Item 1. Business
ITEM 1. BUSINESS
Business Overview
Relmada Therapeutics, Inc. (Relmada, the Company,
we or us) (a Nevada corporation), is a clinical-stage biotechnology company focused on the development of esmethadone (d-methadone, dextromethadone,
REL-1017), an N-methyl-D-aspartate (NMDA) receptor antagonist. Esmethadone, an isomer of methadone, is a new chemical entity (NCE) that
potentially addresses areas of high unmet medical need in the treatment of central nervous system (CNS) diseases and other disorders.
Our lead product candidate, esmethadone, is being
developed as a rapidly acting, oral agent for the treatment of depression and other potential indications. On October 15, 2019, we reported
top-line data from study REL-1017-202. This was a double-blind, placebo-controlled Phase 2 clinical trial evaluating the safety, tolerability
and efficacy of two oral doses of REL-1017, 25 mg once a day and 50 mg once a day, as an adjunctive treatment in patients with major
depressive disorder (MDD), who experienced an inadequate response to 1 to 3 adequate antidepressant treatments with an antidepressant
medication.
Phase 2 Clinical Trial
In the REL-1017-202 study, 62 subjects, with an average
age 49.2 years, with an average Hamilton Depression Rating Scale score of 25.3 and an average Montgomery-Asberg Depression Rating Scale
(MADRS) score of 34.0 (severe depression), were randomized. Other demographic characteristics were balanced across all arms. After an
initial screening period, subjects were randomized to one of three arms: placebo, REL-1017 25 mg or REL-1017 50 mg, in addition to stable
background antidepressant therapy. Subjects in the REL-1017 treatment arms received one loading dose of either 75 mg (25 mg arm) or 100
mg (50 mg arm) of REL-1017. Subjects were treated inpatient for 7 days and discharged home at Day 9. They returned for follow-up visits
at Day 14 and Day 21. Efficacy was measured on Days 2, 4 and 7 in the dosing period and on Day 14, one week after treatment discontinuation.
61 subjects received all treatment doses and were included in the per-protocol population (PPP) treatment analysis; 57 subjects completed
all visits. All 62 randomized subjects were part of the intention-to-treat (ITT) analysis. No differences were observed between the ITT
and PPP analyses and results.
We observed that subjects in both the REL-1017 25
mg and 50 mg treatment groups experienced statistically significant improvement on all efficacy measures tested as compared to subjects
in the placebo group, including: MADRS; the Clinical Global Impression – Severity (CGI-S) scale; the Clinical Global Impression
– Improvement (CGI-I) scale; and the Symptoms of Depression Questionnaire (SDQ).
Improvements on the MADRS endpoint appeared on Day
4 in both REL-1017 dose groups and continued through Day 7 and Day 14, seven days after treatment discontinuation, with P values<
0.03 and large effect sizes (a measure of quantifying the difference between two groups), ranging from 0.7 to 1.0. Similar findings emerged
from the CGI-S and CGI-I scales.
MADRS: Analysis of Change from Baseline to Day
7 and to Day 14 ITT Population
Day 2
Day 4
Day 7
Day 14
LS Means
Difference
P-value
d
LS Means
Difference
P-value
d
LS Means
Difference
P-value
D
LS Means
Difference
P-value
d
REL-1017 25mg vs Placebo
-1.9
0.4340
0.3
-7.9
0.0087
0.9
-8.7
0.0122
0.8
-9.4
0.0103
0.9
REL-1017 50mg vs Placebo
-0.3
0.9092
0.0
-7.6
0.0096
0.8
-7.2
0.0308
0.7
-10.4
0.0039
1.0
LS = Least Squares; d = Cohen’s effect size
The study also confirmed the tolerability profile
of REL-1017, which was observed in the Phase 1 studies. Subjects experienced only mild and moderate adverse events (AEs), and no serious
adverse events, without significant differences between placebo and treatment groups. The AEs observed in the Phase 2a clinical study
were of the same nature as those observed in the Phase 1 clinical studies in d-Methadone, and there was no evidence of either treatment
induced psychotomimetic and dissociative AEs or withdrawal signs and symptoms upon treatment discontinuation.
1
Phase 3 Program
On December 20, 2020, Relmada announced that the
first patient had been enrolled in the first Phase 3 clinical trial (RELIANCE I) for the Company’s lead product candidate, REL-1017,
as an adjunctive treatment for MDD.
On April 1, 2021, Relmada announced the initiation
of RELIANCE II, the second of two sister pivotal Phase 3 clinical trials (RELIANCE I and RELIANCE II) for the Company’s lead product
candidate, REL-1017, as an adjunctive treatment for MDD.
On October 4, 2021, Relmada announced the initiation
of RELIANCE III study, a monotherapy trial for the Company’s lead product candidate, REL-1017.
On August 9, 2022, Relmada
announced that the FDA granted Fast Track designation to REL-1017 as a monotherapy for the treatment of MDD.
On October 13, 2022, Relmada
announced that its RELIANCE III study, evaluating REL-1017 in the monotherapy setting for MDD, did not achieve its primary endpoint,
which was a statistically significant improvement in depression symptoms compared to placebo as measured by MADRS on Day 28. In the study,
the REL-1017 treatment arm showed a MADRS reduction of 14.8 points at Day 28 versus 13.9 points for the placebo arm, a higher than expected
placebo response.
On December 7, 2022,
Relmada announced that its RELIANCE I study, evaluating REL-1017 as an adjunctive treatment for MDD, did not achieve its primary endpoint,
which was a statistically significant improvement in depression symptoms compared to placebo as measured by MADRS on Day 28. In the study,
the REL-1017 treatment arm (n= 113) showed a MADRS reduction of 15.1 points at Day 28 versus 12.9 points for the placebo arm (n=114),
which is a clinically meaningful difference of 2.2 points on the MADRS. The study also showed a nominally statistically significant difference
in the response rate, with a response rate of 39.8% in the REL-1017 arm vs 27.2% in the placebo arm (p<0.05).
Patients who complete the
RELIANCE trials are eligible to rollover into the long-term, open-label study, which also is expected to include subjects who had not
previously participated in a REL-1017 clinical trial.
In addition, in order to support potential regulatory
submissions seeking approval for REL-1017 as monotherapy and adjunctive treatment, the FDA confirmed that, based on what is known at
this time, Relmada will not be required to conduct a two-year carcinogenicity study of REL-1017, as sufficient clinical data have been
generated to date. The FDA also confirmed that Relmada does not need to conduct a Thorough QT analysis (TQT) cardiac study in humans
to support cardiac safety in potential regulatory submissions for REL-1017, as the data provided so far and the data generated by the
Phase 3 program will be adequate to evaluate the cardiac safety profile of REL-1017.
Human Abuse Potential (HAP) Studies
Top-line Results - Oxycodone:
On July 27, 2021, Relmada announced top-line results
that showed that all three doses of REL-1017 (25 mg, 75 mg and 150 mg, the therapeutic, supratherapeutic and maximum tolerated doses (MTD),
respectively, tested in recreational opioid users, demonstrated a highly statistically significant difference vs. the active control drug,
oxycodone 40 mg. The study’s primary endpoint was a measure of “likability” with the subjects rating the maximum effect
(or Emax) for Drug Liking “at the moment”, using a 1-100 bipolar rating scale (known as a visual analog scale or VAS), with
100 as the highest likability, 50 as neutral (placebo-like), and 0 the highest dislike. In summary, all tested doses of REL-1017, including
the 150 mg MTD, showed a highly statistically significant difference in abuse potential versus oxycodone with p-values less than 0.05.
Consistent results were seen for the secondary endpoints. Additionally, all REL-1017 doses including 150 mg (6 times the therapeutic dose
and MTD) were statistically equivalent to placebo (p<0.05). These results support the lack of opioid effects of REL-1017.
2
Top-line Results - Ketamine:
On February 23, 2022, Relmada announced top-line
results that showed that all three doses of REL-1017 (25 mg, 75 mg, and 150 mg, the therapeutic, supratherapeutic and MTD, respectively)
tested in recreational drug users, demonstrated a substantial (30+ points) and statistically significant difference vs. the active control
drug, intravenous ketamine 0.5 mg/kg over 40 minutes, and, importantly, were statistically equivalent to placebo. The study’s primary
endpoint was a measure of “likability” with the subjects rating the maximum effect (or Emax) for Drug Liking “at this
moment”, using a 1-100 bipolar rating scale (known as a visual analog scale or VAS), with 100 as the highest likability, 50 as neutral
(placebo-like), and 0 the highest dislike. Consistent results are seen for the secondary endpoints.
Key Upcoming Anticipated Milestones
We expect multiple key milestones over the next 12-18
months. These include:
●
Results of RELIANCE II, the second of two adjunctive MDD trials, in the first half of 2024.
●
Initiation of a new Phase III adjunctive MDD trial in mid-2023 with completion anticipated
in the second half of 2024.
●
Results of RELIANCE – OLS (Long-term, Open-label) study in MDD in mid-2023.
Our Development Program
Esmethadone (d-Methadone, dextromethadone, REL-1017) as a treatment
for MDD
Background
In 2014, the National Institute of Mental Health
(NIMH) estimated that 15.7 million adults aged 18 or older in the United States had at least one major depressive episode in the past
year. According to data from nationally representative surveys supported by NIMH, only about half of Americans diagnosed with major depression
in a given year receive treatment. Of those receiving treatment with as many as four different standard antidepressants, 33% of drug-treated
depression patients do not achieve adequate therapeutic benefits according to the Sequenced Treatment Alternatives to Relieve Depression
(STAR*D) trial published in the American Journal of Psychiatry.
In
addition to the high failure rate, only two of the marketed products for depression, esketamine (marketed by Johnson and Johnson as Spravato ® ),
an in-clinic nasal spray treatment, and dextromethorphan-bupropion (marketed by Axsome as Auvelity ä ),
can demonstrate rapid antidepressant effects, while the other currently approved
products can take two to eight weeks to show activity. The urgent need for improved, faster acting antidepressant treatments is underscored
by the fact that severe depression can be life-threatening, due to heightened risk of suicide.
Esmethadone Overview and Mechanism of Action
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.
In chemistry an enantiomer, also known as an optical
isomer, is one of two stereoisomers that are mirror images of each other that are non-superimposable (not identical), much as one’s
left and right hands are the same except for being reversed along one axis. A racemic compound, or racemate, is one that has equal amounts
of left- and right-handed enantiomers of a chiral molecule. For racemic drugs, often only one of a drug’s enantiomers is responsible
for the desired physiologic effects, while the other enantiomer is less active or inactive.
As a single isomer of racemic methadone, esmethadone
has been shown to possess NMDA antagonist properties with virtually no traditional opioid or ketamine-like adverse events at the expected
therapeutic doses. In contrast, racemic methadone is associated with common opioid side effects that include anxiety, nervousness, restlessness,
sleep problems (insomnia), nausea, vomiting, constipation, diarrhea, drowsiness, and others. It has been shown that the left (levo) isomer,
l-methadone, is largely responsible for methadone’s opioid activity, while the right (dextro) isomer, esmethadone, at the currently
therapeutic doses used in development is virtually inactive as an opioid while maintaining affinity for the NMDA receptor.
NMDA receptors are present in many parts of the CNS
and play important roles in regulating neuronal activity and promoting synaptic plasticity in brain areas important for cognitive functions
such as executive function, learning and memory. Based on these premises, esmethadone could show benefits in several different CNS indications.
Esmethadone (d-methadone, dextromethadone, REL-1017) in other indications
While our current strategy is currently to focus on the further development
of esmethadone as an adjunctive treatment for MDD, we may in the future re-commence testing of esmethadone as a monotherapy for MDD. In
addition, we are evaluating other indications that Relmada may explore in the future, including restless leg syndrome and other glutamatergic
system activation related diseases.
3
Our Corporate History and Background
We are a clinical-stage, publicly traded biotechnology
company developing New Chemical Entities (NCEs) and novel versions of drug products that potentially address areas of high unmet medical
need in the treatment of depression and other CNS diseases.
Currently, none of our product candidates have 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 $157,043,800 and $125,751,800 for the years ended December
31, 2022 and 2021, respectively. At December 31, 2022, we had an accumulated deficit of approximately $462,110,900.
Business Strategy
Our strategy is to leverage our considerable industry
experience, understanding of CNS markets and development expertise to identify, develop and commercialize product candidates with significant
market potential that can fulfill unmet medical needs in the treatment of CNS diseases. We have assembled a management team along with
both scientific advisors, including recognized experts in the fields of depression, and business advisors with significant industry
and regulatory experience to lead and execute the development and commercialization of esmethadone.
We plan to further develop esmethadone as our priority
program. As the drug esmethadone is an NCE, the regulatory pathway required to support a new drug application (NDA) submission involves
a full clinical development program. We plan to continue to generate intellectual property (IP) that will further protect our products
from competition. We will also continue to prioritize our product development activities after taking into account the resources we have
available, market dynamics and potential for adding value.
Market Opportunity
We believe that the market for addressing areas of
high unmet medical need in the treatment of CNS diseases will continue to be large for the foreseeable future and that it will represent
a sizable revenue opportunity for us. For example, the World Health Organization (WHO) has estimated that CNS diseases affect nearly
2 billion people globally, making up approximately 40% of total disease burden (based on disability adjusted life years), compared with
13% for cancer and 12% for cardiovascular disease.
The depression treatment market is segmented on the
basis of antidepressants drugs, devices, and therapies. Antidepressants are the largest and most popular market segment. The antidepressants
segment consists of large pharmaceutical and generic companies, such as Eli Lilly, Pfizer, GlaxoSmithKline, Allergan, Sage Therapeutics
and Johnson & Johnson. Some of the notable drugs produced by these companies are Cymbalta ® (Eli Lilly), Effexor ®
(Pfizer), Pristiq ® (Pfizer), Zulresso ® (Sage), Spravato ® (Johnson & Johnson) and
Auvelity ® (Axsome).
Intellectual Property Portfolio and Market Exclusivity
We have over 50 issued patents and pending patent applications related
to REL-1017 for multiple uses, including psychological and neurological conditions, potentially provide 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 NDA approval, carries 7-year FDA Orphan Drug marketing exclusivity. In the European Union, some of our actual and
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) plus additional 6 month 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, 2022, the Company has
not generated any revenue related to this license agreement.
4
Inturrisi / Manfredi
In January 2018, we 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 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, 2022, 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.
Wonpung License Agreement
In 2007, the Company entered into a License Development
and Commercialization Agreement with Wonpung Mulsan Co, a shareholder of the Company. Wonpung has exclusive territorial rights in countries
it selects in Asia to market up to two drugs the Company is currently developing and a right of first refusal (“ROFR”) for
up to an additional five drugs that the Company may develop in the future as defined in more detail in the license agreement. If the
parties cannot agree to terms of a license agreement then the Company shall be able to engage in discussions with other potential licensors.
As of March 23, 2023, no discussions are active between the Company and Wonpung.
The Company received an upfront license fee of $1,500,000
and will earn royalties of up to 12% of net sales for up to two licensed products it is currently developing. The licensing terms for
the ROFR products are subject to future negotiations and binding arbitration. The terms of each licensing agreement will expire on the
earlier of any time from 15 years to 20 years after licensing or on the date of commercial availability of a generic product to such
licensed product in the licensed territory.
Psilocybin License Agreement
In July 2021, we executed a License Agreement with Arbormentis, LLC
which gives us the development and commercial rights to a novel psilocybin and derivate program. Under the terms of the agreement, we
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 us but is perpetual and not terminable by the licensor absent
material breach of its terms by us. We will collaborate with Arbormentis, LLC on the development of new therapies targeting neurological
and psychiatric disorders, leveraging its understanding of neuroplasticity, and focusing on this emerging new class of drugs targeting
the neuroplastogen mechanism of action. Importantly, neuroplasticity also plays a key role in the activity of REL-1017, Relmada’s lead
program. Dr. Paolo Manfredi, our Acting Chief Scientific Officer and co-inventor of REL-1017, and Dr. Marco Pappagallo, our Acting Chief
Clinical Officer, are among the scientists affiliated with Arbormentis, LLC.
5
Key Strengths
We believe that the key elements for our market success include:
●
Compelling lead product opportunity, REL-1017 currently in the second
of three Phase 3 trials for the adjunctive treatment of MDD.
●
Robust and highly statistically significant, efficacy seen with esmethadone
in a randomized Phase 2 trial with the primary endpoint at 7 days, with onset of action seen at 4 days, and the effect carrying through
to 14 days (7 days post treatment).
●
Successful Phase 1 safety studies of esmethadone and strong clinical activity signal in depression established in three independent animal models in preclinical studies.
●
Potential in additional multiple indications in underserved markets with large patient population in other affective disorders, and cognitive disorders.
●
Scientific support of leading experts: Our scientific advisors include clinicians and scientists who are affiliated with a number of highly regarded medical institutions such as Harvard, Cornell, Yale, and University of Pennsylvania.
●
Substantial IP portfolio and market protection: approved and filed patent applications provide coverage beyond 2033.
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 preclinical 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.
6
Preclinical 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 preclinical tests must comply with federal regulations and requirements, including good laboratory
practices. The results of preclinical 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 preclinical 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. 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.
FDA 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 to demonstrate the efficacy of the drug. A single Phase 3 trial with other confirmatory evidence may be sufficient
in rare instances, such as 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.
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 preclinical, 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 accepted for filing based on the agency’s threshold determination that it is sufficiently complete
to permit substantive review. Once the submission is accepted for filing, 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.
7
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.
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 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.
8
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.
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, preclinical 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 a new chemical entity (NCE)
such as esmethadone, 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, the NDA for the non-racemic drug may elect 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 non-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.
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.
9
Controlled Substances
The active ingredients in esmethadone 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.
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 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. They may not be marketed or sold for dispensing to patients in
the U.S. Pharmaceutical products having 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, with Schedule II
substances classified as having the highest potential for abuse and physical or psychological dependence, and Schedule V substances
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.
The DEA conducts cyclic inspections of manufacturers, distributors,
importers, and exporters to review compliance with the CSA and DEA regulations including security, record keeping and reporting prior
to issuing a controlled substance registration. 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 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. Regulations also require that registrants restrict employee access to controlled substances.
Once registered, manufacturing, distribution, exporting or importing facilities must maintain records documenting the manufacture, receipt,
distribution, import, or export of all controlled substances. Manufacturers and distributors must also submit regular reports to the DEA
of the 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. 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 imposes quota requirements on certain
controlled substances. 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 maintain compliance 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, refuse to renew necessary registrations, or initiate administrative proceedings to revoke those 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 regulate controlled substances and impose similar licensing, recordkeeping, and reporting requirements on entities
that handle controlled substances. Entities must independently comply with the various state requirements in addition to the federal
controlled substance requirements.
10
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 (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, and the additional federal criminal statutes created by the Health Insurance
Portability and Accountability Act of 1996 (HIPAA), which 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.
Further, pursuant to the Patient Protection and Affordable Care Act
(ACA), the Centers for Medicare & Medicaid Services (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.
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 face civil penalties.
Efforts to ensure that business arrangements with
third parties comply with applicable healthcare laws and regulations involve substantial costs. If a drug company’s operations
are found to be in violation of any such requirements, it may be subject to significant penalties, including civil, criminal and administrative
penalties, damages, fines, disgorgement, imprisonment, the curtailment or restructuring of its operations, loss of eligibility to obtain
approvals from the FDA, exclusion from participation in government contracting, healthcare reimbursement or other federal or state government
healthcare programs, including Medicare and Medicaid, integrity oversight and reporting obligations, imprisonment, and reputational harm.
Although effective compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, these risks
cannot be entirely eliminated. Any action for an alleged or suspected violation can cause a drug company to incur significant legal expenses
and divert management’s attention from the operation of the business, even if such action is successfully defended.
Data privacy and security regulations by both the
federal government and the states in which business is conducted may also be applicable. 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 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 and may not have the same effect, thus complicating
compliance efforts.
11
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), which will, among other things, allow the Department of Health
and Human Services (HHS) to negotiate the selling price of certain drugs and biologics that CMS reimburses under Medicare Part B and Part
D (excluding drugs and biologics that are designated and approved for only one rare disease or condition), although 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. The negotiated prices, which will first become effective in 2026,
will be capped at a statutory ceiling price. Beginning in October 2022 for Medicare Part D and January 2023 for Medicare Part B, the IRA
will also penalize drug manufacturers that increase prices of Medicare Part D and Part B drugs at a rate greater than the rate of inflation.
In addition, the IRA will eliminate, beginning in 2025, the coverage gap under Medicare Part D by significantly lowering the enrollee
maximum out-of-pocket cost and requiring manufacturers to subsidize, through a newly established manufacturer discount program, 10% of
Part D enrollees’ prescription costs for brand drugs below the out-of-pocket maximum, and 20% once the out-of-pocket maximum has
been reached. 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.
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.
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 Report.
A vailable 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.
Human Capital
As of December 31, 2022, we had a total of 14 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.
Inclusion & Diversity
Inclusion and diversity is a focus of our corporate
human capital strategy. By embracing inclusion and diversity, we enhance our work environment and drive business success. We endeavor
to create a culture of inclusion in which our employees feel empowered to bring their full, authentic selves to work and pursue their
professional goals in a setting of equality. Fostering such a culture welcomes different perspectives and generates innovation and growth.
We honor the diversity of our employees—in gender, race/ethnicity, age, gender identity, sexual orientation, socio-economic status,
language, nationality, abilities and life experiences. As of December 31, 2022, our employee population was approximately 60% female.
Total Rewards and Employee Engagement
We maintain a 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 2022, 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.
COVID-19 Response
We moved swiftly in our response to the COVID-19
pandemic to promote the safety of our associates and best serve our members and communities. In March of 2020, we transitioned our workforce
to remote work environments, while maintaining service operations. We continued to pay employees who missed work for COVID-19 related
reasons and avoided role reductions as a direct result of COVID-19.
12
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.