Matinas BioPharma Holdings, Inc. 10-K

Item 1. Business Company Overview We are a clinical-stage biopharmaceutical company focused on redefining the intracellular delivery of nucleic acids and small molecules through our lipid nanocrystal (LNC) delivery platform technology. Our current pipeline consists of two potent anti-infective small molecules, MAT2203 (oral amphotericin B) and MAT2501 (oral amikacin). We are also expanding the application of our LNC platform through collaborations with well-respected pharmaceutical companies whose molecules and compounds benefit from the unique capabilities of our delivery technology, which can provide oral bioavailability and facilitate non-toxic and efficient intracellular delivery. We are intent on further expansion of our LNC platform, both internally and through external partnerships, into the field of nucleic acids where delivery into cells remains a critical element of therapeutic effect. 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 chemical and biological payloads in a way that facilitates safe, efficient, and targeted intracellular delivery for a wide variety of molecules, including nucleic acids (mRNA, DNA, siRNA, antisense oligonucleotides (ASOs)), proteins and small molecules. Our LNCs are primarily comprised of phospholipids, like phosphatidylserine (PS), and calcium (which is required to keep LNCs intact), and are well differentiated from other viral and lipid nano-particle delivery technologies. LNCs have a novel targeting profile utilizing PS fusion and PS-receptor mediated endocytosis. LNCs have a neutral immunogenic profile enabling repeated administration, which is a significant drawback associated with both viral vector (AAV) and lipid nanoparticle (LNP) delivery. The structure of an LNC is highly stable, protecting the payload throughout formulation and following administration into the human body. This stability allows for the avoidance of extreme cold chain storage temperatures required for maintaining the integrity of LNPs and facilitates the oral administration of LNCs, which is not possible with either AAV or LNP delivery as they protect the vulnerable payload from the gastric environment and potential extracellular degradation. LNCs can also be administered via IV injection and intranasally. Because of their unique composition, LNCs can be delivered into a cell through both endocytosis and membrane fusion. Once LNCs gain access to the inside of a cell, they naturally unwind due to the necessarily low calcium concentrations inside a cell. Thereafter, depending on the target, payloads either have their desired impact inside a cell, or utilize the cell as a vehicle to target tissues, in the case of infection or inflammation. 2 Clinical and preclinical studies have demonstrated success in delivering LNCs to professional phagocytes, including macrophages, sites of infection and inflammation, and tumors. Each of these target cells either have exposed PS, enabling cellular fusion, or specific and dedicated PS receptors which facilitate receptor mediated cellular uptake. This tissue targeting, coupled with 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., mRNA, DNA , ASOs, and siRNA,) provide a broad array of potential targets and modalities from which to create a broad pipeline of internal product candidates and partnerships. 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. Amphotericin B is currently only available in IV formulations which are associated with significant renal toxicity and labeled restrictions on its use for up to 2 weeks in the United States and only 1 week in most parts of the world due to its toxicities, the most prevalent of which is severe nephrotoxicity. Despite these limitations, amphotericin B is currently used and approved to treat a variety of invasive, and potentially deadly, fungal infections due to its potency. MAT2203, which is formulated using our LNC delivery technology, has the potential to preserve the efficacy of amphotericin B while eliminating the risk of nephrotoxicity and providing more convenient and cost-effective oral administration. MAT2203’s product profile could potentially allow physicians and patients to use MAT2203 for longer periods of time and more broadly than amphotericin B could ever have been used previously. The initial planned indication for MAT2203 is as step-down therapy from IV amphotericin B during induction treatment in patients with cryptococcal meningitis (CM), a deadly fungal infection located in the brain, and which primarily affects immunocompromised patients. The induction treatment period is typically 14 days and step-down therapy with MAT2203 would begin following an initial, short 1–2-day treatment course with IV amphotericin followed by 12-13 days of MAT2203. This initial step-down indication is a gateway indication, as we plan to expand the utilization of MAT2203 into consolidation therapy in CM patients (weeks 3-6) and then into the treatment of other invasive fungal infections and even for prophylaxis against invasive fungal infections in immunocompromised patients, such as transplant patients. 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. MAT2203 has also received an Orphan drug designation from FDA. Upon approval, MAT2203 could be eligible for up to 12 years of regulatory exclusivity in the United States. 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, the Encochleated Oral Amphotericin for Cryptococcal Meningitis Trial (EnACT), initiated in 2019 and currently enrolling patients in Cohort 4 of the trial. In this trial we are exploring the use of MAT2203 for both induction (step-down and all oral) and consolidation therapy, and we believe that, if positive, this trial could form the foundation for the filing of a New Drug Application for MAT2203. The first three cohorts of EnACT have been completed, with the data from each of the cohorts reviewed by an independent Data Safety Monitoring Board (DSMB) prior to progression from one cohort to the next. EnACT is currently enrolling patients in Cohort 4, which is designed to test an all-oral regimen of MAT2203 during the induction period. Results from Cohort 4 are expected in the third quarter of 2022. Based upon the data from the first two cohorts of EnACT, we held a meeting with the FDA in December of 2021 to discuss potential registration pathways for MAT2203. Following feedback from FDA, we plan to expand the EnACT trial to include a new, Cohort 5, which will replicate the design from Cohort 2, and include more patients where MAT2203 will be evaluated as step-down treatment to IV amphotericin. We anticipate meeting again with FDA in the first half of 2022 to finalize the protocol for Cohort 5 and agree on the requirements for NDA filing for this initial indication. 3 Data to date from EnACT validates the use of MAT2203 in difficult-to-treat fungal infections, and we believe positions MAT2203 to become a best-in-class antifungal drug for the treatment of additional invasive fungal infections. Furthermore, the demonstration that MAT2203 effectively crosses the blood-brain barrier in humans positions our LNC platform delivery technology to potentially be used more broadly with many other types of molecules, potentially including nucleic acids. Our second clinical-stage program is the development of MAT2501, our oral amikacin development program, which also utilizes our LNC platform technology. MAT2501 is currently being studied in a Phase 1, single ascending dose (SAD) pharmacokinetic study in healthy volunteers, with results expected late in the first half of 2022. This program is funded in large part by the Cystic Fibrosis Foundation (CFF) and together we are developing MAT2501 initially for the treatment of non-tuberculous mycobacterial (NTM) infection, a serious lung infection which can be especially problematic in patients with cystic fibrosis (CF). To date, we have received commitments totaling approximately $4.6 million from the CFF based, in part, 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 plan to establish a broad internal and external pipeline of drug candidates utilizing our LNC platform. Internally, we have increased our efforts to demonstrate, validate and optimize the formulation and intracellular delivery of nucleic acids. We also are in active discussions with third parties concerning the formulation of proprietary nucleic acids utilizing our LNC platform and are concentrating on those parties with demonstrated scientific expertise and competitive advantages in the nucleic acid space. We have ongoing collaborations with third parties which have successfully broadened the application of our LNC platform and remain ongoing. ● In December 2019, we announced a feasibility collaboration with Genentech relating to the development of oral formulations of up to three Genentech proprietary compounds applying the LNC platform delivery technology. This collaboration has resulted in the successful formulation of two Genentech compounds and the agreement was recently extended to allow for the formulation and testing of a third proprietary Genentech compound. ● 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. To date, successful in vitro and in vivo studies of LNC formulations of remdesivir have been conducted and another in vivo study is expected to commence in the first quarter of 2022. We continue to evaluate additional potential strategic collaborations with other interested biotechnology and pharmaceutical partners. These collaborations could enable us to grow our external pipeline and generate upfront, license, milestone and royalty payments as we maximize the value of the overall LNC platform delivery technology. Strategy We are focused on redefining the intracellular delivery of nucleic acids and small molecules through our 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. 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 beyond small molecules, including nucleic acids (e.g. mRNA, DNA, ASOs) and proteins, both internally and through additional external collaborations and partnerships. ● Advancing MAT2203 toward NDA filing through the ongoing EnACT study for the treatment of cryptococcal meningitis, which highlights the safety and efficacy of this promising drug candidate, while also 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 (SAD) pharmacokinetic study in healthy volunteers later in 2022, all with the financial support of the CFF. 4 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 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 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 intranasally. 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. Intracellular delivery of molecules is usually accomplished by either endocytosis (through a variety of pathways including phagocytosis, clathrin-mediated endocytosis (CME), caveolin-mediated endocystosis, and macro- and micropinocytosis), or through membrane fusion. LNPs are limited in that they can typically only access a cell via CME, 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 (AEs) and other toxicities associated with LNPs, thereby limiting chronic use. LNPs also cannot be delivered orally. Viral vectors, including adeno-associated virus, attempt 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 both endocytosis and membrane fusion, in addition to having great flexibility with the desired route of administration. 6 We believe that LNC’s unique ability to enter a cell through endocytosis (including phagocytosis and macropinocytosis), membrane fusion, 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 Figure 5: Role of PS and PS Receptors in the Uptake of LNCs into Cells 7 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. Professional phagocytes, with drug-loaded LNCs inside, are believed to 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 advance 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. Safety: 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. Targeted Delivery: The size of our individual LNCs is typically in the range of 50-500 nanometers. 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. 8 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, in animal studies we have orally delivered vaccines, siRNAs, 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 product candidate, MAT2203, is an orally-administered LNC formulation of a broad spectrum anti-fungal drug called amphotericin B. Based on the data generated in Cohort 2 of the EnACT Trial and following an End of Phase 2 Meeting with FDA, we believe we have a pathway to NDA submission for MAT2203 following confirmatory data to be generated in an additional cohort (Cohort 5) in the ongoing EnACT Trial. We additionally believe there are opportunities for approval of MAT2203 for the treatment of additional invasive fungal infections in areas of high unmet medical need, which we will be evaluating in a number of preclinical animal models in Candida auris and mucormycosis in 2022. 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 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 safety based upon the available preclinical tox data for 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 4 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 market exclusivity for MAT2203. We met with the FDA in an End of Phase 2 Meeting in December 2021 to review the Cohort 2 data from the EnACT Trial and discuss a potential path to NDA filing. Following our meeting with FDA, we now have a pathway to NDA submission following confirmatory data to be generated in an additional cohort (Cohort 5) in the ongoing EnACT Trial. We will be meeting with FDA early in the second quarter of 2022 to gain agreement on the design of this confirmatory cohort. 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 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 AEs 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 CFF to complete preclinical studies with Colorado State University which further demonstrated the potential for MAT2501 in treating CF-associated NTM lung infections. In November 2020, we received an additional grant from the CFF in the amount of $3.75 million to support the continued development of MAT2501 through a comprehensive preclinical toxicology program and a SAD study in healthy volunteers with our new and improved formulation of MAT2501. The grant was later increased by $0.3 million in November 2021 to bring the CFF’s total commitment towards the development of MAT2501 to $4.6 million. 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. We are currently conducting key acute and long-term toxicology studies to support Phase 2 clinical trials as well as an ongoing Single Ascending Dose (SAD) Trial. 9 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 reported 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 amphotericin B at the site of infection and a lower level of free circulating drug. 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 drug-carrying phagocytes to inflammatory regions. Based upon data generated 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. These preclinical data have now been born-out in clinical data from Cohort 2 of the EnACT Trial. We believe that MAT2203 has the potential to become a best-in-class induction and consolidation therapy for the treatment of CM in HIV patients by offering the following key potential 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 directly at the site of infection 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 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. 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 a new drug application (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. 10 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 drug; however, it also has significant treatment-limiting side effects, most notably nephrotoxicity. We believe that the ability to provide amphotericin B orally using our proprietary 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 substantial advantage over other amphotericin B formulations in observed toxicities and side effects, which we believe is driven by two primary factors: ● The LNC 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 delivery, 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. Development History of MAT2203 and Initial Target Indication Preclinical Data: Oral MAT2203 has demonstrated antifungal activity when administered orally in several animal models for Cryptococcus , Candida , and Aspergillus infection [ Zarif et al, 2000 ; Perlin, 2004 ; Lu et al, 2019 ]. The efficacy in these animal models have shown to demonstrate comparable or superior antifungal activity compared to IV amphotericin B but with reduced toxicity. The in vivo efficacy of MAT2203 has been shown in multiple mouse models infected with Cryptococcus neoformans; these studies were conducted by Dr Peter Williamson at NIH [ Lu et al, 2019 ]. Multiple studies demonstrated the potential for MAT2203 administered in combination with 5FC to provide an effective oral formulation for treatment of cryptococcal meningitis. Using a 3-day delayed model of murine cryptococcal meningoencephalitis and a large inoculum of a highly virulent strain of serotype A C. neoformans , MAT2203, administered in combination with 5FC, was found to have efficacy equivalent to administered amphotericin B deoxycholate with 5FC and superior to oral fluconazole without any observed toxicity. Transport of fluorescent MAT2203 particles to the brain as well as significant brain levels of amphotericin drug was demonstrated in treated mice, and immunological profiles were similar to those of mice treated with conventional amphotericin B. These studies offer the potential for an efficacious oral formulation of a known fungicidal drug against intrathecal cryptococcal disease. MAT2203 therefore provides a promising therapeutic option for CM. 11 Additional preclinical studies of MAT2203 are planned to investigate the treatment of invasive fungal infections, such as Candida auris and mucormycosis (black fungus), to position MAT2203 for label expansion. Data is expected in late 2022. Clinical Data: Clinical studies conducted and previously completed with MAT2203 include 2 Phase 1 studies in healthy subjects ( Study CAM-102 and Study MB-70011 ), and 2 Phase 2 studies: 1 completed study in patients with moderate to severe vulvovaginal candidiasis (VVC) ( Study MB-70005 ) and 1 study in patients with mucocutaneous candidiasis who are refractory or intolerant to standard non-IV therapies (MB-70004). As of the end of January 2022, MAT2203 has been administered to a total of 247 subjects in 5 clinical trials as follows: 52 healthy subjects (Studies CAM-102 and MB-70011), 36 patients with HIV and 65 patients with cryptococcal meningitis (in EnACT Trial MB-70007), 91 patients with VVC (MB-70005), and 4 patients with mucocutaneous (esophageal and oropharyngeal) candidiasis (MB-70004). In these studies, single doses of MAT2203 up to 2.0 g and repeated doses of MAT2203 up to 2.0 g/day and as long as 60 months have been safe and well-tolerated. Results of these studies support efficacy of oral MAT2203 against Cryptococcus and overall safety of longer-term MAT2203 treatment. The EnACT Trial (MB-70007) consists of 2 parts. Part 1 of the EnACT Trial was conducted in HIV-positive patients with a history of cryptococcosis evaluated ascending oral doses of MAT2203, and identified a safe maximum tolerated dose for Part 2 of the trial. Part 2 of the EnACT Trial is a prospective, randomized, open-label clinical trial to investigate the safety, tolerability, and efficacy of oral MAT2203 compared to Standard of Care (SoC) for the treatment of CM in patients with HIV and was originally divided into four distinct patient cohorts. Cohort 2 of the EnACT Study was 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. This cohort of patients also provided 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 (Cohorts 3 and 4). The primary efficacy endpoint for Part 2 of EnACT is early fungicidal activity (EFA) defined as rate of clearance of Cryptococcus from the cerebrospinal fluid (CSF) (log 10 colony forming units [CFU]/mL/day) as measured by serial quantitative fungal cultures over the first 2 weeks of treatment. In Part 2, cohorts 1, 2, and 3 have been completed and Cohort 4 is ongoing. Enrollment in Cohort 3 has completed with 14 subjects enrolled, 8 of whom are still active in the trial; 10 of the 14 patients received at least 1 dose of MAT2203. Eight patients have been enrolled in Cohort 4 as of 26 January 2022; 5 of these 7 patients received at least 1 dose of MAT2203. In Part 2, Cohort 2 of the EnACT Trial (MB-70007), 40 patients with active CM were treated with MAT2203. The mean EFA for these 40 patients who received MAT2203 during induction was 0.422 log 10 CFU/mL/day (95% CI: 0.294, 0.550). The primary efficacy endpoint for the trial was met because the lower bound of the 95% CI for the mean EFA excluded 0.20 log 10 CFU/mL/day. In addition, among patients treated with MAT2203, CSF sterilization rates were greater than 90% and all patients who completed the induction phase achieved sterile CSF cultures at end of induction or during consolidation treatment. Survival rates in Cohort 2 were high and there were no relapses in patients receiving MAT2203 during consolidation. Additional analysis of final data from Cohort 2 demonstrated survival at Day 30 of 98% in patients receiving MAT2203 vs. 88% in patients receiving IV amphotericin B and culture conversion (sterility) assessed at any time during the trial of 97% in patients receiving MAT2203 and 76% in patients receiving IV amphotericin B. 12 MAT2203 was demonstrated to be safe and well-tolerated over 6 weeks of treatment in Part 2, Cohort 2 of EnACT. The majority of SAEs and AEs reported were considered to be expected in this HIV patient population and there was no evidence of MAT2203-associated renal toxicity or electrolyte abnormalities in patients who received MAT2203. Additionally, GI AEs reported were generally transient, moderate in severity, and did not have an impact on the ability of patients to tolerate the planned treatment course. Health Authority Interactions: In December 2021, the Company had a meeting with FDA to discuss a potential registration pathway for MAT2203. The outcome of the meeting reinforced the FDA’s ongoing commitment to anti-infective drug development generally and to MAT2203 specifically. During the meeting, the FDA expressed no concerns with any data generated to date related to the efficacy, safety, or tolerability of MAT2203. Additional confirmatory evidence was requested for an indication for step-down therapy during induction treatment, but there was no requirement for a separate stand-alone study or enrollment of U.S. patients. The FDA expressed openness to an expansion of EnACT to include a new Cohort 5 to run alongside Cohort 4 in Uganda, increasing the number of clinical sites from two to five to streamline the development program in support of an accelerated NDA submission. The Company is planning to meet with FDA in April 2022 to finalize cohort design, including sample size required for non-inferiority and to discuss a potential primary endpoint of 30-day survival. NIH financial support of EnACT expansion to Cohort 5 is anticipated and the Company continues to evaluate the timing for submission of an application for Breakthrough Designation. A key chemistry, manufacturing, and controls (CMC) meeting with FDA is scheduled late in the first quarter of 2022 to discuss and evaluate our MAT2203 formulation in support of a potential NDA submission in late 2023. The Company also plans to submit a formal Request for Scientific Advice to the European Medicines Agency (EMA) in 2022 to align and plan for expanding the regulatory footprint for MAT2203 globally. 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 Candida 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 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 CF, 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. NTM infections are extremely difficult to treat, especially so in patients with CF (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). MAC and Mycobacterium abscessus complex (MABSC) are NTM 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. MAT2501 Previous and Ongoing Studies The most recently completed pre-clinical animal model studies testing the preclinical efficacy of MAT2501 were funded by a grant from the CFF. An additional grant from the CFF was awarded 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, and later increased by approximately $0.3 million in November 2021, 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. 14 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 NTM infections. 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 ongoing toxicology program is evaluating the optimized formulation of MAT2501 in a rigorous battery of studies to assess and characterize the safety profile of MAT2501. The studies will support the safety package required to progress the development of MAT2501 into Phase 2 clinical trials. These studies are designed to carefully monitor the safety signals known to be associated with IV amikacin treatment (hearing loss and kidney/renal safety). These studies include: ● 28-day rat toxicity study to assess any potential effects of MAT2501 on hearing and associated side effects; and ● 3- and 9-month long-term safety study in dog to support longer-term dosing in clinical trials. We are also currently conducting a Single Ascending Dose (SAD) trial with the optimized formulation of MAT2501 which is currently in the enrollment phase of the study in which we are assessing the PK, safety, and tolerability of escalating doses of MAT2501. Topline data from the trial are expected in the later part of the second quarter of 2022. Additional Phase 1B and Phase 2 trials for the treatment of NTM are expected to commence in 2023, pending additional financial support from the CFF. 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. LYPDISO The Company continues to evaluate potential options for its legacy asset, LYPDISO™. LYPDISO is a prescription-only omega-3 fatty acid-based composition, comprised primarily of EPA and DPA, intended for the treatment of cardiovascular and metabolic conditions. This next-generation omega-3 therapy has been shown in two head-to-head studies to provide effective triglyceride-lowering and significantly higher EPA blood levels than Vascepa ® . A global process to identity and potentially secure a partner to continue development of LYPDISO remains ongoing. 15 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 AEs. 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, and this remains a key part of our strategy to maximize the value of this unique and disruptive LNC delivery technology. 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. Genentech recently extended this collaboration for another year, through 2022. The original agreement provided for cooperation on up to three proprietary Genentech compounds for initial in vitro testing. Two of the programs have been completed. Each demonstrated the successful intracellular delivery of LNC-formulated small molecules and oligonucleotides, without accompanying toxicity. Genentech is evaluating the third proprietary compound to provide the Company for testing, and the Company anticipates additional data from this program during 2022. 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. In the fourth quarter of 2021, the NIAID, together with the Department of Epidemiology at the University of North Carolina at Chapel Hill (UNC), conducted an in vivo test of our LNC formulation of Gilead Science’s remdesivir (LNC-RDV) in a standard genetically modified mouse model of SARS-CoV-2 infection. In this animal model, orally administered LNC-RDV reduced viral titers and improved clinical parameters of body weight and congestion scores five days following infection, with effects similar to those seen with subcutaneous administered remdesivir. Following discussion with both NIAID and Gilead, these highly encouraging results position LNC-RDV for further in vivo work to be conducted at UNC and supported by NIAID. This preclinical study is anticipated to commence late in the first quarter of 2022, with data expected in the second half of 2022. We continue to evaluate additional potential strategic collaborations with other interested biotechnology 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 partners. 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. 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. We changed the name of Aquarius Biotechnologies Inc. to Matinas BioPharma Nanotechnologies, Inc. and in February of 2022, the parties agreed to a Second Amended and Restated Exclusive License Agreement. The agreement provides for (1) royalties on a tiered basis between low single digits and the mid-single digits of net sales of products using such licensed technology, (2) 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 (3) an annual license fee of $50,000 over the term of the license agreement. There was also a reduction in the consideration paid to Rutgers in the event of a sublicense to a third party of the exclusive patent rights granted pursuant to the Agreement. In consideration of the concessions made by Rutgers in the license agreement, the Company issued Rutgers 400,000 shares of common stock in February 2022. We also agreed to continue to assume the responsibility to pay required patent prosecution and maintenance fees covering the technology. 16 Unless otherwise terminated by either party, the term of the license, on a country-by-country basis, shall be the longer of 8-1/2 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 eight years of the effective date of the Second Amended and Restated 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. 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 20 patents issued within the last 5 years, which extends patent protection until at least 2033. In addition, over the past 6 years, we have over 30 Matinas-owned pending patent applications filed both in the United States and in foreign jurisdictions. 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, use of site-regulating agents to control LNC size, methods of treating Mycobacterial infections, methods of treating cryptococcus infections, and LNC-mediated delivery of nucleic acids. 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. 17 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 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. Although we believe that our proprietary LNC platform delivery technology, experience, and knowledge in our areas of focus provide us with competitive advantages, 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. 18 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 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 lease and operate in-house manufacturing capabilities for our lead LNC platform delivery technology product candidates, MAT2203 and 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 are exploring relationships with well-respected third-party contract manufacturers for the formulation and manufacture of MAT2203 necessary to support the filing of an NDA and to support commercial manufacture for this product. We may also 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. There are several 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. 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(DOJ) or other governmental entities. 19 Our product candidates must be approved by FDA through the NDA or biologics license application (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 (cGLP), regulations; ● submission to FDA of an investigational new drug applications (IND), which must take effect before human clinical trials may begin; ● approval by an independent institutional review board (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 (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 (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 (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 IND. Companies usually must complete some long-term nonclinical testing, such as animal tests of reproductive AEs 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. 20 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 another 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. Progress reports detailing the results of the clinical trials must be submitted at least annually to FDA and more frequently if serious AEs 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. 21 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 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. 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. 22 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. 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. 23 FDA’s Decision on an NDA Based on 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 for FDA to reconsider the application. 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 AEs 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. 24 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 AEs 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 (ANDA) 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 (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 (RLD). Specifically, for an 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. 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. 25 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. 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. 26 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 2026; 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. 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. 27 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 General Data Protection Regulation, or GDPR, adopted in 2016, 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, including, but not limited to, requirements 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 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. 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. 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. 28 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. 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. 29 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 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. 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. 30 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 applies 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. 31 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 February 25, 2022, we had 31 full-time employees. There are no collective bargaining agreements covering any of our employees. 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. 32 Research and Development For the years ended December 31, 2021 and 2020, we incurred approximately $14.6 and approximately $14.4 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. Our research and development expenses reflect the reimbursement of certain MAT2501 program expenses of approximately $2.2 million and approximately $0.1 million during the years ended December 31, 2021 and 2020, respectively, related to the CFF grant agreement. 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) 484-8805. 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.