Matinas BioPharma Holdings, Inc. 10-K

Item 1. Business Company Overview We are a biopharmaceutical company focused on improving the intracellular delivery of critical therapeutics through our paradigm-changing lipid nanocrystal (LNC) delivery platform. We are also focused on creating value through identifying a partner to continue the development of LYPDISO™ (formerly MAT9001), a next generation, highly purified, prescription-only omega-3 free fatty acid formulation specifically designed for the treatment of cardiovascular and metabolic conditions. Matinas BioPharma is dedicated to maximizing the value associated with our unique LNC platform delivery technology. This proprietary platform technology, licensed from Rutgers University on an exclusive worldwide basis, nano-encapsulates target molecules in a way that facilitates safe, efficient, and targeted intracellular delivery. Comprised of phospholipids, like phosphatidylserine, and calcium, our LNCs can be differentiated from any other delivery technology today both in terms of how LNCs provide flexibility with route of administration as well as how LNCs gain access to cells and how they can also provide flexibility with route of administration. LNCs have been delivered orally, intramuscularly, intravenously and through inhalation. Because of their unique composition, LNCs can be delivered into a cell through any or all of phagocytosis, membrane fusion, or clathrin-mediated endocytosis. In addition to efficient intracellular delivery to treat a variety of cell-based pathogens, diseases and conditions, our technology allows for the targeted and safe delivery of pharmaceutical agents directly to sites of infection or inflammation. This highly stable, efficient and broadly applicable drug delivery platform has the potential to deliver a broad range of therapeutic agents, including small molecules, vaccines, peptides and proteins, as well as nucleic acid polymers (e.g., antisense, oligonucleotides, siRNA, mRNA) for use in treating a broad range of inflammatory, infectious and other intracellular diseases (e.g., intracellular pathogen-related, genetic disorders, and cancer). 2 Our lead drug candidate based on the LNC platform delivery technology is MAT2203, an oral formulation of amphotericin B, a well-known and highly effective, antifungal drug (though frequently associated with significant renal toxicity and currently only available in an intravenous formulation) currently used and approved to treat a variety of invasive, and potentially deadly, fungal infections. MAT2203 has been developed to date with the assistance and financial support of the National Institutes of Allergy and Infectious Disease (NIAID) of the National Institutes of Health (NIH). MAT2203 has been designated as a Qualified Infectious Disease Product (QIDP) with Fast Track Status for the treatment of invasive candidiasis, the treatment of aspergillosis, the prevention of invasive fungal infections in patients who are on immunosuppressive therapy, and, most recently, the treatment of cryptococcosis. While we continue to believe that MAT2203 could become an important solution to the significant unmet medical need to prevent invasive fungal infections in immunosuppressed patients, we also believe there are opportunities for a more rapid approval of MAT2203 for the treatment of certain invasive fungal infections in areas of high unmet medical need. In partnership with the NIH, we have conducted numerous preclinical studies of MAT2203 in cryptococcal meningitis and demonstrated that MAT2203 was able to (a) cross the blood-brain barrier, (b) effectively treat this infection and (c) eliminate the toxicity normally associated with delivery of amphotericin B intravenously. The NIH has funded a grant submission from the University of Minnesota for a clinical study of MAT2203 in patients with cryptococcal meningitis in Uganda, where this disease is highly prevalent among the human immunodeficiency virus (HIV)-positive community. This study, which has been called the Encochleated Oral Amphotericin for Cryptococcal Meningitis Trial (EnACT), initiated in 2019 and currently enrolling patients in Cohort 2 of the trial, is exploring the use of MAT2203 for both induction and maintenance therapy, and we believe that, if positive, it could form the foundation for registrational approval in this indication. Moreover, since this study potentially validates the use of MAT2203 in what is arguably one of the most difficult-to-treat fungal infections, we believe MAT2203 is well-positioned to become a best-in-class antifungal drug for the treatment of invasive fungal infections. Furthermore, a demonstration that MAT2203 can effectively cross the blood-brain barrier in humans could potentially position our LNC platform delivery technology for use with molecules designed to treat other inflammatory diseases of the central nervous system through an oral route of administration. Developing MAT2203 utilizing primarily non-dilutive, government-sponsored, financing allows us to focus our internal cash resources on LYPDISO while advancing MAT2203, MAT2501 and our innovative LNC platform delivery technology. We are also progressing the development of MAT2501, our oral amikacin development program, which is funded in large part by the Cystic Fibrosis Foundation (CFF) which we are developing for the treatment of non-tuberculous mycobacterial (NTM) infection, a highly prevalent lung infection in patients with underlying cystic fibrosis. We received funding of $3.75 million from the CFF in November 2020 which was based upon the positive preclinical proof-of-concept data generated by Colorado State University testing MAT2501 efficacy against both amikacin-sensitive and resistant strains of infecting organisms in a CF mouse model for NTM infections. We have been engaged in discussions with various large, well-established and well-financed biotech and global pharmaceutical companies on potential applications of the LNC platform delivery technology. ● In July 2018, we announced a research collaboration with the National Institute of Neurological Disorders and Stroke (NINDS) of the NIH, focused on the development of a novel therapy for the treatment of HIV combining targeted antisense oligonucleotides (ASO) and Matinas’ LNC platform delivery technology. ● In January 2019, we announced a research evaluation with a top global pharmaceutical company in which our LNC platform delivery technology would be explored in delivering certain nucleic acid polymers. ● In May 2019, we announced a research collaboration with ViiV Healthcare to develop and evaluate formulations of antiviral drug candidates. ● In December 2019, we announced a feasibility collaboration with Genentech relating to the development of oral formulations of a number of Genentech proprietary compounds applying the LNC platform delivery technology. ● In December 2020, we announced a collaboration with the National Institute of Allergy and Infectious Diseases to evaluate oral formulations of Gilead’s antiviral remdesivir utilizing our LNC platform delivery technology. We continue to evaluate additional potential strategic collaborations with other interested biotech and pharmaceutical partners. These early stage, proof-of-concept evaluations could provide an efficient, less expensive pathway to create numerous strategic verticals in areas of innovative medicine while capitalizing on the development expertise and financial resources of well-established pharmaceutical and biotech companies. Data from these evaluations could position us as a licensor of our LNC platform delivery technology to numerous strategic partners better positioned to absorb the risks and costs of drug development while allowing our company to become a royalty aggregator with the potential to generate upfront license, milestone and royalty payments as we maximize the value of the overall LNC platform delivery technology. 3 We are also focused on securing value for LYPDISO through a collaboration or partnership in the United States or globally. LYPDISO is a soft gelatin capsule containing a complex mixture of multiple long-chain omega-3 fatty acids, primarily eicosapentaenoic acid (EPA) and docosapentaenoic acid (DPA). There are a number of existing FDA-approved prescription omega-3 products, including Lovaza®, Vascepa® and Epanova®, and this class of drugs has extensive evidence of safety and well-documented clinical efficacy in lowering triglycerides (TGs) in patients with hypertriglyceridemia (HTG). We believe that given LYPDISO’s enhanced bioavailability (as a free fatty acid rather than an ethyl ester) and its unique composition (high EPA plus DPA, with very little DHA), it is differentiated from other existing products in the omega-3 class. Triglycerides (TGs) and cholesterol are integral components of lipoproteins, the primary transport vehicle for lipids in the body. High levels of triglyceride-rich lipoproteins are associated with a substantially increased risk of atherosclerotic cardiovascular disease, and, in the case of very high triglycerides, acute pancreatitis. Triglyceride elevations can be due to both genetic and environmental factors and are frequently associated with comorbid conditions such as diabetes, chronic renal failure, and nephrotic syndrome. Unlike the currently approved pharmaceutical omega-3 products, all of which have been repurposed following clinical failures in their originally intended indications, LYPDISO has been specifically designed and developed to treat HTG, dyslipidemia and other cardiovascular and metabolic conditions. We had previously been focused on the initial development of LYPDISO for an initial indication for the treatment of severe hypertriglyceridemia (SHTG), which are those patients with triglyceride levels ≥ 500mg/dL, since TG-lowering is a well-accepted surrogate outcome marker of clinical efficacy in these patients. Additionally, the prescription omega-3 product Vascepa has been approved for cardiovascular risk reduction in patients at high cardiovascular risk with TGs ≥ 150 md/dL. The development plan for LYPDISO is via a 505(b)(2) regulatory pathway, which tends to be shorter and less expensive than under Section 505(b)(1) (for new chemical entities that have never been approved in the United States). The 505(b)(2) pathway allows us to rely, at least in part, on U.S. Food and Drug Administration (FDA) findings of safety and/or effectiveness for a previously approved drug. Based on prior written feedback received from the FDA in 2014, and additional verbal and written feedback from FDA in August of 2020, we believe that a 505(b)(2) pathway is possible and appropriate for LYPDISO. In parallel with the preclinical and clinical studies necessary for FDA approval of LYPDISO, we also recently completed the ENHANCE-IT study, a head-to-head crossover study of LYPDISO vs. Vascepa, which was intended to differentiate LYPDISO from the current leading prescription omega-3 therapy. While the primary endpoint of percent change in TGs from baseline to end-of-treatment did not meet statistical significance in the prespecified pharmacodynamic (PD) population, analysis of the per protocol (PP) population demonstrated statistically significant improvement and superiority of LYPDISO over Vascepa in TGs, total cholesterol and very-low-density lipoprotein (VLDL) cholesterol. A key secondary endpoint in ENHANCE-IT was the measurement of eicosapentaenoic acid, or EPA levels, in the blood, as that has become a key surrogate marker in determining cardiovascular risk reduction. In ENHANCE-IT, plasma EPA concentrations were significantly higher with LYPDISO vs. Vascepa (46% relative percent increase change from baseline EPA level vs. Vascepa) and we believe indicate the potential for superior cardioprotection with LYPDISO vs. Vascepa. Overall, the data from ENHANCE-IT support the pursuit of cardiovascular outcomes indication for LYPDISO. Given the significant time and expense of conducting a cardiovascular outcomes trial, we have determined that a partner will be required to further develop LYPDISO. We have initiated a process to identify and secure a partner over the next few quarters. Strategy We are focused on improving the intracellular delivery of critical therapeutics through our paradigm-changing lipid nanocrystal (LNC) drug delivery platform and its application to overcome current challenges in safely and effectively delivering small molecules, nucleic acids, gene therapies, proteins/peptides, and vaccines. We are also focused on creating value through finding a partner to continue the development of LYPDISO, our proprietary, next-generation prescription omega-3 drug, which we believe is differentiated from all other prescription omega-3 products and positioned to potentially demonstrate superior cardioprotective effects. 4 Key elements of our strategy include: ● Advancing our clinical stage assets based on our LNC platform delivery technology and continuing to expand utilization of this promising technology into areas of innovative medicine. ● Delivering efficacy data for MAT2203 in the EnACT study for the treatment of cryptococcal meningitis, which would highlight the safety and efficacy of this promising drug candidate, while demonstrating the ability of our LNC platform technology to deliver potent medicines across the blood-brain barrier with oral administration. ● Progressing the development of MAT2501 through extensive preclinical toxicology and efficacy studies in NTM infections and completing a single ascending dose pharmacokinetic study in healthy volunteers later in 2021, all with the financial support of the Cystic Fibrosis Foundation. Our Lipid Nanocrystal (LNC) Platform Delivery Technology Efficient and safe delivery of medicines remains one of the biggest challenges in the pharmaceutical and biotech industry today. The advancement of science and the emerging importance of cell-mediated immunity and current challenges associated with effective intracellular drug delivery has created a significant area of need. Current technology options, including liposomes, lipid nanoparticles (LNPs) and viral vectors, have been widely adopted but each have significant limitations including inefficient delivery, undesirable and dangerous toxicity and immunogenicity, and unstable formulations forcing challenging storage conditions (Figure 1). The method in which these technologies gain access to a cell varies and often is responsible for significant adverse effects for patients. Despite these known challenges, adoption has been widespread due to the lack of viable alternatives. Today, LNPs and viral vectors are being used to deliver both small molecules and gene therapy. Figure 1: Current Delivery Technologies Our Solution: LNCs Our proprietary lipid nanocrystals (LNCs) are primarily composed of two naturally occurring materials: a phospholipid, like phosphatidylserine (PS), and calcium. They are stable and have a unique multilayered structure consisting of a large, continuous, solid, lipid bilayer sheet rolled up in a spiral or as stacked sheets, with no internal aqueous space. This unique structure provides protection from degradation for molecules trapped in or between lipid bilayers. Components within the interior of the LNCs remain intact, even though the outer layers of the LNCs may be exposed to harsh environmental conditions or enzymes (Figure 2). 5 Figure 2 LNC Formulation Our LNCs protect active pharmaceutical ingredients in lipid bilayers and can intercalate into the phospholipid interior or otherwise remain trapped within the bilayers (Figure 3). The presence of minimal amounts of calcium keeps the LNCs intact. Figure 3 LNCs Protect API in Bilayers LNCs can be delivered in a variety of ways, including orally, intramuscularly, intravenously and through inhalation. This flexibility represents a significant advantage over other delivery modalities and presents significant opportunities to efficiently encapsulate many different molecules, both water soluble and water insoluble, including small molecules, nucleic acids such as antisense oligonucleotides (ASOs), messenger RNA (mRNA) and small interfering RNA (siRNA), and nucleotides as large as eleven kilobases including DNA plasmids and potentially CRISPR/Cas9, a gene editing technology. 6 Intracellular delivery of molecules is usually accomplished by either phagocytosis, clathrin-mediated endocytosis (CME) or through membrane fusion. LNPs are limited in that they can typically only access a cell through the CME process, followed by disruption of the endosomal membrane within the cell to gain access to the cytoplasm. LNPs typically are very inefficient, and patients also experience injection site adverse events and other toxicities associated with CME delivery, thereby limiting chronic use. LNPs also cannot be delivered orally. Viral vectors, including adeno-associated virus, attempts to utilize nature’s intracellular delivery mechanisms to facilitate fusion with the cell membrane and delivery of molecules into a cell. Unfortunately, viral vectors have historically been associated with severe negative immune responses and, like LNPs, cannot be delivered orally. We believe LNCs can effectively delivery molecules through all three mechanisms, in addition to having great flexibility with the desired route of administration. We believe that LNC’s unique ability to enter a cell through phagocytosis, membrane fusion or CME, or a combination thereof, relates directly to the presence of a phospholipid, like phosphatidylserine. Phosphatidylserine (PS) is present in virtually all cells and is an integral part of the cell membrane. PS is normally localized to the inner part of the membrane bilayer by active cellular processes. However, with cell “activation”, which occurs when there is infection, inflammation, injury, stimulation, cell death or some other issue impacting a particular cell, PS moves from the inner layer to the outer layer and facilitates fusion with our LNCs (Figure 4). Certain cells also contain PS receptors, which actively take up LNCs due to the presence of PS (Figure 5). Figure 4: Asymmetry of the Phospholipid Membrane 7 Figure 5: Role of PS and PS Receptors in the Uptake of LNCs into Cells Through phagocytosis, macrophage and other cells containing PS receptors readily engulf LNCs and their drug cargo into vesicles, or endosomes, facilitating intracellular delivery. LNCs can also fuse with cell membranes and deliver drug cargo directly to the cytoplasm. LNCs have been designed to mimic enveloped viruses and can efficiently deliver drugs and/or molecules to cells without adverse immune responses. For some molecules, the goal is simply to achieve safe and effective intracellular delivery. This is especially relevant when delivering sensitive genetic material and other molecules desiring cellular impact (i.e., antivirals). For other molecules, or drugs, utilizing activated cells as a mechanism to deliver drug to infected tissues or other areas of the body becomes critical. LNCs in pre-clinical studies have been shown to improve existing drugs by providing 1) cell-targeted delivery; 2) reduced blood levels thereby reducing toxicity; and 3) oral delivery of drugs now only available intravenously. For example, LNCs delivered orally work by encapsulating molecules of drugs in a solid, anhydrous, crystalline structure, protecting them as they pass through the GI tract where they cross the mucous membrane. Once the LNCs have crossed the mucosal barrier of the GI tract into the lymphatic system, they are picked up by activated cells including cells of the mononuclear phagocytic system, such as macrophages and dendritic cells. Activated macrophages, with drug-loaded LNCs inside, follow natural signal molecule paths and migrate to the site of infection or to the target organ and deliver their payload. Therapeutic applications of our proprietary delivery technology have been initially focused on the delivery of several potent and highly efficacious anti-fungal and anti-bacterial agents, which are currently still associated with serious side effects, including irreversible toxic effects on kidney and hearing function. We believe our technology has the potential for targeted delivery of these agents, which positions us to be at the forefront of dealing with these very serious problems. We have now also expanded our research and development efforts for our LNC platform delivery technology to focus on the delivery of a wide range of therapeutic treatments, in particular those in the oligonucleotide class of agents (antisense oligonucleotides, mRNA, and CRISPR-Cas9).We continue to push forward our business development efforts to further expand our collaborations across pharma and biotech companies who have innovative therapies with delivery challenges, which may be addressed with our LNC platform delivery technology. Multi-organ Protection: A key innovation of our LNC platform delivery technology is our ability to package medication inside lipid-crystal particles without leaking. Because of their crystalline nature, these particles are truly solid and hold on tightly to their medication payload. This is where the LNC platform delivery technology differs markedly from other lipid-based delivery technology, such as liposomal delivery. Liposomes are liquid delivery systems which typically leak some of their drug content into the circulatory system, thus still exposing vulnerable organs and tissues to potential toxic effects. Keeping potentially organ-toxic medications inside the lipid-crystal particles significantly differentiates our LNC platform delivery technology from other drug-delivery approaches. 8 Targeted Delivery: The size of our individual LNCs is typically in the range of 50-500 nm. This is very small and by comparison close to the size of a large virus or a small bacterium. Our body produces many activated cell-types that are predisposed to interact with our LNCs. These activated cell types, including bone marrow-derived hematopoietic cells such as macrophages, infected cells, injured cells, tumor cells and epithelial cells are all prone to engulf or fuse with our phosphatidylserine-based LNCs. Because of the size of our LNCs and their PS surface structure (the cell membranes of bacteria are also made up from PS), activated cells tend to take up these LNCs very efficiently and without any adverse immune response. Oral Formulation: Many drugs that are currently on the market are only effective in treating diseases when administered intravenously. For example, many anti-infective drugs must be administered intravenously in order to be effective. IV administration presents several challenges to care, such as risk of infection, patient discomfort from injections, and higher cost of care than anti-infective drugs that can be taken orally (IV delivery must be performed by a doctor or nurse, often within a very expensive hospital setting). Although several technologies have been used to attempt to convert IV drugs to orally delivered medications, success has been limited due to the difficulty in achieving adequate bioavailability (i.e., the amount of drug that is absorbed into the body) with an oral formulation. We believe that the unique LNC structure in our platform technology protects the drug from degradation when it passes through the GI tract and that its lipid surface features facilitate the particle being absorbed into the blood stream. The potential application of our LNC platform delivery technology for the delivery of injectable medications offers significant clinical and commercial value with successfully demonstrated safety and efficacy in human clinical trials. Our LNC platform technology changes the delivery of medicines in a unique manner and alters the bio-distribution of these medications by targeting tissues and organs that are affected by infection and inflammation. In addition to IV-only anti-infectives such as amphotericin B and amikacin, we have orally delivered in animal studies the influenza vaccine, siRNA, NSAIDs, other anti-infectives such as atovaquone, and many other compounds across multiple therapeutic areas, demonstrating the potential broad application of our technology. We have observed rapid local accumulation in infected tissues, which appear to be the result of transport of our drug-loaded LNCs by and to activated cells. Our LNC Clinical Stage Assets We have leveraged our platform LNC delivery technology to develop two clinical-stage products that we believe have the potential to become best-in-class drugs in their respective therapeutic classes. Our lead LNC platform delivery technology product candidate, MAT2203, is an orally-administered LNC formulation of a broad spectrum anti-fungal drug called amphotericin B. We believe there are opportunities for a potentially rapid approval of MAT2203 for the treatment of certain invasive fungal infections in areas of high unmet medical need. In partnership with the National Institutes of Health (NIH), we have conducted numerous preclinical studies of MAT2203 for the treatment of cryptococcal meningitis (CM), a deadly fungal infection that affects the brain, typically in immunocompromised individuals. In such studies, we observed the potential for MAT2203, utilizing our LNC platform delivery technology, to (a) cross the blood-brain barrier, (b) treat this infection and (c) eliminate the toxicity normally associated with intravenous delivery of amphotericin B. Based upon the preclinical data generated by the NIH, the NIH has financially supported a grant application from the University of Minnesota to conduct the EnACT study in Uganda. This study was initiated in October 2019 and is exploring the use of MAT2203 for both induction and maintenance therapy in the treatment of CM, which is one of the most frequent and opportunistic infections in HIV patients. Given the high morbidity and mortality associated with CM in HIV patients, the clinical unmet need is globally very high with the global burden estimated at 1 million cases annually. We plan to leverage a 505(b)(2) regulatory pathway for MAT2203, in part relying upon FDA’s findings of the efficacy of IV amphotericin B. This strategy was discussed with the FDA in June 2019, where we outlined our development plans for MAT2203 in CM and received FDA approval to proceed with the EnACT study which is currently enrolling subjects in Cohort 2 of the trial. We have received four qualified infectious disease (QIDP) designations as well as an orphan designation for the treatment of cryptococcosis, which, if approved, would result in twelve years of regulatory exclusivity for MAT2203. We plan to seek accelerated approval for this indication following the availability of the results of the ongoing EnACT Study. We believe that this study may have the potential to become a potential pivotal study to support approval of MAT2203 for the treatment of CM during both induction and maintenance phases of treatment. 9 Our second clinical stage LNC-based product candidate is MAT2501, an orally administered formulation of the broad-spectrum aminoglycoside antibiotic amikacin, which may be used to treat different types of multidrug-resistant bacteria, including non-tuberculous mycobacterium infections (NTM), as well as various multidrug-resistant gram negative and intracellular bacterial infections. In May 2017, we completed and announced topline results from a Phase 1 single escalating dose clinical trial of MAT2501 in healthy volunteers in which no serious adverse events were reported and where oral administration of MAT2501 at all tested doses yielded blood levels that were well below the safety levels recommended for injected amikacin, supporting further development of MAT2501 for the treatment of NTM infections. Following reformulation work, in 2019, we received a grant from the Cystic Fibrosis Foundation (CFF) to complete preclinical studies with Colorado State University which further demonstrated the potential for MAT2501 in treating cystic fibrosis-associated NTM lung infections. In November 2020, we received an additional grant from the CFF in the amount of 3.75 million USD to support the continued development of MAT2501 through a comprehensive preclinical tox program and a single ascending dose (SAD) study in healthy volunteers with our new and improved formulation of MAT2501. This most recent grant was based upon the positive preclinical proof of concept data generated by Dr. Diane Ordway at Colorado State University in a rigorous mouse model of NTM infection in mice with underlying CF disease. MAT2203 Our lead anti-fungal product candidate, MAT2203, is an application of our LNC platform delivery technology to a broad spectrum and potent anti-fungal drug called amphotericin B. Traditionally, amphotericin B is an IV-administered drug used as a last resort for treatment of systemic fungal infections resistant to triazoles and echinocandins, including resistant candidiasis, cryptococcal meningoencephalitis, and aspergillosis. To date, there have been little to no reports of clinically observed drug-resistance to amphotericin B, further bolstering the use of this compound as the most likely last resort treatment for fungal infections in the foreseeable future. However, the use of amphotericin B is relatively limited because it is currently only available as an IV-administered product and has documented history of severe toxicity (most notably nephrotoxicity). By utilizing our LNC platform delivery technology to nano-encapsulate amphotericin B, there is now an opportunity for the drug to be administered orally with targeted delivery to infected cells, which we believe may have fewer side effects than the currently available IV-formulations of amphotericin B. Our LNC delivery of amphotericin B changes the bio-distribution, resulting in a higher level of the drug at the site of infection and a lower level of free circulating amphotericin B. By reducing the amount of circulating drug, our LNC platform delivery technology may reduce overall toxicity. Importantly, drug concentrations will be high only in target tissues due to the migratory nature of activated cells to inflammatory regions. Based upon our studies to date, we believe MAT2203 has the potential to offer improved safety and reduced toxicity and, as a result, we believe MAT2203 will be able to offer a categorically different and improved formulation that delivers orally administered amphotericin B, directly to the target cell at the site of infection. In collaboration with the NIH, in multiple studies, we have demonstrated in CM mouse models that our LNC-delivered amphotericin B, following oral administration, can successfully cross the blood brain barrier to the site of infection in mice. This demonstration provides important data indicating that our LNC platform delivery technology could become an important delivery solution for a variety of CNS-based disorders and diseases. We believe that MAT2203 has the potential to become a best-in-class induction, consolidation, and maintenance therapy for the treatment of CM in HIV patients by offering the following key benefits: ● Potential to treat resistant pathogens . We believe that MAT2203 has the potential to prevent and treat fungal infections caused by drug-resistant fungi, including those resistant to existing azoles and echinocandins, due to amphotericin B’s fungicidal (i.e., killing the fungi) nature and potency against resistant strains and the potential for our LNC platform delivery technology to provide higher drug exposure early in the course of therapy. ● Enabling an all-oral therapy. CM has become the most common cause of adult meningitis in many parts of Africa, where cryptococcosis now rivals tuberculosis in all-cause mortality. While long-term survival has improved with widespread use of antiretroviral therapy in high-income countries, early mortality remains high. Early mortality rates are often ~ 70% in routine practice where access to diagnostics or medications is limited or unavailable, intracranial pressure is uncontrolled, or in settings where other barriers to the management of CM exist. IV administration of amphotericin B deoxycholate is not often possible in resource-limited settings, even when it is available. ● Shorter and less costly hospital stays and lower outpatient costs . By providing physicians and patients with access to an orally available, broad spectrum fungicidal agent in MAT2203, there is the potential to reduce hospital costs, which account for over 70% of the overall treatment cost of invasive fungal infections. 10 The FDA has granted MAT2203 designations for Qualified Infectious Disease Product, or QIDP, and Fast Track for the treatment of invasive candidiasis and aspergillosis, for the prevention of invasive fungal infections in patients on immunosuppressive therapy, and the treatment of cryptococcosis. We recently also received Orphan Drug Designation for MAT2203 for the treatment of cryptococcosis and associated CM. The FDA may designate a product candidate as an orphan drug if it is intended to treat a rare disease or condition, which is generally defined as having a patient population of fewer than 200,000 individuals in the United States, or a patient population greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the United States. The orphan drug designation provides eligibility for orphan drug exclusivity in the United States upon FDA approval if a product that has orphan drug designation subsequently receives the first FDA approval for a particular active ingredient for the disease for which it has such designation. For a product that obtains orphan drug designation based on a plausible hypothesis that it is clinically superior to the same drug that is already approved for the same indication, in order to obtain orphan drug exclusivity upon approval, clinical superiority of such product to this same drug that is already approved for the same orphan indication must be demonstrated. Orphan drug exclusivity means that the FDA may not approve any other applications, including an NDA, to market the same drug for the same indication for seven years, except in limited circumstances such as if the FDA finds that the holder of the orphan drug exclusivity has not shown that it can assure the availability of sufficient quantities of the orphan drug to meet the needs of patients with the disease or condition for which the drug was designated. Similarly, the FDA can subsequently approve a drug with the same active moiety for the same condition during the exclusivity period if the FDA concludes that the later drug is clinically superior, meaning the later drug is safer, more effective or makes a major contribution to patient care. Orphan drug designation also entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, a waiver from payment of user fees, an exemption from performing clinical studies in pediatric patients unless the FDA requires otherwise by regulation, and tax credits for the cost of the clinical research. The QIDP designation, provided under the Generating Antibiotic Incentives Now Act, or the GAIN Act, offers certain incentives for the development of new antibacterial or antifungal drugs, including eligibility for Fast Track designation, priority review and, if approved by the FDA, eligibility for an additional five years of marketing exclusivity. Fast Track designation enables more frequent interactions with FDA to expedite drug development and review. Fast Track designation does not change the standards for approval, and we can provide no assurances that we can maintain Fast Track designation for MAT2203 or that such designation will result in faster regulatory review. The seven-year period of marketing exclusivity provided through orphan designation, if granted, combined with an additional five years of marketing exclusivity provided by the QIDP designation positions MAT2203 with a potential for a total of 12 years of marketing exclusivity to be granted at the time of FDA approval. MAT2203 - Product Profile MAT2203 is an orally-administered, LNC formulation of amphotericin B (a broad-spectrum fungicidal agent). Little to no clinical resistance has been reported to date with amphotericin B as compared to the rapidly emerging drug resistance seen with other antifungal therapies. Currently, IV administered amphotericin B is the only broad spectrum fungicidal; however, it has significant treatment-limiting side effects, most notably nephrotoxicity. We believe that the ability to provide amphotericin B orally using our proprietary and novel oral formulation comprising our LNC platform delivery technology, may offer a new and promising alternative for patients and doctors. The data from animal toxicity studies for MAT2203 indicate a side-effect advantage over other amphotericin B formulations, which we believe is based on two phenomena: ● The lipid- nanocrystal is a solid particle that does not significantly “leak” its drug content while circulating. The particle releases its medication pay-load only when inside the target cells, and thus appears that the use of MAT2203 does not result in off-organ toxicities normally seen in the kidneys when using current formulations of amphotericin B. ● Because of this targeted approach, we have been able to increase the therapeutic window on a mg/kg basis as compared to IV amphotericin B formulations. We have observed equivalent efficacy at lower doses as well as been able to use oral doses of up to 10x the highest tolerable IV dose in animal model studies. 11 Development History of MAT2203 and Initial Target Indication MAT2203 has been studied extensively in animal model studies of various fungal infections including invasive candidiasis, aspergillosis, and CM. In a clinical Phase 1 single-dose, double-blind, dose-escalating, pharmacokinetic study of 48 healthy volunteers, oral MAT2203 was observed to be well-tolerated with no serious adverse events reported, and without any observed nephrotoxicity. The most commonly reported adverse events (AEs) were nausea and abdominal pain. None of the AEs were related to abnormal laboratory evaluations. All treatment emergent adverse events (TEAEs) were mild except 1 instance of “upper respiratory tract infection” which was moderate in a subject following 800 mg MAT2203. No AEs led to withdrawal. There were no serious AEs. There was one pregnancy (subsequently determined that the conception date was 1 to 2 days prior to dosing) resulting in elective termination from the study. More recently, in our Phase 2 trial of MAT2203 conducted by the NIH, four out of four enrolled patients suffering from chronic refractory mucocutaneous candidiasis met their primary efficacy endpoint. One patient continues on treatment with no evidence of kidney or other toxicity frequently associated with the use of amphotericin B. In October 2020, results from Phase 1 of the EnACT Study were published in the Journal of Antimicrobial Agents and Chemotherapy (C. Skipper, et.al) which was a Phase 1 ascending-dose trial of MAT2203 administered at 1.0 g, 1.5 g, or 2.0 g per day in 4 to 6 divided doses among HIV-positive survivors of cryptococcosis (n=9 per cohort). We assessed the tolerability of MAT2203, and the AEs associated with MAT2203 treatment over three days. The second part of the Phase 1 trial assessed the tolerability of 1.5 grams/day (the 100% tolerated dose) administered for seven days. In the singe-ascending dose part of the study, all subjects in the 1.5 g treatment group received their full dose without vomiting (100% tolerability). The cohort receiving 1 g had 4 transient clinical AEs in 2 subjects. The cohort receiving 1.5 g had 7 clinical AEs in 1 subject. The cohort receiving 2 g had 20 clinical AEs in 5 subjects. From a qualitative survey, 26 of 27 (96%) preferred their experience with MAT2203 over their prior experience with IV amphotericin (AMB). The second, multiple dose cohort received 1.5 g/day for 1 week, which was the 100% tolerated dose, with 98.4% of doses taken. Overall, 5 clinical AEs occurred in this cohort of subjects without any observed kidney toxicity. Oral MAT2203 was well-tolerated when given in 4 to 6 divided daily doses without the toxicities commonly seen with IV AMB. Based on the findings from Phase 1 of the EnACT Trial, 2.0 g was selected as the target dose for the induction phase of treatment and 1.5 g for the maintenance dose for Stage 1 of the study. Phase 2 of the trial is evaluating the safety, tolerability, and efficacy of MAT2203 in approximately 100 HIV-infected patients with cryptococcal meningitis. Participants enrolled in the experimental arm of each cohort received oral MAT2203 and flucytosine (5FC) in four separate stages and duration for induction therapy, using the maximum tolerated dose of MAT2203 that was identified in the preceding Phase 1 Trial. The experimental arm receives MAT2203 through induction and maintenance therapy for a total of approximately 6 weeks. Participants randomized to the control arm in each cohort receive the 2018 WHO recommended standard of care, which is IV AMB and 5FC, followed by fluconazole. The first cohort of EnACT has been completed. A key objective of Cohort 1 was to assess the safety and tolerability of oral MAT2203 while assessing efficacy. Ten participants were randomized to the experimental arm and 4 to the control arm. The study treatments received are summarized in the following figure: Patients in the experimental arm received induction therapy with IV AMB (1 mg/kg/day) for the first five days, oral MAT2203 (2 g/day in divided doses) from Day 5-14, and oral 5FC (100 mg/kg/day) for the first 14 days of treatment. Induction therapy was followed by consolidation or maintenance therapy with oral MAT2203 (1.5 g/day) from Day 15 to Week 6, oral fluconazole (800 mg/day) from Day 15 to week 10, followed by oral fluconazole (200 mg/day). 12 Efficacy and safety data from Cohort 1 of the study were reviewed by an Independent Data Safety Monitoring Board (DSMB) which voted unanimously to progress into the second cohort of patients in the EnACT Study. Enrollment in the second cohort of patients has begun and Cohort 2. Cohort 2 (or Stage 2) of the EnACT Study is designed to assess the potential to treat CM infections with oral MAT2203 as a step-down treatment during the induction phase of treatment immediately following only 2 days of IV amphotericin treatment, with continued treatment with MAT2203 for up to 6 weeks during early maintenance treatment. We believe that the clinical benefit of step-down treatment from IV amphotericin to oral MAT2203 will provide compelling clinical evidence of efficacy in treating this deadly infection with our oral agent. We believe that this Cohort of patients will also provide key data to support the further advancement of the EnACT Study to ultimately test the potential to treat CM infections with an all-oral amphotericin dosing regimen in subsequent cohorts (Stages 3 and 4 below). The read-out for Cohort 2 is expected in the second half of 2021. Antifungal Market Opportunity The overall global antifungal market accounted for approximately $11.9 billion in 2018 and is expected to reach approximately $13.9 billion by 2026. In 2018, the global invasive fungal infection market was valued at more than $6 billion. This includes therapies used as active treatment or prophylaxis (preventative) in the inpatient and outpatient setting, therapies used for the treatment of hospitalized patients and therapies used for the treatment of patients who are being discharged from the hospital. We estimate that, each year, there are over 1.5 million cases of invasive fungal infections caused by various species of Candida, Aspergillus and Cryptococcus, the three most common invasive fungal pathogens, globally. The estimated incidence in the U.S. for these conditions is approximately 46,000 for invasive candidiasis, 15,000 for invasive aspergillosis, and 3,700 for CM. For example, aspergillosis-associated hospitalizations in the U.S. alone came at an estimated treatment cost of more than $1 billion. The rapid progression of disease and high mortality rates (20% - 50%) associated with documented invasive fungal infections often result in antifungal therapy being administered in suspected (unconfirmed) cases or as a preventative measure in patients at high risk. Also, the increasingly widespread use of immune suppressive drugs as cancer chemotherapy or for organ transplantation or treatment of autoimmune disease has resulted in an increasing population of patients at risk for invasive fungal infections. Furthermore, the limited number of systemic antifungal drug classes, consisting of azoles, echinocandins and polyenes, and their extensive use, has led to increased numbers of infections with drug-resistant strains. The Centers for Disease Control and Prevention (CDC) has listed fluconazole-resistant Candida as a serious threat requiring prompt and sustained action and has also identified a rise in echinocandin resistance, especially among Candida glabrata. In June 2016, the CDC issued an extraordinary alert for healthcare facilities and providers to be on the lookout for patients with Candida auris , a multidrug resistant strain with high mortality (approximately 60%). Almost half of C. auris isolates are multidrug resistant to two or more antifungal classes (large majority resistant to fluconazole, 40% resistant to echinocandins). We believe this underscores the urgent need for new agents with demonstrated activity against resistant strains and that can be administered with significantly less toxicity and the potential to discharge patients earlier to reduce hospital stays and associated costs. 13 Physicians’ options for the treatment of fungal infections are limited by a lack of innovative therapies. Several factors have contributed to the low rate of antifungal drug development, including a previously challenging regulatory environment that necessitated large and costly clinical trials. As a result of this regulatory environment and other factors, the number of antifungals in development has decreased, while anti-microbial resistance has increased. MAT2501 MAT2501 is an oral, LNC formulation of the broad-spectrum aminoglycoside antibiotic agent amikacin, which utilizes our proprietary LNC platform to achieve oral bioavailability, limit toxicity, and enable targeted delivery to sites of infection. Currently, amikacin can only be delivered parenterally or through inhalation and is used to treat a variety of chronic and acute bacterial infections, including both NTM infections and various multi-drug resistant gram-negative bacterial infections. IV and inhaled amikacin, however, are associated with major side-effects including nephrotoxicity and ototoxicity (permanent loss of hearing) with long-term use. We believe that MAT2501’s ability to orally deliver high levels of amikacin directly to the lung and without use-limiting toxicity, distinguishes it from all available therapies and could provide an important solution for patients and physicians. We are currently developing MAT2501 for the treatment of NTM lung disease, including infections in patients with CF. MAT2501 has been designated as a Qualified Infectious Disease Product (QIDP) and as an Orphan Drug for the treatment of NTM by the US FDA. NTM lung disease is a chronic, debilitating condition arising from an NTM infection in the lungs and is associated with significant patient morbidity and mortality. The signs and symptoms of NTM lung disease often overlap with the underlying lung conditions that increase the risk for NTM, like cystic fibrosis, bronchiectasis, COPD, and asthma. The most common pathogens for NTM infections in the United States are Mycobacterium avium complex (MAC), which accounts for more than 80% of all NTM infections in the US. Patients with NTM lung infections frequently require lengthy hospital stays and prolonged courses of antibiotics to manage their disease. The prevalence of human disease attributable to NTM has increased over the past two decades and is now growing at more than 8% per year and is even more prevalent than tuberculosis in the US. In 2018, it was estimated that between 75,000 and 100,000 patients were diagnosed with NTM lung disease in the US alone. Non-tuberculous mycobacterium (NTM) infections are extremely difficult to treat, especially so in patients with cystic fibrosis (Eikani, et. al ., 2018). The infecting organisms are frequently resistant to most antibiotics, and current treatment regimens require combination therapies with highly toxic drugs for long periods of time, further complicated by challenges in delivering therapeutic levels of these toxic drugs across plasma membranes of infected cells. These challenges are amplified in CF patients, with the thick buildup of pulmonary secretions that further impair treatment of infecting organisms. Pulmonary infections represent the most frequent type of infection in CF patients, and are responsible for more than 90% of deaths in the CF population (Rowe SM, et.al . 2005). Mycobacterium avium complex (MAC) and Mycobacterium abscessus complex (MABSC) are non-tuberculous mycobacterial species that have emerged in recent years as important opportunistic pathogens frequently responsible for pulmonary infections in CF patients (Brode SK, et. al . 2014). Infections due to MAC and MABSC are difficult to treat and to eradicate since these organisms are naturally resistant to most antibiotics. The recommended treatment for MAC and MABSC pulmonary infections includes a combination of a macrolide (clarithromycin or azithromycin), an aminoglycoside (amikacin), and an antimycobacterial antibiotic for MAC (rifampin and ethambutol), while MABSC many times requires intravenous β-lactam (cefoxitin or imipenem) at least for 12 months (Floto RA, et. al. , 2016). The cure rate is only 25-40% in the case of macrolide resistance, which is present in 40 to 60% of the isolates (Roux AL et. al ., 2015). Moreover, unsuccessful eradication of MAC and MABSC is considered as a contraindication for lung transplantation by several CF centers, and significantly restrict therapeutic options in severely ill patients. Therefore, more specific and active and less toxic antimicrobials are urgently needed. 14 MAT2501 Previous and Ongoing Studies The most recent completed pre-clinical animal model studies testing the preclinical efficacy of MAT2501 were funded by a grant from the Cystic Fibrosis Foundation (CFF). An additional grant was awarded from the CFF in February of 2020 to support the screening of new optimized formulations of MAT2501 in collaboration with Diane Ordway, Ph.D. of Colorado State University (CSU). Most recently, a CFF grant of $3.75 million was awarded to us in November 2020 to support the early development of MAT2501 through the end of Phase 1. The recent grant from the CF Foundation was based upon the data generated by CSU and summarized below. Preclinical and Clinical Studies The Investigational New Drug (IND) application for MAT2501, was opened in January 2016 to investigate MAT2501 in the proposed indication for treatment of non-tuberculosis mycobacterial (NTM) infections. We have conducted numerous repeat-dose non-clinical studies including a 28-Day rat study and 3 nonclinical studies in large animals (2 with dog and 1 with dog and minipig). Data generated to date suggest no toxicity signals related to those observed with IV amikacin. We have conducted to date a first-in-human Phase I study entitled: A Phase 1, Double-Blind, Placebo- Controlled, Single, Ascending Dose Study to Evaluate the Safety, Tolerability, and Pharmacokinetics of Encochleated Amikacin (CAMK/MAT2501) Following Oral Administration in Healthy Adult Subjects. Safety was monitored through physical examinations, vital signs, 12-lead ECGs, audiometry tests, pupillary reflex tests and clinical lab tests. No serious adverse events were reported in the study. Adverse events were tolerable and not unexpected. There were no adverse events related to audiology assessments or ophthalmic pupillary reflex testing. A total of 36 subjects were entered into this study in three (3) cohorts (dosing of 12 subjects (9 active drug subjects and 3 placebo subjects in each cohort). Doses tested were 200mg under fasted conditions, 400mg under fasted and fed conditions and 800mg under fed conditions. One subject in high dose cohort (800 mg dose, fed condition) was discontinued early during the study as a result of gastrointestinal issues possibly related to study drug. The study was completed in March of 2017 and the final clinical study report was submitted to the IND in February of 2018. MAT2501 (LNC Oral Amikacin) for the Treatment of NTM Infections in Mouse Models of CF In vivo chronic efficacy studies MAT2501 was tested in in vivo experiments of NTM infections in CF mouse models. In the CF (B6CFTR tm1UNC /CFTR tm1UNC ) mice chronic model for CF, the CAMK was administered daily for each NTM species tested on each of the six NTM strains across two tiers. Tier 1 included strains having a low drug resistance and Tier 2 included drugs that were resistant to macrolide antibiotics (See Table 1). Table 1. US Clinical Isolates Tier 1 (low drug resistance) Tier 2 (macrolide resistant) M. avium ssp. intracellulare M. avium subsp intracellulare M. abscessus ssp. massiliense M. abscesus ssp abscessus M. avium ssp. hominissuis M. abscessus ssp bolletii Study Design Six CF chronic model experiments were conducted i) to evaluate whole organ bacterial burden and ii) to evaluate whole organ pathology and metabolic stability using hepatocytes from mice. Groups of CF mice were infected with mycobacterium avium (Ma) and mycobacterium abscessus (Mabs) strains as described in Table 1. On day 2 after infection, 5 mice in each group were ethically euthanized to quantify the initial bacterial burden. Treatment for the remaining animals began after 28 days of infection. Oral MAT2501 100 mg/kg QD, Oral MAT2501 100 mg/kg BID, untreated control and two positive controls (oral clarithromycin 250 mg/kg and subcutaneous amikacin 150 mg/kg 3x/week) were administered for 8 weeks. After the drug treatment began, any effect the compound had on lung, liver and spleen bacterial numbers and organ histology was assessed (CFU, pathology) at intermittent time intervals of treatment (2, 4, 8, weeks of drug treatment) and compared to untreated concurrent control saline and clarithromycin 250 mg/kg and amikacin 150 mg/kg control values (Obregon A., et. al , 2015). 15 Conclusions Oral administration of MAT2501 safely and effectively treated Mycobacteria infections in a mouse model of Cystic Fibrosis. ● Colony counts showed that the oral administration of MAT2501 100 mg/kg resulted in CFU lung, spleen and liver counts that were lower than those in mice receiving parenteral amikacin alone. ● Colony counts showed that the oral administration BID of MAT2501 resulted in CFU lung, spleen and liver counts that were significantly lower than those in mice receiving clarithromycin alone. ● The lung pathology in cystic fibrosis mice infected with each of the NTM isolates evaluated in this study showed that lesions were more numerous and larger in infected mice that were treated with clarithromycin or parenteral amikacin compared to the smaller lesions after oral administration of MAT2501. NTM Treatment Guidelines and Limitations of Current Treatments The American Thoracic Society (ATS), European Respiratory Society (ERS), European Society of Clinical Microbiology and Infectious Diseases (ESCMIID), and Infectious Diseases Society of America (IDSA) jointly sponsored the recent development of updated NTM Treatment Guidelines in adults (Daley C, et.al , 2020). The guidelines recommend a standard NTM lung disease treatment with a combination of 3-4 medications. These include Amikacin (or streptomycin), clarithromycin (or azithromycin), rifampin (or rifabutin), and ethambutol. Amikacin is an important drug used for treatment of Mycobacterium abscessus pulmonary disease. Certain combinations of antibiotics work better together because of their unique mechanisms of action that work in concert to eliminate the infection. It is for this reason that sputum samples are qualified for precise identification of the species and sensitivity testing of the microorganism. When treatment failures arise, another combination of antibiotics will be recommended depending on the NTM strain. Multiple drug therapy in NTM lung disease can cause adverse effects, which leads to treatment discontinuation or patient nonadherence. Current guidelines recommend monitoring for drug toxicity at repeat intervals. Gastrointestinal side effects with oral agents are common. Due to severe gastrointestinal disturbance, the use of macrolides may require dose adjustment. Drug-induced hepatotoxicity due to rifampin and other agents must be monitored by liver function tests and monitoring complete blood count when using rifampin or tigecycline is recommended. Renal function testing is required with IV amikacin use due to its known renal toxicity liability, an issue that we believe could be addressed with our novel targeted LNC oral formulation of amikacin, MAT2501. Due to the established risk of otoxicity such as hearing loss, tinnitus, or vestibular toxicity, patients who receive IV amikacin or streptomycin need to be educated regarding the signs and symptoms of toxicity with audiometry testing at the start of therapy and again on subsequent visits with discontinuation, or a decrease in dose or frequency if signs suggestive of toxicity occur. There remains a significant unmet clinical need for safer, yet potent, agents for the improved management of NTM lung disease. MAT2501 has the potential of providing a safer and more targeted approach to the treatment of NTM disease. The early development plan for MAT2501 builds upon the preclinical proof of concept in vitro studies which have demonstrated antibiotic activity against both sensitive and multidrug resistant strains M. abscessus and M avium. The planned Tox Program will evaluate the optimized formulation of MAT2501 in a rigorous battery of studies to assess and characterize the safety profile of MAT2501. The planned studies will support the safety package required to progress the development of MAT2501 into Phase 2 clinical trials. These studies will carefully monitor the safety signals known to be associated with IV amikacin treatment (hearing loss and kidney/renal safety). These studies will include: ● 28 rat toxicity study to assess any potential effects of MAT2501 on hearing and associated side effects ● 3- and 9-month long-term safety study in dog to support longer-term dosing in clinical trials 16 These GLP studies are planned to be initiated in the second half of 2021 and will commence following FDA review of the protocols for the 3- and 9-month dog study, which will be submitted for review by Q3 2021. A Phase 1 SAD Study will also be conducted with the optimized formulation in parallel with the long-term tox study and is expected to be initiated in Q4 2021 with final data available early 2022. LYPDISO Overview LYPDISO is a complex mixture of multiple long-chain omega-3 fatty acids, primarily eicosapentanoic acid (EPA) and docosapentanoic acid (DPA) encapsulated in a delayed release soft gelatin capsule. Unlike currently approved pharmaceutical omega-3 products, all of which have been repurposed following clinical failures in their originally intended indications, LYPDISO has been specifically designed and developed to treat HTG in patients with cardiovascular and metabolic conditions. There are a number of existing FDA-approved omega-3 products, including Lovaza®, Vascepa® and Epanova®, and this class of drugs has extensive evidence of safety and well-documented clinical efficacy in lowering TGs in patients with HTG. Vascepa has also demonstrated the ability to achieve meaningful reductions in cardiovascular risk based primarily upon achievement of elevated levels of EPA in the blood. We believe that given LYPDISO’s enhanced bioavailability (as a free fatty acid rather than an ethyl ester) and its unique composition (high EPA plus DPA), it can be differentiated from other existing products in the omega-3 class and have uniquely potent impacts on TGs, but also a variety of other biomarkers, including achieving elevated levels of EPA in the blood. Currently, the only available route to an approval for TG-lowering with a prescription omega-3 drug is in severe hypertriglyceridemia (SHTG), where patients have TG levels ≥ 500 mg/dL, and where TG-lowering is a well-accepted surrogate marker. Additionally, Vascepa has been approved for cardiovascular risk reduction in patients at high cardiovascular risk with TGs ≥ 150mg/dL, based upon its ability to achieve elevated levels of EPA in the blood. Our current development plan is via a 505(b)(2) regulatory pathway, which allows us to rely, at least in part, on FDA findings of safety and/or effectiveness for a previously approved drug. Based on prior written feedback received from the FDA in 2014, and additional verbal and written feedback from FDA in August of 2020, we believe that a 505(b)(2) pathway is possible and appropriate for LYPDISO. In parallel with the preclinical and clinical studies necessary for FDA approval of LYPDISO, we also recently completed the ENHANCE-IT study, a head-to-head crossover study of LYPDISO vs. Vascepa, which was intended to differentiate LYPDISO from the current leading prescription omega-3 therapy. We believe that the results from ENHANCE-IT suggest potential for LYPDISO as a best-in-class prescription omega-3 for cardiovascular risk reduction and we are pursuing a partnership to continue development of LYPDISO moving forward. We do not plan on pursuing an indication for SHTG and have reallocated resources away from this clinical indication. Hypertriglyceridemia and Cardiovascular Disease Triglycerides and cholesterol are integral components of lipoproteins, the primary transport vehicle for lipids in the body. High levels of triglyceride-rich lipoproteins are associated with a substantially increased risk of atherosclerotic cardiovascular disease, and in the case of very high triglycerides (> 500 mg/dL), acute pancreatitis. HTG can be due to both genetic and environmental factors, including obesity, a sedentary lifestyle, and high caloric diets. HTG is also tightly linked with comorbid conditions such as diabetes, chronic renal failure, and nephrotic syndrome. It is estimated that over 25 million adults in the United States have triglyceride levels ≥200 mg/dL and that more than 50 million adults in the United States have triglyceride levels ≥150 mg/dL. Additionally, approximately 4 million adults in the United States have very high triglyceride levels (≥500 mg/dL). The prevalence of HTG is rapidly increasing in both the United States and throughout the world, as a direct consequence the growing epidemic of obesity. Recent studies have confirmed that high levels of triglyceride-rich lipoproteins are an independent risk factor for cardiovascular disease-related events such as myocardial infarction, ischemic heart disease, and ischemic stroke. Mixed dyslipidemia refers to a condition in which patients have a combination of both elevated triglycerides (≥200mg/dl), and elevated cholesterol levels. According to the National Cholesterol Education Program (NCEP), mixed dyslipidemia affects approximately 30 to 35 million Americans. 17 Multiple epidemiological, clinical, and genetic studies suggest that patients with severe hypertriglyceridemia (TGs > 500 mg/dL) are at a much greater risk for pancreatitis, a potentially life-threatening condition. Elevated TG levels are also strongly linked to a higher risk for heart disease and stroke, especially so with low levels of high-density lipoprotein cholesterol (HDL-C) and/or elevated levels of low-density lipoprotein cholesterol (LDL-C). Furthermore, the genes regulating both TGs and LDL-C are equally strong predictors of CAD, unlike HDL-C which is not. Thus, TGs and TG-rich lipoproteins have come to be recognized as an important factor contributing to Atherosclerotic Cardiovascular Disease (ASCVD). There are currently approximately 92 million (more than 1 out of every 3) adults in the United States with one or more types of cardiovascular disease; an estimated 800,000 new or recurrent coronary events and 795,000 new or recurrent strokes occur each year. Heart attacks, strokes and other cardiovascular events represent the leading cause of death and disability among men and women in western societies. Recent ASCVD Guidelines from The American Diabetes Association (ADA), the European Society of Cardiology/European Atherosclerosis Society (ESC/EAS), National Lipid Association (NLA) and American Association of Clinical Endocrinology/American College of Endocrinology (AACE/ACE) as well as a recent Scientific Advisory from the American Heart Association (AHA) have all advocated the use of an omega-3 product (icosapent ethyl) in patients at high CV risk who have persistently high TGs (> 135 mg/dL) despite statin therapy. Current guidelines for the management of very high triglyceride levels (≥500 mg/dL) suggest that reducing triglyceride levels is the primary treatment goal in these patients to reduce the risk of acute pancreatitis, while treating LDL-C remains an important secondary goal. Other important parameters to consider in patients with very high triglycerides include levels of apolipoprotein B (apo B), non-HDL-C, and very low-density lipoprotein cholesterol (VLDL-C). Current Treatment Options The dramatic rise in obesity over the last few decades is strongly linked to concomitant increases in population cholesterol and triglyceride levels. Observational studies have highlighted the critical role that high cholesterol and high triglyceride levels (collectively, “dyslipidemia”) have as a predictor of cardiovascular events. Accordingly, the introduction of new drugs and novel mechanisms of action to lower the risk of cardiovascular events has become a priority. The initial treatment recommendation for patients with dyslipidemia is typically a low-fat diet. If diet alone is not effective, dyslipidemia is then often treated with statins, which account for approximately 80% of all dyslipidemia prescriptions. Statins as a class have been shown to not only lower blood cholesterol levels, but have also been shown in multiple studies to reduce the risk of heart attacks, strokes, and other adverse cardiovascular events. At present statins are utilized in almost 40% of patients with dyslipidemia in the United States. The primary effect of statins is to reduce LDL-cholesterol, with only modest effects on triglycerides. Recognizing that both cholesterol and triglycerides contribute to cardiovascular risk, and that statins alone are not always effective triglyceride lowering drugs, the National Cholesterol Education Program panel recommends the use of additional therapies to lower triglyceride levels in patients with SHTG. Fibrates, niacin, and omega-3-based medications have all been utilized to lower triglycerides levels. The overall treatment rate of patients with HTG has remained relatively low. It is estimated that less than ten percent of the adult population with SHTG actually receives therapy beyond statins. Historically, fibrates such as gemfibrozil (Lopid) and fenofibrate (Tricor or Trilipix) were leading treatments for HTG. However, due to their inability to establish clinical outcome benefits and their limited compatibility with statin therapy, fibrate utilization has remained relatively low and is currently declining. Other niacin-containing products used to treat SHTG have not been able to establish additional outcome benefits beyond statin treatment alone, and their use is also declining. In patients with SHTG, many of whom are already receiving a statin, first-line drug therapy is often a prescription omega-3 product, which have been shown to reduce triglycerides in the range of 20%-45%. 18 The global prescription omega-3 market has been growing steadily over the last two decades; we estimate the market currently is approaching $2 billion in global sales. The leading omega-3 prescription pharmaceutical products currently approved for the treatment of HTG are Glaxo Smith Kline’s Lovaza (omega-3-acid ethyl esters, an omega-3 mixture containing mostly EPA and DHA, originally approved in the US in 2004, branded as Omacor in the rest of the world), Amarin’s Vascepa (an ethyl ester formulation of primarily EPA), approved in 2014 in the United States, Omacor and Seacor, (which are very similar to Lovaza and marketed in Europe); and Mochida Pharmaceutical’s Epadel (98% ethyl eicosapentaenoate), an ethyl ester formulation of EPA, the leading Japanese omega-3 product. In addition, Astra Zeneca’s omega-3, Epanova, a free fatty acid formulation of EPA and DHA was approved in the US in 2016 but has not been launched. Until recently, all prescription omega-3 products in the US were only approved for SHTG, but in December of 2019 Vascepa was approved in the US for the reduction of cardiovascular risk in high-risk patients with TGs > 150 mg/dL despite statin therapy. This approval was based upon data generated in a large, multi-year, multi-center outcomes study of Vascepa called REDUCE-IT. The REDUCE-IT study was a multicenter, randomized, double-blind, placebo-controlled trial of Vascepa in patients at high cardiovascular risk with elevated triglycerides despite statin therapy. A total of 8,179 patients with established cardiovascular disease or with diabetes and other risk factors, who had been receiving statin therapy and who had fasting TGs of 135 to 499 mg/dL and LDL-C levels of 41 to 100 mg/dL were randomized to 2 g of Vascepa twice daily (total daily dose 4 g) or placebo (mineral oil). The primary endpoint was a composite of cardiovascular death, nonfatal myocardial infarction, nonfatal stroke, coronary revascularization, or unstable angina. The key secondary end point was a composite of cardiovascular death, nonfatal myocardial infarction, or nonfatal stroke. Median follow-up was 4.9 years. In the 8,179 patients enrolled (71 % secondary prevention, 29% primary prevention) primary endpoints occurred in 17.2% of the Vascepa-treated patients and 22.0% of the placebo patients (HR 0.75; p<0.001); corresponding key secondary end point event rates were 11.2% and 14.8%, respectively (HR 0.74; p<0.001). There were also significant reductions with Vascepa in the rates of fatal/non-fatal MI (HR 0.69; p<0.001), urgent/emergent coronary revascularization (HR 0.65; p<0.001), cardiovascular death (HR 0.80; p=0.03) hospitalization for unstable angina (HR 0.68; p=0.002) and fatal/non-fatal stroke (HR 0.72; p=0.01). From a safety standpoint, a slightly more patients in the Vascepa group were hospitalized for atrial fibrillation or flutter (3.1% vs. 2.1%, p=0.004), and serious bleeding events were slightly more frequent with Vascepa (2.7% vs 2.1%, p = 0.06). One very important piece of information to emerge from REDUCE-IT was the importance of EPA blood levels. In REDUCE-IT, EPA levels were the only biomarker that was significantly correlated with clinical benefit, across a wide spectrum of cardiovascular outcomes. Changes in TGs, LDL-C, non-HDL, apoB and CRP were all not predictive of better outcomes with Vascepa in the REDUCE-IT trial. Importantly, there was a significant continuous relationship between EPA levels and outcome for the primary and key secondary endpoints. The higher the EPA level, the lower the hazard ration for adverse events, and the better the outcomes in REDUCE-IT. LYPDISO Development History and Plan We completed the first preclinical studies of LYPDISO in 2013 with others completed during 2014. In 2015, we announced results from an open-label head-to-head PK/PD Trial of LYPDISO against Vascepa in patients with elevated triglyceride levels. This crossover study demonstrated superior bioavailability of LYPDISO, along with greater efficacy in reducing serum triglycerides, total- and non-HDL-cholesterol, apolipoprotein CIII and PCSK9 levels. Forty-two patients were treated with 4 grams/day of LYPDISO or Vascepa for 14 days, followed by a 5-week wash-out period and crossed over to the other treatment for another 14 days of treatment. Study subjects were required to have fasting TG levels of 200-400 mg/dl without lipid altering therapy, or fasting TG levels of 200 to 350 mg/dL if they were on stable-dose statin monotherapy. Forty patients completed both arms of the trial. In comparison to Vascepa, treatment with LYPDISO provided significantly greater reductions in TGs, very low-density lipoprotein cholesterol (VLDL) non-HDL cholesterol, total cholesterol, apolipoprotein AI, apolipoprotein CIII, and PCSK9. In additional, LYPDISO achieved significantly higher blood levels of EPA. 19 Following initial announcement of these data in 2015, due primarily to cardiovascular regulatory and commercial market conditions, as well as limited financial resources, we postponed further development of LYPDISO until such time as data could became available from REDUCE-IT. The REDUCE-IT data were announced in the fall of 2018, and as previously noted, there was robust clinical benefit in 8,000+ higher-risk patients with elevated triglycerides despite adequate LDL-C control with statins, with no statistical heterogeneity between the primary and secondary prevention cohorts. Following the release of these data, we promptly re-activated our development program for LYPDISO. The development program for LYPDISO was initially designed to (a) complete studies required for approval for an initial indication to treat SHTG and, (b) complete additional trials to demonstrate the differentiation of LYPDISO vs. other approved omega-3 products while creating the potential for subsequent label enhancement in a broader dyslipidemic patient population. The IND was reactivated in the second quarter of 2019. During the second half of 2019 and the first quarter of 2020 we completed a 28-day preclinical comparative bridging toxicology study, initiated and competed the in-life portion of an additional 90-day preclinical comparative bridging toxicology study, and initiated and completed the clinical dosing for a comparative 4-way crossover clinical bioavailability study versus Lovaza in 36 healthy volunteers. Lovaza was identified as the reference-listed drug under Section 505(b)(2) to FDA as part of the regulatory strategy for approval of LYPDISO. The comparative bioavailability study to Lovaza involved an open label, single-dose, randomized, 4-way crossover comparison of 4g of LYPDISO to 4g of Lovaza, under both fasted and fed conditions (high-calorie, high-fat breakfast). Treatments were administered with at least 14 days between each dosing. Plasma free and total EPA, DPA and DHA were measured at baseline and at specified timepoints up to 48-hours post-dose to assess bioavailability. Key areas of interest were baseline-free adjusted free and total EPA (primary) and baseline-adjusted free and total DPA (secondary). Under fasted conditions, baseline-adjusted total EPA and total DPA were substantially higher for LYPDISO compared with Lovaza. Similar findings were noted for free EPA and free DPA. Under fed conditions, the absorption of Lovaza improved substantially, while that of LYPDISO improved slightly. Total omega-3 levels (EPA + DPA + DHA) were approximately 50-60% higher with LYPDISO than with Lovaza after a high fat meal. Given that in the fasted state LYPDISO was very well absorbed, with only a minimal food effect, whereas Lovaza was poorly absorbed unless taken with a high fate meal, this indicated that the free fatty acid formulation of LYPDISO provided improved absorption with a minimal food effect and without the need for a high fat meal for effective absorption. Key endpoints and assessments include PK parameters (e.g., AUC, C max , T max , t 1/2 ) for total EPA, DHA and DPA and comparison of PK parameters for LYPDISO in the fasted and fed (high fat meal) state. In August of 2020 we held an End-of-Phase 2 Meeting with FDA to review the results of the preclinical and comparative bioavailability studies, and to discuss issues related to an approval in SHTG. The FDA provided feedback that: 1) with these preclinical and comparative bioavailability data in-hand, a 505(b)(2) registration pathway was reasonable; 2) a single placebo-controlled Phase 3 trial would likely be sufficient to establish efficacy in SHTG, and 3) the necessary safety database for approval could be supplement with other patients, including patients with SHTG. In parallel with the preclinical and clinical studies necessary for FDA approval, we have also recently completed the ENHANCE-IT study, an additional clinical study intended to differentiate LYPDISO from Vascepa, widely considered the leading prescription omega-3 drug. ENHANCE-IT was a randomized, open-label, parallel-group, crossover study designed to assess and compare the effects of LYPDISO and Vascepa on lipid markers and blood omega-3 levels. It included 100 adult men and women with elevated triglycerides (150-499 mg/dL); approximately 58% of study subjects had TGs ≥ 200 mg/dL. The study protocol involved two 28-day treatment periods, with a washout period of at least 28 days between treatments and was conducted at 8 sites in the U.S. LYPDISO and Vascepa were each given as 2g twice daily with food in accordance with the approved Vascepa labeling. Baseline and post-treatment measurements included triglycerides, Total-, LDL-, VLDL-, HDL- and non-HDL cholesterol, apolipoproteins A1, B and C3 and PCSK9, as well as hs-CRP. An additional important endpoint was omega-3 blood levels, including EPA, DPA, DHA and total levels for both treatment periods. The primary endpoint in ENHANCE-IT was the percent change from baseline to end-of-treatment in plasma triglycerides. The first subject as randomized in June of 2020, enrollment was completed by the end of August, last-patient, last-visit was at the end of November and the database was locked in mid-January 2021. 20 In February 2021 we announced topline data from the ENHANCE-IT trial. Two analysis populations were prespecified in the statistical analysis plan: a pharmacodynamic (PD) population (94 patients), and a per-protocol (PP) population (82 patients). The PD population included all subjects for whom estimation of pharmacodynamic parameters was possible for both treatment periods, regardless of study drug compliance. The PP population included patients from the PD population, with the added stipulation of at least 80% compliance with study medications (verified by pill counts), with no clinically important protocol violations or deviations. The PP population group was expected to have less variability due to poor study drug compliance, and to provide a more accurate representation of how each study drug (LYPDISO or Vascepa) would perform when taken as directed. The topline results from ENHANCE-IT were as follows: ● The primary endpoint (% change in TG from baseline) was numerically greater with LYPDISO vs. Vascepa (21.9% vs. 15.7%) but did not meet statistical significance in the prespecified PD population. Statistical significance as achieved in the PP population (20.9% vs. 13.8%). ● Plasma EPA concentrations, absolute change from baseline and % change from baseline were all significantly higher with LYPDISO than with Vascepa, in both the PD and PP populations (46% relative percent increase change from baseline EPA with LYPDISO vs. Vascepa). ● There were also significant reductions in hs-CRP with LYPDISO as compared with Vascepa, suggesting the potential superior anti-inflammatory impact of LYPDISO. ● There were no serious adverse events reported and no dropouts related to study drug adverse events. These results provided important information about the potential role of LYPDISO in the management of patients with elevated triglycerides and cardiovascular disease and highlighted the differentiation from Vascepa and generic copies of Vascepa in the omega-3 class. The results of ENHANCE-IT suggest meaningful opportunities for LYPDISO as a best-in-class prescription omega-3 product for cardiovascular risk reduction. Given the significant time and cost associated with cardiovascular outcomes clinical trials, we have initiated a process to identify a partner to advance development of LYPDISO. We have allocated resources away from a Phase 3 program in SHTG and will focus our internal resources primarily on advancement of our LNC platform delivery technology. 21 Strategic Collaborations Using LNC Platform Delivery Technology We believe our LNC platform delivery technology can be used to reformulate a wide variety of molecules and drugs which, (i) require delivery technology to effectively protect molecules and drugs in the body and could benefit from efficient delivery and cellular uptake by target cells, and (ii) are currently only available in IV formulations or, (iii) otherwise experience significant toxicity-related adverse events. We have tested a range of pharmaceutical compounds reformulated by our LNC platform delivery technology in proof-of-concept animal studies, including oligonucleotides (mRNA, siRNA, DNA plasmids), vaccines, anti-inflammatory agents, NSAIDs and atovaquone. We intend to pursue opportunities to develop products, either alone or in partnership with other pharmaceutical or biotech companies, related to this technology and this remains a key part of our strategy to maximize the value of this unique and disruptive lipid-crystal nanoparticle delivery technology. In January 2019 we announced a research evaluation with an undisclosed top global pharmaceutical company aimed to evaluate synergistic effects of our LNC platform delivery technology with our partner’s nucleic acid polymer technology. Formulations will be developed using our LNC platform delivery technology which enables the development of a wide range of difficult-to-deliver molecules. Promising formulations will be tested in in vitro and in vivo preclinical studies. For competitive reasons, the agreement stipulates certain confidential provisions, including the pharmaceutical company’s identity, the therapeutic molecule(s), the intended targets and the financial terms of the agreement. In May 2019 we announced a research collaboration with ViiV Healthcare, a global specialist HIV company established by GlaxoSmithKline and Pfizer dedicated to delivering advances in the treatment and care of people living with HIV or who are at risk for developing HIV. As part of this collaboration, formulations of select antivirals will be developed using our LNC platform delivery technology. Promising formulations will be tested in in vivo preclinical studies to identify a lead LNC antiviral formulation to take forward in development. Due to the global pandemic, progress on this program has been limited due to competing ViiV Healthcare priorities. In December 2019, we announced a feasibility collaboration with Genentech, a Roche company, to evaluate formulations of a number of Genentech compounds utilizing our LNC platform delivery technology. During 2020 we made progress in formulating two molecules from this collaboration and continue to work with Genentech to evaluate these formulations and plan for additional preclinical studies. In December 2020, we announced a collaboration with the National Institute of Allergy and Infectious Diseases (NIAID) to develop oral formulations of Gilead’s remdesivir, which is currently only available as an intravenous therapy in the fight against COVID-19. We believe the attributes of our LNC platform technology will allow for oral bioavailability and efficient intracellular delivery. We have begun formulating remdesivir and preparing to deliver formulations to NIAID for in vitro preclinical studies in COVID-19 models. If successful, the formulations will proceed to in vivo testing later in 2021. We continue to evaluate additional potential strategic collaborations with other interested biotech and pharmaceutical partners. These early stage, proof-of-concept evaluations could provide an efficient, less expensive pathway to create numerous strategic verticals in areas of innovative medicine while capitalizing on the development expertise and financial resources of well-established pharmaceutical and biotech companies. Data from these evaluations could position us as a licensor of our LNC platform delivery technology to numerous strategic partners better positioned to absorb the risks and costs of drug development while allowing our company to become a royalty aggregator with the potential to generate upfront license, milestone and royalty payments as we maximize the value of the overall LNC platform delivery technology. 22 Exclusive License Agreement with Rutgers University Through our acquisition of Aquarius Biotechnologies Inc., we acquired a license from Rutgers University for the LNC platform delivery technology. The Amended and Restated Exclusive License Agreement between Aquarius and Rutgers, The State University of New Jersey (successor in interest to the University of Medicine and Dentistry of New Jersey) provides for, among other things, (1) a license issue fee of $25,000 paid upon execution, (2) an increased equity interest in the company from 5% to 7.5% of Aquarius (prior to our acquisition of Aquarius in the Aquarius Merger), (3) royalties on a tiered basis between low single digits and the mid-single digits of net sales of products using such licensed technology, (4) a one-time sales milestone fee of $100,000 when and if sales of products using the licensed technology reach the specified sales threshold and (5) an annual license fee of initially $10,000, increasing to $50,000 over the term of the license agreement. We also agreed to assume the responsibility to pay required patent prosecution and maintenance fees covering the technology. Unless otherwise terminated by either party, the term of the license, on a country-by-country basis, shall be the longer of 7-1/2 years from the date of first commercial sale of a product in a country using the licensed technology or until the expiration of the last-to-expire patent rights licensed under the agreement, whichever is longer. Rutgers has the right to terminate the license agreement if we have not commenced commercial sales of at least one product using the licensed technology within nine years of the effective date of the license agreement. Intellectual Property The proprietary nature of, and protection for, our product candidates and our discovery programs, processes and know-how are important to our business. We will seek to protect our products and associated technologies for their manufacturing and development through a combination of patents, trade secrets, proprietary know-how, FDA exclusivity and contractual restrictions on disclosure. Our policy is to pursue, maintain and defend patent rights and to protect the technology, inventions and improvements that are commercially important to the development of our business. Our success will significantly depend on our ability to obtain and maintain patent and other proprietary protection for commercially important technology and inventions and know-how related to our business, defend and enforce our patents, preserve the confidentiality of our trade secrets and operate without infringing the valid and enforceable patents and proprietary rights of third parties. We also rely heavily on know-how and continuing technological innovation to develop and maintain our proprietary position. Matinas-Owned Intellectual Property Relating to LYPDISO We have sought patent protection in the United States and internationally for our LYPDISO discovery program, and any other inventions to which we have rights, where available and when appropriate. Our policy is to pursue, maintain and defend patent rights, whether developed internally or licensed from third parties, and to protect the technology, inventions and improvements that are commercially important to the development of our business. Our current patent portfolio relating to LYPDISO is comprised of two issued U.S. patents and one issued foreign patent in Australia. The issued patents cover the Company’s proprietary methods relating to triglyceride levels, total cholesterol, VLDL-cholesterol or apolipoprotein C-III by administering a pharmaceutical composition comprising omega-3 fatty acids including eicosapentaenoic acid (EPA) and docosapentaenoic acid (DPA). These patents provide important protection to LYPDISO through 2033. In addition, we have eight additional patent applications across four patent families covering the oil composition for LYPDISO, other omega-3 fatty acid compositions, as well as formulations of LYPDISO and similar formulations. All of these filed patent applications also comprise methods of use of such oil compositions and formulations. Any patents that may issue from these filed United States patent applications and their counterpart international application covering the LYPDISO drug substance, formulation, and methods for use in treatment would extend protection until at least 2033. Exclusively Licensed and Matinas-Owned Intellectual Property Relating to Our Proprietary LNC Platform Delivery Technology and MAT2203 The patents and patent applications that we exclusively license from Rutgers University provide patent protection for the proprietary chemistry technology used in our process to make our lipid nanocrystal and geodate cochleates and formulate the active pharmaceutical ingredients delivered inside this delivery technology, as in MAT2203, our lead product comprising the LNC platform delivery technology. Pursuant to our license agreement, we acquired rights to a portfolio that currently includes 2 pending applications and 30 issued U.S. and foreign patents, including 24 patents issued within the last 5 years, which extends patent protection until at least 2033. In addition, we have over 20 Matinas-owned pending patent applications filed both in the United States and in foreign jurisdictions within the past 5 years. We have chosen to file these patent applications in selected foreign markets that we consider important for our product candidates. These international markets generally include Europe, China, India, Brazil, Russia, Canada, Japan, Korea, Australia and Mexico. These pending patent applications can extend patent protection through 2040. This patent portfolio covers our LNC platform delivery technology which covers a broad spectrum of technology, including amphotericin B LNCs, geodate LNCs, methods of delivering nutrients or biologically relevant molecules to a host using LNCs, LNC vaccine compositions and protein-lipid vesicles, small interfering RNA LNCs, methods of enhancing the LNC encapsulation of hydrophilic molecules, LNCs made with low purity soy phosphatidylserine, methods of treating Mycobacterial infections, and methods of treating cryptococcus infections. 23 We cannot be sure that patents will be granted with respect to any of our pending patent applications or with respect to any patent applications we may own or license in the future, nor can we be sure that any of our existing patents or any patents we may own or license in the future will be useful in protecting our technology. For this and more comprehensive risks related to our intellectual property, please see “Risk Factors—Risks Relating to Our Intellectual Property and Regulatory Exclusivity.” In addition to patents, we rely on trade secrets and know-how to develop and maintain our competitive position. For example, significant aspects of our proprietary LNC platform delivery technology as well as the manufacture of certain intermediates utilized in LYPDISO, as well as our soft gelatin capsule formulation, are based on unpatented trade secrets and know-how. Trade secrets and know-how can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by confidentiality agreements and invention assignment agreements with our employees, consultants, scientific advisors, contractors and commercial partners. These agreements are designed to protect our proprietary information and, in the case of the invention assignment agreements, to grant us ownership of technologies that are developed through a relationship with a third party. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems. While we have confidence in these individuals, organizations and systems, agreements or security measures may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors. To the extent that our contractors use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions. We also plan to seek trademark protection in the United States and outside of the United States where available and when appropriate. We intend to use these registered marks in connection with our pharmaceutical research and development as well as our product candidates. Competition The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. We face competition from many different sources, including commercial pharmaceutical and biotechnology enterprises, academic institutions, government agencies and private and public research institutions. Many of these companies have far greater human and financial resources and may have product candidates in more advanced stages of development and many will reach the market before our product candidates. Competitors may also develop products that are more effective, safer or less expensive or that have better tolerability or convenience. LYPDISO Our competitors, both in the United States and abroad, include large, well-established pharmaceutical and generic companies, specialty and generic pharmaceutical sales and marketing companies, and specialized cardiovascular treatment companies. GlaxoSmithKline plc currently sells Lovaza ® , a prescription-only omega-3 fatty acid indicated for patients with SHTG, which was approved by FDA in 2004 and has been on the market in the United States since 2005. Multiple generic versions of Lovaza are available in the United States. Other large companies with competitive products include AbbVie, Inc., which currently sells Tricor ® and Trilipix ® for the treatment of SHTG and Niaspan ® , which is primarily used to raise high-density lipoprotein cholesterol, or HDL-C, but is also used to lower triglycerides. Multiple generic versions of Tricor, Trilipix and Niaspan are also available in the United States. In 2012, Amarin Corporation received an approval to market its prescription-only omega-3 ethyl ester called Vascepa® for the treatment of SHTG. In December of 2019 Vascepa was approved in the US for the reduction of cardiovascular risk in high-risk patients with TGs > 150 mg/dL despite statin therapy. In January of 2021, the European Medicines Agency’s (EMA) Committee for Medicinal Products for Human Use (CHMP) recommended approval for Vazkepa (Vascepa) in the EU for a similar indication. Approval of Vazkepa is expected in the second quarter of 2021. 24 In addition, in May 2014, Epanova ® (omega-3-carboxylic acids) capsules, a free fatty acid form of omega-3 (comprised of 55% EPA and 20% DHA), was approved by the FDA for patients with SHTG. Epanova was developed by Omthera Pharmaceuticals, Inc., and is now owned by AstraZeneca Pharmaceuticals LP (AstraZeneca). To date, AstraZeneca has not launched Epanova in the United States or in any other territory around the world but did conduct the STRENGTH study (a long-term outcomes study to assess ST atin R esidual risk reduction with E pa N ova in hi G h cardiovascular risk patien T s with H ypertriglyceridemia). STRENGTH was a randomized, double-blind, placebo-controlled (corn oil), parallel group design study that enrolled approximately 13,000 patients with HTG and low HDL and high risk for cardiovascular disease, randomized 1:1 to either corn oil plus statin or Epanova plus statin, once daily. In January 2020, following the recommendation of an independent data monitoring committee, AstraZeneca decided to end the STRENGTH trial due to a low likelihood of Epanova having any demonstrable benefit in the study. Final results were published in November of 2020. In addition, in March 2017, Kowa Research Institute (a subsidiary of the Japanese company Kowa Co., Ltd.) initiated a Phase 3 cardiovascular outcomes trial titled PROMINENT, examining the effect of pemafibrate in reducing cardiovascular events in Type II diabetic patients with HTG. Kowa Research Institute has publicly estimated study completion in May 2022, and if successful, US regulatory approval is estimate mid-2023. During 2018, two outcomes studies were completed of omega-3 mixtures which both failed to achieve their primary endpoints of cardiovascular risk reduction and two meta-analyses were published showing that omega-3 mixtures are not effective in lowering cardiovascular risk. Results of these failed outcomes studies and analysis, while not done with LYPDISO, may negatively affect utilization of LYPDISO, if approved. For example, the VITamin D and OmegA-3 TriaL (VITAL), failed to achieve its primary endpoint of lowering cardiovascular events. VITAL was an NIH funded randomized double-blind, placebo-controlled, 2x2 factorial trial of 2000 IU per day of vitamin D3 and 1 gram per day of omega-3 fatty acid mixture supplementation (Lovaza) for the primary prevention of cancer and cardiovascular disease in a nationwide US cohort of 25,874 adults not selected for elevated cardiovascular or cancer risk. Likewise, in 2018, results from A Study of Cardiovascular Events iN Diabetes (ASCEND) trial were released and showed negligible results for omega-3 fatty acid mixtures 1 gram daily. ASCEND was a British Heart Foundation funded 2x2 factorial design, randomized study to assess whether aspirin 100 mg daily versus placebo and separately, omega-3 fatty acid mixtures 1 gram daily versus placebo, reduce the risk of cardiovascular events in a nationwide UK cohort of over 15,000 individuals with diabetes who do not have atherosclerotic cardiovascular disease. In a meta-analysis, presented in 2018 by the Cochran Foundation and separately as published in JAMA, additional omega-3 studies were evaluated. Similar to the VITAL and ASCEND studies, most of the studies in these omega-3 meta-analyses were of omega-3 mixtures, including DHA, and most were studies of relatively low doses of omega-3 as is associated with dietary supplementation and/or they studied relatively low risk patient populations. The exception was the JELIS study, conducted in Japan, of highly pure EPA which showed a positive outcome benefit but had significant limitations in its application to a wider population. The negative results from such omega-3 mixture studies could create misleading impressions about the use of omega-3s generally, including LYPDISO, despite the unique combination of active ingredients in LYPDISO and its higher dose regimen. MAT2203 and MAT2501 Although we believe that our proprietary LNC platform delivery technology, experience and knowledge in our areas of focus provide us with competitive advantages, these potential competitors could reduce our commercial opportunities. For many of our product candidates, we anticipate facing competition from other products that are available on a generic basis and offered at low prices. Many of these generic products have been marketed by third parties for many years and are well accepted by physicians, patients and payers. We believe that MAT2203 and MAT2501 and any other development candidate we may pursue in the future using our proprietary LNC platform delivery technology, paralleled with our scientific and development expertise in the field of drug delivery, provide us with competitive advantages over our peers. However, we face potential competition from various sources, including larger and better-funded pharmaceutical, specialty pharmaceutical, and biotechnology companies, as well as from generic drug manufacturers, academic institutions, governmental agencies and public and private research institutions. 25 MAT2203 will primarily compete with antifungal classes approved for the treatment of fungal and mold infections, which include polyenes, azoles and echinocandins. The approved branded therapies for these indications include Cancidas (caspofungin, marketed by Merck & Co.), Eraxis (anidulafungin, marketed by Pfizer, Inc.), Mycamine (micafungin, marketed by Astellas Pharma US, Inc.), Diflucan (fluconazole, marketed by Pfizer, Inc.), Noxafil (posaconazole, marketed by Merck & Co.), Vfend (voriconazole, marketed by Pfizer, Inc.), Sporanox (itraconazole, marketed by Jansen Pharmaceuticals, Inc.), Cresemba (isavuconazole, marketed by Astellas Pharma US, Inc.), Ambisome (liposomal amphotericin B, marketed by Astellas Pharma US, Inc.) Abelcet (lipid complex amphotericin B, marketed by Sigma Tau Pharmaceuticals Inc.) and amphotericin B deoxycholate (marketed by X-Gen Pharmaceuticals, Inc.). There currently are and may be more generic versions of these products available at the time of MAT2203 market approval, which will create added competition. In addition to approved therapies, we expect that MAT2203 may compete with product candidates that we are aware of in clinical development by third parties, such as SCY-078 (being developed by Scynexis, Inc.), rezafungin acetate (being developed by Cidara Therapeutics, Inc.) and certain products being developed by Viamet Pharmaceuticals Holdings, LLC, Vical Incorporated and F2G, Ltd. MAT2501 will primarily compete with aminoglycosides indicated for the treatment of NTM lung infections and will include Arikayce®, an inhaled formulation of amikacin (marketed by Insmed) and IV amikacin (Amikin; marketed by Bristol Myers Squibb) as well as a number of generic manufacturers of IV amikacin. Manufacturing We currently engage with multiple third-party manufacturers to supply us with certain of the intermediates used in LYPDISO and an additional manufacturer to formulate a third intermediate and supply us with the final drug form. We have an additional manufacturer which fills and provides our final LYPDISO capsules. If any of these manufacturers should become unavailable to us for any reason, we have identified a number of potential replacements, although we might incur some delay in qualifying such replacements. We expect to add additional suppliers and manufacturers for both the intermediates and final LYPDISO drug product as we advance LYPDISO further into clinical development. We currently lease and operate in-house manufacturing capabilities for our lead LNC platform delivery technology product candidate, MAT2203, MAT2501, and for our LNC platform discovery programs in the gene therapy and vaccine spaces. While sufficient to produce the clinical supplies of product necessary to conduct our ongoing clinical trials and potentially early commercialization of MAT2203 and MAT2501, we may need to expand our internal manufacturing capabilities in the future. If we are not able to retain our current manufacturing facilities and if we do not develop additional in-house manufacturing capability for our MAT2203, MAT2501 and product candidates sufficient to produce product for commercialization of these products, we will need to develop relationships with third-party manufacturers for the manufacture of our product candidates which could be time consuming and expensive. We are in the process of identifying a third-party contract manufacturer for MAT2203 and other products derived from our LNC platform technology. There are a number of potential third-party suppliers for amphotericin B, the generic active pharmaceutical ingredient in our lead clinical stage product candidate – MAT2203 and for amikacin, the generic active pharmaceutical ingredient in our preclinical LNC product candidate – MAT2501. Although to date we have not entered into formal supply agreements to secure sufficient supply of amphotericin B or amikacin to support our clinical programs for MAT2203 or MAT2501, we believe we will be able to secure supply of amphotericin B and amikacin to support our clinical programs for MAT2203 and MAT2501 and from one or more third-party suppliers. As we move through development for our product candidates, we expect to enter into long term supply arrangements for key active pharmaceutical ingredients. Sales and Marketing We currently do not have any sales and marketing infrastructure. We plan to retain U.S. marketing and sales rights or co-promotion rights for our product candidates for which we receive marketing approvals, particularly in situations where it is possible to access the market through a focused, specialized sales force. For situations in which a large sales force is required to access the market, and with respect to markets outside the United States, we generally plan to commercialize our product candidates through collaborative arrangements with leading pharmaceutical and biotechnology companies. 26 Review and Approval of Drugs in the United States In the United States, FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations requires the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval may subject an applicant and/or sponsor to a variety of administrative or judicial sanctions, including refusal by FDA to approve pending applications, withdrawal of an approval, imposition of a clinical hold, issuance of warning letters and other types of letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement of profits, or civil or criminal investigations and penalties brought by FDA and the Department of Justice, or DOJ, or other governmental entities. Our product candidates must be approved by FDA through the new drug application, or NDA, or biologics license application, or BLA, in the case of biologic product candidates, process before they may be legally marketed in the United States. An applicant seeking approval to market and distribute a new drug product in the United States must typically undertake the following: ● completion of nonclinical laboratory tests, animal studies and formulation studies in compliance with FDA’s good laboratory practice, or cGLP, regulations; ● submission to FDA of an IND, which must take effect before human clinical trials may begin; ● approval by an independent institutional review board, or IRB, representing each clinical site before each clinical trial may be initiated; ● performance of adequate and well-controlled human clinical trials in accordance with current good clinical practices, or GCP, to establish the safety and efficacy of the proposed drug product for each indication; ● preparation and submission to FDA of an NDA or BLA; ● review of the product by an FDA advisory committee, where appropriate or if applicable; ● satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which the product, or components thereof, are produced to assess compliance with current Good Manufacturing Practices, or cGMP, requirements and to assure that the facilities, methods and controls are adequate to preserve the product’s identity, strength, quality and purity; ● payment of user fees and securing FDA approval of the NDA or BLA; and ● compliance with any post-approval requirements, including a risk evaluation and mitigation strategy, or REMS, and post-approval studies required by FDA. Nonclinical Studies Nonclinical studies include laboratory evaluation of the purity and stability of the manufactured drug substance or active pharmaceutical ingredient and the formulated drug or drug product, as well as in vitro and animal studies to assess the safety and activity of the drug for initial testing in humans and to establish a rationale for therapeutic use. The conduct of nonclinical studies is subject to federal regulations and requirements, including cGLP regulations. The results of the nonclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and plans for clinical trials, among other things, are submitted to FDA as part of an investigational new drug application, or IND. 27 Companies usually must complete some long-term nonclinical testing, such as animal tests of reproductive adverse events and carcinogenicity, and must also develop additional information about the chemistry and physical characteristics of the drug and finalize a process for manufacturing the drug in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the drug candidate and, among other things, the manufacturer must develop methods for testing the identity, strength, quality and purity of the final drug product. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the drug candidate does not undergo unacceptable deterioration over its shelf life. Human Clinical Trials in Support of a Regulatory Approval Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators in accordance with GCP requirements, which include, among other things, the requirement that all research subjects provide their informed consent in writing before their participation in any clinical trial. Clinical trials are conducted under written study protocols detailing, among other things, the objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. A protocol for each clinical trial and any subsequent protocol amendments must be submitted to FDA as part of the IND. An IND automatically becomes effective 30 days after receipt by FDA, unless before that time FDA raises concerns or questions related to a proposed clinical trial and places the trial on clinical hold. In such a case, the IND sponsor and FDA must resolve any outstanding concerns before the clinical trial can begin. Accordingly, submission of an IND may or may not result in FDA allowing clinical trials to commence. In addition, an IRB representing each institution participating in the clinical trial must review and approve the plan for any clinical trial before it commences at that institution, and the IRB must conduct continuing review and reapprove the study at least annually. The IRB must review and approve, among other things, the study protocol and informed consent information to be provided to study subjects. An IRB must operate in compliance with FDA regulations. Information about certain clinical trials must be submitted within specific timeframes to the National Institutes of Health for public dissemination on their ClinicalTrials.gov website. A sponsor who wishes to conduct a clinical trial outside the United States may, but need not, obtain FDA authorization to conduct the clinical trial under an IND. When a foreign clinical study is conducted under an IND, all FDA IND requirements must be met unless waived. If a foreign clinical trial is not conducted under an IND, the sponsor may submit data from the clinical trial to FDA in support of an NDA or IND so long as the clinical trial is conducted in accordance with GCP and if FDA is able to validate the data from the clinical trial through an on-site inspection, if FDA deems it necessary. Human clinical trials are typically conducted in three sequential phases, which may overlap or be combined: Phase 1 : The drug is initially introduced into a small number of healthy human subjects or patients with the target disease (e.g. cancer) or condition and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an early indication of its effectiveness and to determine optimal dosage. Phase 2 : The drug is administered to a larger number of trial participants, up to several hundred, who usually have the disease or condition that the experimental drug is intended to treat, to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage. Phase 3 : These clinical trials are commonly referred to as “pivotal” studies, which typically denotes a study which presents the data that FDA or other relevant regulatory agency will use to determine whether or not to approve a drug. In Phase 3 clinical trials, the drug is administered to an expanded patient population, generally at geographically dispersed clinical trial sites, in well-controlled clinical trials to generate enough data to statistically evaluate the efficacy and safety of the product for approval, to establish the overall risk-benefit profile of the product, and to provide adequate information for the labeling of the product. 28 Progress reports detailing the results of the clinical trials must be submitted at least annually to FDA and more frequently if serious adverse events occur. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, or at all. Furthermore, FDA or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution, or an institution it represents, if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients. FDA will typically inspect one or more clinical sites to assure compliance with GCP and the integrity of the clinical data submitted. Submission of an NDA to FDA Regulatory approval for most new drug or biologic products is based on two adequate and well-controlled Phase 3 clinical trials that provide evidence of the safety and efficacy of the proposed new product. Assuming successful completion of required clinical testing and other requirements, the results of the nonclinical and clinical trials, together with detailed information relating to the product’s chemistry, manufacture, controls and proposed labeling, among other things, are submitted to FDA as part of an NDA requesting approval to market the drug product for one or more indications. Under federal law, the submission of most NDAs is additionally subject to an application user fee and the sponsor of an approved NDA is also subject to annual prescription drug program fees and establishment user fees. These fees are typically increased annually. FDA conducts a preliminary review of an NDA within 60 days of its receipt and informs the sponsor by the 74th day after FDA’s receipt of the submission whether the application is sufficiently complete to permit substantive review. FDA may request additional information rather than accept an NDA for filing. In this event, the application must be resubmitted with the additional information. The resubmitted application is also subject to review before FDA accepts it for filing. Once the submission is accepted for filing, FDA begins an in-depth substantive review. FDA has agreed to specified performance goals in the review process of NDAs. Most such applications are meant to be reviewed within ten months from the date of filing, and most applications for “priority review” products are meant to be reviewed within six months of filing. The review process may be extended by FDA for various reasons, and for various time periods, including for three additional months to consider new information or clarification provided by the applicant to address an outstanding deficiency identified by FDA following the original submission. Before approving an NDA, FDA typically will inspect the facility or facilities where the product is or will be manufactured. These pre-approval inspections cover all facilities associated with an NDA submission, including drug component manufacturing (such as Active Pharmaceutical Ingredients), finished drug product manufacturing and control testing laboratories. FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before approving an NDA, FDA will typically inspect one or more clinical sites to assure compliance with GCP. FDA is required to refer an application for a novel drug to an advisory committee or explain why such referral was not made. Typically, an advisory committee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation as to whether the application should be approved and under what conditions. FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions. Fast Track, Breakthrough Therapy and Priority Review Designations FDA is authorized to designate certain products for expedited review if they are intended to address an unmet medical need in the treatment of a serious or life-threatening disease or condition. These programs are fast track designation, breakthrough therapy designation and priority review designation. Specifically, FDA may designate a product for Fast Track review if it is intended, whether alone or in combination with one or more other drugs, for the treatment of a serious or life-threatening disease or condition, and it demonstrates the potential to address unmet medical needs for such a disease or condition. For Fast Track products, sponsors may have greater interactions with FDA and FDA may initiate review of sections of a fast track product’s NDA before the application is complete. This rolling review may be available if FDA determines, after preliminary evaluation of clinical data submitted by the sponsor, that a Fast Track product may be effective. The sponsor must also provide, and FDA must approve, a schedule for the submission of the remaining information and the sponsor must pay applicable user fees. However, FDA’s time period goal for reviewing a Fast Track application does not begin until the last section of the NDA is submitted. In addition, the Fast Track designation may be withdrawn by FDA if FDA believes that the designation is no longer supported by data emerging in the clinical trial process. 29 Second, in 2012, Congress enacted the Food and Drug Administration Safety and Improvement Act, or FDASIA. This law established a new regulatory scheme allowing for expedited review of products designated as “breakthrough therapies.” A product may be designated as a breakthrough therapy if it is intended, either alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. FDA may take certain actions with respect to breakthrough therapies, including holding meetings with the sponsor throughout the development process; providing timely advice to the product sponsor regarding development and approval; involving more senior staff in the review process; assigning a cross-disciplinary project lead for the review team; and taking other steps to design the clinical trials in an efficient manner. Third, FDA may designate a product for priority review if it is a drug that treats a serious condition and, if approved, would provide a significant improvement in safety or effectiveness. FDA determines, on a case-by-case basis, whether the proposed drug represents a significant improvement when compared with other available therapies. Significant improvement may be illustrated by evidence of increased effectiveness in the treatment of a condition, elimination or substantial reduction of a treatment-limiting drug reaction, documented enhancement of patient compliance that may lead to improvement in serious outcomes, and evidence of safety and effectiveness in a new subpopulation. A priority designation is intended to direct overall attention and resources to the evaluation of such applications, and to shorten FDA’s goal for taking action on a marketing application from ten months to six months. Under Section 524 of the FDCA, FDA is authorized to award a priority review voucher to sponsors of certain tropical disease product applications that meet the criteria specified in the Act. A priority review voucher may be used by the sponsor who obtains it, or it may be transferred to another sponsor who may use it to obtain priority review for a different application. Priority review vouchers can result in the acceleration of review and approval of a product candidate by up to four months. In order to be eligible for a tropical disease priority review voucher, the application must be: for a listed tropical disease; submitted under Section 505(b)(1) of the FDCA or Section 351 of the Public Health Service Act; for a product that contains no active ingredient that has been approved in any other application under those statutory provisions; and must qualify for priority review. FDA has identified in guidance those product applications for the prevention or treatment of tropical diseases that may qualify for a priority review voucher. Accelerated Approval Pathway FDA may grant accelerated approval to a drug for a serious or life-threatening condition that provides meaningful therapeutic advantage to patients over existing treatments based upon a determination that the drug has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit. FDA may also grant accelerated approval for such a condition when the product has an effect on an intermediate clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality, or IMM, and that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. Drugs granted accelerated approval must meet the same statutory standards for safety and effectiveness as those granted traditional approval. For the purposes of accelerated approval, a surrogate endpoint is a marker, such as a laboratory measurement, radiographic image, physical sign, or other measure that is thought to predict clinical benefit but is not itself a measure of clinical benefit. Surrogate endpoints can often be measured more easily or more rapidly than clinical endpoints. An intermediate clinical endpoint is a measurement of a therapeutic effect that is considered reasonably likely to predict the clinical benefit of a drug, such as an effect on IMM. FDA has limited experience with accelerated approvals based on intermediate clinical endpoints but has indicated that such endpoints generally may support accelerated approval where the therapeutic effect measured by the endpoint is not itself a clinical benefit and basis for traditional approval, if there is a basis for concluding that the therapeutic effect is reasonably likely to predict the ultimate clinical benefit of a drug. 30 The accelerated approval pathway is most often used in settings in which the course of a disease is long, and an extended period of time is required to measure the intended clinical benefit of a drug, even if the effect on the surrogate or intermediate clinical endpoint occurs rapidly. The accelerated approval pathway is usually contingent on a sponsor’s agreement to conduct, in a diligent manner, additional post-approval confirmatory studies to verify and describe the drug’s clinical benefit. As a result, a product candidate approved on this basis is subject to rigorous post-marketing compliance requirements, including the completion of Phase 4 or post-approval clinical trials to confirm the effect on the clinical endpoint. Failure to conduct required post-approval studies, or confirm a clinical benefit during post-marketing studies, would allow FDA to withdraw the drug from the market on an expedited basis. All promotional materials for product candidates approved under accelerated regulations are subject to prior review by FDA. FDA’s Decision on an NDA On the basis of FDA’s evaluation of the NDA and accompanying information, including the results of the inspection of the manufacturing facilities, FDA may issue an approval letter or a complete response letter. An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications. A complete response letter generally outlines the deficiencies in the submission and may require substantial additional testing or information in order for FDA to reconsider the application. If and when those deficiencies have been addressed to FDA’s satisfaction in a resubmission of the NDA, FDA will issue an approval letter. FDA has committed to reviewing such resubmissions in two or six months depending on the type of information included. Even with submission of this additional information, FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval. If FDA approves a product, it may limit the approved indications for use for the product, require that contraindications, warnings or precautions be included in the product labeling, require that post-approval studies, including Phase 4 clinical trials, be conducted to further assess the drug’s safety after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions which can materially affect the potential market and profitability of the product. In addition, as a condition of approval, FDA may require an applicant to develop a REMS. REMS use risk minimization strategies beyond the professional labeling to ensure that the benefits of the product outweigh the potential risks. To determine whether a REMS is needed, FDA will consider the size of the population likely to use the product, seriousness of the disease, expected benefit of the product, expected duration of treatment, seriousness of known or potential adverse events and whether the product is a new molecular entity. REMS can include medication guides, physician communication plans for healthcare professionals and elements to assure safe use, which may include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring and the use of patient registries. FDA may require a REMS before approval or post-approval if it becomes aware of a serious risk associated with use of the product. The requirement for a REMS can materially affect the potential market and profitability of a product. FDA may prevent or limit further marketing of a product based on the results of post-market studies or surveillance programs. After approval, many types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testing requirements and FDA review and approval. Post-Approval Requirements Drugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion and reporting of adverse experiences with 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. In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with FDA and state agencies and are subject to periodic unannounced inspections by FDA and these state agencies for compliance with cGMP requirements. Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting and documentation requirements upon the sponsor and any third-party manufacturers that the sponsor may decide to use. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain cGMP compliance. 31 Once an approval is granted, FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of distribution or other restrictions under a REMS program. Other potential consequences include, among other things: ● restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls; ● fines, warning or untitled letters or holds on post-approval clinical trials; ● refusal of FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of product approvals; ● product seizure or detention, or refusal to permit the import or export of products; or ● injunctions or the imposition of civil or criminal penalties. FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Drugs may be promoted only for the approved indications and in accordance with the provisions of the approved label. FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability. In addition, the distribution of prescription pharmaceutical products is subject to the Prescription Drug Marketing Act, or PDMA, which regulates the distribution of drugs and drug samples at the federal level and sets minimum standards for the registration and regulation of drug distributors by the states. Both the PDMA and state laws limit the distribution of prescription pharmaceutical product samples and impose requirements to ensure accountability in distribution. Abbreviated New Drug Applications for Generic Drugs In 1984, with passage of the Hatch-Waxman Amendments to the FDCA, Congress authorized FDA to approve generic drugs that are the same as drugs previously approved by FDA under the NDA provisions of the statute. To obtain approval of a generic drug, an applicant must submit an abbreviated new drug application, or ANDA, to the agency. In support of such applications, a generic manufacturer may rely on the nonclinical and clinical testing previously conducted for a drug product previously approved under an NDA, known as the reference listed drug, or RLD. Specifically, in order for an abbreviated new drug application, or ANDA to be approved, FDA must find that the generic version is identical to the RLD with respect to the active ingredients, the route of administration, the dosage form and the strength of the drug. At the same time, FDA must also determine that the generic drug is “bioequivalent” to the innovator drug. Under the statute, a generic drug is bioequivalent to a RLD if the rate and extent of absorption of the drug do not show a significant difference from the rate and extent of absorption of the listed drug. Upon approval of an ANDA, FDA indicates whether the generic product is therapeutically equivalent to the RLD in its publication “Approved Drug Products with Therapeutic Equivalence Evaluations,” also referred to as the “Orange Book.” Physicians and pharmacists consider a therapeutically equivalent generic drug to be fully substitutable for the RLD. In addition, by operation of certain state laws and numerous health insurance programs, FDA’s designation of therapeutic equivalence often results in automatic substitution of the generic drug by the pharmacist without the knowledge or consent of either the prescribing physician or patient. 32 Under the Hatch-Waxman Amendments, FDA may not approve an ANDA until any applicable period of non-patent exclusivity for the RLD has expired. The FDCA provides a period of five years of non-patent data exclusivity for a new drug containing a new chemical entity. In cases where such exclusivity has been granted, an ANDA may not be submitted to FDA until the expiration of five years unless the submission is accompanied by a Paragraph IV certification, in which case the applicant may submit its application four years following the original product approval. The FDCA also provides for a period of three years of exclusivity if the NDA includes reports of one or more new clinical investigations, other than bioavailability or bioequivalence studies, that were conducted by or for the applicant and are essential to the approval of the application. This three-year exclusivity period often protects changes to a previously approved drug product, such as a new dosage form, route of administration, combination or indication. Hatch-Waxman Patent Certification and the 30 Month Stay Upon approval of an NDA or a supplement thereto, NDA sponsors are required to list with FDA each patent with claims that cover the applicant’s product or an approved method of using the product. Each of the patents listed by the NDA sponsor is published in the Orange Book. When an ANDA applicant submits its application to FDA, the applicant is required to certify to FDA concerning any patents listed for the reference product in the Orange Book, except for patents covering methods of use for which the ANDA applicant is not seeking approval. Specifically, the applicant must certify with respect to each patent that: ● the required patent information has not been filed; ● the listed patent has expired; ● the listed patent has not expired, but will expire on a particular date and approval is sought after patent expiration; or ● the listed patent is invalid, unenforceable or will not be infringed by the new product. A certification that the new product will not infringe the already approved product’s listed patents or that such patents are invalid or unenforceable is called a Paragraph IV certification. If the applicant does not challenge the listed patents or indicate that it is not seeking approval of a patented method of use, the ANDA application will not be approved until all the listed patents claiming the referenced product have expired. If the ANDA applicant has provided a Paragraph IV certification to FDA, the applicant must also send notice of the Paragraph IV certification to the NDA and patent holders once the ANDA has been accepted for filing by FDA. The NDA and patent holders may then initiate a patent infringement lawsuit in response to the notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days after the receipt of a Paragraph IV certification automatically prevents FDA from approving the ANDA until the earlier of 30 months after the receipt of the Paragraph IV notice, expiration of the patent, or a decision in the infringement case that is favorable to the ANDA applicant. Pediatric Studies and Exclusivity Under the Pediatric Research Equity Act of 2003, an NDA or supplement thereto must contain data that are adequate to assess the safety and effectiveness of the drug product for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. With enactment of the Food and Drug Administration Safety and Innovation Act, or FDASIA, in 2012, sponsors must also submit pediatric study plans prior to the assessment data. Those plans must contain an outline of the proposed pediatric study or studies the applicant plans to conduct, including study objectives and design, any deferral or waiver requests, and other information required by regulation. The applicant, FDA and FDA’s internal review committee must then review the information submitted, consult with each other, and agree upon a final plan. FDA or the applicant may request an amendment to the plan at any time. FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric data requirements. Additional requirements and procedures relating to deferral requests and requests for extension of deferrals are contained in FDASIA. 33 Pediatric exclusivity is another type of non-patent marketing exclusivity in the United States and, if granted, provides for the attachment of an additional six months of marketing protection to the term of any existing regulatory exclusivity, including the non-patent exclusivity. This six-month exclusivity may be granted if an NDA sponsor submits pediatric data that fairly respond to a written request from FDA for such data. The data do not need to show the product to be effective in the pediatric population studied; rather, if the clinical trial is deemed to fairly respond to FDA’s request, the additional protection is granted. If reports of requested pediatric studies are submitted to and accepted by FDA within the statutory time limits, whatever statutory or regulatory periods of exclusivity or patent protection cover the product are extended by six months. This is not a patent term extension, but it effectively extends the regulatory period during which FDA cannot approve another application. Orphan Designation and Exclusivity Under the Orphan Drug Act, FDA may designate a drug product as an “orphan drug” if it is intended to treat a rare disease or condition (generally meaning that it affects fewer than 200,000 individuals in the United States, or more in cases in which there is no reasonable expectation that the cost of developing and making a drug product available in the United States for treatment of the disease or condition will be recovered from sales of the product). A company must request orphan product designation before submitting a NDA. If the request is granted, FDA will disclose the identity of the therapeutic agent and its potential use. Orphan product designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process. If a product with orphan status receives the first FDA approval for the disease or condition for which it has such designation, the product will be entitled to orphan product exclusivity. Orphan product exclusivity means that FDA may not approve any other applications for the same product for the same indication for seven years, except in certain limited circumstances. Competitors may receive approval of different products for the indication for which the orphan product has exclusivity and may obtain approval for the same product but for a different indication. If a drug or drug product designated as an orphan product ultimately receives marketing approval for an indication broader than what was designated in its orphan product application, it may not be entitled to exclusivity. 21st Century Cures Act On December 13, 2016, Congress passed the 21 st Century Cures Act, or the Cures Act. The Cures Act is designed to modernize and personalize healthcare, spur innovation and research, and streamline the discovery and development of new therapies through increased federal funding of particular programs. It authorizes increased funding for FDA to spend on innovation projects. The new law also amends the Public Health Service Act to reauthorize and expand funding for the National Institutes of Health. The Act establishes the NIH Innovation Fund to pay for the cost of development and implementation of a strategic plan, early-stage investigators and research. It also charges NIH with leading and coordinating expanded pediatric research. In addition, the Cures Act includes provisions requiring FDA to assess and publish guidance on the use of novel clinical trial designs, the use of real-world evidence in applications, the availability of summary level review for supplemental applications for certain indications, and the qualification of drug development tools. Because the Cures Act has only recently been enacted, its potential effect on our business remains unclear with the exception of a provision requiring that we post our policies on the availability of expanded access programs for individuals. Because these provisions allow FDA to spend several years developing these policies, the effect on us could be delayed. With amendments to the FDCA and the Public Health Service Act, or PHSA, Title III of the Cures Act seeks to accelerate the discovery, development, and delivery of new medicines and medical technologies. To that end, and among other provisions, the Cures Act reauthorizes the existing priority review voucher program for certain drugs intended to treat rare pediatric diseases until 2020; creates a new priority review voucher program for drug applications determined to be material national security threat medical countermeasure applications; and revises the FDCA to streamline review of combination product applications. 34 Section 3042 of the Cures Act authorizes a new “Limited Population Pathway” to expedite approval of antimicrobial products intended to treat serious or life-threatening infections for which there are unmet medical needs. Drugs approved under this provision would be required to adhere to special labeling requirements, including a prominent “Limited Population” statement. Additionally, in recognition of increasing concerns about drug-resistant infections, the Act requires the U.S. Government Accountability Office (GAO) to compile a report on antimicrobial resistance by 2021, which would include a review of any effect of the new Limited Population Pathway on antibacterial or antifungal resistance. We will monitor these developments but cannot currently assess how this initiative may impact our business. Other Health Care Regulations Health Privacy Laws We are subject to data protection laws and regulations (i.e., laws and regulations that address privacy and data security). In the U.S., numerous federal and state laws and regulations, including state data breach notification laws, state health information privacy laws, and federal and state consumer protection laws (e.g., Section 5 of the FTC Act), govern the collection, use, disclosure, and protection of health-related and other personal information. Failure to comply with data protection laws and regulations could result in government enforcement actions and create liability for us (which could include civil and/or criminal penalties), private litigation and/or adverse publicity that could negatively affect our operating results and business. In addition, we may obtain health information from third parties (e.g., principal investigators involved in our clinical trials) that are subject to privacy and security requirements under the Health Insurance Portability and Accountability Act of 1996, or HIPPA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH. HIPAA generally requires that covered entities (healthcare providers, health plans and healthcare clearinghouses) obtain written authorizations from patients prior to disclosing protected health information of the patient (unless an exception to the authorization requirement applies). If authorization is required and the patient fails to execute an authorization or the authorization fails to contain all required provisions, then we may not be allowed access to and use of the patient’s information and our research efforts could be impaired or delayed. Furthermore, use of protected health information that is provided to us pursuant to a valid patient authorization is subject to the limits set forth in the authorization (e.g., for use in research and in submissions to regulatory authorities for product approvals). Among other things, HITECH makes HIPAA’s privacy and security standards, as well as the various penalties or failure to comply, directly applicable to “business associates”—independent contractors or agents of covered entities performing certain functions involving the creation or use of protected health information on behalf of a covered entity or providing services to a covered entity. While we do not believe we are a “business associate” under HIPAA, regulatory agencies may disagree. The collection and use of personal health data in the European Union, presently governed by the provisions of the European Data Protection Directive (95/46/EC), or the EU Directive, as implemented by the European Member States, will be replaced with the General Data Protection Regulation, or GDPR. Currently, the EU Directive establishes a regulatory framework designed to protect the security of personal data collected about residents of the EU and the movement of such personal data across the national borders of the EU Member States. The EU Directive would apply to clinical trial data we may collect about residents of the European Union. GDPR was adopted in 2016 and will become enforceable in the European Union Member States in May 2018. The GDPR will impose many new or additional requirements including, but not limited to, obtaining consent of the individuals to whom the personal data relates, the nature and scope of notifications provided to the individuals, the security and confidentiality of the personal data, data breach notification and using third party processors in connection with the processing of the personal data. Failure to comply with the EU Directive and the GDPR, when effective, could subject us to regulatory sanctions, delays in clinical trials, criminal prosecution and/or civil fines or penalties. Additionally, GDPR creates a direct cause of action by individual data subjects. To comply with the new data protection rules imposed by the GDPR we may be required to use additional human and financial resources to come into and maintain compliance. Fraud and Abuse Laws In addition to FDA restrictions on marketing of pharmaceutical products, several other types of state and federal laws have been applied to restrict certain marketing practices in the pharmaceutical industry in recent years. These laws include anti-kickback statutes and false claims statutes. The federal healthcare program anti-kickback statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing, leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financed healthcare programs. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers and formulary managers on the other. Violations of the anti-kickback statute are punishable by imprisonment, criminal prosecution, civil monetary penalties and exclusion from participation in federal healthcare programs. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activities from prosecution or other regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor. 35 Federal false claims laws prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government, or knowingly making, or causing to be made, a false statement to have a false claim paid. Recently, several pharmaceutical and other healthcare companies have been prosecuted under these laws for allegedly inflating drug prices they report to pricing services, which in turn were used by the government to set Medicare and Medicaid reimbursement rates, and for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product. In addition, certain marketing practices, including off-label promotion, may also violate false claims laws. The majority of states also have statutes or regulations similar to the federal anti-kickback statute and false claims laws, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor. Affordable Care Act In late March 2010, the Federal government enacted the comprehensive health care reform package, the Affordable Care Act (ACA). Among other provisions, the ACA imposes individual and employer health insurance requirements, provides certain insurance subsidies (e.g., premiums and cost sharing), mandates extensive insurance market reforms, creates new health insurance access points (e.g., State and federal-based health insurance exchanges), expands the Medicaid program, promotes research on comparative clinical effectiveness of different technologies and procedures, and makes a number of changes to how products and services will be reimbursed by the Medicare program. Amendments to the Federal False Claims Act under the ACA have made it easier for private parties to bring “qui tam” (whistleblower) lawsuits against companies, under which the whistleblower may be entitled to receive a percentage of any money paid to the government. Since its enactment, there have been judicial and Congressional challenges and amendments to certain aspects of the ACA. There is continued uncertainty about the implementation of the ACA, including the potential for further amendments to the ACA and legal challenges to or efforts to repeal the ACA. If the ACA is repealed or further modified, or if implementation of certain aspects of the ACA are delayed, such repeal, modification or delay may materially adversely impact our business, strategies, prospects, operating results or financial condition. We are unable to predict the full impact of any repeal, modification or delay in the implementation of the ACA on us at this time. Due to the substantial regulatory changes that will need to be implemented by CMS and others, and the numerous processes required to implement these reforms, we cannot predict which healthcare initiatives will be implemented at the federal or state level, the timing of any such reforms, or the effect such reforms or any other future legislation or regulation will have on our business. Designation of and Exclusivity for Qualified Infectious Disease Products In 2012, Congress passed legislation known as the Generating Antibiotic Incentives Now Act, or GAIN Act. This legislation is designed to encourage the development of antibacterial and antifungal drug products that treat pathogens that cause serious and life-threatening infections. To that end, the law grants an additional five years of marketing exclusivity upon the approval of an NDA for a drug product designated by FDA as a Qualified Infectious Disease Product, or QIDP. Thus, for a QIDP, the periods of five-year new chemical entity exclusivity, three year new clinical investigation exclusivity and seven year orphan drug exclusivity, would become 10 years, eight years, and 12 years, respectively. A QIDP is defined in the GAIN Act to mean “an antibacterial or antifungal drug for human use intended to treat serious or life-threatening infections, including those caused by—(1) an antibacterial or antifungal resistant pathogen, including novel or emerging infectious pathogens;” or (2) certain “qualifying pathogens.” A “qualifying pathogen” is a pathogen that has the potential to pose a serious threat to public health (e.g., resistant gram-positive pathogens, multi-drug resistant gram negative bacteria, multi-drug resistant tuberculosis and Clostridium difficile ) and that is included in a list established and maintained by FDA. A drug sponsor may request FDA to designate its product as a QIDP any time before the submission of an NDA. FDA must make a QIDP determination within 60 days of the designation request. A product designated as a QIDP will be granted priority review by FDA and can qualify for “fast track” status. 36 The additional five years of market exclusivity under the GAIN Act for drug products designated by FDA as QIDPs applies only to a drug that is first approved on or after July 9, 2012. Additionally, the five-year exclusivity extension does not apply to: a supplement to an application under Section 505(b) of the FDCA for any QIDP for which an extension is in effect or has expired; a subsequent application submitted with respect to a product approved by FDA for a change that results in a new indication, route of administration, dosing schedule, dosage form, delivery system, delivery device or strength; or a product that does not meet the definition of a QIDP under Section 505(g) based upon its approved uses. Patent Term Restoration and Extension A patent claiming a new drug product may be eligible for a limited patent term extension under the Hatch-Waxman Act, which permits a patent restoration of up to five years for patent term lost during product development and FDA regulatory review. The restoration period granted is typically one-half the time between the effective date of an IND and the submission date of a NDA, plus the time between the submission date of a NDA and the ultimate approval date. Patent term restoration cannot be used to extend the remaining term of a patent past a total of 14 years from the product’s approval date. Only one patent applicable to an approved drug product is eligible for the extension, and the application for the extension must be submitted prior to the expiration of the patent in question. A patent that covers multiple drugs for which approval is sought can only be extended in connection with one of the approvals. The USPTO reviews and approves the application for any patent term extension or restoration in consultation with FDA. Review and Approval of Drug Products in the European Union In order to market any product outside of the United States, a company must also comply with numerous and varying regulatory requirements of other countries and jurisdictions regarding quality, safety and efficacy and governing, among other things, clinical trials, marketing authorization, commercial sales and distribution of drug products. Whether or not it obtains FDA approval for a product, the company would need to obtain the necessary approvals by the comparable non-U.S. regulatory authorities before it can commence clinical trials or marketing of the product in those countries or jurisdictions. The approval process ultimately varies between countries and jurisdictions and can involve additional product testing and additional administrative review periods. The time required to obtain approval in other countries and jurisdictions might differ from and be longer than that required to obtain FDA approval. Regulatory approval in one country or jurisdiction does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country or jurisdiction may negatively impact the regulatory process in others. Pursuant to the European Clinical Trials Directive, a system for the approval of clinical trials in the European Union has been implemented through national legislation of the member states. Under this system, an applicant must obtain approval from the competent national authority of a European Union member state in which the clinical trial is to be conducted. Furthermore, the applicant may only start a clinical trial after a competent ethics committee has issued a favorable opinion. Clinical trial application must be accompanied by an investigational medicinal product dossier with supporting information prescribed by the European Clinical Trials Directive and corresponding national laws of the member states and further detailed in applicable guidance documents. To obtain marketing approval of a drug under European Union regulatory systems, an applicant must submit a marketing authorization application, or MAA, either under a centralized or decentralized procedure. The centralized procedure provides for the grant of a single marketing authorization by the European Commission that is valid for all European Union member states. The centralized procedure is compulsory for specific products, including for medicines produced by certain biotechnological processes, products designated as orphan medicinal products, advanced therapy products and products with a new active substance indicated for the treatment of certain diseases. For products with a new active substance indicated for the treatment of other diseases and products that are highly innovative or for which a centralized process is in the interest of patients, the centralized procedure may be optional. 37 Under the centralized procedure, the Committee for Medicinal Products for Human Use, or the CHMP, established at the European Medicines Agency, or EMA, is responsible for conducting the initial assessment of a drug. The CHMP is also responsible for several post-authorization and maintenance activities, such as the assessment of modifications or extensions to an existing marketing authorization. Under the centralized procedure in the European Union, the maximum timeframe for the evaluation of an MAA is 210 days, excluding clock stops, when additional information or written or oral explanation is to be provided by the applicant in response to questions of the CHMP. Accelerated evaluation might be granted by the CHMP in exceptional cases, when a medicinal product is of major interest from the point of view of public health and in particular from the viewpoint of therapeutic innovation. In this circumstance, the EMA ensures that the opinion of the CHMP is given within 150 days. The decentralized procedure is available to applicants who wish to market a product in various European Union member states where such product has not received marketing approval in any European Union member states before. The decentralized procedure provides for approval by one or more other, or concerned, member states of an assessment of an application performed by one-member state designated by the applicant, known as the reference member state. Under this procedure, an applicant submits an application based on identical dossiers and related materials, including a draft summary of product characteristics, and draft labeling and package leaflet, to the reference member state and concerned member states. The reference member state prepares a draft assessment report and drafts of the related materials within 210 days after receipt of a valid application. Within 90 days of receiving the reference member state’s assessment report and related materials, each concerned member state must decide whether to approve the assessment report and related materials. If a member state cannot approve the assessment report and related materials on the grounds of potential serious risk to public health, the disputed points are subject to a dispute resolution mechanism and may eventually be referred to the European Commission, whose decision is binding on all member states. Pharmaceutical Coverage, Pricing and Reimbursement Significant uncertainty exists as to the coverage and reimbursement status of products approved by FDA and other government authorities. Sales of products will depend, in part, on the extent to which the costs of the products will be covered by third party payors, including government health programs in the United States such as Medicare and Medicaid, commercial health insurers and managed care organizations. The process for determining whether a payor will provide coverage for a product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the product once coverage is approved. Third party payors may limit coverage to specific products on an approved list, or formulary, which might not include all of the approved products for a particular indication. Additionally, the containment of healthcare costs has become a priority of federal and state governments, and the prices of drugs have been a focus in this effort. The U.S. government, state legislatures and foreign governments have shown significant interest in implementing cost-containment programs, including price controls, restrictions on 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. In order to secure coverage and reimbursement for any product that might be approved for sale, a company may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of the product, in addition to the costs required to obtain FDA or other comparable regulatory approvals. A payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved. Third party reimbursement may not be sufficient to maintain price levels high enough to realize an appropriate return on investment in product development. In the European Union, pricing and reimbursement schemes vary widely from country to country. Some countries provide that drug products may be marketed only after a reimbursement price has been agreed. Some countries may require the completion of additional studies that compare the cost-effectiveness of a particular product candidate to currently available therapies. For example, the European Union provides options for its member states to restrict the range of drug products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. European Union member states may approve a specific price for a drug product, or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the drug product on the market. Other member states allow companies to fix their own prices for drug products but monitor and control company profits. The downward pressure on health care costs in general, particularly prescription drugs, has become intense. As a result, increasingly high barriers are being erected to the entry of new products. In addition, in some countries, cross-border imports from low-priced markets exert competitive pressure that may reduce pricing within a country. Any country that has price controls or reimbursement limitations for drug products may not allow favorable reimbursement and pricing arrangements. 38 Healthcare Law and Regulation Healthcare providers, physicians and third-party payors play a primary role in the recommendation and prescription of drug products that are granted marketing approval. Arrangements with third party payors and customers are subject to broadly applicable fraud and abuse and other healthcare laws and regulations. Such restrictions under applicable federal and state healthcare laws and regulations, include the following: ● the federal healthcare anti-kickback statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made, in whole or in part, under a federal healthcare program such as Medicare and Medicaid; ● the federal False Claims Act imposes civil penalties, and provides for civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government; ● the HIPPA imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters; ● HIPAA, as amended by the HITECH and its implementing regulations, also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information; ● the federal false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services; ● the federal transparency requirements under the ACA requires manufacturers of drugs to report to the Department of Health and Human Services information related to payments and other transfers of value to physicians and teaching hospitals and physician ownership and investment interests and the reported information will be made publicly available on a searchable website; and ● analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers. Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report information related to payments to physicians and other health care providers or marketing expenditures. State and foreign laws also govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. Human Capital Resources As of March 22, 2021, we had 20 full-time employees. There are no collective bargaining agreements covering any of our employees. 39 We believe that our success depends on our ability to attract, develop and retain key personnel. We believe that the skills, experience and industry knowledge of our key employees significantly benefit our operations and performance. Employee health and safety in the workplace is one of our core values. The COVID-19 pandemic has underscored for us the importance of keeping our employees safe and healthy. In response to the pandemic, we have taken actions aligned with the World Health Organization and the Centers for Disease Control and Prevention in an effort to protect our workforce so they can more safely and effectively perform their work. Employee levels are managed to align with the pace of business and management believes it has sufficient human capital to operate its business successfully. Research and Development For the years ended December 31, 2020 and 2019, we incurred approximately $14.4 million and $11.2 million, respectively, on research and development activities. These expenses include cash and non-cash expenses relating to the development of our clinical and pre-clinical programs, including our anti-infective product candidates, MAT2203 and MAT2501 as well as support and enhancement of our drug delivery technology. Corporate and Available Information We were incorporated in Delaware under the name Matinas BioPharma Holdings, Inc. in May 2013. We have two operating subsidiaries: Matinas BioPharma, Inc., a Delaware corporation originally formed on August 12, 2011 as Nereus BioPharma LLC, and Matinas BioPharma Nanotechnologies, Inc., a Delaware corporation originally formed on January 29, 2015 as Aquarius Biotechnologies, Inc. Our principal executive offices are located at 1545 Route 206 South, Suite 302, Bedminster, New Jersey 07921, and our telephone number is (908) 443-1860. Our website address is www.matinasbiopharma.com. Our website and the information contained on, or that can be accessed through, our website will not be deemed to be incorporated by reference into this Annual Report on Form 10-K or any other report we file with or furnish to the SEC. We make available on our website, free of charge, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission, or the SEC. Our SEC reports can be accessed through the Investors section of our internet website. Further, a copy of this Annual Report on Form 10-K is located at the SEC’s Public Reference Rooms at 100 F Street, N.E., Washington, D. C. 20549. Information on the operation of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains a website that contains reports, proxy and information statements and other information regarding our filings at http://www.sec.gov. 40