Item 1. Business
ITEM 1. BUSINESS
Overview
We are a clinical stage product discovery company
developing products using both natural and engineered phage technologies designed to target and kill specific harmful bacteria associated
with chronic diseases, such as cystic fibrosis, or CF and diabetic foot osteomyelitis, or DFO. Bacteriophage or phage are bacterial,
species-specific, strain-limited viruses that infect, amplify and kill the target bacteria and are considered inert to mammalian cells.
By utilizing proprietary combinations of naturally occurring phage and by creating novel phage using synthetic biology, we develop phage-based
therapies intended to address both large-market and orphan diseases.
Based on the urgency of treating the infection
(whether acute or chronic), the susceptibility of the target bacteria to phage (e.g. the ability to identify a phage cocktail that would
target a broad range of bacterial strains) and other considerations, we offer two phage-based product types:
(1)
Fixed cocktail therapy – in this approach a single
product containing a fixed number of selected phages is developed to cover a wide range of bacterial strains, thus allowing treatment
of broad patient populations with the same product. Fixed cocktails are developed using our proprietary BOLT platform, in which high
throughput screening, directed evolution, and bioinformatic approaches are leveraged to produce an optimal phage cocktail.
(2)
Personalized therapy – in this approach a large
library of phages is developed, of which single optimal phages are personally matched to treat specific patients. Matching optimal
phages with patients is carried out using a proprietary phage susceptibility testing, or PST, where multiple considerations are analyzed
simultaneously – allowing for an efficient screen of the phage library while maintaining short turnaround times.
In our therapeutic programs, we focus on using
phage therapy to target specific strains of pathogenic bacteria that are associated with diseases. Our phage-based product candidates
are developed utilizing our BOLT proprietary research and development platform. The BOLT platform is unique, employing cutting edge methodologies
and capabilities across disciplines including computational biology, microbiology, synthetic engineering of phage and their production
bacterial hosts, bioanalytical assay development, manufacturing and formulation, to allow agile and efficient development of natural
or engineered phage combinations, or cocktails. The cocktail contains phage with complementary features and is optimized for multiple
characteristics such as broad target host range, ability to prevent resistance, biofilm penetration, stability and ease of manufacturing.
Our goal is to develop multiple products based
on the ability of phage to precisely target harmful bacteria and on our ability to screen, identify and combine different phage, both
naturally occurring and created using synthetic engineering, to develop these treatments.
Our Product Pipeline
The chart below identifies our product candidates’
pipeline, their current status and expected timing for upcoming milestones. We do not have any products approved or available for sale,
our product candidates are still in the preclinical and clinical development stages, and we have not generated any revenue from product
sales.
Ongoing Programs
BX004 – Treatment of Cystic Fibrosis
BX004 is our therapeutic phage product candidate
under development for chronic pulmonary infections caused by Pseudomonas aeruginosa, or P. aeruginosa, a main contributor to morbidity
and mortality in patients with CF. Enhanced resistance to antibiotics develops, particularly in CF patients, due to extensive drug use
consisting of prolonged and repeated broad-spectrum antibiotic courses often beginning in childhood, and leading to the appearance of
multidrug-resistant strains. In preclinical in vitro studies, BX004 was shown to be active against antibiotic resistant strains
of P. aeruginosa and demonstrated the ability to penetrate biofilm, an assemblage of surface-associated microbial cells enclosed
in an extracellular polymeric substance and one of the leading causes for antibiotic resistance.
1
The Phase 1b/2a trial in CF patients with chronic
respiratory infections caused by P. aeruginosa. was comprised of two parts. The study design was based on recommendations from
the Cystic Fibrosis Therapeutic Development Network.
In February 2023, we announced positive results
from Part 1 of the Phase 1b/2a trial evaluating BX004. Part 1 evaluated the safety, tolerability, pharmacokinetics, or PK, and microbiologic
activity of BX004 over a 7-day ascending treatment period in nine CF patients (7 on BX004, 2 on placebo) with chronic P. aeruginosa
pulmonary infection in a single ascending dose and multiple dose design.
Results from Part 1 of the Phase 1b/2a trial included
the following findings: No safety events related to treatment with BX004 occurred; Mean P. aeruginosa colony forming units, or CFU, at
Day 15 (compared to baseline): -1.42 log (BX004) vs. -0.28 log (placebo). This reduction was seen on top of standard of care inhaled
antibiotics; Phage were detected in all patients treated with BX004 during the dosing period, including in several patients up to Day
15 (one week after end of therapy); no phage were detected in patients receiving placebo; there was no evidence of treatment-related
resistance to BX004 during or after treatment, compared to placebo; and as expected due to the short duration of treatment, there was
no detectable effect on % predicted forced expiratory volume in 1 second, or FEV1.
In November 2023, we announced positive topline
results from Part 2 of the Phase 1b/2a trial evaluating BX004. The objectives of Part 2 of the Phase 1b/2a trial were to evaluate the
safety and tolerability of BX004 in a larger number of CF patients dosed for a longer treatment duration than Part 1 of the study, with
the anticipation that the longer treatment might result in greater effects than in the Part 1. In Part 2, 34 CF patients were randomized
in a 2:1 ratio with 23 CF patients receiving BX004 and 11 patients receiving placebo via nebulization twice daily for 10 days.
Key results from Part 2 of the Phase 1b/2a trial
included the following findings:
●
Study drug was safe and
well-tolerated, with no related SAEs (serious adverse events) or related APEs (acute pulmonary exacerbations) to study drug.
●
In the BX004 arm, 3 out
of 21 (14.3%) patients with quantitative CFU at baseline converted to sputum culture negative for P. aeruginosa after
10 days of treatment (including 2 patients after 4 days) compared to 0 out of 10 (0%) in the placebo arm.
●
BX004 vs. placebo showed
a positive clinical effect in a predefined subgroup of patients with reduced baseline lung function (FEV1<70%). Difference between
groups at Day 17: relative FEV1 improvement of 5.67% (change from baseline +1.46 vs. -4.21) and +8.87 points in Cystic Fibrosis
Questionnaire-Revised (CFQR) respiratory symptom scale (change from baseline +2.52 vs. -6.35).
●
In full population, BX004
vs. placebo P. aeruginosa levels were more variable in sputum, potentially driven by aligning initiation of study
drug administration with the initiation of standard of care antibiotic treatment regimen. In a prespecified subgroup of patients
on standard of care inhaled antibiotics on continuous regimen, BX004 vs. placebo reduced sputum P. aeruginosa levels at
Day 10: difference in change from baseline between groups of -2.8 log10 CFU/g sputum (change from baseline -2.91 vs -0.11),
exceeding Part 1 results.
●
Alternating/cycling background
antibiotic regimen likely associated with fluctuations in P. aeruginosa levels potentially confounding the ability
to observe a P. aeruginosa reduction in this subgroup.
●
During the study period,
based on current available data, no evidence of treatment-related phage resistance was observed in patients treated with BX004 compared
to placebo.
In August 2023, the FDA granted BX004 Fast Track
designation for the treatment of chronic respiratory infections caused by P. aeruginosa bacterial strains in patients with CF.
In addition, in December 2023, BX004 received orphan drug designation from the FDA.
BiomX expects to initiate a randomized, double
blind, placebo-controlled, multi-center Phase 2b study in CF patients with chronic P. aeruginosa pulmonary infections in
the second quarter of 2025. The study is designed to enroll approximately 60 patients randomized at a 2:1 ratio to BX004 or placebo.
Treatment is expected to be administered via inhalation twice daily for a duration of 8 weeks. The study is designed to monitor the safety
and tolerability of BX004 and is designed to demonstrate improvement in microbiological reduction of P. aeruginosa burden
and evaluation of effects on clinical parameters such as lung function measured by FEV1 and patient reported outcomes. BX004 Phase 2b
topline results are anticipated in the first quarter of 2026.
BiomX has been in communication with the FDA and
additional regulatory agencies regarding the potential to use Real-World Evidence, or RWE, to explore the link between P. aeruginosa
reduction and improved clinical outcomes. RWE is clinical evidence on the usage, benefits, or risks of a medical product derived from
real-world data, which includes sources such as electronic health records, claims data, patient registries, wearable devices, and observational
studies. We anticipate further discussion with the FDA and European Committee for Medicinal Products for Human Use, or CHMP, in 2025 to
discuss our proposed plan to use RWE to support potential future regulatory filings.
2
BX211 – Treatment of Diabetic Foot Osteomyelitis (DFO)
BX211 is a phage therapy for the
treatment of DFO associated with Staphylococcus aureus, or S. aureus . The personalized phage treatment tailors a specific
phage selected from a proprietary phage-bank according to the specific strain of S. aureus biopsied and isolated from each patient. DFO
is a bacterial infection of the bone that usually develops from an infected foot ulcer and is a leading cause of amputation in patients
with diabetes. We believe that scientific literature demonstrating the potential benefit in treating osteomyelitis using phage in animal
models as well as numerous successful compassionate cases using phage therapy to treat DFO patient support our approach of using phage
therapy to treat DFO.
The randomized, double-blind, placebo-controlled,
multi-center phase 2 study investigating the safety, tolerability, and efficacy of BX211 for subjects with DFO associated with S. aureus
enrolled 41 subjects randomized at a 2:1 ratio to BX211 or placebo. BX211 or placebo is designed to be administered weekly, by topical
and intravenous, or IV route at week 1 and by the topical route only at each of weeks 2-12. Over the 12-week treatment period, all subjects
will be treated in accordance with standard of care which includes antibiotic treatment as appropriate. Readout of study topline results
is expected at week 13 evaluating healing of the wound associated with osteomyelitis, and is expected in the first quarter of 2025.
Non-CF Bronchiectasis, or NCFB
NCFB is a chronic, progressive inflammatory lung
disease characterized by permanent dilation of the bronchi. Affecting over 1 million diagnosed patients across the US, Europe, and Japan
(according to Weycker, Chron Respir Dis. 2017, Quint, European Respiratory Journal, 2016, Ringshausen, European Respiratory Journal, 2019,
Henkle, Chest, 2018, Asakura, American Journal of Respiratory and Critical Care Medicine 2024, Insmed Commercial Presentation June 4th,
2024), NCFB is caused by multiple etiologies but manifests with similar debilitating symptoms, including chronic cough, sputum production,
and recurrent infections. Chronic P. aeruginosa infections in NCFB patients are a main contributor to morbidity and mortality in
this disease. In preclinical in vitro studies, BX004 was shown to be active against antibiotic resistant strains of P. aeruginosa
and demonstrated the ability to penetrate biofilm, an assemblage of surface-associated microbial cells enclosed in an extracellular polymeric
substance and one of the leading causes for antibiotic resistance.
Pending positive data of BX004 in our CF Phase
2b study, we will explore the feasibility of a Phase 2 study in NCFB as an additional indication for BX004.
National Institutes of Health, or NIH study in Cystic Fibrosis
We are supporting a study conducted by the NIH
and The Antibacterial Resistance Leadership Group targeting P. Aeruginosa infections in CF patients under FDA emergency Investigational
New Drug, or eIND, allowance. The Phase 1b/2, multi-centered, randomized, double-blind, placebo-controlled trial is assessing the safety
and microbiological activity of a single IV dose of bacteriophage therapy in cystic fibrosis subjects colonized with P. aeruginosa .
Programs on hold
Prosthetic Joint Infections, or PJI
Our personalized phage therapy for treating PJI
targets multiple bacterial organisms such as Staphylococcus aureus, Staphylococcus epidermidis and Enterococcus faecium. This treatment
was granted Orphan-drug designation by the FDA in July 2020. As of the date of this Annual Report, we have paused development efforts
of this program due to prioritizing resources towards our CF and DFO programs, and we cannot provide guidance on resuming its development.
Discontinued programs
BX005 – Treatment of Atopic Dermatitis , or AD
BX005 is our topical phage product candidate targeting
Staphylococcus aureus, or S. aureus , a bacterium associated with the development and exacerbation of inflammation in AD.
S. aureus is more abundant on the skin of AD patients than on the skin of healthy individuals and on lesional skin than non-lesional
skin. It also increases in abundance, becoming the dominant bacteria, when patients experience flares. By reducing the load of S.
aureus , BX005 is designed to shift the skin microbiome composition to its ‘pre-flare’ state and potentially provide a
clinical benefit. In preclinical in vitro studies, BX005 was shown to eradicate over 90% of strains, including antibiotic resistant
strains, from a panel of S. aureus strains (120 strains isolated from skin of subjects from the U.S. and Europe). On April 8,
2022, the FDA approved the Company’s Investigational New Drug, or IND, application for BX005.
In 2024, we discontinued the development of BX005,
choosing instead to focus our resources on our Cystic Fibrosis and DFO programs.
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Our Strategy
Our goal is to develop multiple products based
on the ability of phage to precisely target harmful bacteria and on our ability to screen, identify and optimally combine different phage,
both naturally occurring and generated using synthetic engineering, to develop these treatments. We intend to continue to:
●
Investigate clinical safety
and efficacy of our lead phage-based product candidates to treat CF and DFO;
●
Identify new pathogenic bacteria to be targeted by
phage therapy for our existing indications and possible new indications; and
●
Develop and partner microbiome-based biomarker tests,
based on our proprietary XMarker platform, that can be used for disease diagnosis or as companion diagnostics.
Our phage discovery platform
Our approach is driven by the convergence of several
factors: a rapidly increasing understanding of phage, including the links between phage behaviors and their genomes; growing evidence
that the presence of specific harmful bacteria may impact chronic diseases, such as CF, making them in principle, amenable to treatment
with phage; and by a growing number of anecdotal reports from different academic centers of successful compassionate use of phage to
treat seriously ill patients who were unresponsive to other therapies. We believe our phage therapeutic product candidates have the potential
to treat conditions and diseases by precisely targeting pathogenic bacteria without disrupting elements of the healthy microbiota.
Our phage-based product candidates, either fixed
phage cocktails or personalized phage treatments, are developed utilizing our proprietary research and development platforms, named BOLT
and PST. The BOLT, platform is unique, employing cutting edge methodologies and capabilities across disciplines including computational
biology, microbiology, synthetic engineering of phage and their production bacterial hosts, bioanalytical assay development, manufacturing
and formulation, to allow agile and efficient development of natural or engineered phage combinations, or cocktails.
The PST platform utilizes proprietary assays to
allow us to screen extensive phage libraries in search of optimal phage for treatment of the specific target bacteria isolated from a
given patient.
BOLT is designed to allow the rapid development
of optimized phage cocktails. These cocktails may be comprised of naturally-occurring or synthetically engineered phage. The cocktail
contains phage with complementary features and is optimized for multiple characteristics such as broad target host range, ability to
prevent resistance, biofilm penetration, stability and ease of manufacturing. Pre-clinical development of the optimized phage cocktail
is anticipated to require 1-2 years.
We combine multiple technologies that originate
from the laboratories of our scientific founders and that were developed internally. Technologies that were developed by our scientific
founders are described in leading scientific journals. One of our scientific founders, Professor Rotem Sorek, a Professor in the Department
of Molecular Genetics at the Weizmann Institute of Science, or WIS, is a world leader in phage genomics and bacterial defense mechanisms.
Another scientific founder, Professor Eran Elinav, a Professor in the Department of Immunology at the WIS, is an expert in investigating
the link between the microbiome and human health and disease. Our third scientific founder, Professor Timothy K. Lu, is a world leader
in synthetic biology approaches to engineering gene circuits and phage, leading the Synthetic Biology Group in the Department of Electrical
Engineering and Computer Science and the Department of Biological Engineering at the Massachusetts Institute of Technology. In addition,
through the acquisition of the privately held Israel-based company, RondinX Ltd. in 2017, we gained access to high throughput genomic
analyses techniques developed by Professor Eran Segal, a leading computational biologist from the Department of Computer Science and
Applied Mathematics at the WIS. The combination of the technologies and expertise from these leaders in each of their respective fields
is critical in enabling us to focus on treating complex human diseases and conditions by precise manipulation of the microbiome.
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Additionally, we developed proprietary assays
and screening technology for robust and high throughput testing PST. The PST platform combines state of the art automation with advanced
microbiology assays. The output is a reproducible conclusive decision for optimal phage matching, based on multiple factors, including
success of phage infection, suppression of resistant mutants, and antibiofilm activity.
Manufacturing
We have developed manufacturing processes that
utilize state-of-the-art industrial methods for the manufacturing of our product candidates. These processes are designed to comply with
current Good Manufacturing Practice, or cGMP, with the appropriate scale to meet our clinical study needs, and to fulfill the requirements
of regulators for human studies.
In February 2021, we consolidated our U.S. Good
Manufacturing Practice, or GMP, manufacturing, testing and development into a 6,100 square feet space in our Gaithersburg facility and
in March 2021, we moved into a new 6,500 square feet manufacturing facility in our headquarters, in Ness Ziona, Israel. Both facilities
were designed to produce clinical quantities of our product candidates required for early-stage clinical development with compliance
suitable for this stage of development and to support eIND. Currently, our use of these 2 facilities for GMP manufacturing has been put
on hold while our in-house development activities continue to support our projects in other ways.
The Ness Ziona facility, which has currently been
put on hold but can resume GMP manufacturing, consists of two suites for drug substance phage production/development as well as formulation
and final drug product production rooms to support topical, oral, inhaled and injectable phage-based products in a liquid, cream, semi-solid
or dry form. We no longer expect to use our Gaithersburg facility for manufacturing.
We currently operate a manufacturing model that
combines in-house process development and testing with the flexibility to outsource to third-party development, manufacturing, testing,
and logistics organizations, when needed. We maintain service agreements with multiple manufacturers, testing laboratories and a third-party
logistics warehouse for product candidate distribution. These service agreements are generally short-term in nature and can be extended
or renewed. As such, for BX004, we have engaged a third-party to supplement our in-house process development activities. We selected
this organization based on its experience, capability, capacity and regulatory status. Manufacturing and development projects are managed
by a team of internal staff who assure compliance with the technical aspects and regulatory requirements of the manufacturing process.
5
While we do not have a current need for a commercial
scale manufacturing capacity, at the appropriate time we intend to evaluate building large scale cGMP internal manufacturing capabilities,
which may include expansion of our operations.
Intellectual Property
We strive to protect the proprietary technology
that we believe is important to our business, including seeking and maintaining patent protection in the United States and internationally
for our product candidates and discovery platform. We also rely on trademarks, trade secrets, know-how, copyrights, continuing technological
innovation and in-licensing opportunities to develop and maintain our proprietary position. For more information regarding the risks
related to our intellectual property, see “ Risk Factors — Risks Related to our Licensed and Co-Owned Intellectual Property. ”
We plan to continue to expand our intellectual
property estate by filing patent applications directed to formulations, related methods of treatment, methods of manufacture or identification
from our ongoing development of our product candidates, as well as discovery based on our proprietary product platform. Our success will
depend on our ability to obtain and maintain patent and other proprietary protection for commercially important technology, inventions
and know-how related to our business, defend, and enforce any patents that we may obtain, preserve the confidentiality of our trade secrets
and know-how and operate without infringing the valid and enforceable patents and proprietary rights of third parties.
Because patent applications in the United States
and certain other jurisdictions are maintained in secrecy for 18 months or potentially even longer, and because publication of discoveries
in the scientific or patent literature often lags behind actual discoveries and patent application filings, we cannot be certain of the
priority of inventions covered by pending patent applications. Accordingly, we may not have been the first to invent the subject matter
disclosed in some of its patent applications or the first to file patent applications covering such subject matter, and we may have to
participate in interference proceedings or derivation proceedings declared by the United States Patent and Trademark Office, or USPTO,
to determine priority of invention.
Patent portfolio
Our patent portfolio consists of owned patent
applications, as well as both licensed and co-owned patent applications (that are also licensed). See “ Risk Factors —
Risks Related to our Licensed and Co-Owned Intellectual Property. ” For some of these applications, prosecution has not started,
and others are in the early stages of prosecution in the United States and in selected jurisdictions outside of the United States. We
solely own eight patent families. We co-own one US patent family with Keio University in Tokyo, Japan, or Keio, one international patent
family (United States, Australia, Canada, European Patent Office national filings) with Yeda Research and Development Company Limited,
the technology transfer office of the WIS, or Yeda, and one international patent family (United States, Europe) with both Keio and Yeda.
We have an exclusive license from Yeda and Keio for these co-owned patent applications. We have exclusive licenses from Yeda or Keio
for the rest of the patents and patent applications in its portfolio.
A significant portion of our portfolio is directed
to CF, as well as product candidates relevant to programs which we have stopped their development such as: AD, inflammatory bowel disease,
or IBD, primary sclerosing cholangitis and colorectal cancer, or CRC, as well as to our bacterial target discovery and bacteriophage
discovery technology platforms. Prosecution has yet to commence for most of the pending patent applications covering our product candidates.
Prosecution is a lengthy process, during which the scope of the claims initially submitted for examination by the USPTO are often significantly
narrowed by the time they issue, if they issue at all. We expect this to be the case with respect to our licensed and co-owned patent
applications, described briefly below.
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In connection with the Acquisition, we further
enhanced our intellectual property portfolio with the addition of APT’s portfolio comprising of 7 issued or allowed patents, 19
patent families (including applications in United States, Europe, Australia, Canada, China, India, Japan, Korea, Israel, Brazil, and
South Africa). APT’s patents and patent applications consist of patents and patent applications with respect to pharmaceutical
compositions and methods of treatment, methods of manufacture of such compositions and expire between June 2037 and October 2043.
CF
We solely own two patent families (one at pre-PCT
stage and a second in national phase stage in United States, Australia, Canada, European Patent Office, Japan and China) containing claims
directed to pharmaceutical compositions comprising combinations of bacteriophage to treat chronic Pseudomonas lung infections, especially
common in CF patients, methods of use for these bacteriophage combinations, and methods of identifying patients who will respond to these
bacteriophage combinations. Any United States patents issuing from the pending application covering our lead bacteriophage combination
in this program, if issued, are expected to expire in 2042. Patent term adjustments or patent term extensions could result in later expiration
dates.
DFOAD
We solely own one patent family (United States,
Australia, Canada, European Patent Office and Japan) containing claims directed to pharmaceutical compositions comprising combinations
of bacteriophage to treat staphylococcus aureus infections, common in patients with DFO and in AD patients, methods of use for these
bacteriophage combinations, and methods of identifying patients who will respond to these bacteriophage combinations. Any United States
patents issuing from the pending application covering our lead bacteriophage combination in this program, if issued, are expected to
expire in 2042. Patent term adjustments or patent term extensions could result in later expiration dates.
Patent term
The term of individual patents depends upon the
legal term of the patents in the countries in which they are obtained. In most countries in which we file patent applications, including
the United States, the base term is 20 years from the filing date of the earliest-filed non-provisional patent application from which
the patent claims priority. The term of a United States patent can be lengthened by patent term adjustment, which compensates the owner
of the patent for administrative delays at the USPTO. In some cases, the term of a United States patent is shortened by a terminal disclaimer
that reduces its term to that of an earlier-expiring patent. The term of a United States patent may be eligible for patent term extension
under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Act, to account for at least
some of the time the drug is under development and regulatory review after the patent is granted. With regard to a drug for which FDA
approval is the first permitted marketing of the active ingredient, the Hatch-Waxman Act allows for extension of the term of one United
States patent that includes at least one claim covering the composition of matter of such an FDA-approved drug, an FDA-approved method
of treatment using the drug and/or a method of manufacturing the FDA-approved drug. The extended patent term cannot exceed the shorter
of five years beyond the non-extended expiration of the patent or fourteen years from the date of the FDA approval of the drug, and a
patent cannot be extended more than once or for more than a single product. During the period of extension, if granted, the scope of
exclusivity is limited to the approved product for approved uses. Some foreign jurisdictions, including Europe and Japan, have analogous
patent term extension provisions, which allow for extension of the term of a patent that covers a drug approved by the applicable foreign
regulatory agency.
In the future, if and when our product candidates
receive FDA approval, we expect to apply, if appropriate, for patent term extension on patents directed to those product candidates,
their methods of use and/or methods of manufacture. However, there is no guarantee that the applicable authorities, including the FDA
in the United States, will agree with our assessment of whether such extensions should be granted, and if granted, the length of such
extensions.
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Trade Secrets and Know-How
In addition to patents, we rely on trade secrets
and know-how to develop and maintain our competitive position. We typically rely on trade secrets to protect aspects of our business
that are not amenable to, or that we do not consider appropriate for, patent protection. We protect trade secrets and know-how by establishing
confidentiality agreements and invention assignment agreements with our employees, consultants, scientific advisors, contractors and
collaborators. These agreements provide that all confidential information developed or made known during the course of an individual’s
or entities’ relationship with us must be kept confidential during and after the relationship. These agreements also provide that
all inventions resulting from work performed for us or relating to our business and conceived or completed during the period of employment
or assignment, as applicable, shall be our exclusive property. In addition, we take other appropriate precautions, such as physical and
technological security measures, to guard against misappropriation of its proprietary information by third parties.
Although we take steps to protect our proprietary
information and trade secrets, including through contractual means with our employees and consultants, third parties may independently
develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets or disclose our
technology. Thus, we may not be able to meaningfully protect our trade secrets and benefit from the exclusive use thereof. For more information
regarding the risks related to our intellectual property, see “ Risk Factors — Risks Related to Our Licensed and Co-Owned
Intellectual Property .”
Competition
The biotechnology and pharmaceutical industries
are characterized by rapidly advancing technologies, strong competition and an emphasis on proprietary products. While we believe that
our technology, knowledge and experience provide us with competitive advantages, we face substantial competition from many different
sources, including larger pharmaceutical companies with more resources. Specialty biotechnology companies, academic research institutions,
governmental agencies, as well as public and private institutions are also potential sources of competitive products and technologies.
We believe that the key competitive factors affecting the success of any of our product candidates will include efficacy, safety profile,
time to market, cost, level of promotional activity and intellectual property protection.
We are aware of a number of biotechnology companies
developing bacteriophage products to treat diseases. To our knowledge, several biotechnology companies, such as Locus Biosciences, Inc.,
Armata Pharmaceuticals, Inc. and SNIPR Biome, as well as academic institutions, have discovery stage or clinical programs utilizing naturally
occurring phage or synthetic biology approaches. In addition, we are aware of several investigational and marketed products to treat
the indications that we are targeting with our product candidates, including, but not limited to:
●
CF: Trikafta, Symdeco,
Pulmozyme, Tobramycin, Aztreonam
●
DFO : TP-102 being
developed by Technophage, a phage-based product being developed by Phaxiam
Many of our competitors, either alone or with
their strategic partners, have substantially greater financial, technical and human resources than ours and significantly greater experience
in the discovery and development of product candidates, obtaining FDA and other regulatory approvals of products and the commercialization
of those products. Accordingly, our competitors may be more successful than us in discovering product candidates, obtaining approval
for such product candidates and achieving widespread market acceptance. Our competitors’ products may be more effective, or more
effectively marketed and sold, than any product we may commercialize and may render our product candidates obsolete or non-competitive
before we can recover the expenses of developing and commercializing any of our product candidates. We anticipate that we will face intense
and increasing competition as new drugs enter the market and advanced technologies become available.
These third parties compete with us in recruiting
and retaining qualified scientific, clinical, manufacturing, sales and marketing and management personnel, establishing clinical trial
sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our program.
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Sales and Marketing
We intend to pursue the commercialization of our
drug product candidates either by building internal sales and marketing capabilities or through collaborations with others.
Government Regulation
Government authorities in the United States and
other countries regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging,
storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing and export and import
of drug and biological products. Generally, before a new drug or biologic can be studied in human clinical trials or marketed, considerable
data demonstrating its quality, safety, efficacy, purity, and/or potency must be obtained, organized into a format specific for each
regulatory authority, submitted for review and approved by the regulatory authority where the product is intended to be studied or marketed.
U.S. Biological Product Development Process
In the United States, the FDA regulates drugs
under the Federal Food, Drug, and Cosmetic Act, or the FDCA, and its implementing regulations under the FDCA, the Public Health Service
Act, or the PHSA, and their implementing regulations. Both drugs and biologics are also subject to other federal, state and local statutes
and regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state and local
statutes and regulations requires the expenditure of substantial time and financial resources. Failure to comply with applicable U.S.
requirements at any time during the product development, approval, or post-marketing process may subject an applicant to administrative
or judicial sanctions. These sanctions could include, among other actions, the FDA’s refusal to approve pending applications, withdrawal
of an approval or license revocation, a clinical hold, untitled or warning letters, product recalls or market withdrawals, product seizures,
total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement
and civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us.
Certain of our current product candidates and
future product candidates must be approved by the FDA through a Biologics License Application, or BLA, process before they may be legally
marketed in the United States. The process generally involves the following. However, the new Trump administration may change or overhaul
existing drug regulations, which would lead to additional time and money to comply with:
●
Completion of extensive preclinical studies in accordance
with applicable regulations, including studies conducted in accordance with GLP requirements, if needed;
●
Submission to the FDA of an IND, which must become
effective before human clinical trials may begin;
●
Approval by an institutional review board, or IRB,
at each clinical trial site before each trial may be initiated;
●
Performance of adequate and well-controlled human clinical
trials in accordance with applicable IND regulations, good clinical practice, or GCP, requirements and other clinical trial-related
regulations to establish the safety, purity, potency and efficacy of the investigational product for each proposed indication;
●
Submission to the FDA of a BLA;
●
A determination by the FDA within 60 days of its receipt
of a BLA to accept the application for review;
●
Satisfactory completion of an FDA pre-approval inspection
of the manufacturing facility or facilities where the biologic will be produced to assess compliance with cGMP requirements to assure
that the facilities, methods and controls are adequate to preserve the biologic’s identity, strength, quality and purity;
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●
Potential FDA audit of the clinical trial sites that
generated the data in support of the BLA;
●
Payment of user fees for FDA review of the BLA (unless
a fee waiver applies); and
●
FDA review and approval of the BLA, including consideration
of the views of any FDA advisory committee, prior to any commercial marketing or sale of the biologic in the United States.
Preclinical Studies and IND
Preclinical studies include laboratory evaluation
of product chemistry and formulation, as well as in vitro and animal studies to establish a rationale for therapeutic use and
in some cases to assess the potential for adverse events. The conduct of preclinical studies is subject to federal regulations and requirements,
including in some cases GLP regulations for safety/toxicology studies. An IND sponsor must submit the results of the preclinical tests,
together with manufacturing information, analytical data, any available clinical data or literature and plans for clinical trials, among
other things, to the FDA as part of an IND. An IND is a request for authorization from the FDA to administer an investigational product
to humans, and, must become effective before human clinical trials may begin. Some long-term preclinical testing may continue after the
IND is submitted. An IND automatically becomes effective 30 days after receipt by the FDA, unless before that time, the FDA raises
concerns or questions related to one or more proposed clinical trials and places the trial on clinical hold. In such a case, the IND
sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. As a result, submission of an IND may
not result in the FDA allowing clinical trials to commence.
Clinical Trials
Clinical trials involve the administration of
the drug or biological product candidate to healthy volunteers or disease-affected patients under the supervision of qualified investigators,
generally physicians not employed by, or under, the trial sponsor’s control. Clinical trials are conducted under protocols detailing,
among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria, and the parameters
to be used to monitor subject safety and efficacy, including stopping rules that assure a clinical trial will be stopped if certain adverse
events should occur. Each protocol and any amendments to the protocol must be submitted to the FDA as part of the IND. Clinical trials
must be conducted and monitored in accordance with the FDA’s regulations comprising the GCP requirements, including the requirement
that all research subjects provide informed consent. Further, each clinical trial must be reviewed and approved by an IRB at or servicing
each institution at which the clinical trial will be conducted. An IRB is charged with protecting the welfare and rights of study participants
and considers such items as whether the risks to individuals participating in the clinical trials are minimized and are reasonable in
relation to anticipated benefits. The IRB also approves the form and content of the informed consent that must be signed by each clinical
trial subject or his or her legal representative and must monitor the clinical trial until completed. There are also requirements governing
the reporting of ongoing clinical trials and completed clinical trial results to public registries. Information about certain clinical
trials, including clinical trial results, must be submitted within specific timeframes for publication on the www.clinicaltrials.gov
website.
Clinical trials generally are conducted in three
sequential phases, known as Phase 1, Phase 2 and Phase 3, and may overlap.
●
Phase 1 clinical trials generally involve a small number
of healthy volunteers or disease-affected patients who are initially exposed to a single dose and then multiple doses of the product
candidate. The primary purpose of these clinical trials is to assess the metabolism, pharmacologic action, side effect tolerability
and safety of the product candidate.
10
●
Phase 2 clinical trials generally involve studies in
disease-affected patients to evaluate proof of concept and/or determine the dosing regimen(s) for subsequent investigations. At the
same time, safety and sometimes further pharmacokinetic and pharmacodynamic information is collected, possible adverse effects and
safety risks are identified and a preliminary evaluation of efficacy is conducted.
●
Phase 3 clinical trials generally involve a large number
of patients at multiple sites and are designed to provide the data necessary to demonstrate the effectiveness of the product for
its intended use, its safety in use and to establish the overall benefit/risk relationship of the product and provide an adequate
basis for labeling for new drugs.
Post-approval trials, sometimes referred to as
Phase 4 clinical trials, may be conducted after initial marketing approval. These trials are conducted to gain additional experience
from the treatment of patients in the intended therapeutic indication. In certain instances, the FDA may mandate the performance of Phase
4 clinical trials as a condition of approval of a BLA.
Progress reports detailing the results of the
clinical trials, among other information, must be submitted at least annually to the FDA and written IND safety reports must be submitted
to the FDA and the investigators for serious and unexpected suspected adverse events, findings from other studies or animal or in
vitro testing that suggest a significant risk for human subjects and any clinically important increase in the rate of a serious suspected
adverse reaction over that listed in the protocol or investigator brochure.
It is possible for Phase 1, Phase 2, Phase 3 and
other types of clinical trials not to be completed successfully within a specified period, if at all. The FDA or the sponsor may suspend
or terminate a clinical trial at any time on various grounds, including a finding that the patients are being exposed to an unacceptable
health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not
being conducted in accordance with the IRB’s requirements or if the tested biological product has been associated with unexpected
serious harm to patients. Additionally, some clinical trials are overseen by an independent group of qualified experts organized by the
clinical trial sponsor, or the Data Safety Monitoring Board. This group provides authorization for whether a trial may move forward at
designated check points based on access to certain data from the trial.
Concurrent with clinical trials, companies may
complete additional animal studies and also must develop additional information about the chemistry and physical characteristics of the
biologic as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The
manufacturing process must be capable of consistently producing quality batches of the product and, among other things, companies must
develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must
be selected and tested, and stability studies must be conducted to demonstrate that the product candidates do not undergo unacceptable
deterioration over their shelf life.
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FDA Review Process
Following completion of the clinical trials, data
are analyzed to assess whether the investigational product is safe and effective for the proposed indicated use or uses and also meets
the regulatory requirements for potency and purity. The results of preclinical studies and clinical trials are then submitted to the
FDA as part of a BLA, along with proposed labeling, chemistry and manufacturing information to ensure product quality and other relevant
data. The BLA is a request for approval to market the biological product for one or more specified indications and must contain proof
of safety, purity and potency. The application may include both negative and ambiguous results of preclinical studies and clinical trials,
as well as positive findings. Data may come from company-sponsored clinical trials intended to test the safety and efficacy of a product’s
use or from a number of alternative sources, including studies initiated by investigators. To support marketing approval, the data submitted
must be sufficient in quality and quantity to establish the safety and efficacy in the intended indication, purity and potency of the
investigational product to the satisfaction of the FDA. FDA approval of a BLA must be obtained before a biologic may be marketed in the
United States. Under the Prescription Drug User Fee Act, or PDUFA, as amended, each BLA must be accompanied by a user fee. The FDA adjusts
the PDUFA user fees on an annual basis. Fee waivers or reductions are available in certain circumstances, including a waiver of the application
fee for the first application filed by a small business. Additionally, no user fees are assessed on BLAs for products designated as orphan
drugs, unless the product also includes a non-orphan indication.
The FDA reviews all submitted BLAs before it accepts
them for filing and may request additional information rather than accept the BLA for filing. The FDA must make a decision on accepting
a BLA for filing within 60 days of receipt, and such a decision could include a refusal to file by the FDA. Once the submission is accepted
for filing, the FDA begins an in-depth review of the BLA. Under the goals and policies agreed to by the FDA under PDUFA, the FDA has
10 months, from the filing date, in which to complete its initial review of an original BLA and respond to the applicant, and 6 months
from the filing date of an original BLA designated for priority review. The FDA does not always meet its PDUFA goal dates for standard
and priority BLAs, and the review process is often extended by FDA requests for additional information or clarification.
Before approving a BLA, the FDA will conduct a
pre-approval inspection of the manufacturing facilities for the new product to determine whether they comply with cGMP requirements.
The FDA will not approve the product 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. The FDA also may audit data
from clinical trials to ensure compliance with GCP requirements. Additionally, the FDA may refer applications for novel products or products
which present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other
experts, for review, evaluation and a recommendation as to whether the application should be approved and under what conditions, if any.
The FDA is not bound by recommendations of an advisory committee, but it considers such recommendations when making decisions on approval.
The FDA likely will reanalyze the clinical trial data, which could result in extensive discussions between the FDA and the applicant
during the review process.
After the FDA evaluates a BLA, it will issue an
approval letter, or a Complete Response Letter. An approval letter authorizes commercial marketing of the biologic with specific prescribing
information for specific indications. A Complete Response Letter indicates that the review cycle of the application is complete and the
application will not be approved in its present form. A Complete Response Letter usually describes all the specific deficiencies in the
BLA identified by the FDA. The Complete Response Letter may require additional clinical data and/or other significant and time-consuming
requirements related to clinical trials, preclinical studies or manufacturing. If a Complete Response Letter is issued, the applicant
may either resubmit the BLA, addressing all the deficiencies identified in the letter, or withdraw the application. Even if such data
and information are submitted, the FDA may decide that the BLA does not satisfy the criteria for approval. Data obtained from clinical
trials are not always conclusive and the FDA may interpret data differently than the sponsor’s interpretation of the same data.
Orphan Drug Designation
Under the Orphan Drug Act of 1983, or the Orphan
Drug Act, the FDA may grant orphan designation to a drug or biological product intended to treat a rare disease or condition, which is
generally a disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in
the United States and for which there is no reasonable expectation that the cost of developing and making the product available in the
United States for this type of disease or condition will be recovered from sales of the product. Orphan drug designation for a biological
product must be requested before submitting a BLA. After the FDA grants orphan drug designation, the identity of the therapeutic agent
and its potential orphan use are disclosed publicly by the FDA. orphan drug designation does not convey any advantage in or shorten the
duration of the regulatory review and approval process.
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Orphan drug designation entitles a party to financial
incentives such as opportunities for grant funding towards clinical trial costs, tax advantages and user-fee waivers. If a product that
has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, the
product is entitled to orphan drug exclusivity, which means that the FDA may not approve any other applications to market the same drug
for the same indication for seven years from the date of such approval, except in limited circumstances, such as a showing of clinical
superiority to the product with orphan exclusivity by means of greater effectiveness, greater safety or providing a major contribution
to patient care, or in instances of drug supply issues. Competitors, however, may receive approval of either a different product for
the same indication or the same product for a different indication but that could be used off-label in the orphan indication. Orphan
drug exclusivity also could block the approval of one of our products for seven years if a competitor obtains approval before we do for
the same product, as defined by the FDA, for the same indication we are seeking approval, or if our product is determined to be contained
within the scope of the competitor’s product for the same indication or disease. If one of our products designated as an orphan
drug receives marketing approval for an indication broader than that which is designated, it may not be entitled to orphan drug exclusivity.
In December 2023, BX004, received orphan drug designation from the FDA.
Expedited Development and Review Programs
The FDA has a fast-track program that is intended
to expedite or facilitate the process for reviewing new drugs and biologics that meet certain criteria. Specifically, new drugs and biologics
are eligible for fast-track designation if they are intended to treat a serious or life-threatening condition and preclinical or clinical
data demonstrate the potential to address unmet medical needs for the condition. Fast track designation applies to the combination of
the product and the specific indication for which it is being studied. Any product submitted to the FDA for marketing, including under
a fast-track program, may be eligible for other types of FDA programs intended to expedite development and review, such as priority review
and accelerated approval. A product is eligible for priority review if it treats a serious or life-threatening condition and, if approved,
would provide a significant improvement in safety and effectiveness compared to available therapies. The FDA will attempt to direct additional
resources to the evaluation of an application for a new drug or biologic designated for priority review in an effort to facilitate the
review.
A product may also be eligible for accelerated
approval if it treats a serious or life-threatening condition and demonstrates an effect on a surrogate endpoint that is reasonably likely
to predict clinical benefit or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, or IMM,
that is reasonably likely to predict an effect on IMM or other clinical benefit. As a condition of approval, the FDA generally requires
that a sponsor of a drug or biologic receiving accelerated approval perform adequate and well-controlled post-marketing clinical trials
to demonstrate clinical benefit. Products receiving accelerated approval may be subject to expedited withdrawal procedures if such clinical
trials fail to verify the predicted clinical benefit or if the sponsor fails to conduct such trials in a timely manner.
Additionally, a drug or biologic may be eligible
for designation as a breakthrough therapy if the product is intended, alone or in combination with one or more other drugs or biologics,
to treat a serious or life-threatening condition and preliminary clinical evidence indicates that the product may demonstrate substantial
improvement over currently approved therapies on one or more clinically significant endpoints. The benefits of breakthrough therapy designation
include the same benefits as fast-track designation, plus intensive guidance from the FDA to ensure an efficient drug development program.
Even if a product qualifies for one or more of
these programs, the FDA may later decide that the product no longer meets the conditions for qualification or the time period for FDA
review or approval may not be shortened. Furthermore, fast track designation, priority review, accelerated approval and breakthrough
therapy designation do not change the standards for approval, but may expedite the development or approval process.
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Pediatric Information
Under the Pediatric Research Equity Act of 2003,
or PREA, a BLA or supplement to a BLA must contain data to assess the safety and efficacy of the biologic 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. The FDA may grant deferrals for submission of pediatric data or full or partial waivers. A sponsor who is planning
to submit a marketing application for a drug that includes a new active ingredient, new indication, new dosage form, new dosing regimen
or new route of administration must submit an initial Pediatric Study Plan, or PSP, within 60 days of an end-of-Phase 2 meeting
or, if there is no such meeting, as early as practicable before the initiation of the Phase 3 or Phase 2/3 study. The initial PSP must
include an outline of the pediatric study or studies that the sponsor plans to conduct, including study objectives and design, age groups,
relevant endpoints and statistical approach, or a justification for not including such detailed information, and any request for a deferral
of pediatric assessments or a full or partial waiver of the requirement to provide data from pediatric studies along with supporting
information. The FDA and the sponsor must reach an agreement on the PSP. A sponsor can submit amendments to an agreed-upon initial PSP
at any time if changes to the pediatric plan need to be considered based on data collected from preclinical studies, early phase clinical
trials and/or other clinical development programs.
Post-marketing Requirements
Following approval of a new product, the manufacturer
and the approved product are subject to continuing regulation by the FDA, including, among other things, monitoring and record-keeping
activities, reporting of adverse experiences, complying with promotion and advertising requirements, which include restrictions on promoting
products for unapproved uses or patient populations (known as “off-label use”) and limitations on industry-sponsored scientific
and educational activities. Although physicians may prescribe legally available products for off-label uses, manufacturers may not market
or promote such uses. Prescription drug and biologic promotional materials must be submitted to the FDA in conjunction with their first
use. Further, if there are any modifications to the biologic, including changes in indications, labeling or manufacturing processes or
facilities, the applicant may be required to submit and obtain FDA approval of a new BLA or BLA supplement, which may require the development
of additional data or preclinical studies and clinical trials.
The FDA may also place other conditions on approvals
including the requirement for a Risk Evaluation and Mitigation Strategy, or REMS, to assure the safe use of the product. If the FDA concludes
a REMS is needed, the sponsor of the BLA must submit a proposed REMS. The FDA will not approve the BLA without an approved REMS, if required.
A REMS could include medication guides, physician communication plans or elements to assure safe use, such as restricted distribution
methods, patient registries and other risk minimization tools. Any of these limitations on approval or marketing could restrict the commercial
promotion, distribution, prescription or dispensing of products. Newly discovered or developed safety or effectiveness data may require
changes to a product’s approved labeling, including the addition of new warnings and contraindications, and also may require the
implementation of other risk management measures, including a REMS or the conduct of post-marketing studies to assess a newly discovered
safety issue. Product approvals may be withdrawn for non-compliance with regulatory standards or if problems occur following initial
marketing.
FDA regulations require that products be manufactured
in specific approved facilities and in accordance with cGMP regulations, which require, among other things, quality control and quality
assurance, the maintenance of records and documentation and the obligation to investigate and correct any deviations from cGMP. Manufacturers
and other entities involved in the manufacture and distribution of approved drugs or biologics are required to register their establishments
with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for
compliance with cGMP requirements 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. The discovery of violative conditions, including failure to conform to
cGMP regulations, could result in enforcement actions, and the discovery of problems with a product after approval may result in restrictions
on a product, manufacturer or holder of an approved BLA, including recall.
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Biosimilars and Exclusivity
An abbreviated approval pathway for biological
products shown to be biosimilar to, or interchangeable with, an FDA licensed reference biological product was created by the Biologics
Price Competition and Innovation Act of 2009. This amendment to the PHSA, in part, attempts to minimize duplicative testing. Biosimilarity,
which requires that the biological product be highly similar to the reference product notwithstanding minor differences in clinically
inactive components and that there be no clinically meaningful differences between the product and the reference product in terms of
safety, purity and potency, can be shown through analytical studies, animal studies and a clinical trial or trials.
Interchangeability requires that a biological
product be biosimilar to the reference product and that the product can be expected to produce the same clinical results as the reference
product in any given patient and, for products administered multiple times to an individual, that the product and the reference product
may be alternated or switched after one has been previously administered without increasing safety risks or risks of diminished efficacy
relative to exclusive use of the reference biological product without such alternation or switch.
A reference biological product is granted 12 years
of data exclusivity from the time of first licensure of the product, and the FDA will not accept an application for a biosimilar or interchangeable
product based on the reference biological product until four years after the date of first licensure of the reference product. “First
licensure” typically means the initial date the particular product at issue was licensed in the United States. Date of first licensure
does not include the date of licensure of (and a new period of exclusivity is not available for) a biological product if the licensure
is for a supplement for the biological product or for a subsequent application by the same sponsor or manufacturer of the biological
product (or licensor, predecessor in interest, or other related entity) for a change (not including a modification to the structure of
the biological product) that results in a new indication, route of administration, dosing schedule, dosage form, delivery system, delivery
device or strength, or for a modification to the structure of the biological product that does not result in a change in safety, purity,
or potency.
Pediatric exclusivity is another type of regulatory
market exclusivity in the United States, available under the Best Pharmaceuticals for Children Act by way of its application to biologics
through the Biologics Price Competition and Innovation Act. Pediatric exclusivity, if granted, adds six months to existing regulatory
exclusivity periods, which must be in place in order for pediatric exclusivity to apply. This six-month exclusivity may be granted based
on the voluntary completion of a pediatric trial in accordance with an FDA issued “Written Request” for such a trial, although
FDA may issue such a Written Request at the request of the sponsor.
Companion Diagnostics
We may employ companion diagnostics to identify
the most suitable phage to treat a specific patient under our personalized phage treatments and to help more accurately identify patients
sensitive to our phage cocktails, during our clinical trials and potentially also in connection with the commercialization of our product
candidates that we are developing or may in the future develop. Companion diagnostics can identify patients who are most likely to benefit
from a particular therapeutic product; identify patients likely to be at increased risk for serious side effects as a result of treatment
with a particular therapeutic product; or monitor response to treatment with a particular therapeutic product for the purpose of adjusting
treatment to achieve improved safety or effectiveness. Companion diagnostics are regulated as medical devices by the FDA and, as such,
require either clearance or approval prior to commercialization. The level of risk combined with available controls to mitigate risk
determines whether a companion diagnostic device requires Premarket Approval Application approval or is cleared through the 510(k) premarket
notification process. For a novel therapeutic product for which a companion diagnostic device is essential for the safe and effective
use of the product, the companion diagnostic device should be developed and approved or 510(k)-cleared contemporaneously with the therapeutic.
The use of the companion diagnostic device will be stipulated in the labeling of the therapeutic product.
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Government Regulation Outside of the United States
In addition to regulations in the United States,
we will be subject to a variety of regulations in other jurisdictions governing, among other things, clinical trials of drug products
as well as the approval, manufacture and distribution of our product candidates. Because biologically sourced raw materials are subject
to unique contamination risks, their use may be restricted in some countries. Whether or not we obtain FDA approval for a product candidate,
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. If we fail to comply with applicable foreign regulatory requirements, we may be subject
to, among other things, fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions
and criminal prosecution.
Clinical Trials
Certain countries outside of the United States
have a regulatory process similar to the U.S process that requires the submission of a clinical trial application much like the IND prior
to the commencement of human clinical trials. In the European Union, for example, a clinical trial application, or CTA, must be submitted
for each clinical trial in a centralized manner to the relevant national health authority and an independent ethics committee in each
country in which the trial is to be conducted through a single EU portal for harmonized assessment, much like the FDA and an IRB, respectively.
CTAs must be accompanied by an investigational medicinal product dossier with supporting information prescribed by the Clinical Trials
Regulation (and corresponding national laws of the member states) and further detailed in applicable guidance documents. Once the CTA
is approved in accordance with the European Commission and each country’s requirements, the clinical trial may proceed. A similar
process to the one described for the European Union is required in Israel for initiation of clinical trials. The requirements and process
governing the conduct of clinical trials vary from country to country. In all cases, the clinical trials must be conducted in accordance
with GCP and the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki.
Approval Process
In order to market our products, we must obtain
a marketing approval for each product and comply with numerous and varying regulatory requirements. The approval procedure varies among
countries and can involve additional testing in comparison to the testing carried out for the U.S. approval. The time required to obtain
approval in foreign countries may differ substantially from that required to obtain FDA approval. Clinical trials conducted in one country
may not be accepted by regulatory authorities in other countries. The regulatory approval process outside the United States generally
is subject to all of the same risks associated with obtaining FDA approval. In addition, in many countries outside the United States,
it is required that the product be approved for reimbursement before the product can be approved for sale in that country.
To obtain marketing approval of a medicinal product
under the European Union regulatory system, an applicant must submit a marketing authorization application, or MAA, under either a centralized
or a decentralized procedure. The decentralized procedure is based on a collaboration among the member states selected by the applicant.
In essence, the applicant chooses a ‘lead’ member state that will carry out the scientific assessment of the MAA and review
the product information. The other member states must recognize the outcome of such assessment and review except in case of a “serious
potential risk to public health.” The decentralized procedure results in the grant of a national marketing authorization in each
selected country. That procedure is available for all medicinal products unless they fall into the mandatory scope of the centralized
procedure. In practice, it is used for OTC, not highly innovative products, generic products and, increasingly, for biosimilars.
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 certain medicinal products, including for medicinal products produced by certain biotechnological processes, products
designated as orphan medicinal products, advanced therapy medicinal products, or ATMPs, and products with a new active substance and
indicated for the treatment of certain diseases. For products with a new active substance and indicated for the treatment of other diseases,
products that are highly innovative or for which a centralized process is in the interest of patients, the centralized procedure is optional.
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Under the centralized procedure, the CHMP, the
main scientific committee established at the European Medicines Agency, or EMA, is responsible for conducting the scientific assessment
of the future medicinal product. 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. The maximum timeframe for the evaluation of an MAA
is 210 days, excluding clock stops. The European Commission grants or refuses the marketing authorization, following a procedure that
involves representatives of the member states. The European Commission’s decision is in accordance with the CHMP scientific assessment
except in very rare cases.
Pursuant to Regulation (EC) 1394/2007, specific
rules apply to ATMPs, a category that is comprised of gene therapy medical products, somatic cell therapy medicinal products, and tissue-engineered
medicinal products. Those rules have triggered the adoption of guidelines on manufacturing, clinical trials and pharmacovigilance that
adapt the general regulatory requirements to the specific characteristics of ATMPs. Regulation (EC) 1394/2007 introduced a “hospital
exemption”, which authorizes hospitals to develop ATMP for their internal use without having obtained a marketing authorization
and to complying with European Union pharmaceutical law. The hospital exemption, which is in essence a compounded ATMP, has been transposed
in all Member States, sometimes in such a way that the ATMPs under the hospital exemption are competitive alternatives to ATMPs with
marketing authorization. The broad use of the hospital exemption by national hospitals led the European Commission to discuss with the
Member States a more reasonable application of the hospital exemption that would not undermine the common legal regime for ATMP.
Marketing authorization is valid for five years
in principle and the marketing authorization may be renewed after five years on the basis of a re-evaluation of the risk-benefit balance
by the EMA or the competent authority of the authorizing member state. To this end, the marketing authorization holder must provide the
EMA or the competent authority with a consolidated version of the file in respect of quality, safety and efficacy, including all variations
introduced since the marketing authorization was granted, at least six months before the marketing authorization ceases to be valid.
Once renewed, the marketing authorization is valid for an unlimited period, unless the European Commission or the national competent
authority decides, on justified grounds relating to pharmacovigilance, to proceed with one additional renewal. Any authorization which
is not followed by the actual placing of the medicinal product on the European Union market (in case of centralized procedure) or on
the market of the authorizing member state within three years after authorization ceases to be valid (the so-called sunset clause).
Orphan Designation
Countries other than the United States have adopted
a specific legal regime to support the development and marketing of drugs and biologics for rare diseases.
For example, in the European Union, Regulation
141/2000 organizes the grant of orphan drug designations to promote the development of products that are intended for the diagnosis,
prevention or treatment of life threatening or chronically debilitating conditions affecting not more than 5 in 10,000 persons in the
European Economic Area (the European Union, plus Iceland, Liechtenstein and Norway), or EEA, (or where it is unlikely that the development
of the medicine would generate sufficient return to justify the investment) and for which no satisfactory method of diagnosis, prevention
or treatment has been authorized or, if a method exists, the product would be of significant benefit to those affected. The EMA’s
Committee for Orphan Medicinal Products, or COMP, examines if the orphan criteria are met and gives opinions thereon, and the orphan
status is granted by the European Commission. The meeting of the criteria for orphan designation is examined again by the COMP at the
time of approval of the medicinal product, which typically occurs several years after the grant of the orphan designation. If the criteria
for orphan designation are no longer met at that time, the European Commission withdraws the orphan status.
In the European Union, orphan drug designation
entitles the sponsor to financial incentives such as reduction of fees or fee waivers and to ten years of market exclusivity granted
following medicinal product approval. Market exclusivity precludes the EMA or a national regulatory authority from validating another
MAA, and the European Commission or a national regulatory authority from granting another marketing authorization, for a same or similar
medicinal product and a same therapeutic indication, for that time period. This 10-year period may be reduced to six years if the orphan
drug designation criteria are no longer met, including where it is shown that the product is sufficiently profitable not to justify maintenance
of market exclusivity. The orphan exclusivity may be lost vis-à-vis another medicinal product in cases the manufacturer is unable
to assure sufficient quantity of the medicinal product to meet patient needs or if that other product is proved to be clinically superior
to the approved orphan product. A drug is clinically superior if it is safer, more effective or makes a major contribution to patient
care. Orphan drug designation must be requested before submitting a MAA. Orphan drug designation does not convey any advantage in, or
shorten the duration of, the regulatory review and approval process, and it does not afford any regulatory exclusivity until a marketing
authorization is granted.
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Expedited Development and Approval
Mechanisms are in place in many jurisdictions
that allow an earlier approval of the drug so that it reaches patients with unmet medical needs earlier. The European Union, for example,
has instituted several expedited approval mechanisms including two mechanisms that are specific to the centralized procedure:
●
the accelerated approval: the EMA may reduce the maximum
timeframe for the evaluation of an MAA from 210 days to 150 days when the future medicinal product is of major interest from the
point of view of public health, in particular from the viewpoint of therapeutic innovation.
●
the conditional marketing authorization: as part of
its marketing authorization process, the European Commission may grant marketing authorizations on the basis of less complete data
than is normally required.
A conditional marketing authorization may be granted
when the CHMP finds that, although comprehensive clinical data referring to the safety and efficacy of the medicinal product have not
been supplied, all the following requirements are met:
●
the risk/benefit balance of the medicinal product is
positive;
●
it is likely that the applicant will be in a position
to provide the comprehensive clinical data;
●
unmet medical needs will be addressed; and
●
the benefit to public health of the immediate availability
on the market of the medicinal product concerned outweighs the risk inherent in the fact that additional data is still required.
The granting of a conditional marketing authorization
is typically restricted to situations in which only the clinical part of the application is not yet fully complete. Incomplete preclinical
or quality data may however be accepted if duly justified and only in the case of a product intended to be used in emergency situations
in response to public health threats.
Conditional marketing authorizations are valid
for one year, on a renewable basis. The conditions to which approval is subject will typically require the holder to complete ongoing
trials or to conduct new trials with a view to confirming that the benefit-risk balance is positive and to collect pharmacovigilance
data. Once the conditions to which the marketing authorization is subject are fulfilled, the conditional marketing authorization is transformed
into a regular marketing authorization. If, however, the conditions are not fulfilled with the timeframe set by EMA, the conditional
marketing authorization ceases to be renewed.
The EMA has also implemented the so-called “PRIME”
(PRIority MEdicines) status in order support the development and accelerate the approval of complex innovative medicinal products addressing
an unmet medical need. PRIME status enables early dialogue with the relevant EMA scientific committees and, possibly, some payors and
thus reinforces the EMA’s scientific and regulatory support. It also opens accelerated assessment of the MAA as PRIME status, is
normally reserved for medicinal products that may benefit from accelerated assessment, i.e., medicines of major interest from a public
health perspective, in particular from a therapeutic innovation perspective.
Finally, all medicinal products (i.e. decentralized
and centralized procedures) may benefit from an MA “under exceptional circumstances.” This marketing authorization is close
to the conditional marketing authorization as it is reserved to medicinal products to be approved for severe diseases or unmet medical
needs and the applicant does not hold the complete data set legally required for the grant of a marketing authorization. However, unlike
the conditional marketing authorization, the applicant does not have to provide the missing data and will never have to. The risk-benefit
of the medicinal product is reviewed annually. As a result, although the MA “under exceptional circumstances” is granted
definitively, the risk-benefit balance of the medicinal product is reviewed annually and the marketing authorization is withdrawn in
case the risk-benefit ratio is no longer favorable.
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Pediatrics
Mandatory testing in the pediatric population
is required in more and more jurisdictions. The European Union has enacted a complex and very stringent system that has inspired other
jurisdictions, including the United States and Switzerland. Any application for approval of (i) a medicinal product containing a new
active substance or (ii) a new therapeutic indication, pharmaceutical form or route of administration of an already authorized medicinal
product which contains an active substance still protected by a supplementary protection certificate, or SPC, or a patent that qualifies
for an SPC, must include pediatric data. Otherwise, the application is not validated by the competent regulatory authority. The submission
of pediatric data is mandatory in those cases, even if the application concerns an adult use. Submission of pediatric data is not required
or fully required if the EMA granted, respectively, a full or partial waiver to pediatric development. Moreover, that submission can
be postponed if the EMA grants a deferral in order not to delay the submission of the MAA for the adult population.
The pediatric data are generated through the implementation
of a pediatric investigation plan, or PIP, that is proposed by the company after completion of the PK studies in adults and agreed upon
by the EMA, typically after some modifications. The PIP lists all the studies to conduct and measures to take in order to prove the safety
and efficacy of the future medicinal product when used in children. The EMA may agree to modify the PIP at the company’s request.
The scope of the PIP is the adult therapeutic indication or the condition of which the adult application is part or even the mechanism
of action of the active substance, at the EMA’s quasi-discretion. This very broad discretion enables the EMA to require companies
to develop children indications that are different from the adult indications.
Completion of a PIP renders the company eligible
for a pediatric reward, which can be six-month extension of the term of the SPC or, in the cases of orphan medicinal products, two additional
years of market exclusivity. The reward is subject, among other conditions, to the PIP being fully completed, to the pediatric medicinal
product being approved in all the member states, and to the results of the pediatric studies being mentioned, in one way or another (for
example, the approval of a pediatric indication), in the summary of product characteristics of the product.
Post-Marketing Requirements
Many countries impose post-marketing requirements
similar to those imposed in the United States, in particular safety monitoring or pharmacovigilance. In the European Union, pharmacovigilance
data are the basis for the competent regulatory authorities imposing the conduct of post-approval safety or efficacy study, including
on off-label use. Non-compliance with those requirements can result in significant financial penalties as well as the suspension or withdrawal
of the marketing authorization.
Supplementary Protection Certificate and Regulatory Exclusivities
In some countries other than the United States,
some of our patents may be eligible for limited patent term extension, depending upon the timing, duration and specifics of the regulatory
approval of our product candidates and any future product candidates. Furthermore, authorized drugs and biologics may benefit from regulatory
exclusivities (in additional to patent protection resulting from patents).
In the European Union, Regulation (EC) 469/2009
institutes SPCs. An SPC is an extension of the term of a patent that compensates for the patent protection lost because of the legal
requirements to conduct safety and efficacy tests and to obtain a marketing authorization before placing a medicinal product on the market.
An SPC may be applied for any active substance that is protected by a “basic patent” (a patent chosen by the patent holder,
which can be a product, process or application patent) and has not been placed on the market as a medicinal product before having obtained
a marketing authorization in accordance with European Union pharmaceutical law. The term of the SPC is maximum five years, and the combined
patent and SPC protection may not exceed fifteen years from the date of the first marketing authorization in the EEA. SPC rights are
restricted by both the basic patent and the marketing authorization, i.e., the SPC grants the same rights as those conferred by the basic
patent but limited to the active substance covered by the marketing authorization (and any use as medicinal product approved afterwards).
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While SPC are regulated at the European level,
they are granted by the national patent offices. The grant of an SPC requires a basic patent granted by the national patent office and
a marketing authorization, which is the first marketing authorization for the active substance as a medicinal product in the country.
Furthermore, no SPC must have already been granted to the active substance, and the application for the SPC must be filed with the national
patent office within six months of the first marketing authorization in the EEA or the grant of the basic patent, whichever is the latest.
In the future, we may apply for an SPC for one
or more of our currently owned or licensed European patents to add patent life beyond their current expiration date, depending on the
expected length of the clinical trials and other factors involved in the filing of the relevant MAA.
Furthermore, in the European Union, medicinal
products may benefit from the following regulatory exclusivities: data exclusivity, market protection, market exclusivity, and pediatric
reward.
A medicinal product that contains a new active
substance (reference medicinal product) is granted eight years of data exclusivity followed by two years of market protection. Data exclusivity
prevents other companies from referring to the non-clinical and clinical data in marketing authorization dossier of the reference medicinal
product for submission of generic MAA purposes, and market protection prevents other companies from placing generics on the market. Pursuant
to the concept of global marketing authorization, any further development of that medicinal product (e.g., new indication, new form,
change to the active substance) by the marketing authorization holder does not trigger any new or additional protection. The authorization
of any new development is considered as “falling” into the initial marketing authorization with regard to regulatory protection;
hence, the new development only benefits from the regulatory protection that remains when it is authorized. The only exception is a new
therapeutic indication that is considered as bringing a significant clinical benefit in comparison to the existing therapies. Such new
indication will add one-year of market protection to the global marketing authorization, provided that it is authorized within the first
eight years of authorization (i.e., during the data exclusivity period). Moreover, a new therapeutic indication of a “well-established
substance” benefits from one-year data exclusivity but limited to the non-clinical and clinical data supporting the new indication.
Any active substance approved for at least ten years in the EEA qualifies as well-established substance.
Biosimilars may be approved through an abbreviated
approval pathway after the expiration of the eight-year data exclusivity period and may be marketed after the 10 or 11-year market protection
period. The approval of biosimilars requires the applicant to demonstrate similarity between the biosimilar and the biological medicinal
product and to submit the non-clinical and clinical data defined by the EMA. The biosimilar legal regime has been mainly developed through
EMA’s scientific guidelines applicable to categories of biological active substances. Unlike in the United States, interchangeability
is regulated by each member state.
Market exclusivity is a regulatory protection
exclusively afforded to medicinal products with an orphan status. Market exclusivity precludes the EMA or a national regulatory authority
from validating another MAA, and the European Commission or a national regulatory authority from granting another marketing authorization,
for a same or similar medicinal product and a same therapeutic indication, for a period of ten years from approval (see above).
Pediatric reward is another regulatory exclusivity.
Completion of a PIP renders the company eligible for a pediatric reward, which can be six-month extension of the term of the SPC or,
in the cases of orphan medicinal products, two additional years of market exclusivity (see above). In case a PIP is completed on a voluntary
basis, i.e., for an approved medicinal product that is not or no longer protected by an SPC or a basic patent, the pediatric reward takes
the form of a “pediatric use marketing authorization”, or PUMA. That special authorization does not fall into the global
marketing authorization and thus benefits from eight years of data exclusivity followed by two or three years of market protection.
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Other U.S. Healthcare Laws and Compliance Requirements
In addition to FDA restrictions on the marketing
of pharmaceutical products, we may be subject to various federal and state laws targeting fraud and abuse in the healthcare industry.
These laws may impact, among other things, our business or financial arrangements and relationships through which we market, sell and
distribute the products, if any, for which we obtain approval. The laws that may affect our ability to operate include:
●
the federal Anti-Kickback Statute, which prohibits,
among other things, knowingly and willfully soliciting, receiving, offering or paying any remuneration (including any kickback, bribe,
or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce, or in return for, either the referral of
an individual, or the purchase, lease, order or recommendation of any good, facility, item or service for which payment may be made,
in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs; a person or entity does not
need to have actual knowledge of the federal Anti-Kickback Statute or specific intent to violate it to have committed a violation.
In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback
Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act, or FCA, or federal civil money penalties
statute;
●
federal civil and criminal false claims laws and civil
monetary penalties laws, such as the FCA, which impose criminal and civil penalties and authorize civil whistleblower or qui tam
actions, against individuals or entities for, among other things: knowingly presenting, or causing to be presented, to the federal
government, claims for payment that are false or fraudulent; making, using or causing to be made or used, a false statement or record
material to a false or fraudulent claim or obligation to pay or transmit money or property to the federal government; or knowingly
concealing or knowingly and improperly avoiding or decreasing an obligation to pay money to the federal government;
●
the civil monetary penalties law, which prohibits,
among other things, the offering or giving of remuneration, which includes, without limitation, any transfer of items or services
for free or for less than fair market value (with limited exceptions), to a Medicare or Medicaid beneficiary that the person knows
or should know is likely to influence the beneficiary’s selection of a particular supplier of items or services reimbursable
by a federal or state governmental program;
●
the Health Insurance Portability and Accountability
Act of 1996, or HIPAA, which created new federal criminal statutes that prohibit knowingly and willfully executing, or attempting
to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations,
or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless
of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up by any trick or device a
material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits,
items or services relating to healthcare matters; similar to the federal Anti-Kickback Statute, a person or entity does not need
to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;
●
the federal transparency requirements under the Affordable
Care Act, or ACA, including the provision commonly referred to as the Physician Payments Sunshine Act, which requires manufacturers
of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s
Health Insurance Program to report annually to the U.S. Department of Health and Human Services information related to payments or
other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors),
certain non-physician practitioners (physician assistants, nurse practitioners, clinical nurse specialists, anesthesiologist assistants,
certified registered nurse anesthetists and certified nurse midwives) and teaching hospitals, as well as ownership and investment
interests held by the physicians described above and their immediate family members;
●
federal government price reporting laws, which require
us to calculate and report complex pricing metrics in an accurate and timely manner to government programs; and
●
federal consumer protection and unfair competition
laws, which broadly regulate marketplace activities and activities that potentially harm consumers.
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Additionally, we are subject to state and foreign
equivalents of each of the healthcare laws described above, among others, some of which may be broader in scope and may apply regardless
of the payor. Many U.S. states have adopted laws similar to the federal Anti-Kickback Statute, some of which apply to the referral of
patients for healthcare services reimbursed by any source, not just governmental payors, including private insurers. In addition, some
states have passed laws that require pharmaceutical companies to comply with the April 2003 Office of Inspector General Compliance Program
Guidance for Pharmaceutical Manufacturers and/or the Pharmaceutical Research and Manufacturers of America’s Code on Interactions
with Healthcare Professionals. Several states also impose other marketing restrictions or require pharmaceutical companies to make marketing
or price disclosures to the state. There are ambiguities as to what is required to comply with these state requirements and if we fail
to comply with an applicable state law requirement we could be subject to penalties. Finally, there are state and foreign laws governing
the privacy and security of health information, many of which differ from each other in significant ways and often are not pre-empted
by HIPAA, thus complicating compliance efforts.
Because of the breadth of these laws and the narrowness
of the statutory exceptions and safe harbors available, it is possible that some of our business activities could be subject to challenge
under one or more of such laws.
Violations of fraud and abuse laws may be punishable
by criminal and/or civil sanctions, including penalties, fines, imprisonment and/or exclusion or suspension from federal and state healthcare
programs such as Medicare and Medicaid and debarment from contracting with the U.S. government. In addition, private individuals have
the ability to bring actions on behalf of the U.S. government under the federal FCA, as well as under the false claims laws of several
states.
Law enforcement authorities are increasingly focused
on enforcing fraud and abuse laws, and it is possible that some of our practices may be challenged under these laws. Efforts to ensure
that our current and future business arrangements with third parties, and our business generally, will comply with applicable healthcare
laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices,
including our arrangements with physicians and other healthcare providers, some of whom receive stock options as compensation for services
provided, may not comply with current or future statutes, regulations, agency guidance or case law involving applicable fraud and abuse
or other healthcare laws and regulations. If any such actions are instituted against us, and we are not successful in defending ourselves
or asserting our rights, those actions could have a significant impact on our business, including the imposition of civil, criminal and
administrative penalties, damages, disgorgement, monetary fines, imprisonment, possible exclusion from participation in Medicare, Medicaid
and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, and curtailment
of our operations, any of which could adversely affect our ability to operate our business and our results of operations. In addition,
the approval and commercialization of any of our product candidates outside the United States will also likely subject us to foreign
equivalents of the healthcare laws mentioned above, among other foreign laws.
If any of the physicians or other healthcare providers
or entities with whom we expect to do business are found to be not in compliance with applicable laws, they may be subject to criminal,
civil or administrative sanctions, including exclusions from government funded healthcare programs, which may also adversely affect our
business.
Much like the federal Anti-Kickback Statute in
the United States, the provision of benefits or advantages to physicians to induce or encourage the prescription, recommendation, endorsement,
purchase, supply, order or use of medicinal products is also prohibited in the European Union. The provision of benefits or advantages
to physicians is mainly governed by the national anti-bribery laws of the member states, such as the UK Bribery Act 2010, or national
anti-kickback provisions (France, Belgium, etc.). Infringement of these laws could result in substantial fines and imprisonment. In certain
member states, payments made to physicians must be publicly disclosed. Moreover, agreements with physicians often must be the subject
of prior notification and approval by the physician’s employer, his or her competent professional organization and/or the regulatory
authorities of the individual member states. These requirements are provided in the national laws, industry codes or professional codes
of conduct, applicable in the member states. Failure to comply with these requirements could result in reputational risk, public reprimands,
administrative penalties, fines or imprisonment.
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Additional Regulation
In addition to the foregoing, state and federal
laws regarding environmental protection and hazardous substances, including the Occupational Safety and Health Act, the Resource Conservancy
and Recovery Act and the Toxic Substances Control Act, affect our business. These and other laws govern our use, handling and disposal
of various biological, chemical and radioactive substances used in, and wastes generated by, our operations. If our operations result
in contamination of the environment or expose individuals to hazardous substances, we could be liable for damages and governmental fines.
We believe that we are in material compliance with applicable environmental laws and that continued compliance therewith will not have
a material adverse effect on our business. We cannot predict, however, how changes in these laws may affect our future operations.
U.S. Foreign Corrupt Practices Act
The U.S. Foreign Corrupt Practices Act, to which
we are subject, prohibits corporations and individuals from engaging in certain activities to obtain or retain business or to influence
a person working in an official capacity. It is illegal to pay, offer to pay or authorize the payment of anything of value to any foreign
government official, government staff member, political party or political candidate in an attempt to obtain or retain business or to
otherwise influence a person working in an official capacity. Similar rules apply to many other countries worldwide such as France (“ Loi
Sapin” ) or the United Kingdom (UK Bribery Act).
U.S. Healthcare Reform
A primary trend in the U.S. healthcare industry
and elsewhere is cost containment. Government authorities and other third-party payors have attempted to control costs by limiting coverage
and the amount of reimbursement for particular medical products. For example, in March 2010, the ACA was enacted, which, among other
things, increased the minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program; introduced a new methodology
by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled,
implanted or injected; extended the Medicaid Drug Rebate Program to utilization of prescriptions of individuals enrolled in Medicaid
managed care plans; imposed mandatory discounts for certain Medicare Part D beneficiaries as a condition for manufacturers’ outpatient
drugs coverage under Medicare Part D; subjected drug manufacturers to new annual fees based on pharmaceutical companies’ share
of sales to federal healthcare programs; created a new Patient Centered Outcomes Research Institute to oversee, identify priorities in
and conduct comparative clinical effectiveness research, along with funding for such research; and established the Center for Medicare
& Medicaid Innovation at the CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending.
Since its enactment, there have been a number
of significant changes to the ACA. On June 17, 2021, the U.S. Supreme Court dismissed the most recent judicial challenge to the
ACA without specifically ruling on the constitutionality of the ACA. Prior to the U.S. Supreme Court’s decision, President Biden
issued an executive order initiating a special enrollment period from February 15, 2021 through August 15, 2021 for purposes
of obtaining health insurance coverage through the ACA marketplace. The executive order also instructed certain governmental agencies
to review and reconsider their existing policies and rules that limit access to healthcare. More recently, on March 11, 2021, President
Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap, currently set
at 100% of a drug’s average manufacturer price, beginning January 1, 2024.
23
In addition, the Budget Control Act of 2011 and
the Bipartisan Budget Act of 2015 led to aggregate reductions of Medicare payments to providers of 2% per fiscal year that will remain
in effect through 2030, unless additional Congressional action is taken. Further, on January 2, 2013, the American Taxpayer Relief Act
was signed into law, which, among other things, reduced Medicare payments to several types of providers, including hospitals, imaging
centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers
from three to five years. More recently, there has been heightened governmental scrutiny over the manner in which manufacturers set prices
for their marketed products, which have resulted in several recent Congressional inquiries and proposed bills designed to, among other
things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform
government program reimbursement methodologies for pharmaceutical products. In August 2022, the Inflation Reduction Act authorized Medicare
to negotiate drug prices for certain high expenditure, single source Medicare part B or D drugs. Individual states in the United States
have also become increasingly active in passing legislation and implementing regulations designed to control pharmaceutical product pricing,
including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure
and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
We expect that additional foreign, federal and
state healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments
will pay for healthcare products and services, which could result in limited coverage and reimbursement and reduced demand for our products,
once approved, or additional pricing pressures.
Coverage and Reimbursement
Significant uncertainty exists as to the coverage
and reimbursement status of any products for which we obtain regulatory approval. In the United States, cosmetics are not generally eligible
for coverage and reimbursement and thus any products that are marketed as cosmetics will not be covered or reimbursed. In the United
States and markets in other countries, sales of any products for which we receive regulatory approval for commercial sale will depend,
in part, on the availability of coverage and reimbursement from third-party payors. Third-party payors include government authorities,
managed care providers, private health insurers and other organizations. The process for determining whether a payor will provide coverage
for a product may be separate from the process for setting the reimbursement rate that the payor will pay for the product. Third-party
payors may limit coverage to specific products on an approved list, or formulary, which might not include all of the FDA-approved products
for a particular indication. A decision by a third-party payor not to cover our products could reduce physician utilization of our products
once approved and have a material adverse effect on our sales, results of operations and financial condition. Moreover, a payor’s
decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved. Adequate third-party
reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment
in product development.
In addition, coverage and reimbursement for products
can differ significantly from payor to payor. One third-party payor’s decision to cover a particular medical product or service
does not ensure that other payors will also provide coverage for the medical product or service, or will provide coverage at an adequate
reimbursement rate.
As a result, the coverage determination process
will require us to provide scientific and clinical support for the use of our products to each payor separately and will be a time-consuming
process.
Third-party payors are increasingly challenging
the price and examining the medical necessity and cost-effectiveness of medical products and services, in addition to their safety and
efficacy. In order to obtain and maintain coverage and reimbursement for any product, we may need to conduct expensive clinical trials
in order to demonstrate the medical necessity and cost-effectiveness of such product, in addition to the costs required to obtain regulatory
approvals. If third-party payors do not consider a product to be cost-effective compared to other available therapies, they may not cover
the product as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow a company to sell its
products at a profit.
24
Outside of the United States, the pricing of pharmaceutical
products is subject to governmental control in many countries. For example, in the European Union, pricing and reimbursement schemes
vary widely from member state to member state. Some countries provide that 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
therapy to currently available therapies or so-called health technology assessments, in order to obtain reimbursement or pricing approval.
Other countries may allow companies to fix their own prices for products, but monitor and control product volumes and issue guidance
to physicians to limit prescriptions. Efforts to control prices and utilization of pharmaceutical products and medical devices will likely
continue as countries attempt to manage healthcare expenditures.
Data Privacy and Security Laws
Numerous state, federal and foreign laws, including
consumer protection laws and regulations, govern the collection, dissemination, use, access to, confidentiality and security of personal
information, including health-related information. In the United States, numerous federal and state laws and regulations, including data
breach notification laws, health information privacy and security laws, including HIPAA, and federal and state consumer protection laws
and regulations (e.g., Section 5 of the FTC Act), that govern the collection, use, disclosure, and protection of health-related and other
personal information could apply to our operations or the operations of our partners. In addition, certain state and non-U.S. laws, such
as the California Consumer Protection Act, the California Privacy Rights Act, and the General Data Protection Regulation, or GDPR, govern
the privacy and security of personal information, including health-related information in certain circumstances, some of which are more
stringent than HIPAA and many of which differ from each other in significant ways and may not have the same effect, thus complicating
compliance efforts. Failure to comply with these laws, where applicable, can result in the imposition of significant civil and/or criminal
penalties and private litigation. Privacy and security laws, regulations, and other obligations are constantly evolving, may conflict
with each other to complicate compliance efforts, and can result in investigations, proceedings, or actions that lead to significant
civil and/or criminal penalties and restrictions on data processing.
Material Agreements
License Agreements
License Agreement with Yeda
On June 22, 2015, BiomX Ltd. entered into a Research
and License Agreement, with Yeda, or, as amended, the Yeda 2015 License Agreement, pursuant to which BiomX Ltd. received an exclusive
worldwide license to certain know-how and research information related to the development, testing, manufacturing, production and sale
of microbiome-based therapeutic product candidates, including candidates specified in the agreement, which are used in our phage discovery
platform, as well as patents, research and other rights to phage product candidates resulting from the work of the consultants identified
in the agreement and further research conducted at the WIS which BiomX Ltd. funded.
In connection with this license, BiomX Ltd. agreed
to pay a non-refundable license fee of $10,000 per year. In addition, BiomX Ltd. contributed an aggregate of approximately $2.0 million
to the research budget agreed upon in the Yeda 2015 License Agreement. BiomX Ltd is also required to pay tiered royalties in the low single
digits on net sales of products and diagnostic kits covered by the Yeda 2015 License Agreement, subject to reductions as described therein.
The products and diagnostic kits covered by the license agreement include those directed to CF and any other indication that may be treated
by phage-based therapies, as well as related technology platforms. If BiomX Ltd. sublicenses its rights under the Yeda 2015 License Agreement,
BiomX Ltd. will be obligated to pay Yeda additional sublicense royalties expressed as a percentage of the sublicensing receipts described
in the agreement received ranging from the mid-teens to the mid-twenties. BiomX Ltd. is obligated to pay filing and maintenance expenses
in respect of patents licensed under the Yeda 2015 License Agreement. In connection with the Yeda 2015 License Agreement, BiomX Ltd. also
issued certain ordinary shares which were subsequently converted to 193,406 shares of our Common Stock as part of the Business Combination
as defined below under “Liquidity and Capital Resources” . In the event of certain mergers and acquisitions we are party
to, we are obligated to pay Yeda an amount equivalent to approximately 1% of the consideration received under such transaction.
Unless terminated earlier by either party, the
license granted will remain in effect in each country and for each product developed based on the license until the later of the expiration
of the last licensed patent (which is expected to be in 2039) in such country for such product, and eleven years from the date of first
commercial sale of such product in such country for such product. The Yeda 2015 License Agreement terminates upon the later of the expiration
of the last of the patents covered under the agreement, and the expiry of a continuous 15-year period during which there has not been
a first commercial sale of any product in any country. Yeda may also terminate the agreement if BiomX Ltd. fails to observe certain diligence
and development requirements and milestones as described in the Yeda 2015 License Agreement. BiomX Ltd. or Yeda may terminate the Yeda
2015 License Agreement for the material uncured breach of the other party after a notice period, or the other party’s winding up,
bankruptcy, insolvency, dissolution or other similar discontinuation of business. Upon termination of the Yeda 2015 License Agreement,
other than due to the passage of time, BiomX Ltd. is required to grant to Yeda a non-exclusive, irrevocable, perpetual, fully paid-up,
sublicensable, worldwide license in respect of our rights in know-how and research results as described in the Yeda 2015 License Agreement,
provided that if Yeda subsequently grants a license to a third party that utilizes our rights, BiomX Ltd. is entitled to share in the
net proceeds actually received by Yeda arising out of that license, subject to a cap based on the development expenses that BiomX incurs
in connection with the Yeda 2015 License Agreement.
25
BiomX Ltd. consults with Yeda with respect to
patent prosecution and maintenance decisions. Yeda is primarily responsible for prosecution and maintenance with respect to Licensed
Information (as defined in the license) and we are responsible for prosecution and maintenance with respect to Subsequent Results (as
defined in the license). BiomX Ltd. and Yeda are both entitled to consultation rights. BiomX is responsible for costs associated with
prosecution and maintenance of all patents and applications.
BiomX Ltd. is entitled to enforce the patent rights
under the license upon approval by Yeda. Yeda may elect to join the lawsuit, but we are responsible for all litigation-related expenses.
Yeda reserves the right to bring its own actions if we do not notify Yeda of our intent to enforce a right or bring an action after we
initially notified Yeda of the potential action.
Exclusive License with United States Navy
On March 16, 2017, APT entered into an exclusive
license (as amended on January 10, 2019, or the USN License Agreement, with the United States of America, as represented by the Secretary
of the Navy or the USN, pursuant to which APT received an exclusive license throughout the territory encompassing the United States,
Canada and Europe to an invention entitled “Bacteriophage Compositions and Method of Selection of Components Against Specific Bacteria
or the USN Licensed Patent, as well as associated materials, including approximately 350 phage (or collectively with the USN Licensed
Patent, the USN Materials), in the field of treating and/or eliminating multi-drug resistant bacteria for all uses, including industrial
or medical uses. Pursuant to the USN License Agreement, APT agreed to carry out a commercial development plan or the Commercial Development
Plan, for the development and marketing of an invention claimed or disclosed in the USN Licensed Patent or a Licensed Invention, to bring
a Licensed Invention to practical application consistent with the milestones provided in the Commercial Development Plan by December
31, 2022, and, thereafter, to continue to make the benefits of a Licensed Invention reasonably accessible to the public for the remainder
of the term of the USN License Agreement. For the term of the license, any Licensed Invention or product produced through the use of
a Licensed Invention for use or sale in the United States must be manufactured substantially in the United States. The Company uses the
phage provided in connection with the USN License Agreement as a potential source of phage for the development of its phage treatments.
In connection with the USN License Agreement,
APT paid the USN a license execution royalty of $5,000. We are also required to pay royalties expressed as a percentage in the high single
digits on net sales of products, or Royalty-Bearing Products (i) defined by or containing a composition defined by any claim of the USN
Licensed Patent, (ii) made by a method claimed in a Licensed Invention, (iii) based on, originating from or containing USN Materials,
or (iv) based on, originating from or supported by USN-created information not found within the USN Licensed Patent and used to support
the commercialization or regulatory approval of a Royalty-Bearing Product, including, DNA sequence data, clinical trial data and detailed
laboratory methods, related to the Licensed Invention.
APT agreed to pay minimum annual royalties in
the amount of $5,000 from 2018 to 2020 and $20,000 thereafter. APT also agreed to pay (a) a regulatory approval royalty in the low $100,000s
within 180 days of receiving FDA approval to market a Royalty-Bearing Product and (b) a revenue milestone royalty in the low $100,000s
when certain revenue thresholds have been met. Additionally, we agreed to pay royalties expressed as a percentage in the mid-twenties
of all revenue received from sublicensing any Royalty-Bearing Product.
We are responsible for controlling and diligently
prosecuting the USN Licensed Patent and paying all costs associated with prosecuting and maintaining the USN Licensed Patent in the United
States and in foreign jurisdictions. We agreed to submit annual progress reports on our efforts to achieve a practical application of
the Licensed Invention by January 1, 2021, and thereafter until such practical application has been received.
We
may terminate the USN License Agreement upon 120 days’ written notice, and the USN may terminate the USN License Agreement if (i)
the USN determines we are not executing the Commercial Development Plan, and cannot demonstrate progression towards practical application,
(ii) the USN determines such termination is necessary to meet requirements for public use specified by U.S. federal regulations issued
after the date of the USN License Agreement and not reasonably satisfied by us, (iii) in the event we willfully made a material false
statement or omitted a material fact in our application for the USN License Agreement or any report required thereby, (iv) we commit
a substantial material breach of the USN License Agreement that has not been remedied within 30 days of written notice, (v) we file for
bankruptcy, become subject to bankruptcy proceedings, or assign the agreement without USN approval, or (vi) the agreement automatically
terminates on May 1, 2025, unless a new agreement is executed. Upon termination, all rights to the Licensed Patents, USN Materials, and
data revert to the USN.
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License Agreement with Walter Reed Army Institute
of Research
On August 24, 2021, APT entered into a Biological
Materials License Agreement (or, as modified on August 31, 2022, the WRAIR License Agreement) with Walter Reed Army Institute of Research
or WRAIR, pursuant to which APT received a nonexclusive worldwide license to certain materials and information, including approximately
100 phage, or WRAIR Materials, to develop and commercialize phage products to treat/prevent Pseudomonas aeruginosa , Acinebactor
baumannii , Staphylococcus aureus , Klebsiella pneumonia , wound and UTI Escherichia coli and Enterobacter cloacae
bacterial infections. The Company uses the phage provided in connection with the WRAIR License Agreement as a potential source of
phage for the development of its phage treatments.
In connection with the WRAIR License Agreement,
APT paid WRAIR an initial execution fee in the mid-thousands of dollars and agreed to pay a maintenance fee in the mid-thousands of dollars
per year. We are also required to pay royalties expressed as a percentage in the low single digits on net sales of products that incorporate
the WRAIR Materials, or the WRAIR Licensed Products, subject to reductions as described in the WRAIR License Agreement. In addition,
if we sublicense our rights under the WRAIR License Agreement we are obligated to pay WRAIR additional sublicense royalties expressed
as a percentage in the low teens of the sublicensing receipts we receive from any such sublicense royalties. In addition, additional
royalties in the low teens may be assessed on any overdue royalty payments.
We are obligated to make written annual progress
reports to WRAIR, detailing our efforts to bring any inventions licensed under WRAIR License Agreement to the point of practical application,
together with any additional information requested by WRAIR or as contemplated or required under the development plan. As part of our
performance under the WRAIR License Agreement, we have agreed to dose the first patient in a clinical trial with a WRAIR Licensed Product
within four years from the effective date of the WRAIR License Agreement.
In the event WRAIR files a non-provisional patent
application covering the WRAIR Materials and/or the use thereof, provided as part of this License Agreement, WRAIR is obligated to notify
us, and we and WRAIR will assess the need and/or desirability of a patent license. In such case, we will have the first right of refusal
to negotiate a non-exclusive or exclusive license.
The WRAIR License Agreement will expire as to
each WRAIR Material ten years from the date that such WRAIR Material was added to the WRAIR License Agreement unless earlier terminated
in accordance with its terms. We may terminate the WRAIR License Agreement upon 60 days’ written notice, and WRAIR may terminate
if we are in default and such default has not been remedied within 90 days after written notice of such default.
The MTEC Grant Agreement
Industry and academia have entered into a Consortium
Member Agreement to participate in the Medical Technology Enterprise Consortium, or MTEC, a 501(c)(3) biomedical technology consortium
working in partnership with the U.S. Department of Defense, for the purpose of conducting research, development and testing in cooperation
with the U.S. Government in an overall effort to improve Service member health and performance in diverse environments. In 2019, APT entered
into a Base Agreement and Research Project Award, or, collectively, the Research Agreement, with the U.S. Army Medical Research Acquisition
Activity, or USAMRAA, and the U.S. Army Medical Research & Development Command, or USAMRDC, to advance personalized phage therapy
from niche to broad use. Awards under the Research Agreement are intended to lay the groundwork for rapid advancement of personalized
phage therapy to commercialization for the variety of clinical indications and bacterial pathogens representing un-met needs with a focus
on infections with significant military relevance. The competitive award was granted by USAMRAA and USAMRDC in collaboration with MTEC.
Under the cost reimbursement contract, MTEC reimburses APT for approved incurred costs that are based upon the achievement of certain
milestones to support the development of personalized phage therapy. For the period between the Acquisition and December 31, 2024, APT
received an aggregate of $3.5 million in grants from MTEC.
Employees
As of December 31, 2024, we had 52 full-time
employees and 5 part-time employees. 17 of our employees have Ph.D. or M.D. degrees and 41 of our employees are currently engaged in
research and development and clinical activities. None of our employees is represented by labor unions or covered by collective bargaining
agreements. We consider our relationship with our employees to be strong.
Corporate Information
The mailing address of our principal executive
office is 22 Einstein St., Floor 4, Ness Ziona, Israel 7414003 and the telephone number is (972) 72-394-2377. Our corporate website address
is www.biomx.com. The content of our website is not intended to be incorporated by reference into this Annual Report or in any other
report or document we file and any references to these websites are intended to be inactive textual references only.
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