Item 1. Business
Item
1. Business
Overview
We
are a biopharmaceutical company focused on developing and commercializing therapeutic products for the prevention and treatment
of infectious and inflammatory diseases.
Our
primary focus is on the development of our lead product candidate, DefenCath ™ , for potential commercialization
in the United States, or U.S., and other key markets. We have in-licensed the worldwide rights to develop and commercialize DefenCath
and Neutrolin ® . The name DefenCath is the U.S. proprietary name conditionally approved by the U.S. Food and Drug
Administration (“FDA”). The name Neutrolin is currently used in the European Union (“EU”) and other territories
where the Company has received CE-Mark approval for the commercial distribution of Neutrolin as a catheter lock solution (“CLS”)
regulated as a medical device.
DefenCath is a novel
anti-infective solution (a formulation of taurolidine 1.35% and heparin 1000 USP U/ml) intended for the reduction of catheter-related
infections in patients requiring central venous catheters in clinical settings such as hemodialysis, total parenteral nutrition
and oncology. Infections represent key complications among hemodialysis, total parenteral nutrition and cancer patients with central
venous catheters. These complications can lead to treatment delays and increased costs to the healthcare system when they occur
due to hospitalizations, need for intravenous, or IV, antibiotic treatment, removal/replacement of the central venous catheter
(“CVC”), related treatment costs and increased mortality. We believe DefenCath addresses a significant unmet medical
need and a potential large market opportunity.
DefenCath
– United States
In
late 2013, we met with the FDA, to determine the pathway for U.S. marketing approval of DefenCath. We launched the Phase 3 clinical
trial in patients with hemodialysis catheters in the U.S. in December 2015. The clinical trial, named Phase 3 Prospective, Multicenter,
Double-blind, Randomized, Active Control Study to Demonstrate Safety and Effectiveness of DefenCath in Preventing Catheter-related
Bloodstream Infection in Subjects on Hemodialysis for End Stage Renal Disease, or LOCK-IT-100, was a prospective, multicenter,
randomized, double-blind, active control trial which aimed to demonstrate the efficacy and safety of DefenCath in preventing catheter-related
bloodstream infections, or CRBSI, in subjects receiving hemodialysis therapy as treatment for end stage renal disease. The primary
endpoint for the trial was time to CRBSI. The trial evaluated DefenCath relative to the active control heparin by documenting
the incidence of CRBSI and the time until the occurrence of CRBSI for each study subject. Secondary endpoints were catheter patency,
which was defined as required use of tissue plasminogen activating factor, or tPA, or removal of catheter due to dysfunction,
and removal of catheter for any reason.
1
During
the course of the study, in consultation with the FDA, we established the Clinical Adjudication Committee, or CAC, to critically
and independently assess CRBSI while being blinded to treatment assignment. As announced in July 2018, the CAC reviewed potential
cases of CRBSI in our LOCK-IT-100 study that occurred through early December 2017 and identified 28 such cases. As previously
agreed with the FDA, an interim efficacy analysis was performed when the first 28 CRBSIs were identified. On July 25, 2018, we
announced that the independent Data Safety Monitoring Board, or DSMB, had completed its review of the interim analysis of the
data from the LOCK-IT-100 study. Based on the first 28 cases, there was a highly statistically significant 72% reduction in CRBSI
relative to the control (p=0.0034). Because the pre-specified level of statistical significance was reached for the primary endpoint
and efficacy had been demonstrated with no safety concerns, the DSMB recommended the study be terminated early.
Following
discussions with the FDA, we proceeded with an orderly termination of LOCK-IT-100. In late January 2019, we announced the topline
results of the full data set of the LOCK-IT-100 study. The study continued enrolling and treating subjects until study termination,
and the final efficacy analysis was based on a total of 795 subjects.
The
primary endpoint of the Phase 3 LOCK-IT-100 study was the reduction of the risk of occurrence of CRBSI by DefenCath relative to
the active control of heparin. In the analysis of the full data set, a total of 41 CRBSI events were determined by the CAC. There
was a 71% reduction in the risk of occurrence of CRBSIs compared with the active control of heparin, which was well in excess
of the study’s assumed treatment effect size of a 55% reduction. In the DefenCath arm, the CRBSI event rate was 0.13 per
1000 catheter days, which is significantly lower than the event rate of 0.46 per 1000 catheter days in the control arm. The statistical
significance of the primary endpoint in the full data set (p=0.0006) was even more impressive than that of the interim analysis
(p=0.0034).
There
were no statistically significant differences between the results in the DefenCath arm compared with the control arm in the final
analysis for the secondary endpoints. The event rate for one of the secondary endpoints, catheter removal for any reason, was
3.48 per 1000 catheter-days (236 out of 397 subjects) in the DefenCath arm and 3.23 per 1000 catheter-days (225 out of 398 subjects)
in the control arm (p=0.416). The loss of catheter patency, which was defined either as catheter removal due to loss of catheter
patency or the administration of tPA, was also a secondary endpoint. The event rate for loss of catheter patency was 0.99 per
1000 catheter-days (63 out of 397 subjects) in the DefenCath arm and 0.74 per 1000 catheter-days (48 out of 398 subjects) in the
control arm (p=0.12). In the top-line safety analysis, the observed rate of treatment-emergent adverse events was lower in the
DefenCath arm. The rate of adverse events per patient was 5.1 in the DefenCath arm and 5.8 in the control arm.
Although
the FDA usually requires two pivotal clinical trials to provide substantial evidence of safety and effectiveness for approval
of a New Drug Application, or NDA, the FDA will in some cases accept one adequate and well-controlled trial, where it is a large
multicenter trial with a broad range of subjects and investigation sites with procedures to include trial quality that has demonstrated
a clinically meaningful and statistically very persuasive effect on prevention of a disease with potentially serious outcome.
In March 2020, we
began the modular submission process for the NDA for DefenCath for the prevention of CRBSI in hemodialysis patients, and in
August 2020, the FDA accepted for filing the DefenCath NDA. The FDA also granted our request for priority review, which
provides for a six-month review period instead of the standard ten-month review period. As we announced in March 2021, the
FDA informed us that it will not approve the NDA for DefenCath in its present form. The FDA noted concerns at the third-party
manufacturing facility after a review of records requested by the FDA and provided by the manufacturing facility. We are
working with the manufacturing facility to develop plans for resolution of the deficiencies. Additionally, the FDA is
requiring a manual extraction study to demonstrate that the labeled volume can be consistently withdrawn from the vials
despite an existing in-process control to demonstrate fill volume within specifications. We expect to be able to complete
this requirement expeditiously. Satisfactory resolution of these issues is required for approval of the DefenCath NDA by a
pre-approval inspection and/or adequate manufacturing facility responses addressing these concerns. If an inspection is
required, we may encounter delays in obtaining FDA approval because the FDA is currently facing a backlog due to the pandemic
and is actively working to define an approach for scheduling outstanding inspections once safe travel may resume. We will
request a meeting with the FDA, which we estimate will occur in mid-April, to obtain agreement with the FDA on the proposed
resolutions of the deficiencies.
2
The
FDA did not request additional clinical data and did not identify any deficiencies related to the data submitted on the efficacy
or safety of DefenCath from LOCK-IT-100. In draft labeling discussed with the FDA, the FDA added that the initial approval will
be for the limited population of patients with kidney failure receiving chronic hemodialysis through a central venous catheter.
This is consistent with our request for approval pursuant to the Limited Population Pathway for Antibacterial and Antifungal Drugs,
or LPAD. LPAD, passed as part of the 21 st Century Cures Act, is a new program intended to expedite the development
and approval of certain antibacterial and antifungal drugs to treat serious or life-threatening infections in limited populations
of patients with unmet needs. LPAD provides for a streamlined clinical development program involving smaller, shorter, or fewer
clinical trials and is intended to encourage the development of safe and effective products that address unmet medical needs of
patients with serious bacterial and fungal infections. We believe that LPAD will provide additional flexibility for the FDA to
approve DefenCath to reduce CRBSIs in the limited population of patients with kidney failure receiving hemodialysis through a
central venous catheter.
In
January 2015, the FDA granted Fast Track designation to DefenCath, a designation intended to facilitate development and expedite
review of drugs that treat serious and life-threatening conditions so that the approved drug can reach the market expeditiously.
Also in January 2015, the FDA designated DefenCath as a Qualified Infectious Disease Product, or QIDP, for prevention of catheter-related
blood stream infections in patients with end stage renal disease receiving hemodialysis through a central venous catheter. Catheter-related
blood stream infections can be life-threatening. The QIDP designation provides five years of marketing exclusivity in addition
to the five years granted for a New Chemical Entity upon approval of the NDA. We received a deferral from FDA for the requirement
of submitting data in the NDA for use of DefenCath in pediatric hemodialysis patients as a catheter lock solution. When the pediatric
study is completed as a post-approval commitment, DefenCath will be eligible for an additional six months of marketing exclusivity.
Neutrolin
– International
In
the European Union, or EU, Neutrolin is regulated as a Class 3 medical device. In July 2013, we received CE Mark approval for
Neutrolin. In December 2013, we commercially launched Neutrolin in Germany for the prevention of CRBSI, and maintenance of catheter
patency in hemodialysis patients using a tunneled, cuffed central venous catheter for vascular access. To date, Neutrolin is registered
and may be sold in certain European Union and Middle Eastern countries for such treatment.
In
September 2014, the TUV-SUD and The Medicines Evaluation Board of the Netherlands, or MEB, granted a label expansion for Neutrolin
for these same expanded indications for the EU. In December 2014, we received approval from the Hessian District President in
Germany to expand the label to include use in oncology patients receiving chemotherapy, IV hydration and IV medications via central
venous catheters. The expansion also adds patients receiving medication and IV fluids via central venous catheters in intensive
or critical care units (cardiac care unit, surgical care unit, neonatal critical care unit, and urgent care centers). An indication
for use in total parenteral nutrition was also approved.
Additional
Development Possibilities
In
addition to developing the use of taurolidine as a catheter lock solution, we are sponsoring a pre-clinical research collaboration
for the use of taurolidine as a possible treatment for rare pediatric tumors. In February 2018, the FDA granted orphan drug designation
to taurolidine for the treatment of neuroblastoma in children. We may seek one or more strategic partners or other sources of
capital to help us develop and commercialize taurolidine for the treatment of neuroblastoma in children. We are also evaluating
opportunities for the possible expansion of taurolidine as a platform compound for use in certain medical devices. Patent applications
have been filed in several indications, including wound closure, surgical meshes, and wound management. Based on initial feasibility
work, we are advancing pre-clinical studies for taurolidine-infused surgical meshes, suture materials and hydrogels. We will seek
to establish development/commercial partnerships as these programs advance.
The
FDA regards taurolidine as a new chemical entity and therefore it is currently regulated as an unapproved new drug. We might in
the future pursue product candidates that would involve devices impregnated with taurolidine, and we believe that at the current
time such products would be combination products subject to both device premarket submission requirements and drug regulations.
Consequently, given that there is no appropriate predicate medical device currently marketed in the U.S. on which a 510(k) clearance
process could be based and that taurolidine is not yet approved in any application, we anticipate that we would be required to
submit a premarket approval application, or PMA, for marketing authorization for any medical device indications that we may pursue
for devices containing taurolidine. In the event that an NDA for DefenCath is approved by the FDA, the regulatory pathway for
these medical device product candidates may be revisited with the FDA. Although there may be no appropriate predicate, de novo
Class II designation can be proposed, based on a risk assessment and a reasonable assurance of safety and effectiveness.
3
DefenCath
Market
Opportunity
Central venous catheters
and peripherally inserted central catheters (“Central Catheters”) are an important and frequently used method for accessing
the vasculature in hemodialysis (a form of dialysis where the patient’s blood is circulated through a dialysis filter), administering
chemotherapy and basic fluids in cancer patients and for cancer chemotherapy, long term antibiotic therapy, total parenteral nutrition
(complete or partial dietary support via intravenous nutrients).
According
to the 2015 United States Renal Disease System, there were 660,000 patients on hemodialysis in the U.S. Hemodialysis National
Kidney Foundation has reported that patients requiring Central Catheters represent over 63 million catheter/dialysis treatment
days per year. In 2019, the estimated number of patients with cancer is approximately 6 million, and between 25-60% require Central
Catheters, and represents about 136 million catheter days per year, based on market research by a third-party commissioned by
us.
One
of the major and common complications for all patients requiring CVCs is CRBSI and the clinical complications associated with
them. The total annual cost for treating CRBSI episodes and their related complications in the U.S. is up to $2.7 billion, with
approximately 250,000 CRBSI episodes per year (Becker’s Hospital Review).
Biofilm
build up is the pathogenesis of both infections and thrombotic complications in central venous catheters. Prevention of CRBSI
and inflammatory complications requires both removal of pathogens from the internal surface of the catheter to prevent the systemic
dissemination of organisms contained within the biofilm as well as an anticoagulant to retain blood flow during dialysis. Biofilm
forms when bacteria adhere to surfaces in aqueous environments and begin to excrete a slimy, glue-like substance that can anchor
them to various types of materials, including intravenous catheters. The presence of biofilm has many adverse effects, including
the ability to release bacteria into the blood stream. The current standard of catheter care is to instill a heparin lock solution
at a concentration of 1000 u/mL into each catheter lumen immediately following treatment, in order to prevent clotting between
dialysis treatments. However, a heparin lock solution provides no protection from the risk of infection.
Currently, there are
no pharmacologic agents approved in the U.S. for the prevention of CRBSI in CVCs. As noted above, we received the CE Mark approval
for Neutrolin from the MEB of the EU in July 2013. We believe there is a significant need for prevention of CRBSI in the hemodialysis
patient population as well as for other patient populations utilizing central venous catheters and peripherally inserted central
catheters, such as oncology/chemotherapy, and total parenteral nutrition.
DefenCath
is a broad-spectrum antibacterial, antifungal and anticoagulant combination that is active against common microbes including antibiotic-resistant
strains and in addition may prevent biofilm formation. We believe that using DefenCath as an anti-infective solution will significantly
reduce the incidence of life-threatening catheter-related blood stream infections, thus reducing the need for local and systemic
antibiotics while prolonging catheter function.
Initially, we expect
to sell DefenCath in the U.S. primarily to key operators of dialysis centers. We anticipate that Medicare reimbursement could be
available for DefenCath in hemodialysis and other catheter indications such as oncology patients and total parenteral nutrition
patients through relevant hospital inpatient diagnosis-related groups, or DRGs, or outpatient ambulatory payment classifications,
or APCs, the End-Stage Renal Disease Prospective Payment System, or ESRD PPS, base payment, or under the Durable Medical Equipment,
Prosthetics, Orthotics, and Supplies, or DMEPOS, Fee Schedule, depending on the setting of care. We also plan to seek separate
reimbursement as a drug, where available under Medicare, through mechanisms such as pass-through status under the Hospital Outpatient
Prospective Payment System, the transitional drug add-on payment adjustment, or TDAPA, under the ESRD PPS, or reimbursement as
a drug used with a DMEPOS infusion pump. We have engaged the U.S. Centers for Medicare & Medicaid Services, or CMS, in preliminary
discussions concerning the reimbursement for DefenCath under TDAPA, however, qualifications cannot be determined until after FDA
approval and CMS evaluates the request for coverage in a quarterly review. If approved under TDAPA, reimbursement of DefenCath
would be calculated based on its average selling price. To be eligible for TDAPA, a new renal drug or biologic must be:
● Approved
by FDA pursuant to Section 505(b)(1) of the Federal Food, Drug, and Cosmetic Act
● Commercially
available
4
● Assigned
a Healthcare Common Procedure Coding System code
● Identified
as having an end action effect that treats or manages a condition or conditions associated
with ESRD
● Identified
as not fitting into an established ESRD PPS functional category
● Designated
by CMS as a renal dialysis service.
Although
we cannot fully anticipate changes in reimbursement requirements and mechanisms in the coming years, we expect DefenCath would
be eligible for and would obtain TDAPA. DefenCath meets the criterion of being a new renal dialysis product used to treat or manage
a condition associated with ESRD, since infections are the second leading cause of death in patients with ESRD and CVCs are a
significant risk factor for infection-associated mortality.
Furthermore,
we anticipate that the CMS, and private payers will increasingly demand that manufacturers demonstrate the cost effectiveness
of their product as part of the reimbursement review and approval process. With this in mind, we are performing health economic
evaluations to support this review in the context of the prospective use of DefenCath in dialysis, and other settings, such as
oncology. Our studies may not be sufficient to support coverage or reimbursement at levels that allow providers to use DefenCath.
Competitive
Landscape
The
drug and medical device industries are highly competitive and subject to rapid and significant technological change. DefenCath’s
current and future competitors include large as well as specialty pharmaceutical and biotechnology companies. Many of our competitors
have substantially greater financial, technical and human resources than we do and significantly more experience in the development
and commercialization of drugs and medical devices. Further, the development of new treatment methods could render DefenCath non-competitive
or obsolete.
We believe that the
key competitive factors that will affect the development and commercial success of DefenCath are efficacy and safety, as well as
pricing and reimbursement. Given that there are no approved catheter lock solutions with antimicrobial properties in the U.S.,
and that the current standard of care is heparin, we believe there is an opportunity for DefenCath to become the new standard of
care as a CLS in the U.S. market, if approved by FDA. We are not aware of any potentially competitive CLS which are approved or
under development by other companies in the U.S. A development stage product from Citius is being studied for salvage of CVCs once
a patient becomes diagnosed with a catheter related blood stream infection.
In the EU, several
catheter lock solutions have received a CE Mark, in addition to Neutrolin. For example, TauroLock contains a combination of citrate
4% with (cyclo)-taurolidine and heparin or urokinase, but it is not approved for use in the U.S. Some device companies have launched
antibiotic or antimicrobial-coated catheters as short-term prevention of catheter infections. We believe these are not effective
for hemodialysis catheters due to the long-term use and high blood flow associated with hemodialysis.
Manufacturing/Supply
Chain
We
do not own or operate any manufacturing facilities related to the production of our products. All our manufacturing processes
currently are, and we expect them to continue, to be outsourced to third parties. We rely on third-party manufacturers to produce
sufficient quantities of drug product for use both commercially and in clinical trials. We intend to continue this practice in
the future.
With
regards to taurolidine, an active drug ingredient, or API, of DefenCath, we have a Drug Master File filed with the FDA. There
is a master commercial supply agreement between the third-party manufacturer, Alcami, and us in place from August 2018. We have
two sources for the other key API, Heparin sodium.
We have utilized two
drug product contract manufacturing organizations, or CMOs. One CMO manufactures for the EU and Middle East markets and the other
is for U.S. production. In order to assure supply, we are in the process of beginning to qualify a second CMO for U.S. vial production.
All API and drug products are validated at commercial scale.
We are confident that
these CMO’s have adequate capacity to produce the volumes needed, and that there exists a sufficient number of potential
alternate sources for the drug substances required to produce our products, as well as third-party manufacturers, that we will
be able to find alternate suppliers and third-party manufacturers in the event that our relationship with any supplier or third-party
manufacturer deteriorates. The process for selecting and qualifying an alternative contract manufacturer and for completing the
technology transfer to such a manufacturer to the point of enabling commercialization of the product would take several years.
5
United
States Government Regulation
The
research, development, testing, manufacture, labeling, promotion, advertising, distribution, and marketing, among other things,
of our products are extensively regulated by governmental authorities in the U.S. and other countries. Our products may be classified
by the FDA as a drug or a medical device depending upon the indications for use or claims. Because certain of our product candidates
are considered as medical devices and others are considered as drugs for regulatory purposes, we intend to submit applications
to regulatory agencies for approval or clearance of both medical devices and pharmaceutical product candidates.
In
the U.S., the FDA regulates drugs and medical devices under the Federal Food, Drug, and Cosmetic Act (FDCA) and the Agency’s
implementing regulations. If we fail to comply with the applicable U.S. requirements at any time during the product development
process, clinical testing, and during the approval process or after approval, we may become subject to administrative or judicial
sanctions. These sanctions could include the FDA’s refusal to approve pending applications, license suspension or revocation,
withdrawal of an approval, warning letters, adverse publicity, product recalls, product seizures, total or partial suspension
of production or distribution, injunctions, fines, civil penalties or criminal prosecution, among other actions. Any agency enforcement
action and/or any related impact could have a material adverse effect on us.
Drug
Approval Process
The
research, development, and approval process in the United States and elsewhere is intensive and rigorous and generally takes many
years to complete. The typical process required by the FDA before a therapeutic drug may be marketed in the United States includes:
● Pre-clinical
laboratory and animal tests performed under the FDA’s Good Laboratory Practices,
or GLP, regulations;
● submission
to the FDA of an investigational new drug application, or IND, which must become effective
before human clinical trials may commence;
● human
clinical studies to evaluate the drug’s safety and effectiveness for its intended
uses;
● FDA
review of whether the facility in which the drug is manufactured, processed, packaged,
or held meets standards designed to assure the product’s continued quality and
FDA review of clinical trial sites to determine whether the clinical trials were conducted
in accordance with Good Clinical Practices, or GCPs; and
● submission
of a new drug application, or NDA, to the FDA, and approval of the application by the
FDA to allow sales of the drug.
During
pre-clinical testing, studies are performed with respect to the chemical and physical properties of candidate formulations. These
studies are subject to GLP requirements. Biological testing is typically done in animal models to demonstrate the activity of
the compound against the targeted disease or condition and to assess the apparent effects of the new product candidate on various
organ systems, as well as its relative therapeutic effectiveness and safety. An IND application must be submitted to the FDA and
become effective before studies in humans may commence.
Clinical
trial programs in humans generally follow a three-phase process. Typically, Phase 1 studies are conducted in small numbers of
healthy volunteers or, on occasion, in patients afflicted with the target disease. Phase 1 studies are conducted to determine
the metabolic and pharmacological action of the product candidate in humans and the side effects associated with increasing doses,
and, if possible, to gain early evidence of effectiveness. In Phase 2, studies are generally conducted in larger groups of patients
having the target disease or condition in order to validate clinical endpoints, and to obtain preliminary data on the effectiveness
of the product candidate and optimal dosing. This phase also helps determine further the safety profile of the product candidate.
In Phase 3, large-scale clinical trials are generally conducted in patients having the target disease or condition to provide
sufficient data for the statistical proof of effectiveness and safety of the product candidate as required by United States and
foreign regulatory agencies. Typically, two Phase 3 trials are required for marketing approval.
6
In
the case of products for certain serious or life-threatening diseases, the initial human testing may be done in patients with
the disease rather than in healthy volunteers. Because these patients are already afflicted with the target disease or condition,
it is possible that such studies will also provide results traditionally obtained in Phase 2 studies. These studies are often
referred to as “Phase 1/2” studies. However, even if patients participate in initial human testing and a Phase 1/2
study is carried out, the sponsor is still responsible for obtaining all the data usually obtained in both Phase 1 and Phase 2
studies.
Before
proceeding with a study, sponsors may seek a written agreement known as a Special Protocol Assessment, or SPA, from the FDA regarding
the design, size, and conduct of a clinical trial. Among other things, SPAs can cover clinical studies for pivotal trials whose
data will form the primary basis to establish a product’s efficacy. SPAs help establish up-front agreement with the FDA
about the adequacy of a clinical trial design to support a regulatory approval, but the agreement is not binding on the FDA if
new circumstances arise. An SPA may only be modified with the agreement of the FDA and the trial sponsor or if the director of
the FDA reviewing division determines that a substantial scientific issue essential to determining the safety or efficacy of the
drug was identified after the testing began. There is no guarantee that a study will ultimately be adequate to support an approval
even if the study is subject to an SPA.
Additionally,
some clinical trials are overseen by an independent group of qualified experts organized by the clinical trial sponsor, known
as a data safety monitoring board or committee. This group regularly reviews accumulated data and advises the study sponsor regarding
the continuing safety of trial subjects, and the continuing validity and scientific merit of the clinical trial. The data safety
monitoring board receives special access to unblinded data during the clinical trial and may advise the sponsor to halt the clinical
trial if it determined there is an unacceptable safety risk for subjects or on other grounds, such as no demonstration of efficacy.
The committee can also stop a clinical trial for an overwhelming demonstration of efficacy, based on pre-defined, stringent statistical
parameters and ethical considerations.
The
manufacture of investigational drugs for the conduct of human clinical trials is subject to current Good Manufacturing Practice,
or cGMP, requirements. Investigational drugs and active pharmaceutical ingredients imported into the United States are also subject
to regulation by the FDA relating to their labeling and distribution. Further, the export of investigational drug products outside
of the United States is subject to regulatory requirements of the receiving country as well as U.S. export requirements under
the FDCA.
IND
sponsors are required to submit a number of reports to the FDA during the course of a development program. For instance, sponsors
are required to make annual reports to the FDA concerning the progress of their clinical trial programs as well as more frequent
reports for certain serious adverse events. Sponsors must submit a protocol for each clinical trial, and any subsequent protocol
amendments to the FDA. Investigators must also provide certain information to the clinical trial sponsors to allow the sponsors
to make certain financial disclosures to the FDA. Information about certain clinical trials, including a description of the study
and study results, must be submitted within specific timeframes to the National Institutes of Health, or NIH, for public dissemination
on their clinicaltrials.gov website. Moreover, under the 21st Century Cures Act, manufacturers or distributors of investigational
drugs for the diagnosis, monitoring, or treatment of one or more serious diseases or conditions must have a publicly available
policy concerning expanded access to investigational drugs.
United
States law requires that studies conducted to support approval for product marketing be “adequate and well controlled.”
In general, this means that either a placebo or a product already approved for the treatment of the disease or condition under
study must be used as a reference control. The recently passed 21st Century Cures Act, however, provides for FDA acceptance of
new kinds of data such as patient experience data, real world evidence, and, for appropriate indications sought through supplemental
marketing applications, data summaries. Studies must also be conducted in compliance with good clinical practice requirements,
and informed consent must be obtained from all study subjects.
In
addition, under the Pediatric Research Equity Act, or PREA, an NDA or supplement to an NDA for a new active ingredient, indication,
dosage form, dosage regimen, or route of administration 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.
7
The
FDA also may require submission of a risk evaluation and mitigation strategy, or REMS, to ensure that the benefits of the drug
outweigh the risks of the drug. The REMS plan could include medication guides, physician communication plans, and elements to
assure safe use, such as restricted distribution methods, patient registries, or other risk minimization tools. An assessment
of the REMS must also be conducted at set intervals. Following product approval, a REMS may also be required by the FDA if new
safety information is discovered and the FDA determines that a REMS is necessary to ensure that the benefits of the drug outweigh
the risks of the drug.
The
clinical trial process for a new compound can take ten years or more to complete. The FDA may prevent clinical trials from beginning
or may place clinical trials on hold at any point in this process if, among other reasons, it concludes that study subjects are
being exposed to an unacceptable health risk. Trials may also be prevented from beginning or may be terminated by institutional
review boards, or IRBs, who must review and approve all research involving human subjects and amendments thereto. The IRB must
continue to oversee the clinical trial while it is being conducted. This includes the IRB receiving information concerning unanticipated
problems involving risk to subjects. Side effects or adverse events that are reported during clinical trials can delay, impede,
or prevent marketing authorization. Similarly, adverse events that are reported after marketing authorization can result in additional
limitations being placed on a product’s use and, potentially, withdrawal of the product from the market.
Following
the completion of a clinical trial, the data are analyzed by the sponsoring company to determine whether the trial successfully
demonstrated safety and effectiveness and whether a product approval application may be submitted. In the United States, if the
product is regulated as a new drug, an NDA must be submitted and approved by the FDA before commercial marketing may begin. The
NDA must include a substantial amount of data and other information concerning the safety and effectiveness of the compound from
laboratory, animal, and human clinical testing, as well as data and information on manufacturing, product quality and stability,
and proposed product labeling.
Each
domestic and foreign manufacturing establishment, including any contract manufacturers that we may decide to use, must be listed
in the NDA and must be registered with the FDA. The application generally will not be approved until the FDA conducts a manufacturing
inspection, approves the applicable manufacturing process for the drug product, and determines that the facility is in compliance
with current cGMP requirements. Moreover, FDA will also typically inspect one or more clinical trial sites to confirm that the
applicable clinical trials were conducted in accordance with GCPs.
Under
the Prescription Drug User Fee Act (PDUFA), as amended, the FDA assesses and receives application user fees for reviewing an NDA,
as well as annual program fees for commercial manufacturing establishments and for approved products. These fees can be significant.
Fee waivers, reductions or refunds are available in certain circumstances. One basis for a waiver or refund of the application
user fee is if the applicant is a “small business” generally defined as employing fewer than 500 employees, including
employees of affiliates, no approved marketing application for a product that has been introduced or delivered for introduction
into interstate commerce, and the applicant, including its affiliates, is submitting its first marketing application. Product
candidates that are designated as orphan drugs, which are further described below, are also not subject to application user fees
unless the application includes an indication other than the orphan indication. Under certain circumstances, orphan products may
also be exempt from product and establishment fees.
Each
NDA submitted for FDA approval is usually reviewed for administrative completeness and reviewability. Following this review, the
FDA may request additional information rather than accept an NDA for filing. In this event, the application must be resubmitted
with the additional information. The resubmitted application is also subject to review before the FDA accepts it for filing.
Once
accepted for filing, the FDA’s review of an application may involve review and recommendations by an independent FDA advisory
committee. The FDA must refer applications for drugs that contain active ingredients, including any ester or salt of the active
ingredients that have not previously been approved by the FDA to an advisory committee or provide in an action letter a summary
for not referring it to an advisory committee. The FDA may also refer drugs to advisory committees when it is determined that
an advisory committee’s expertise would be beneficial to the regulatory decision-making process, including the evaluation
of novel products and the use of new technology. An advisory committee is typically a panel that includes clinicians and other
experts, which review, evaluate, and make a recommendation as to whether the application should be approved and under what conditions.
The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making
decisions.
8
After
evaluating the NDA and all related information, including the advisory committee recommendation, if any, and inspection reports
regarding the manufacturing facilities and clinical trial sites, the FDA may issue an approval letter, or, in some cases, a Complete
Response Letter, or CRL. If a CRL is issued, the applicant may either resubmit the NDA, addressing all the deficiencies identified
in the letter; withdraw the application; or request an opportunity for a hearing. A CRL indicates that the review cycle of the
application is complete, and the application is not ready for approval and describes all the specific deficiencies that the FDA
identified in the NDA. A CRL generally contains a statement of specific conditions that must be met in order to secure final approval
of the NDA and may require additional clinical or pre-clinical testing in order for the FDA to reconsider the application. The
deficiencies identified may be minor, for example, requiring labeling changes; or major, for example, requiring additional clinical
trials. Even with submission of this additional information, the FDA ultimately may decide that the application does not satisfy
the regulatory criteria for approval. If and when those conditions have been met to the FDA’s satisfaction, the FDA may
issue an approval letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information
for specific indications.
Even
if the FDA approves a product, it may limit the approved therapeutic uses for the product as described in the product labeling,
require that warning statements be included in the product labeling, require that additional studies be conducted following approval
as a condition of the approval, impose restrictions and conditions on product distribution, prescribing, or dispensing in the
form of a REMS or otherwise limit the scope of any approval.
Special
FDA Expedited Review and Approval Programs
The
FDA has various programs, including Fast Track designation, priority review and breakthrough designation, that are intended to
expedite or simplify the process for the development and FDA review of certain drug products that are intended for the treatment
of serious or life threatening diseases or conditions, and demonstrate the potential to address unmet medical needs or present
a significant improvement over existing therapy. The purpose of these programs is to provide important new drugs to patients earlier
than under standard FDA review procedures.
To
be eligible for a Fast Track designation, the FDA must determine, based on the request of a sponsor, that a product is intended
to treat a serious or life-threatening disease or condition and demonstrates the potential to address an unmet medical need. The
FDA will determine that a product will fill an unmet medical need if the product will provide a therapy where none exists or provide
a therapy that may be potentially superior to existing therapy based on efficacy, safety, or public health factors. If Fast Track
designation is obtained, drug sponsors may be eligible for more frequent development meetings and correspondence with the FDA.
In addition, the FDA may initiate review of sections of an NDA before the application is complete. This “rolling review”
is available if the applicant provides and the FDA approves a schedule for the remaining information. A Fast Track product is
also eligible to apply for accelerated approval and priority review.
The
FDA may give a priority review designation to drugs that are intended to treat serious conditions and, if approved, would provide
significant improvements in the safety or effectiveness of the treatment, diagnosis, or prevention of serious conditions. A priority
review means that the goal for the FDA is to review an application within six months, rather than the standard review of ten months
under current PDUFA guidelines, of the 60-day filing date for new molecular entities.
Moreover,
under the provisions of the Food and Drug Administration Safety and Innovation Act, or FDASIA, enacted in 2012, a sponsor can
request designation of a product candidate as a “breakthrough therapy.” A breakthrough therapy is defined as a drug
that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition,
and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one
or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. Drugs
designated as breakthrough therapies are eligible for the Fast Track designation features as described above, intensive guidance
on an efficient drug development program beginning as early as Phase 1 trials, and a commitment from the FDA to involve senior
managers and experienced review staff in a proactive collaborative, cross-disciplinary review.
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.
9
A
final new program to expedite the development of drug products is the LPAD, which was passed as part of the 21 st Century
Cures Act. LPAD allows for the FDA’s determination of safety and effectiveness to reflect the risk-benefit profile of the
drug in the intended limited population, taking into account the severity, rarity, or prevalence of the infection and the availability
of alternative treatments in the limited population. Under LPAD, a sponsor may request drug approval for an antibacterial or antifungal
drug if the drug is intended to treat a serious life-threatening infection in a limited population of patients with unmet needs.
The drug may be approved for the limited population notwithstanding a lack of evidence to fully establish a favorable benefit-risk
profile in a broader population. The FDA must provide prompt advice to sponsors seeking approval under LPAD to enable them to
plan a development program. If approved under LPAD, certain post-marketing requirements would apply, such as required labeling
and advertising statements and pre-distribution submission of promotional materials to FDA. If after approval for a limited population,
a product receives a broader approval, the FDA may remove such post-marketing restrictions. While a drug may only be approved
for a limited population under this program, the 21 st Century Cures Act states that it is not intended to restrict
the prescribing of antimicrobial drugs or other products by healthcare professionals.
Exclusivity
For
approved drug products, market exclusivity provisions under the FDCA provide periods of regulatory exclusivity, which gives the
holder of an approved NDA limited protection from new competition in the marketplace for the innovation represented by its approved
drug.
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 Section 505(b)(2) NDA is an application in which the applicant, in part, relies on 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. 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, or 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. Limited changes must be pre-approved by the FDA via a
suitability petition.
Five
years of exclusivity are available to New Chemical Entities, or NCEs. A NCE is a drug that contains no active moiety that has
been approved by the FDA in any other NDA. An active moiety is the molecule or ion, excluding those appended portions of the molecule,
that cause the drug to be an ester, salt, including a salt with hydrogen or coordination bonds, or other noncovalent derivatives,
such as a complex, chelate, or clathrate, of the molecule, responsible for the therapeutic activity of the drug substance. During
the exclusivity period, the FDA may not accept for review and make an ANDA or a 505(b)(2) NDA approval effective for an application
submitted by another company that contains the previously approved active moiety. An ANDA or 505(b)(2) application, however, may
be submitted one year before NCE exclusivity expires if the applicant submits a certification stating that the patents listed
by the NCE sponsor in FDA’s list of Approved Drug Products with Therapeutic Equivalence Evaluations, or Orange Book, are
invalid or will not be infringed by the manufacture, use, or sale of the drug product for which approval is sought. Five-year
exclusivity will also 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 the pre-clinical studies and adequate and well-controlled clinical trials
necessary to demonstrate safety and efficacy.
Pediatric
exclusivity is another type of non-patent marketing exclusivity in the United States and, if granted, provides for the attachment
of an additional six months of marketing protection to the term of any existing regulatory exclusivity, including the non-patent
exclusivity period described above. This six-month exclusivity may be granted if an NDA sponsor submits pediatric data that fairly
respond to a written request from the FDA for such data. The data do not need to show the product to be effective in the pediatric
population studied; rather, if the clinical trial is deemed to fairly respond to the FDA’s request, the additional protection
is granted. If reports of requested pediatric studies are submitted to and accepted by the FDA within the required time frames,
whatever statutory or regulatory periods of exclusivity or Orange Book listed patent protection cover the drug are extended by
six months. Moreover, pediatric exclusivity attaches to all formulations, dosage forms, and indications for products with existing
marketing exclusivity or patent life that contain the same active moiety as that which was studied.
10
The
Orphan Drug Act also provides incentives for the development of drugs intended to treat rare diseases or conditions, which generally
are diseases or conditions affecting fewer than 200,000 individuals annually in the United States, or affecting more than 200,000
in the United States and for which there is no reasonable expectation that the cost of developing and making the drug available
in the United States will be recovered from sales in the United States. Additionally, sponsors must present a plausible hypothesis
for clinical superiority to obtain orphan designation if there is a drug already approved by the FDA that is intended for the
same indication and that is considered by the FDA to be the same drug as the already approved drug. This hypothesis must be demonstrated
to obtain orphan drug exclusivity. If granted, prior to product approval, Orphan Drug Designation entitles a party to financial
incentives such as opportunities for grant funding towards clinical study costs, tax advantages, and user-fee waivers. In addition,
if a product receives FDA approval for the indication for which it has orphan designation, the product is generally entitled to
orphan drug exclusivity, which means the FDA may not approve any other application to market the same drug for the same indication
for a period of seven years, except in limited circumstances, such as a showing of clinical superiority over the product with
orphan exclusivity.
For
certain infectious disease products, the above discussed exclusivity periods may be further extended under the FDA’s qualified
infectious disease product program. A qualified infectious disease product, or QIDP, is an antibacterial or antifungal drug for
human use intended to treat serious or life-threatening infections, including those caused by an antibacterial or antifungal resistant
pathogen, including novel or emerging infectious pathogens; or qualifying pathogens designated by the FDA that have the potential
to pose a serious threat to public health. Subject to the specified statutory limitations, a drug that is designated as a QIDP
and is approved for the use for which the QIDP designation was granted will receive a 5-year extension to any exclusivity for
which the application qualifies upon approval. For example, if the FDA approves an NDA for a drug designated as a QIDP, the NCE
exclusivity period is extended to ten years and the FDA may not accept applications for nine years. Moreover, if a product is
designated as a QIDP and an orphan product, the orphan product exclusivity period is extended to twelve years. These extensions
are in addition to any extension that an application may be entitled to under the pediatric exclusivity provisions. To receive
a QIDP designation, the sponsor must request that the FDA designate the product as such prior to the submission of an NDA. This
designation may not be withdrawn except if the FDA finds that the request for designation contained an untrue statement of material
fact. QIDPs are also eligible for fast track status and priority review.
Post
Approval Requirements
Significant
legal and regulatory requirements also apply after FDA approval to market under an NDA. These include, among other things, requirements
related to adverse event and other reporting, product tracking and tracing, suspect and illegitimate product investigations and
notifications, product advertising and promotion and ongoing adherence to cGMPs, as well as the need to submit appropriate new
or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling, or manufacturing
process. The FDA also enforces the requirements of the Prescription Drug Marketing Act which, among other things, imposes various
requirements in connection with the distribution of product samples to physicians. The FDA enforces these requirements through,
among other ways, periodic announced and unannounced facility inspections.
The
FDA also strictly regulates marketing, labeling, advertising, and promotion of products that are placed on the market. A company
can make only those claims relating to safety and efficacy that are approved by the FDA. Physicians, in their independent professional
medical judgment, may prescribe legally available products for unapproved indications that are not described in the product’s
labeling and that differ from those tested and approved by the FDA. Pharmaceutical companies, however, are allowed to promote
their drug products only for the approved indications 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, and a company that is found
to have improperly promoted off-label uses may be subject to significant liability, including, but not limited to, criminal and
civil penalties under the FDCA and the civil False Claims Act, or FCA, exclusion from participation in federal healthcare programs,
mandatory compliance programs under corporate integrity agreements, debarment, and refusal of government contracts.
The
regulatory framework applicable to the production, distribution, marketing, and/or sale, of our product candidates may change
significantly from the current descriptions provided herein in the time that it may take for any of our product candidates to
reach a point at which an NDA is approved. Moreover, individual states may have laws and regulations that we must comply with,
such as laws and regulations concerning licensing, promotion, sampling, distribution, and reporting.
11
Overall
research, development, and approval times depend on a number of factors, including the period of review at the FDA, the number
of questions posed by the FDA during review, how long it takes to respond to the FDA’s questions, the severity or life-threatening
nature of the disease in question, the availability of alternative treatments, the availability of clinical investigators and
eligible patients, the rate of enrollment of patients in clinical trials, and the risks and benefits demonstrated in the clinical
trials.
Medical
Device Approval Process
In
addition to our lead product candidate DefenCath, which is subject to regulation by the FDA as a drug, we may be developing other
products that may be regulated as medical devices in the United States. The FDA considers a product to be a device, and subject
to the FDA regulation, if it meets the definition of a medical device in the FDCA, which states that a device is an instrument,
apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article, including a
component part, or accessory which is:
● recognized
in the official National Formulary, or the United States Pharmacopoeia, or any supplement
to them,
● intended
for use in the diagnosis of disease or other conditions, or in the cure, mitigation,
treatment, or prevention of disease, in man or other animals, or
● intended
to affect the structure or any function of the body of man or other animals, and which
does not achieve its primary intended purposes through chemical action within or on the
body of man or other animals and which does not achieve its primary intended purposes
through chemical action within or on the body of man or other animals and which is not
dependent upon being metabolized for the achievement of its primary intended purposes.
The
FDA regulates the design, development, clinical testing, manufacture, labeling, distribution, import and export, sale and promotion
of medical devices. Unless an exemption applies or a product is a Class I device, all medical devices must receive either 510(k)
clearance or an approved pre-market application, or PMA, from the FDA before they may be commercially distributed in the U.S.
In addition, certain modifications made to marketed devices also may require 510(k) clearance or approval of a PMA supplement.
Unlike approved drug products, there are no market exclusivity provisions under the FDCA for products regulated as medical devices.
To
obtain a 510(k) clearance for a device, a pre-market notification to the FDA must be submitted demonstrating that the device is
substantially equivalent to a legally marketed predicate device. For a new device to be found “substantially equivalent”
to one or other legally marketed predicate devices, the new device must have: 1) the same intended use as a predicate; and 2)
either a) the same technological characteristics as the predicate device or b) different technological characteristics, but the
information submitted must not raise new questions of safety and effectiveness and must demonstrate substantial equivalence. The
FDA attempts to respond to a 510(k) pre-market notification within 90 days of submission, but as a practical matter, pre-market
clearance can take significantly longer, potentially up to one year or more.
The
PMA process is much more demanding and uncertain than the 510(k) pre-market notification process and must be supported by extensive
clinical, laboratory, technical and other information, including at least one adequate and well-controlled clinical investigation
conducted under an investigational device exemption (IDE). The FDA has 180 days to review an accepted PMA, although the review
generally occurs over a significantly longer period of time and can take up to several years.
The
FDA has informed us that it regards taurolidine as a new chemical entity and therefore an unapproved new drug. Consequently, for
any other products that we intend to develop as a medical device, there is currently no appropriate predicate device currently
marketed in the U.S. on which a 510(k) approval process could be based. As a result, we will be required to submit a premarket
approval application for marketing authorization for these indications. In the event that the NDA for DefenCath is approved by
the FDA, the regulatory pathway for these taurolidine product candidates can be revisited with the FDA. Although there will presumably
still be no appropriate predicate, de novo Class II designation can be proposed, a process that provides a pathway to classify
novel medical device for which there is no legally marketed predicate device, based on a risk assessment and a reasonable assurance
of safety and effectiveness.
12
After
a device is placed on the market, numerous regulatory requirements apply, including:
● Quality
System Regulations, or QSRs, which require manufacturers to have a quality system for
the design, manufacture, packaging, labeling, storage, installation, and servicing of
finished medical devices;
● labeling
regulations, which govern product labels and labeling, prohibit the promotion of products
for unapproved, or off-label, uses and impose other restrictions on labeling and promotional
activities;
● medical
device listing and establishment registration;
● post-approval
restrictions or conditions, including post-approval study commitments;
● post-market
surveillance requirements;
● medical
device reporting, or MDR, regulations, which require that manufacturers evaluate and
investigate potential adverse events and malfunctions, and report to the FDA if their
device may have caused or contributed to a death or serious injury or malfunctioned in
a way that would likely cause or contribute to a death or serious injury if it were to
recur;
● regulations
requiring the reporting of any device corrections or removals if the correction or removal
was initiated to reduce a risk to health posed by the device or remedy a violation of
the FDCA which may present a risk to health; and
● the
FDA’s recall authority, whereby it can ask, or under certain conditions order,
device manufacturers to recall from the market a product that is a risk to health.
Our
manufacturing facilities, as well as those of certain of our suppliers, are subject to periodic and for-cause inspections by the
FDA and other governmental authorities to verify compliance with the QSR and other regulatory requirements.
Reimbursement
and Pricing Controls
In
many of the markets where we or the parties we collaborate with have targeted or will target DefenCath for sale, laws control
the prices charged to certain purchasers of pharmaceutical products and the prices paid by drug reimbursement programs through
varying price control mechanisms. Public and private health care payors control costs and influence drug pricing through a variety
of mechanisms, including through negotiating rebates with the manufacturers, limiting the reimbursement rate paid to providers,
and using tiered formularies, co-payment structures that incentivize beneficiaries to request lower cost alternatives, and other
mechanisms that provide preferential access to certain drugs over others within a therapeutic class. Federal and commercial payors
use competition for health plan coverage and market share as leverage to obtain rebates on products they reimburse, which impacts
the manufacturer’s net realization on the sale of the products. These rebates may be paid on drugs sold at a mandatory discount.
Additionally, federal and commercial health plans may choose to reimburse dialysis providers for dialysis services and drugs used
in the provision of those services through a single bundled payment rate, which tends to make cost a more important factor for
providers when making drug purchase decisions than it would otherwise be if the providers were reimbursed for drugs on a stand-alone
basis. Payors also set other criteria to govern the uses of a drug that will be deemed medically appropriate and therefore reimbursed
or otherwise covered. In particular, many public and private health care payors limit reimbursement and coverage to the uses of
a drug that are either approved by the FDA or that are supported by other appropriate evidence (for example, published medical
literature) and appear in a recognized drug compendium. Drug compendia are publications that summarize the available medical evidence
for particular drug products and identify which uses of a drug are supported or not supported by the available evidence, whether
or not such uses have been approved by the FDA.
Foreign
Regulatory Requirements
We
and our collaborative partners may be subject to widely varying foreign regulations, which may be quite different from those of
the FDA, governing clinical trials, manufacture, product registration and approval, and pharmaceutical sales. Whether or not FDA
approval has been obtained, we or our collaboration partners must obtain a separate approval for a product by the comparable regulatory
authorities of foreign countries prior to the commencement of product marketing in those countries. In certain countries, regulatory
authorities also establish pricing and reimbursement criteria. The approval process varies from country to country, and the time
may be longer or shorter than that required for FDA approval. In addition, under current United States law, there are restrictions
on the export of products not approved by the FDA, depending on the country involved and the status of the product in that country.
13
International
sales of medical devices manufactured in the U.S. that are not approved by the FDA for use in the U.S., or are banned or deviate
from lawful performance standards, are subject to FDA export requirements. Exported devices are subject to the regulatory requirements
of each country to which the device is exported. Some countries do not have medical device regulations, but in most foreign countries,
medical devices are regulated. Frequently, regulatory approval may first be obtained in a foreign country prior to application
in the U.S. to take advantage of differing regulatory requirements. Most countries outside of the U.S. require that product approvals
be recertified on a regular basis, generally every five years. The recertification process requires that we evaluate any device
changes and any new regulations or standards relevant to the device and conduct appropriate testing to document continued compliance.
Where recertification applications are required, they must be approved in order to continue selling our products in those countries.
In
the European Union, in order for our product candidates to be marketed and sold, we are required to comply with the Medical Devices
Directive and obtain CE Mark certification. The CE Mark certification encompasses an extensive review of our quality management
system which is inspected by a notified body’s auditor as part of a Stage 1 and 2 International Organization for Standardization,
or ISO, 13485:2003 audit, in accordance with worldwide recognized ISO standards and applicable European Medical Devices Directives
for quality management systems for medical device manufacturers. Once the quality management system and design dossier has been
successfully audited by a notified body and reviewed and approved by a competent authority, a CE certificate for the medical device
will be issued. We are also required to comply with other foreign regulations such as the requirement that we obtain Ministry
of Health, Labor and Welfare approval before we can launch new products in Japan. The time required to obtain these foreign approvals
to market our products may vary from U.S. approvals, and requirements for these approvals may differ from those required by the
FDA.
Medical
device laws and regulations are in effect in many of the countries in which we may do business outside the United States. These
laws and regulations range from comprehensive device approval requirements for our medical device product to requests for product
data or certifications. The number and scope of these requirements can be complex and could increase. We may not be able to obtain
or maintain regulatory approvals in such countries and we may be required to incur significant costs in obtaining or maintaining
our foreign regulatory approvals. In addition, the export of certain of our products which have not yet been cleared for domestic
commercial distribution may be subject to FDA export restrictions. Any failure to obtain product approvals in a timely fashion
or to comply with state or foreign medical device laws and regulations may have a serious adverse effect on our business, financial
condition or results of operations.
Intellectual
Property
On
January 30, 2008, we entered into a License and Assignment Agreement, or the NDP License Agreement, with ND Partners, LLC, or
NDP. Pursuant to the NDP License Agreement, NDP granted us exclusive, worldwide licenses for certain antimicrobial catheter lock
solutions, processes for treating and inhibiting infections, a biocidal lock system and a taurolidine delivery apparatus, and
the corresponding United States and foreign patents and applications (the “NDP Technology”). We acquired such licenses
and patents through our assignment and assumption of NDP’s rights under certain separate license agreements by and between
NDP and Dr. Hans-Dietrich Polaschegg, Dr. Klaus Sodemann, and Dr. Johannes Reinmueller. NDP also granted us exclusive licenses,
with the right to grant sublicenses, to use and display certain trademarks in connection with the NDP Technology. As consideration
in part for the rights to the NDP Technology, we paid NDP an initial licensing fee of $325,000 and granted NDP an equity interest
in our company consisting of 73,107 shares of common stock as of December 31, 2010. In addition, we are required to make payments
to NDP upon the achievement of certain regulatory and sales-based milestones. Certain of the milestone payments are to be made
in the form of shares of common stock currently held in escrow for NDP, and other milestone payments are to be paid in cash. The
maximum aggregate number of shares issuable upon achievement of milestones and the number of shares held in escrow is 29,109 shares
of common stock. The maximum aggregate amount of cash payments upon achievement of milestones is $3,000,000 with $2,500,000 remaining
at December 31, 2020. Events that trigger milestone payments include but are not limited to the reaching of various stages of
regulatory approval processes and certain worldwide net sales amounts.
During the year ended
December 31, 2013, a milestone payment of $500,000 was earned by NDP upon the first issuance of the CE Mark for Neutrolin. Under
Article 6 of the NDP License Agreement, we were obligated to make a milestone payment of $500,000 to NDP upon the first issuance
of a CE Mark for a licensed product, which payment was payable to NDP within 30 days after such issuance. On April 11, 2013, we
entered into an amendment to the NDP License Agreement which extended the milestone payment from within 30 days after such issuance
to within twelve months after the achievement of such issuance. As consideration for the amendment, we issued NDP a five-year warrant
to purchase 25,000 shares of our common stock at an exercise price of $7.50 per share. The warrant was exercisable immediately
upon issuance and expired in April 2018. In January 2014, the $500,000 milestone payment due to NDP was converted into 10,000 Series
C-3 non-voting preferred stock and a warrant to purchase 50,000 shares of our common stock at an exercise price of $4.50 per share.
The warrants expired during the year ended December 31, 2020.
14
During the year ended December 31, 2014, a certain milestone
was achieved resulting in the release of 7,277 shares held in escrow. The number of shares held in escrow as of December 31, 2020
is 21,832 shares of common stock. There were no milestones achieved in 2020 or 2019.
The
NDP License Agreement will expire on a country-by-country basis upon the earlier of (i) the expiration of the last patent claim
under the NDP License Agreement in a given country, or (ii) the payment of all milestone payments and release of all shares of
our common stock held in escrow under the NDP License Agreement. Upon the expiration of the NDP License Agreement in each country,
we will have an irrevocable, perpetual, fully paid-up, royalty-free exclusive license to the NDP Technology in such country. The
NDP License Agreement also may be terminated by NDP if we materially breach or default under the NDP License Agreement and that
breach is not cured within 60 days following the delivery of written notice to us, or by us on a country-by-country basis upon
60 days prior written notice. If the NDP License Agreement is terminated by either party, our rights to the NDP Technology will
revert back to NDP.
We
believe that the patents and patent applications we have licensed pursuant to the NDP License Agreement cover effective solutions
to the various medical problems discussed previously when using taurolidine in clinical applications, and specifically in hemodialysis
applications. Our patent portfolio consists of 5 issued U.S. patents and 13 pending U.S. patent applications; 15 issued foreign
patents and 44 pending foreign patent applications. Additional patent applications will be filed to cover any additional related
subject matter developed. The patents cover additional applications using taurolidine in, among others, sutures, hydrogels, meshes,
transdermal and biofilm products.
Employees and Human Capital Resources
As of March 19, 2021, we employed 35 full-time employees, who work out of our corporate offices in Berkeley Heights NJ or work remotely in various
locations throughout the United States and Europe. We are committed to diversity, equity and inclusion, regardless of gender or
race/ethnicity, and conduct training to reflect our commitment as an organization and build awareness.
We invest in our workforce
by offering competitive salaries and benefits. We endeavor to foster a strong sense of ownership by offering stock options under
our stock incentive program. We also offer comprehensive and locally relevant benefits for all eligible employees. We recognize
and support the growth and development of our employees.
We have implemented
COVID-19 policies designed to ensure the safety and well-being of all employees and the people associated with them. As a result
of the COVID-19 pandemic, to reduce risk, our employees have been asked to work remotely, and all employees have been asked to
avoid all non-essential travel, adhere to good hygiene practices, and engage in physical distancing.
None of our employees
are subject to a collective bargaining agreement. We consider our relationship with our employees to be good.
Corporate
Information
We
were organized as a Delaware corporation on July 28, 2006 under the name “Picton Holding Company, Inc.” and we changed
our corporate name to “CorMedix Inc.” on January 18, 2007. Our principal executive offices are located at 300 Connell
Drive, Suite 4200, Berkeley Heights, New Jersey 07922. Our telephone number is (908) 517-9500.
On
March 26, 2019, we effected a 1-for-5 reverse stock split of our issued and outstanding shares of common stock, par value $0.001,
per share (“Common Stock”), by combining, reclassifying and changing each authorized and outstanding five shares of
“old” common stock into one share of “new” common stock. No fractional shares were issued, and, in lieu
thereof, where applicable, one whole share was issued. To reflect the reverse stock split, reclassification, combination and change,
proportional adjustments were also made to the number of shares of our common stock issuable upon conversion of outstanding preferred
shares and the convertible note payable, warrants and options and other equity awards. The reverse stock split did not affect
the par value per share of our common stock (which remains at $0.001 per share) or the total number of shares of common stock
that are authorized to be issued pursuant to our Amended and Restated Certificate of Incorporation, as amended, which remains
at 160 million shares. All issued and outstanding share and per share amounts included in the accompanying consolidated financial
statements and in this report have been adjusted to reflect the reverse stock split, reclassification, combination and change
for all periods presented.
In April 2020, we received
approximately $5.2 million, net of expenses, from the sale of most of our remaining unused New Jersey net operating losses (“NOL”)
eligible for sale under the State of New Jersey’s Economic Development Authority’s New Jersey Technology Business Tax
Certificate Transfer program (“NJEDA Program”). The NJEDA Program allowed us to sell approximately $5.5 million of
our total $6.0 million in available NOL tax benefits for the state fiscal year 2019.
As previously announced,
the NJEDA has approved our application to participate in the NJEDA Program for the state fiscal year 2020. The approval will allow
us to sell approximately $1.3 million of the total $1.3 million in available tax benefits to an unrelated, profitable New Jersey
corporation in return for approximately $1.3 million in cash. Closing is subject to NJEDA’s typical closing conditions, which
are in process of completion.
15
In April 2020, we received
from the FDA a refund for the NDA application fee in the amount of $2.9 million, which was paid in the first quarter of 2020. We
met the conditions of the Federal Food, Drug, and Cosmetic Act for the small business waiver of the user fees and our request for
a waiver of an application user fee was granted by the FDA.
In May 2020, we formed a wholly-owned Spanish subsidiary, CorMedix
Spain, S.L.U. for which no substantial operations had occurred during the year 2020.
On July 30, 2020, we
completed an underwritten public offering of our common stock, par value $0.001 per share, which yielded gross proceeds, before
underwriting commissions and estimated expenses, of approximately $23.0 million. The public offering was made pursuant to an underwriting
agreement with SunTrust Robinson Humphrey, Inc. and JMP Securities LLC (collectively, the “Underwriters”), relating
to the issuance and sale of an aggregate of 5,111,110 shares of common stock, including 666,666 shares of common stock pursuant
to the full exercise of the Underwriters’ option, at a public offering price of $4.50 per share. The offering was made pursuant
to our effective registration statement on Form S-3 Registration Statement No. 333-223562 previously filed with and declared effective
by the SEC and a prospectus supplement and accompanying prospectus filed with the SEC.
In November 2020, we
filed a new registration statement, under which we could issue and sell up to an aggregate of $100.0 million of shares of our common
stock, $0.001 par value per share. On November 27, 2020, we entered into an Amended and Restated At Market Issuance Sales Agreement
(“Amended Sales Agreement”) with B. Riley and Needham & Company, LLC (“Needham”), together with B.
Riley, acting as sales agents (“Sales Agent”). The Amended Sales Agreement relates to the sale of shares of up to $25.0
million of our common stock under our ATM program, of which we may issue and sell common stock from time to time through the Sales
Agent, subject to limitations imposed by us and subject to Sales Agent’s acceptance, such as the number or dollar amount
of shares registered under the registration statement to which the offering relates. Sales Agent is entitled to a commission of
up to 3% of the gross proceeds from the sale of common stock sold under the ATM program. During the year ended December 31, 2020,
we sold 832,676 shares of common stock under the Amended Sales Agreement at the weighted average price of $8.69 per share and realized
net proceeds of approximately $7.0 million. At December 31, 2020, we have approximately $17.8 million available under the Amended
Sales Agreement and $75.0 million available under our current shelf registration for the issuance of equity, debt or equity-linked
securities unrelated to the Amended Sales Agreement. On February 5, 2021, we allocated to our ATM program an additional $25.0 million
of the remaining $75.0 million available under our shelf registration statement. Giving effect to the additional $25.0 million,
plus the $17.8 million available at December 31, 2020, we had a total of $42.8 million available under the ATM program. During
January and February 2021, we sold an aggregate of 3,737,862 shares of our common stock under the ATM program and realized net
proceeds of approximately $41.5 million. As of the filing of this Annual Report on Form 10-K, we have no available balance under
our ATM program and we have $50.0 million available under our current shelf registration for the issuance of equity, debt or equity-linked
securities.
We maintain a website
at www.cormedix.com; however, the information on, or that can be accessed through, our website or certain information in our website
is not part of this report. This report and all of our filings under the Exchange Act, including copies of annual reports on Form
10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports, are available free of charge
through our website on the date we file those materials with, or furnish them to, the Securities and Exchange Commission (the “SEC”).
Such filings are also available to the public on the internet at the SEC’s website at www.sec.gov.
16
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.