What changed in this filing

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Item 1. Business

2023-03-29 compared with 2022-02-28 · 470 added, 204 removed, 170 unchanged (80% of the section changed)

Product Candidate - PEDMARK TM

Our only product candidate in the clinical stage of development is:

PEDMARK TM (a unique formulation of sodium thiosulfate (“STS”)).

We have announced results of two Phase 3 clinical trials for the prevention of cisplatin induced hearing loss, or ototoxicity in children, including the pivotal Phase 3 study SIOPEL 6, “A Multicentre Open Label Randomised Phase 3 Trial of the Efficacy of Sodium Thiosulfate in Reducing Ototoxicity in Patients Receiving Cisplatin Chemotherapy for Standard Risk Hepatoblastoma,” and the proof of concept Phase 3 study in collaboration with the Children’s Oncology Group (“COG ACCL0431”) “A Randomized Phase 3 Study of Sodium Thiosulfate for the Prevention of Cisplatin-Induced Ototoxicity in Children”.

COG ACCL0431 final results were published in the Lancet Oncology in 2016.

SIOPEL 6 final results were published in the New England Journal of Medicine in June 2018.

We continue to focus our resources on the development of PEDMARK TM .

We have licensed from Oregon Health & Science University (“OHSU”) intellectual property rights for the use of PEDMARK TM as a chemoprotectant and are developing PEDMARK TM as a protectant against the hearing loss often caused by platinum-based anti-cancer agents in children.

Preclinical and clinical studies conducted by OHSU and others have indicated that PEDMARK TM can effectively reduce the incidence of hearing loss caused by platinum-based anti-cancer agents.

Hearing loss among children receiving platinum-based chemotherapy is frequent, permanent and often severely disabling.

The incidence of hearing loss in these children depends upon the dose and duration of chemotherapy, and many of these children require lifelong hearing aids.

In addition, adults undergoing chemotherapy for several common malignancies, including ovarian cancer, testicular cancer, and particularly head and neck cancer and brain cancer, often receive intensive platinum-based therapy and may experience severe, irreversible hearing loss, particularly in the high frequencies.

and Europe, it is estimated that, annually, over 10,000 children may receive platinum-based chemotherapy.

We are a commercial-stage biopharmaceutical company focused on our only product candidate PEDMARK ® .

On September 20, 2022, we received approval from the FDA for PEDMARK ® (sodium thiosulfate injection) to reduce the risk of ototoxicity associated with cisplatin in pediatric patients one month of age and older with localized, non-metastatic solid tumors.

This approval makes PEDMARK ® the first and only treatment approved by the FDA in this area of significant unmet medical need.

On October 17, 2022, we announced commercial availability of PEDMARK ® in the United States.

We sell our product through an experienced field force including Regional Pediatric Oncology Specialists and medical science liaisons who are helping to educate the medical communities and patients about cisplatin induced ototoxicity and our programs supporting patient access to PEDMARK ® .

Further, we have established Fennec HEARS™, a comprehensive single source program designed to connect PEDMARK ® patients to both patient financial and product access support.

The program offers assistance and resources, regardless of insurance type, that can address co-pays or lack of coverage when certain eligibility requirements are met.

Fennec HEARS also provides access to care coordinators that can answer insurance questions about coverage for PEDMARK ® and provide tips and resources for managing treatment.

We received Orphan Drug Exclusivity for PEMARK in January 2023, which provides seven years of market exclusivity from its FDA approval on September 20, 2022 until September 20, 2029.

We currently have three patents listed for PEDMARK ® in the FDA’s Orange Book.

In March 2020, the United States Patent and Trademark Office, or USPTO,

allowed Patent No.

10,596,190 (“US ‘190”), which is exclusively in-licensed from Oregon Health & Science University (“OHSU”) and relates to a method of using our PEDMARK ® product.

In September 2022, the USPTO issued Patent No.

11,291,728 (“728”) and, in December 2022, the USPTO issued Patent No.

11,510,984 (‘984) that covers PEDMARK ® pharmaceutical formulation.

The “728” and “984” patents will expire in 2039 and the “190” patent will expire in 2038.

Additionally, in January 2023, the USPTO issued Notices of Allowance for an additional patent application that covers the PEDMARK ® pharmaceutical formulation.

We expect this additional U.S.

patent to issue in Q1 or Q2 of 2023.

This patent will expire in 2039, unless held invalid or unenforceable by a court of final jurisdiction.

We are also pursuing additional patent applications in both the U.S.

and internationally for PEDMARK ® .

There can be no assurance that we do not or will not infringe on patents held by third parties or that third parties in the future will not claim that we have infringed on their patents.

In the event that our product or technologies infringe or violate the patent or other proprietary rights of third parties, there is a possibility we may be prevented from pursuing product development, manufacturing or commercialization of our product until the underlying patent dispute is resolved.

For example, there may be patents or patent applications held by others that contain claims that our product or operations might be determined to infringe or that may be broader than we believe them to be.

Given the complexities and uncertainties of patent laws, there can be no assurance as to the impact that future patent claims against us may have on our business, financial condition, results of operations, or prospects.

PEDMARK ® Product Overview

PEDMARK ® is the first and only FDA approved therapy indicated to reduce the risk of ototoxicity associated with cisplatin treatment in pediatric patients with localized, non-metastatic, solid tumors.

It is a unique formulation of sodium thiosulfate in single-dose, ready-to-use vials for intravenous use in pediatric patients.

PEDMARK ® is also the only therapeutic agent with proven efficacy and safety data with an established dosing paradigm, across two open-label, randomized Phase 3 clinical studies, the Clinical Oncology Group (COG) Protocol ACCL0431 and SIOPEL 6.

and Europe, it is estimated that, annually, more than 10,000 children may receive platinum-based chemotherapy.

The incidence of ototoxicity depends upon the dose and duration of chemotherapy, and many of these children require lifelong hearing aids.

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Infants and young children that suffer ototoxicity at critical stages of development lack speech language development and literacy, and older children and adolescents lack social-emotional development and educational achievement.

In March 2018, PEDMARK TM received Breakthrough Therapy and Fast Track designations from the U.S.

Food and Drug Administration (“FDA”).

Further, PEDMARK TM has received Orphan Drug Designation in the U.S.

in this setting.

We initiated our rolling New Drug Application (“NDA”) for PEDMARK TM for the prevention of ototoxicity induced by cisplatin chemotherapy patients 1 month to < 18 years of age with localized, non-metastatic, solid tumors with the FDA in December 2018.

We announced that we had submitted full completion of the NDA in February 2020.

The FDA set a Prescription Drug User Fee Act (“PDUFA”) target action date of August 10, 2020 for the completion of the FDA’s review.

On August 10, 2020, we announced that we received a Complete Response Letter (“CRL”) from the FDA regarding our NDA for PEDMARK TM , which identified deficiencies in the third-party manufacturing facility that manufactures PEDMARK TM on our behalf.

Importantly, no clinical safety or efficacy issues were identified during the review and there was no requirement for further clinical data.

In May 2021, we announced the resubmission of our NDA for PEDMARK TM and in June 2021 we further announced that the FDA accepted for filing the resubmission of our NDA and set a PDUFA target action date of November 27, 2021.

On November 29, 2021, we announced that we received a CRL from the FDA regarding our NDA for PEDMARK TM , which identified deficiencies in the third-party manufacturing facility that manufactures PEDMARK TM on our behalf.

We are working to fully address the CRL, and we plan to resubmit our NDA for PEDMARK TM in the first quarter of 2022.

In August 2018, the Pediatric Committee (“PDCO”) of the European Medicines Agency (“EMA”) accepted our pediatric investigation plan (PIP) for sodium thiosulfate with the trade name Pedmarqsi for the condition of the prevention of platinum-induced hearing loss.

PEDMARK ® has been studied by co-operative groups in two Phase 3 clinical studies of survival and reduction of ototoxicity, COG ACCL0431 and SIOPEL 6.

Both studies have been completed.

The COG ACCL0431 protocol enrolled childhood cancers typically treated with intensive cisplatin therapy for localized and disseminated disease, including newly diagnosed hepatoblastoma, germ cell tumor, osteosarcoma, neuroblastoma, medulloblastoma, and other solid tumors.

SIOPEL 6 enrolled only hepatoblastoma patients with localized tumors.

Cisplatin Induced Ototoxicity

Cisplatin and other platinum compounds are essential chemotherapeutic agents for the treatment of many pediatric malignancies.

Unfortunately, platinum-based therapies can cause ototoxicity, or hearing loss, which is permanent, irreversible, and particularly harmful to the survivors of pediatric cancer.

The incidence of ototoxicity depends upon the dose and duration of chemotherapy, and many of these children require lifelong hearing aids or cochlear implants, which can be helpful for some, but do not reverse the hearing loss and can be costly over time.

Infants and young children that are affected by ototoxicity at critical stages of development lack speech and language development and literacy, and older children and adolescents often lack social-emotional development and educational achievement.

European Marketing Authorization Application

In August 2018, the Pediatric Committee (“PDCO”) of the European Medicines Agency (“EMA”) accepted our pediatric investigation plan (“PIP”) for sodium thiosulfate with the trade name Pedmarqsi for the condition of the prevention of

platinum-induced hearing loss.

An accepted PIP is a prerequisite for filing a Marketing Authorization Application (“MAA”) for any new medicinal product in Europe.

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No deferred clinical studies were required in the positive opinion given by PDCO.

We were also advised that sodium thiosulfate (tradename to be determined) is eligible for submission of an application for a Pediatric Use Marketing Authorization (“PUMA”).

A PUMA is a dedicated marketing authorization covering the indication and appropriate formulation for medicines developed exclusively for use in the pediatric population and provides data and market protection up to 10 years.

We were also advised that Pedmarqsi is eligible for submission of an application for a Pediatric Use Marketing Authorization (“PUMA”).

Therefore, this decision allows us to proceed with the submission of a PUMA in the European Union (“EU”) with incentives of automatic access to the centralized procedure and up to 10 years of data and market protection.

In February 2020, we announced that we had submitted a MAA for the prevention of ototoxicity induced by cisplatin chemotherapy patients 1 month to < 18 years of age with localized, non-metastatic, solid tumors.

Clinical Studies

PEDMARK TM has been studied by cooperative groups in two Phase 3 clinical studies of survival and reduction of ototoxicity, COG ACCL0431 and SIOPEL 6.

Both studies have been completed.

The COG ACCL0431 protocol enrolled one of five childhood cancers typically treated with intensive cisplatin therapy for localized and disseminated disease, including newly diagnosed hepatoblastoma, germ cell tumor, osteosarcoma, neuroblastoma, and medulloblastoma.

SIOPEL 6 enrolled only hepatoblastoma patients with localized tumors.

In October 2007, we announced that our collaborative partner, the International Childhood Liver Tumour Strategy Group, known as SIOPEL, a multi-disciplinary group of specialists under the umbrella of the International Society of Pediatric Oncology, had launched a randomized Phase 3 clinical trial SIOPEL 6 to investigate whether STS reduces hearing loss in standard risk hepatoblastoma (liver) cancer patients receiving cisplatin as a monotherapy.

The study was initiated in October 2007 initially in the United Kingdom and completed enrollment at the end of 2014.

52 sites from 11 countries enrolled 109 evaluable patients.

Under the terms of our agreement, SIOPEL conducted and funded all clinical activities and we provided drug, drug distribution and pharmacovigilance, or safety monitoring, for the study.

SIOPEL 6 was completed in December 2014 and the final results of SIOPEL 6 were published in The New England Journal of Medicine in June 2018.

The primary objectives of SIOPEL 6 were:

● To assess the efficacy of STS to reduce the hearing impairment caused by cisplatin.

● To carefully monitor any potential impact of STS on response to cisplatin and survival.

SIOPEL 6 - Results

Background / Objectives:

Bilateral high-frequency hearing loss is a serious permanent side-effect of cisplatin therapy, particularly debilitating when occurring in young children.

STS has been shown to reduce cisplatin induced hearing loss.

SIOPEL 6 was a Phase 3 randomized trial to assess the efficacy of STS in reducing ototoxicity in young children treated with cisplatin (Cis) for Standard Risk Hepatoblastoma (SR-HB).

Design / Methods:

Newly diagnosed patients with SR-HB, defined as tumor limited to PRETEXT I, II or III, no portal or hepatic vein involvement, no intra-abdominal extrahepatic disease, AFP >100ng/ml and no metastases, were randomized to Cis or Cis+STS for 4 preoperative and 2 postoperative courses.

Cisplatin 80mg/m2 was administered over 6 hours, STS 20g/m2 was administered intravenously over 15 minutes exactly 6 hours after stopping cisplatin.

Tumor response was assessed after 2 and 4 preoperative cycles with serum AFP and liver imaging.

In case of progressive disease (PD), STS was to be stopped and doxorubicin 60mg/m2 combined with cisplatin.

The primary endpoint was centrally reviewed absolute hearing threshold, at the age of ≥3.5 years by pure tone audiometry.

109 randomized patients (52 Cisplatin only ("Cis") and 57 Cis+STS) were evaluable.

The combination of Cis+STS was generally well tolerated.

With a patient follow-up time of 52 months, the three-year Event Free Survival ("EFS") for Cis was 78.8% Cisplatin and 82.1% for the Cis + STS.

The three-year Overall Survival ("OS") is 92.3% for Cis and 98.2% for Cis + STS.

Treatment failure defined as Progressive Disease ("PD") at 4 cycles was equivalent in both arms.

Among the first 101 evaluable patients, hearing loss occurred in 29/46=63.0% under Cis and in 18/55=32.7% under Cis +STS, corresponding to a relative risk of 0.52(P=0.002).

This randomized Phase 3 trial in SR-HB of cisplatin versus cisplatin plus STS shows that the addition of STS significantly reduces the incidence of cisplatin-induced hearing loss without any evidence of tumor protection.

In March 2008, we announced the activation of a Phase 3 trial with STS to prevent hearing loss in children receiving cisplatin-based chemotherapy in collaboration with the Children’s Oncology Group.

The goal of this Phase 3 study was to evaluate in a multi-centered, randomized trial whether STS is an effective and safe means of preventing hearing loss in children receiving cisplatin-based chemotherapy for newly diagnosed germ cell, liver (hepatoblastoma), brain (medulloblastoma), nerve tissue (neuroblastoma) or bone (osteosarcoma) cancers.

Eligible children, one to eighteen years of age, were to receive cisplatin according to their disease-specific regimen and, upon enrollment in this study, were randomized to receive STS or not.

Efficacy of STS was determined through comparison of hearing sensitivity at follow-up relative to baseline measurements using standard audiometric techniques.

The Children’s Oncology Group was responsible for funding the clinical activities for the study and we were responsible for providing the drug, drug distribution and pharmacovigilance, or safety monitoring, for the study.

The trial completed enrollment of

131 pediatric patients in the first quarter of 2012.

The final results of COG ACCL0431 were published in Lancet Oncology in December 2016.

COG ACCL0431 - Results

COG Study ACCL0431, “A Randomized Phase 3 Study of Sodium Thiosulfate for the Prevention of Cisplatin-Induced Ototoxicity in Children,” finished enrollment of 131 patients of which 125 were eligible patients.

The patients had been previously diagnosed with childhood cancers.

The primary endpoint was to evaluate the efficacy of STS for prevention of hearing loss in children receiving cisplatin chemotherapy (hypothesis:

50% relative reduction in hearing loss).

Secondary endpoints included:

● Compare change in mean hearing thresholds.

● Compare incidence of other Grade 3/4 toxicities (renal and hematological).

● Monitor Event Free Survival (EFS) and Overall Survival (OS) in two groups.

125 eligible subjects were enrolled with germ cell tumor (32), osteosarcoma (29), neuroblastoma (26), medulloblastoma/pnet (26), hepatoblastoma (7), or other (5).

Of these, 104 subjects (64 male and 29 <5 years old) were evaluable for the primary endpoint.

Subjects were randomized either to no treatment (control) or treatment with STS 16 grams/m2 IV over 15 minutes, 6 hours after each cisplatin dose.

Hearing was measured using standard audiometry for age and data was reviewed centrally using American Speech-Language-Hearing Association criteria.

The proportion of subjects with hearing loss assessed at 4 weeks post the final cisplatin dose (primary endpoint):

● The proportion of hearing loss for STS vs.

Control was 28.6% (14/49) vs.

56.4% (31/55), respectively (p=0.004).

● In a predefined subgroup of patients less than 5 years old with 29 eligible subjects:

Control was 21.4% (3/14) vs.

73.3% (11/15), respectively (p=0.005).

● STS protects against cisplatin-induced hearing loss in children across a heterogeneous range of tumor types, with even stronger efficacy in the protocol predefined subgroup of patients under five years old, and is not associated with serious adverse events attributed to its use.

● Further potential clinical use will be informed by the final results of SIOPEL 6 study.

The EMA continues its review of our MAA.

Third-Party Reimbursement

Sales of drug products depend in significant part on the availability of coverage and adequate reimbursement by third party payors, such as state and federal governments, including Medicare and Medicaid, managed care providers, private commercial insurance plans and pharmacy benefit management (PBM) plans.

Decisions regarding the extent of coverage and the amount of reimbursement to be provided for PEDMARK ® are expected to be made on a plan-by-plan, and in some cases, on a patient-by-patient basis.

Particularly given the small size of the pediatric cancer population, our experience has been that securing coverage and appropriate reimbursement from third-party payors requires targeted education and highly skilled insurance navigation experts that have experience with rare and orphan disease launches and medical exception processes at insurance companies to provide patient coverage for important orphan disease therapies.

To that end, we have engaged a dedicated team of reimbursement experts as well as a patient service center staffed with experienced personnel focused on ensuring that clinically-qualified patients have access to our product.

There can be no assurance, however, as to whether payors will continue to cover our product, and if so, at what level of reimbursement.

In that regard, we have advised payors that we will provide free medication to support titration and confirm patient therapeutic benefit.

Further, when necessary, we may provide patients with access to therapy at no charge while those patients are awaiting coverage decisions.

Intellectual Property

Patent Coverage

Patents are important to developing and protecting our competitive position.

Our general policy is to seek patent protection in the United States, major European countries, Japan, Canada and other jurisdictions as appropriate for our compounds and methods.

Our general policy is to seek patent protection in the United States, Europe, China, Japan, Canada and other jurisdictions as appropriate for our compounds and methods.

patents, as well as most foreign patents, are generally effective for 20 years from the date the earliest (priority) application was filed.

however, U.S.

patents that issue on applications filed before June 8, 1995 may be effective until 17 years from the issue date, if that is later than the twenty-year date.

In some cases, the patent term may be extended to recapture a portion of the term lost during the U.S.

FDA regulatory review or because of U.S.

Patent and Trademark Office (“USPTO”) delays in prosecuting the application.

The duration of foreign patents varies similarly, in accordance with local law.

Currently, we have licensed from OHSU one U.S.

set to expire in December 2038.

Further, in September 2020, a U.S.

patent was issued to us that captures the unique anhydrous form of the active

ingredient in our PEDMARK TM product, as well as related methods of synthesis.

This patent is eligible for listing in the FDA Orange Book, and reflects our strategy to expand and diversify our intellectual property portfolio to obtain protection for our PEDMARK TM product.

The duration of foreign patents may vary in accordance with local law.

Our current patent portfolio reflects our strategy to expand and diversify our intellectual property to obtain protection for our PEDMARK ® product.

We currently wholly own two patent families directed to formulations that cover PEDMARK ® and other potential future sodium thiosulfate formulations, and methods of using and manufacturing the same.

Three US patents have been issued from these two families, and two of the issued patents (US ‘984 Patent;

US ‘728 Patent) qualify for and have been listed in the FDA Orange Book.

Our ‘363 issued patent covers a process of manufacture, which is a patent category that does not qualify for FDA orange book listing.

One additional US pending patent application covering our PEDMARK formulation has been allowed (US App.

17/871,825), and on issuance will be listed in the FDA Orange Book.

Six additional US patent applications are pending, three of which applications cover methods of using our PEDMARK ® formulation and are eligible for listing on the FDA Orange Book if issued.

The three other applications cover additional sodium thiosulfate formulations for potential future use.

Additional applications from these families are pending in Australia, Brazil, Canada, China, the European Patent Office (EPO), Hong Kong, Indonesia, Israel, Japan, South Korea, Mexico, Malaysia, New Zealand, Russia, Singapore, and Thailand.

Applications from these patent families, where granted, valid, and enforceable, will expire in July 2039, exclusive of any patent term adjustment or extension.

We have exclusively in-licensed from Oregon Health & Science University (“OHSU”) one patent family directed to the use of sodium thiosulfate to reduce the occurrence of ototoxicity.

This family includes the granted US ‘190 Patent and

one pending US patent application.

The US ‘190 Patent has been listed in the FDA Orange Book.

The US ‘190 Patent will expire in January 2038, unless held invalid or unenforceable by a court of final jurisdiction.

The pending US patent application, if granted, valid, and enforceable, will expire in November 2037, exclusive of any patent term adjustment or extension.

In 2022, OHSU abandoned applications from this family in all ex-US jurisdictions.

Our success is significantly dependent on our ability to obtain and maintain patent protection for PEDMARK ® , both in the United States and abroad.

Our patent position and proprietary rights are subject to various risks and uncertainties.

Please read the “Risk Factors” in Item 1A of this Annual Report for information about certain risks and uncertainties that may affect our patent position and proprietary rights.

We also rely upon unpatented confidential information to remain competitive.

We protect such information principally through confidentiality agreements with our employees, consultants, outside scientific collaborators, and other advisers.

In the case of our employees, these agreements also provide, in compliance with relevant law, that inventions and other intellectual property conceived by such employees during their employment shall be our exclusive property.

FDA Orange Book Listings

On April 5, 2022, the USPTO issued U.S.

11,291,728 (the “US ‘728 Patent”) that covers the PEDMARK ® pharmaceutical formulation.

On November 9, 2022, the USPTO issued U.S.

11,510,984 (the “US ‘984 Patent”) that also covers the PEDMARK ® pharmaceutical formulation.

On January 23, 2023, the USPTO issued a Notice of Allowance for an additional patent application (US App.

17/871,825) that covers the PEDMARK ® pharmaceutical formulation.

We expect this application to issue as a patent in Q2 of 2023.

We own three additional pending US patent applications directed to methods of treatment using the PEDMARK ® formulation.

These patents where granted will expire in July 2039, exclusive of patent term adjustment and/or extension, unless held invalid or unenforceable by a court of final jurisdiction.

We have exclusively licensed from OHSU U.S.

10,596,190 (“the US ‘190 Patent”) and a pending US patent application directed to a method of reducing ototoxicity using sodium thiosulfate.

The US ‘190 Patent will expire in January 2038, unless held invalid or unenforceable by a court of final jurisdiction.

The pending US patent application, if granted, valid, and enforceable, will expire in November 2037, exclusive of any patent term adjustment or extension, unless held invalid or unenforceable by a court of final jurisdiction.

On approval of PEDMARK ® , we listed the US ‘190 Patent and US ‘728 Patent in the United Stated Food and Drug Administration’s (FDA) Approved Drug Products with Therapeutic Equivalence Evaluations, commonly referred to as the Orange Book.

The US’984 Patent was listed in the FDA Orange Book on December 14, 2022, following its issuance.

A third formulation application, USSN 17/871,825 has been allowed by the U.S.

Patent Office and will be listed when issued.

If issued, the three additional US pending patent applications owned by us and the exclusively licensed pending US patent application owned by OHSU are eligible for listing in the FDA Orange Book.

Orphan Drug Exclusivity

We were granted Orphan Drug Exclusivity (“ODE”) in January 2023 for the use of PEDMARK ® in the indication to reduce the risk of ototoxicity, or hearing loss, associated with cisplatin use in pediatric patients one month of age and older with localized, non-metastatic solid tumors.

The ODE designation is effective as of September 20, 2022, and provides us with seven years of market exclusivity in the PEDMARK ® indication pursuant to Section 527 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C.

We plan to pursue PUMA upon approval of the MAA, which would allow for 10 years of market exclusivity upon PUMA approval.

Hope Medical Enterprises, Inc.

Inter Partes Review Challenges

On October 29, 2021, Hope Medical Enterprises, Inc.

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In its petitions, Hope seeks to invalidate our U.S.

10,596,190 (“US ‘190”), which is exclusively in-licensed from Oregon Health & Science University (“OHSU”) and relates to a method of using our PEDMARK™ product, and our U.S.

10,792,363 (“US ’363”), which relates to an anhydrous form of STS, which is the active pharmaceutical ingredient in our PEDMARK™ product.

US ‘190 was issued on March 24, 2020.

US ‘363 was issued on October 6, 2020.

We filed preliminary responses to the petitions in February 2022, and thereafter, the PTAB has three months to decide whether to institute IPR proceedings.

If the PTAB institutes one or both reviews, the final written decision(s) will be due about one year after the PTAB’s decision to institute IPR proceedings, and following additional submissions by the parties.

Any appeals of a PTAB decision would delay any final outcome.

10,596,190 (“US ‘190 Patent”), which is exclusively in-licensed from Oregon Health & Science University (“OHSU”) and relates to a method of using our PEDMARK ® product, and our U.S.

10,792,363 (“US ’363 Patent”), which relates to an anhydrous form of STS and its method of manufacture, which is the active pharmaceutical

ingredient in our PEDMARK ® product.

The US ‘190 Patent was issued on March 24, 2020.

The US ‘363 Patent was issued on October 6, 2020.

On January 11, 2022, OHSU filed a Request for Supplemental Examination of US ‘190 requesting the consideration by the Central Re-examination Unit (“CRU”) of the USPTO of certain prior art references, including references cited by Hope in its Petition for IPR that are relevant to the granted claim of the patent.

On May 9, 2022, the PTAB granted Hope’s Petition to Institute the IPR against the ‘190 patent and a stayed the Supplemental Examination pending the result of the ‘190 IPR.

On August 12, 2022, we filed a Motion to Amend the single claim of the ‘190 Patent in the IPR to focus on the treatment of medulloblastoma.

We expect a decision in the ‘190 IPR in May 2023, which can be appealed by the losing party.

Further, in May 2022, the PTAB granted Hope’s Petition to Institute the IPR against the ‘363 patent.

During the ‘363 IPR, we disclaimed the patent claims directed to the anhydrous morphic form of STS and continued with claims directed to its method of manufacture.

We expect a decision in the ‘363 IPR in May 2023, which can be appealed by the losing party.

Further, in May 2022, the PTAB granted Hope Medical’s Petition to Institute the IPR against the ‘363 Patent.

During the ‘363 Patent IPR, we disclaimed the ‘363 Patent claims directed to the anhydrous morphic form of STS, and filed a Motion to Amend the remaining method of manufacture claims.

On December 14, 2022, we filed a Revised Motion to Amend the remaining claims in the ‘363 Patent.

We expect a decision in the ‘363 IPR in May 2023, which can be appealed by the losing party.

We plan to vigorously defend our intellectual property rights related to PEDMARK ® .

However, we are unable to predict the outcome of these petitions, and an invalidation of one or both of these patents may have a material adverse effect on our ability to protect our rights in PEDMARK™ beyond the periods of marketing exclusivity for PEDMARK TM possible in the United States under Orphan Drug Designation and in Europe under European Market Exclusivity for Pediatric Use (“PUMA”).

We obtained U.S.

Orphan Drug Designation for the use of PEDMARK TM in the prevention of platinum-induced ototoxicity in pediatric patients in 2004.

We plan to pursue PUMA upon approval of the MAA, which would allow for 10 years of market exclusivity upon PUMA approval.

On January 11, 2022, our licensor OHSU filed a Request for Supplemental Examination of US ‘190 requesting the consideration by the USPTO of certain prior art references, including references cited by Hope in its Petition for IPR that are relevant to the granted claim of the patent.

On January 28, 2022, the USPTO found that the cited references constitute a substantial new question of patentability and ordered an ex parte reexamination of the single US ‘190 claim of pursuant to 35 U.S.C.

We are unable to predict the outcome of the ex parte reexamination.

If the USPTO does not uphold the ‘190 claim as granted or in amended form, our ability to protect our PEDMARK TM product beyond Orphan Drug Designation and PUMA may be adversely affected.

Our success is significantly dependent on our ability to obtain and maintain patent protection for PEDMARK TM , both in the United States and abroad.

However, we are unable to predict the outcome of Hope’s IPR petitions, or the Reexamination.

While we now have, or will shortly receive, additional U.S.

patents that cover PEDMARK ® over the IPR challenged patents, an invalidation of our patents covering PEDMARK ® could have a material adverse effect on our ability to protect our rights in PEDMARK ® beyond periods of marketing exclusivity for PEDMARK ® possible in the United States under Orphan Drug Designation and in Europe under European Market Exclusivity for Pediatric Use (“PUMA”).

CIPLA ANDA Litigation

On December 1, 2022, we received a letter dated November 30, 2022, notifying us that CIPLA Ltd.

and CIPLA USA (“CIPLA”) submitted to the FDA an ANDA (ANDA No.

218028) for a generic version of PEDMARK ® (sodium thiosulfate solution) that contains Paragraph IV Certifications on two of our patents covering PEDMARK ® :

the OHSU licensed US ‘190 Patent, expiration date January 2038;

and our US 11,291,728 Patent, expiration date July 2039.

On January 6, 2023, we received a letter dated January 5, 2023, notifying us that CIPLA submitted to the FDA a Paragraph IV Certification on our newly issued US 11,510,984 Patent.

These patents are listed in FDA’s list of Approved Drug Products with Therapeutic Equivalence Evaluations, commonly referred to as the Orange Book, for PEDMARK ® .

The certifications allege these patents are invalid or will not be infringed by the manufacture, use, or sale of CIPLA’s sodium thiosulfate solution.

Under the Food and Drug Cosmetic Act, as amended by the Drug Price Competition and Patent Term Restoration Act of 1984, as amended, after receipt of a valid Paragraph IV notice, the Company may bring a patent infringement suit in a federal district court against CIPLA within 45 days from the receipt of the Notice Letter and if such a suit is commenced within the 45-day period, the Company is entitled to a 30 month stay on the FDA’s ability to give final approval to any proposed products that reference PEDMARK ® .

In addition to the 30-month stay, because we have received Orphan Drug Exclusivity, the FDA may not approve CIPLA’s ANDA for at least 7 years from PEDMARK ® ’s FDA approval date of September 20, 2022.

On January 10, 2023 we filed suit against the CIPLA entities in the United States District Court for the District of New Jersey (Case No.

3:23-cv-00123), for infringement of the ‘190 Patent and the ‘728 Patent.

The suit is ongoing.

We plan to pursue PUMA upon approval of the MAA, which would allow for 10 years of market exclusivity in Europe upon PUMA approval.

Our success is significantly dependent on our ability to obtain and maintain patent protection for PEDMARK ® , both in the United States and abroad.

Our patent position and proprietary rights are subject to various risks and uncertainties.

Please read the “Risk Factors” in Item 1A of this Annual Report for information about certain risks and uncertainties that may affect our patent position and proprietary rights.

read the “Risk Factors” in Item 1A of this Annual Report for information about certain risks and uncertainties that may affect our patent position and proprietary rights.

We also rely upon unpatented confidential information to remain competitive.

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Manufacturing and Supply

We are licensed as a virtual drug manufacturer, which means that we have no in-house manufacturing capacity and we are obligated to rely on contract manufacturers and packagers.

We have no plans to build or acquire the manufacturing capability needed to manufacture PEDMARK ® , and we expect that PEDMARK ® will be prepared by contractors with suitable capabilities for these tasks and that we will enter into appropriate supply agreements with these contractors at appropriate times in the development and commercialization of our product.

Because we will use contractors to manufacture and supply our product, we will be reliant on such contractors.

Further, the contractors selected would have to be inspected by the FDA and found to be in substantial compliance with federal regulations in order for an application for one of our drug candidates to be approved, and there can be no assurance that the contractors we select would pass such an inspection.

We have entered into agreements with a supplier of the active pharmaceutical ingredient (API) contained in PEDMARK ® for future requirements and we have contracted with third-party contract manufacturers who are manufacturing PEDMARK ® vials for us.

Any significant change that we make for PEDMARK ® must be approved by the FDA in a supplemental new drug application (sNDA).

If the manufacturing plan and data are insufficient, any sNDA we submit will not be approved.

Before an sNDA can be approved, our manufacturers must also demonstrate compliance with FDA’s current Good Manufacturing Practices (cGMPs) regulations and policies.

Further, even if we receive approval of any sNDAs for PEDMARK ® , if our manufacturers do not follow cGMPs in the manufacture of our product, it may delay product launches or shipments and adversely affect our business.

Since we contract with third parties to manufacture our product, our contract manufacturers are required to comply with all applicable environmental laws and regulations that affect the manufacturing process.

As a result, we do not believe that we will have any significant direct exposure to environmental issues.

Corporate Relationships

License Agreement with Oregon Health & Science University

On February 20, 2013, we entered into a new exclusive license agreement with OHSU for exclusive worldwide license rights to intellectual property directed to thiol-based compounds, including PEDMARK TM , and their use in oncology (the "OHSU Agreement").

On February 20, 2013, we entered into a new exclusive license agreement with OHSU for exclusive worldwide license rights to intellectual property directed to thiol-based compounds, including PEDMARK ® , and their use in oncology (the "OHSU Agreement").

OHSU will receive certain milestone payments, royalty on net sales for licensed products and a royalty on any consideration received from sublicensing of the licensed technology.

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Further, Amendment 1 adjusts select milestone payments entered in the OHSU Agreement including but not limited to the royalty rate on net sales for licensed products, royalty rate from sublicensing of the licensed technology and the fee payable upon the regulatory approval of a licensed product.

Certain milestone payments are due upon FDA approval and achievement of sufficient positive EBITDA over a specified period.

PEDMARK ® received FDA approval in September 2022, however at this time, due to significant uncertainty surrounding timing and magnitude of certain milestones, the Company has only recorded a royalty liability associated with net revenue.

The term of the OHSU Agreement as amended by Amendment 1 expires on the date of the last to expire claim(s) covered in the patents licensed to us or 8 years, whichever is later.

In the event a licensed product obtains regulatory approval and is covered by the Orphan Drug Designation, the parties will in good faith amend the term of the agreement.

PEDMARK TM is currently protected by methods of use patent that we exclusively license from OHSU that that expire in the United States in 2038 The OHSU Agreement is terminable by either us or OHSU in the event of a material breach of the agreement by either party after 45 days prior written notice.

PEDMARK ® is currently protected by methods of use patent that we exclusively license from OHSU in the ‘190 patent that is set to expire in the United States in 2038.

The OHSU Agreement is terminable by either us or OHSU in the event of a material breach of the agreement by either party after 45 days prior written notice.

We also have the right to terminate the OHSU Agreement at any time upon 60 days prior written notice and payment of all fees due to OHSU under the OHSU Agreement.

Our operations may be affected by the ongoing COVID-19 pandemic.

The ultimate disruption that may be caused by the pandemic is uncertain;

The ultimate disruption that may be caused by the outbreak is uncertain;

however, it may result in a material adverse impact on our financial position, operations and cash flows.

Possible effects may include, but are not limited to, disruption to our product launch which includes the ability of sales reps to communicate with oncologists, absenteeism in our labor workforce, unavailability of products and supplies used in operations, and a decline in value of our assets, including inventories, property and equipment, and marketable securities.

COVID-19 has not had a material effect on our operations to date as we have historically had a workforce which works remotely.

COVID-19 has not had a material effect on our operations to date as we have historically had a workforce which works remotely, preparations for product launch have been under the assumption of a virtual launch, and product supplies have not been impacted.

The biotechnology and pharmaceutical industries are extremely competitive.

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We cannot give any assurances that we can compete effectively with these other biotechnology and pharmaceutical companies.

We expect that if PEDMARK TM achieves regulatory approval for sale, it will compete on the basis of drug efficacy, safety, patient convenience, reliability, ease of manufacture, price, marketing, distribution, and patent protection, among other variables.

Our competitors may develop technologies or drugs that are more effective, safer or more affordable than any we may develop.

We are not aware of any commercially available agents that reduce the incidence of hearing loss associated with the use of platinum-based anti-cancer agents, for which purpose we are developing PEDMARK TM .

There are several potential competitive agents with activity in preclinical or limited clinical settings.

Now that PEDMARK ® has regulatory approval for sale, it will compete on the basis of drug efficacy, safety, patient convenience, reliability, ease of manufacture, price, marketing, distribution, and patent protection, among other variables.

Our competitors may develop technologies or drugs that are more effective, safer or more affordable than PEDMARK ® .

We are not aware of any commercially available agents that reduce the incidence of hearing loss associated with the use of platinum-based anti-cancer agents, which is the purpose of PEDMARK ® .

However, there are several potential competitive agents with activity in preclinical or limited clinical settings.

These include:

D-methionine, an amino acid that has been shown to protect against hearing loss in experimental settings but was demonstrated to be inferior to PEDMARK TM in comparative studies;

D-methionine, an amino acid that has been shown to protect against hearing loss in experimental settings but was demonstrated to be inferior to PEDMARK ® in comparative studies;

SPI-3005, an oral agent primarily being developed by Sound Pharmaceuticals for noise and age-related hearing loss but in early Phase II trials for chemotherapy related hearing loss, which mimics glutathione peroxidase and induces the intracellular induction of glutathione;

N-acetylcysteine and amifostine, which have shown effectiveness (but less than PEDMARK TM ) in experimental systems;

N-acetylcysteine and amifostine, which have shown effectiveness (but less than PEDMARK ® ) in experimental systems;

and Vitamin E, salicylate and tiopronin, which have all demonstrated moderate activity in rat models to protect against cisplatin-induced ototoxicity, but no clinical trials have been completed, and DB-020, a clinical stage candidate in an ongoing Phase1b trial being developed by Decibel Therapeutics.

Cochlear implants, which are small electronic devices that are surgically placed in the inner ear to assist with certain types of deafness, are utilized to offer some relief for hearing loss associated with the use of platinum-based anti-cancer agents, but are often suboptimal.

Manufacturing and Clinical Supplies

We do not own or operate manufacturing facilities for the production of commercial or clinical quantities of any product, including PEDMARK TM .

We currently rely on a small number of third-party manufacturers to produce compounds used in our product development and commercial activities and expect to continue to do so to meet the preclinical and clinical requirements of our potential products and for all of our commercial needs.

We currently have long-term commercial supply agreements with certain third-party manufacturers.

Our manufacturing and processing agreements require that all third-party contract manufacturers and processors produce active pharmaceutical ingredients and finished products in

accordance with the FDA’s current Good Manufacturing Practices (“cGMP”) and all other applicable laws and regulations.

We maintain confidentiality agreements with potential and existing manufacturers in order to protect our proprietary rights related to PEDMARK TM .

Some of the critical materials and components used in manufacturing PEDMARK TM are sourced from single suppliers.

An interruption in the supply of a key material could significantly delay our research and development process or increase our expenses for commercialization or development of PEDMARK TM .

Specialized materials must often be manufactured for the first time for use in drug delivery technologies, or materials may be used in the technologies in a manner that is different from their customary commercial uses.

The quality of materials can be critical to the performance of a drug delivery technology, so a reliable source that provides a consistent supply of materials is important.

Materials or components needed for our drug delivery technologies may be difficult to obtain on commercially reasonable terms, particularly when relatively small quantities are required or if the materials traditionally have not been used in pharmaceutical products.

Finally, we are aware that sodium thiosulfate has been available from compounding pharmacies for many years and may remain available, even though we have obtained FDA approval of PEDMARK ® .

Compounded sodium thiosulfate is likely to be substantially less expensive than PEDMARK ® .

The Food and Drug Administration Modernization Act of 1997 included a new section, which clarified the status of pharmacy compounding under Federal law.

Under Section 503A, drug products that are lawfully compounded by a pharmacist or physician for an individual patient may be entitled to exemptions from three key provisions of the FDCA:

(1) the adulteration provision of section 501(a)(2)(B) (concerning FDA’s cGMP regulations);

(2) the misbranding provision of section 502(f)(1) (concerning the labeling of drugs with adequate directions for use);

and (3) the new drug provision of section 505 (concerning the approval of drugs under new drug or abbreviated new drug applications).

To qualify for these statutory exemptions, a compounded drug product must satisfy several legal requirements.

One of these requirements restricts the universe of bulk drug substances that a compounder may use.

Specifically, every bulk drug

substance used in compounding:

(1) must comply with an applicable and current USP or NF drug monograph, if one exists, as well as the current USP chapters on pharmacy compounding;

(2) if such a monograph does not exist, the bulk drug substance must be a component of an FDA-approved drug;

or (3) if a monograph does not exist and the bulk drug substance is not a component of an FDA-approved drug, it must appear on a list of bulk drug substances that may be used in compounding (i.e., the “Section 503A bulk substances list 1”).

While the advertising provisions in Section 503A were ruled unconstitutional in part in the United States by the Supreme Court in 2002, the FDA, since 2013, has aggressively regulated and exercised oversight over the practice of pharmacy compounding following the compounding incident at the New England Compounding Center in Massachusetts that sickened hundreds and killed over 60 individuals.

In 2013, Congress removed the unconstitutional advertising provisions in Section 503A when it passed the Drug Quality and Security Act of 2013 (DQSA), Title I (The Compounding Quality Act).

The DQSA also created “outsourcing facilities” under Section 503B of the Federal Food, Drug, and Cosmetic Act, which are drug compounders that voluntarily register with FDA and may produce compounded formulations for office use (at least one of which must be sterile), but must comply with FDA’s cGMP regulations and other requirements set forth in Section 503B.

Section 503B outsourcing facilities may also only compound from bulk substances if the product is on FDA’s drug shortage list, or the substance is on FDA’s Section 503B list of bulk substances that may be used in compounding (i.e., the Section 503B bulk substances list 1”).

While the FDA has been aggressively enforcing Section 503A since its re-enactment, compounders may still compound “near copies” (but not “essentially copies”) of approved drug products, under Section 503A, so long as the prescriber makes a change to the compounded formulation that produces for that patient a significant difference between the commercially available drug and the compounded version.

Compounders may also copy commercially available products if they do not do so in “regular or inordinate amounts.” In January 2018, FDA published a Final Guidance document titled, “Compounded Drug Products That Are Essentially Copies of a Commercially Available Drug Product Under Section 503A of the Federal Food, Drug, and Cosmetic Act.” This Final Guidance sets forth FDA’s enforcement policy concerning those compounders that make essentially copies of commercially available drug products.

FDA has defined the term “regular or inordinate” in the Final Guidance to mean:

“a drug product that is essentially a copy of a commercially available drug product is compounded regularly or in inordinate amounts if it is compounded more frequently than needed to address unanticipated, emergency circumstances, or in more than the small quantities needed to address unanticipated, emergency circumstances.” FDA has further stated it will not take enforcement action, considering all the facts and circumstances, against a compounder that compounds less than four “essentially copies” of a commercially available drug product in a calendar month.

Factors affecting competition generally

In general, our ability to compete depends in large part upon:

• our ability to obtain regulatory approvals for our drug candidates outside the U.S.;

• the demonstrated efficacy, safety and reliability of our drug candidates;

• the timing and scope of regulatory approvals;

• product acceptance by physicians and other health care providers;

• the willingness of payors to reimburse for our product;

• protection of our proprietary rights and the level of generic competition;

• our ability to supply commercial quantities of our product to the market;

• our ability to obtain reimbursement from private and/or public insurance entities for product use in approved indications;

• our ability to recruit and retain skilled employees;

• the availability of capital resources to fund our development and commercialization activities, including the availability of funding from the federal government.

Government Regulation

The production and manufacture of our product candidate and our research and development activities are subject to significant regulation for safety, efficacy and quality by various governmental authorities around the world.

The production and manufacture of our product and our research and development activities are subject to significant regulation for safety, efficacy and quality by various governmental authorities around the world.

Before new pharmaceutical products may be sold in the U.S.

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A typical program of preclinical studies takes 18 to 24 months to complete.

The results of the preclinical studies as well as information related to the chemistry and comprehensive descriptions of proposed human clinical studies are then submitted as part of the Investigational New Drug Application (“IND”) to the FDA, a Clinical Trial

Application to the TPD, or similar submission to other foreign regulatory bodies.

This is necessary in Canada, the United States and most other countries prior to undertaking clinical studies.

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● Phase 2 Clinical Trials :

Phase 2 clinical trials typically take one to two years to complete and are generally carried out on a relatively small number of patients, generally between 15 and 50, in a specific setting of targeted disease or medical condition, in order to provide an estimate of the drug’s effectiveness in that specific setting.

or medical condition, in order to provide an estimate of the drug’s effectiveness in that specific setting.

This phase also provides additional safety data and serves to identify possible common short-term side effects and risks in a somewhat larger group of patients.

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While European, U.S.

and Canadian regulatory systems require that medical products be safe, effective, and manufactured according to high quality standards, the drug approval process in Europe differs from that in the United States and Canada and may require us to perform additional preclinical or clinical testing regardless of whether FDA or TPD approval has been obtained.

The amount of time required to obtain necessary approvals may be longer or shorter than that required for FDA or TPD approval.

European Union Regulations and Directives generally classify health care products either as medicinal products, medical devices or in vitro diagnostics.

For medicinal products, marketing approval may be sought using either the centralized procedure of the European Agency for the Evaluation of Medicinal

Products (“EMEA”), or the decentralized, mutual recognition process.

For medicinal products, marketing approval may be sought using either the centralized procedure of the European Agency for the Evaluation of Medicinal Products (“EMEA”), or the decentralized, mutual recognition process.

The centralized procedure, which is mandatory for some biotechnology derived products, results in an approval recommendation from the EMEA to all member states, while the European Union mutual recognition process involves country by country approval.

The NDA Approval Process

Assuming successful completion of the required clinical testing, the results of the preclinical studies and clinical trials, including negative or ambiguous results as well as positive findings, together with detailed information relating to the product’s chemistry, manufacture, controls and proposed labeling, among other things, are submitted to the FDA as part of an NDA to support approval to market the product for one or more indications.

In most cases, the submission of an NDA is subject to a substantial application user fee.

Fennec anticipates a waiver of the application user fee related to its NDA for PEDMARK TM .

The FDA is required to conduct a preliminary review of an NDA within the first 60 days after submission, before accepting it for filing, to determine whether it is sufficiently complete to permit a substantive review.

The FDA may accept the NDA for filing, potentially refuse to file the NDA due to deficiencies but work with the applicant to rectify the deficiencies (in which case the NDA is filed upon resolution of the deficiencies) or refuse to file the NDA.

The FDA must notify the applicant of a refusal to file a decision within 60 days after the original receipt date of the application.

If the FDA refuses to file the NDA the applicant may resubmit the NDA with the deficiencies addressed.

The resubmitted NDA is considered a new application subject to a new review goal, as described below.

If the NDA is refused for filing, the FDA will refund 75 percent of the application fee.

Upon resubmission, a new application fee will be required, unless the applicant is eligible for a waiver or reduction.

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

Once an NDA is accepted for filing, the FDA begins an in-depth substantive review.

Under PDUFA, and the FDA’s commitments under the current PDUFA reauthorization, the FDA has a goal of reviewing and acting on 90% of standard non-priority NDA applications for drugs that are not new molecular entities within ten months from the FDA’s receipt of the NDA.

The FDA reviews an NDA to determine, among other things, whether the drug is safe and effective for its intended use and whether the facility in which it is manufactured, processed, packaged or held meets standards designed to assure the product’s continued safety, quality and purity.

The FDA is required to refer an application for a novel drug to an advisory committee or explain why such referral was not made.

An advisory committee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation in response to specific questions raised by the FDA, which may include 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.

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

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

Additionally, before approving an NDA, the FDA will typically inspect one or more clinical investigational sites to evaluate the integrity of the data and confirm compliance with cGCP.

After the FDA evaluates the NDA and conducts its inspections, it may issue an approval letter or a CRL.

An approval letter authorizes the commercial marketing of the drug subject to specific prescribing information for specific indications and, if applicable, specific post-approval requirements.

A CRL indicates that the review cycle of the application is complete and the application is not ready for approval in its present form.

After receiving a CRL, the applicant must decide within twelve months (subject to extension), if it wants to resubmit the NDA addressing the deficiencies identified by the FDA in the CRL, withdraw the NDA, or request an opportunity for a hearing to challenge the FDA’s determination.

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

Even if such data are submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval.

Data from clinical trials are not always conclusive and the FDA may interpret data differently than we interpret data.

The FDA also may require implementation of a Risk Evaluation and Mitigation Strategy (“REMS”), to mitigate any identified or suspected serious risks.

The REMS could include a medication guide, physician communication plan,

assessment plan and elements to assure safe use, such as restricted distribution methods, patient registries or other risk minimization tools.

The drug testing and approval process requires substantial time, effort and financial resources, and may take several years to complete.

Data obtained from clinical activities are not always conclusive and may be susceptible to varying interpretations, which could delay, limit or prevent marketing approval.

The FDA may not grant marketing approval on a timely basis, or at all.

Even if the FDA approves a product, it may limit the approved indications for use for the product.

The FDA requires that the approved product labeling include information regarding contraindications, warnings or precautions.

It may also require that post-approval studies, including a long-term registry, be conducted to further assess a drug’s safety after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution restrictions or other risk management mechanisms, which can materially affect the potential market and profitability of the product.

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

After approval, some types of changes to the approved product, such as adding new indications or labeling claims or manufacturing changes may be subject to further testing requirements and FDA review and approval.

Also after approval, the FDA may require labeling changes as new information becomes known, particularly if new risks are identified, such as unexpected adverse events.

The FDA has the authority to prevent or limit further marketing of a drug based on the results of these post-marketing studies and programs or other information that may become known after approval.

Other Regulatory Requirements

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After approval, most changes to the approved product labeling, such as adding new indications, are subject to prior FDA review and approval.

Also, any post-approval changes in the drug substance, drug product, production process, quality controls, equipment, or facilities that have a substantial potential to have an adverse effect on the identity, strength, quality, purity, or potency of the drug product are subject to FDA review and approval.

are subject to FDA review and approval.

Any such changes that have a moderate potential to have an adverse effect on the identity, strength, quality, purity, or potency of the drug product may not be implemented until 30 days after the FDA receives a supplement for the change.

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Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances.

The FDA does not regulate the behavior of physicians in their choice of treatments for their individual patients.

The FDA does not regulate the

behavior of physicians in their choice of treatments for their individual patients.

The FDA does, however, regulate manufacturers’ communications about their drug products and interprets the Federal Food, Drug, and Cosmetic Act (“FFDCA”) to prohibit pharmaceutical companies from promoting their FDA-approved drug products for uses that are not specified in the FDA-approved labeling.

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If, after receiving approval from regulatory agencies, a company makes a material change in manufacturing equipment, location or process, additional regulatory review and approval may be required.

All facilities and manufacturing techniques that may be used for the manufacture of our products must comply with applicable regulations governing the production of pharmaceutical products known as Good Manufacturing Practices.

All facilities and manufacturing techniques that may be used for the manufacture of our product must comply with applicable regulations governing the production of pharmaceutical products known as Good Manufacturing Practices.

Orphan Drug Act

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Such PUMA approval is ultimately valid in all countries within the European Economic Area (which excludes the United Kingdom as of February 1, 2020).

The PUMA was introduced by the EU Paediatric Regulation for medicines that are:

The PUMA was introduced by the EU Pediatric Regulation for medicines that are:

● Normally contain an already authorized active ingredient;

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The PUMA process was established to make it more efficient for pharmaceutical companies to invest in the development of drugs for children.

PUMA drugs receive 8 plus 2 years of regulatory data and marketing protection.

and the applications are, in part, exempt from fees.

PUMA drugs receive 8 plus 2 years of regulatory data and marketing protection and the applications are, in part, exempt from fees.

The regulatory protection does not prevent off-label use of other drugs with the same active substance and indication for adults, nor pharmacy compounding.

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The extent of government regulation, which might result from future legislation or administrative action, cannot accurately be predicted.

Orange Book Listing

In seeking approval for a drug through an NDA, applicants are required to list with the FDA each patent with claims covering the applicant’s product or approved methods of using the product.

Upon approval of a drug, each of the patents listed in the application for the drug are then published in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book.

Drugs listed in the Orange Book can, in turn, be cited by potential generic competitors in support of approval of an abbreviated new drug application, or ANDA.

An ANDA provides for marketing of a drug product that has the same active ingredients in the same strengths and dosage form as the listed drug and has been shown to be bioequivalent to the listed drug.

Other than the requirement for bioequivalence testing, ANDA applicants are not required to conduct, or submit results of, pre-clinical or clinical tests to prove the safety or effectiveness of their drug product.

Drugs approved in this way are commonly referred to as “generic equivalents” to the listed drug and can often be substituted by pharmacists under prescriptions written for the original listed drug.

The ANDA applicant is required to certify to the FDA concerning any patents listed for the approved product in the FDA’s Orange Book.

Specifically, the applicant must certify that:

(i) the required patent information has not been filed;

(ii) the listed patent has expired;

(iii) the listed patent has not expired but will expire on a particular date and approval is sought after patent expiration;

or (iv) the listed patent is invalid or will not be infringed by the new product.

The ANDA applicant may also elect to submit a section viii statement certifying that its proposed ANDA label does not contain (or carves out) any language regarding the patented method-of-use rather than certify to a listed method-of-use patent.

If the applicant does not challenge the listed patents, the ANDA application will not be approved until all the listed patents claiming the referenced product have expired.

A certification that the new product will not infringe the already approved product’s listed patents, or that such patents are invalid, is called a Paragraph IV certification.

If the ANDA applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification to the NDA and patent holders once the ANDA has been accepted for filing by the FDA.

The NDA and patent holders may then initiate a patent infringement lawsuit in response to the notice of the Paragraph IV certification.

The filing of a patent infringement lawsuit within 45 days of the receipt of a Paragraph IV certification automatically prevents the FDA from approving the ANDA until the earlier of 30 months, expiration of the patent, settlement of the lawsuit, or a decision in the infringement case that is favorable to the ANDA applicant.

The ANDA application also will not be approved until any applicable non-patent exclusivity listed in the Orange Book for the referenced product has expired.

Upon NDA approval of a new chemical entity (NCE), which is a drug product that contains an active moiety that has never been approved by FDA in any other NDA, that drug receives five years of marketing exclusivity during which FDA cannot receive any ANDA seeking approval of a generic version of that drug.

A drug may obtain a three-year period of exclusivity for a particular condition of approval, or change to a marketed product, such as a new formulation for the previously

approved product, if one or more new clinical studies (other than bioavailability or bioequivalence studies) was essential to the approval of the application and was conducted/sponsored by the applicant.

During this period of exclusivity, FDA cannot approve an ANDA for a generic drug that includes the change.

An ANDA may be submitted one year before NCE exclusivity expires if a Paragraph IV certification is filed.

If there is no listed patent in the Orange Book, there cannot be a Paragraph IV certification, and, thus, no ANDA can be filed before the expiration of the exclusivity period.

Section 505(b)(2) New Drug Applications

Most drug products obtain FDA marketing approval pursuant to an NDA or an ANDA.

A third alternative is a special type of NDA, commonly referred to as a Section 505(b)(2), or 505(b)(2), NDA, which enables the applicant to rely, in part, on FDA’s previous approval of a similar product, or published literature, in support of its application.

505(b)(2) NDAs often provide an alternate path to FDA approval for new or improved formulations or new uses of previously approved products.

Section 505(b)(2) permits the filing of an NDA where at least some of the information required for approval comes from studies not conducted by, or for, the applicant and for which the applicant has not obtained a right of reference.

If the Section 505(b)(2) applicant can establish that reliance on FDA’s prior findings of safety and effectiveness or published literature is scientifically appropriate, it may eliminate the need to conduct certain pre-clinical or clinical studies of the new product.

The FDA may also require companies to perform additional studies or measurements to support the change from the approved product.

The FDA may then approve the new product candidate for all, or some, of the label indications for which the referenced product has been approved, as well as for any new indication sought by the Section 505(b)(2) applicant.

To the extent that the Section 505(b)(2) applicant is relying on studies conducted for an already approved product, the applicant is required to certify to the FDA concerning any patents listed for the approved product in the Orange Book to the same extent that an ANDA applicant would.

A Section 505(b)(2) NDA may be eligible for three years of marketing exclusivity to the same extent that a Section 505(b)(1) NDA is.

Abbreviated New Drug Applications

Generic drugs may enter the market after the approval of an ANDA.

The ANDA development process typically does not require new pre-clinical or clinical studies, but it does typically require one or more bioequivalence studies to show that the ANDA drug is bioequivalent to the previously approved brand name reference listed drug.

Bioequivalence studies compare the bioavailability of the proposed drug product with that of the approved listed product containing the same active ingredient.

Bioavailability is a measure of the rate and extent to which the active ingredient or active moiety is absorbed from a drug product and becomes available at the site of action.

A demonstration of bioequivalence means that the rate and extent of absorption of the ANDA drug is not significantly different from the rate and extent of absorption of the brand name reference listed drug when administered at the same molar dose under similar experimental conditions.

As noted above, generic drug products are generally introduced to the marketplace at the expiration of patent protection and non-patent market exclusivity for the reference listed drug.

However, if an ANDA applicant is the first ANDA applicant to submit an ANDA containing a Paragraph IV certification, that ANDA may be eligible for a period of generic marketing exclusivity on approval.

This exclusivity, which under certain circumstances must be shared with other ANDA applicants with Paragraph IV certifications, lasts for 180 days, during which the FDA cannot grant final approval to other ANDA sponsors of an application for a generic equivalent to the same reference drug.

Under certain circumstances, eligibility for 180-day exclusivity may be forfeited.

Various types of changes to an approved ANDA must be requested in a prior approval supplement.

In addition, some changes may only be approved after new bioequivalence studies are conducted or other requirements are satisfied.

In addition, the ANDA applicant must demonstrate that manufacturing procedures and operations conform to FDA cGMP requirements.

Facilities, procedures, operations, and/or testing of products are subject to periodic inspection by the FDA and other authorities.

In addition, the FDA conducts pre-approval and post-approval reviews and inspections to determine whether the systems and processes are in compliance with cGMP and other FDA regulations.

There are also user fees for ANDA applicants, sponsors, and manufacturers.

For fiscal year 2022, the application fees are $225,712 per ANDA application and the facility fees are $195,012 per domestic finished dosage form facility, $210,012 per foreign finished dosage form facility, $42,557 per domestic active pharmaceutical ingredient facility, and $57,557 per foreign active pharmaceutical ingredient facility.

In addition, there is a new annual program fee based on the size of the generic drug applicant.

These user fees typically increase each fiscal year.

Other regulatory requirements

In addition to regulation by the FDA and certain state regulatory agencies, we are also subject to a variety of foreign regulations governing clinical trials and the marketing of other products.

Outside of the United States, our ability to market our product depends upon receiving a marketing authorization from the appropriate regulatory agencies.

The requirements governing the conduct of clinical trials, marketing authorization, pricing and reimbursement vary widely from country to country.

In any country, however, we will only be permitted to commercialize our product if the appropriate regulatory agency is satisfied that we have presented adequate evidence of safety, quality and efficacy.

Whether or not FDA approval has been obtained, approval of a product by the comparable regulatory authorities of foreign countries must be obtained prior to the commencement of marketing of the product in those countries.

The regulatory approval and oversight process in other countries includes all of the risks associated with regulation by the FDA and certain state regulatory agencies as described above.

Under the European Union regulatory system, applications for drug approval may be submitted either in a centralized or decentralized manner.

Under the centralized procedure, a single application to the European Medicines Agency leads to an approval granted by the European Commission which permits marketing of the product throughout the European Union.

The decentralized procedure provides for mutual recognition of nationally approved decisions and is used for products that do not comply with requirements for the centralized procedure.

Under the decentralized procedure, the holders of national marketing authorization in one of the countries within the European Union may submit further applications to other countries within the European Union, who will be requested to recognize the original authorization based on an assessment report provided by the country in which marketing authorization is held.

Pharmaceutical pricing and reimbursement

In both United States and foreign markets, our ability to commercialize our product successfully, and to attract commercialization partners for our product, depends in significant part on the availability of adequate financial coverage and reimbursement from third-party payors, including, in the United States, governmental payors such as Medicare and Medicaid, managed care organizations, private commercial health insurers and PBMs.

Third party payors are increasingly challenging the prices charged for medicines and examining their cost effectiveness, in addition to their safety and efficacy.

We may need to conduct expensive pharmacoeconomic or other studies in order to further demonstrate the value of our product.

Even with the availability of such studies, our product may be considered less safe, less effective or less cost-effective than alternative products, and third-party payors may not provide coverage and reimbursement for our drug candidates, in whole or in part.

Political, economic and regulatory influences are subjecting the health care industry in the United States to fundamental changes.

There have been, and we expect there will continue to be, legislative and regulatory proposals to change the healthcare system in ways that could significantly affect our business, including the Patient Protection and Affordable Care Act of 2010 (the “Affordable Care Act”).

In fact, there continue to be efforts in Congress to revise the Affordable Care Act and replace it with another law.

As a result, there is great uncertainty as to what changes will be made to United States healthcare laws and there can be no assurance how changes to those laws may affect our business.

We anticipate that in the United States, Congress, state legislatures, and private sector entities will continue to consider and may adopt healthcare policies intended to curb rising healthcare costs.

These cost containment measures could include:

• controls on government-funded reimbursement for drugs;

• mandatory rebates or additional charges to manufacturers for their products to be covered on Medicare Part D formularies;

• controls on healthcare providers;

• controls on pricing of drug products, including the possible reference of the pricing of United States drugs to non-United States drug pricing for the same product;

• challenges to the pricing of drugs or limits or prohibitions on reimbursement for specific products through other means;

• reform of drug importation laws;

• entering into contractual agreements with payors;

• expansion of use of managed-care systems in which healthcare providers contract to provide comprehensive healthcare for a fixed cost per person.

We are unable to predict what additional legislation, regulations or policies, if any, relating to the healthcare industry or third-party coverage and reimbursement may be enacted in the future or what effect such legislation, regulations or policies would have on our business.

Any cost containment measures, including those listed above, or other healthcare system reforms that are adopted may have a material adverse effect on our business prospects.

Further, the pricing of drug products generally, and particularly the pricing of orphan drugs, has recently received scrutiny from the press, and from members of Congress in both parties.

The impact of this scrutiny on us and on the pricing of orphan drugs and other drug products generally cannot be determined with any certainty at this time.

Orphan Drug Exclusivity and Pediatric Exclusivity Designation

Some jurisdictions, including the United States and Europe, may designate drugs for relatively small patient populations as orphan drugs.

Under the Orphan Drug Act of 1983 (ODA), the FDA may grant Orphan Drug Designation to drugs intended to treat a rare disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the United States and for which there is no reasonable expectation that the cost of developing and making available in the United States a drug for this type of disease or condition will be recovered from sales in the United States for that drug.

In the United States, Orphan Drug Designation must be requested before submitting an application for marketing approval.

An Orphan Drug Designation does not shorten the duration of the regulatory review and approval process.

The grant of an Orphan Drug Designation request does not alter the standard regulatory requirements and process for obtaining marketing approval.

Safety and efficacy of a compound must be established through adequate and well-controlled studies.

If a product which has been granted Orphan Drug Designation subsequently receives the first FDA approval for the indication for which it has such designation, the product is entitled to an orphan drug exclusivity period, which means the FDA may not approve any other application to market the same drug for the same disease or condition for a period of seven years, except in limited circumstances, such as where an alternative product demonstrates clinical superiority to the product with orphan exclusivity.

In addition, holders of exclusivity for orphan drugs are expected to assure the availability of sufficient quantities of their orphan drugs to meet the needs of patients.

Failure to do so could result in the withdrawal of marketing exclusivity for the drug.

The orphan drug exclusivity contained in the ODA has been the subject of recent scrutiny from the press, from some members of Congress and from some in the medical community, and a recent proposed change to the ODA would limit the availability of the benefits of the act for drugs that treat more than 200,000 individuals in the United States.

There can be no assurance that the exclusivity granted in ODA to orphan drugs approved by the FDA will not be modified in the future, and as to how any such change might affect our product, if approved.

Pediatric exclusivity is another type of non-patent 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 five-year and three-year non-patent and seven-year orphan exclusivities.

This six-month exclusivity may be granted if an NDA sponsor submits pediatric data that fairly responds 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.

If the FDA determines that information relating to the use of the new drug in the pediatric population may produce health benefits in the population, the clinical study is deemed to fairly respond to the FDA’s request and the reports of FDA-requested pediatric studies are submitted to and accepted by the FDA within the statutory time limits, whatever statutory or regulatory periods of exclusivity or patent protection covering the product are extended by six months.

This is not a patent term extension, but it effectively extends the regulatory period during which the FDA cannot approve another application relying on the NDA sponsor’s data.

The European Orphan Drug Regulation is considered for drugs intended to diagnose, prevent or treat a life-threatening or very serious condition afflicting five or fewer per 10,000 people in the EU, including compounds that for serious and chronic conditions would likely not be marketed without incentives due to low market return on the sponsor’s development

The medicinal product considered should be of significant benefit to those affected by the condition.

Benefits of being granted Orphan Medicinal Product Designation are significant, including eight years of data exclusivity, two years of marketing exclusivity and a potential one-year extension of both.

The EU Community and Member States may not accept or grant for ten years a new marketing authorization or application for another drug for the same therapeutic indication as the orphan drug, although the ten-year period can be reduced to six years if, after the end of the fifth year, available evidence establishes that the product is sufficiently profitable not to justify maintenance of the marketing exclusivity.

A supplementary protection certificate may extend the protection six months beyond patent expiration if that is later than the orphan drug exclusivity period.

To apply for the supplementary protection, a pediatric investigation plan, or PIP, must be included in the market application.

In Europe all drugs now seeking marketing authorization need to have a PIP agreed with the European Medicines Agency (EMA) before it can be approved, even if it is a drug being developed specifically for a pediatric indication.

If a product is developed solely for use in the pediatric population, then a Pediatric Use Marketing Authorization, or PUMA, may provide eight years of data exclusivity and ten years of marketing exclusivity.

Breakthrough Therapy Designation

Breakthrough therapy designation by the FDA is intended to expedite the development and review of drugs for serious or life-threatening conditions.

The criteria for breakthrough therapy designation require preliminary clinical evidence that demonstrates the drug may have substantial improvement on at least one clinically significant endpoint over available therapy.

A breakthrough therapy designation conveys all of the fast track program features (see below for more details on fast track designation), as well as more intensive FDA guidance on an efficient drug development program.

The FDA also has an organizational commitment to involve senior management in such guidance.

Actions taken to expedite development may include the following actions, as appropriate:

• holding meetings with the sponsor and review team throughout the development of the drug;

• providing timely advice to, and interactive communication with, the sponsor regarding the development of the drug to ensure that the development program to gather the non-clinical and clinical data necessary for approval is as efficient as possible;

• taking steps to ensure that the design of the clinical trials is as efficient as practicable, when scientifically appropriate, such as by minimizing the number of patients exposed to a potentially less efficacious treatment;

• assigning a cross-disciplinary project lead for the FDA review team to facilitate an efficient review of the development program and to serve as a scientific liaison between the cross-discipline members of the review team (i.e., clinical, pharmacology-toxicology, chemistry, manufacturing and control (CMC), compliance) for coordinated internal interactions and communications with the sponsor through the review division’s Regulatory Health Project Manager;

• involving senior managers and experienced review staff, as appropriate, in a collaborative, cross-disciplinary review.

Fast Track Designation and Accelerated Approval

FDA is required to facilitate the development, and expedite the review, of drugs that are intended for the treatment of a serious or life-threatening disease or condition for which there is no effective treatment and which demonstrate the potential to address unmet medical needs for the condition.

Under the fast track program, the sponsor of a new drug candidate may request that FDA designate the drug candidate for a specific indication as a fast track drug concurrent with, or after, the filing of the IND for the drug candidate.

FDA must determine if the drug candidate qualifies for fast track designation within 60 days of receipt of the sponsor’s request.

Under the fast track program and FDA’s accelerated approval regulations, FDA may approve a drug for a serious or life-threatening illness that provides meaningful therapeutic benefit to patients over existing treatments based upon a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or

other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments.

In clinical trials, a surrogate endpoint is a measurement of laboratory or clinical signs of a disease or condition that substitutes for a direct measurement of how a patient feels, functions, or survives.

Surrogate endpoints can often be measured more easily or more rapidly than clinical endpoints.

A drug candidate approved on this basis is subject to rigorous post-marketing compliance requirements, including the completion of Phase 4 or post-approval clinical trials to confirm the effect on the clinical endpoint.

Failure to conduct required post-approval studies, or confirm a clinical benefit during post-marketing studies, will allow FDA to withdraw the drug from the market on an expedited basis.

All promotional materials for drug candidates approved under accelerated regulations are subject to prior review by FDA.

In addition to other benefits such as the ability to use surrogate endpoints and engage in more frequent interactions with FDA, FDA may initiate review of sections of a fast track drug’s NDA before the application is complete.

This rolling review is available if the applicant provides, and FDA approves, a schedule for the submission of the remaining information and the applicant pays applicable user fees.

However, FDA’s time period goal for reviewing an application does not begin until the last section of the NDA is submitted.

Additionally, the fast track designation may be withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging in the clinical trial process.

Priority Review

Under FDA policies, a drug candidate is eligible for priority review, or review within a six to eight-month time frame from the time a complete NDA is submitted, if the drug candidate is intended for the treatment, diagnosis, or prevention of a serious or life-threatening condition, demonstrates the potential to address an unmet medical need, or provides a significant improvement compared to marketed drugs.

Disclosure of clinical trial information

Sponsors of clinical trials of FDA-regulated products, including drugs, are required to register and disclose certain clinical trial information.

Information related to the product, patient population, phase of investigation, study sites and investigators, and other aspects of the clinical trial is then made public as part of the registration.

Sponsors are also obligated to disclose the results of their clinical trials after completion.

Disclosure of results of these trials can be delayed in certain circumstances for up to two years after the date of completion of the clinical trial.

Competitors may use this publicly-available information to gain knowledge regarding the progress of development programs.

Anti-Kickback, False Claims Laws & the Prescription Drug Marketing Act

In addition to FDA restrictions on marketing of drug products, other state and federal laws have been applied to restrict certain marketing practices in the pharmaceutical industry in recent years.

These laws include anti-kickback statutes and false claims statutes.

The federal healthcare program anti-kickback statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing, leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financed healthcare programs.

This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and patients, prescribers, purchasers and formulary managers on the other.

Violations of the anti-kickback statute are punishable by imprisonment, criminal fines, civil monetary penalties, and exclusion from participation in federal healthcare programs.

Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activities from prosecution or other regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor.

Federal false claims laws prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government, or knowingly making, or causing to be made, a false statement to have a false claim paid.

Recently, several pharmaceutical and other healthcare companies have been prosecuted under these laws for allegedly inflating drug prices they report to pricing services, which in turn were used by the government to set Medicare and Medicaid reimbursement rates, and for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product.

In addition, certain marketing practices, including off-label promotion, may also violate false claims laws.

The majority of states also have statutes or regulations similar to the federal

anti-kickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payer.

The Centers for Medicare & Medicaid Services (CMS) has issued a final rule that requires manufacturers of approved prescription drugs to collect and report information on payments or transfers of value to physicians, physician assistants, certain types of advanced practice nurses and teaching hospitals, as well as investment interests held by physicians and their immediate family members.

The information reported each year is made publicly available on a searchable website.

Failure to submit required information may result in civil monetary penalties.

In addition, several states now require prescription drug companies to report expenses relating to the marketing and promotion of drug products, to report gifts and payments to individual physicians in these states and to report certain pricing information, including price increases.

Other states prohibit various other marketing-related activities.

Still other states require the posting of information relating to clinical studies and their outcomes.

In addition, California, Connecticut, Nevada, and Massachusetts require pharmaceutical companies to implement compliance programs and/or marketing codes.

Several additional states are considering similar proposals.

Compliance with these laws is difficult and time consuming, and companies that do not comply with these state laws face civil penalties.

Prescription drug advertising is subject to federal, state and foreign regulations.

In the United States, the FDA regulates prescription drug promotion, including direct-to-consumer advertising.

Prescription drug promotional materials must be submitted to the FDA in conjunction with their first use.

Any distribution of prescription drug products and pharmaceutical samples must comply with the United States Prescription Drug Marketing Act (PDMA), a part of the FDCA.

In addition, Title II of the Federal Drug Quality and Security Act of 2013, known as the Drug Supply Chain Security Act (DSCSA), has imposed new “track and trace” requirements on the distribution of prescription drug products by manufacturers, distributors, and other entities in the drug supply chain.

The DSCSA requires product identifiers (i.e., serialization) on prescription drug products in order to eventually establish an electronic interoperable prescription product to system to identify and trace certain prescription drugs distributed in the United States and preempts existing state drug pedigree laws and regulations on this topic.

The DSCSA also establishes new requirements for the licensing of wholesale distributors and third-party logistic providers, although FDA regulations addressing wholesale distributors and third party logistics providers have not yet been promulgated.

We serialize our product at both the package and homogeneous case level, pass serialization and required transaction information to our customers, and believe that we comply with all such requirements.

Government Programs for Marketed Drugs

Medicaid, the 340B Drug Pricing Program, and Medicare

Federal law requires that a pharmaceutical manufacturer, as a condition of having its products receive federal reimbursement under Medicaid and Medicare Part B, must pay rebates to state Medicaid programs for all units of its covered outpatient drugs dispensed to Medicaid beneficiaries and paid for by a state Medicaid program under either a fee-for-service arrangement or through a managed care organization.

This federal requirement is effectuated through a Medicaid drug rebate agreement between the manufacturer and the Secretary of Health and Human Services.

CMS administers the Medicaid drug rebate agreements, which provide, among other things, that the drug manufacturer will pay rebates to each state Medicaid agency on a quarterly basis and report certain price information on a monthly and quarterly basis.

The rebates are based on prices reported to CMS by manufacturers for their covered outpatient drugs.

For innovator products, that is, drugs that are marketed under approved NDAs, the basic rebate amount is the greater of 23.1% of the average manufacturer price (“AMP”) for the quarter or the difference between such AMP and the best price for that same quarter.

The AMP is the weighted average of prices paid to the manufacturer (1) directly by retail community pharmacies and (2) by wholesalers for drugs distributed to retail community pharmacies.

The best price is essentially the lowest price available to non-governmental entities.

Innovator products are also subject to an additional rebate that is based on the amount, if any, by which the product’s current AMP has increased over the baseline AMP, which is the AMP for the first full quarter after launch, adjusted for inflation.

To date, the rebate amount for a drug has been capped at 100% of the AMP;

however, effective January 1, 2024, this cap will be eliminated, which means that a manufacturer could pay a rebate amount on a unit of the drug that is greater than the average price the manufacturer receives for the drug.

For non-innovator products, generally generic drugs marketed under approved abbreviated new drug applications, the basic rebate amount is 13% of the AMP for the quarter.

Non-innovator products are also subject to an additional rebate.

The additional rebate is similar to that discussed above for innovator products, except that the baseline AMP quarter is the fifth full quarter after launch (for non- innovator multiple source drugs launched on April 1, 2013 or later) or the third quarter of 2014 (for those

launched before April 1, 2013).

The terms of participation in the Medicaid drug rebate program impose an obligation to correct the prices reported in previous quarters, as may be necessary.

Any such corrections could result in additional or lesser rebate liability, depending on the direction of the correction.

In addition to retroactive rebates, if a manufacturer were found to have knowingly submitted false information to the government, federal law provides for civil monetary penalties for failing to provide required information, late submission of required information, and false information.

A manufacturer must also participate in a federal program known as the 340B drug pricing program in order for federal funds to be available to pay for the manufacturer’s drugs under Medicaid and Medicare Part B.

Under this program, the participating manufacturer agrees to charge certain federally funded clinics and safety net hospitals no more than an established discounted price for its covered outpatient drugs.

The formula for determining the discounted price is defined by statute and is based on the AMP and the unit rebate amount as calculated under the Medicaid drug rebate program, discussed above.

Manufacturers are required to report pricing information to the Health Resources and Services Administration (“HRSA”) on a quarterly basis.

HRSA has also issued regulations relating to the calculation of the ceiling price as well as imposition of civil monetary penalties for each instance of knowingly and intentionally overcharging a 340B covered entity.

Federal law also requires that manufacturers report data on a quarterly basis to CMS regarding the pricing of drugs that are separately reimbursable under Medicare Part B.

These are generally drugs, such as injectable products, that are administered “incident to” a physician service and are not generally self-administered.

The pricing information submitted by manufacturers is the basis for reimbursement to physicians and suppliers for drugs covered under Medicare Part B.

As with the Medicaid drug rebate program, federal law provides for civil monetary penalties for failing to provide required information, late submission of required information, and false information.

Medicare Part D provides prescription drug benefits for seniors and people with disabilities.

Medicare Part D beneficiaries once had a gap in their coverage (between the initial coverage limit and the point at which catastrophic coverage begins) where Medicare did not cover their prescription drug costs, known as the coverage gap.

However, beginning in 2019, Medicare Part D beneficiaries pay 25% of brand drug costs after they reach the initial coverage limit—the same percentage they were responsible for before they reached that limit—thereby closing the coverage gap.

Most of the cost of closing the coverage gap is being borne by innovator companies and the government through subsidies.

Each manufacturer of a drug approved under an NDA is required to enter into a Medicare Part D coverage gap discount agreement and provide a 70% discount on those drugs dispensed to Medicare beneficiaries in the coverage gap, in order for its drugs to be reimbursed by Medicare Part D.

Federal Contracting/Pricing Requirements

Manufacturers are also required to make their covered drugs, which are generally drugs approved under NDAs, available to authorized users of the Federal Supply Schedule (“FSS”) of the General Services Administration.

The law also requires manufacturers to offer deeply discounted FSS contract pricing for purchases of their covered drugs by the Department of Veterans Affairs, the Department of Defense (“DoD”), the Coast Guard, and the Public Health Service (including the Indian Health Service) in order for federal funding to be available for reimbursement or purchase of the manufacturer’s drugs under certain federal programs.

FSS pricing to those four federal agencies for covered drugs must be no more than the Federal Ceiling Price (“FCP”), which is at least 24% below the Non-Federal Average Manufacturer Price (“Non-FAMP”) for the prior year.

The Non-FAMP is the average price for covered drugs sold to wholesalers or other middlemen, net of any price reductions.

The accuracy of a manufacturer’s reported Non-FAMPs, FCPs, or FSS contract prices may be audited by the government.

Among the remedies available to the government for inaccuracies is recoupment of any overcharges to the four specified federal agencies based on those inaccuracies.

If a manufacturer were found to have knowingly reported false prices, in addition to other penalties available to the government, the law provides for civil monetary penalties of $100,000 per incorrect item.

Finally, manufacturers are required to disclose in FSS contract proposals all commercial pricing that is equal to or less than the proposed FSS pricing, and subsequent to award of an FSS contract, manufacturers are required to monitor certain commercial price reductions and extend commensurate price reductions to the government, under the terms of the FSS contract Price Reductions Clause.

Among the remedies available to the government for any failure to properly disclose

commercial pricing and/or to extend FSS contract price reductions is recoupment of any FSS overcharges that may result from such omissions.

Tricare Retail Pharmacy Network Program

The DoD provides pharmacy benefits to current and retired military service members and their families through the Tricare healthcare program.

When a Tricare beneficiary obtains a prescription drug through a retail pharmacy, the DoD reimburses the pharmacy at the retail price for the drug rather than procuring it from the manufacturer at the discounted FCP discussed above.

In order for the DoD to realize discounted prices for covered drugs (generally drugs approved under NDAs), federal law requires manufacturers to pay refunds on utilization of their covered drugs sold to Tricare beneficiaries through retail pharmacies in DoD’s Tricare network.

These refunds are generally the difference between the Non-FAMP and the FCP and are due on a quarterly basis.

Absent an agreement from the manufacturer to provide such refunds, DoD will designate the manufacturer’s products as Tier 3 (non-formulary) and require that beneficiaries obtain prior authorization in order for the products to be dispensed at a Tricare retail network pharmacy.

However, refunds are due whether or not the manufacturer has entered into such an agreement.

Branded Pharmaceutical Fee

A branded pharmaceutical fee is imposed on manufacturers and importers of branded prescription drugs, generally drugs approved under NDAs.

In each year between 2011 and 2018, the aggregate fee for all such manufacturers ranged from $2.5 billion to $4.1 billion, and has remained at $2.8 billion in 2019 and subsequent years.

This annual fee is apportioned among the participating companies based on each company’s sales of qualifying products to or utilization by certain U.S.

government programs during the preceding calendar year.

The fee is not deductible for U.S.

federal income tax purposes.

Utilization of generic drugs, generally drugs approved under ANDAs, is not included in a manufacturer’s sales used to calculate its portion of the fee.

Human Capital Management

We are dedicated to making a meaningful impact on the lives of those suffering from pediatric cancer, and we believe in putting patients first in everything we do.

To facilitate talent attraction and retention, we strive to make Fennec an inclusive, safe, and healthy workplace, with opportunities to grow and develop in their careers, supported by strong compensation, benefits, health and welfare programs.

Our goal in selecting employees is to retain high quality personnel with substantial prior experience who understand and support our mission as a company to develop and commercialize innovative therapies for people with rare, debilitating, chronic neuromuscular and neurological diseases and who are willing to work hard and in a collaborative manner to further that mission.

Employee Profile

As of December 31, 2022, we had approximately 36 employees, 25 of whom are in our commercial organization, two of whom are in our R&D organization, and the rest of whom are in our G&A organization.

We also utilize the services of several full-time consultants who work with our commercial organization.

None of our employees are covered by a collective bargaining agreement.

We believe our relationship with our employees and consultants is good.

Compensation and Benefits

Our compensation philosophy is to provide pay and benefits that are competitive in the biotechnology and pharmaceutical industry where we compete for talent.

We monitor our compensation programs closely and review them at least annually to provide what we consider to be a very competitive mix of compensation and health, welfare and retirement benefits for all our employees.

Our compensation package for all employees includes market-competitive base salaries, annual performance bonuses and stock option grants.

Our benefits programs include company sponsored medical, dental and vision health care coverage, life and AD&D insurance, and a 401(k) plan among others benefits.

Research and Development

Our research and development efforts have been focused on the development of PEDMARK TM since 2013.

Our research and development efforts have been focused on the development of PEDMARK ® since 2013.

We have established relationships with contract research organizations (“CROs”), universities and other institutions, which we utilize to perform many of the day-to-day activities associated with our drug development.

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Research and development expenses totaled $3.5 million and $5.0 million for the fiscal years ended December 31, 2022 and 2021, respectively.

We have decreased slightly our research and development expenses related to PEDMARK TM as our efforts have maintained over fiscal 2020 and 2021 with a mix of pre-commercialization activities with some continued regulatory and manufacturing expenses associated with the resubmission of the NDA for PEDMARK TM in response to the CRLs discussed above under the heading “Business – Overview – Product Candidate” and elsewhere in this Annual Report.

Our product candidate still requires significant, time-consuming and costly research and development, testing and regulatory clearances.

In developing our product candidate, we are subject to risks of failure that are inherent in the development of products based on innovative technologies.

We have decreased our research and development expenses related to PEDMARK ® as our efforts have shifted to commercial readiness and launch activities.

PEDMARK ® still requires significant, time-consuming and costly research and development, testing and regulatory clearances.

In developing PEDMARK ® , we are subject to risks of failure that are inherent in the development of products based on innovative technologies.

For example, it is possible that our product candidate will be ineffective or toxic, or will otherwise fail to receive the necessary regulatory clearances.

There is a risk that our product candidate will be uneconomical to manufacture or market or will not achieve market acceptance.

There is a risk that PEDMARK ® will be uneconomical to manufacture or market or will not achieve market acceptance.

There is also a risk that third parties may hold proprietary rights that preclude us from marketing our product candidate or that others will market a superior or equivalent product.

As a result of these factors, we are unable to accurately estimate the nature, timing and future costs necessary to complete the development of this product candidate.

In addition, we are unable to reasonably estimate the period when material net cash inflows could commence from the sale, licensing or commercialization of such product candidate, if ever.

At December 31, 2021, we had ten employees all of which are full time.

In addition, we use independent contractors to perform certain of our daily operations.

What changed 10-K

Item 1. Business