Item 1. Business
Item 1. Business
Our Strategy
Our objective is to develop
and commercialize our product candidates to treat diseases where the innate immune system is dysfunctional causing and contributing to
the patient’s disease. Innate immune dysfunction can occur for a variety of reasons including genetics, lifestyle, and other factors
however, age plays a significant role in the development of immune dysfunction. Innate immune dysfunction can be in cancer where Natural
Killer (“NK”) cells are inactive and contribute to a tumor’s evasion of the immune system and/or disease progression.
Further, chronic inflammation causes expression of MUC4 and immunosuppressive cells of the tumor microenvironment proliferate to protect
the tumor from attack by the patient’s immune system and can cause other diseases such as neurologic and metabolic diseases where
chronic inflammation results in innate immune system dysfunction. Our initial focus will be the treatment of cancer, treatment of Alzheimer’s
Disease (“AD”), the treatment of Treatment Resistant Depression (“TRD”) and an out-licensing strategy for Duchenne’s
Muscular Dystrophy (“DMD”). In cancer, we plan to pursue two parallel development programs: (1) with INKmune we will initially
focus on treating women with resistant disease relapse refractory carcinoma solid tumor and patients with high-risk myelodysplastic syndrome
(high risk MDS); (2) with INB03, we plan to treat patients with cancers that express MUC4, a mucinous polyglucan on the surface of some
epithelial cancer cells, that appears to predict resistant to immunotherapy including women with MUC4 expressing HER2+ breast cancer and
potentially other MUC4 resistant cancers. Our third drug candidate XPro1595 (“XPro”), targets Alzheimer’s Disease and
TRD. XPro for AD has completed Phase I trials and Phase II trials are underway in Australia and Canada. The Company is currently in discussions
with the US FDA to obtain approval to commence the Phase II AD trials in the U.S. which the FDA placed on full clinical hold on May 20,
2022. XPro for TRD is being prepared for Phase II trials and will start after the FDA has cleared XPro for use in the US. In early 2023,
the Company also announced pre-clinical data in DMD including new intellectual property for the purpose of trying to seek partnership
for the development of this program. DMD is a X-linked genetic disease that occurs most often in young boys. People with DMD do not produce
dystrophin, a protein necessary for normal skeletal muscle function. The patients develop weakness of skeletal muscles initially seen
as weakness in standing and walking. Over time, the disease progresses forcing the patient to be wheelchair bound by early teens. The
patients die young due to respiratory and cardiac failure before they reach thirty years old. Therapies for DMD delay progression, there
is no cure.
The overall principal components
of our business strategy to achieve these objectives are to:
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pursue development strategies and regulatory approval pathways that allow the treatment of oncology patients with our lead product candidates, INKmune and INB03;
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pursue development strategies and regulatory approval pathways that allow the treatment of neurodegenerative diseases in patients with our lead product candidates, XPro;
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Pursue development strategies with a dominant-negative
tumor necrosis factor (“DN-TNF”) compound for the treatment of DMD;
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adopt a product development strategy that solidifies our existing intellectual property (“IP”) to prevent competition and expand our IP suite into related immunotherapeutic areas;
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provide clear value propositions to third-party payers, such as managed care companies or government programs like Medicare, to merit reimbursement for our product candidates; and
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Collaborate with other pharmaceutical companies with respect to, among other things, our INKmune and the DN-TNF platform that includes INB03 and XPro product candidates, our DMD DN-TNF candidate and other products that will benefit from development or marketing beyond our current resources.
Pursue development and
regulatory approval pathways. We believe INKmune, INB03 and XPro may be approvable under pathways that are potentially shorter than
those typically available for drug products based on novel active ingredients, including as an orphan drug under the Orphan Drug Act and
approval under the Food and Drug Administration (the “FDA”) Accelerated Approval Program (see “Government Regulation”).
We have not yet had a discussion with the Medicines and Healthcare Products Regulatory Agency (“MHRA”) and/or FDA regarding
such designation, but plan to do so in the future. We believe the INKmune MDS cancer program may qualify for orphan status. We believe
that it would take a minimum of six months to receive Orphan Drug status once we apply for application and a minimum of 12 months
to receive a designation once we submit an application. We might never have these discussions, submit applications under the Orphan Drug
Act or the FDA Accelerated Approval Program or have these applications approved if we do.
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Adopt a two-pronged patent
strategy. We are pursuing a two-pronged product development strategy that will seek to solidify our existing IP to prevent competition
and expand our IP suite into related therapeutic areas. We are confident that our core in-licensed IP (see “Intellectual Property”)
will allow us both freedom-to-operate and provide robust protection from outside competition. We will continue to invest in expanding
our patent suite. We will also seek to further to strengthen our IP position by looking to in-license IP related to our focus on the innate
immune system.
Provide clear value propositions
to third-party payors to merit reimbursement for our product candidates . We are designing our clinical development programs to demonstrate
compelling, competitive advantages to patients and prescribers, and to demonstrate value propositions to third-party payors. We believe
the use of INKmune and/or INB03 in patients with a high risk of tumor progression and death from tumor should prolong survival, improve
the patient’s quality of life and decrease the total cost of care for patients with these lethal malignancies. For example, cancer
patients relapse frequently. Each relapse requires a complex treatment regimen that has decreasing benefits. Treatment with INKmune as
an out-patient may provide a more durable remission and limit the need for treatment-associated hospitalizations. At the patient level,
we believe INKmune and INB03 therapy, if approved, should improve survival and quality of life. At the payor level, we believe INKmune,
if approved, should provide more predictable costs and outcomes. Therapies for Alzheimer’s disease are needed for medical, social
and economic reasons. The cost of Alzheimer’s disease to the government is large and growing. Recently approved therapies that target
amyloid have a modest impact on disease progression and are difficult to use due to side-effects in some patients. The cost of AD
to families and care givers is real and burdensome. We believe treatment of dementia patients with XPro, including Alzheimer’s disease,
may provide a strategy to alter the costly dynamic of this disease in society today.
Collaborate to maximize
the value of our technology . We believe there are two reasons for us to enter collaborations with other companies. The first is the
further development of INKmune, INB03, XPro and DN-TNF by either providing additional innovations to the product, including combination
therapy strategies, and/or providing resources to improve the speed and breadth of the development process. The second is to optimize
the commercialization of our products either globally or regionally. The ideal partner will benefit us in both ways.
We continue to look for ways to utilize our unique capabilities to
optimize clinical application of cell therapies. We believe that we have identified a way to manufacture human mesenchymal stem cells
for the medical research and biotech community that offers large volumes of high-quality, low passage human umbilical cord mesenchymal
stem cells with minimal batch-to-batch variability. We have established a reliable supply of human umbilical cords based on our agreement
with the Anthony Nolan Cord Blood Bank in the United Kingdom and may seek additional supplies in the future. We have developed a validated
manufacturing process that reliably produces contract manufacturer of the clinical grade (“cGMP”) quality mesenchymal stem
cells that we call CORDstrom. The manufacturing process can be performed at a contract manufacturing site under the direction of Mark
Lowdell, the Company’s CSO. We will seek academic laboratories and biopharma companies who need a reliable source of high quality
pooled human umbilical cord mesenchymal stem cells for research of and development of clinical products. Once identified, we plan to act
as a cGMP for the development of therapeutic products by utilizing contract manufacturers. Because the production of the product is not
continuous, we do not expect to engage a contract manufacturer until we have a customer identified. To date, we are supporting two academic
clinical trials with CORDstrom. One program is a Phase 2 trial sponsored by the Great Ormond Street Children’s Hospital in the UK
treating children with Erythematous Bullousa (“EB”), a disfiguring skin disease in children that is similar to a second degree
burn and the second program is treatment of system lupus in adults. Both these studies are ongoing. INmune Bio is supplying the clinical
product for treatment of these patients. The Company does not know the results of these trials until they are announced by the principal
investigators at the clinical sites. We have identified contract manufacturers in the UK that have the capability to produce cGMP stem
cells. We expect the commercial arrangement with academic laboratories or biopharma companies to be a combination of fee-for-service and
licensing that does not require additional investment by us. We will be opportunistic in pursuing therapeutic opportunities for our own
portfolio with this platform in the future if resources become available. The regulatory path for therapeutic applications of the mesenchymal
stem cell products is well established and similar to the regulatory approval process for other cell therapies. We will only be responsible
for regulatory compliance related to manufacturing of the mesenchymal stem cells when the product is being developed by a third party.
When developing a therapeutic product for the Company’s commercial portfolio, the Company will be responsible for all aspects of
the regulatory process.
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Overview of Immunotherapy for Cancer
The immune system has two
parts, innate and adaptive. The innate immune system is the body’s first line of defense against an infection, providing immediate,
non-specific responses to eliminate harmful cells in the body. Components of the innate immune system include cytokines, chemokines, macrophages,
neutrophils and NK cells, among others.
The adaptive immune system
is often initially triggered by the innate immune system, mounts a delayed response against diseased cells and plays a role protecting
against re-infection. An adaptive immune response is highly specific to a pathogen or antigen and is developed or learned from prior exposure.
Key components of the adaptive immune system include antibodies which bind to antigens and mark them for destruction by other immune cells,
B-cells which produce these antibodies upon exposure to antigens, and T-cells which attack and eliminate the diseased cells.
The biopharmaceutical industry
has made significant advances in harnessing specific components of innate and adaptive immune systems for therapeutic use. Some of these
approaches are summarized below.
Cytokines. Tumor
Necrosis Factor alpha (“TNF”) is the focus of XPro and INB03. TNF biology has four elements that include two cytokines, soluble
TNF and trans-membrane TNF (“sTNF” and “tmTNF,” respectively), and two receptors, TNF Receptor 1 and 2 (“TNFR1”
and “TNFR2”). The biology of TNF ligation of TNFR varies dramatically based on what elements of the TNF system that are used.
sTNF binding to TNFR1 is responsible for inflammation and cell death while sTNF binding to TNFR2 promotes proliferation of regulatory
T cells (“Treg”). In patients with advanced cancers, increased sTNF is not favorable to long-term survival because it promotes
epithelial-mesenchymal transformation and metastasis while making the tumor microenvironment more immunosuppressive promoting resistance
to therapy. In the CNS, sTNF promotes neuronal cell death, demyelination and synaptic pruning while tmTNF promotes nerve cell survival,
improves synaptic function and stimulates remyelination. In brief, sTNF is the “bad” TNF and tmTNF is the “good”
TNF. In patients with cancer, infection or neurologic disease, blockade of tmTNF function has negative consequences such as immunosuppression,
increased infection, synaptic dysfunction and demyelination.
One of the early applications
of immunotherapy is the use of cytokines, including interferons and interleukin-2 (“IL-2”). Interferons are molecules that
inhibit the growth and replication of diseased cells and stimulate innate immune cells to attack them. They have been used as standard
of care for hepatitis B and C and multiple sclerosis, and to a lesser extent, as treatment for certain cancers, including chronic myeloid
leukemia, cutaneous T-cell lymphoma, myeloma and non-Hodgkin’s lymphoma. However, the use of interferons has generally decreased
over the years due to serious adverse events ( e.g. , flu-like symptoms and dramatic weight loss) and introduction of new therapies
with higher efficacy, better safety profiles and more convenient administration although Alpha-interferon remains the treatment of choice
for some hematological conditions such as polycythemia. IL-2 activates T-cells and NK cells to attack diseased cells. IL-2 has been used
to treat select cancers, but due to its relatively poor safety profile, physicians often only resort to this therapy for the most advanced
settings.
Antibody therapy.
Antibodies exist in three formats: monoclonals (“mAbs”), oligo/polyclonal and antibody-drug conjugates. mAbs represent an
effective therapeutic modality and are important to the treatment paradigm of various diseases. Drug manufacturers have leveraged mAbs’
ability to induce an antibody-dependent cell-mediated cytotoxicity, or ADCC effect to develop better treatments that prolong survival
and quality of life of patients. In addition, mAbs designed to inhibit specific checkpoints in the immune system have overcome in vivo
immune suppression and the resulting immune responses have led to profound therapeutic benefit in some patients. However, the degree of
efficacy of these therapies is heavily reliant on the immune system of patients, many of whom are severely immuno-compromised. In addition,
mAbs are manufactured through a complex process that requires purification of cell products created from a cell line. Polyspecific antibodies,
for example bi-specific antibodies, are able to target more than one antigen. These are often used to bring and effector T cell in contact
with a target cell. Antibody drug conjugates are mAbs attached to a toxin, chemotherapy or radio therapy that delivers the cancer killing
payload directly to the cancer.
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Dendritic Cell Therapies.
This approach is designed to indirectly stimulate a patient’s T-cells by leveraging the role of dendritic cells in presenting antigens
to T-cells. Cancer vaccines are the most common application of dendritic cells. The only FDA-approved dendritic cell therapy is PROVENGE,
which entails collecting monocytes from the patient, maturing them into dendritic cells, “loading” ex vivo with the
patient’s cancer antigens, and then re-infusing in the patient. Currently, this process is cumbersome and expensive, and again,
relies on an intact and effective immune system of the patient. There are additional ongoing preclinical studies and clinical trials being
conducted by our competitors aimed at addressing certain of the limitations associated with this approach. To date, current clinical results
of dendritic cell therapies have been mixed.
CAR-T and TCR Therapies.
T-cells recognize diseased cells by receptors engaging with antigens that are present on or inside the diseased cells. CAR-T therapy entails
genetically engineering T-cells to express synthetic CARs that direct T-cells to antigens on the surface of cancer cells. TCR therapy
modifies T-cells to express high-affinity tumor specific TCRs that recognize intra-cellular antigens that must be presented on the surface
of target cells. In early clinical trials, CAR-T and TCR therapies have demonstrated impressive anti-tumor activity in a narrow spectrum
of hematologic cancers and garnered significant attention by research institutions and biopharmaceutical companies. We believe a key limitation
of adaptive autologous immunotherapy is the need to retrieve non-compromised immune cells from a cancer patient which requires a complex
and costly manufacturing process to develop the therapy. The complexity of this personalized process is reflected in the price of the
two approved therapies. CAR-T therapies - tisagenlecleucel and axicabtagene ciloleucel for advanced leukemia and lymphoma respectively.
The cost of a single therapy is many hundreds of thousands of dollars. As a consequence of this need to harvest active T-cells, current
Phase I clinical trials for autologous CAR-T cell therapy in large part enroll patients from highly selected, often relatively early-stage
disease in a narrow spectrum of cancers, including bulky hematological cancers. In addition, Phase I clinical trials of CAR-T cell immunotherapy
have reported severe adverse toxicities of cytokine release syndrome and neurotoxicity, requiring hospitalization, pre-conditioning and,
in some instances, intensive care unit admission following side effects associated with cytokine release syndrome. As a result, though
our competitors continue to develop their CAR-T and TCR product candidates with the goal of addressing certain of the limitations associated
with these approaches, we believe these serious challenges may limit their potential and use in a variety of indications, including solid
tumors.
Checkpoint Inhibitors.
Immune cells express proteins that are immune checkpoints that control and down-regulate the immune response. These are best defined
in T lymphocytes and include PD-1, CTLA-4, TIM-3 and LAG3. Tumor cells express the ligands to these receptors. When T cells bind the ligand
to these proteins on the tumor cells, the T cell is turned off and does not attempt to attack the tumor cell. Thus, checkpoint inhibitors
(“CPI”) are part of the complex strategy used by the tumor to evade the patient’s immune system and are responsible
for resistance to immunotherapy. Biopharmaceutical companies have successfully developed CPI that block the receptor/ligand interaction
to promote the adaptive immune response to the tumor. Six CPI are currently approved, pembrolizumab, nivolumab, atezolizumab, avelumab,
durvalumab, and ipilimumab for a wide variety of solid tumors including melanoma, lung, bladder, gastric cancers and others. More CPI
are in development and more tumor types will be added to the list of sensitive tumors over the next years. CPI have become the backbone
of cancer therapy and are expected to be the best -selling class of drugs by 2027.
NK Cells. NK
cells typically represent approximately 2% to 13% of circulating lymphocytes and are a critical component of the immune system responsible
for innate immunity. Unlike adaptive immune cells, they are ever present and ready to attack, having the inherent ability to detect and
eliminate diseased cells without the need for antigen presentation, which is why they are called “natural killers.”
NK cells bind to stress ligands
expressed by the diseased cells and directly eliminate them. This binding induces NK cells to release cytokines, including, interferons
and GM-CSF, which are integral in recruiting additional innate and adaptive immune responses by the host. NK cells also represent a critical
effector cell for ADCC, whereby target cells bound with human antibodies, whether made by the patient’s body or administered, are
selectively destroyed by the NK cells.
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Our Innate Immune Dominant-Negative
TNF (“DN-TNF”) product candidate
We renamed XPro, which we license
from Xencor, to INB03 when it is used for cancer related indications. We will continue to call the drug XPro when used for treatment of
neurologic and psychiatric diseases, including Alzheimer’s disease and TRD discussed below. INB03 and XPro are the same drug with
different names. INB03 neutralizes soluble TNF in the tumor microenvironment (“TME”). Neutralizing sTNF in the TME has two main effects
– decreases expression of MUC4 by the tumor and converting the immunosuppressive cancer promoting TME that promotes tumor growth
to an immunologically active TME that promotes tumor cell death. INB03 decreases proliferation of MDSC, promotes recruitment of cytotoxic
T cells to the TME and may convert immunosuppressive tumor macrophages into tumor phagocytic macrophages. In murine models, these changes
make the tumor reverse resistance to treatment with immunotherapy alone or in combination with tyrosine kinase inhibitors (TKI) such a
lapatinib and tucatinib. MUC4 expression is increased by sTNF produced by the tumor. MUC4 causes resistance to trastuzumab therapy in
HER2+ breast and gastric cancer cells by preventing binding of trastuzumab to HER2 by steric hinderance. By neutralizing sTNF with INB03,
decreases MUC4 expression to allow trastuzumab to bind HER2. The importance of trastuzumab based immunotherapy in the treatment of HER2
expressing tumors has increased recently due to the success of trastuzumab-deruxtecan (Enhertu, TDxd). TDxd improves survival in women
with metastatic HER2+ breast cancer in both high and low HER2 expressing tumors. MUC4 expression inhibits the TDxd tumor killing in a
murine model of HER2+ trastuzumab resistant HER2+ breast cancer. The mechanism by which combination of INB03 with TKI improves efficacy
over TKI alone remains under investigation. By using INB03 as part of combination therapy for cancer, we believe the patient’s dysregulated
immune response, a hallmark of cancer progression and resistance to therapy, to be converted to a coordinated immune response that can
overcome resistance mechanisms to immunotherapy in MUC4 expressing cancers. These immune responses have been studied in at least two animal
models. In a murine model of an inflammatory cancer, where 3-methylcholanthrese is given to mice in a subcutaneous injection that causes
the development of multiple cutaneous fibrosarcoma. This model was developed by Y Akamatsu in 1967 while working at the National Cancer
Institute of the NIH. In research published by Professor Nikola Vujanovic in Cancer Immunology Research in 2016, treatment
with INB03 resulted in smaller and fewer cancers with increased survival. INB03 is an engineered PEGylated protein that neutralizes human
soluble TNF, a human inflammatory cytokine that is increased in patients with advanced cancer. By specifically neutralizing the cytokine,
there is decreased phosphorylation of STAT3, an essential step required for the proliferation of the MDSC population, and secretion of
the immunosuppressive cytokines. The combination of decreased MDSC proliferation and decreased immunosuppressive cytokines allows the
immune system to respond to the tumor. This data was published in an article entitled Inhibition of Soluble Tumor Necrosis Factor Prevents
Chemically Induced Carcinogenesis in Mice in Cancer Immunology Research in Cancer Immunology Research, 2016. In summary,
INB03 functions as an innate immune system checkpoint inhibitor by eliminating the population of MDSC that provides an immunosuppressive
shield protecting the tumor, the patient’s immune system is able to function normally to the benefit of the patient – it can
attack the tumor. TNF plays an important role in breast cancer (Schillaci R, Front. Oncol., 22 April 2020 | https://doi.org/10.3389/fonc.2020.00584 ).
In a murine model of trastuzumab resistant breast cancer using JMIT-1 cells, a human cell line of HER2 positive breast cancer resistant
to trastuzumab placed into immunocompromised mice, INB03 downregulates MUC4 from the surface of the JMIT-1 HER2+ breast cancer cells to
allow the trastuzumab resistant cells to become trastuzumab sensitive (Figure A from Bruni, NYAS 2020) to decrease tumor growth (from
Schillaci SABCS 2018, Figure B). JMIT-1 cells are also resistant to lapatinib, a TKI inhibitor used as a second line therapy in women
with trastuzumab resistant HER2+ breast cancer. The addition of INB03 to lapatinib in the animal model reverses lapatinib resistance in
part by decreasing expression of MUC4 (from Bruni NYAS 2020, Figure C). In addition to decreasing resistance to trastuzumab by decreasing
MUC4 expression, INB03 decreases the immunosuppressive tumor microenvironment (Schillaci SABCS 2018, Bruni NYAS 2020). Recently, Dr. Schillaci
reported the MUC4 expressing triple negative breast (TNBC) cancer patients have a worse overall survival. (Schillaci SABCS 2021). More
recently, Schillaci has shown that MUC4 causes resistance to trastuzumab ADC (trastuzumab-XXX and TDxd). Combination therapy with INB03
overcomes resistance in this breast cancer model. These data may be relevant to all tumors that express HER2 or MUC4 including upper gastrointestinal
malignancies such as gastric and pancreatic cancer. We believe MUC4 expression is a biomarker of resistance that may improve therapeutic
decision making by clinical teams
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Because INB03 targets the
patient’s immune system and not the tumor, we believe INB03 is an immunotherapy that can be used to treat many types of hematologic
malignancies and solid tumors as part of combination therapy. The decision to use INB03 in a patient will be based on biomarkers that
should predict that a patient will benefit from treatment with the drug. We believe the ideal biomarker is easy to use and is determined
before treatment begins. MUC4 expression by epithelial tumors is an example of this type of biomarker. Our Phase I clinical trial preceded
the identification of MUC4 as a biomarker and focused on using determining the safety of INB03 as monotherapy in patients with advanced
solid tumors. This is a typical Phase I clinical trial design for first-in-man trials in cancer. We expect to use INB03 as part of combination
therapy with approved cancer therapies as part of Phase II development. We do not expect to need to modify INB03 therapy to treat each
different type of cancer, because INB03 therapy targets the immune system, not the cancer. We do expect to develop the INB03 beyond Phase
II to target a specific type of cancer to meet the current system of regulatory approval. For instance, INB03 may be approved to treat
patients with HER2+/MUC4+ breast cancer. To get subsequent approval for the treatment of patients with MUC4+ TNBC or MUC4+ pancreatic
cancer, we will need to perform a pivotal trial in patients with TNBC and pancreatic cancer respectively. After the first regulatory approval,
if and when achieved, we believe the difficulty and cost of achieving these labels extensions will decline with each successive approval.
At this time, we cannot predict if patients without biomarkers of inflammation, elevated MDSC or cytokines, or increased expression of
MUC4 will benefit from treatment with INB03. Those studies may be performed in the future, but they are not a priority.
XPro neutralizes soluble TNF
in the brain in exactly the same way INB03 neutralizes soluble TNF in the tumor microenvironment but the effects of soluble TNF neutralization
in the brain are different. The cause of the destructive neuroinflammation in the brain are microglial and astroglial cells. The glial
cell are two of four cells in the neural unit that also includes oligodendrocytes and nerve cells. Activated microglial cells are considered
the resident macrophages of the brain. The primary role of microglial cells is to protect the neural unit from infection. When innate
immune dysfunction causes chronic inflammation, activated microglial cells produce soluble TNF that activates astrocytes. Activated glial
cells cause nerve cell and oligodrocyte dysfunction that results in synaptic pruning, nerve cell death and demyelination of neurons. These
pathologies contribute, in part, to neurodegenerative diseases such as AD, Parkinson’s disease, ALS, MS, Huntington’s disease,
glaucoma and TBI (traumatic brain injury) may contribute to neuropsychiatric diseases such as depression, bi-polar disease, sleep disorders,
autism, schizophrenia and PTSD. In the setting of AD, microglial activation causes dendritic pruning, synaptic dysfunction and nerve cell
death that contributes to cognitive decline and the behavioral manifestations of AD including depression, aggressiveness, sleep disorders,
hallucinations and anhedonia. Elimination of microglial activation should reverse these symptoms. Because soluble TNF is the apex cytokine
in the inflammatory cytokine cascade, neutralization of soluble TNF with XPro should prevent glial activation and normalizes function
of the neural unit.
The Company has completed
a Phase I trial using XPro to reverse neuroinflammation in patients with Alzheimer’s disease. The trial was performed in Australia
and is partially funded by a $1M USD Part-the-Cloud Award from the Alzheimer’s Association. The clinical trial was the first in
the Company’s development program for the treatment of dementia. The open label, dose escalation trial in patients with Alzheimer’s
disease with biomarkers of peripheral inflammation (one of CRP>1.5mg/L, HgbA1c>6.0, ESR>10sec or have ApoE4) treats the patients
with XPro as a once-a-week subcutaneous injection for 3 months. AD patients with one biomarker of inflammation are classified as having
AD with neuroinflammation (ADi). The company estimates this group of patients includes at least 40% of patients with AD. Patients have
multiple biomarkers of neuroinflammation tested before and during therapy including soluble biomarkers in blood and cerebral spinal fluid,
behavioral biomarkers (neuropsychiatric symptoms of AD) and neuroimaging biomarkers using MRI. The primary goal of this short, open label
study was to demonstrate that treatment with XPro decreases neuroinflammation safely and to define the dose of XPro to use in the Phase
II trial. The Company has opened a Phase II trial in ADi in Australia (“AUS”) and Canada (“CAN”). We anticipate
opening additional countries including the US in 2023. The Phase II ADi program is not yet open in the US. The FDA has placed a full
clinical hold on the program related to product characteristics in the product produced for the Phase II program at KBI Biosciences in
2021. The XPro produced by KBI is being used in the Phase II trial in AUS and CAN, the Phase II extension trial in patients that have
completed the Phase II trial in AUS and the Expanded Access Scheme in patients who completed the Phase I trial in AUS. The Company is
working closely with the FDA to reverse the clinical hold. We cannot predict when this will occur. Our plan is to continue to enroll
patients in the Phase II ADi trial in regulatory venues outside of the US while working to resolve the concerns of the FDA. The goal
of the Phase II trial will be to demonstrate the prolonged control of neuroinflammation in patients with dementia will help control cognitive
decline. The Company has review its two Phase II trials in dementia, one each in mild cognitive impairment due to neuroinflammation (“MCI”)
and mild ADi. New data supports combining the two trials into a single trial. Instead of having separate blinded randomized Phase II
clinical trials in mild ADi and MCI 2 , there will be one clinical trial in early ADi that will include patients with either
mild ADi or MCI. Combination of the two trials into a single clinical trial may speed enrollment and decrease costs and will likely mirror
the planned Phase III registration trial without increasing the risk of the clinical program.
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The Phase I trial enrolled
18 patients at doses of 0.3, 0.6 and 1.0mg/kg given once a week as subcutaneous injection for three months. Patients in the 10mg/kg group
were offered extended use of the drug for up to 12 months. Three patients remained on XPro for 12 months. Preliminary data was presented
in a webinar on 13 July 2020. Neuroimaging data from six patients were presented in the figure below. In summary, treatment with XPro
at either 0.3 or 1.0mg/kg once-a-week as a subcutaneous injection (low and target dose respectively) decreased white matter free water
(“WMFW”) as measured by MRI. WMFW is a validated biomarker of neuroinflammation. Although the number of patients is low, there was a dose
response with a greater decrease in WMFW in the target dose compared to the low dose group. An analysis of inflammation in white matter
tracts demonstrated a significant decrease in WMFW (40%; range 20-52%) in the arcute fasciculus, a white matter tract important in the
control of language and short-term memory (Figure D). These data suggest XPro is decreasing neuroinflammation in patients with Alzheimer’s
disease who have biomarkers of peripheral inflammation.
Additional data was presented
on January 21, 2021. The goal of the January 21 data release was to show a correlation between the white matter free water, a novel biomarker
of inflammation with cerebral spinal fluid (“CSF”) cytokines and chemokine levels, a traditional measure neuroinflammation.
CSF cytokine/chemokines were measured in 9 patients before and after 12 weeks of weekly therapy with XPro using a panel from OLINK Target
48 Cytokine ( https://www.olink.com/products/olink-target-48-cytokine/ ), that measures 45 (Figure AD1).
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In the 6 patients in the 1mg/kg
per week dose, only one cytokine and chemokine, interferon gamma (“INFg”) did not change in the CSF of patients, the remainder all decreased
on average of 15%. Using data from all patients treated for 12 weeks (3 low dose, 6 target dose), a high correlation (R 2 =.7561)
between the white matter free water safe mask and the inflammation composite score is shown in figure AD2. The data analyzed provides
evidence that XPro decreases neuroinflammation in patients with Alzheimer’s disease.
We believe these data support the use of XPro to treat other diseases
where neuroinflammation is a part of the pathophysiology of the disease. The company studied the consequences of decreasing neuroinflammation
in the 6 patients from target dose group (XPro 1mg/kg for 12 weeks) be looking at the CSF proteome using technology for Proteome Sciences
using their TMT Calibrator™ platform. A large data set of proteins were identified. Early analysis of the data focusing on 26 AD
related proteins demonstrated changes in inflammation, neuronal and synaptic proteins caused by decreasing neuroinflammation after treatment
with XPro (Figure AD3). The proteome also demonstrated a clear dose response with a greater number of proteins being affected by the target
dose compared to low dose XPro therapy (0.3 vs 1.0 mg/kg/week for 12 weeks) (Figure AD4). The CSF proteome data is only partially analyzed.
Additional data may result from these ongoing analytics.
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The results of the Phase I
study demonstrated that XPro safely decreases neuroinflammation in patients with ADi who have biomarkers of peripheral inflammation or
are ApoE4 positive when given for at least 3 months at the 1mg/kg once a week dose. Decreasing neuroinflammation with XPro appears to
decrease neurodegeneration and improve synaptic function and promote remyelination. The effect of XPro on the biology and immunology of
the brain in patients with AD suggest XPro therapy in patients with peripheral biomarkers of inflammation or ApoE4 allele(s) may impact
cognitive decline. Although there were anecdotes of improved cognitive function in patients receiving the target dose of XPro, this cannot
be verified because the trial was not a blinded, randomized trial. The impact on cognition of controlling neuroinflammation with XPro
will be studied in the Phase II program which is a blinded randomized, placebo controlled clinical trial.
The Company has consolidated
the two Phase II trials into a single trial of early ADi. Early ADi patients have either mild AD or MCI with neuroinflammation. Mild
AD or MIC patients must with at least one of elevated CRP, hemoglobinA1c, ESR in blood or have an ApoE4 allele are eligible for the trial.
The blinded randomized trial in patients with early ADi will enroll 201 patients in a 2:1 ratio (XPro:placebo) at 1mg/kg once a week.
The trial is currently enrolling study subjects. Patients will be treated for 6 months. The primary end-point is Early/Mild Alzheimer’s
Cognitive Composite (EMACC), a sensitive cognitive end-point validated for use in patients with early AD. Secondary cognitive (ADAS-Cog13,
CDR-SB and NPI) and functional (GAS, ADCS-ADL) end-points will be measured. Biomarkers of inflammation using white and gray matter analytics
measured by MRI DTI similar to those used in the Phase I trial will also be used. All patients will be eligible to continue XPro for
at 12 additional months. Clinical and MRI metrics will be followed during the extension trial.
Effective therapy for TRD
is a large unmet need. Twenty percent of patients with a Major Depressive Disorder have TRD. Once third of TRD patients have peripheral
biomarkers to inflammation (elevated CRP). This is a large patient population. The role of TNF and anti-TNF therapeutics was explored
in a small open label clinical trial by Prof. Andrew Miller, MD of Emory University whereby it was demonstrated that patients which have
elevated TNF levels responded to treatment with infliximab (Miller, 2011).
The Company received a $2.9M USD award from the National Institute
of Mental Health (“NIMH”) to treat TRD with XPro. The blinded, randomized Phase II trial will use a biomarkers of peripheral
inflammation to select patients with TRD for enrollment. Patients will be treated for 6 weeks. Primary end-points include both clinical
and neuroimaging measures. The final trial design is ongoing and discussions with the FDA are not complete. The Company anticipates receiving
authorization to initiate the clinical trial in 2023 at which point the Company may begin to request funds from the NIMH pursuant to the
award.
INB03 and XPro are delivered
as a subcutaneous injection, similar to an insulin treatment, given one to three times per week. Because this is a simple subcutaneous
injection similar to an insulin injection (the therapy patients give themselves for treatment of Type 1 diabetes mellitus), we expect
patients to administer the therapy by themselves or caregivers and not require expensive or logistically challenging clinic visits to
receive the therapy.
10
Release of INB03 and XPro drug supply
GMP DN-TNF product (INB03 and XPro) used in the
oncology Phase I, AD Phase I and COVID-19 Phase II trial were manufactured by Lonza at a site in New Hampshire. The supply of Lonza DN-TNF
product is limited but allowed completion of the Phase I study in Alzheimer’s disease and support of patients in the extension
study for 12 months. New batches of XPro have been produced to support future clinical trials. The Company engaged KBI Biopharma to manufacture
6 lots of XPro/INB03 at the Boulder, Colorado facility using the original master cell bank and updated manufacturing process. Two lots
have been converted into drug product using the US fill/finish facility of Vetter Pharma. Two of the lots are frozen as drug substance
at -80C with a plan to convert to drug product the second half of 2023. The final two lots are frozen as a cell paste with a plan to
process to drug substance in during 2023 or 2024 as needed to support the clinical trials. We plan to use a two-step approach to improve
the yield of the drug substance from the fermentation process. We hope to improve the yield of the drug product using the existing E.coli-based
system. Once the new process is validated and functional, we will perform a manufacturing campaign drug for future clinical trials. In
the future, the Company may consider a strain change to improve yield of the fermentation step further. The decision for strain improvements
and strain change will be made in the future as clinical development programs proceed.
Interaction with Regulatory Authorities Regarding
INB03 and XPro Development
We have completed a Phase I trial with INB03 in oncology and a Phase
I trial with XPro in patients with Alzheimer’s disease. The Phase II program with Alzheimer’s disease started during 2022.
The Phase I trial with XPro in patients with Alzheimer’s disease was performed in Australia under the regulatory authority of the
TGA using the Clinical Trials Exemption (“CTX”) scheme. Our first interaction with the regulatory body occurred in March 2018.
The Company received approval to initiate the Phase I trial with INB03 in patients with advanced solid tumors on May 21, 2018. The
second interaction with the regulatory body occurred in March 2019. The Company received approval to initiate the Phase I trial with
XPro in patients with Alzheimer’s disease in May 2019 and received authorization to start the Phase II trial in patients with mild
AD on January 5, 2022. Our first interaction with the FDA occurred in July 2020 as part of the Phase II Quellor program to treat respiratory
failure in patients hospitalized with COVID-19 infection. The newly manufactured XPro is being used to support the Phase II AD trial in
AUS and CAN, the extension trial in AUS, and the Expand Access Scheme in AUS. The FDA has not allowed the use of this drug in the US yet.
The FDA has asked for additional analytical testing to demonstrate comparability between the XPro used in the Phase I oncology, AD and
Phase II COVID-19 clinical trials with the drug planned to be used in the Phase II AD clinical trials. This comparability testing is underway.
We cannot predict when the FDA will release the US Phase II from clinical hold. The CAN and AUS regulatory authorities are aware of the
FDA clinical hold – they have not asked for similar information and allow the clinical program to proceed.
INB03 Product Development Path: Proposed Phase
II Studies in patients with cancer
Phase I open label study in
patients with advanced solid tumors has been completed. All future studies cancer will use INB03 as part of combination therapy. The evolution
of oncology standard of care occurs quickly. Immune checkpoint inhibitors (“CPI”) were introduced 5 years ago. The success of CPI change
the focus of cancer therapy from cytotoxic based cancer regimens to immunotherapy-based cancer regimens. The approval of Trastuzumab (“TDxd”)
in 2022 had a similar effect on HER2 expressing cancers. For example, use of trastuzumab based therapy in HER2+ breast cancer required
3+ expression of HER2. With TDxd, low HER2 expression (1+ or 2+ but not null) benefit for TDxd. This has dramatically expanded the number
of women eligible for trastuzumab based immunotherapy from 20% to half of women with breast cancer. This dramatic change in breast cancer
standard-of-care impacted our development plans for INB03 in breast cancer. The Phase II trial is planned to be in women who have failed
TDxd therapy. About half of women who receive TDxd are resistant to therapy. We believe, but need to confirm, that many of those women
express MUC4. We believe an exploratory, single arm open label Phase II in woman who progress after TDxd is warranted. We believe the
combination of TDxD, INB03 and TKI will be effective. We continue to conduct pre-clinical studies of INB03 in MUC4 expressing tumors.
A decision on the clinical trial will not be made until the pre-clinical work has been completed and the data has been presented to an
Advisory Board of clinical experts.
11
INB03 Registration Studies and/or Partnering
We plan to pursue an efficient
registration strategy using INB03 to improve the lives of patients with cancer and biomarkers of resistance such as MUC4. We believe that
this strategy has use across many types of solid tumors including patients who have failed CPI, tyrosine kinase inhibitors (“TKI”)
and anti-cancer antibody therapy such as trastuzumab monoclonal antibodies and trastuzumab based antibody drug conjugates. We have an
active partnering position as it relates to INB03 development in cancer, although limited partnering discussion are underway at this time
for INB03. We do not expect partnering discussions to begin until Phase II data demonstrating efficacy of INB03 as part of combination
therapy for cancer are available.
Our INB03 platform can be
used in cancer patients in many ways. The Phase I trial suggests the drug should not be used alone to treat cancer but used in combination
with, but not limited to, other cancer therapies including cytotoxic chemotherapy, immunotherapy, radiation and surgery. We believe that
INB03 can also be used to treat many types of hematologic and epithelial cancers.
INB03 and XPro Regulatory Strategy
Drugs from the DN-TNF platform
will be developed using adequately powered, well designed studies with the goal to demonstrate a meaningful clinical benefit to patients.
Beyond Phase I, these will most often be blinded, randomized clinical trials using validated end-points that have been authorized by a
regulatory authority – the FDA, TGA, MHRA, EMA, etc. Currently, all planned studies will be performed in North America, AUS, EU
and/or the UK. Because there are no therapies similar to INB03 or XPro approved in any market, we plan to take advantage of the regulatory
opportunities afforded to therapies that treat markets with a high unmet need. In the U.S., this includes Orphan Drug Designation and
expedited programs for approval including Accelerated Approval, Breakthrough Therapy Designation, Fast Track Designation, and priority
review (see “Government Regulation). We cannot predict which, if any, of these programs we will benefit from without further discussions
with the FDA, EMA and other competent regulatory authorities.
Immunotherapy for Treatment of Alzheimer’s Disease
XPro is being developed for
the treatment of Alzheimer’s disease. Microglial activation and neuroinflammation are important causes of the synaptic dysfunction
and nerve cell death that causes cognitive decline in patient with dementia and Alzheimer’s disease. The relationship between β
amyloid plaques and tau neurofibrillary tangles, the traditional targets in AD drug development and neuroinflammation is complex. We believe
targeting plaques and tangles will have limited benefit. Targeting neuroinflammation, the common pathway leading to synaptic dysfunction
and nerve cell death, may be an effective treatment strategy. Substantial pre-clinical data supports the use of XPro in murine models
of AD. Substantial indirect data supports use of XPro in humans including a decreased risk of AD in patients treated with non-selective
TNF inhibitors for rheumatoid arthritis and treatment using direct injection into paraspinous venous plexus. Because of different mechanism
of action of XPro compared to the non-selective TNF inhibitors, we expect a lower risk of immunosuppression and demyelinating complications
such as multiple sclerosis (MS). The Company reported preliminary data on July 13, 2020 and January 21, 2021 supporting the use of XPro
to decrease neuroinflammation in patients with Alzheimer’s disease and biomarkers of peripheral inflammation (see above).
We completed enrollment of
patients into an open label, biomarker directed, Phase I clinical trial in AUS that approaches AD as an immunologic disease. Patients
with dementia with the diagnosis of AD with biomarkers of chronic inflammation that includes at least one of a hs-CRP>1.5 mg/L, a ESR>10
mm/h, a HbgA1C>6.0% or are ApoE4 positive were treated with XPro for 12 weeks. Three dosing cohorts were preformed – 0.3, 0.6
and 1.0 mg per week as a subcutaneous injection. Patients had multiple inflammatory biomarkers test before therapy, at 6 weeks and at
12 weeks. Biomarkers were reported in blood and cerebral spinal fluid, MRI measures of white matter tract neuroinflammation, axonal quality
and axon myelin, and MRI measures of gray matter quality after XPro therapy. Cognitive end-points were not the focus of the Phase 1 clinical
trial because of the wide range of disease severity enrolled and lack of a placebo group. Patients enrolled in the Phase I trial had MMSE
ranging from 24 to 12. This wide range of disease severity at the time of enrollment and the lack of a blinded concurrent control group
did not allow for determination of cognitive benefit beyond several anecdotal reports. The first patient was enrolled in the low dose
0.3mg/kg/week cohort in the last week of November 2019. The Safety Review Committee met by teleconference on January 7, 2020, to review
the course of the patients in the first cohort and voted to open the second cohort, 1.0mg/kg/week, to enrollment. The first patients were
enrolled in the cohort the second week of February 2020. Based on preliminary data released on July 13, 2020, and January 21, 2021, we
closed after completion of a 0.6mg/kg treatment group. We canceled plans to treat patients with 3.0mg/kg. The data from the Phase I trial
allowed the Company to choose a design the Phase II trials described above.
12
XPro Registration Studies and/or Partnering
We plan to aggressively pursue an efficient registration
strategy using XPro to improve the lives of patients with ADi. We define ADi as Alzheimer’s disease with biomarkers of inflammation.
We believe ADi is not the only indication for XPro in neurodegenerative and neuropsychiatric diseases. We plan to pursue other indications
in neurodegenerative diseases as resources become available. We have received NIMH funding to support a Phase II TRD program that hopes
to start patient enrollment in 2023. We have an active partnering position as it relates to XPro development in neurodegenerative and
neuropshyciatric diseases, although limited partnering discussion are underway at this time. There are two partnering opportunities with
this novel immunotherapy for the treatment of neurologic and psychiatric diseases. The first is a traditional partnership focused on the
developing the drug for all neurodegenerative and neuropsychiatric applications. The second is a more focused partnership developing XPro
as part of a combination therapy for a company’s existing therapy. After completion of proof-of-concept Phase II studies, we will
decide what the most efficient registration strategy is available to the company with XPro.
DN-TNF for the treatment of Duchene Muscular
Dystrophy
The Company also is exploring partnership opportunities
outside of neurodegenerative disease with DN-TNF such as DMD. DMD is a X-linked muscular dystrophy that occurs in 1 in 3500 male births
in the US. The disease is caused by defects in dystrophin, a protein needed for efficient function of skeletal muscle. Boys with DMD develop
skeletal muscle weakness that manifests early on with difficult standing and walking. The boys become wheelchair bound by late adolescence
and die of respiratory and cardiac failure in their twenties. There is no cure. Symptomatic therapies include corticosteroids and novel
strategies to replace dystrophin including ASO and gene therapies. Better therapies are needed.
The pathology of DMD is inflammation, skeletal
muscle cell destruction, replacement of muscle fibers with fat and fibrosis. The most widely used therapy, corticosteroids are focused
on decreasing skeletal muscle inflammation. Although anti-inflammatory, corticosteroids cause metabolic and immunologic problems including
insulin resistance, obesity, hirsutism, short stature, depression and behavioral problems. Long term use of corticosteroids exacerbates
skeletal muscle weakness.
In collaboration with Professor
Armando Vallarta of University of California Irvine, the Company has completed and has ongoing studies with DN-TNF in murine models of
DMD. The animal models show that DN-TNF therapy decreases inflammation and muscle degradation, promotes muscle regeneration and decreases
fibrosis. This is a unique set of attributes compared to other therapies on the market or in development. Because muscle cells produce
TNF, we believe the benefits of DN-TNF therapy extends beyond the obvious immunologic attributes of modifying T cell and macrophage infiltrates.
Pre-clinical animal studies continue to better define the exact mechanism for these effects.
The Company has filed global
IP on the use of DN-TNF to treat muscular dystrophy. The Company has placed the IP and knowhow into a wholly owned subsidiary called DN02,
Inc. The purpose of this structure is to facilitate partnering and/or co-development of DN-TNF for DMD in a way that does not complicate
or compromise the development of XPro for CNS diseases. The Company is actively seeking a partner to develop DN-TNF for DMD. We cannot
predict if or when or under what terms a partnership will be formed.
13
INKmune: Our NK cell Directed Product Candidate
INKmune is our lead product
candidate that converts the patient’s resting NK cells into cancer memory like NK cells, an essential step to allow them to participate
in the immune control of the patient’s cancer. We have shown this works ex vivo in human tissue cell cultures, and we believe that
this will work in vivo which is the purpose of our planned clinical trials.
Cancers grow and relapse because
they evade the immune system. In many cancers, NK cells are the most important cell for the elimination of residual disease that causes
cancer relapse. NK cells target cells based on a series of complex antigens on the cancer cell surface that signal the NK cells to activate
and kill the cancer cell. NK cells develop a memory like NK cell phenotype to enhance killing of cancer cells. This phenotype requires
multiple simultaneous signals to be delivered to the NK cells. A cocktail of three cytokines, IL12, IL15 and IL18 can be used to convert
a resting NK cell to cytokine induced memory like NK cells (“CIML”) [Fehneger 2016 ] or by INKmune priming with INB16 (TpNK – tumor
primed NK cells). Although the intracellular biology of these two strategies has yet to be worked out, they do not appear to be identical.
In summary, INKmune converts resting NK cells into tumor killing memory like NK cells that function well in the hostile environment of
the TME. (Figure 1 below).
14
The ability of NK cells to
kill tumor cells depends on the strength and duration of the cell-cell interaction. This is call avidity. The higher the avidity the
greater the tumor cell killing. Cytokine stimulation may increase avidity of NK binding to some cancer cells whereas, in all experiments
to date, INKmune priming enhances NK binding to all cancer cells tested. The relative increase in avidity to specific cancer cells is
cytokine specific; as shown below, IL15 increases NK avidity for the ovarian cancer line SKOV-3 whereas IL2 has a limited effect. IL15
primed NK cells lyse SKOV-3 cells whereas IL2 primed NK do not. INKmune primed NK (TpNK) showed the highest avidity for the tumor cells
and the highest level of cytotoxicity. It is likely that the use of multiple cytokines will achieve the same level of avidity and cytotoxicity
as INKmune but studies with multiple cytokines have not yet been performed (Figure below).
We have demonstrated
TpNK killing of many tumor types in laboratory studies. Tumor priming is effective regardless of the source of the NK cells (normal volunteers
or patients with cancer) and in many types of tumors – both cell lines and primary tumors from patients. The principle of TpNK
killing has also been demonstrated in two Phase I trials in patient with acute myelogenous leukemia (“AML”). These trials
were not supported by us and used a first-generation personalized cell therapy product and treatment strategy that is different from
the INKmune product and treatment strategy. In these trials, haplo-identical NK cells obtained from a first degree relative by leukapheresis
were primed ex-vivo using a lysate of the parent cell line from which we derived INB16 - INKmune. Once the TpNK therapy has been produced
and passed quality testing, the patient received conditioning therapy with chemotherapy (cyclophosphamide and fludarabine), the primed
haplo-identical NK cells were given to patients by intravenous infusion. Two Phase I clinical trials have been performed using that first-generation
adoptive cell therapy treatment strategy. An investigator-initiated trial performed at the Royal Free Hospital in London 2009 was funded
by a UK charity. Fifteen patients with relapsed, high-risk AML were enrolled in the trial. Because of drop-out due to disease progression,
delays in product production and complications of conditioning therapy, only 7 of the fifteen patients were treated with the TpNK cell
product. Four of seven patients showed clear benefit from the treatment with the TpNK product with prolonged relapse free remission and,
in one patient, conversion of a partial remission to full remission. None of the remissions were durable; all patients ultimately died
from disease progression. The safety of the product was found to be a combination of toxicity from the chemotherapy/radiotherapy conditioning
regimen and the TpNK therapy. In general, the complications were well tolerated although did require medical intervention including prolonged
periods of aplasia in two heavily pretreated patients that resolved with supportive care. The results of this study have been published
in a medical journal (PLoS One. 2015 Jun 10;10(6):e0123416. doi: 10.1371/journal.pone.0123416. eCollection 2015). In 2013, a second open
label, multi-center trial was performed in the US using the same product and procedures but targeting a slightly different patient population.
In the second trial, 12 patients in first remission with AML were treated with the haplo-identical TpNK product produced using the first
generation ex-vivo priming process. After conditioning with chemotherapy alone, the patients received TpNK in three dosing cohorts –
3x10^5, 1x10^6 or 3x10^6 TpNK per kilogram. Patients were followed for safety and relapse free survival. This trial confirmed the safety
of the TpNK treatment in patients with AML and reinforced many of the efficacy findings seen in the first trial with none of the previously
experienced side effects. Patients benefited from haplo-identical TpNK therapy with prolonged relapse free survival including two patients
that remain in remission more than 42 months after treatment. This trial has been published. (Biol Blood Marrow Transplant. 2018 Mar
26. pii: S1083-8791(18)30132-0. doi: 10.1016/j.bbmt.2018.03.019.) The results of the laboratory and Phase I studies provide evidence
that our strategy for treating residual disease is sensible but unproven.
15
Because INKmune primes NK
cells to target naturally occurring antigens, we believe INKmune can be used in to treat a wide variety of cancers including hematologic
malignancy (AML, MM, CML, high risk MDS) and solid tumors (renal, prostate, breast, ovarian, pancreas and lung). We expect the list of
INKmune sensitive tumors to continue to expand.
The primary role for INKmune
will be an immunotherapy targeting residual disease in patients after debulking cancer therapies such as cytotoxic chemotherapy and surgery.
At this time, we plan to give INKmune as monotherapy. We do not rule out the possibility of using INKmune as part of combination therapy
in the future. We do not expect to need to modify INKmune to treat these additional types of cancer, because we believe INKmune is a universal
cancer therapy where “one size fits all”. We believe for INKmune to receive regulatory approval for each cancer indication,
clinical trials will need to be performed which demonstrate its safety and effectiveness as a treatment for each such cancer. We believe
the difficulty and cost of achieving these labels extensions will decline with each successive approval, if and when achieved. For example,
if INKmune is proven to be effective therapy in patients with ovarian cancer and high-risk MDS, we will need to perform separate pivotal
trials for approval in lung, prostate or renal cancer.
Three step process to preparation for INKmune
human clinical trials:
INKmune GMP scale-up for Phase I/II clinical
material
The working cell banks and
individual INKmune product to be used in the patients for the clinical trial have been produced at the Centre for Cell, Gene & Tissue
Therapeutics at Royal Free Hospital / University College London to full cGMP (MHRA MIA(IMP)11149). All manufacturing has been under the
direction of Professor Mark Lowdell. The Company can produce enough INKmune to complete both Phase I clinical trials in women with ovarian
cancer and in patients with high-risk MDS. We have validated storage of INKmune for up over 3 years in vapor phase nitrogen and have
a fully scalable, closed system manufacturing process in validation which can produce up to 6 patient doses per week during phase I and
II trials. At intermediate scale we can manufacture 40 doses per week in a single 80-liter bioreactor. Importantly, we have validated
the storage of INKmune at -80 o C for up to 27 days which greatly facilitates the delivery and local storage of the drug for
clinical trials and post commercialization use. In contrast, as far as we know all other NK cell therapies and T cell therapies require
complex shipping of drug products in vapor phase nitrogen below -150 o C and specialized arrangements for ongoing storage at
the clinical sites. We may need additional INKmune for future clinical trials.
Interaction with Regulatory Authorities Regarding
INKmune Development
The INKmune Phase I studies
in high-risk MDS are being performed in the UK and Greece. We met with the Medicines and Healthcare Products Regulatory Agency (“MHRA”),
the UK version of the FDA as part of a Scientific Advice Meetings in preparation for submitting the CTA for our first planned program.
The purpose of the meeting was to explain to the MHRA our manufacturing process and clinical plan for the development of INKmune in a
Phase I relapse/refractory ovarian cancer. We are working to seek regulatory approval to start a solid tumor program in the US. The Company
has had initial discussion with the FDA. Those discussions are ongoing. We plan to file an IND for a solid tumor indication in 2023. We
have not announced the solid tumor target.
16
INKmune Product Development Path Proposed Phase
I Study in patients with high-risk MDS
During 2021, we initiated
an open label Phase I cancer study in patients with high-risk myelodysplastic syndrome (“MDS”). Patients are being enrolled
who have a low burden of disease after completion of conventional therapy. The first patients were enrolled in the first quarter of 2021.
In the Phase I trial, patients with detectable residual disease in bone marrow and/or peripheral blood (<15% blasts by conventional
tests) will be treated with intravenous infusions of INKmune and monitored for changes in peripheral blood NK activation, NK function
and changes in residual blast counts in blood and bone marrow. We and others have previously shown that MDS patients with inadequate NK
function have statistically significantly poorer prognosis than matched patients with normal levels of NK function (Tsirogianni et al
2019) and we have shown in laboratory experiments that the functional activity of NK cells from MDS patients can be enhanced by exposure
to INKmune. Moreover, INKmune-primed NK cells are not inhibited by the hypoxic conditions of the diseased bone marrow microenvironment.
The first patient was treated
in the second quarter of 2021. The patient is now more than 12 months out from therapy with INKmune. The patient, part of the first cohort,
received 1x10^8 INKmune cells on day 1,8 and 15 as an in-patient. The patient did not require any type of conditioning therapy or cytokine
support. The patient tolerated the three infusions without any problems. The patient underwent intensive monitoring over 120 days. There
are 4 observations from this first patient. The patient has dramatically increased the number of activated, “memory-like”
NK cells in circulation. Memory-like NK cells (mlNK) are activated NK cells with a unique cell surface protein phenotype and which show
enhanced lysis of tumor cell in vitro. Post treatment with INKmune, elevated levels of mlNK cells were present in the patients in the
peripheral blood for more than 119 days when trial follow-up ceased. The patient mlNK actively kill NK resistant cancer targets in vitro.
Finally, the patient has had a significant clinical improvement with a reduction of his ECOG score from 2 to 0 and a significant reduction
in blood product support.
Three compassionate use cases
have also been treated. Two were young patients with AML who had failed previous hematopoietic stem cell transplants (“HSCT”). The first
compassionate-treatment patient showed such improved neutrophil and platelet counts that she was discharged from hospital for the first
time in six months. The second patient treated compassionately had failed two high risk HSCT and entered the course of INKmune therapy
with high percentage of blasts in his bone marrow. His blood NK cells responded in differentiation into mlNK as hoped but it is too early
to determine if INKmune has provide any clinical benefit.
17
INKmune Registration Studies and/or Partnering
The Company plans to file
an Investigational New Drug (“IND”) application in 2023 for a Phase I/II trial of INKmune in a solid tumor indication. Other solid cancers
are of interest including nasopharyngeal cancer (“NPC”) which is a known target for NK cells and an important unmet clinical
need in emerging markets such as mainland China. Renal cell carcinoma is also a known target for INKmune. We may seek partner or sell
INKmune. Although our development strategy is focused on North America and Europe, we believe INKmune will also be attractive for markets
on the Pacific Rim, South Asia and South America, but will wait for partners to help with the development in those regions, however, at
this time, we are not negotiating with any potential partners.
Importantly, we have published
data demonstrating INKmune efficacy at priming allogeneic NK cells ex-vivo (described above) and this includes priming of NK cells differentiated
from cord-blood derived hematopoietic stem cells (Domogala et al Cytotherapy 2017: 19:710-720). Numerous companies are developing
therapeutic strategies using cord blood derived NK cell products and one or more may wish to partner with us to potentiate their product
by co-incubation or co-administration with INKmune. We are also aware of companies developing cytokine primed NK cells (CIML) for the
treatment of cancer. We believe tumor primed NK cells are superior to ex vivo or in vivo cytokine strategies.
Challenges in the Market for Our Product Candidates
The market for new oncology therapies is competitive, complicated,
and rapidly evolving. We will be competing with companies that are older, larger, better financed and have greater experience. There are
two types of drug companies – development companies and commercial companies. Development companies take the risk of developing
new products to proof-of-concept. Once proof-of-concept has been achieved, if the drug provides clinical benefit, the product is usually
acquired by a commercial company, which completes the drug’s clinical development and markets the product. We are a development
company which will seek to develop products such as INKmune from the bench to the bedside to demonstrate proof-of-concept. The goal for
us is to successfully develop such products to the point where they are attractive targets for potential partners/acquirers.
According to a recent Markets and Markets report, the immunotherapy
market is growing rapidly at an annual rate of over 13%. Recently, the market is biased towards T cell-based immunotherapies including
bi-specific antibody therapies, checkpoint inhibitors and CAR-T cell-based therapies. There are substantial numbers of clinical trials
that are focused on the adaptive immune system versus clinical trials that are focused on the innate immune system for the treatment of
cancer. Our challenge will be to educate partners on the value of NK cell-based therapeutic strategies. The need to educate people of
the importance of INB03 is equally challenging. At the academic and investor level, there is little recognition of the role MUC4 plays
in causing resistance to immunotherapy. The concept of adding a drug to modify the immunosuppressive environment of the TME to allow immunotherapy
to be effective is also new. We will be responsible for educating them on the importance of MUC4 expression, TAM, MDSC and why INB03 may
be an important addition to the oncologist’s armamentarium. We believe educating investors and partners about new therapeutic opportunities
is an easier task than trying to differentiate our company from the many other cancer immunotherapy companies. We plan to use a combination
of publication, presentation and investor relations to discuss INKmune and INB03 and to educate the clinical, biopharma and investor community
on the value of these novel therapeutic approaches.
18
DN-TNF Competition
To our knowledge, there are
no other companies developing a therapy to treat patients with MUC4+HER2+ tumors. This set of biomarkers predicts a tumor that will be
resistant to therapy. We believe MUC4 expression means that patient will be resistant to first line trastuzumab based immunotherapy and
will be resistant to CPI. INB03 is a unique category of cancer therapies. It is does not kill cancer cells. INB03 modulates the immunology
of the TME to make existing therapies more effective. The advantage of this strategy is that it can be used prospectively, and it does
not add toxicity to existing therapy.
INKmune Competition
Our industry is highly competitive
and subject to rapid and significant technological change. Our potential competitors include large pharmaceutical and biotechnology companies,
specialty pharmaceutical and generic drug companies, academic institutions, government agencies and research institutions. We believe
that key competitive factors that will affect the development and commercial success of our product candidates are efficacy, safety, tolerability,
reliability, price, and reimbursement level. Many of our potential competitors, including many of the organizations named below, have
substantially greater financial, technical, and human resources than we do and significantly greater experience in the discovery and development
of product candidates, obtaining FDA and other regulatory approvals of products and the commercialization of those products. Accordingly,
our competitors may be more successful than us in obtaining FDA approval for and achieving widespread market acceptance of their drugs.
Our competitors’ drugs may be more effective, or more effectively marketed and sold, than any drug we may commercialize and may
render our product candidates obsolete or non-competitive before we can recover the expenses of developing and commercializing any of
our product candidates. We anticipate that we will face intense and increasing competition as new drugs enter the market and advanced
technologies become available. Further, the development of new treatment methods for the conditions we are targeting could render our
drugs non-competitive or obsolete.
INKmune is an immunotherapy
that harnesses the biology of NK cells for the treatment of cancer. There is a long list of immunotherapy strategies for the treatment
of cancer and the immunotherapy for cancer market is growing rapidly. There are at least three ways to classify immunotherapy for cancer.
The list below classifies immunotherapy strategies beginning with those that are most closely related to INKmune:
1.
Companies in the NK cell therapy business;
2.
Companies in the personalized immune-oncology business; and
3.
Companies in the precision immuno-oncology business.
19
We are not aware of any approved
treatments that are classified as NK cell therapies. We are aware of public companies in the NK cell therapy business such as Century
Therapeutics, Immunity Bio, Nkarta, Fate Therapeutics, Glycostem and others. These companies are developing products that involve replacing
or supplementing NK cells of the patient for the treatment cancer. Their product requires extensive ex-vivo cell manipulations which,
with respect to Century Therapeutics and Fate Therapeutics, may include gene therapy. The next larger group of companies are in the personalized
immuno-oncology business with products focused on T cell activation strategies. The most popular are the CAR-T cell therapies which are
a patient specific ex-vivo gene therapy approach to a single disease (for example: pediatric ALL). CAR-T therapy has become wildly popular
of late and includes many private companies, newer public companies such as Bluebird, Juno Therapeutics and Mustang Bio as well as established
companies such as Novartis and Gilead. For many of the companies, CAR-T cell therapies is their only business. For the latter two, CAR-T
cell therapies is a newly in-licensed program with marketing authorization in the US. Finally, the precision immune-oncology category
also includes companies with anti-cancer antibody products and the newer “check-point” inhibitors. Antibody therapies are
all about “illuminating” the cancer to the innate immune system (NK cells). Monoclonal antibodies were the original immunotherapy
that drove the growth of well-known biopharma companies including Genentech/Roche, Amgen, Merck and others. Each of these products is
disease specific (ie: treat only HER2+ breast cancer). Modern therapeutic antibodies are much more complicated bi-specific and tri-specific
antibodies that attempt to connect the cancer with activated T-cells of the adaptive immune system. Check-point inhibitors are currently
the most rapidly expanding product category in immuno-oncology. These CTLA-4 (ipilimumab) and PD-1 inhibitors (pembrolizumab and nivolumab)
specifically block a mechanism that shields cancers from T-cell killing. The two companies in this business are Merck (pembrolizumab)
and GSK (ipilimumab and nivolumab). There are many others trying to join this promising therapeutic area including large companies such
as BMS and Roche.
There are several FDA approved
drugs that improve the ability of the innate immune system (NK-cells) to treat cancer including mono-clonal antibody therapies (for example:
Rituximab®; Avastin® and Herceptin® marketed by Roche/Genentech); and “check-point” inhibitors (Yervoy® and
Opdivo®, BMS, Keytruda®, Merck and others). There is a large amount of development activity in the immune checkpoint inhibitor
field from both pharmaceutical giants including AstraZeneca, Merck & Co, Pfizer, Merck KGaA, Roche, GSK, Novartis and Amgen and many
start-ups, small companies and university spin-offs which have emerged in the past two years. Examples (in alphabetical order) include
Agenus, Alligator Bioscience, Ambrx, AnaptysBio, argenx, Bioceros, BioNovion, Cellerant Therapeutics, Checkpoint Therapeutics, Compugen,
CureTech, Enumeral, Five Prime Therapeutics, Genmab, GITR, ImmuNext, IOmet Pharma, iTeos Therapeutics, Jounce Therapeutics, KAHR Medical,
Multimeric Biotherapeutics, Nativis, Orega Biotech, Pelican Therapeutics, Pieris Pharmaceuticals, Prima BioMed, Redx Pharma, Sorrento
Therapeutics, Tesaro, TG Therapeutics, Theravectys and ToleroTech active in the field. The list of companies with poly-specific antibodies
that attempt to link the cancer with a cytotoxic T cell is long, includes both private and public companies (Amgen, Xencor, F-Star, Merus
and many others). Finally, two CAR-T cell therapies were just approved for the treatment of ALL – Kymriah™ (Novartis) and
Yescarta™ (Gilead). We expect additional drugs to gain marketing authorization in the immune-oncology space.
To our knowledge, there are
no innate immune check-point inhibitors in development that have the unique characteristics of INB03 that neutralize sTNF to: i) decreases
the proliferation of MDSC; ii) decreasing local and systemic immunosuppression caused by MDSC by stopping production of immunosuppressive
cytokines and; iii) improving NK/DC cross-talk to recruit the adaptive immune system to fight the cancer.
20
Intellectual Property
We seek to protect our therapeutic
programs by continuously developing patent properties covering novel compositions, formulations, purpose-limited compositions, combination
treatments, methods of medical treatment, and other inventions, whether created internally or in-licensed, in the United States Patent
& Trademark Office (the “USPTO”), the World Intellectual Property Organization (“WIPO”) under the Patent Cooperation
Treaty (“PCT”), and in patent offices for various foreign jurisdictions. While each invention is unique and territories for
protection are decided on a case-by-case basis, we generally pursue patents in Australia, Canada, Europe, Japan, and the United States,
and sometimes in Brazil, China and/or Korea. We currently have in our portfolio eleven (11) issued patents and forty-seven (47) pending
patent applications, including both company-owned and in-licensed properties. The following sections and corresponding tables summarize,
for each of our current therapeutic programs, our pending and granted patent positions, to the extent publicly available, as of the time
of preparing this document:
DN-TNF Platform Technology (Oncology, Central
Nervous System Disorders, Acute and Chronic Peripheral Diseases)
The DN-TNF Platform Technology
covers a variety of dominant negative tumor necrosis factor (“DN-TNF”) variant proteins, including the pegylated DN-TNF protein
variants known as XPro and INB03. These DN-TNF protein variants can be considered a platform technology for treating the underlying immune
dysfunction associated with many disease manifestations. Unlike approved anti-TNF therapeutics, DNTNF selectively targets and neutralizes
soluble TNF, and is therefore not immunosuppressive. Additionally, XPro has been shown to cross the blood brain barrier after peripheral
administration, making it attractive for use in treating CNS disorders. The following table summarizes current IP covering our DN-TNF
Platform Technology:
Subject Matter / Compound
# Pending
Applications
# Issued
Patents
Geographical
Scope
Nominal Patent
Term
DNTNF compositions and formulations
2
4
global
2024-2041
Use of DNTNF for treating disease
31
3
global
2033-2041
INB-16 / INKmune (Oncology)
INKmune is a replication-incompetent
derivative of our proprietary INB-16 cell line. One commercial application of INKmune includes use as a therapeutic composition designed
to enhance the ability of a patient’s own NK cells to seek, recognize and eliminate cancer. Another commercial application of INKmune
includes use as a cytokine-like (“pseudokine”) agent for enhancing NK cell killing specificity, potency, and efficacy of NK
cell -based therapeutics. INKmune, as a therapeutic, is intended for provision as an I.V. -infused product containing replication-incompetent
bio substrate units, each of which is adapted to present an aggregate of protein ligands and/or receptors to a patient’s own NK
cells, in vivo . Upon contacting the patient’s NK cells, INKmune converts resting NK cells into what we call “primed”
NK cells (“pNKs”). Data suggests that pNKs demonstrate enhanced killing of tumor cells, thus INKmune may indirectly improve
a patient’s own immune response to cancer. As a pseudokine agent, INKmune can be used to contact the NK cells of an NK cell therapeutic
product in vitro , e.g., during manufacturing, for enhancing characteristics of the NK cell therapeutic and rendering an improved
product. The following table summarizes current IP covering INB-16 / INKmune:
Subject Matter / Compound
# Pending
Applications
# Issued
Patents
Geographical
Scope
Nominal Patent
Term
INB-16 / INKmune compositions
2
0
global
2036-2040
Use of INKmune for treating disease
10
4
global
2036-2040
Use of INKmune for enhancing NK cell therapeutics
2
0
global
2036-2040
21
General IP Disclosures
Our commercial success depends
in part on obtaining and maintaining patent and trade secret protections, where applicable, of our current and future product candidates
and the methods used to manufacture them, as well as successfully defending our patents against third-party challenges.
Our ability to stop third
parties from making, using, selling, offering to sell or importing our products depends on the extent to which we have rights under valid
and enforceable patents or trade secrets that cover these activities, and whether we are able to enforce such rights. We cannot assure
you that our pending patent applications will result in issued patents, or that any or all rights will be enforceable in every jurisdiction
whether or not patent rights are sought.
International PCT patent applications
cover all 152 nations which are signatories of the PCT. However, our global IP strategy generally targets Australia, Canada, Europe, Japan,
and the United States, and sometimes Brazil, China and/or Korea, as targets for extending patent protection under the PCT. Decisions regarding
which countries to extend patent coverage under the PCT is taken on a case-by-case basis, subject to normal business considerations such
as value and return on investment. Given the markets for products we are developing, we consider the foregoing jurisdictions to amount
to “global” coverage as used herein as it relates to IP.
The above disclosures related
to patents and patent applications are subject to change based on strategic patent portfolio building decisions, which may include refiling
and reissue, certain abandonments, including those in favor of continuing patent applications, maturations from provisional to non-provisional
filings, and other regular patent prosecution activities.
Trademarks
The designations INMUNE BIO TM ,
INB16 TM , INKmune TM , PSEUDOKINE TM , and XPro TM are trademarks of INmune Bio, Inc. Some or all
these trademarks may be protected by applications pending at the USPTO and other trademark registration authorities globally. As part
of the trademark registration process, we may be required to submit a statement of use evidencing bona fide use of each mark in
commerce. By nature of being in the biopharmaceutical business, certain regulatory requirements must be met in connection with certain
products and/or services prior to receiving marketing authorization from a regulatory agency, and thus it may take some time before products
and/or services are offered for sale and a statement of use can be submitted for perfecting trademark registration. For these reasons,
we may be required to obtain extensions of time, or to refile applications, seeking registration of trademarks. We cannot guarantee that
a given trademark application will be allowed or issued in a respective office for each jurisdiction.
IP License Agreements
Immune Ventures, LLC License Agreement
On October 29, 2015, the Company
entered into an exclusive license agreement (the “INKmune License Agreement”) with Immune Ventures, LLC (“Immune Ventures”).
Pursuant to the INKmune License Agreement, we were granted an exclusive worldwide, sub-licensable, royalty-bearing license to commercialize
INKmune (the “INKmune License”). In consideration for the INKmune License, we are obligated to pay Immune Ventures certain
milestone and royalty payments.
22
The term of the Immune Ventures
Agreement began on October 29, 2015, and, if not terminated sooner pursuant to the agreement, ends on a country-by-country basis on the
date of the expiration of the last to expire patent rights where patent rights exist. Subject to granting, prosecution-related patent
term adjustments, and requirements for maintenance and renewals, the latest to expire patent is scheduled to expire on March 15, 2038
(“Natural Expiration”). Upon Natural Expiration of the Immune Ventures Agreement, we shall have a fully paid up, perpetual,
royalty-free license without further obligation to Immune Ventures. The Immune Ventures Agreement can be terminated by Immune Ventures
if, after 60 days from our receipt of notice that we have not made a payment under the Immune Ventures Agreement we still do not make
this payment. On July 18, 2018, the parties amended the agreement under which the Company was required to achieve milestones pursuant
to the agreement. On October 30, 2020, the parties executed an additional amendment to the agreement under which the Company is required
to achieve the following milestones:
Initiation of Phase II clinical
trials or equivalent by October 29, 2023;
Initiation of Phase III
clinical trials or equivalent by October 29, 2025; and
Filing of NDA or equivalent by October 29, 2026 or equivalent.
If we don’t achieve
the above milestones, we are required to negotiate in good faith with Immune Ventures to determine how we can either remedy the failure
or achieve an alternate development. If we fail to make any required efforts or if the efforts do not remedy the situation within 60 days
of written notice by Immune Ventures, then Immune Ventures may provide notice to terminate the license or convert it to a non-exclusive
license.
University of Pittsburg License Agreement
On October 3, 2017, the
Company entered into an Assignment and Assumption Agreement with Immune Ventures related to intellectual property licensed from the University
of Pittsburgh. Pursuant to the Assignment and Assumption Agreement (the “Assignment Agreement”), Immune Ventures assigned
all its rights, obligations and liabilities under an Exclusive License Agreement between the University of Pittsburgh – Of the Commonwealth
System of Higher Education (“Licensor”) and Immune Ventures to INmune Bio (“Licensee”), (the “PITT Agreement”).
As consideration under the
PITT Agreement, we are obligated to pay: (i) annual maintenance fees, (ii) royalty payments based on the sale of products making use of
the licensed technology, and (iii) milestone payments.
In 2022, the Company paid
$5,000 according to the PITT Agreement as an annual maintenance fee.
The PITT Agreement expires
upon the earlier of: (i) expiration of the last claim of the Patent Rights forming the subject matter of the PITT Agreement; or (ii) the
date that is 20 years from the effective date of the agreement (June 26, 2037).
The Company may terminate
the PITT Agreement upon 3 months prior written notice provided all payments under the license are current. Licensor may terminate the
PITT Agreement upon written notice if: (i) the Company defaults as to performance of material obligations which have not been cured within
60 days after receiving written notice; or (ii) the Company ceases to carry out its business, becomes bankrupt or insolvent, applies for
or consents to the appointment of a trustee, receiver or liquidator of its assets or seeks relief under any law for the aid of debtors.
23
Xencor License Agreement
On October 3, 2017, the
Company entered into a license agreement with Xencor, Inc. (“Xencor”), which has discovered and developed a proprietary biological
molecule that inhibits soluble tumor necrosis factor (the “Xencor Agreement”). During June 2021, the Company entered into
the First Amendment to License Agreement with Xencor. Pursuant to the Xencor Agreement, Xencor granted the Company an exclusive worldwide,
royalty-bearing license in licensed patent rights, licensed know-how and licensed materials (as defined in the Xencor Agreement) to make,
develop, use, sell and import any pharmaceutical product that comprises, contains, or incorporates Xencor’s proprietary protein
known as “XPro” that inhibits soluble tumor necrosis factor (or all modifications, formulations and variants of the licensed
protein that specifically bind soluble tumor necrosis factor) alone or in combination with one or more active ingredients, in any dosage
or formulation. The Xencor Agreement expires upon the later of: (a) the expiration of the last to expire valid claim covering any pharmaceutical
product that contains, comprises, or incorporates Xencor’s proprietary protein known as XPro alone or in combination with one or
more active ingredients, in any dosage or formulation. (“Licensed Product”) in such country or (b) ten years following the
first sale to a third party of the licensed product in such country. Net Sales with respect to any Licensed Product is the gross amounts
invoiced by us for sales of the Licensed Products less deductions actually incurred. A valid claim is an issued, unexpired or pending
claim with the patent rights that Xencor controls as of October 3, 2017 which patent rights are necessary to make, develop, use, sell,
have sold, offer for sale and import a Licensed Product in the Field (the Field means all applications for the treatment of diseases in
humans) or the Product Patent Rights, which claim has not lapsed, been abandoned, been revoked or been held to be unpatentable, invalid
or unenforceable by a final judgment of a court or other governmental agency or competent jurisdiction from which no appeal can be or
is taken within the time allowed for appeal and which has not been admitted to be invalid or unenforceable through reissue, re-examination,
disclaimer or otherwise. Product Patent Rights shall mean any and all our patent rights that are necessary to make, develop, use, sell,
have sold, offer for sale and import a Licensed Product in the Field, including any improvements or patent rights directed to the Licensed
Product. Either party may terminate the Xencor Agreement upon 60 days’ (10 days for any payment default) prior written notice to
the other party after the breach of any material provision of the agreement by the other party if the breaching party has not cured the
breach within the 60-day period (10-day period for any payment default) following written notice of termination by the non-breaching party.
We can terminate the Xencor Agreement upon 180 days prior written notice to Xencor. Xencor may terminate the Xencor Agreement in its entirety
or with respect to any specific Licensed Product upon written notice in the event that we contest, oppose or challenge or assist any party
in contesting, opposing or challenging, Xencor’s ownership of, or the enforceability or validity of the Patent Rights that Xencor
controls as of October 3, 2017 which Patent Rights are necessary to make develop, use, sell, have sold, offered for sale and import a
Licensed Product in the Field. Either party may terminate the Xencor Agreement upon written notice to the other party upon or after the
insolvency, bankruptcy, dissolution or winding up of such other party or the making or seeking to make or arrange an assignment for the
benefit of creditors of such other party or the initiation of proceedings in voluntary or involuntary bankruptcy which proceeding, or
action remains undismissed or unstayed for a period of more than 60 days.
In consideration of the
Xencor Agreement, we agreed to royalty payments and a percentage of any payments received in exchange for a sub-license.
24
INKmune Research and Development
We expect to use third parties
to conduct our preclinical and clinical trials under the direct supervision of management.
INKmune Manufacturing
We intend to contract with third parties for the manufacture of our
compounds for investigational purposes, for preclinical and clinical testing and for any FDA approved products for commercial sale. Pre-clinical
and clinical material for the early clinical trials with INKmune has been manufactured under the direction of Mark Lowdell at a licensed
Good Manufacturing Practice (“GMP”) facility. The master cell bank, working cell bank and individual product doses were completed
in July 2018. This clinical material is planned for use in the Phase I/II clinical trials in ovarian cancer. As we progress in our clinical
programs, additional working cell banks and therapeutic product will be produced from the existing master cell bank. This process takes
approximately 6 months and is not anticipated to delay the initiation of the high-risk MDS Phase I/II trials. We may transfer the manufacturing
to a different commercial contract manufacturing organization after completion of these Phase II studies.
Human Mesenchymal Stem
Cells
In November 2017 (amended in October 2022), we entered into a Material
Transfer and License Agreement with the Anthony Nolan Cord Blood Bank (“AN”), the oldest and largest non-directed cord blood
bank in the United Kingdom for the supply the starting material for the mesenchymal stem cells - umbilical cords not used after cord blood
harvest. Mark Lowdell’s research group developed and validated a methodology for producing large numbers of clinical-grade pooled
human umbilical cord derived mesenchymal stem cells (“HucMSC”). We believe we are well positioned to become a preferred manufacturing
partner for companies who need MSC for clinical programs. Manufacture of HucMSC is performed under the direction of Mark Lowdell in a
licensed GMP facility that is contracted to the Company as part of existing research and development agreements. The starting material
for the HucMSC product is provided by the AN. The HucMSC product produced in this facility are fully qualified to be used for either research
or clinical trials. We have developed a validated manufacturing process that reliably produces contract manufacturer of the clinical grade
(“cGMP”) quality mesenchymal stem cells that we call CORDstrom. To date, we are supporting two academic clinical trials with
CORDstrom. One program is a in the UK treating children with erythematous bullousa, a disfiguring skin disease in children that is similar
to a second degree burn and treatment of system lupus in adults. Both these studies are ongoing. INmune Bio is supplying the clinical
product for treatment of these patients. The Company does not know the results of these trials until they are announced by the principal
investigators at the clinical sites. Currently, we plan to supply HucMSC to third parties for their research use and in clinical trials
as part of the development process for commercial pro/ducts. We may decide to expand this agreement in the future if the commercial and/or
development opportunities warrant such expansion. At the current time, we expect this program to be funded by revenues from commercial
sales. The agreement with AN terminates on November 29, 2027. AN may terminate the license on written notice to us, if a donor withdraws
consent to the continued use of umbilical cord tissue samples that were obtained by AN. Additionally, either party may terminate the agreement
on 30 days prior written notice to the other if that other party materially breach any term of the agreement and such breaches (to the
extent it is remediable) is not remedied within 30 days of the written request to the other party to do so.
25
Challenges in the Market for Immunotherapy
Products
Government Regulation
The FDA and other federal,
state, local and foreign regulatory agencies impose substantial requirements upon the clinical development, approval, labeling, manufacture,
marketing, and distribution of drug products. These agencies regulate, among other things, research and development activities and the
testing, approval, manufacture, quality control, safety, effectiveness, labeling, storage, record keeping, advertising and promotion of
our product candidates. The regulatory approval process is generally lengthy and expensive, with no guarantee of a positive result. Moreover,
failure to comply with applicable FDA or other requirements may result in civil or criminal penalties, recall or seizure of products,
injunctive relief including partial or total suspension of production, or withdrawal of a product from the market.
Various regulatory authorities
regulate, among other things, the research, manufacture, promotion, and distribution of drugs in the United States under the FDA and other
statutes and implementing regulations. The process required by the FDA before prescription drug product candidates may be marketed in
the United States generally involves the following:
●
completion of extensive nonclinical laboratory tests, animal studies and formulation studies, all performed in accordance with the FDA’s Good Laboratory Practice regulations;
●
submission to the FDA of an investigational new drug application, or IND, which must become effective before human clinical trials may begin;
●
for some products, performance of adequate and well-controlled human clinical trials in accordance with the FDA’s regulations, including Good Clinical Practices, to establish the safety and efficacy of the product candidate for each proposed indication;
●
submission to the FDA of a new drug application or NDA;
●
satisfactory completion of an FDA preapproval inspection of the manufacturing facilities at which the product is produced to assess compliance with current Good Manufacturing Practice, or cGMP, regulations; and
●
FDA review and approval of the NDA prior to any commercial marketing, sale or shipment of the drug.
The testing and approval process
requires substantial time, effort and financial resources, and we cannot be certain that any approvals for our product candidates will
be granted on a timely basis, if at all.
Preclinical tests include
laboratory evaluations of product chemistry, formulation and stability, as well as studies to evaluate toxicity in animals and other animal
studies. The results of preclinical tests, together with manufacturing information and analytical data, are submitted as part of an IND
to the FDA. Some preclinical testing may continue even after an IND is submitted. The IND also includes one or more protocols for the
initial clinical trial or trials and an investigator’s brochure. An IND automatically becomes effective 30 days after receipt by
the FDA, unless the FDA, within the 30-day time period, raises concerns or questions relating to the proposed clinical trials as outlined
in the IND and places the clinical trial on a clinical hold. In such cases, the IND sponsor and the FDA must resolve any outstanding concerns
or questions before any clinical trials can begin. Clinical trial holds also may be imposed at any time before or during studies due to
safety concerns or non-compliance with regulatory requirements. An independent institutional review board, or IRB, at each of the clinical
centers proposing to conduct the clinical trial must review and approve the plan for any clinical trial before it commences at that center.
An IRB considers, among other things, whether the risks to individuals participating in the trials are minimized and are reasonable in
relation to anticipated benefits. The IRB also approves the consent form signed by the trial participants and must monitor the study until
completed.
The FDA offers several regulatory
mechanisms that provide expedited or accelerated approval procedures for selected drugs in the indications on which we are focusing our
efforts. These include accelerated approval under Subpart H of the agency’s NDA approval regulations, fast track drug development
procedures and priority review.
26
We plan to seek orphan drug
designation for INKmune for the treatment of high-risk MDS if the results of the clinical trials support this activity. The United States,
European Union and other jurisdictions may grant orphan drug designation to drugs intended to treat a “rare disease or condition,”
which, in the United States, is generally a disease or condition that affects no more than 200,000 individuals. In the European Union,
orphan drug designation can be granted if: the disease is life threatening or chronically debilitating and affects no more than 50 in
100,000 persons in the European Union; without incentive it is unlikely that the drug would generate sufficient return to justify the
necessary investment; and no satisfactory method of treatment for the condition exists or, if it does, the new drug will provide a significant
benefit to those affected by the condition. If a product that has an orphan drug designation subsequently receives the first regulatory
approval for the indication for which it has such designation, the product is entitled to orphan exclusivity, meaning that the applicable
regulatory authority may not approve any other applications to market the same drug for the same indication, except in limited circumstances,
for a period of seven years in the United States and 10 years in the European Union Orphan drug designation does not prevent competitors
from developing or marketing different drugs for the same indication or the same drug for different indications. Orphan drug designation
must be requested before submitting an NDA. After orphan drug designation is granted, the identity of the therapeutic agent and its potential
orphan use are publicly disclosed. Orphan drug designation does not convey an advantage in, or shorten the duration of, the review and
approval process. However, this designation provides an exemption from marketing and authorization (NDA) fees. We plan to follow a similar
path with INB03 or XPro, although the precise indication cannot be determined until we are farther along in the development process.
Clinical Trials
Phase 1 clinical trials typically
involve the initial introduction of the product candidate into healthy human volunteers. In Phase 1 clinical trials, the product candidate
is typically tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and pharmacodynamics.
Phase 2 clinical trials are
conducted in a limited patient population to gather evidence about the efficacy of the product candidate for specific, targeted indications;
to determine dosage tolerance and optimal dosage; and to identify possible adverse effects and safety risks.
Phase 3 clinical trials are
undertaken to evaluate clinical efficacy and to test for safety in an expanded patient population at geographically dispersed clinical
trial sites. The size of Phase 3 clinical trials depends upon clinical and statistical considerations for the product candidate and disease,
but sometimes can include several thousand patients. Phase 3 clinical trials are intended to establish the overall risk-benefit ratio
of the product candidate and provide an adequate basis for product labeling.
Clinical trials involve the
administration of the product candidate to human subjects under the supervision of qualified medical investigators according to approved
protocols that detail the objectives of the study, dosing procedures, subject selection and exclusion criteria, and the parameters to
be used to monitor participant safety. Regulatory procedures differ in each country we will be working in. For example, in the US, each
protocol is submitted to the FDA as part of the IND for their review and consent before enrolling patients in the clinical trial. The
US is not the only place to perform clinical trials. Most countries have systems in place to allow academics and companies to sponsor
clinical trials of novel therapies in patients. For financial and technical reasons, the Company will perform the Phase I clinical trials
of our programs in the United Kingdom and Australia. The US will be included in the Phase II programs. Other venues such as Europe, Canada,
Japan and other Pacific Rim countries may be included in the development program in the future. The first clinical trial with INKmune
will be initiated in the United Kingdom. In the United Kingdom, the regulatory submission is made to the MHRA for a clinical trials authorization
(“CTA”). This is a multistep process. The Company had a Scientific Advice meeting with the MHRA in September 2017 to discuss
the INKmune Phase I/II trial in women with relapse/refractory ovarian cancer including trial design, manufacturing processes and clinical
trial execution. The MHRA gave recommendations on trial design, manufacturing controls and the regulatory procedures needed to initiate
the clinical trial. We received CTA approval from the MHRA for an INKmune trial in ovarian cancer on December 18, 2018. The approval allows
for the execution of the Phase I/II INKmune clinical trial in the United Kingdom. We plan to have two cancer clinics referring the 6 patients
needed for the Phase I portion of the trial. We expect the first Phase I sites to be in the United Kingdom. If the first cohort of the
Phase I trial proceeds as planned, we expect to expand the clinical trial in the United Kingdom and may include clinical sites in the
US. Any Phase II program will start as a multi-national trial because at least 30 patients will be required to complete the Phase II program.
The additional clinical sites in the United Kingdom or US have not been identified at this time. No additional regulatory procedures will
be needed to add sites in the United Kingdom. To add sites in the US, we will need to file an IND with the FDA. Once the FDA approves
the IND, clinical sites can be opened. We have chosen relapsed/refractory ovarian cancer as the anticipated Phase 1 study for INKmune
for a number of reasons. Relapsed refractory is a disease with poor treatment options. Our pre-clinical data suggests INKmune may have
advantages over other immunotherapies in the treatment of ovarian cancer. Ovarian cancer has a sensitive and validated biomarker to measure
disease burden – CA125. This allows the Company to accurately select patients for the clinical trial and determine if INKmune therapy
is effective. This provides regulatory advantages for registration of INKmune. INB03 will follow a similar development strategy but used
Australia for the Phase I programs. In Australia, clinical trials for INB03 are performed under the clinical trials notification (“CTN”)
scheme authorized by the Therapeutic Good Administration (“TGA”). The TGA is the equivalent agency to the FDA in the US and
the MHRA in the United Kingdom. We filed an Australian Clinical Trial Notification, or CTN, for INB03 and XPro during the second quarter
of 2018 and 2019 respectively. Applications were accepted in May 2018 and 2019 to allow us to initiate the Phase I trials in cancer and
Alzheimer’s disease respectively. We have completed the oncology Phase 1 open label dose escalation trial in patients with advanced
solid tumors and biomarkers of inflammation in their blood.
27
The INBO3 Phase I trial has been completed and provided evidence
of safety and a pharmacodynamic drug affect, decrease of inflammatory biomarkers, needed to move the program to a Phase II clinical trial
in cancer. The Phase II clinical trial will combine INB03 with approved second line therapy in patients with HER2+ breast cancer with
or without brain metastasis that have progressed after treatment with TDxd. This is a combination trial where the addition of INB03 to
approved second line therapy may provide a therapeutic alternative in a disease without any drugs approved. The Company has not lost interest
in combining INB03 with immune checkpoint inhibitors (CPI), but competition for patients is fierce in this arena. Our plan is to pursue
treatment of tumors that express MUC4 as our lead indication. Tumors that express MUC4 are resistant to all forms of immunotherapy due
to a combination of increased MDSC in the tumor, decrease tumor macrophage (TAM) phagocytosis, decreased inflammation in the tumor (a
“cold” tumor) and direct effects of MUC4 and soluble TNF on HER2 function. If combination therapy with INB03 decreases MUC4
expression and changes the TME to make the “cold” tumor “hot”, then addition of a CPI will be warranted. At this
time, the combination trial to treat MUC4+ TDxd resistant HER2+ expressing cancer is our most probable registration strategy for INB03.
This includes the combination of INB03 with trastuzumab antibody drug conjugate therapy TDxd in combination with a TKI and/or CPI. Current
therapies for TDxd resistant cancers are used on a trial by error approach. Using MUC4 expression as a biomarker for to predict resistance
may bring a precision medicine approach to this difficult clinical scenario. Addition of INB03 to the treatment regimen for treating MUC4+
cancers may convert “cold” tumors to “hot” tumors making the eligible for treatment with CPI. The design and successful
completion of a Phase II trial is not guarantee of clinical relevance or commercial viability. There are multiple therapies on the market
or in development for the treatment of resistant breast cancer. The introduction of TDxd to the clinician’s armamentarium is new
and evolving. The future standard-of-care is not known. The registration and development strategy for INB03 is multinational. The Phase
II program may enroll patients in other countries, including the United States after submitting an Investigational New Drug application,
or IND, to the U.S. Food and Drug Administration, or FDA. If partnering is successful at any stage of INB03 development, we expect the
partner to influence the development and regulatory decisions needed with moving the drug to commercialization. Finally, combination therapy
to treat patients resistant to trastuzumab or CPI are not the only oncology application for INB03. INB03 can be combined with other immune-oncology
therapy to improve efficacy, safety or both. INB03 can be used as part of combination therapy with immuno-oncology drugs, paired with
tradition therapies such as cytotoxic chemotherapy, kinase inhibitors, cell therapies or radiation therapy. The company is pursuing pre-clinical
data in some of these areas. When and if positive developments occur, we will communicate them to our shareholders. There are other regulatory
venues that will be important for both our products – the largest and most important is Europe. In Europe, the European Medicines
Agencies (“EMA”) is responsible for authorization of clinical trials in member states. In EU, there may be a requirement to
get individual country authorization at the same time as EMA authorization. The initial development of INB03 and XPro occurred in AUS
followed by trials in other regulatory jurisdictions including the US. The development of INKmune will start in the United Kingdom followed
by trials in the US. XPro is being developed for the treatment of Alzheimer’s disease under a Part-the-Cloud Award received Feb
2019. The biomarker directed Phase I trial was performed in AUS using a regulatory strategy identical to that used for INB03 in cancer.
Regulatory approval to initiate the trial was received on February 8, 2019. XPro treats microglial activation and innate immune dysregulation
may be the cause with Alzheimer’s disease in some patients. To our knowledge, there are few companies using an anti-inflammatory
strategy for the treatment of Alzheimer’s disease. Those companies include Denali Therapeutics (NASDAQ: DNLI); developing DNL747
that targets critical signaling proteins in the TNF pathway that regulate inflammation and cell death. Alector (NASDAQ: ALEC) in partnership
with Abbvie is developing AL002 that targets TREM2 on microglial cells. Gliacure is targeting microglial cells in Alzheimer’s disease
with a small molecule candidate GC021109.
Lecanemab (Leqembi™; Eisai) was approved for the treatment
of patients with Early AD in January 2023 This is this the second anti-amyloid drug for the treatment of ealy AD to be approved. Donanemab
(Lilly), a third drug anti-amyloid therapy for early AD is expected to be approved in the second half of 2023. These three drugs have
similar efficacy and safety profiles. One of the common safety problems is the development of ARIA (Alzheimer’s Related Imaging
Abnormality) that causes a delay or discontinuation of therapy. ARIA is neuroinflammation related side-effect more common in patients
expressing ApoE4. The modest efficacy, sub-optimal safety and difficulty of use makes combination therapy for the treatment of early AD
an attractive development and therapeutic strategy. The Company is following the developments in this area closely.
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Clinical testing must satisfy
extensive FDA regulations. Reports detailing the results of the clinical trials must be submitted at least annually to the FDA and safety
reports must be submitted for serious and unexpected adverse events. Success in early-stage clinical trials does not assure success in
later stage clinical trials. The FDA, an IRB or we may suspend a clinical trial at any time on various grounds, including a finding that
the research subjects or patients are being exposed to an unacceptable health risk.
New Drug Applications
Assuming successful completion
of the required clinical trials, the results of product development, preclinical studies and clinical trials are submitted to the FDA
as part of an NDA. An NDA also must contain extensive manufacturing information, as well as proposed labeling for the finished product.
An NDA applicant must develop information about the chemistry and physical characteristics of the drug and finalize a process for manufacturing
the product in accordance with cGMP. The manufacturing process must be capable of consistently producing quality product within specifications
approved by the FDA. The manufacturer must develop methods for testing the quality, purity and potency of the final product. In addition,
appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the product does not undergo
unacceptable deterioration over its shelf life. Prior to approval, the FDA will conduct an inspection of the manufacturing facilities
to assess compliance with cGMP.
The FDA reviews all NDAs submitted
before it accepts them for filing. The FDA may request additional information rather than accept an NDA for filing. In this event, the
NDA must be resubmitted with the additional information and is subject to review before the FDA accepts it for filing. After an application
is filed, the FDA may refer the NDA to an advisory committee for review, evaluation and recommendation as to whether the application should
be approved and under what conditions. The FDA is not bound by the recommendation of an advisory committee, but it considers them carefully
when making decisions. The FDA may deny approval of an NDA if the applicable regulatory criteria are not satisfied. Data obtained from
clinical trials are not always conclusive and the FDA may interpret data differently than we interpret the same data. The FDA may issue
a complete response letter, which may require additional clinical or other data or impose other conditions that must be met in order to
secure final approval of the NDA. If a product receives regulatory approval, the approval may be significantly limited to specific diseases
and dosages or the indications for use may otherwise be limited, which could restrict the commercial value of the product. In addition,
the FDA may require us to conduct Phase 4 testing which involves clinical trials designed to further assess a drug’s safety and
effectiveness after NDA approval and may require surveillance programs to monitor the safety of approved products which have been commercialized.
Once issued, the FDA may withdraw product approval if ongoing regulatory requirements are not met or if safety or efficacy questions are
raised after the product reaches the market.
Post-Approval Requirements
Any products manufactured
or distributed by us pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things,
requirements relating to record-keeping, reporting of adverse experiences, periodic reporting, distribution, and advertising and promotion
of the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims, are subject
to prior FDA review and approval. There also are continuing, annual user fee requirements for any marketed products and the establishments
at which such products are manufactured, as well as new application fees for supplemental applications with clinical data. Pharmaceutical
manufacturers and their subcontractors are required to register their establishments with the FDA and certain state agencies and are subject
to periodic unannounced inspections by the FDA and certain state agencies for compliance with GMP, which impose certain procedural and
documentation requirements upon us and our third-party manufacturers. Changes to the manufacturing process are strictly regulated, and,
depending on the significance of the change, may require prior FDA approval before being implemented. FDA regulations also require investigation
and correction of any deviations from cGMP and impose reporting requirements upon us and any third-party manufacturers that we may decide
to use. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain
compliance with cGMP and other aspects of regulatory compliance. If our future suppliers are not able to comply with these requirements,
the FDA may, among other things, halt our clinical trials, require us to recall a product from distribution, or withdraw approval of the
product.
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The FDA may withdraw approval
if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market.
Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with
manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new
safety information; imposition of post-market studies or clinical studies to assess new safety risks; or imposition of distribution restrictions
or other restrictions under a REMS program.
The FDA closely regulates
the marketing, labeling, advertising and promotion of pharmaceutical products. A company can make only those claims relating to safety
and efficacy, purity and potency that are approved by the FDA and in accordance with the provisions of the approved label. The FDA and
other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses. Failure to comply with these requirements
can result in, among other things, adverse publicity, warning letters, corrective advertising and potential civil and criminal penalties.
Physicians may prescribe legally available products for uses that are not described in the product’s labeling and that differ from
those tested by us and approved by the FDA. Such off-label uses are common across medical specialties. Physicians may believe that such
off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians
in their choice of treatments. The FDA does, however, restrict manufacturer’s communications on the subject of off-label use of
their products.
Other Healthcare Laws and Compliance Requirements
Our sales, promotion, medical
education, clinical research and other activities following product approval will be subject to regulation by numerous regulatory and
law enforcement authorities in the United States in addition to FDA, including potentially the Federal Trade Commission, the Department
of Justice, the Centers for Medicare and Medicaid Services, or CMS, other divisions of the U.S. Department of Health and Human Services
and state and local governments. Our promotional and scientific/educational programs must comply with the federal Anti-Kickback Statute,
the civil False Claims Act, physician payment transparency laws, privacy laws, security laws, and additional federal and state laws similar
to the foregoing.
The federal Anti-Kickback
Statute prohibits, among other things, the knowing and willing, direct or indirect offer, receipt, solicitation or payment of remuneration
in exchange for or to induce the referral of patients, including the purchase, order or lease of any good, facility, item or service that
would be paid for in whole or part by Medicare, Medicaid or other federal health care programs. Remuneration has been broadly defined
to include anything of value, including cash, improper discounts, and free or reduced-price items and services. The federal Anti-Kickback
Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on one hand and prescribers, purchasers, formulary
managers, and beneficiaries on the other. Although there are a number of statutory exceptions and regulatory safe harbors protecting some
common activities from prosecution, the exceptions and safe harbors are drawn narrowly. Practices that involve remuneration that may be
alleged to be intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exception
or safe harbor. Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor does
not make the conduct per se illegal under the federal Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated
on a case-by-case basis based on a cumulative review of all its facts and circumstances. Several courts have interpreted the statute’s
intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal healthcare
covered business, the federal Anti-Kickback Statute has been violated. The government has enforced the federal Anti-Kickback Statute to
reach large settlements with healthcare companies based on sham research or consulting and other financial arrangements with physicians.
Further, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a
violation. In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback
Statute constitutes a false or fraudulent claim for purposes of the False Claims Act. Many states have similar laws that apply to their
state health care programs as well as private payors.
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Federal false claims and false
statement laws, including the federal civil False Claims Act, or FCA, imposes liability on persons or entities that, among other things,
knowingly present or cause to be presented claims that are false or fraudulent or not provided as claimed for payment or approval by a
federal health care program. The FCA has been used to prosecute persons or entities that “cause” the submission of claims
for payment that are inaccurate or fraudulent, by, for example, providing inaccurate billing or coding information to customers, promoting
a product off-label, submitting claims for services not provided as claimed, or submitting claims for services that were provided but
not medically necessary. Actions under the FCA may be brought by the Attorney General or as a qui tam action by a private individual in
the name of the government. Violations of the FCA can result in significant monetary penalties and treble damages. The federal government
is using the FCA, and the accompanying threat of significant liability, in its investigation and prosecution of pharmaceutical and biotechnology
companies throughout the country, for example, in connection with the promotion of products for unapproved uses and other illegal sales
and marketing practices. The government has obtained multi-million and multibillion dollar settlements under the FCA in addition to individual
criminal convictions under applicable criminal statutes. In addition, certain companies that were found to be in violation of the FCA
have been forced to implement extensive corrective action plans, and have often become subject to consent decrees or corporate integrity
agreements, restricting the manner in which they conduct their business.
The federal Health Insurance
Portability and Accountability Act of 1996, or HIPAA, created additional federal criminal statutes that prohibit, among other things,
knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party
payors; knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent
statement in connection with the delivery of or payment for healthcare benefits, items or services; and willfully obstructing a criminal
investigation of a healthcare offense. Like the federal Anti-Kickback Statute, the Affordable Care Act amended the intent standard for
certain healthcare fraud statutes under HIPAA such that a person or entity no longer needs to have actual knowledge of the statute or
specific intent to violate it in order to have committed a violation.
Given the significant size
of actual and potential settlements, we expect that the government will continue to devote substantial resources to investigating healthcare
providers’ and manufacturers’ compliance with applicable fraud and abuse laws. Also, many states have similar fraud and abuse
statutes or regulations that may be broader in scope and may apply regardless of payor, in addition to items and services reimbursed under
Medicaid and other state programs. Additionally, to the extent that our products, once commercialized, are sold in a foreign country,
we may be subject to similar foreign laws.
In addition, there has been
a recent trend of increased federal and state regulation of payments made to physicians and other healthcare providers. The Patient Protection
and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively, the Affordable Care Act, among
other things, imposed new reporting requirements on certain manufacturers of drugs, devices, biologics and medical supplies for which
payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, for payments
or other transfers of value made by them to physicians and teaching hospitals, as well as ownership and investment interests held by physicians
and their immediate family members. Covered manufacturers are required to collect and report detailed payment data and submit legal attestation
to the accuracy of such data to the government each year. Failure to submit required information may result in civil monetary penalties
of up to an aggregate of $150,000 per year (or up to an aggregate of $1 million per year for “knowing failures”), for all
payments, transfers of value or ownership or investment interests that are not timely, accurately and completely reported in an annual
submission. Additionally, entities that do not comply with mandatory reporting requirements may be subject to a corporate integrity agreement.
Certain states also mandate implementation of commercial compliance programs, impose restrictions on covered manufacturers’ marketing
practices and/or require the tracking and reporting of gifts, compensation and other remuneration to physicians and other healthcare professionals.
We may also be subject to
data privacy and security regulation by both the federal government and the states in which we conduct our business. HIPAA, as amended
by the Health Information Technology and Clinical Health Act, or HITECH, and their respective implementing regulations, imposes specified
requirements on certain health care providers, plans and clearinghouses (collectively, “covered entities”) and their “business
associates,” relating to the privacy, security and transmission of individually identifiable health information. Among other things,
HITECH makes HIPAA’s security standards directly applicable to “business associates,” defined as independent contractors
or agents of covered entities that create, receive, maintain or transmit protected health information in connection with providing a service
for or on behalf of a covered entity. HITECH also increased the civil and criminal penalties that may be imposed against covered entities,
business associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions
in federal courts to enforce HIPAA and seek attorney’s fees and costs associated with pursuing federal civil actions. In addition,
certain states have their own laws that govern the privacy and security of health information in certain circumstances, many of which
differ from each other and/or HIPAA in significant ways and may not have the same effect, thus complicating compliance efforts.
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Coverage and Reimbursement
Sales of pharmaceutical products
depend significantly on the extent to which coverage and adequate reimbursement are provided by third-party payors. Third-party payors
include state and federal government health care programs, managed care providers, private health insurers and other organizations. Although
we currently believe that third-party payors will provide coverage and reimbursement for our product candidates, if approved, we cannot
be certain of this. Third-party payors are increasingly challenging the price, examining the cost-effectiveness, and reducing reimbursement
for medical products and services. In addition, significant uncertainty exists as to the reimbursement status of newly approved healthcare
products. The U.S. government, state legislatures and foreign governments have continued implementing cost containment programs, including
price controls, restrictions on coverage and reimbursement and requirements for substitution of generic products. Adoption of price controls
and cost containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further
limit our net revenue and results. We may need to conduct expensive clinical studies to demonstrate the comparative cost-effectiveness
of our products. The product candidates that we develop may not be considered cost-effective and thus may not be covered or sufficiently
reimbursed. It is time consuming and expensive for us to seek coverage and reimbursement from third-party payors, as each payor will make
its own determination as to whether to cover a product and at what level of reimbursement. Thus, one payor’s decision to provide
coverage and adequate reimbursement for a product does not assure that another payor will provide coverage or that the reimbursement levels
will be adequate. Moreover, a payor’s decision to provide coverage for a drug product does not imply that an adequate reimbursement
rate will be approved. Reimbursement may not be available or sufficient to allow us to sell our products on a competitive and profitable
basis.
Healthcare Reform
The United States and some
foreign jurisdictions are considering or have enacted a number of legislative and regulatory proposals to change the healthcare system
in ways that could affect our ability to sell our products profitably. Among policy makers and payors in the United States and elsewhere,
there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving
quality and/or expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has
been significantly affected by major legislative initiatives.
By way of example, in March 2010, the Affordable Care Act (“ACA”)
was signed into law, intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies
against fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, impose new taxes and fees
on the health industry and impose additional health policy reforms. Among the provisions of the ACA of importance to our potential drug
candidates are:
●
an annual, nondeductible fee on any entity that manufactures, or imports specified branded prescription drugs and biologic agents, apportioned among these entities according to their market share in certain government healthcare programs;
●
an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13.0% of the average manufacturer price for branded and generic drugs, respectively;
●
a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected;
●
a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for a manufacturer’s outpatient drugs to be covered under Medicare Part D;
●
extension of a manufacturer’s Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;
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●
expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for certain individuals with income at or below 133% of the federal poverty level, thereby potentially increasing a manufacturer’s Medicaid rebate liability;
●
expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program; and
●
a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.
In addition, other legislative changes have been proposed and
adopted since the ACA was enacted. These changes include, among others, the Budget Control Act of 2011, which mandates aggregate reductions
to Medicare payments to providers of up to 2% per fiscal year effective April 1, 2013, and, due to subsequent legislative amendments,
will remain in effect through 2024 unless additional Congressional action is taken. In January 2013, President Obama signed into law the
American Taxpayer Relief Act of 2012, which, among other things, further reduced Medicare payments to several providers, including hospitals
and cancer treatment centers, increased the statute of limitations period for the government to recover overpayments to providers from
three to five years. These new laws may result in additional reductions in Medicare and other healthcare funding, which could have a material
adverse effect on customers for our product candidates, if approved, and, accordingly, our financial operations.
Since
its enactment, there have been judicial, administrative, executive and legislative challenges to certain aspects of the ACA. On June
17, 2021 the U.S. Supreme Court dismissed the most recent judicial challenge to the ACA brought by several states without specifically
ruling on the constitutionality of the ACA. Thus, the ACA will remain in effect in its current form. Further, prior to the U.S. Supreme
Court ruling, President Biden issued an executive order to, among other things, instruct certain governmental agencies to review and reconsider
their existing policies and rules that limit access to health care, including among others, reexamining Medicaid demonstration projects
and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance
coverage through Medicaid or the ACA.
On
March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate
cap, currently set at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs, beginning
January 1, 2024. Payment methodologies may also be subject to changes in healthcare legislation and regulatory initiatives. For example,
Centers for Medicare and Medicaid Services may develop new payment and delivery models, such as bundled payment models. There also has
been heightened governmental scrutiny in the United States of pharmaceutical pricing practices in light of the rising cost of prescription
drugs and biologics. Such scrutiny has resulted in several recent U.S. Congressional inquiries and proposed and enacted federal and state
legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare,
review the relationship between pricing and manufacturer patient programs and reform government program reimbursement methodologies for
drugs. By way of example, in August 2022, the Inflation Reduction Act of 2022, or the IRA, was signed into law. Among other things, the
IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare (beginning in 2026), with prices that can be
negotiated subject to a cap; imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation
(first due in 2023); and replaces the Part D coverage gap discount program with a new discounting program (beginning in 2025). The IRA
permits the Secretary of the Department of Health and Human Services to implement many of these provisions through guidance, as opposed
to regulation, for the initial years. For that and other reasons, it is currently unclear how the IRA will be effectuated, or the impact
of the IRA on our business.
At
the state level, legislatures in the United States have also increasingly passed legislation and implemented regulations designed to control
pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access
and marketing cost disclosure and transparency measures and, in some cases, designed to encourage importation from other countries and
bulk purchasing. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine
what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs.
We expect that the ACA, as well as other healthcare reform measures
that may be adopted in the future, may result in more rigorous coverage criteria and lower reimbursement, and in additional downward pressure
on the price that we receive for any approved product. Any reduction in reimbursement from Medicare or other government-funded programs
may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare
reforms may prevent us from being able to generate revenue, attain profitability or commercialize our drugs.
Human Capital Resources
As of December 31, 2022, we
had 10 full-time employees. We consider the intellectual capital of our employees to be an important driver of our business and key to
our future prospects. We monitor our compensation programs closely and provide what we consider to be a very competitive mix of compensation
and insurance benefits for all our employees, as well as participation in our equity programs. None of our employees is subject to a collective
bargaining agreement or represented by a trade or labor union. We consider our relations with our employees to be good.
Corporate Information
We were incorporated under the laws of the State
of Nevada on September 25, 2015. Our principal executive office is located at 225 NE Mizner Blvd, Suite 640, Boca Raton FL 33432 and our
telephone number is (858) 964-3720.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.