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 life-threatening
diseases and conditions.
Our
primary focus is on the commercialization of our lead product, DefenCath ® in the United States. We have in-licensed the
worldwide rights to develop and commercialize DefenCath. The name DefenCath is the U.S. proprietary name approved by the U.S. Food and
Drug Administration, or FDA.
DefenCath is an antimicrobial
catheter lock solution (“CLS”) (a formulation of taurolidine 13.5 mg/mL, and heparin 1000 USP Units/mL) indicated to reduce
the incidence of catheter-related bloodstream infections (“CRBSI”) in adult patients with kidney failure receiving chronic
hemodialysis through a central venous catheter (“CVC”). It is indicated for use in a limited and specific population of patients.
CRBSIs can lead to treatment delays and increased costs to the healthcare system when they occur due to hospitalizations, need for IV
antibiotic treatment, long-term anticoagulation therapy, removal/replacement of the CVC, related treatment costs, as well as increased
mortality. We believe DefenCath can address a significant unmet medical need.
DefenCath
– United States
On November 15, 2023, we announced
that the FDA approved the new drug application (“NDA”) for DefenCath to reduce the incidence of CRBSI in adult patients with
kidney failure receiving chronic hemodialysis through a CVC. DefenCath is indicated for use in a limited and specific population of patients.
DefenCath is the first and only FDA-approved antimicrobial CLS in the U.S. and was shown to reduce the risk of CRBSI by up to 71% in a
Phase 3 clinical study. As a result of the November 2023 FDA approval, we are currently preparing for the commercial launch of DefenCath.
DefenCath is listed in the
Orange Book as having New Chemical Entity or NCE exclusivity (5 years) expiring on November 15, 2028, and the Generating Antibiotic Incentives
Now or GAIN exclusivity extension of the NCE exclusivity (an additional 5 years) expiring on November 15, 2033. The GAIN exclusivity extension
of 5 years is the result of the January 2015 designation of DefenCath as a Qualified Infectious Disease Product (“QIDP”).
As part of the DefenCath approval
letter, the FDA communicated the existence of a required pediatric assessment under the Pediatric Research Equity Act (“PREA”).
PREA requires sponsors to conduct pediatric studies for, among other things, NDAs for a new active ingredient, such as taurolidine in
DefenCath, unless a waiver or deferral is obtained from the FDA. A deferral acknowledges that a pediatric assessment is required but permits
the applicant to submit the pediatric assessment after the submission of an NDA. FDA deferred submission of the pediatric study for DefenCath
because the product is ready for approval for use in adults and the pediatric study has not been completed. We are obligated to conduct
the study communicated in the approval letter: an open-label, two-arm (DefenCath vs. standard of care) study to assess safety and time
to CRBSI in subjects from birth to less than 18 years of age with kidney failure receiving hemodialysis via a central venous catheter.
Because this is a required post-marketing study, we must make annual reports to the FDA. Pediatric studies for an approved product conducted
under PREA may qualify for pediatric exclusivity, which, if granted, provides an additional six months of exclusivity that attaches to
the end of existing marketing exclusivity and patent periods for DefenCath. Depending on the timing of final report submission, DefenCath
could potentially receive a total marketing exclusivity period of 10.5 years. However, there are factors that could affect whether this
exclusivity is received or the duration of exclusivity, and DefenCath may or may not ultimately be eligible for the additional 0.5 years
of exclusivity associated with this pediatric study.
1
We announced on April 26,
2023 that following the submission of a duplicate New Technology Add-On Payment (“NTAP”) application in the fourth quarter
of 2022 to the Centers for Medicare & Medicaid Services (“CMS”), CMS has subsequently issued the Inpatient Prospective
Payment System (“IPPS”) 2024 proposed rule that includes a NTAP of up to $17,111 per hospital stay for DefenCath. This NTAP
represents reimbursement to inpatient facilities of 75% of the anticipated wholesaler acquisition cost (“WAC”) price of $1,170
per 3 mL vial, and an average utilization of 19.5 vials per hospital stay. The final IPPS rule was published in early August 2023 and
confirmed this payment amount in that final rule. This NTAP was conditioned upon the DefenCath NDA obtaining final FDA approval prior
to July 1, 2024. As the NTAP was calculated by CMS based upon an anticipated WAC price of $1,170, and following FDA approval of the DefenCath
NDA, an actual WAC of $249.99 per 3ml vial was established, we anticipate that CMS will revise the amount of the NTAP payment to reflect
the actual WAC price in the next IPPS rulemaking, effective October 1, 2024. Upon the listing in the compendia of the actual WAC price
of $249.99 per 3ml vial, we notified CMS of the new lower WAC pricing and recommended that CMS make an off-cycle adjustment to the NTAP
to reflect the current lower WAC pricing amount. CMS subsequently communicated to us that they do not intend to update the NTAP reimbursement
amount until the next review cycle in October 2024.
On January 25, 2024, CMS determined
that DefenCath should be classified as a renal dialysis service that is subject to the Medicare end-stage renal disease prospective payment
system (“ESRD PPS”). The ESRD PPS provides bundled payment for renal dialysis services, but also affords a transitional drug
add-on payment adjustment, or TDAPA, which provides temporary, additional payments for certain new drugs and biologicals. We submitted
an application for TDAPA on January 26, 2024, and CMS has confirmed receipt. We also submitted a HCPCS application for a J-code to CMS
on December 8, 2023, for DefenCath, which is relevant to billing and the TDAPA application. CMS has confirmed the coding application is
under review. TDAPA reimbursement is calculated based on 100 percent of the average selling price (“ASP”) (or 100 percent
of WAC or else manufacturers’ list price, respectively, if such data is unavailable). If CMS grants TDAPA and post-TDAPA add-on
payment adjustments for DefenCath, collective payments would be for five years (with such post-TDAPA add-on payments applying to all ESRD
PPS payments for years three through five). CMS confirmed to us that, assuming a favorable review, CMS is working towards a July 1, 2024
implementation date for TDAPA.
We may pursue additional indications
for DefenCath use as a CLS in populations with unmet medical needs that may also represent potentially significant market opportunities.
While we are continuing to assess these areas, potential future indications may include use as a CLS to reduce CRBSIs in total parenteral
nutrition patients using a central venous catheter and in certain oncology patients using a central venous catheter. In 2024, we anticipate
discussing with the FDA potential pathways for expanded indications.
We
announced on May 1, 2023 that the United States Patent and Trademark Office (“USPTO”) allowed our patent application directed
to a locking solution composition for treating and reducing infection and flow reduction in central venous catheters. This application
was granted on August 29, 2023 as U.S. Patent No. 11,738,120. Our newly granted U.S. Patent reflects the unique and proprietary
formulation of our product, DefenCath, for which we received FDA approval on November 15, 2023. This patent supplements the coverage
of our existing licensed U.S. Patent No. 7,696,182, and has the potential to provide an additional layer of patent protection for DefenCath
through 2042.
Neutrolin
– International
Neutrolin
was previously sold in the European Union, or EU, and other territories where we received CE-Mark approval for the commercial distribution
of Neutrolin as a CLS. We have elected to discontinue sales of Neutrolin for lack of commercial viability. The winding down of our operations
in the EU is nearly complete and Neutrolin sales in both the EU and the Middle East have been discontinued since 2022.
Additional
Development Possibilities
In
addition to DefenCath, we have sponsored 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.
License
Agreement with NDP Partners
On January 30, 2008, we entered
into a License and Assignment Agreement, or the ND License Agreement, with ND Partners LLC, or NDP. Pursuant to the ND 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”). 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 cash payments to NDP upon the achievement of certain milestones. The maximum aggregate
amount of cash payments upon achievement of milestones is $3,000,000, with $2,000,000 remaining at December 31, 2023.
2
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. On April 11, 2013, we
entered into an amendment to the ND 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, which was exercisable immediately upon
issuance, 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. These warrants expired
and were unexercised during the year ended December 31, 2020.
During the year ended December
31, 2014, a certain milestone was achieved resulting in the release of 7,277 shares held in escrow. The terms of the escrow agreement
provide that if, as of December 31, 2022, any shares remain in escrow, such shares will be returned to the Company and cancelled. There
were no milestones achieved in 2023 or 2022.
The ND License Agreement will
expire on a country-by-country basis upon the earlier of (i) the expiration of the last patent claim under the ND License Agreement in
a given country, or (ii) the payment of all milestone payments. Upon the expiration of the ND 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 ND License Agreement
also may be terminated by NDP if we materially breach or default under the ND 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
ND License Agreement is terminated by either party, our rights to the NDP Technology will revert back to NDP.
We announced on May 1, 2023
that the USPTO allowed our patent claims directed to a locking solution composition for treating and reducing infection and flow reduction
in central venous catheters. Our newly issued U.S. Patent 11,738,120 reflects the unique and proprietary formulation of our product, DefenCath,
for which we received FDA approval on November 15, 2023. The newly issued patent provides patent coverage that supplements our existing
licensed U.S. Patent No. 7,696,182, and has the potential to provide an additional layer of patent protection for DefenCath through 2042.
We believe that the patents
and patent applications we have licensed pursuant to the ND License Agreement cover effective solutions to the various medical problems
discussed previously when using taurolidine in clinical applications, and specifically in hemodialysis applications. The foregoing summary
of the ND License Agreement does not purport to be complete and is qualified in its entirety by reference to the ND License Agreement,
attached as an exhibit hereto and which is incorporated by reference herein.
DefenCath
Market
Opportunity
Central
venous catheters, or CVCs, and peripherally inserted central catheters, or Central Catheters, are an important and frequently used method
for accessing the vasculature for 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, administering long term antibiotic therapy,
and administering total parenteral nutrition (complete or partial dietary support via intravenous nutrients).
Bloodstream
infections resulting from the use of central catheters known as CRBSIs can result in significant morbidity and increased rates of hospital
admissions, readmissions and mortality. One of the major and common risk factors 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 $2.3 billion, with approximately 250,000 CRBSI episodes per year (Becker’s Hospital Review).
According
to the 2022 United States Renal Disease System, reporting data from 2020, there were nearly 808,000 End-Stage-Renal-Disease, or ESRD,
patients on permanent hemodialysis in the U.S. Of these, nearly 108,000 hemodialysis patients were new patients diagnosed with ESRD during
the year they were receiving dialysis through a CVC. Patients are typically treated in various care settings including inpatient hospitals
and outpatient dialysis clinics. Kidney failure patients can include ESRD, Acute Kidney Injury, or AKI and Chronic Kidney Disease, or
CKD, populations that progress into dialysis. Patients that present in the hospital have an average length of stay of 13.3 days and additionally
high 30-day readmission rates both for same diagnosis and all-cause with the all-cause readmissions being higher.
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.
Other than DefenCath, there
are no pharmacologic drug products approved in the U.S. for the prevention or reduction of CRBSIs in CVCs. We believe there is a significant
need for reduction or prevention of CRBSIs 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, our FDA-approved
product, is a non-antibiotic, 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
catheter-lock 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. We are unaware of any drug products other than DefenCath
approved by the FDA with an indication for use as a catheter lock solution.
3
Competitive
Landscape
The drug and medical device industries are highly
competitive and subject to rapid and significant technological change. DefenCath’s potential competitors could include large as
well as specialty pharmaceutical and biotechnology companies and large and specialty medical device companies. Many of our potential 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 commercial success of DefenCath are efficacy and safety, as well as pricing and reimbursement. Given that
DefenCath is the only approved catheter lock solution with antimicrobial properties in the U.S., we believe that with adequate reimbursement
there is an opportunity for DefenCath to become the new standard of care as a CLS in the U.S. market. We are not aware of any potentially
competitive CLS which are approved or under development by other companies in the U.S. As a means to reduce infections, some dialysis
providers may be using anti-infective infused catheter caps and/or compounded unapproved antibiotic catheter lock solutions.
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.
We currently have one FDA
approved source for each of our two key active drug ingredients (“APIs”) for DefenCath, taurolidine and heparin sodium, respectively.
With regards to taurolidine, we have a Drug Master File (“DMF”) filed with the FDA. There is a master commercial supply agreement
between a third-party manufacturer and us in place from August 2018. We are currently in the process of identifying and qualifying an
alternate third-party manufacturer for taurolidine under our existing DMF. With respect to heparin sodium API, we have identified an alternate
third party supplier and intend to qualify such supplier under the DefenCath NDA over the next twelve months.
We received FDA approval of
DefenCath with finished dosage production from our European based CMO Rovi Pharma Industrial Services. We believe this CMO has adequate
capacity to produce the volumes needed to meet near term projected demand for the commercial launch of DefenCath.
We previously announced commercial
arrangements with additional finished dosage CMOs, Alcami Corporation and Siegfried Hameln, that provide for the manufacture of commercial
sterile parenteral drug products. The Company anticipates the submission to the FDA of a supplement adding Siegfreid Hameln as an alternate
manufacturing site in the second fiscal quarter of 2024. The Company will also discontinue its relationship with Alcami as a potential
alternate manufacturing site for DefenCath.
We
note that CMOs and our API suppliers are subject to FDA oversight and inspection regarding compliance with cGMP, and if deemed non-compliant
with cGMP by FDA, we could face shortages or risk with respect to producing sufficient quantities of drug product or drug substance.
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. DefenCath is an FDA-approved drug, and
our other product candidates may be classified by the FDA as a drug or a medical device (or combination product) depending upon the indications
for use or claims, and/or how the product affects the structure or function of the body. 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 medical device and pharmaceutical product candidates, or combination products, as appropriate.
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, 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.
4
Drug
Approval Process
The
research, development, and approval process in the U.S. 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 U.S. 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 compliance
with cGMPs, 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, though one such trial, plus confirmatory evidence, may be acceptable.
Post-approval
trials, sometimes referred to as Phase 4 clinical trials, 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 and are commonly intended to generate
additional safety data regarding use of the product in a clinical setting. In certain instances, the FDA may mandate the performance
of Phase 4 clinical trials as a condition of approval of an NDA or post-approval.
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.
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.
5
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, 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.
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.
6
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 Risk Evaluation
and Mitigation Strategy, or a REMS, or otherwise limit the scope of any approval.
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.
Such deferred studies become required post-marketing studies upon approval of the product.
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.
A
sponsor can also 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.
A
new program to expedite the development of drug products is the Limited Population Pathway for Antibacterial and Antifungal Drugs, or
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.
7
Exclusivity
For
approved drug products, market exclusivity provisions under the FDCA provide periods of 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 submitted under Section 505 of the FDCA. 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 physiological or pharmacological action of
the drug substance. During the exclusivity period, the FDA may not accept for review an ANDA or a 505(b)(2) NDA application submitted
by another company that contains the previously approved active moiety, except that an ANDA or 505(b)(2) that contains a certification
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,
may be submitted one year before NCE exclusivity expires. Five-year exclusivity will also not delay the submission or approval of a 505(b)(1)
NDA; however, an applicant submitting a 505(b)(1) 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.
The
FDCA also provides three years of marketing exclusivity for an NDA, 505(b)(2) NDA or supplement to an existing 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, new indications, dosages or strengths of an existing drug. This three-year exclusivity covers only the
conditions of use associated with the new clinical investigations and does not prohibit the FDA from approving NDAs or ANDAs for drugs
containing the original active agent.
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 exclusivity to the term of any existing exclusivity for the product, such as NCE exclusivity. 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 that cover the drug
are extended by six months. For patent protection, pediatric exclusivity does not extend the term of the patent or the term a patent
extension, but rather the period during which FDA cannot approve an ANDA or 505(b)(2) NDA that certifies to a patent listed in the Orange
Book. 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.
8
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 if the product is designated as
a QIDP and receives GAIN Act exclusivity. 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. FDA can also require
the completion of studies post-approval, such as required studies under PREA. 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, review of promotional material submissions, review of adverse
events, review of annual reports, periodic announced and unannounced facility inspections.
The
FDA also strictly regulates marketing, labeling, advertising, and promotion of products that are placed on the market. 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; off-label
promotion is prohibited, as is false and misleading promotion. 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.
FDA
regulations require that products be manufactured in specific approved facilities and in accordance with cGMP regulations. We rely, and
expect to continue to rely, on third parties for the production of clinical and commercial quantities of our products in accordance with
cGMP regulations. These manufacturers must comply with cGMP regulations that require, among other things, quality control and quality
assurance, the maintenance of records and documentation and the obligation to investigate and correct any deviations from cGMP. Manufacturers
and other entities involved in the manufacture and distribution of approved drugs or biologics 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 requirements and other laws. Accordingly, manufacturers must continue to expend time, money and effort in the area
of production and quality control to maintain cGMP compliance. The discovery of violative conditions, including failure to conform to
cGMP regulations, could result in enforcement actions, and the discovery of problems with a product after approval may result in restrictions
on a product, manufacturer or holder of an approved NDA or BLA, including recall.
9
After
approval of a drug is granted, FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained
or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse
events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may
result in mandatory revisions to the approved labeling to add new safety information, or imposition of additional post-market surveillance
or clinical trials to assess new safety risks. Other potential consequences include, among other things: restrictions on the marketing
or manufacturing of the product, complete withdrawal of the product from the market or product recalls; fines, warning letters or
other enforcement-related letters or clinical holds on investigational or post-approval clinical trials; refusal by FDA to approve
pending NDAs or supplements to approved NDAs, or suspension or revocation of product approvals; product seizure or detention, or
refusal to permit the import or export of products; injunctions or the imposition of civil or criminal penalties; and consent
decrees, corporate integrity agreements, debarment, or exclusion from federal health care programs; or mandated modification of
promotional materials and labeling and the issuance of corrective information.
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.
Pricing
and Reimbursement
We
expect to sell DefenCath primarily to inpatient acute-care hospitals and outpatient dialysis clinics.
Inpatient
Reimbursement
For Medicare, inpatient acute-care
hospitals are paid under the inpatient prospective payment system (referred to herein as the “IPPS”). The IPPS pays a
flat rate based on the average charges across all hospitals for a specific diagnosis, regardless of whether that particular patient costs
more or less. Under the IPPS, each case is categorized into a diagnosis-related group, or DRG, which is weighted and multiplied by a standardized
amount (updated each year for inflation and other factors), to yield a fixed payment for that DRG and adjusted for hospital-specific factors
(e.g., wages, teaching hospitals) to cover care furnished during the inpatient stay. Additional, temporary payment is available for new
medical services and technologies called New Technology Add-on Payment, or NTAP, if certain criteria are met. There are three criteria
required for new technologies to be eligible to receive NTAP:
1.
Product must meet “newness” criteria;
2.
Product must meet “substantial clinical improvement” over existing technologies; and
3.
Product must meet certain cost thresholds.
CMS created several alternative
NTAP approval pathways for certain devices that obtain breakthrough designation and drugs that obtain Qualified Infectious Disease
Product, or QIDP, designation from the FDA. Under these alternative pathways, the new technology need only meet the cost criterion because
CMS assumes that those products meet the newness and substantial clinical improvement criteria.
We submitted an NTAP application
under the alternative pathway for fiscal year (“FY”) 2024 IPPS and received conditional approval from CMS pending FDA marketing
authorization for DefenCath before July 1, 2024. Based on the information available at the time of the FY 2024 IPPS final rule, CMS determined
the cost per case of DefenCath was $22,815. Under CMS’ regulations, NTAPs are limited to the lesser of 75% of the average cost of
the technology, or 75% of the costs in excess of the MS-DRG payment for the case. Accordingly, CMS finalized for FY 2024 $17,111.25 as
the maximum NTAP for a case involving the use of DefenCath. This NTAP represents reimbursement to inpatient facilities of 75% of the anticipated
wholesaler acquisition cost price of $1,170 per 3 mL vial, and an average utilization of 19.5 vials per hospital stay. Given that FDA
approval of the NDA was obtained on November 15, 2023 and prior to the July 1, 2024 deadline, the NTAP for cases involving the technology
will be effective beginning January 1, 2024. As the NTAP was calculated by CMS based upon an anticipated WAC price of $1,170, and following
FDA approval of the DefenCath NDA an actual WAC of $249.99 per 3ml vial was established, we anticipate that CMS will revise the amount
of the NTAP payment to reflect the actual WAC price in the next IPPS rulemaking, effective October 1, 2024. Upon the listing in the compendia
of the actual WAC price of $249.99 per 3ml vial, we notified CMS of the new lower WAC pricing and recommended that CMS make an off-cycle
adjustment to the NTAP to reflect the current lower WAC pricing amount. CMS subsequently communicated to us that CMS does not intend to
update the NTAP reimbursement amount until the next review cycle in October 2024.
10
NTAP is granted for a period
of 2-3 years after the date of FDA approval. Although NTAP is intended to identify and ensure adequate payment for qualifying new technologies,
it may have a limited effect depending on the DRG assignment after the NTAP period ends. With established reimbursement in the inpatient
setting, we plan to launch DefenCath in hospitals first while outpatient reimbursement is expected to be effective July 1, 2024 (assuming
TDAPA approval as discussed below).
Outpatient
Reimbursement
On January 25, 2024, CMS determined
that DefenCath should be classified as a renal dialysis service within an existing functional category, and is therefore subject to the
Medicare end-stage renal disease prospective payment system (referred to herein as the “ESRD PPS”). The ESRD PPS does afford,
however, a transitional drug add-on payment adjustment, or TDAPA, followed by post-TDAPA add-on payment adjustments. If CMS grants TDAPA
and post-TDAPA add-on payment adjustments for DefenCath, collective payments would be for five years (with such add-on payments applying
to all ESRD PPS payments for years three through five). New renal dialysis drugs or biological products that fall within an ESRD PPS functional
category are paid TDAPA unless certain exclusion criteria apply (related to the FDA approval or the NDA classification type). To be considered
a new renal drug or biologic, the product must be:
● Used
to treat or manage a condition(s) associated with ESRD
● Approved
by the FDA pursuant to Section 505(b)(1) of the Federal Food, Drug, and Cosmetic Act or section
351 of the Public Health service Act;
● Commercially
available;
● Assigned a Healthcare Common Procedure Coding System ("HCPCS") code (or have an application submitted); and
● Designated
by CMS as a renal dialysis service.
We
believe that DefenCath would meet the criterion of being a new renal dialysis product based upon communications received from CMS. We
submitted a HCPCS application for a J-code to CMS on December 8, 2023 for DefenCath and CMS has confirmed the application is under review.
We submitted an application for TDAPA on January 26, 2024. CMS confirmed receipt and advised us in writing that CMS is working toward
a July 1, 2024 effective date for TDAPA, assuming a favorable review. CMS reserves the right to request more information, and does not
guarantee that the TDAPA application will be approved or will be effective by July 1, 2024.
TDAPA
reimbursement is calculated based on 100 percent ASP (or 100 percent of wholesale acquisition price or else manufacturers’ list
price, respectively, if such data is unavailable). CMS has recently adopted policies related to the submission of ASP data making TDAPA
conditional in certain circumstances on the continued submission of such data. Accordingly, it is possible that the duration of TDAPA
could be shortened if the submission requirements of the ASP policy are not met. When TDAPA ends for new products for which there is
a functional category, CMS does not make any adjustments to the ESRD PPS rate.
Although
we cannot anticipate changes in reimbursement requirements and mechanisms in the coming years, CMS has acknowledged TDAPA payment mechanisms
may be adjusted to encourage innovation for this patient population. Beginning with calendar year 2024, CMS adopted a new payment adjustment
that follows the TDAPA period which is applied to all ESRD PPS payments for three years. Following such additional ESRD PPS payment adjustments,
DefenCath would be paid as part of the bundled ESRD PPS rate.
In anticipation that payers
will require that we demonstrate the cost effectiveness of DefenCath as part of the reimbursement review and approval process, we have
submitted posters and abstracts to support our health economic analysis and continue to commission and develop health economic evaluations
to support this review in the context of the prospective use of DefenCath in dialysis.
11
We may seek CMS reimbursement
for DefenCath in other catheter indications, such as oncology patients and total parenteral nutrition patients, including through (i)
relevant hospital inpatient DRGs, (ii) additional NTAP payments, (iii) outpatient ambulatory payment classifications, or APCs, (iv) the
End-Stage Renal Disease Prospective Payment System, or ESRD PPS, base payment, or (v) under the Durable Medical Equipment, Prosthetics,
Orthotics, and Supplies, or DMEPOS, Fee Schedule, depending on the setting of care. Coverage and payment under these Medicare benefit
categories is not guaranteed for these additional potential indications.
Healthcare
Regulation
Federal and state healthcare
laws, including fraud and abuse and health information privacy and security laws, also govern our business. If we fail to comply with
those laws, we could face substantial penalties and our business, results of operations, financial condition and prospects could be adversely
affected. Such laws include, but are not limited to: the federal Anti-Kickback Statute (“AKS”); federal pricing transparency
and reporting laws and regulations; federal Physician Payments Sunshine Act and Open Payments requirements to track and report certain
payments and other transfers of value; federal and state civil and criminal false claims laws, including the civil False Claims Act. Additionally,
we are subject to state and local law equivalents of the above federal laws, which may be broader in scope and apply regardless of whether
the payer is a governmental healthcare program. We may also be subject to certain state healthcare laws that may not have a federal parallel,
such as pharmaceutical detailing and disclosure laws and requirements.
We are subject to federal
government price reporting, such as those applicable to the Medicare Part B program, those under the Medicaid Drug Rebate Program (“MDRP”),
the 340 Drug Pricing Program and individual state laws relating to pricing and sales and marketing practices. Manufacturers report Average
Sales Price (ASP) data for Part B-covered drugs and biologicals and related items, services, supplies, and products that are paid as drugs
or biologicals. We also participate in the MDRP and report ASP, Best Price and other metrics related to our participation in such program.
We pay rebates to state Medicaid agencies based on those metrics on Medicaid beneficiary utilization of products. In addition, we are
required to sell our covered outpatient drugs at or below the 340B Ceiling Price to 340B Covered Entities. We are also required to discount
our products to authorized users of the Federal Supply Schedule, under which additional laws and requirements apply. Each of these programs
require submission of pricing data and calculation of discounts and/or rebates pursuant to complex statutory formulas and regulatory guidance,
as well as the entry into government procurement contracts governed by the Federal Acquisition Regulations, and the guidance governing
such calculations is not always clear. Compliance with such requirements can require significant investment in personnel, systems and
resources. Failure to properly calculate prices, or to offer required discounts or rebates could subject us to substantial penalties including,
but not limited to, potential False Claims Act liability. CMS continues to issue guidance and rulemaking governing our participation in
the MDRP, and we cannot predict how future guidance or rules would affect our profitability (including the potential for increases in
our overall Medicaid rebate liability and the obligation to charge greatly reduced prices to 340B Covered Entities).
In
the U.S., the federal and state governments are considering proposals or have enacted legislative and regulatory changes to the healthcare
system that could affect our ability to sell our products profitably. Among policy makers and payers in the U.S., there is significant
interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding
access.
There
has been increasing legislative and enforcement interest in the U.S. with respect to drug pricing practices. In particular, there have
been several recent U.S. Congressional inquiries, hearings and proposed and enacted federal legislation and rules, as well as executive
orders and sub-regulatory guidance that may impact pricing for pharmaceutical products. These initiatives include, among others:
● efforts
to reevaluate, reduce or limit the prices of drugs and make them more affordable for patients;
● implementation
of additional data collection and transparency reporting regarding drug pricing, rebates,
fees and other remuneration provided by drug manufacturers;
● revisions
to rules associated with ESRD PPS Transitional Drug Add-on Payment Adjustment;
● potential
revisions to rules associated with the calculation of average sales price;
● revisions
to rules associated with the calculation of average manufacturer price and best price under
Medicaid;
● changes
to the MDRP, including through a May 2023 CMS-proposed rulemaking for this program, that
could significantly increase manufacturer rebate liability;
12
● implementation
of the inflation Reduction Act of 2022 (Inflation Reduction Act), including provisions that
generally require manufacturers of Medicare Part B and Part D drugs to pay inflation rebates
to the Medicare program if pricing metrics associated with their products increase faster
than the rate of inflation;
● potential
elimination of the AKS discount safe harbor protection for manufacturer rebate arrangements
with Medicare Part D plan sponsors; and
● reevaluation
of safe harbors under the AKS.
In
addition, at the state level, legislatures have increasingly passed legislation and implemented regulations similar to those under consideration
at the federal level, as well as laws designed to control pharmaceutical and biotherapeutic product pricing, including restrictions on
pricing or reimbursement at the state government level, limitations on discounts to patients, marketing cost disclosure and transparency
measures, restrictions or other limitations on patient assistance, and, in some cases, policies to encourage importation from other countries
(subject to federal approval) and bulk purchasing.
In
addition, the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws generally prohibit companies and their intermediaries
from making improper payments for the purpose of obtaining or retaining business.
These
laws and regulations may affect our sales, marketing, and other promotional activities by imposing administrative and compliance burdens
on us. In addition, given the lack of clarity with respect to these laws and their implementation, our reporting actions could be subject
to the penalty provisions of the pertinent state and federal authorities.
Foreign
Regulatory Requirements
We
have not made any filings seeking approval for DefenCath outside of the United States. In order to market any product outside of the
United States, we would need to comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy
and governing, among other things, clinical trials, marketing authorization, commercial sales and distribution of our products. Even
though we have obtained FDA approval for DefenCath, and more generally, whether or not with FDA approval for a product, we would need
to 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 administrative review periods. The time required to obtain approval in other countries might differ from and be
longer than that required to obtain FDA approval. 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.
13
Employees
and Human Capital Resources
As of March 7, 2024, we employed
82 full-time employees and one part-time employee, 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, or any protected status, 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 benefits for all eligible employees. We recognize and
support the growth and development of our employees and we provide performance feedback and conduct employee goal and development discussions.
None
of our employees are subject to a collective bargaining agreement. We emphasize organizational communication and consider our relationship
with our employees to be strong.
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.
Available
Information
We
maintain our websites at www.cormedix.com, www.defencath.com. and www.crbis.com. This Annual Report on Form 10-K 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. The information contained on, or that can be accessed through, the websites referenced
in this Annual Report on Form 10-K is not a part of, nor shall it be deemed to be, incorporated by reference into this filing or any
of our other filings with the SEC. Further, the Company’s references to website URLs are intended to be inactive textual references
only.