Item 1. Business
ITEM 1. BUSINESS
SUMMARY
This summary highlights information contained
elsewhere in this report This summary does not contain all the information you should consider before investing in the securities. However,
you should read the entire report carefully, including the “Risk Factors,” “Management’s Discussion and Analysis
of Financial Condition and Results of Operations,” and our financial statements, including the notes thereto, appearing elsewhere
in this report.
Our primary business is the development of a portfolio
of transdermal pharmaceutical products. Our lead product is our AVERSA ™ technology,
an abuse deterrent technology that can be added to a new or existing transdermal patch with the goal of deterring the abuse of certain
drugs when delivered transdermally. Our first product under development is our AVERSA fentanyl patch (“AVERSA Fentanyl”) to
provide clinicians and patients with an extended-release, transdermal-delivered fentanyl product for use in managing chronic pain requiring
around the clock opioid therapy, combined with our AVERSA® technology to reduce the abuse and misuse of fentanyl patches. Following
our acquisition of 4P Therapeutics on August 1, 2018, we are planning to develop, and seek FDA approval of, a number of transdermal pharmaceutical
products under development by 4P Therapeutics. With the acquisition of the transdermal, topical, cosmetic and nutraceutical business of
Pocono Coated Products, LLC effective August 31, 2020, we manufacture on a contract basis transdermal, topical, coated and consumer products.
Selected Risks Associated with our Business
and Operations
Our business is subject to significant risks,
which are disclosed in more detail under “Risk Factors,” which begins on page 13, as a result of which an investment in
our common stock is highly speculative and could result in the loss of your entire investment. Significant risks include, but are not
limited to, the following:
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Our business could be adversely affected by the effects of health pandemics or epidemics, including the recent outbreak of COVID-19, which was declared by the World Health Organization as a global pandemic, and is resulting in travel and other restrictions to reduce the spread of the disease, including state and local orders across the country, which, among other things, direct individuals to shelter at their places of residence, direct businesses and governmental agencies to cease non-essential operations at physical locations, prohibit certain non-essential gatherings, and order cessation of non-essential travel. The effects of these orders, government-imposed quarantines and measures we would take, such as work-from-home policies, may negatively impact productivity, disrupt our business and could delay our clinical programs and timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course. These and similar, and perhaps more severe, disruptions in our operations could negatively impact our business, operating results and financial condition. Further, quarantines, shelter-in-place and similar government orders, or the perception that such orders, shutdowns or other restrictions on the conduct of business operations could occur, related to COVID-19 or other infectious diseases could impact personnel at third-party manufacturing facilities in the United States and other countries, or the availability or cost of materials, which could disrupt our supply chain.
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The FDA regulatory process may take longer and be more expensive than we anticipate without any assurance that we will obtain FDA approval.
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If we are not able to obtain FDA approval for our lead product, we may not have the resources to develop any other product, and we may not be able to continue in business.
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We may not be able to launch any products for which we receive FDA marketing approval.
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We may not be able to establish a distribution network for the marketing and sale of any products for which we receive FDA approval.
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We may not be able to establish manufacturing facilities in compliance with FDA good manufacturing practices or to enter into manufacturing agreements for the manufacture of our products in an FDA approved manufacturing facility.
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It will be necessary to us to enter into a joint venture or other strategic relationship in order to develop, perform clinical testing for, manufacture or market any of our proposed products. We may not be able to enter into such a relationship, and any relationship may not be successful, and the other party may have business interests and priorities that are different from ours.
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We may not be able to protect our rights in our intellectual property, and we may be subject to intellectual property litigation which would be expensive and disruptive of our operations even if we eventually prevail on the merits.
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Unanticipated side effects or other adverse events resulting from the use of our product could require a recall of our products and, even if no recall is required, our reputation could be impaired by side effects.
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We may fail to comply with all applicable laws and regulations relating to our product. We may have to change or adapt our operations in the event of changes in national, regional and local government regulations, taxation, controls and political and economic developments that affect our products and the market for our products;
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We may be unable to accurately estimate anticipated expenses, capital requirements and needs for additional financing;
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The terms of our recent financing, including the antidilution provisions of the warrants, may impair our ability to raise funds for our operations during the term of the warrants.
Our Business
Our primary business is the development of a portfolio of transdermal
pharmaceutical products. Our development pipeline consists of transdermal products that are based on our proprietary AVERSA ®
abuse deterrent transdermal technology that can be incorporated into transdermal patches that contain drugs that are susceptible to abuse
and misuse.
Our first product under development is AVERSA Fentanyl, an abuse deterrent
fentanyl transdermal system that combines an existing generic fentanyl patch with our AVERSA technology to reduce the abuse and misuse
of fentanyl patches. We believe that AVERSA technology can be broadly applied to various transdermal products, and our plan is to follow
the development of our abuse deterrent fentanyl transdermal system with the development of additional transdermal deterrent products for
pharmaceuticals that have a risk or history of abuse. Specifically, we have expanded our development pipeline to include AVERSA Buprenorphine
and AVERSA Methylphenidate. In addition, we are developing a portfolio of transdermal pharmaceutical products to deliver already approved
drugs or biologics that are typically delivered by injection but with the potential to improve compliance and therapeutic outcomes by
providing them as transdermal patches.
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We have signed a feasibility agreement for with Kindeva Drug Delivery,
formerly 3M Drug Delivery, for the development of AVERSA Fentanyl using Kindeva’s FDA approved Fentanyl patch. The
feasibility agreement is focused on adapting Kindeva’s commercial transdermal manufacturing process to incorporate AVERSA technology.
The product development program for AVERSA Fentanyl
includes performing preclinical and clinical studies to demonstrate the abuse deterrent properties of the product. The program assumes
that the fentanyl transdermal system is already approved and the only change to the approved product will be to incorporate the AVERSA
technology into the patch design with no change being made to the fentanyl drug matrix or its demonstrated safety or drug release characteristics.
Preclinical studies to be performed primarily consist of laboratory-based in vitro manipulation and extraction studies in various extraction
media per FDA guidance. Clinical evaluation primarily consists of a Phase 1 Human Abuse Liability (HAL) study to demonstrate the abuse
potential of the product per FDA guidance. The regulatory path for FDA approval is planned to be a 505(b)(2) NDA submission to access
the safety and efficacy information on file for Duragesic ® fentanyl transdermal system as the reference-listed drug. The
product development program for the additional AVERSA pipeline products, AVERSA Buprenorphine and AVERSA Methylphenidate, are similar
to that of AVERSA Fentanyl, assuming that the AVERSA technology is incorporated into an already approved transdermal patch.
Through July 31, 2018, we had not generated any
revenue from our business, which was the research and development of transdermal consumer patches. Consumer products are products that
can be sold over-the-counter and do not require a prescription. Most transdermal patches are considered drugs in the United States and
cannot be marketed in the United States without approval from the FDA. We have not taken any steps to seek to obtain FDA approval for
any of our consumer products in development, and we have no plans to do so in the near term.
Acquisition of 4P Therapeutics
Pursuant to an acquisition agreement dated April
5, 2018 between us and 4P Therapeutics, on August 1, 2018, we acquired all of the equity interest in 4P Therapeutics from Steven Damon,
the owner of 4P Therapeutics. The purchase price of $2,250,000, consisting of 62,500 shares of common stock, valued at $1,850,000, and
cash of $400,000, and are to pay Mr. Damon a 6% royalty on any revenue we receive or derive from our utilization or sale of the abuse
deterrent intellectual property that we acquired as a part of the assets 4P Therapeutics, including partner license milestones and development
payments. The royalty is payable pursuant to the acquisition agreement and continues as long as we generate revenue from our utilization
or sale of the abuse deterrent intellectual property we acquired as part of the acquisition of 4P Therapeutics. The 62,500 shares were
issued to Mr. Damon (41,750 shares) and Dr. Alan Smith (20,750 shares). In connection with the acquisition, Mr. Damon retained any cash
and accounts receivable and assumed any liabilities other than those relating to the ongoing business. Pursuant to the acquisition agreement,
we appointed Mr. Damon to our board of directors in April 2018, when we signed the acquisition agreement, and we agreed to pay Mr. Damon
the compensation received by independent board members.
As a result of the acquisition, the focus of our business has changed
from the development and marketing outside of the U.S. of consumer transdermal products to the development of 4P Therapeutics’ portfolio
of pharmaceutical transdermal products. Our lead product under development is AVERSA ® Fentanyl (abuse deterrent fentanyl
transdermal system) which we plan to develop to deter the abuse and accidental misuse of fentanyl transdermal patches. Fentanyl is a potent
synthetic opioid that is marketed as a transdermal patch for chronic pain management. There are currently a number of generic fentanyl
patches on the market but none of them have abuse deterrent properties. We believe that our AVERSA ® abuse deterrent technology,
containing aversive agents will significantly deter the abuse and accidental misuse of fentanyl from transdermal patches.
With the acquisition of 4P Therapeutics, we acquired
a research pipeline of other transdermal products, including peptides and proteins such as exenatide for type 2 diabetes and FSH for infertility.
These drugs are off patent but are currently only available as injections, and we are evaluating the possibility of developing a transdermal
delivery system for these drugs as an alternative to injection but with improved compliance and safety. In addition, we may develop certain
generic transdermal products where we think we can make an improvement to existing patches and where we believe we can take significant
market share with good profit margins. One example of such a product candidate is the development of a generic scopolamine patch. The
prioritization of our portfolio product candidates will be reviewed on an ongoing basis and will take into account technical progress,
market potential and commercial interest. We cannot assure you that we will be able to develop and obtain FDA approval for any of these
potential products or that we can be successful in marketing any such products. The FDA approval process can take many years to complete
successfully, and we will require substantial funding for each product that goes through the process. We cannot assure you that we will
obtain FDA marketing approval for any of our products.
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In addition to performing research and development for its own products,
4P Therapeutics performs contract research and development services for a small number of clients in the life sciences field to help support
its ongoing operations. The work includes conducting early-stage drug and device clinical and preclinical studies and providing clinical-regulatory
and formulation/analytical consulting services. Neither we nor current clients have any long-term commitments, and either party can terminate
at any time. We do not expect to generate significant revenues from these services.
Acquisition of Pocono Coated Products
On August 25, 2020, the Company formed Pocono
Pharmaceuticals Inc.(“Pocono”), a wholly owned subsidiary of the Company. Effective August 31, 2020, the Company entered into
a Purchase Agreement (“Agreement”) with Pocono Coated Products (“PCP”), a manufacturer of Topical and transdermal
products, pursuant to which PCP agreed to sell the Company certain of the assets and liabilities associated with its Transdermal, Topical,
Cosmetic and Nutraceutical business (the “Business”), including all related equipment, intellectual property and trade secrets,
cash balances, receivables, bank accounts and inventory. The net assets were contributed to Pocono. Included in the transaction, the Company
acquired 100% of the membership interests of Active Intelligence LLC (“Active Intelligence”). The purchase price for the assets
of the Business is (i) $6,000,000 paid in 608,519 shares of the Company’s common stock, based on the average price for the Company’s
common stock for the previous 90 days as of the date of Closing (the “Shares”); (ii) a promissory note of the Company in the
principal amount of $1,500,000, which has been paid in full as of October 1, 2021.
Our Organization
We are a Nevada corporation, incorporated on January
4, 2016. In January 2016, we acquired Nutriband Ltd, an Irish company which was formed by Gareth Sheridan, our chief executive officer,
in 2012, to enter the health and wellness market by marketing transdermal patches. Our corporate headquarters are located at 121 S. Orange
Ave. Suite 1500, Orlando, Florida 32801, telephone (407) 377-6695. Our website is www.nutriband.com . Information contained on or
available through our website or any other website does not constitute a portion of this annual report.
Implications of Being an Emerging Growth Company
As a company with less than $1.07 billion in revenue
during our last fiscal year, we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups
Act of 2012, or the JOBS Act. An emerging growth company may take advantage of reduced reporting requirements that are otherwise generally
applicable to public companies, although as a smaller reporting company we are taking advantage of reduced reporting requirements. In
particular, as an emerging growth company, we:
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may present only two years of audited financial statements and related disclosure under Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A;
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are not required to provide a detailed narrative disclosure discussing our compensation principles, objectives and elements and analyzing how those elements fit with our principles and objectives, which is commonly referred to as “compensation discussion and analysis”;
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are not required to obtain an attestation and report from our auditors on our management’s assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002;
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are not required to obtain a non-binding advisory vote from our stockholders on executive compensation or golden parachute arrangements (commonly referred to as the “say-on-pay,” “say-on frequency” and “say-on-golden-parachute” votes);
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are exempt from certain executive compensation disclosure provisions requiring a pay-for-performance graph and chief executive officer pay ratio disclosure;
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are not required to conduct an evaluation of our internal control over financial reporting by our auditors.
We intend to take advantage of all of these reduced
reporting requirements and exemptions. However, since we have already adopted certain new or revised accounting standards under §107
of the JOBS Act, we are not able to take advantage of the delayed phase in of the new or revised accounting standards.
Under the JOBS Act, we may take advantage of the
above-described reduced reporting requirements and exemptions for up to five years after our initial sale of common equity pursuant to
a registration statement declared effective under the Securities Act of 1933, as amended, or such earlier time that we no longer meet
the definition of an emerging growth company. The JOBS Act provides that we would cease to be an “emerging growth company”
if we have more than $1.07 billion in annual revenues (as adjusted for inflation), have more than $700 million in market value of our
common stock held by non-affiliates, or issue more than $1 billion in principal amount of non-convertible debt over a three-year period.
Under current Securities and Exchange Commission, or SEC, rules however, we will continue to qualify as a “smaller reporting company”
for so long as we have either (i) a public float (i.e., the market value of common equity held by non-affiliates) of less than $250 million
as of the last business day of our most recently completed second fiscal quarter or (ii) annual revenues of less than $100 million and
a public float of less than $700 million.
Effects of the COVID-19 Pandemic
Our business may be affected by the COVID-19 pandemic
and the response to the pandemic. Factors which may affect our business include, but are not limited to, the following:
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Our ability to raise financing for our operations and to enter into a joint venture agreement may be affected by both the willingness and ability of potential financing sources and potential joint venture partners to invest in an undercapitalized business, particularly at a time when the potential financing source or joint venture partner may need to devote its resources to existing portfolio companies or joint ventures which may be in need of financing decision by investors who would invest in early stage pharmaceutical companies to limit their financing efforts to companies that are dealing with products or services related to COVID-19 diagnosis or treatment.
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The decision by investors who would invest in early-stage pharmaceutical companies to limit their financing efforts to companies that are dealing with products or services related to COVID-19 diagnosis or treatment.
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The effect of recent stock market declines on the willingness of investors to make an investment in our securities.
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The financial health of our potential contract service customers.
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Our ability to perform contract services.
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Our ability to obtain any goods or services which we may need to perform contract services.
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The ability of our foreign distributors to obtain regulatory approval, which may be affected by the regulatory agencies giving a low priority to products such as our consumer patches.
Pharmaceutical Products in Development
We have a pipeline of transdermal pharmaceutical
products that are primarily in the early stages of development. Our current focus is on the development of AVERSA Fentanyl for which we
have signed a feasibility agreement with Kindeva Drug Delivery, a contract development and manufacturing organization. We plan to follow
on from this with development of additional products utilizing the AVERSA abuse deterrent transdermal technology, AVERSA Buprenorphine
and AVERSA Methylphenidate.
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Our lead product under development is our AVERSA
Fentanyl product which is an abuse deterrent fentanyl patch for the treatment of chronic pain. As the United States faces an epidemic
of opioid abuse, fentanyl transdermal patches have become an attractive target for recreational drug abusers due to the high potency
of fentanyl and its ease of abuse by the oral route. We are looking to utilize our proprietary approach to incorporate aversive agents
into the transdermal patch to deter the abuse of fentanyl patches by the oral, buccal and inhaled routes, which represent as much as
70% of all transdermal fentanyl abuse. The technology is based on the incorporation of taste and sensory aversive agents into the patch
that have high potency, established safety, and the potential to prevent accidental misuse by children and pets. The aversive agents
are coated onto the backing of the transdermal patch in a controlled release formulation that provides immediate and sustained release.
This provides several advantages including physical separation of the aversive agents from the drug matrix, availability of aversive
agents before and after use as well as making it difficult to separate the aversive agents from the drug by extraction. The aversive
agents are not contained in the drug matrix and are not delivered to the skin during patch wear. In addition to the fentanyl patch, this
technology has broad applicability to any therapeutic patch where deterring abuse as well as accidental misuse by children and pets are
valuable attributes.
We believe that our abuse deterrent technology
can be broadly applied to various transdermal products and our strategy is to follow the development of our AVERSA Fentanyl with the development
of additional products for pharmaceuticals that have a risk or history of abuse. For example, we believe that our technology can be utilized
in other transdermal products to deter the abuse of other drugs such as buprenorphine, an opioid used to treat acute pain and chronic
pain, and methylphenidate, a central nervous system stimulant. Buprenorphine is an opioid used to treat opioid addiction, acute pain and
chronic pain. It can be used under the tongue, by injection, as a skin patch, or as an implant. For opioid addiction, it is typically
only started when withdrawal symptoms have begun and for the first two days of treatment under direct observation of a health care provider.
For longer term treatment of addiction, a combination formulation of buprenorphine/naloxone is recommended to prevent misuse by injection.
Methylphenidate, sold under various trade names, such as Ritalin in oral form, and in transdermal patch form known as Daytrana, is a central
nervous system stimulant that is used in the treatment of attention deficit hyperactivity disorder and narcolepsy. We plan to develop
transdermal delivery systems for buprenorphine and methylphenidate after we make significant progress on our abuse deterrent fentanyl
transdermal system.
Our research pipeline consists primarily of drug compounds which have
been previously approved by the FDA and are now off-patent. In some cases, we are developing a non-injectable version of the drug utilizing
our transdermal technology which represents a new route of administration. In most cases, we plan to utilize the 505(b) (2) NDA regulatory
pathway provided by the FDA which allows us to reference the safety information on file at FDA for the approved drug or to reference the
published literature instead of having to generate new safety information that would typically be required for new chemical entities.
However, we cannot assure you that the FDA will concur with our approach or that we will be able to receive FDA approval to market any
of products that we develop.
We are also exploring product applications for
our transdermal technology to deliver proteins and peptides such as exenatide for type 2 diabetes and follicle stimulating hormone (FSH)
for infertility. Presently, these products are only available by injection or oral routes. We believe that transdermal delivery has the
potential to improve compliance, which can lead to improved therapeutic outcomes associated with these treatments.
Exenatide (exendin-4) is a glucagon-like peptide-1
(GLP-1) receptor agonist which is approved to improve glycemic control in patients with type 2 diabetes mellitus. Exenatide is currently
approved as a twice-daily subcutaneous injection or as a once-weekly injection. However, many patients have a strong aversion to needles,
resist initiation of injections even when oral agents are failing to control their diabetes and struggle with compliance after starting
therapy. We have performed pre-clinical work on the development of a novel transdermal patch for administration of exenatide to match
the therapeutic plasma levels achieved by subcutaneous injections of exenatide. However, we need substantial funds before we can continue
these efforts. In addition to being needle-free, painless and easy-to-use, our proposed exenatide transdermal system is being designed
to incorporate compliance tracking to help providers improve patient outcomes. We believe that the development of an exenatide patch matching
the profile of exenatide injections will follow the 505(b)(2) NDA regulatory pathway, thereby limiting the extent of safety and efficacy
trials required for FDA approval, although we cannot assure you that the FDA will agree. Transdermal exenatide is currently in the preclinical
phase of development.
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Follicle-stimulating hormone (FSH) is a gonadotropin,
a glycoprotein polypeptide hormone that is synthesized and secreted by the gonadotropic cells of the anterior pituitary gland. Follicle
stimulating hormone (FSH) is indicated for the treatment of infertility in women and is currently only approved and marketed as a subcutaneous
injection. FSH is mainly used for ovarian hyperstimulation as part of an in vitro fertilization (IVF) regimen. There are several purified
and recombinant FSH injections currently on the market. We are developing a novel transdermal patch to match the pharmacokinetic profile
of FSH subcutaneous injection but without the need for painful injections. Transdermal FSH is intended to offer a painless, easy to use
one-step application to improve patient compliance with FSH therapy. Transdermal FSH will be offered at multiple strengths to match the
typical doses prescribed to treat infertility. We plan to conduct a Phase 1 clinical trial to demonstrate that the transdermal patch can
match the pharmacokinetics of subcutaneous injection. Then we plan to conduct an irritation and sensitization study to demonstrate the
skin safety of the product and a pivotal clinical efficacy trial to demonstrate that transdermal FSH is not inferior to subcutaneous injection.
We intend to seek to utilize the 505(b)(2) NDA regulatory pathway to register the product with the FDA which allows us to reference the
know safety of FSH on file at FDA for the reference listed drug and the safety information that has been published in the literature.
We have not yet communicated with the FDA on our proposed development plan or registration plan and we cannot assure you that the FDA
will agree to our use of the 505(b)(2) pathway. Transdermal FSH is currently in the preclinical phase of development.
In addition, we may seek to develop certain generic
transdermal products where we think we can efficiently make an improvement to existing patches and potentially take significant market
share with good profit margins.
The prioritization of our portfolio of product
candidates will be reviewed on an ongoing basis and will take into account technical progress, market potential, available funding and
commercial interest. Our ability to take any meaningful steps to the development of any of these products is determined by our ability
to provide sufficient funding for such activities. As stated above, without additional financing or a joint venture agreement we will
not be able to take any steps to the development of any of these products.
We currently have no branded OTC or Consumer products
nor do we plan to launch any OTC or Consumer products in the near term as our focus is primarily on our pharmaceutical development pipeline
and continuing the contract services offered by both 4P Therapeutics and Pocono Pharma.
Pharmaceutical Manufacturing and Supply
Manufacturing of our pharmaceutical transdermal
products in development will be performed in compliance with FDA current Good Manufacturing Practices (cGMP) and all applicable local
regulations by contract manufacturers. All manufacturing processes and facilities will be subject to review by the FDA during development,
prior to approval and during subsequent routine FDA inspections. We plan to continue to rely on contract manufacturers and, potentially,
collaboration partners to manufacture commercial quantities of our products, if and when approved for marketing by the FDA.
Employees
As of January 31, 2022, the Company has 13 full time employees, of
which five are officers of the Company. None of our employees are represented by a labor union, and we consider our employee relations
to be good.
Government Regulation
United States
The pharmaceutical business is subject to extensive
government regulation. In the United States, we must comply with the rules and regulations of the FDA. In other countries we must comply
with the laws and regulations of each country to legally market and sell our products. Obtaining FDA approval does not mean that the product
will be approved in other countries. Each country may require that additional clinical and nonclinical studies be conducted prior to approval.
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The process required by the FDA to receive approval
prior to marketing and distributing a drug in the United States generally involves a preclinical phase followed by three phases of clinical
trials. The definition of drug is broadly defined and includes the pharmaceutical products we have in development. Even though the drug
used in each of our proposed products is currently approved by the FDA in other dosage forms, we will still need to conduct a development
program that will include preclinical and clinical trials before we receive FDA marketing approval. The FDA also has a number of abbreviated
approval pathways which, if we are eligible, could shorten the time for approval. For example, the regulatory path for the AVERSA products
in development is intended follow a 505(b)(2) NDA regulatory pathway which reduce the amount of clinical work that needs to be performed
to a single trial to evaluate the abuse potential of the product as the safety and efficacy of the drug has already been established.
However, we cannot be certain that we will be able to use any abbreviated approval pathway, in which event we will need to comply with
the full regulatory pathway as described below.
The full (although not typical for the AVERSA
related products) FDA regulatory pathway consists of the following phases of development.
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Preclinical phase . Before a drug company can test an experimental treatment in humans, it must prove the drug is safe and effective in animals. Scientists run tests in various animals before presenting the data to the FDA as an investigational new drug application. For already approved drugs, an animal study may not be required prior to testing in humans. In most cases, the company must file an Investigational New Drug (IND) submission to get clearance to test the product in humans.
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Phase one clinical trial . In the first round of clinical trials, the drug company attempts to establish the drug’s safety in humans. Drug researchers administer the treatment to healthy individuals — instead of patients suffering from the disease or condition the drug is intended to treat — and gradually increase the dose to see if the drug is toxic at higher levels or if any possible side effects occur. These drug trials are usually small, containing about 20 to 80 participants, according to the FDA. For drug delivery products incorporating already approved drugs, Phase 1 studies involve measuring blood levels of the drug to understand the pharmacokinetics for a new route of administration.
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Phase two clinical trial . In the second round of clinical trials, researchers give the treatment to patients who have the disease to assess the drug’s efficacy. The trial is randomized, meaning half of the study participants receive the drug and half receive a placebo. These trials usually contain hundreds of participants, according to the FDA. There is about a 30 percent chance of a drug moving on to a phase three clinical trial, according to data from the biotech trade organization BIO. For already approved drugs, as is the case with drug delivery products, a Phase 2 trial may not be necessary as the therapeutic drug doses and blood concentrations are already known. However, a Phase 2 may be conducted to inform the design of the Phase 3 clinical trial in regards to the safety and efficacy of the product when used by patients.
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Phase three clinical trial . In the third phase of clinical trials, researchers work with the FDA to design a larger trial to test the drug’s ideal dosage, patient population and other factors that could decide whether the drug is approved, according to the report. These trials usually contain a few hundred to thousands of participants. In the case of drug delivery products that utilize an approved drug, Phase 3 trials will typically include a comparison to the already approved reference product. For example a transdermal patch may be compared to an injection.
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New drug application . Once a drug company collects and analyzes all data from the clinical trials, it submits a new drug application to the FDA. The application includes trial data, preclinical information and details on the drug’s manufacturing process. If the FDA accepts the application for review, the agency has ten months — or six months if the drug has priority review status — to make a decision, according to the report. The FDA can hold an advisory committee meeting where independent experts assess the data and recommend whether to approve the drug. From there, the FDA will either approve the drug or give the applicant a complete response letter, which explains why the drug did not get approved and what steps the applicant must take before resubmitting the application for approval.
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Before approving an NDA, the FDA may inspect the
facilities where the product is being manufactured or facilities that are significantly involved in the product development and distribution
process and will not approve the product unless compliance with current good manufacturing practices is satisfactory. The FDA may deny
approval of an NDA if applicable statutory or regulatory criteria are not satisfied, or may require additional testing or information,
which can delay the approval process. In pursuing FDA approval there may be various delays and it is possible that approval may never
be granted. In addition, new government requirements may be established that could delay or prevent regulatory approval of our product
candidates under development.
If a product is approved, the FDA may impose limitations
on the indications for use for which the product may be marketed, may require that warning statements be included in the product labeling,
may require that additional studies or trials be conducted following approval as a condition of the approval, may impose restrictions
and conditions on product distribution, prescribing or dispensing in the form of a risk management plan, or impose other limitations.
Once a product receives FDA approval, marketing
the product for other indicated uses or making certain manufacturing or other changes related to the product will require FDA review and
approval of a supplemental NDA or a new NDA, which may require additional clinical safety and efficacy data and may require additional
review fees. In addition, further post-marketing testing and surveillance to monitor the safety or efficacy of a product may be required.
Also, product approvals may be withdrawn if compliance with regulatory standards is not maintained or if safety or manufacturing problems
occur following initial marketing.
With respect to the labeling for our abuse deterrent
transdermal fentanyl system or any other opioid transdermal patch we develop, it is likely that we will need to disclose the risks of
improper use or abuse using language required by the FDA.
FDA Approval Pathways
The FDA has several pathways that can be followed
to obtain FDA approval.
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A stand-alone NDA is an application submitted under Section 505(b)(1) of the Food, Drug and Cosmetic Act (“FD&C Act”) and approved under Section 505(c) of the FD&C Act that contains full reports of investigations of safety and effectiveness that were conducted by or for the applicant or for which the applicant has a right of reference or use. This is typically the pathway used for new chemical entities.
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A 505(b)(2) application is an NDA submitted under Section 505(b)(1) and approved under Section 505(c) of the FD&C Act that contains full reports of investigations of safety and effectiveness, where at least some of the information required for approval comes from studies not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use. This is the pathway typically taken for off-patent drugs that are being development into alternate dosage forms or routes of administration.
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An ANDA is an application for a duplicate of a previously approved drug product that was submitted and approved under Section 505(j) of the FD&C Act. An ANDA relies on the FDA’s finding that the previously approved drug product is safe and effective. An ANDA generally must contain information to show that the proposed generic product (1) is the same as the drug with respect to the active ingredients, conditions of use, route of administration, dosage form, strength and labeling (with certain permissible differences) and (2) is bioequivalent to the referenced drug. An ANDA may not be submitted if studies are necessary to establish the safety and effectiveness of the proposed product. This is the pathway taken for generic drugs.
We cannot assure you that we will be able to take
advantage of any of the available abbreviated approval pathways for any of our proposed products.
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Post-approval requirements
Any drug products for which we receive FDA approval
will be subject to continuing regulation by the FDA. Certain requirements include, among other things, record-keeping requirements, reporting
of adverse events with the product, providing the FDA with updated safety and efficacy information on an annual basis or more frequently
for specific events, product sampling and distribution requirements, complying with certain electronic records and signature requirements
and complying with FDA promotion and advertising requirements. These promotion and advertising requirements include, among others, standards
for direct-to-consumer advertising, prohibitions against promoting drugs for uses or patient populations that are not described in the
drug’s approved labeling, known as “off-label use,” and other promotional activities, such as those considered to be
false or misleading. Failure to comply with FDA regulations can have negative consequences, including the immediate discontinuation of
noncomplying materials, adverse publicity, enforcement letters from the FDA, mandated corrective advertising or communications with doctors,
and civil or criminal penalties. Such enforcement may also lead to scrutiny and enforcement by other government and regulatory bodies.
Although physicians may prescribe legally available
drugs for off-label uses, manufacturers may not encourage, market or promote such off-label uses. As a result, “off-label promotion”
has formed the basis for litigation under the Federal False Claims Act, violations of which are subject to significant civil fines and
penalties. In addition, manufacturers of prescription products are required to disclose annually to the Center for Medicaid and Medicare
any payments made to physicians and teaching hospitals in the U.S. under the federal Physician Payment Sunshine Act. Reportable payments
may be direct or indirect, in cash or kind, for any reason, and are required to be disclosed even if the payments are not related to the
approved product. Failure to fully disclose or not in time reporting could lead to penalties up to $1.15 million per year.
The manufacturing of any of our products will
be required to comply with the FDA’s current Good Manufacturing Practices (cGMP) regulations. These regulations require, among other
things, quality control and quality assurance, as well as the corresponding maintenance of comprehensive records and documentation. Drug
manufacturers and other entities involved in the manufacture and distribution of approved drugs are also required to register with the
FDA their establishments and list any products they make and to comply with related requirements in certain states. These entities are
further subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with current good manufacturing
practices and other laws. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality
control to maintain cGMP compliance.
Discovery of problems with a product after approval
may result in serious and extensive restrictions on a product, manufacturer or holder of an approved NDA, as well as lead to potential
market disruptions. These restrictions may include recalls, suspension of a product until the FDA is assured that quality standards can
be met, and continuing oversight of manufacturing by the FDA under a “consent decree,” which frequently includes the imposition
of costs and continuing inspections over a period of many years, as well as possible withdrawal of the product from the market. In addition,
changes to the manufacturing process generally require prior FDA approval before being implemented. Other types of changes to the approved
product, such as adding new indications and additional labeling claims, are also subject to further FDA review and approval.
The FDA also may require post-marketing testing,
or Phase IV testing, as well as risk minimization action plans and surveillance to monitor the effects of an approved product or place
conditions on an approval that could otherwise restrict the distribution or use of our products.
Other Government Regulations
We may be subject to government regulations that
are applicable to businesses generally, including those relating to workers’ health and safety, environmental and waste disposal,
wage and hour and labor practices, including sexual harassment laws and regulations, and anti-discrimination laws and regulations.
In addition, we must comply with the laws and
regulations governing the research and manufacture of products containing controlled substances such as fentanyl and other opioids. We
or our contract manufacturer must be licensed by the Drug Enforcement Agency (DEA) and the state(s) in which we conduct research and development
activities.
Europe and Other Countries
If we market our products in any countries other than the United States,
we would be subject to the laws of those countries. To obtain market access for our products in other countries we must comply with numerous
and varying regulatory requirements of such countries regarding safety and efficacy and governing, among other things, clinical trials
and commercial sales, pricing and distribution of our products.
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The European medicines regulatory system is based
on a network of around 50 regulatory authorities from the 31 countries in the European Economic Area, the European Commission and
the European Medicines Agency. All medicines must be authorized before they can be placed on the market in the European Union. The European
system offers different routes for authorization. A centralized procedure allows the marketing of a medicine on the basis of a single
European Union assessment and marketing authorization which is valid throughout the European Union. However, a majority of medicines authorized
in the European Union do not fall within the scope of the centralized procedure, and we do not know whether our proposed products will
fall within the centralized authorization. We also do not know how the withdrawal of Great Britain from the European Union will affect
the procedure for approval of medicines in the United Kingdom. If we are not able to use the centralized procedure, we would need to use
one of the following procedures. One method is the decentralized procedure where we would apply for the simultaneous authorization in
more than one European Union member. The second method is the mutual-recognition procedure where we would have a medicine authorized in
one European Union country apply for authorization to be recognized in other European Union countries. In either case, we would be required
to complete clinical trials to demonstrate the safety and efficacy of the medicine and show and that the medicine is manufactured in accordance
with good manufacturing practices based upon European Union standards.
In countries other than the United States and
the European Union, we would be required to comply with the applicable laws of those countries, which may require us to perform additional
clinical testing.
Failure to obtain regulatory approval in any country
would prevent our product candidates from being marketed in those countries. In order to market and sell our products in jurisdictions
other than the United States and the European Union, we must obtain separate marketing approvals and comply with numerous and varying
regulatory requirements. The regulatory approval process outside the United States and the European Union generally includes all of the
risks associated with obtaining FDA and European Union approval but can involve additional testing.
In addition, in many countries worldwide, it is
required that the product be approved for reimbursement before the product can be approved for sale in that country. We may not obtain
approvals from regulatory authorities outside the United States on a timely basis, if at all. Even if we were to receive approval in the
United States or the European Union, approval by the FDA or the European Medicines Agency does not ensure approval by regulatory authorities
in other countries or jurisdictions. Similarly, approval by one regulatory authority outside the United States would not ensure approval
by regulatory authorities in other countries or jurisdictions. We may not be able to file for marketing approvals and may not receive
necessary approvals to commercialize our products in any market. If we are unable to obtain approval of our product candidates by regulatory
authorities in other foreign jurisdictions, the commercial prospects of those product candidates may be significantly diminished and our
business prospects could decline.
Outside the United States, particularly in member
states of the European Union, the pricing of prescription drugs is subject to governmental control. In these countries, pricing negotiations
or the successful completion of health technology assessment procedures with governmental authorities can take considerable time after
receipt of marketing approval for a product. In addition, there can be considerable pressure by governments and other stakeholders on
prices and reimbursement levels, including as part of cost containment measures.
In addition to regulations in the United States,
if we market outside of the United States, we will be subject to a variety of regulations governing, among other things, clinical trials
and any commercial sales and distribution of our products. Whether or not we obtain FDA approval for a product, we must obtain the requisite
approvals from regulatory authorities in foreign countries prior to the commencement of clinical trials or marketing of the product in
those countries.
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Intellectual Property
The AVERSA abuse deterrent technology utilized
in our AVERSA product pipeline is covered by an international intellectual property portfolio with patents issued in 44 countries including
the United States, Europe, Japan, Korea, Russia, Mexico, and Australia and with patents pending in Canada and China. These patents provide
patent coverage to 2035. We continue to build on our proprietary positions in the United States and internationally for our product candidates
AVERSA Fentanyl, AVERSA buprenorphine and AVERSA methylphenidate as well as other products and technology that we may have in development.
Our policy is to pursue, maintain and defend patent rights developed internally or acquired externally and to protect the technology,
inventions and improvements that are commercially important to the development of our business. 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 filed by us in the future, nor
can we be sure that any of our existing patents or any patents granted to us in the future will be commercially useful in protecting our
technology. We also rely on trade secrets to protect our commercial products and product candidates. Our commercial success also depends
in part on our non-infringement of the patents or proprietary rights of third parties. For a more comprehensive discussion of the risks
related to our intellectual property, please see “Risk Factors—Risks Related to Our Intellectual Property” appearing
elsewhere in this Form 10-K.
Further, we plan to seek trademark protection in the United States
and internationally where available and when appropriate. We have registered the name Nutriband in the United States. We have received
a notice of allowance for the AVERSA trademark for our abuse deterrent technology in the United States.
Competition
The pharmaceutical industry is highly competitive
and subject to rapid change as new products are developed and marketed. Potential competitors include large pharmaceutical and biotechnology
companies, specialty pharmaceutical and generic drug companies, and medical technology companies. We believe the key competitive factors
that will affect the development and commercial success of our products are product performance including safety and efficacy, level of
patient compliance, healthcare professional acceptance, and the extent of insurance reimbursement of our products.
As our development pipeline includes products
that contain opioids (AVERSA Fentanyl and AVERSA Buprenorphine), we continually monitor the market for opioid products, particularly in
the United States. Pharmaceutical companies engaged in the distribution and sale of opioids, in particular for the treatment of chronic
pain, are promoting responsible opioid use. Our opioid products potentially offer a unique proposition to meet the unmet needs of patients
by deterring the abuse and misuse of opioids while making opioids accessible to those patients who need them. If approved, our AVERSA
pipeline products will compete with the currently marketed products that do not contain abuse deterrent features as well as other products
that may employ different abuse deterrent technology. We may also have to compete with products that do not contain opioids or other drugs
that are susceptible to abuse. We are not aware of any abuse deterrent transdermal products that are in development or being marketed
at this time. If we obtain regulatory approval to market our products, we cannot assure you that we will be successful in the marketplace.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.