified drug product.

Five-year and three-year exclusivity will not delay the submission or approval of a full NDA;

however, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the preclinical studies and adequate and well‑controlled clinical trials necessary to demonstrate safety and effectiveness.

Pediatric exclusivity is another type of marketing exclusivity available in the United States.

Pediatric exclusivity provides for an additional six months of marketing exclusivity attached to another period of exclusivity if a sponsor conducts clinical trials in children in response to a written request from the FDA.

The issuance of a written request does not require the sponsor to undertake the described clinical trials.

In addition, orphan drug exclusivity, as described above, may offer a seven-year period of marketing exclusivity, except in certain circumstances.

The Hatch‑Waxman Amendments:

505(b)(2) Approval Process

Section 505(b)(2) of the FDCA provides an alternate regulatory pathway to FDA approval for new or improved formulations or new uses of previously approved drug products.

Specifically, Section 505(b)(2) permits the filing of an NDA where at least some of the information required for approval comes from studies not conducted by or for the applicant and for which the applicant has not obtained a right of reference.

The applicant may rely upon the FDA’s findings of safety and effectiveness for an approved product that acts as the Reference Listed Drug, or RLD.

If the 505(b)(2) applicant can establish that reliance on FDA’s previous findings of safety and effectiveness is scientifically appropriate, it may eliminate the need to conduct certain preclinical or clinical studies of the new product.

The FDA may also require 505(b)(2) applicants to perform additional studies or measurements to support the change from the RLD.

The FDA may then approve the new product candidate for all or some of the labeled indications for which the referenced product has been approved, as well as for any new indication sought by the Section 505(b)(2) applicant.

In seeking approval for a drug through an NDA, including a 505(b)(2) NDA, applicants are required to list with the FDA certain patents whose claims cover the applicant’s product.

Upon approval of an NDA, each of the patents listed in the application for the drug is then published in the Orange Book.

Any applicant who files an ANDA seeking approval of a generic equivalent version of a drug listed in the Orange Book or a 505(b)(2) NDA referencing a drug listed in the Orange Book must certify to the FDA that (i) no patent information on the drug product that is the subject of the application has been submitted to the FDA;

(ii) such patent has expired;

(iii) the date on which such patent expires;

or (iv) such patent is invalid or will not be infringed upon by the manufacture, use or sale of the drug product for which the application is submitted.

This last certification is known as a paragraph IV certification.

A notice of the paragraph IV certification must be provided to each owner of the patent that is the subject of the certification and to the holder of the approved NDA to which the ANDA or 505(b)(2) application refers.

The applicant may also elect to submit a “section viii”

statement certifying that its proposed label does not contain or carves out any language regarding the patented method‑of‑use rather than certify to a listed method‑of‑use patent.

If the reference NDA holder and patent owners assert a patent challenge directed to one of the Orange Book listed patents within 45 days of the receipt of the paragraph IV certification notice, the FDA is prohibited from approving the application until the earlier of 30 months from the receipt of the paragraph IV certification expiration of the patent, settlement of the lawsuit or a decision in the infringement case that is favorable to the applicant.

The ANDA or 505(b)(2) application also will not be approved until any applicable non‑patent exclusivity listed in the Orange Book for the branded reference drug has expired.

however, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and efficacy.

FDA Approval and Regulation of Medical Devices and Companion Diagnostics

If safe and effective use of a therapeutic depends on an in vitro diagnostic, then the FDA generally will require approval or clearance of that diagnostic, known as a companion diagnostic, at the same time that the FDA approves the therapeutic product.

In August 2014, the FDA issued final guidance clarifying the requirements that will apply to approval of therapeutic products and in vitro companion diagnostics.

According to the guidance, if FDA determines that a companion diagnostic device is essential to the safe and effective use of a novel therapeutic product or indication, FDA generally will not approve the therapeutic product or new therapeutic product indication if the companion diagnostic device is not approved or cleared for that indication.

Approval or clearance of the companion diagnostic device will ensure that the device has been adequately evaluated and has adequate performance characteristics in the intended population.

The review of in vitro companion diagnostics in conjunction with the review of our therapeutic treatments for cancer will, therefore, likely involve coordination of review by the FDA’s Center for Drug Evaluation and Research and the FDA’s Center for Devices and Radiological Health Office of In Vitro Diagnostics and Radiological Health.

Under the FDCA, in vitro diagnostics, including companion diagnostics, are regulated as medical devices.

In the United States, the FDCA and its implementing regulations, and other federal and state statutes and regulations govern, among other things, medical device design and development, preclinical and clinical testing, premarket clearance or

approval, registration and listing, manufacturing, labeling, storage, advertising and promotion, sales and distribution, export and import, and post-market surveillance.

Unless an exemption applies, medical devices, including companion diagnostic tests, require marketing clearance or approval from the FDA prior to commercial distribution.

The two primary types of FDA marketing authorization applicable to a medical device are premarket notification, also called 510(k) clearance, and premarket approval (“PMA”).

To obtain 510(k) clearance, a manufacturer must submit to the FDA a premarket notification submission demonstrating that the proposed device is “substantially equivalent” to a legally marketed predicate device.

The FDA’s 510(k) clearance process usually takes from three to twelve months, but may take longer.

The FDA may require additional information, including clinical data, to make a determination regarding substantial equivalence.

If the FDA agrees that the device is substantially equivalent to a predicate device currently on the market, it will grant 510(k) clearance to commercially market the device.

If the FDA determines that the device is “not substantially equivalent” to a previously cleared device, the device is automatically designated as a Class III (i.e., high-risk) device.

The device sponsor must then fulfill more rigorous PMA requirements, or can request a risk-based classification determination for the device in accordance with the “de novo” process, which is a route to market for novel medical devices that are low to moderate risk and are not substantially equivalent to a predicate device.

After a device receives 510(k) clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute a major change or modification in its intended use, will require a new 510(k) clearance or, depending on the modification, PMA approval or de novo classification.

The FDA requires each manufacturer to determine whether the proposed change requires submission of a 510(k), de novo classification or a PMA in the first instance, but the FDA can review any such decision and disagree with a manufacturer’s determination.

If the FDA disagrees with a manufacturer’s determination, the FDA can require the manufacturer to cease marketing and/or request the recall of the modified device until 510(k) marketing clearance, approval of a PMA, or issuance of a de novo classification.

Also, in these circumstances, the manufacturer may be subject to significant regulatory fines or penalties.

The PMA process, including the gathering of clinical and preclinical data and the submission to and review by the FDA, can take several years or longer.

It involves a rigorous premarket review during which the applicant must prepare and provide the FDA with reasonable assurance of the device’s safety and effectiveness and information about the device and its components regarding, among other things, device design, manufacturing and labeling.

PMA applications are subject to an application fee.

In addition, PMAs for certain devices must generally include the results from extensive preclinical and adequate and well-controlled clinical trials to establish the safety and effectiveness of the device for each indication for which FDA approval is sought.

In particular, for a diagnostic, a PMA application typically requires data regarding analytical and clinical validation studies.

As part of the PMA review, the FDA will typically inspect the manufacturer’s facilities for compliance with the QSR which imposes elaborate testing, control, documentation and other quality assurance requirements.

PMA approval is not guaranteed, and the FDA may ultimately respond to a PMA submission with a not approvable determination based on deficiencies in the application and require additional clinical trial or other data that may be expensive and time-consuming to generate and that can substantially delay approval.

If the FDA’s evaluation of the PMA application is favorable, the FDA typically issues an approvable letter requiring the applicant’s agreement to specific conditions, such as changes in labeling, or specific additional information, such as submission of final labeling, in order to secure final approval of the PMA.

If the FDA’s evaluation of the PMA or manufacturing facilities is not favorable, the FDA will deny approval of the PMA or issue a not approvable letter.

A not approvable letter will outline the deficiencies in the application and, where practical, will identify what is necessary to make the PMA approvable.

The FDA may also determine that additional clinical trials are necessary, in which case the PMA approval may be delayed for several months or years while the trials are conducted and then the data submitted in an amendment to the PMA.

If the FDA concludes that the applicable criteria have been met, the FDA will issue a PMA for the approved indications, which can be more limited than those originally sought by the applicant.

The PMA can include post-approval conditions that the FDA believes necessary to ensure the safety and effectiveness of the device, including, among other things, restrictions on labeling, promotion, sale and distribution.

Once granted, PMA approval may be withdrawn by the FDA if compliance with post approval requirements, conditions of approval or other regulatory standards are not maintained or problems are identified following initial marketing.

After a device is placed on the market, it remains subject to significant regulatory requirements.

Medical devices may be marketed only for the uses and indications for which they are cleared or approved.

Device manufacturers must also establish registration and device listings with the FDA.

A medical device manufacturer’s manufacturing processes and those of its suppliers are required to comply with the applicable portions of the QSR, which cover the methods and documentation of the design, testing, production, processes, controls, quality assurance, labeling, packaging and shipping of medical devices.

Domestic facility records and manufacturing processes are subject to periodic unscheduled inspections by the FDA.

The FDA also may inspect foreign facilities that export products to the United States.

International Regulations

In addition to regulations in the United States, we are and will be subject to a variety of foreign regulations regarding development, approval, commercial sales and distribution of our products.

Whether or not we obtain FDA approval for a product, we must obtain the necessary approvals by the comparable regulatory authorities of foreign countries before we can commence clinical trials or marketing of the product in those countries.

The approval process varies from country to country and can involve additional product testing and additional review periods, and the time may be longer or shorter than that required to obtain FDA approval.

The requirements governing, among other things,

the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country.

Regulatory approval in one country does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country may negatively impact the regulatory process in others.

If we fail to comply with applicable foreign regulatory requirements, we may be subject to fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.

To obtain regulatory approval of an investigational drug under European Union regulatory systems, we must submit a marketing authorization application.

The application used to file the NDA in the United States is similar to that required in Europe, with the exception of, among other things, country‑specific document requirements.

For other countries outside of the European Union, such as countries in Eastern Europe, Latin America or Asia, the requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country.

In all cases, again, the clinical trials are conducted in accordance with GCP and the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki.

If we fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things, fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.

Centralized Procedure

In the European Economic Area (EEA), which is comprised of the 27 EU member states plus Iceland, Liechtenstein, and Norway, and the United Kingdom (until the end of the transition period on 31 December, 2020 provided for in the Withdrawal Agreement between the EU and the UK), the European Medicines Agency, or EMA, has responsibility for reviewing applications for the approval of human medicines under the Centralized Procedure.

This procedure results in a single marketing authorization issued by the European Commission following a favorable opinion by the EEA.

The centralized procedure is compulsory for human medicines that are derived from biotechnology processes, advanced therapy medicinal products (such as gene therapy, somatic cell therapy and tissue engineered products), and medicinal products that contain a new active substance indicated for the treatment of certain diseases, such as HIV/AIDS, cancer, diabetes, neurodegenerative disorders or autoimmune diseases and other immune dysfunctions, and officially designated orphan medicines.

For medicines that do not fall within these categories, an applicant has the option of submitting an application for a centralized marketing authorization to the EMA, for products containing a new active substance not yet authorized in the EEA, or for products that constitute a significant therapeutic, scientific or technical innovation or which are in the interest of public health in the EU.

There are also two other possible routes to authorize medicinal products in several EEA countries, which are available for investigational medicinal products that fall outside the scope of the centralized procedure the decentralized procedure and the mutual recognition procedure.

Under the decentralized procedure, an applicant may apply for simultaneous authorization in more than one EEA country for medicinal products that have not yet been authorized in any EEA country.

Under the mutual recognition procedure, a medicine is first authorized in one EEA member state, in accordance with the national procedures of that country.

Following a national authorization, the applicant may seek further marketing authorizations from other EEA countries under a procedure whereby the countries concerned agree to recognize the validity of the original national marketing authorization.

In the EEA, medicinal products designated as orphan drug products benefit from financial incentives such as reductions in marketing authorization application fees or fee waivers and 10 years of marketing exclusivity following medicinal product approval.

For a medicinal product to qualify as orphan drugs (i) it must be intended for the treatment, prevention or diagnosis of a disease that is life threatening or chronically debilitating;

(ii) the prevalence of the condition in the EU must not be more than five in 10,000 or it must be unlikely that marketing of the medicine would generate sufficient returns to justify the investment needed for its development;

and (iii) no satisfactory method of diagnosis, prevention or treatment of the condition concerned can be authorized, or, if such a method exists, the medicine must be of significant benefit to those affected by the condition.

Accelerated Review

Based on results of the Phase 3 clinical trial(s) submitted in an NDA, upon the request of an applicant, the FDA may grant the NDA a priority review designation, which sets the target date for FDA action on the application at six months.

Priority review is granted where preliminary estimates indicate that a product, if approved, has the potential to provide a safe and effective therapy where no satisfactory alternative therapy exists, or a significant improvement compared to marketed products is possible.

If criteria are not met for priority review, the NDA is subject to the standard FDA review period of 10 months.

Priority review designation does not change the scientific/medical standard for approval or the quality of evidence necessary to support approval.

Under the Centralized Procedure in the EEA, the maximum timeframe for the evaluation of a marketing authorization application is 210 days (excluding clock stops, when additional written or oral information is to be provided by the applicant in response to questions asked by the Committee for Medicinal Product for Human Use or CHMP, accelerated evaluation might be granted by the CHMP in exceptional cases when a medicinal product is expected to be of a major public health interest, defined by three cumulative criteria:

the seriousness of the disease (e.g.

heavy disabling or life‑threatening diseases) to be treated;

the absence or insufficiency of an appropriate alternative therapeutic approach;

and anticipation of high therapeutic benefit.

In this circumstance, EMA ensures that the opinion of the CHMP is given within 150 days, excluding clock stops.

There can be no assurance that we or any of our partners would be able to satisfy one or more of these requirements to conduct preclinical or clinical trials or receive any regulatory approvals.

In addition to regulations in the United States, we are and will be subject to a variety of regulations in other jurisdictions governing, among other things, clinical studies and any commercial sales and distribution of our products.

Whether or not we obtain FDA approval of a product, we must obtain the requisite approvals from regulatory authorities in foreign countries prior to the commencement of clinical studies or marketing of the product in those countries.

The requirements and process governing the conduct of clinical studies, product licensing, pricing and reimbursement vary from country to country.

Failure to comply with applicable foreign regulatory requirements, may be subject to, among other things, fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.

Clinical Trials

Certain countries outside of the United States have a similar process that requires the submission of a clinical study application, or CTA, much like the IND prior to the commencement of human clinical studies.

In the European Union, or EU, for example, a CTA must be submitted to each country’s national health authority and an independent ethics committee, much like the FDA and the IRB, respectively.

Once the CTA is approved by the national health authority and the ethics committee has granted a positive opinion in relation to the conduct of the trial in the relevant member state(s), in accordance with a country’s requirements, clinical study development may proceed.

Clinical trials of medicinal products in the European Union must be conducted in accordance with EU and national regulations and the International Conference on Harmonization, or ICH, guidelines on Good Clinical Practices, or GCP, as well as the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki.

Additional GCP guidelines from the European Commission, focusing in particular on traceability, apply to clinical trials of advanced therapy medicinal products, or ATMPs.

If the sponsor of the clinical trial is not established within the EU, it must appoint an EU entity to act as its legal representative.

The sponsor must take out a clinical trial insurance policy, and in most EU countries, the sponsor is liable to provide ‘no fault’ compensation to any study subject injured in the clinical trial.

Prior to commencing a clinical trial, the sponsor must obtain a clinical trial authorization from the competent authority, and a positive opinion from an independent ethics committee.

The CTA must include, among other things, a copy of the trial protocol and an investigational medicinal product dossier containing information about the manufacture and quality of the medicinal product under investigation.

Currently, CTAs must be submitted to the competent authority in each EU member state in which the trial will be conducted.

Under the new Regulation on Clinical Trials, which is currently expected to take effect by early 2022, there will be a centralized application procedure where one national authority takes the lead in reviewing the application and the other national authorities have only limited involvement.

Any substantial changes to the trial protocol or other information submitted with the CTA must be notified to or approved by the relevant competent authorities and ethics committees.

Medicines used in clinical trials must be manufactured in accordance with GMP.

Other national and European Union-wide regulatory requirements may also apply.

During the development of a medicinal product, the EMA and national regulators provide the opportunity for dialogue and guidance on the development program.

At the EMA level, this is usually done in the form of scientific advice, which is given by the Scientific Advice Working Party of the Committee for Medicinal Products for Human Use, or CHMP.

A fee is incurred with each scientific advice procedure.

Advice from the EMA is typically provided based on questions concerning, for example, quality (chemistry, manufacturing and controls testing), nonclinical testing and

clinical trials, and pharmacovigilance plans and risk-management programs.

Advice is not legally binding with regard to any future marketing authorization application of the product concerned.

Marketing Authorizations

In the European Union, medicinal products can only be placed on the market after obtaining a Marketing Authorization, or MA.

To obtain regulatory approval of an investigational drug in the EU, we must submit a marketing authorization application, or MAA.

The process for doing this depends, among other things, on the nature of the medicinal product.

The centralized procedure results in a single MA, issued by the European Commission, based on the opinion of the EMA’s CHMP, which is valid across the entire territory of the EU.

The centralized procedure is compulsory for human medicines that are:

(i) derived from biotechnology processes, such as genetic engineering, (ii) contain a new active substance indicated for the treatment of certain diseases, such as HIV/AIDS, cancer, diabetes, neurodegenerative diseases, autoimmune and other immune dysfunctions and viral diseases, (iii) designated orphan medicines and (iv) advanced therapy medicinal products, or ATMPs, such as gene therapy, somatic cell therapy or tissue-engineered medicines.

The centralized procedure may at the request of the applicant also be used in certain other cases.

It is very likely that the centralized procedure would apply to the products we are developing.

Under the centralized procedure, the maximum timeframe for the evaluation of a MAA by the EMA is 210 days.

This excludes so-called clock stops, during which additional written or oral information is to be provided by the applicant in response to questions asked by the CHMP.

At the end of the review period, the CHMP provides an opinion to the European Commission.

If this opinion is favorable, the Commission may then adopt a decision to grant an MA.

In exceptional cases, the CHMP might perform an accelerated review of a MAA in no more than 150 days (not including clock stops).

Innovative products that target an unmet medical need and are expected to be of major public health interest may be eligible for a number of expedited development and review programs, such as the PRIME scheme, which provides incentives similar to the breakthrough therapy designation in the U.S.

PRIME is a voluntary scheme aimed at enhancing the EMA’s support for the development of medicines that target unmet medical needs.

It is based on increased interaction and early dialogue with companies developing promising medicines, to optimize their product development plans and speed up their evaluation to help them reach patients earlier.

Product developers that benefit from PRIME designation can expect to be eligible for accelerated assessment, but this is however not guaranteed.

The benefits of a PRIME designation include the appointment of a CHMP rapporteur before submission of a MAA, early dialogue and scientific advice at key development milestones, and the potential to qualify products for accelerated review earlier in the application process.

There are also two other possible routes to authorize medicinal products in several EU member states, which are available for investigational medicinal products that fall outside the scope of the centralized procedure:

the decentralized procedure and the mutual recognition procedure.

Under the decentralized procedure, an applicant may apply for simultaneous authorization in more than one EU member state for medicinal products that have not yet been authorized in any EU member states.

Under the mutual recognition procedure, a medicine is first authorized in one EU member state, in accordance with the national procedures of that country.

Following a national authorization, the applicant may seek further marketing authorizations from other EU member states under a procedure whereby the countries concerned agree to recognize the validity of the original national marketing authorization.

MAs have an initial duration of five years.

After these five years, the authorization may be renewed on the basis of a reevaluation of the risk-benefit balance.

Once renewed, the MA is valid for an unlimited period unless the European Commission or the national competent authority decides, on justified grounds relating to pharmacovigilance, to proceed with one additional five-year renewal.

Orphan Medicinal Products

The criteria for designating an “orphan medicinal product” in the European Union are similar in principle to those in the United States.

A medicinal product may be designated as orphan if (1) it is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition;

(2) either (a) such condition affects no more than

five in 10,000 persons in the European Union when the application is made, or (b) the product, without the benefits derived from orphan status, would not generate sufficient return in the European Union to justify investment;

and (3) there exists no satisfactory method of diagnosis, prevention or treatment of such condition authorized for marketing in the European Union, or if such a method exists, the product will be of significant benefit to those affected by the condition.

The application for orphan drug designation must be submitted before the MAA.

Orphan medicinal products are eligible for financial incentives such as reduction of fees or fee waivers and are, upon grant of a MA, entitled to ten years of market exclusivity for the approved therapeutic indication.

During the ten-year market exclusivity period, the EMA cannot accept a MAA, or grant a MA, or accept an application to extend a MA, for the same indication, in respect of a similar medicinal product.

An orphan medicinal product can also obtain an additional two years of market exclusivity in the European Union for pediatric studies.

No extension to any supplementary protection certificate can be granted on the basis of pediatric studies for orphan indications.

Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.

The 10-year market exclusivity may be reduced to six years if, at the end of the fifth year, it is established that the product no longer meets the criteria for orphan designation, for example, if the product is sufficiently profitable not to justify maintenance of market exclusivity.

Additionally, a MA may be granted to a similar product for the same indication at any time if (1) the second applicant can establish that its product, although similar, is safer, more effective or otherwise clinically superior;

(2) the applicant consents to a second orphan medicinal product application;

or (3) the applicant cannot supply enough orphan medicinal product.

Approval and Regulation of Companion Diagnostics

In the EU, in vitro diagnostic medical devices are regulated by Directive 98/79/EC which regulates the placing on the market, the CE-marking, the essential requirements, the conformity assessment procedures, the registration obligations for manufactures and devices as well as the vigilance procedure.

In vitro diagnostic medical devices must comply with the requirements provided for in the Directive, and with further requirements implemented at national level (as the case may be).

Companion diagnostics can also be considered “combination products” which are governed by a different regulatory pathway depending on the mode of action of the products.

A combination medicine/device product could either be regulated as a medicinal product or a medical device based on its primary mode of action.

In principle, if a medical device incorporates a substance which, if used separately, is likely to be considered as a medicinal product and act on the human body by an action ancillary to that of the device, the device must be evaluated and authorized in accordance with the medical device regulations.

However, if the medicinal substance constitutes the main function of the product then the product is considered as a medicinal product.

Currently, for such combination products, the manufacturer will have to consult, prior to obtaining the CE marking of the device, the EMA or national competent authorities to obtain scientific advice on the quality and safety of the medicinal substance, including the benefit/risk profile of its incorporation into the device.

The regulation of companion diagnostics will be subject to further requirements as of the entry into force of the in-vitro diagnostic devices Regulation (No 2017/746) which introduces a new classification system for companion diagnostics which are now specifically defined as diagnostic tests that support the safe and effective use of a specific medicinal product, by identifying patients that are suitable or unsuitable for treatment.

Companion diagnostics will have to undergo a conformity assessment by a notified body.

Before it can issue a CE certificate, the notified body must seek a scientific opinion from the EMA on the suitability of the companion diagnostic to the medicinal product concerned if the medicinal product falls exclusively within the scope of the centralized procedure for the authorization of medicines, or the medicinal product is already authorized through the centralized procedure, or a marketing authorization application for the medicinal product has been submitted through the centralized procedure.

For other substances, the notified body can seek the opinion from a national competent authorities or the EMA.

The aforementioned EU rules are generally applicable in the European Economic Area, or EEA, which consists of the 27 EU member states plus Norway, Liechtenstein and Iceland.

The United Kingdom, or UK, formally left the EU on January 31, 2020, commonly referred to as “Brexit”.

The post-Brexit transition period, during which EU pharmaceutical laws continued to apply to the UK, expired on December 31, 2020.

This means that since January 1, 2021, the UK operates under a distinct regulatory regime.

EU pharmaceutical laws now only apply to the UK in respect of Northern Ireland (as laid out in the Protocol on Ireland and Northern Ireland, including but not limited to MAAs).

Since January 1, 2021, EU laws which have been transposed into UK law through secondary legislation continue to be applicable as “retained EU law”.

Pharmaceutical Coverage, Pricing and Reimbursement

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Our product candidates may not be considered medically necessary or cost-effective.

A payor’s decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved.

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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• an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents;

a new Medicare Part D coverage gap discount program, in which pharmaceutical manufacturers who wish to have their drugs covered under Part D must offer discounts to eligible beneficiaries during their coverage gap period, or the “donut hole”;

• a new Medicare Part D coverage gap discount program, in which pharmaceutical manufacturers who wish to have their drugs covered under Part D must offer discounts to eligible beneficiaries during their coverage gap period, or the “donut hole”;

• a new formula that increases the rebates a manufacturer must pay under the Medicaid Drug Rebate Program.

Since its enactment, there have been judicial and Congressional challenges to certain aspects of the ACA.

For example, the Tax Cuts and Jobs Act, or the Tax Act, was enacted in 2017, which, among other things, removes penalties for not complying with the Affordable Care Act’s individual mandate to carry health insurance.

Since its enactment, there have been judicial, executive and Congressional challenges to certain aspects of the ACA.

For example, the Tax Cuts and Jobs Act, or the Tax Act, was enacted in 2017, which, among other things, removes penalties for not complying with the ACA’s individual mandate to carry health insurance.

On December 14, 2018, a U.S.

District Court Judge in the Northern District of Texas, ruled that the individual mandate is a critical and inseverable feature of the Affordable Care Act, and therefore, because it was repealed as part of the Tax Act, the remaining provisions of the Affordable Care Act are invalid as well.

District Court Judge in the Northern District of Texas, ruled that the individual mandate is a critical and inseverable feature of the ACA, and therefore, because it was repealed as part of the Tax Act, the remaining provisions of the ACA are invalid as well.

On December 18, 2019, the U.S.

Court of Appeals for the 5th Circuit upheld the District Court’s decision that the individual mandate was unconstitutional but remanded the case back to the District Court to determine whether the remaining provisions of the Affordable Care Act are invalid as well.

It is unclear how these decisions, subsequent appeals, if any, or other efforts to challenge, repeal or replace the Affordable Care Act will impact the law, or our business or financial condition.

Supreme Court is currently reviewing the case, although it is unclear how the Supreme Court will rule.

It is unclear how these decisions, subsequent appeals, if any, or other efforts to challenge, repeal or replace the ACA will impact the law, or our business or financial condition.

In addition, we expect that federal, state and local governments in the United States will continue to consider legislation to limit the growth of healthcare costs, including the cost of prescription drugs.

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Different pricing and reimbursement schemes exist in other countries.

In the European Community, governments influence the price of pharmaceutical products through their pricing and reimbursement rules and control of national health care systems that fund a large part of the cost of those products to consumers.

In the European Union, governments influence the price of pharmaceutical products through their pricing and reimbursement rules and control of national health care systems that fund a large part of the cost of those products to consumers.

Member states are free to restrict the range of pharmaceutical products for which their national health insurance systems provide reimbursement, and to control the prices and reimbursement levels of pharmaceutical products for human use.

Some jurisdictions operate positive and negative list systems under which products may only be marketed once a reimbursement price has been agreed.

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If we obtain regulatory approval for any of our product candidates, we may be subject to various federal and state laws targeting fraud and abuse in the healthcare industry.

For example, in the United States, there are federal and state anti‑kickback laws that prohibit the payment or receipt of kickbacks, bribes or other remuneration intended to induce the purchase or recommendation of healthcare products and services or reward past purchases or

recommendations.

Violations of these laws can lead to civil and criminal penalties, including fines, imprisonment and exclusion from participation in federal healthcare programs.

Such laws include, without limitation, U.S.

federal and state anti-kickback, fraud and abuse, false claims, consumer fraud, pricing reporting, data privacy and security, and transparency laws and regulations with respect to drug pricing and payments and other transfers of value made to physicians and other healthcare professionals, as well as similar foreign laws in the jurisdictions outside the U.S.

The federal Anti-Kickback Statute prohibits persons from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, to induce either the referral of an individual, or the furnishing, recommending, or arranging for a good or service, for which payment may be made under a federal healthcare program, such as the Medicare and Medicaid programs.

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In addition, the government may assert that 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 False Claims Act.

The “qui tam”

provisions of the False Claims Act allow a private individual to bring civil actions on behalf of the federal government alleging that the defendant has submitted a false claim to the federal government, and to share in any monetary recovery.

In addition, various states have enacted false claims laws analogous to the False Claims Act.

The “qui tam” provisions of the False Claims Act allow a private individual to bring civil actions on behalf of the federal government alleging that the defendant has submitted a false claim to the federal government, and to share in any monetary recovery.

various states have enacted false claims laws analogous to the False Claims Act.

Many of these state laws apply where a claim is submitted to any third-party payer and not merely a federal healthcare program.

When an entity is determined to have violated the False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus significant civil penalties for each separate false claim.

Also, the Health Insurance Portability and Accountability Act of 1996, or HIPAA, created several new federal crimes, including healthcare fraud, and false statements relating to healthcare matters.

Also, the Health Insurance Portability and Accountability Act of 1996, or HIPAA, created several federal crimes, including healthcare fraud, and false statements relating to healthcare matters.

The health care fraud statute prohibits knowingly and willfully executing a scheme to defraud any health care benefit program, including private third-party payers.

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Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of this statute or specific intent to violate it in order to have committed a violation.

The Physician Payment Sunshine Act, or the Sunshine Act, which was enacted as part of the ACA, requires applicable manufacturers of drugs, devices, biologicals, or medical supplies covered under Medicare, Medicaid or the Children’s Health Insurance Program, to report annually to the Secretary of the Department of Health and Human Services payments or other transfers of value made by that entity, or by a third party as directed by that entity, to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other healthcare providers starting in 2022, and teaching hospitals, or to third parties on behalf of such providers, during the course of the preceding calendar year.

Failure to comply with the reporting requirements can result in significant civil monetary penalties for any payment or other transfer of value that is not reported.

Violations of any of these laws or any other governmental laws and regulations that may apply include, without limitation, significant civil, criminal and administrative penalties, damages, fines, imprisonment, exclusion of products from government funded healthcare programs, such as Medicare and Medicaid, disgorgement, contractual damages, reputational harm, diminished profits and the curtailment or restructuring of our operations.

In addition, we may be subject to data privacy and security laws, including, without limitation, HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and its implementing regulations, which established uniform standards for certain “covered entities”

(healthcare providers, health plans and healthcare clearinghouses) and their business associates governing the conduct of certain electronic healthcare transactions and protecting the security and privacy of protected health information.

In addition, certain state laws govern the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways, thus complicating compliance efforts.

For example, California recently enacted legislation, the California Consumer Privacy Act, or CCPA, which went into effect January 1, 2020.

The CCPA, among other things,

creates new data privacy obligations for covered companies and provides new privacy rights to California residents, including the right to opt out of certain disclosures of their information.

The CCPA also creates a private right of action with statutory damages for certain data breaches, thereby potentially increasing risks associated with a data breach.

Although the law includes limited exceptions, including for “protected health information”

maintained by a covered entity or business associate, it may regulate or impact our processing of personal information depending on the context.

As of December 31, 2019, we employed a total of 24 full‑time employees.

In addition, we have access to certain BioXcel employees and resources through various agreements we have entered into with BioXcel.

We are not a party to any collective bargaining agreements.

We believe that we maintain good relations with our employees and also that of the Parent.

Data Privacy & Security

Numerous state, federal and foreign laws, including consumer protection laws and regulations, govern the collection, dissemination, use, access to, confidentiality and security of personal information, including health-related information.

In the United States, numerous federal and state laws and regulations, including data breach notification laws, health information privacy and security laws, including HIPAA, and federal and state consumer protection laws and regulations (e.g., Section 5 of the FTC Act), that govern the collection, use, disclosure, and protection of health-related and other personal information could apply to our operations or the operations of our partners.

In addition, certain state and non-U.S.

laws, such as the California Consumer Privacy Act, or CCPA, the California Privacy Rights Act, or CPRA, and the EU General Data Protection Regulation, or GDPR, govern the privacy and security of personal information, including health-related 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 and private litigation.

Privacy and security laws, regulations, and other obligations are constantly evolving, may conflict with each other to complicate compliance efforts, and can result in investigations, proceedings, or actions that lead to significant civil and/or criminal penalties and restrictions on data processing.

Additionally, our use of artificial intelligence and machine learning may be subject to laws and evolving regulations regarding the use of artificial intelligence/machine learning, controlling for data bias, and antidiscrimination.

Human Capital

Our Employees .

We have grown to a team of 50 employees as of December 31, 2020, all of whom were employed in the U.S.

Our highly qualified and experienced team includes scientists, physicians and professionals across sales,

marketing, manufacturing, regulatory, finance and other important functions that are critical to our success.

We also leverage certain experts in drug development employed by our BioXcel to provide flexibility for our business needs.

We expect to continue to hire additional employees in 2021 with a focus on expanding our expertise and bandwidth in clinical and preclinical research and development, marketing and sales and finance.

We continually evaluate our business needs and opportunities.

Our Culture .

The success of our human capital management investments is evidenced by our low employee turnover, a number which is regularly reviewed by our Board of Directors as part of their oversight of our human capital strategy.

Employee Engagement, Talent Development & Benefits .

We believe that our future success largely depends upon our continued ability to attract and retain highly skilled employees.

We provide our employees with competitive salaries and bonuses, and opportunities for equity ownership.

Diversity & Inclusion .

Much of our success is rooted in the diversity of our teams and our commitment to inclusion.

We value diversity at all levels and continue to focus on extending our diversity and inclusion initiatives across our entire workforce.

We believe that our business benefits from the different perspectives a diverse workforce brings, and we pride ourselves on having a strong, inclusive and positive culture based on our shared mission and values.

Our Corporate Information

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The contents of, or information accessible through, our website are not part of this Annual Report on Form 10-K.

We make our filings with the SEC, including our Annual Report on Form 10-K, Quarterly Reports on For m 10-Q, Current Reports on Form 8-K and all amendments to those reports, available free of charge on our website as soon as reasonably practicable after we file such reports with, or furnish such reports to, the SEC.

Our website and the information contained on or through that site are not incorporated into this Annual Report on Form 10-K.

We make our filings with the SEC, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports, available free of charge on our website as soon as reasonably practicable after we file such reports with, or furnish such reports to, the SEC.

We may use our website as a distribution channel of material information about the Company.

Financial and other important information regarding the Company is routinely posted on and accessible through the Investors sections of its website at www.bioxceltherapeutics.com .

In addition, you may automatically receive email alerts and other information about the Company when you enroll your email address by visiting the “Email Alerts” option under the News / Events menu of the Investors section of our website at www.bioxceltherapeutics.com .

The reference to our website address does not constitute incorporation by reference of the information contained on or available through our website, and you should not consider such information to be a part of this Annual Report on Form 10-K.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business