Item 1. Business
ITEM 1. BUSINESS
Business Overview
Relmada Therapeutics, Inc. (Relmada, the
Company, we or us) (a Nevada corporation), is a publicly traded, clinical-stage biotechnology company. We substantially redesigned
our development programs following a comprehensive strategic review occasioned by disappointing interim analysis results in December
2024 indicating that our then lead development candidate, esmethadone (d-methadone, dextromethadone, or REL-1017) for the adjunctive
treatment of Major Depressive Disorder (MDD), was unlikely to succeed in its pivotal trial. We concluded in our review that the most
promising path to create shareholder value was to lever our extensive drug development expertise and clinical operations
capabilities by acquiring new development candidates, while pausing further work on REL-1017. Hence we accelerated ongoing efforts
to augment our development pipeline while diversifying its risk, which culminated in the recently announced licensing of NDV-01, a
novel delivery formulation of a widely used chemotheraphy regimen used to treat non muscle-invasive bladder cancer (NMIBC) that is
currently in Phase 2, and the acquisition of Sepranolone, a Phase 2b-ready neurosteroid with potential applications in Prader-Willi
syndrome (PWS), Tourette Syndrome (TS), essential tremor and other diseases related to excessive GABAergic activity.
We also had been developing REL-P11, a modified-release
formulation of psilocybin, as an investigational agent for the treatment of metabolic disease. The REL-P11 program has successfully completed
a Phase 1 safety study. However, in light of an ongoing strategic review of this business opportunity, the changing regulatory landscape
for psychedelics, its early stage of development and the acquisition of new, more advanced product candidates, this program has also
been paused.
REL-1017 Program Updates
Since 2013, we had been developing esmethadone
as our lead product candidate as an oral agent for the treatment of depression and other potential indications. In December 2024,
we reported that the pre-planned interim analysis, conducted by the Independent Data Monitoring Committee (DMC), of Reliance II, our Phase
3 study of esmethadone as a potential adjunctive treatment for MDD, indicated that the study was futile and unlikely to meet the primary
efficacy endpoint with statistical significance, and that we would pause the Reliance II and Relight Phase 3 studies of esmethadone.
Following this 2024 REL-1017 setback, which we
believe mostly likely resulted from an overwhelming placebo response—a trend that has become more common than exceptional in central
nervous system (CNS) clinical trials—the program has been paused pending a comprehensive data review, after which we will make a
decision regarding the future of this program.
Strategic Business Review and New Approach
Following a comprehensive evaluation of the Company’s
business strategy and growth opportunities, management and the Board of Directors have implemented a revised approach aimed at maximizing
shareholder value. This refined strategy remains focused on:
● Innovation
– Advancing novel and differentiated therapeutic solutions
● Addressing
Unmet Medical Needs – Targeting areas with significant gaps in treatment
● Large
Market Opportunities – Prioritizing programs with substantial commercial potential
● Intellectual
Property Protection – Strengthen and extending patent coverage to safeguard long-term value
Key Strategic Priorities
Under this updated approach, we will continue
to emphasize:
● Leveraging
Development Expertise – Focusing on high-value therapeutic areas while rigorously assessing development risks, market viability,
and success probabilities
● Pipeline
Diversification – Expanding and balancing our portfolio to mitigate risk and enhance growth potential
● Prioritizing
Mid- to Late-Stage Programs – Concentrating resources on assets with clear path to commercialization
● Accelerating
Market Entry – Streamline development timelines to bring therapies to patients faster
● Pursuing
Cost-Effective Development Paths – Optimizing resource allocation and strategic partnerships
● Targeted
Commercialization Strategy – Focusing on opportunities that require minimal sales and marketing infrastructure
This strategic framework positions the Company for long-term
growth while maintaining execution and financial prudence.
1
Progress in Strategic Execution
We commenced a strategic review in December 2024
of our then existing development pipeline and the opportunities open to us given our core strengths in every aspect of drug development,
with particular expertise in CNS. That process recently resulted in a series of transactions that have considerably expanded and strengthened
Relmada’s potential to create shareholder value. Over the past three months, we have successfully closed two important transactions,
NDV-01 in-licensing and Sepranolone acquisition, which align with our new strategy.
On February 6, 2025, Relmada announced the acquisition
from Asarina Pharma AB (Asarina) of Sepranolone, a Phase 2b ready neurosteroid being developed for the potential treatment of PWS, TS,
essential tremor and other diseases related to the excessive GABAergic activity.
On March 25, 2025, Relmada announced the in-license
agreement from Trigone Pharma Ltd. (Trigone) of NDV-01, a novel delivery formulation of a widely used chemotherapeutic regimen used to
treat NMIBC.
Key Upcoming Anticipated Milestones
We expect multiple key milestones over the next
12 months. These include:
●
NDV-01 Phase 2a data presentation at the 2025 American Urological Association Meeting – 1 st Half 2025
●
NDV-01 United States Investigative New Drug clearance – 2 nd Half 2025
●
Sepranolone – Initiation of clinical trial in PWS – Year-end 2025
Our Development Programs
Sepranolone Program
The GABAergic system is the primary inhibitory
neurotransmitter pathway. It consists of two types of receptors, GABA A and GABAB. GABA A receptors are a major target
for neuropsychiatric drugs, including benzodiazepines, barbituates and anesthetic agents. The GABAergic system regulates a host of physiological
and neurological functions and their related moods and behaviors. The principal positive physiologic modulators of the GABAergic system
are the neurotransmitter GABA (γ-aminobutyric acid) and the positive allosteric modulator Allopregnaolone. GABA generally inhibits
nervous system excitability and thereby produces a calming effect that reduces anxiety and compulsive behavior, among other manifestations.
While Allopregnanolone typically enhances GABA’s calming effects, in some individuals it paradoxically exacerbates anxiety and compulsive
behavior.
Sepranolone is a synthetic version of Isoallopregnanolone,
a naturally occurring neurosteroid that counteracts the effects of Allopregnanolone. Sepranolone is designed to normalize GABA A receptor
activity by targeting two specific receptor subtypes (alpha-2 and alpha-4) without directly interfering with GABA signaling, making it
a novel and selective treatment approach for diseases such as PWS and TS and other disorders that feature compulsive behavior.
Data from an open-label Phase 2a randomized study
demonstrated that Sepranolone has the potential to improve TS symptoms versus standard of care alone, as measured by changes in the YGTSS
scoring system (the world-standard Yale Global Tic Severity Scale) compared to baseline. In the 12-week, dual-center, parallel-group
study, 26 subjects were treated with Sepranolone (10 mg), administered by subcutaneous injection twice weekly in addition to standard
of care (SOC) versus standard of care alone.
The Phase 2a results showed competitive tic reduction
and improved quality of life while displaying no CNS off-target effects. Sepranolone not only reduced tic severity in its primary clinical
endpoint as measured by YGTSS by 28% (p=0.051) – but also achieved positive results in four key secondary endpoints compared with
standard of care:
● 69%
greater increase of Quality of Life (using the Gilles de la Tourette Syndrome Quality of
Life) total score (GTS-QOL)
● 50%
greater reduction in impairment (YGTSS)
● 44%
greater reduction of the premonitory urge to tic (PUTS – the Premonitory Urge to Tic
scale)
Importantly, no off-target CNS effects or systemic
side effects were observed in this study. Further, Sepranolone has been evaluated in multiple clinical neuro/hormonal studies involving
over 335 participants and has demonstrated a favorable safety profile.
Relmada is currently evaluating the nonclinical
and clinical strategy for the development of Sepranolone.
2
NDV-01 Program
The second program we recently in-licensed, NDV-01,
is a novel intravesicular delivery technology designed for the long-acting, controlled release of gemcitabine and docetaxel. This combination
therapy has gained significant interest as an alternative to Bacillus Calmette-Guérin (BCG) for treating NMIBC, especially given
the global BCG shortage since 2019. Clinical studies have shown that gemcitabine and docetaxel achieve response rates and Recurrence-Free
Survival comparable to or better than BCG. However, conventional administration is cumbersome, requiring sequential drug delivery over
three hours, with limited tumor exposure time.
NDV-01 potentially addresses these limitations
by enabling a single administration in approximately 10 minutes, delivering sustained, localized chemotherapy for up to 10 days. This
extended exposure enhances the therapeutic effect while improving patient convenience. NDV-01 is currently in a Phase 2 clinical trial
evaluating its safety and efficacy in patients with aggressive NMIBC.
NDV-01 is formulated as a controlled-release intravesical
therapy containing gemcitabine and docetaxel. By maintaining continuous drug exposure within the bladder, NDV-01 may optimize local efficacy
while minimizing systemic absorption and associated side effects. Unlike conventional intravesical instillations, which result in fluctuating
drug levels, NDV-01 provides a continuous release of both agents over 10 days. This sustained delivery may improve cancer cell eradication
and reduce recurrence risk while lowering the frequency of administration.
Esmethadone (d-Methadone, dextromethadone, REL-1017) as a treatment
for MDD
Esmethadone’s mechanism of action, as a
low affinity, non-competitive NMDA channel blocker or antagonist, is fundamentally differentiated from most currently FDA-approved antidepressants,
as well as all atypical antipsychotics used adjunctively with standard, FDA-approved antidepressants. Working through the same brain
mechanisms as ketamine and esketamine but potentially lacking their adverse side effects, esmethadone is being developed as a rapidly
acting, oral agent for the treatment of depression and potentially other CNS conditions.
Relmada has paused this program pending a comprehensive data review,
after which a decision regarding the future of this program will be made.
Esmethadone (d-methadone, dextromethadone, REL-1017) in other indications
While our strategy was to focus on the development of esmethadone as
an adjunctive treatment for MDD, we are also evaluating other indications that Relmada may explore in the future, including restless leg
syndrome and other glutamatergic system activation related diseases.
3
Psilocybin Program
Relmada acquired the development and commercial
rights to a novel psilocybin and derivative program from Arbormentis LLC in July of 2021. The original focus of the program was limited
to neurodegenerative diseases. Psilocybin has neuroplastogen™ effects that have the potential to ameliorate the consequences of
multiple neurodegenerative conditions. The pleiotropic metabolic effects of low-dose psilocybin were discovered while studying its neuroplastogen™
potential in a rodent model deficient in neurogenesis – obese rodents maintained on a high fructose, high fat diet (HFHFD). Specifically,
in a rodent model of metabolic dysfunction-associated steatotic liver disease (MASLD), beneficial effects of psilocybin were observed
on multiple metabolic parameters, including reduced hepatic steatosis, reduced body weight gain, and fasting blood glucose levels.
Relmada has paused this program in light of an
ongoing strategic review of this business opportunity, the changing regulatory landscape for psychedelics, its early stage of development
and the acquisition of new, more advanced product candidates.
Our Corporate History and Background
We are a clinical-stage, publicly traded biotechnology
company developing NCEs and novel versions of drug products that potentially address areas of high unmet medical need in the treatment
of cancer, neurological disorders, depression and other diseases.
Currently, none of our product candidates has been approved for sale
in the United States or elsewhere. We have no commercial products, nor do we have a sales or marketing infrastructure. In order to market
and sell our products we must conduct clinical trials on patients and obtain regulatory approvals from appropriate regulatory agencies,
like the FDA in the United States, and similar organizations elsewhere in the world.
We have not generated revenues and do not anticipate
generating revenues for the foreseeable future. We had net loss of approximately $79,979,400 and $98,791,700 for the years ended December
31, 2024 and 2023, respectively. As of December 31, 2024, we had an accumulated deficit of approximately $640,882,000.
Business Strategy
Our strategy is to leverage our considerable
industry experience, understanding of pharmaceutical markets and development expertise to identify, develop and commercialize product
candidates with significant market potential that can fulfill unmet medical needs. We have assembled a management team along with both
scientific advisors and business advisors with significant industry and regulatory experience to lead and execute the development and
commercialization of our product candidates.
4
Intellectual Property Portfolio and Market Exclusivity
We have more than 40 issued patents and pending
patent applications related to Sepranolone for multiple uses, including diseases and disorders exhibiting compulsive behaviors such as
PWS, TS, obsessive-compulsive disorder, and gambling disorder, potentially providing coverage beyond 2030.
We have more than 10 issued patents and pending
patent applications related to NDV-01 for multiple uses, including formulations and methods for controlled release of therapeutics for
treatment of diseases such as bladder cancer, potentially providing coverage beyond 2038.
We have more than 50 issued patents and pending
patent applications related to REL-1017 for multiple uses, including psychological and neurological conditions, potentially providing
coverage beyond 2033. We have also secured an Orphan Drug Designation from the FDA for d-methadone for “the treatment of postherpetic
neuralgia” (postherpetic neuralgia is lasting pain in areas of skin affected by previous outbreaks of shingles, caused by the varicella-zoster,
or herpes zoster, virus) which, upon potential NDA approval, carries 7-year FDA Orphan Drug marketing exclusivity. In the European Union,
some of our prospective products may be eligible up to 10 years of market exclusivity, which includes 8 years data exclusivity and 2 years
market exclusivity. In addition to any granted patents, REL-1017 will be eligible for market exclusivity to run concurrently with the
term of the patent for 5 years in the U.S. (Hatch Waxman Act) and may be eligible for an additional 6 months of pediatric exclusivity
and up to 10 years of exclusivity in the European Union.
We believe an extensive intellectual property
estate of US and foreign patents and applications, once approved, will protect our technology and products.
Esmethadone License Agreement
As a result of a prior acquisition, the Company
assumed an obligation to pay third parties (Dr. Charles E. Inturrisi and Dr. Paolo Manfredi – see below): (A) royalty payments up
to 2% on net sales of licensed products that are not sold by sublicensee and (B) on each and every sublicense earned royalty payment received
by licensee from its sublicensee on sales of license product by sublicensee, the higher of (i) 20% of the royalties received by licensee;
or (ii) up to 2% of net sales of sublicensee. The Company will also make milestone payments of up to $4 or $2 million, for the first commercial
sale of product in the field that has a single active pharmaceutical ingredient, and for the first commercial sale of product in the field
of product that has more than one active pharmaceutical ingredient, respectively. As of December 31, 2024, the Company has not generated
any revenue related to this license agreement.
Sepranolone Acquisition
On February 3, 2025, we entered into an Asset
Purchase Agreement with Asarina, a Swedish corporation, pursuant to which we purchased, subject to the terms and conditions set forth
therein, from Asarina all right, title, and interest in Sepranolone. The total purchase price was €3,000,000. The Company paid Asarina
$2,756,000 on February 5, 2025, which includes a credit of $250,000 for a previous payment made by the Company to Asarina pursuant to
an exclusivity agreement in October 2024.
We will only assume liabilities arising after
the effective date of the Purchase Agreement. All other liabilities, including those arising before the effective date of the Purchase
Agreement, taxes, employment-related liabilities, and those related to the negotiation and consummation of the Purchase Agreement, will
remain with Asarina.
NDV-01 In-License Agreement
On March 24, 2025, we entered into an Exclusive
License Agreement with Trigone, an Israeli company. The license agreement is for Trigone’s NDV-01 product, which is a novel, sustained-release,
intravesical gemcitabine/docetaxel, ready-for-use product candidate for the treatment of NMIBC. Under the terms of the agreement, the
Company made a $3,500,000 upfront payment on March 25, 2025, and issued 3,017,420 shares of common stock, which represent 10% of the Company’s
outstanding shares, for exclusive worldwide rights to NDV-01, excluding Israel, India and South Africa.
In addition, the Company will pay up to $200 million
in development, regulatory and sales milestones pending successful commercialization. The Company will also pay a royalty of 3% on any
net sales. Following the completion of the ongoing Phase 2 study, the Company will assume responsibility for NDV-01’s development,
manufacturing and commercialization.
5
Inturrisi / Manfredi
In January 2018, the Company entered into an
Intellectual Property Assignment Agreement (the Assignment Agreement) and License Agreement (the License Agreement and together with
the Assignment Agreement, the Agreements) with Dr. Charles E. Inturrisi and Dr. Paolo Manfredi (collectively, the Licensor). Pursuant
to the Agreements, Relmada assigned its existing rights, including patents and patent applications, to esmethadone in the context of
psychiatric use (the Existing Invention) to Licensor. Licensor then granted Relmada under the License Agreement a perpetual, worldwide,
and exclusive license to commercialize the Existing Invention and certain further inventions regarding esmethadone, in the context of
other indications such as those contemplated above. In consideration of the rights granted to Relmada under the License Agreement, Relmada
paid the Licensor an upfront, non-refundable license fee of $180,000. Additionally, Relmada will pay Licensor $45,000 every three months
until the earliest to occur of the following events: (i) the first commercial sale of a licensed product anywhere in the world, (ii)
the expiration or invalidation of the last to expire or be invalidated of the patent rights anywhere in the world, or (iii) the termination
of the License Agreement. Relmada will also pay Licensor tiered royalties with a maximum rate of 2%, decreasing to 1.75%, and 1.5% in
certain circumstances, on net sales of licensed products covered under the License Agreement. Relmada will also pay Licensor tiered payments
up to a maximum of 20%, and decreasing to 17.5%, and 15% in certain circumstances, of all consideration received by Relmada for sublicenses
granted under the License Agreement. As of December 31, 2024, no events have occurred, and the Company continues to pay Licensor $45,000
every three months.
The License Agreement includes standard termination
rights for Licensor in the event of our insolvency, challenge of the licensed patents and uncured material breach of our obligations
under the License Agreement. In addition, the License Agreement contains certain “Key Man” provisions such that Licensor
may terminate the License Agreement if we terminate the employment of our Chief Executive Officer, Dr Sergio Traversa, for any reason
other than for specified causes determined by a majority of our Board of Directors (including fraud, gross negligence, unauthorized use
of our confidential information, conduct including harassment or discrimination, breach of fiduciary duty or uncured material breach),
or if we (a) substantially modify Dr. Traversa’s job responsibilities or decision-making rights in connection with the development
and commercialization of esmethadone, (b) remove him from the role of Chief Executive Officer other than in connection with a permitted
change-of-control transaction, (c) materially reduce his compensation, or (d) assign or transfer our rights under the License Agreement
or the esmethadone intellectual property without Dr. Traversa’s consent, in each case (termination or the events in (a) through
(d)) during the period commencing on the effective date and ending on the later of five years from the original effective date of the
License Agreement or December 31, 2022. The December 2019 amendment to the License Agreement made certain clarifications to the nature
of a termination for Cause, including to clarify that termination due to Dr. Traversa’s death or disability does not give Licensor
the right to terminate the License Agreement. On December 27, 2022, the Licensor and the Company entered into a new amendment extending
the “Key Man” provision period until December 31, 2027. The License Agreement was not otherwise modified.
Psilocybin License Agreement
On July 16, 2021, the Company entered into a
License Agreement with Arbormentis, LLC, a privately held Delaware limited liability company, by which the Company acquired development
and commercial rights to a novel psilocybin and derivate program from Arbormentis, LLC, worldwide excluding the countries of Asia. The
Company will collaborate with Arbormentis, LLC on the development of new therapies targeting neurological and psychiatric disorders,
leveraging Arbormentis’ understanding of neuroplasticity, and focusing on this emerging new class of drugs targeting the neuroplastogen
mechanism of action. Under the terms of the License Agreement, the Company paid Arbormentis, LLC an up-front fee of $12.7 million, consisting
of a mix of cash and warrants to purchase the Company’s common stock, in addition to potential milestone payments totaling up to
approximately $160 million related to pre-specified development and commercialization milestones. Arbormentis, LLC is also eligible to
receive a low single digit percentage royalty on net sales of any commercialized therapy resulting from this agreement. The license agreement
is terminable by the Company but is perpetual and not terminable by the licensor absent material breach of its terms by us.
Key Strengths
We believe that the key elements for our market success include:
●
Compelling lead product opportunities in NDV-01 and Sepranolone
●
Experienced management team with considerable drug development expertise
●
Multiple potential bladder cancer related indications for NDV-01
●
Extensive safety database for Sepranolone as well as promising signal of efficacy in Tourette Syndrome
●
Substantial and growing IP portfolio for both Sepranolone and NDV-01
●
Scientific support of leading experts: Our scientific advisors include clinicians and scientists who are affiliated with a number of highly regarded medical institutions.
6
Competition
The pharmaceutical and biotechnology industry
is characterized by intense competition, rapid product development and technological change. Competition is intense among manufacturers
of prescription pharmaceuticals and other product areas where we may develop and market products in the future. Most of our competitors
are large, well-established pharmaceutical or healthcare companies with considerably more financial, marketing, sales and technical resources
than are available to us. Additionally, many of our competitors have research and development capabilities that may allow such competitors
to develop new or improved products that may compete with our products. Our products could be rendered obsolete or made uneconomical
by the development of new products.
Regarding our competitive position in the industry,
we currently have no products approved for sale.
Government Regulation
Government authorities in the United States,
at the federal, state and local level, and in other countries and jurisdictions extensively regulate, among other things, the research,
development, testing, manufacture, quality control, approval, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution,
marketing, post-approval monitoring and reporting, and import and export of pharmaceutical products. The processes for obtaining regulatory
approvals in the United States and in foreign countries and jurisdictions, along with subsequent compliance with applicable statutes
and regulations and other regulatory authorities, require the expenditure of substantial time and financial resources.
FDA Approval Process
In the United States, pharmaceutical products
are subject to extensive regulation by the FDA. The Federal Food, Drug, and Cosmetic Act (FD&C Act) and other federal and state statutes
and regulations govern, among other things, the research, development, testing, manufacture, storage, recordkeeping, approval, labeling,
promotion and marketing, distribution, post-approval monitoring and reporting, sampling and import and export of pharmaceutical products.
Failure to comply with applicable U.S. requirements may subject a company to a variety of administrative or judicial sanctions, such
as FDA refusal to approve pending NDAs, warning or untitled letters, product recalls, product seizures, total or partial suspension of
production or distribution, injunctions, fines, civil penalties and criminal prosecution.
Pharmaceutical product development for a new
product or certain changes to an approved product in the U.S. typically involves nonclinical laboratory and animal tests, the submission
to FDA of an investigational new drug application (IND) which must become effective before clinical testing may commence, and adequate
and well-controlled clinical trials to establish the safety and effectiveness of the drug for each indication for which FDA approval
is sought. Satisfaction of FDA pre-market approval requirements typically takes many years and the actual time required may vary substantially
based upon the type, complexity and novelty of the product or disease.
Nonclinical tests include laboratory evaluation
of product chemistry, formulation and toxicity, as well as animal trials to assess the characteristics and potential safety and efficacy
of the product. The conduct of the nonclinical tests must comply with federal regulations and requirements, including good laboratory
practices. The results of nonclinical testing are submitted to FDA as part of an IND along with other information, including information
about product chemistry, manufacturing and controls, and a proposed clinical trial protocol. Long-term nonclinical tests, such as animal
tests of reproductive toxicity and carcinogenicity, may continue after the IND is submitted. A 30-day waiting period after the submission
of each IND is required prior to the commencement of clinical testing in humans. During this period, if FDA concludes that a deficiency
exists in a clinical investigation that may be grounds for the imposition of clinical hold, FDA will usually attempt to discuss and satisfactorily
resolve the matter with the IND applicant. If such resolution is not possible, FDA may issue a clinical hold order by telephone or other
means of rapid communication or in writing. No more than 30 days after imposition of the clinical hold, a written explanation of the
basis for the hold will be issued by FDA and sent to the applicant. The applicant must respond in writing to each deficiency before the
clinical hold can be lifted. If FDA has neither commented on nor questioned the IND within this 30-day period, the clinical trial proposed
in the IND may begin. Clinical trials involve the administration of the investigational new drug to healthy volunteers or patients under
the supervision of a qualified investigator. Clinical trials must be conducted: (i) in compliance with federal regulations; (ii) in compliance
with good clinical practice, or GCP, an international standard meant to protect the rights and health of patients and to define the roles
of clinical trial sponsors, administrators and monitors; as well as (iii) under protocols detailing the objectives of the trial, the
parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. Each protocol involving testing on U.S. patients
and subsequent protocol amendments must be submitted to FDA as part of the IND.
7
FDA may not permit a clinical trial to begin,
or may order the temporary, or permanent, discontinuation of a clinical trial at any time, or impose other sanctions, if it believes
that the clinical trial either is not being conducted in accordance with FDA requirements or presents an unacceptable risk to the clinical
trial patients. The study protocol and informed consent information for patients in clinical trials must also be submitted to an institutional
review board (IRB) for approval. An IRB may also require the clinical trial at the site to be halted, either temporarily or permanently,
for failure to comply with the IRB’s requirements, or may impose other conditions.
Clinical trials to support NDAs for marketing
approval are typically conducted in three sequential phases, but the phases may overlap. In Phase 1, the initial introduction of the
drug into healthy human subjects or patients, the drug is tested to assess metabolism, pharmacokinetics, pharmacological actions, side
effects associated with increasing doses, and, if possible, early evidence of effectiveness. Phase 2 usually involves trials in a limited
patient population to determine the effectiveness of the drug for a particular indication, dosage tolerance and optimum dosage, and to
identify common adverse effects and safety risks. If a drug demonstrates evidence of effectiveness and an acceptable safety profile in
Phase 2 evaluations, Phase 3 trials are undertaken to obtain the additional information about clinical efficacy and safety in a larger
number of patients, typically at geographically dispersed clinical trial sites, to permit FDA to evaluate the overall benefit-risk relationship
of the drug and to provide adequate information for the labeling of the drug. In most cases, FDA requires two adequate and well-controlled
Phase 3 clinical trials, each convincing on its own, to demonstrate the efficacy of the drug. A single Phase 3 trial with other confirmatory
evidence may be sufficient in rare instances, such as (i) where the study is a large multicenter trial demonstrating internal consistency
and a statistically very persuasive finding of a clinically meaningful effect on mortality, irreversible morbidity or prevention of a
disease with a potentially serious outcome and confirmation of the result in a second trial would be practically or ethically impossible
or (ii) when in conjunction with other confirmatory evidence.
After completion of the required clinical testing,
an NDA is prepared and submitted to FDA. FDA approval of the NDA is required before marketing of the product may begin in the U.S. The
NDA must include the results of all nonclinical, clinical and other testing and a compilation of data relating to the product’s
pharmacology, chemistry, manufacture and controls. The cost of preparing and submitting an NDA is substantial. The submission of most
NDAs is additionally subject to a substantial application user fee, and the applicant under an approved NDA is also subject to an annual
program fee for each prescription product. These fees are typically increased annually. Sponsors of applications for drugs granted Orphan
Drug Designation are exempt from these user fees.
FDA has 60 days from its receipt of an NDA to
determine whether the application will be filed based on the agency’s threshold determination that it is sufficiently complete
to permit substantive review. Once the submission is filed, FDA begins an in-depth review. FDA has agreed to certain performance goals
in the review of NDAs to encourage timeliness. Applications for most standard review drug products are reviewed within twelve months
from submission of NDAs for new molecular entities (NMEs) and ten months from submission of NDAs for non-NMEs. Priority review can be
applied to drugs that FDA determines offer major advances in treatment or provide a treatment where no adequate therapy exists. The review
process for both standard and priority review may be extended by FDA for three additional months to consider certain late-submitted information
or information intended to clarify information already provided in the submission.
FDA may also refer applications for novel drug
products, or drug products that present difficult questions of safety or efficacy, to an outside 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. FDA is not bound by the recommendation of an advisory committee, but it generally follows such recommendations.
Before approving an NDA, FDA will typically inspect
one or more clinical sites to assure compliance with GCP. Additionally, FDA will inspect the facility or the facilities at which the
drug is manufactured. FDA will not approve the product unless compliance with current good manufacturing practices (cGMPs) is satisfactory
and the NDA contains data that provide substantial evidence that the drug is safe and effective in the indication studied.
After FDA evaluates the NDA and the manufacturing
facilities, it issues either an approval letter or a complete response letter. A complete response letter generally outlines the deficiencies
in the submission and may require substantial additional testing, or information, in order for FDA to reconsider the application. If,
or when, those deficiencies have been addressed to FDA’s satisfaction in a resubmission of the NDA, FDA will issue an approval
letter. FDA has committed to reviewing such resubmissions in two or six months depending on the type of information included. An approval
letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. As a condition of
NDA approval, FDA may require a risk evaluation and mitigation strategy (REMS) to help ensure that the benefits of the drug outweigh
the potential risks. REMS can include medication guides, communication plans for healthcare professionals, and elements to assure safe
use (ETASU). ETASU can include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only
under certain circumstances, special monitoring and the use of patient registries. The requirement for a REMS can materially affect the
potential market and profitability of the drug. Moreover, product approval may require substantial post-approval testing and surveillance
to monitor the drug’s safety or efficacy. Once granted, product approvals may be withdrawn if compliance with regulatory standards
is not maintained or problems are identified following initial marketing.
Changes to some of the conditions established
in an approved application, including changes in indications, labeling, or manufacturing processes or facilities, require submission
and FDA approval of a new NDA or NDA supplement before the change can be implemented. An NDA supplement for a new indication typically
requires clinical data similar to that in the original application, and FDA uses the same procedures and actions in reviewing NDA supplements
as it does in reviewing NDAs.
8
Fast Track Designation
FDA is required to facilitate the development,
and expedite the review, of drugs that are intended for the treatment of a serious or life-threatening disease or condition for which
there is no effective treatment and which demonstrate the potential to address unmet medical needs for the condition. Under the Fast
Track program, the sponsor of a new drug candidate may request that FDA designate the drug candidate for a specific indication as a Fast
Track drug concurrent with, or after, the submission of the IND for the drug candidate. FDA must determine if the drug candidate qualifies
for Fast Track Designation within 60 days of receipt of the sponsor’s request.
If a submission is granted Fast Track Designation,
the sponsor may engage in more frequent interactions with FDA, and FDA may review sections of the NDA before the application is complete.
This rolling review is available if the applicant provides, and FDA approves, a schedule for the submission of the remaining information
and the applicant pays applicable user fees. However, FDA’s time period goal for reviewing an application does not begin until
the last section of the NDA is submitted. Additionally, Fast Track Designation may be withdrawn by FDA if FDA believes that the designation
is no longer supported by data emerging in the clinical trial process.
Orphan Drugs
Under the Orphan Drug Act, FDA may grant Orphan
Drug Designation to drugs intended to treat a rare disease or condition – generally a disease or condition that affects fewer than
200,000 individuals in the U.S. Orphan Drug designation must be requested before submitting an NDA. After FDA grants Orphan Drug Designation,
the generic identity of the drug and its potential orphan use are disclosed publicly by FDA. Orphan Drug Designation does not convey
any advantage in, or shorten the duration of, the regulatory review and approval process. The first NDA applicant to receive FDA approval
for a particular active ingredient to treat a particular disease with FDA Orphan Drug Designation is entitled to a seven-year exclusive
marketing period in the U.S. for the active ingredient in that product, for that indication. During the seven-year exclusivity period,
FDA may not approve any other applications to market the same drug for the same disease, except in limited circumstances, such as a showing
of clinical superiority to the product with orphan drug exclusivity. Orphan drug exclusivity does not prevent FDA from approving a different
drug for the same disease or condition, or the same drug for a different disease or condition. Among the other benefits of Orphan Drug
Designation are tax credits for certain research and an exemption from the NDA application user fee.
Disclosure of Clinical Trial Information
Sponsors of clinical trials of FDA regulated
products, including drugs, are required to register and disclose certain clinical trial information. Information related to the product,
patient population, phase of investigation, study sites and investigators, and other aspects of the clinical trial is then made public
as part of the registration. Sponsors are also obligated to discuss the results of their clinical trials after completion. Disclosure
of the results of these trials can be delayed in certain circumstances for up to two years after the date of completion of the trial.
Competitors may use this publicly available information to gain knowledge regarding the progress of development programs.
Pediatric Information
Under the Pediatric Research Equity Act (PREA),
NDAs or supplements to NDAs must contain data to assess the safety and effectiveness of the drug for the claimed indications in all relevant
pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the drug is safe and effective.
FDA may grant full or partial waivers, or deferrals, for submission of data. With certain exceptions, PREA does not apply to any drug
for an indication for which orphan designation has been granted.
The Best Pharmaceuticals for Children Act (BPCA)
provides NDA holders a six-month extension of any exclusivity – patent or nonpatent – for a drug if certain conditions are
met. Conditions for exclusivity include FDA’s determination that information relating to the use of a new drug in the pediatric
population may produce health benefits in that population, FDA making a written request for pediatric studies, and the applicant agreeing
to perform, and reporting on, the requested studies within the statutory timeframe. Applications under the BPCA are treated as priority
applications, with all of the benefits that designation confers.
Post-Approval Requirements
Once an NDA is approved, a product will be subject
to certain post-approval requirements. For instance, FDA closely regulates the post-approval marketing and promotion of drugs, including
standards and regulations for direct-to-consumer advertising, off-label promotion, industry-sponsored scientific and educational activities
and promotional activities involving the internet. Drugs may be marketed only for the approved indications and in accordance with the
provisions of the approved labeling.
Adverse event reporting and submission of periodic
reports are required following FDA approval of an NDA. FDA also may require post-marketing testing, known as Phase 4 testing, REMS and
surveillance to monitor the effects of an approved product, or FDA may place conditions on an approval that could restrict the distribution
or use of the product. In addition, quality control, drug manufacture, packaging and labeling procedures must continue to conform to
cGMPs after approval. Drug manufacturers and certain of their subcontractors are required to register their establishments with FDA and
certain state agencies. Registration with FDA subjects entities to periodic unannounced inspections by FDA, during which the Agency inspects
manufacturing facilities to assess compliance with cGMPs. Accordingly, manufacturers must continue to expend time, money and effort in
the areas of production and quality-control to maintain compliance with cGMPs. Regulatory authorities may withdraw product approvals
or request product recalls if a company fails to comply with regulatory standards, if it encounters problems following initial marketing,
or if previously unrecognized problems are subsequently discovered.
FDA strictly regulates marketing, labeling, advertising
and promotion of drugs that are placed on the market. Advertising and promotion of drugs must be in compliance with the Federal Food,
Drug, and Cosmetic Act (FDCA) and its implementing regulations and only for the approved indications and in a manner consistent with
the approved labeling. FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses,
and a company that is found to have improperly promoted off-label uses may be subject to significant liability, including investigation
by federal and state authorities.
9
Generic Competition
In seeking approval for a drug through an NDA,
applicants are required to list with the FDA each patent whose claims cover the applicant’s product. Upon approval of a drug, each
of the patents listed in the application for the drug is then published in the FDA’s Approved Drug Products with Therapeutic Equivalence
Evaluations, commonly known as the Orange Book. Drugs listed in the Orange Book can, in turn, be cited by potential generic competitors
in support of approval of an abbreviated new drug application (ANDA). An ANDA provides for marketing of a drug product that has the same
active ingredients in the same strengths and dosage form as the listed drug and has been shown through bioequivalence testing to be therapeutically
equivalent to the listed drug. Other than the requirement for bioequivalence testing, ANDA applicants are not required to conduct, or
submit results of, nonclinical or clinical tests to prove the safety or effectiveness of their drug product. Drugs approved in this way
are commonly referred to as “generic equivalents” to the listed drug and can often be substituted by pharmacists under prescriptions
written for the original listed drug.
The ANDA applicant is required to certify to
the FDA concerning any patents listed for the approved product in the FDA’s Orange Book. Specifically, the applicant must certify
that (i) the required patent information has not been filed; (ii) the listed patent has expired; (iii) the listed patent
has not expired but will expire on a particular date and approval is sought after patent expiration; or (iv) the listed patent is
invalid or will not be infringed by the new product (a Paragraph IV certification). The ANDA applicant may also elect to submit a section
viii statement certifying that its proposed ANDA label does not contain (or carve out) any language regarding the patented method-of-use
rather than certify to a listed method-of-use patent. If the applicant does not challenge the listed patents or certifies that the listed
patents will not be infringed by the new product, the ANDA application will not be approved until all the listed patents claiming the
referenced product have expired. If the ANDA applicant has provided a Paragraph IV certification, the NDA and patent holders may then
initiate a patent infringement lawsuit in response. The filing of a patent infringement lawsuit within 45 days of the receipt of a such
certification automatically prevents the FDA from approving the ANDA until the earlier of 30 months, expiration of the patent, settlement
of the lawsuit, or a decision in the infringement case that is favorable to the ANDA applicant.
Exclusivity
Upon NDA approval of an NCE, which is a drug
that contains no active moiety that has been approved by FDA in any other NDA, that drug receives five years of marketing exclusivity
during which FDA cannot receive any ANDA seeking approval of a generic version of that drug. An ANDA may be submitted one year before
NCE exclusivity expires if a Paragraph IV certification is filed. If there is no listed patent in the Orange Book, there may not be a
Paragraph IV certification, and, thus, no ANDA may be filed before the expiration of the exclusivity period. Certain changes to a drug,
such as the addition of a new indication to the package insert, can be the subject of a three-year period of exclusivity if the application
contains reports of new clinical investigations (other than bioavailability studies) conducted or sponsored by the sponsor that were
essential to approval of the application. FDA cannot approve an ANDA for a generic drug that includes the change during the period of
exclusivity.
In the case of a non-racemic drug containing
as an active ingredient a single enantiomer that is contained in a racemic drug approved in another NDA, such as esmethadone, the applicant
for the non-racemic drug may elect, in the NDA, to have the single enantiomer not be considered the same active ingredient as that contained
in the approved racemic drug and therefore eligible for NCE exclusivity, if certain conditions are met. These conditions include: (1)
the single enantiomer has not been previously approved except in the approved racemic drug, (2) the NDA for the non-racemic drug includes
full reports of new clinical investigations necessary for the approval of the product conducted or sponsored by the applicant and not
submitted for approval of the racemic drug, and (3) the NDA for the non-racemic drug is not submitted for approval of a condition of
use in a therapeutic category in which the approved racemic drug has been approved or for which any other enantiomer of the racemic drug
has been approved. In addition, FDA will not approve the non-racemic drug for any condition of use in the therapeutic category in which
the racemic drug has been approved for a period of 10 years after approval of the racemic drug, and the labeling of the non-racemic drug
will include a statement in the indication that the non-racemic drug is not approved, and has not been shown to be safe and effective,
for any condition of use of the racemic drug. The applicant for the non-racemic drug may make this election only in an application submitted
before October 1, 2027.
10
Patent Term Extension
After NDA approval, owners of relevant drug patents
may apply for up to a five-year patent extension. The allowable patent term extension is calculated as half of the drug’s testing
phase (the time between IND application and NDA submission) and all of the review phase (the time between NDA submission and approval
up to a maximum of five years). The time can be shortened if FDA determines that the applicant did not pursue approval with due diligence.
The total patent term after the extension may not exceed 14 years, and only one patent can be extended. For patents that might expire
during the application phase, the patent owner may request an interim patent extension. An interim patent extension increases the patent
term by one year and may be renewed up to four times. For each interim patent extension granted, the post-approval patent extension is
reduced by one year. The director of the United States Patent and Trademark Office must determine that approval of the drug covered by
the patent for which a patent extension is being sought is likely. Interim patent extensions are not available for a drug for which an
NDA has not been submitted.
Controlled Substances
The active ingredients in esmethadone and psilocybin
are regulated as controlled substances pursuant to the Comprehensive Drug Abuse Prevention and Control Act of 1970 (CSA) and regulations
promulgated by the United States Drug Enforcement Administration (DEA). The CSA and its implementing regulations establish a closed chain
of distribution for entities handling controlled substances. The DEA is responsible for enforcing the law and regulations that impose
registration, security, inventory, recordkeeping, reporting and storage requirements on entities that manufacture, distribute, import
and export, prescribe, dispense or otherwise physically handle controlled substances. The law and regulations require those individuals
or entities that handle controlled substances to comply with these requirements in order to ensure legitimate use and prevent the diversion
of controlled substances to illicit channels of commerce.
The CSA classifies controlled substances into
one of five schedules – Schedule I, II, III, IV, or V – depending on the potential for abuse and physical or psychological
dependence. Schedule I substances by definition have a high potential for abuse, have no currently accepted medical use in treatment
in the U.S. and lack accepted safety for use under medical supervision. . Drugs classified as schedule I drugs may not be marketed, sold
or prescribed for dispensing to patients in the U.S. Controlled substances that have a currently accepted medical use and that are otherwise
approved for marketing may be listed as Schedule II, III, IV, or V substances depending on the comparative abuse potential of the
drug or substance, Schedule II substances by definition are classified as having the highest potential for abuse and physical or
psychological dependence, whereas Schedule V substances are classified as having the lowest relative potential for abuse and dependence.
Schedule II substances are subject to the strictest regulatory requirements involving registration, storage, recordkeeping, reporting
and security. Schedule II drugs are subject to manufacturing quotas and the distribution and dispensing of Schedule II drugs are more
limited and tightly controlled. For example, Schedule II drug prescriptions cannot be refilled and must contain a written or electronic
signature of a practitioner when presented to a pharmacy. Schedules III, IV and V controlled substances are subject to registration,
recordkeeping, reporting and security requirements, but these requirements are less restrictive than Schedule II drugs.
Esmethadone is the single isomer of methadone,
is currently classified as a Schedule II substance, and psilocybin is currently classified as a Schedule I substance. Any Schedule I
substance, such as psilocybin, that obtains FDA-approval for marketing in the United States will need to be rescheduled from Schedule
I to Schedule II-V by the DEA before it can be commercially marketed, distributed, sold, prescribed or dispensed. Rescheduling requires
the FDA to provide the DEA with a scientific and medical evaluation related to the FDA approval and the FDA also must make a recommendation
to the DEA on the appropriate schedule. The DEA must conduct notice and comment rulemaking to reschedule any controlled substance. Such
action is subject to public comment and potential requests for an administrative hearing objecting to, or supporting, any such action.
In addition, because each state has its own statutory and regulatory requirements related to controlled substances (which often mirror
the federal scheduling), each state or jurisdiction must also take appropriate administrative or legislative action to reschedule a controlled
substance within that state based on federal rescheduling.
11
Facilities that manufacture, distribute, import
or export any controlled substance must register annually with the DEA. The DEA registration is specific to a particular location, activity,
and controlled substance schedule. For example, separate registrations are required for importation and manufacturing activities, and
the authority granted under each registration determines which schedules of controlled substances the registrant may handle. However,
certain DEA registrations permit coincident activities without obtaining a separate DEA registration, such as authorizing a manufacturer
to also distribute controlled substances produced by that registrant.
The CSA and DEA regulations impose certain security,
recordkeeping and reporting requirements on DEA registrants. The DEA will conduct a preregistration inspection to evaluate compliance
with these requirements before issuing a new registration. The DEA also conducts cyclic inspections of current manufacturers, distributors,
importers, and exporters to review compliance with these requirements. The specific security requirements vary by the type of business
activity and the schedule and quantity of controlled substances handled by the registrant. The most stringent requirements apply to manufacturers
of Schedule I and Schedule II substances. For example, manufacturers and distributors must store Schedule I and II drugs in
a secure vault with specific structural requirements. Other physical security requirements that apply to all controlled substances include
safes and cages, and the use of alarm systems and surveillance cameras. DEA regulations also require that registrants restrict employee
access to controlled substances. Once registered, manufacturing, distribution, exporting or importing facilities must maintain records
documenting the receipt, manufacture, storage, distribution, import, or export of all controlled substances. Manufacturers and distributors
must also submit regular reports to the DEA of the acquisition and distribution of Schedule I and II controlled substances, Schedule III
narcotic substances, and certain other designated substances. All DEA registrants must report any controlled substance thefts or significant
losses and must obtain authorization to destroy or dispose of controlled substances. In addition to maintaining an importer and/or exporter
registration, importers and exporters of controlled substances must obtain a permit for every import or export of a Schedule I or II
substance and a narcotic substance in Schedule III, IV and V. For all other drugs in Schedule III, IV and V, importers and exporters
must submit an import or export declaration to be authorized to import or export these substances. The DEA conducts cyclic inspections
to determine whether registrants are complying with these requirements.
Practitioners such as pharmacies and physicians,
as well as other types of entities that handle controlled substances, such as researchers and analytical laboratories, are also subject
to DEA registration, recordkeeping, reporting, and security requirements on the receipt, storage, and dispensing of controlled substances.
The CSA also requires that the DEA establish
annual aggregate quotas for manufacturing of each Schedule II and some Schedule III drugs for the entire industry. In addition, DEA registered
manufacturers must obtain annual individual manufacturing and procurement quotas. The DEA establishes annually an aggregate production
quota for the amount of substances within Schedules I and II and certain Schedule III substances, that may be produced in the U.S. based
on the DEA’s estimate of the quantity needed to meet legitimate medical, scientific, research and industrial needs. The aggregate
quota for each controlled substance is allocated among the various individual bulk manufacturers through an application process. Manufacturers
of dosage forms are also subject to procurement quotas to obtain the bulk active pharmaceutical ingredients to make finished drugs. Manufacturers
may not exceed the manufacturing or procurement quota granted in a given year. The quotas apply equally to the manufacturing of the active
pharmaceutical ingredient and production of dosage forms. The DEA may adjust aggregate production quotas and individual manufacturing
or procurement quotas from time to time during the year, although the DEA has substantial discretion concerning whether or not to make
such adjustments.
Failure to comply with applicable DEA requirements,
particularly as manifested in the loss or diversion of controlled substances, can result in an enforcement action. The DEA may seek civil
penalties for recordkeeping and reporting violations, refuse to renew necessary registrations, or initiate administrative proceedings
to revoke the DEA registrations. In certain circumstances, violations of the CSA and DEA regulations could lead to criminal prosecution.
The various states, commonwealths, and the District
of Columbia, also have established laws to regulate controlled substances and impose similar licensing, recordkeeping, and reporting
requirements on entities that manufacture, distribute, sell, dispense or prescribe controlled substances in their jurisdiction. Entities
must independently comply with the various state requirements in addition to the federal controlled substance requirements.
The United States and the majority of countries
are signatories to the United Nations (UN) international drug control treaties which dictate certain scheduling, licensing, restrictions
and other requirements involving controlled substances. Because psilocybin is classified as a Schedule I controlled substance under the
UN Convention on Psychotropic Substances, 1971 most countries maintain laws and regulations comparable to those in the United Stated
related to methadone, psilocybin and other controlled substances.
12
Other Healthcare Laws
In the United States, biotechnology company activities
are subject to regulation by various federal, state and local authorities in addition to the FDA, including but not limited to, the Centers
for Medicare& Medicaid Services (CMS), other divisions of the U.S. Department of Health and Human Services (HHS) (e.g., the Office
of Inspector General and the Office for Civil Rights), the U.S. Department of Justice (DOJ) and individual U.S. Attorney offices within
the DOJ, and state and local governments.
The federal Anti-Kickback Statute prohibits,
among other things, persons and entities from knowingly and willfully offering, soliciting or receiving or providing remuneration, directly
or indirectly, in cash or in kind, to induce, or in return for, purchasing, leasing, ordering or arranging for the purchase, lease or
order of any healthcare item or service reimbursable under Medicare, Medicaid, or other federally financed healthcare programs. This
statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers
and formulary managers, among others, on the other. Although there are a number of statutory exceptions and regulatory safe harbors protecting
certain common activities from prosecution or other regulatory sanctions, the exceptions and safe harbors are drawn narrowly, and practices
that involve remuneration intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify
for an exception or safe harbor. In addition, a person or entity does not need to have actual knowledge of the Anti-Kickback Statute
or specific intent to violate it in order to commit a violation.
Federal civil and criminal false claims laws,
including the federal civil False Claims Act, prohibit any person or entity from knowingly presenting, or causing to be presented, a
false claim for payment to the federal government, or knowingly making, or causing to be made, a false statement to have a false claim
paid. This includes claims made to programs where the federal government reimburses, such as Medicare and Medicaid, as well as programs
where the federal government is a direct purchaser, such as when it purchases off the Federal Supply Schedule. Recently, several pharmaceutical
and other healthcare companies have been prosecuted under these laws for allegedly inflating drug prices they report to pricing services,
which in turn were used by the government to set Medicare and Medicaid reimbursement rates, and for allegedly providing free product
to customers with the expectation that the customers would bill federal programs for the product. In addition, certain marketing practices,
including off-label promotion, may also violate false claims laws. Additionally, 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 civil False Claims Act. Most states also have statutes or regulations similar to the federal Anti-Kickback Statute and civil
False Claims Act, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply
regardless of the payor.
Other federal statutes pertaining to healthcare
fraud and abuse include the civil monetary penalties statute, which prohibits, among other things, the offer or payment of remuneration
to a Medicaid or Medicare beneficiary that the offeror or payor knows or should know is likely to influence the beneficiary to order
a receive a reimbursable item or service from a particular supplier.
Further, pursuant to the federal Physician Payment
Sunshine Act, CMS, has issued a final rule that requires manufacturers of prescription drugs to collect and report information on certain
payments or transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), physician
assistants, certain types of advance practice nurses and teaching hospitals, as well as ownership and investment interests held by physicians
and their immediate family members. The reported data is made available in searchable form on a public website on an annual basis. Failure
to submit required information may result in civil monetary penalties.
In addition, several states now require prescription
drug companies to report certain expenses relating to the marketing and promotion of drug products and to report gifts and payments to
individual healthcare practitioners in these states. Other states prohibit various marketing-related activities, such as the provision
of certain kinds of gifts or meals. Still other states require the posting of information relating to clinical studies and their outcomes.
Some states require the reporting of certain drug pricing information, including information pertaining to and justifying price increases
and new high-cost drug introductions. In addition, certain states require pharmaceutical companies to implement compliance programs and/or
marketing codes. Certain states and local jurisdictions also require the registration of pharmaceutical sales and medical representatives.
Compliance with these laws is difficult and time consuming, and companies that do not comply with these state laws may face civil penalties.
13
Data privacy and security regulations by both
the federal government and the states in which business is conducted may also be applicable. Health Insurance Portability and Accountability
Act of 1996 (HIPAA), as amended by the Health Information Technology for Economic and Clinical Health Act (HITECH), and its implementing
regulations, imposes requirements relating to the privacy, security and transmission of individually identifiable health information.
HIPAA prohibits, among other things, 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 of any money or property owned by or under the
control of any healthcare benefit program in connection with the delivery of or payment for healthcare benefits, items or services. 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 commit a violation. HIPAA requires covered entities to limit the use and disclosure of protected health information
to specifically authorized situations and requires covered entities to implement security measures to protect health information that
they maintain in electronic form. Among other things, HITECH made HIPAA’s security standards directly applicable to business associates,
independent contractors or agents of covered entities that receive or obtain protected health information in connection with providing
a service on behalf of a covered entity. HITECH also created four new tiers of civil monetary penalties, amended HIPAA to make civil
and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions
for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with
pursuing federal civil actions. In addition, state laws govern the privacy and security of health information in specified circumstances,
many of which differ from each other in significant ways, may not have the same effect, and often are not preempted by HIPAA, thus complicating
compliance efforts. For example, the California Consumer Privacy Act (CCPA), which went into effect on January 1, 2020, creates
new data privacy obligations for covered companies and provides new privacy rights to California residents. On January 1, 2023, the California
Privacy Rights Act (CPRA), which substantially amends the CCPA, went into effect. The CCPA and CPRA provide for unlimited civil penalties
for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. Virginia’s
Consumer Data Protection Act, which took effect on January 1, 2023, requires businesses subject to the legislation to conduct data protection
assessments in certain circumstances and requires opt-in consent from consumers to acquire and process their sensitive personal information,
which includes information revealing a consumer’s physical and mental health diagnosis and genetic and biometric information that
can identify a consumer. Colorado enacted the Colorado Privacy Act, and Connecticut enacted the Connecticut Data Privacy Act, each of
which took effect on July 1, 2023, and Utah enacted the Consumer Privacy Act, which became effective on December 31, 2023, and each of
these laws may increase the complexity, variation in requirements, restrictions, and potential legal risks.
Healthcare Reform
Healthcare reforms that have been adopted, and
that may be adopted in the future, could result in further reductions in coverage and levels of reimbursement for pharmaceutical products,
increases in rebates payable under U.S. government rebate programs and additional downward pressure on pharmaceutical product prices.
Healthcare reform proposals recently culminated in the enactment of the Inflation Reduction Act (IRA) in August 2022, which, among other
things, allows the HHS to directly negotiate the selling price of statutorily specified number of drugs and biologics each year that
CMS reimburses under Medicare Part B and Part D. The negotiated price may not exceed a statutory ceiling price. Only high-expenditure
single-source drugs that have been approved for at least 7 years (11 years for biologics) can be selected by CMS for negotiation, with
the negotiated price taking effect two years after the selection year. For 2026, the first year in which negotiated prices become effective,
CMS selected 10 high-cost Medicare Part D products in 2023, negotiations began in 2024, and the negotiated maximum fair price for each
product has been announced. CMS has selected 15 additional Medicare Part D drugs for negotiated maximum fair pricing in 2027. For 2028,
an additional 15 drugs, which may be covered under either Medicare Part B or Part D, will be selected, and for 2029 and subsequent years,
20 Part B or Part D drugs will be selected. A drug or biological product that has an orphan drug designation for only one rare disease
or condition will be excluded from the IRA’s price negotiation requirements, but will lose that exclusion if it receives designations
for more than one rare disease or condition, or if it is approved for an indication that is not within that single designated rare disease
or condition, unless such additional designation or such disqualifying approvals are withdrawn by the time CMS evaluates the drug for
selection for negotiation. The IRA also imposes rebates on Medicare Part D and Part B drugs whose prices have increased at a rate greater
than the rate of inflation, and in November 2024, CMS finalized regulations for these inflation rebates. In addition, the IRA extends
enhanced subsidies for individuals purchasing health insurance coverage in Patient Protection and Affordable Care Act (ACA) marketplaces
through plan year 2025. The IRA permits the Secretary of HHS to implement many of these provisions through guidance, as opposed to regulation,
for the initial years. Manufacturers that fail to comply with the IRA may be subject to various penalties, including civil monetary penalties.
It is unclear to what extent other statutory, regulatory, and administrative initiatives will be enacted and implemented.
14
Insurance Coverage and Reimbursement
Significant uncertainty exists as to the insurance
coverage and reimbursement status of any products for which we may obtain regulatory approval. In the United States, sales of any product
candidates for which regulatory approval for commercial sale is obtained will depend in part on the availability of coverage and adequate
reimbursement from third-party payors. Third-party payors include government authorities and health programs in the United States such
as Medicare and Medicaid, managed care providers, private health insurers and other organizations. These third-party payors are increasingly
reducing reimbursements for medical products and services. The process for determining whether a payor will provide coverage for a drug
product may be separate from the process for setting the reimbursement rate that the payor will pay for the drug product. Third-party
payors may limit coverage to specific drug products on an approved list, or formulary, which might not include all of FDA-approved drugs
for a particular indication. A payor’s decision to provide coverage for a drug product does not imply that an adequate reimbursement
rate will be approved. Further, coverage and reimbursement for drug products can differ significantly from payor to payor. As a result,
the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical
support for the use of our products to each payor separately, with no assurance that coverage and adequate reimbursement will be applied
consistently or obtained in the first instance.
Human Capital
As of December 31, 2024, we had a total of 17
employees. We understand people are our greatest asset and that our innovation and operational excellence are ultimately noted in our
human capital. Our success depends in large part on our ability to recruit, develop and retain a qualified, productive, and engaged workforce.
Total Rewards and Employee Engagement
We maintain competitive compensation and benefits
package including incentive compensation tied to both company and individual performance, and retirement benefits. Our performance-based
compensation strategy is designed to recognize and reward employees for their contribution to our success, and we strive to provide strong,
equitable incentives for performance. Compensation is comprised of two elements: base compensation, which is determined based upon a
number of factors, including size, scope and impact of the employee’s role, the market value associated with the employee’s
role, leadership skills, length of service and individual performance; and an annual bonus, which is a cash award determined based on
a combination of individual and company performance during the period to which the bonus relates. We seek to determine compensation on
the basis of merit and without regard to demographic characteristics. During 2023, we employed a third-party consultant to assist us
in evaluating our pay practices. In conducting this exercise, we found no meaningful difference in compensation based upon gender, race
or any other defining characteristic examined.
Corporate Information
Our principal executive offices are located at
2222 Ponce de Leon Blvd., Floor 3, Coral Gables, Florida 33134 and our telephone number is (786) 629-1376. Our website address is www.relmada.com. The
information contained in, or that can be accessed through, our website is not part of, and is not incorporated in, this Annual Report.
Available Information
Reports we file with the Securities and Exchange
Commission (SEC) pursuant to the Exchange Act of 1934, as amended (the Exchange Act), including annual and quarterly reports, and other
reports we file, can be inspected and copied at the public reference facilities maintained by the SEC at 100 F Street NE, Washington,
D.C. 20549.
15