SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
the fiscal year ended April 30, 2018
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
the transition period from __________ to __________
file number 333-68008
name of registrant as specified in its charter)
or other jurisdiction of incorporation or organization)
Employer Identification No.)|
Avenida de la Carlota, Suite 600, Laguna Hills, CA 92653
of principal executive offices)
(Registrant’s telephone number, including area code)
registered pursuant to Section 12(b) of the Act:
pursuant to Section 12(g) of the Act:
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405) during the
precedent 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405) is not contained herein,
and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company and emerging growth company” in Rule 12b-2 of the Exchange Act.
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price
at which the common equity was last sold, or the average bid and asked price of such common equity, as of October 31, 2017: $50,208,028.
As of July 20, 2018, the registrant had
1,041,038,422 outstanding shares of common stock.
INCORPORATED BY REFERENCE
Note Regarding Forward-Looking Statements
Report on Form 10-K (“Report”) includes “forward-looking statements” within the meaning of the federal
securities laws. All statements other than statements of historical fact are “forward-looking statements” for purposes
of this Report, including any projections of earnings, revenue or other financial items, any statements regarding the plans and
objectives of management for future operations, any statements concerning proposed new products or services, any statements regarding
future economic conditions or performance, any statements regarding expected benefits from any transactions and any statements
of assumptions underlying any of the foregoing. In some cases, forward-looking statements can be identified by use of terminology
such as “may,” “will,” “should,” “believes,” “intends,” “expects,”
“plans,” “anticipates,” “estimates,” “goal,” “aim,” “potential”
or “continue,” or the negative thereof or other comparable terminology. Although we believe that the expectations
reflected in the forward-looking statements contained in this Report are reasonable, there can be no assurance that such expectations
or any of the forward-looking statements will prove to be correct, and actual results could differ materially from those projected
or assumed in the forward-looking statements. Thus, investors should refer to and carefully review information in future documents
we file with the United States Securities and Exchange Commission (“Commission”). Our future financial condition and
results of operations, as well as any forward-looking statements, are subject to inherent risk and uncertainties, including, but
not limited to, the risk factors set forth in “Part I, Item 1A – Risk Factors” set forth in this Report and
for the reasons described elsewhere in this Report, among others, our estimates regarding expenses, future revenues, capital requirements
and needs for additional financing; whether the FDA approves our Investigational New Drug Application (“IND”) once
submitted to the United States Food and Drug Administration (“FDA”) so that we can commence our planned clinical trial
involving locally advanced, inoperable non-metastatic pancreatic cancer; the success and timing of our preclinical studies and
clinical trials; the potential that results of preclinical studies and clinical trials may indicate that any of our technologies
and product candidates are unsafe or ineffective; our dependence on third parties in the conduct of our preclinical studies and
clinical trials; the difficulties and expenses associated with obtaining and maintaining regulatory approval of our product candidates;
and whether the FDA will approve our product candidates. All forward- looking statements and reasons why results may differ included
in this Report are made as of the date hereof, and we do not intend to update any forward-looking statements except as required
by law or applicable regulations. Except where the context otherwise requires, in this Report, the “Company,” “we,”
“us” and “our” refer to PharmaCyte Biotech, Inc., a Nevada corporation, and, where appropriate, its subsidiaries.
are a clinical stage biotechnology company focused on developing and preparing to commercialize cellular therapies for cancer
and diabetes based upon a proprietary cellulose-based live cell encapsulation technology known as “Cell-in-a-Box®.”
The Cell-in-a-Box® technology is intended to be used as a platform upon which therapies for several types of cancer,
including locally advanced, inoperable non-metastatic pancreatic cancer (“LAPC”) and diabetes will be developed.
are developing therapies for pancreatic and other solid cancerous tumors that involve the encapsulation of genetically engineered
live human cells and the placement of the capsules in the body to enable the conversion of cancer prodrugs to their cancer-killing
forms at the source of the cancer. We are also involved in preclinical studies to determine if our cancer therapy can slow the
production or accumulation of malignant ascites fluid in the abdomen that accompanies the growth of several types of abdominal
cancers. Also, we are developing a therapy for Type 1 diabetes and insulin-dependent Type 2 diabetes based upon the encapsulation
of a human cell line genetically engineered to produce, store and secrete insulin at levels in proportion to the levels of blood
sugar in the human body using our Cell-in-a-Box® technology. In addition, we are considering an alternative route
to bring a biological treatment for diabetes into the clinic. We are exploring the possibility of encapsulating human insulin-producing
cells (beta pancreatic islet cells or their like) and then transplanting the encapsulated cells into diabetic patients. Finally,
we are examining ways to exploit the benefits of the Cell-in-a-Box® technology to develop therapies for cancer
based upon certain constituents of the Cannabis plant; these constituents are of the class of compounds known as “cannabinoids.”
live-cell encapsulation technology-based therapies consist of encapsulating different types of genetically modified living cells
depending on the disease being treated. For our leading product candidate, a therapy for pancreatic cancer, about 10,000 genetically
modified live cells that produce an enzyme which converts the chemotherapy prodrug ifosfamide into its cancer-killing form are
encapsulated in porous, spherical, pinhead-sized capsules, composed largely of cellulose. About 300 of these capsules are placed
in the blood supply as close to the tumor in the pancreas as possible. Then about one-third the normal dose of the chemotherapy
prodrug ifosfamide is given to the patient intravenously. The prodrug is normally activated in the patient’s liver. By activating
the prodrug near the tumor using the Cell-in-a-Box® capsules, our cellular therapy acts as a type of “artificial
liver.” Using this “targeted chemotherapy,” we are seeking to create an environment that enables optimal concentrations
of the “cancer-killing” form of ifosfamide at the site of the tumor. Because the cancer-killing form of ifosfamide
has a short biological half-life, we believe that this approach results in little to no collateral damage to other organs in the
body. We also believe this treatment significantly reduces tumor size with no treatment-related side effects.
1: Proposed treatment for pancreatic cancer by targeted deployment and activation of chemotherapy using Cell-in-a-Box®
Charts A and B are generalized graphic depictions of the principal mechanisms of our proposed treatment for pancreatic
cancer using our product candidate, the combination of Cell-in-a-Box® encapsulated cells plus low-dose
ifosfamide, under expected conditions. This combination therapy will be the subject of a Phase 2b clinical trial we plan
to conduct, subject to FDA approval. No regulatory authority has granted marketing approval for the Cell-in-a-Box®
technology, the related encapsulated cells, or Cell-in-a-Box® and encapsulated cells plus low-dose
capsules containing live ifosfamide-activating cells (shown in white) are implanted in the blood vessels leading
to the tumor in the pancreas. Then low-dose ifosfamide is given intravenously.
B shows the human pancreas and generalized depictions of two pancreatic cancer tumors (shown in pink) as examples. In
this chart, ifosfamide is converted to its cancer-killing form by the encapsulated live cells implanted near the tumors
(shown in maroon).
Arrows: Ifosfamide enters capsules
Arrows: Conversion to active form
Arrows: Activated ifosfamide targets tumors
2: Mechanism of action of treatment for pancreatic cancer by targeted deployment of the encapsulated live cells and activation
of the chemotherapy prodrug drug ifosfamide.
critical unmet medical need exists for patients with LAPC who no longer respond to first-line therapy with either Abraxane®
plus gemcitabine or the 4-drug combination known as FOLFIRINOX, the current standards of care for this disease. We believe
that these patients have no effective treatment alternative once their tumors no longer respond to these therapies. Two of the
most commonly used treatments are 5-fluorouiracil (“5-FU”) or capecitabine (a prodrug of 5-FU) plus radiation. We
believe both treatments are only marginally effective in treating the tumor and result in serious side effects. Other treatments
are being tried in an attempt to address this problem, but their success is far from certain. We are developing a therapy that
we believe can serve as a “consolidation therapy” with the current standards of care and address the critical unmet
medical need discussed above.
to FDA approval, we plan to commence a clinical trial involving patients with LAPC whose tumors have ceased to respond to either
Abraxane® plus gemcitabine or FOLFIRINOX. We had a Pre-Investigational New Drug Application (“Pre-IND”)
meeting with the Center for Biologics Evaluation and Research of the FDA (“CBER”) on January 17, 2017. At the Pre-IND
meeting, the FDA communicated its agreement with certain aspects of our clinical development plan, charged us with completing
numerous tasks and provided us with the guidance on the tasks we need to complete for a successful Investigational New Drug Application
(“IND”) process, although no assurance can be given whether the FDA will approve our IND once it is submitted. The
proposed clinical trial is designed to show that our Cell-in-a-Box® plus low-dose ifosfamide therapy can serve
as an effective and safe consolidation chemotherapy for patients whose tumors no longer respond after four to six months of therapy
with Abraxane® plus gemcitabine or FOLFIRINOX. The trial will initially take place in the United States (“U.S.”)
with possible study sites in Europe.
of the Investigational New Drug Application
we can begin our clinical trial, we must submit an IND to the FDA. The IND consists of a submission of all available preclinical
information (e.g. animal toxicity studies), Chemistry, Manufacturing and Controls (“CMC”) information and other pre-clinical
information about the product candidate, as well as clinical information and a whole host of information and documentation required
by the FDA. Facet Life Sciences has been retained by us as our regulatory affairs consultant and is leading the preparation of
fiscal year 2018, we completed the production of a Master Cell Bank (“MCB”) of cells that will be encapsulated and
used for our planned clinical trial in LAPC. Cells from the MCB have been shipped from the U.S. to Bangkok, Thailand where Austrianova
Singapore Pte. Ltd. (“Austrianova”) has its encapsulation facility.
following describes the work that was accomplished to achieve this:
Lancaster Laboratories (“Eurofins"), the Contract Manufacturing Organization
that we selected to prepare our MCB, successfully completed its independent growth evaluation
of the cells that we will use in our Cell-in-a-Box®-based pancreatic cancer
completed production of the MCB. Cells from the MCB will be encapsulated and used in
our upcoming trial in patients with LAPC. |
completed the 29 separate tests on the MCB cells required to comply with FDA requirements.|
of cells from the MCB were shipped by Eurofins to Austrianova’s encapsulation facility
in Thailand and arrived there safely. Upon arrival, the cells from the MCB were placed
in quarantine. Once the manufacturing facility has successfully undergone final testing,
a vial of cells will be unfrozen, grown and encapsulated. This will be followed by another
round of testing that will be performed by Austrianova and its partners after encapsulation,
in accordance with FDA guidelines and requirements. |
addition to the MCB work, we completed, or are in the process of completing, a series of tests and studies on cells from the MCB
and the capsules into which they will be placed. These tests are required by the FDA, and the data will be included in our IND.
The tests and studies consist of the following:
6-month study on storage of the frozen encapsulated cells necessary for the determination
of an initial shelf life; |
multiple course ifosfamide study; |
studies on the type of cells that will be encapsulated using our Cell-in-a-Box®
technology and then combined with low doses of the cancer prodrug ifosfamide for
the treatment of patients with LAPC. These
studies, which have taken over three years to complete, are needed to develop the comprehensive
dossier of information concerning the genetically engineered human cells that are encapsulated
for use in our therapy for LAPC; |
size studies” on our Cell-in-a Box® capsules; |
comprehensive characterization of our proprietary cell clone known as 22P1G; |
studies on thawed laboratory-produced capsules containing 22P1GSF cells. The studies
consisted of thawing out frozen 22P1GSF capsules (lab made) and testing them for stability
in terms of viability (as measured by Prestoblue and resorufin assays), capsule integrity
and sterility. Even though this work was done on laboratory-produced capsules, we developed
a body of data which will support the stability data we plan to generate using the “engineering
run” capsules that will be produced by the same encapsulation equipment that will
be used to produce clinical supplies for the LAPC trial; and|
Prestoblue assay to evaluate its feasibility in estimating the number of 22P1GSF cells
within a standard GMP specification capsule.|
site of integration study to characterize the site of integration and the structure of
the integrated pCMV CYP2B1 plasmid (hence CYP therapeutic transgene) into the genome
of the 22P1G cell line being used for the clinical study; this line is referred to as
22P1GSF because it can be grown in serum-free medium. The aim of this study is to identify
and characterize PCR primers that could be used as an identity test for release of the
of alternative methods and reagents for measuring cell division. This involves the testing
of various new assays, especially those directed at new DNA synthesis, to validate or
modify Austrianova’s existing cell number metabolic activity assays. This testing
is being done at the request of FDA to demonstrate cell numbers in capsules and cell
viability. Currently this work program is focusing on developing the Celltox Green assay
as an appropriate and quantitative assay that is effective even at high cell densities.
of the 22P1G cells must be completed by Austrianova. Following the encapsulation process,
a battery of tests will be conducted by Austrianova to generate the necessary data to
satisfy regulatory requirements for the IND. When Austrianova finishes its work, it will
issue to us a Certificate of Analysis for our 22P1G encapsulated cell product that we
believe will comply with the FDA requirements.|
have redesigned our impending clinical trial to be a Phase 2b trial, instead of a pivotal trial, upon consultation with the FDA
and our advisors.
Synopsis and Schedule of Assessments Finalized
Study Synopsis and Schedule of Assessments for the Phase 2b trial have been prepared and finalized by our Clinical Trial Leadership
Team” (“CTLT”). The CTLT meets telephonically weekly to advance our clinical development program.
revised purpose of the study is to investigate the efficacy and safety of CypCapsTM (genetically engineered human cells
encapsulated using the Cell-in-a-Box® technology) in combination with low-dose ifosfamide as compared to chemoradiation
therapy with capecitabine plus external beam radiation therapy (“EBRT”) or stereotactic body radiation therapy (“SBRT”)
alone. The study population has been finalized and will consist of approximately 100 patients with LAPC.
Selection Process Underway
CTLT has led the process for selection of a CRO. We underwent a formal selection process, and have narrowed the potential CROs
to three candidates.
Ascites Fluid Therapy
are also studying the development of a possible therapy to delay the production and accumulation of malignant ascites fluid that
results from many types of abdominal tumors. Malignant ascites fluid is secreted by an abdominal tumor into the abdomen after
the tumor reaches a certain stage of growth. This fluid contains cancer cells that can seed and form new tumors throughout the
abdomen. As this ascites fluid accumulates in the abdominal cavity, it can cause gross swelling of the abdomen, severe breathing
difficulties and extreme pain.
ascites fluid must be removed by paracentesis on a periodic basis. This procedure is painful and costly. We know of no available
therapy that prevents or delays the production and accumulation of malignant ascites fluid. We have been involved in eight preclinical
studies conducted by Translational Drug Development (“TD2”) to determine if the combination of Cell-in-a-Box® encapsulated
cells plus ifosfamide can delay the production and accumulation of malignant ascites fluid. The data indicated that the treatment
might play a role in malignant ascites fluid production and accumulation, but the conclusions were difficult to interpret with
certainly. As a result, we plan to conduct another preclinical study in Germany to determine if our conclusions from the TD2 studies
are valid. If the ninth study is successful, we plan to seek approval from the FDA to conduct a Phase 1 clinical trial in the
is caused by insufficient availability of, or resistance to, insulin. Insulin is produced by the beta islet cells of the pancreas.
Its function is to assist in the transport of sugar (glucose) in the blood to the inside of most types of cells in the body where
it is used as a source of energy for those cells. In Type 1 diabetes the islet cells of the pancreas have been destroyed, usually
by an autoimmune reaction. Type 1 diabetics require daily insulin administration through injection or by using an insulin pump.
In Type 2 diabetes, the body does not use insulin that is produced by the pancreas properly. This means the body has become resistant
to insulin produced by the pancreas. Type 2 diabetes can generally be controlled by diet and exercise in its early stages. As
time goes by, it may be necessary to use antidiabetic drugs to control the disease. However, over time these too may lose their
effectiveness. Thus, even Type 2 diabetics may become insulin-dependent.
is one of the largest health problems in the world. In its 2016 Global Report on Diabetes, the World Health Organization (“WHO”)
estimated that, by the end of 2014, 422 million people worldwide had the disease – 314 million more than in 1980. Approximately
8.5% of adults worldwide have diabetes. Approximately $825 billion is spent annually in the treatment of diabetes and related
healthcare. Nearly 30 million people in the U.S. have diabetes. Diabetes and prediabetes costs the U.S. more than $32 billion
per year. The worldwide market for diabetes treatment drugs alone is over $70 billion.
to Cure Diabetes
an attempt to “cure” Type 1 diabetes, replacement of damaged pancreatic beta islet cells has been attempted. This
involves transplantation of the entire pancreas or of its beta islet insulin-producing cells. In 2000, islet cells from human
cadavers were transplanted into insulin-dependent diabetics in a clinical trial. In this clinical trial involving seven patients
in Edmonton, Canada, each patient remained insulin-independent for one year. High doses of immune-suppressive drugs were needed
to accompany such transplantations to avoid rejection of the transplanted islet cells, because without such immunosuppressive
drugs, these patients would be at a high risk of infection by bacteria, viruses and fungi and open to the growth of cancerous
tumors. Therefore, the administration of these immunosuppressive drugs was necessary throughout the remaining lifespan of the
patients in the trial. Unfortunately, these drugs are not only expensive, but they are also associated with serious side effects
that have required patients to cease long-term treatment with them. Worldwide, less than 1,000 people with Type 1 diabetes are
known to have been transplanted with pancreatic islet cells from another human.
avoid the use of islet cells from human donors, encapsulated islet cells from pigs have been used. This type of interspecies transplantation
is known as “xenotransplantation.” Drug regulatory authorities have been reluctant to approve the use of such interspecies
transplantations. In addition, other challenges with this approach include the potential for the body’s immune system to
attack the transplanted cells. To protect the non-human cells from attack by the immune system of the human being, they have been
encapsulated using forms of encapsulation technology that are different than the technology we use. In those studies, the transplanted
islet cells from pigs were surrounded by a porous capsule, typically made of alginate - a derivative of seaweed.
to translate this concept into a viable treatment for Type 1 diabetes have been plagued by poor survival of the transplanted islet
cells. Furthermore, the integrity of capsules composed of alginate has been shown to degrade over time. This degradation allows
for immune system cells to attack the transplanted pig islet cells and this, in turn, necessitates additional transplantations.
Also, as the alginate “capsules” degrade, they themselves can elicit an immune response.
tubular and planar “chamber-type” immune-protective devices that contain islet cells are under development by several
companies. Such devices are placed in the body where they can be retrieved and replaced if necessary. Tubular chambers have shown
good biocompatibility, but they are subject to rupture, exposing the islets to immune system attack. They also require large numbers
of islet cells. Planar chambers are more stable, but they can cause extensive foreign body reactions in the host resulting in
fibrotic overgrowth of the chambers which can cause “death” of the encapsulated islet cells and thus overall transplant
the most extensively researched immune-protective strategy is that which employs micro-capsules. They are relatively simple to
manufacture, can be implanted into the body without major surgery and, depending on the nature of the encapsulation material,
micro-encapsulated cells can be cryopreserved. Micro-encapsulated islet cells first appeared in 1994 when a diabetic patient,
already receiving immunosuppressive drugs, was transplanted with these cells encapsulated in alginate and remained insulin-independent
for 9 months. However, 23 years and numerous clinical trials later, there are still no publicly reported cases of long-term insulin-independence
in non-immune-suppressed diabetic patients receiving encapsulated pancreatic islet transplants.
Pancreas for Diabetes
plan to develop a therapy for Type 1 diabetes and insulin-dependent Type 2 diabetes. Our therapy involves encapsulation of human
liver cells that have been genetically engineered to produce, store insulin and release insulin on demand at levels in proportion
to the levels of blood sugar (glucose) in the human body. The encapsulation will be done using the Cell-in-a-Box®
technology. Another approach that we are exploring is the use of natural, human insulin producing cells (primary islet cells)
that have been protected using our Cell-in-a-Box® encapsulation technology. The resultant encapsulated islet cells
would then be transplanted into diabetic patients.
has already successfully encapsulated live pig pancreas islet insulin-producing cells using the Cell-in-a-Box®
technology. We understand that the encapsulated cells were then given to the University of Graz and implanted into diabetic rats.
In this one-time experiment, it was reported in a poster presentation that the rats’ blood glucose levels normalized by
7 days and remained normal throughout the study period of approximately 150 days. However, when attempts were made at the University
of Graz to repeat this study (including the encapsulation process), Graz was unsuccessful. It is believed that this lack of reproducibility
was due to a lack of knowledge of Austrianova’s encapsulation technology and trade secrets that reside with the Cell-in-a-Box®
believe that encapsulating genetically engineered human cells and/or beta islet cells using the Cell-in-a-Box® cellulose-based
encapsulation technology has numerous advantages over encapsulation of cells with other materials, such as alginate. Since the
Cell-in-a-Box® capsules are composed largely of cellulose, which is a bio-inert material in the human body, these
capsules are robust and do not trigger any sort of immune or inflammatory response from the body. This allows them to remain intact
for long periods of time in the body, all the while protecting the living cells inside them from immune system attack. In earlier
clinical studies, these capsules and the cells inside them have not caused any immune or inflammatory responses like those seen
with alginate-encapsulated cells and any fibrotic overgrowth is minimal.
plan to encapsulate a human cell line that has been genetically engineered to produce, store and release insulin in response to
the levels of blood sugar in the human body and/or human beta islet cells. The encapsulation will be done using the Cell-in-a-Box®
technology. We believe that once the encapsulated cells are implanted in a diabetic patient, they will function as a “bio-artificial
pancreas” for purposes of insulin production.
Diabetes Program began with two of the most critical components of a biological diabetes therapy - a line of human cells which
release insulin in response to the blood glucose level in their environment and a technology to protect the cells from an attack
by the immune system once they are transplanted into a patient’s body to replace his or her own destroyed insulin producing
cells. This technology is the Cell-in-a-Box®. The cells are called Melligen cells. They are patent-protected and
have been licensed to us by the University of Technology, Sydney (“UTS”).
cells are no ordinary insulin-producing cells. They stand out from the array of cells used and newly created to serve as a replacement
for insulin-producing cells in diabetics. We believe Melligen cells are much more robust than intrinsic insulin-producing cells
and withstand an attack by cell-toxic molecules that typically lead to the destruction of insulin-producing cells.
for the use of living cells as a medical product require that the potential of the cells to grow and form a tumor in a patient
be assessed. This so-called “tumorigenicity study” has been completed successfully by our International Diabetes Consortium
(defined below). Melligen cells showed very low tumorigenicity – the level one would expect to pass regulatory scrutiny.
Melligen cells and the Cell-in-a-Box® technology together, we conducted the first functional study in diabetic mice. The results
did not meet our expectations. We discovered that, contrary to what we had expected and what we had read in published scientific
papers on the Melligen cells published by UTS, the cells are not stable. With extensive testing and experiments, we discovered
that the Melligen cells lose some of their specific beneficial properties over time.
of the advantages we felt the Melligen cells have over other competing therapies for diabetes, we made the decision to re-create
the Melligen cells and to include a few needed improvements. To minimize the delay in the development of our Diabetes Program
caused by the challenges encountered from the Melligen cells, we opened an additional, alternative route to bring a biological
treatment for diabetes into the clinic. Concurrently with the recreation of functioning Melligen cells, we are exploring the possibility
of encapsulating human insulin producing pancreatic islet cells and then transplanting them into diabetic patients.
first step in examining the feasibility of such an approach is an animal experiment using insulin-producing islet cells from one
animal -- encapsulating them -- and then transplanting them into another animal. We plan to conduct preclinical studies at the
University of Veterinary Medicine (“VetMed”), Vienna, Austria where Dr. Günzburg is a Professor. An encapsulation
machine has been put into place at the VetMed, and the first live-cell encapsulation at the site was recently conducted successfully.
we are continuing efforts to recreate a new and improved version of the Melligen cells.
have established an international Diabetes Consortium (“Consortium”). The Consortium consists of world-renowned physicians
and scientists from several countries around the globe, all of whom share the same goal of developing a therapy for Type 1 and
insulin-dependent Type 2 diabetes.
addition to our Chief Executive Officer, Chief Operating Officer, Chief Medical Officer and Chief Scientific Officer, the Consortium
is made up of well-known physicians and scientists from leading Universities in Munich, Germany, Mannheim, Germany, Vienna, Austria,
Barcelona, Spain, Copenhagen, Denmark and Sydney, Australia. It also includes members from the Karolinska Institute in Stockholm,
Sweden, the Vorarlberg Institute for Vascular Investigation and Treatment (“VIVIT”) in Feldkirch, Austria and Austrianova
Eva Maria Brandtner, Head of the Bioencapsulation Unit at VIVIT, leads the Consortium and is our Director of Diabetes Program
Development. Dr. Brandtner previously served as the Chief Scientist with Austrianova and is an expert in the use of the Cell-in-a-Box®
studies have demonstrated the anti-cancer effects of certain cannabinoids (constituents of Cannabis). Two of the most widely
studied cannabinoids in this regard are tetrahydrocannabinol (“THC”) and cannabidiol (“CBD”). Cannabinoids
are: (i) anti-proliferative (slow tumor growth); (ii) anti-metastatic (slow tumor spread); (iii) anti-angiogenic (slowing blood
vessel development); and (iv) pro-apoptotic initiate programed cell death). In in vitro and in vivo models, the
anti-cancer effects of cannabinoids are broad. They have been shown to apply to lung, brain, thyroid, lymphoma, liver, skin, pancreas,
uterus breast and prostate cancers. In a review of 51 scientific studies, among other properties, it was observed that cannabinoids
have the ability to regulate cellular signaling pathways critical for cell growth and survival. These properties indicate that
cannabinoids could be useful in the treatment of cancer.
of May 2018, 30 states and the District of Columbia have approved the use of Cannabis for medical purposes. A plethora
of medical marijuana companies have emerged. Most of them are involved in the production and distribution of Cannabis in
its various forms, such as liquid extracts and pills, and in Cannabis delivery systems, such as vapor pens. We believe
we are one of the few companies that are focused on using cannabinoids for the treatment of specific diseases.
have several competitors that are developing Cannabis-based treatments for cancer. GW Pharmaceuticals, PLC has an approved
cannabinoid product for the treatment of multiple sclerosis spasticity and is developing a product portfolio to treat a variety
of illnesses, including glioblastoma (brain cancer). Cannabis Science, Inc. is developing topical cannabinoid treatments for basal
and squamous cell skin cancers and Kaposi’s sarcoma, and is exploring pre-clinical development of cannabinoid-based anti-cancer
drugs in a collaborative agreement with the Dana Farber/Harvard Cancer Center. OWC Pharmaceutical Research Corp. is developing
Cannabis-based products targeting a variety of indications and has a collaborative agreement with an academic medical center
in Israel to study the effects of cannabinoids on multiple myeloma (a cancer of plasma cells). Cannabis Pharmaceuticals, Inc.
is developing personalized anti-cancer and palliative Cannabis-based treatments aimed mainly at improving the cachexia,
anorexia syndrome and quality-of-life issues that are often characteristic of patients with devastating diseases like cancer.
contrast to the work being done by these companies, we plan to focus on developing specific therapies based on carefully chosen
molecules rather than using complex Cannabis extracts. Our therapy will use the Cell-in-a-Box® technology
in combination with genetically modified cell lines designed to activate cannabinoid molecules for the treatment of diseases and
their related symptoms. Our initial target will be glioblastoma – a very difficult-to-treat form of brain cancer.
encapsulated using Cell-in-a-Box® produces activating
chemotherapy using activated cannabinoids ☐
May 2014, we entered into a Research Agreement with the University of Northern Colorado (“UNC”). The goal of the ongoing
research is to develop methods for the identification, separation and quantification of constituents of Cannabis, some
of which are prodrugs, which may be used in combination with the Cell-in-a-Box® technology to treat cancer. Significant
effort has been expended to establish accurate analytical methods to separate, identify and quantitate various cannabinoids; these
methods have now been identified. Studies have also been undertaken using cannabinoids to identify the appropriate cell type that
can best convert the selected cannabinoid prodrugs into metabolites with anticancer activity. Once identified, the genetically
modified cells which are expected to produce the appropriate enzyme to convert that cannabinoid prodrug will be encapsulated using
the Cell-in-a-Box® technology. The encapsulated cells and cannabinoid prodrugs identified by these studies will
then be combined and used for future studies to evaluate their anticancer effectiveness.
January 2017, we entered into a second Research Agreement with UNC. The goal of this ongoing research is to assess the synthesis
of the patG gene and incorporation into a vector, transfection of human embryonic kidney cells, and assessment of cannabinoic
acid decarboxylase activity.
2017, UNC identified an organism whose genome contains the genetic code for production of an enzyme capable of activating a cannabinoid
prodrug into its active cancer-killing form. Our current cannabis program has two primary areas of focus. The first is confirming
the anti-cancer activity of cannabinoids, such as THC and CBD, particularly in our main “target” tumor (glioblastoma).
UNC’s research has confirmed that a purified cannabinoid showed a potent dose-dependent decrease in cell viability for various
cancers, suggesting that this cannabinoid exhibits significant anti-proliferative effects (stops the growth of cancer cells).
This activity has been demonstrated in glioblastoma (brain), pancreatic, breast, lung, colon and melanoma cancer cells. The second
area of focus is in finding an enzyme capable of converting an inactive, side-effect-free, cannabinoid prodrug into its active
cancer-killing form. The research team at UNC has screened numerous cell lines and numerous enzymes. As result of this extensive
work, an organism has been identified that has been confirmed to produce an enzyme capable of catalyzing the desired cannabinoid-prodrug-activating
reaction. Work is now underway to locate the enzyme’s gene on the organism’s genome.
the location of the activating enzyme gene has been determined within the organism’s genome, a series of steps will occur
to amplify and clone the gene and confirm its activity. The gene will then be used to bio-engineer a human cell line that will
then become a cannabinoid-prodrug-activating enzyme “factory.” Upon confirmation of the desired activity of the bio-engineered
cell line, the final steps would include live-cell encapsulation with the Cell-in-a-Box® technology and validation.
targeted cannabinoid-based chemotherapy would be accomplished by implanting the encapsulated bio-engineered cells near the site
of a tumor, along with administration of a cannabinoid prodrug which would become activated at the site of the tumor by an enzyme
produced by the encapsulated cells. The end goal is better efficacy than existing therapies with few, if any, side effects.
between PharmaCyte, S.G. Austria and Austrianova
principal developers of the Cell-in-a-Box® technology are Prof. Dr. Walter H. Günzburg (“Dr. Günzburg”)
and Dr. Brian Salmons (“Dr. Salmons”). Both are officers of SG Austria Pte. Ltd. (“SG Austria”) and its
wholly-owned subsidiary Austrianova. The success of SG Austria and Austrianova, on the one hand, and our success, on the other
hand, are co-dependent in almost every respect. SG Austria and Austrianova benefit from our success. If we sublicense our encapsulation
technology for the development of therapies for cancer and diabetes, payments are owed by us to SG Austria or Austrianova. In
turn, we are dependent upon SG Austria and Austrianova because of the knowledge and expertise of Dr. Günzburg and Dr. Salmons
concerning the Cell-in-a-Box® technology and the actual process of cell encapsulation. This technology serves as
the basis for all our efforts in developing treatments for both cancer and diabetes. In addition, we own a 14.5% equity interest
in SG Austria and have contractual relationships, including license agreements, with SG Austria and Austrianova.
Günzburg and Dr. Salmons are involved in numerous aspects scientific endeavors relating to our cancer and diabetes therapies,
having initially commenced work for us as consultants at the beginning of 2014 under an oral agreement. They provide services
to us as consultants through their consulting company, Vin-de-Bona Trading Company Pte Ltd (“Vin-de-Bona”). This arrangement
was formalized in writing as of April 1, 2014, when we entered a Consulting Agreement with Vin-de-Bona (“Vin-de-Bona Consulting
Agreement”). The Vin-de-Bona Consulting Agreement has an initial term of 12 months, with additional terms of 12 months automatically
renewing unless either party terminates an additional term upon 30 days’ prior written notice. The professional services
rendered to us by Dr. Günzburg and Dr. Salmons are charged at a negotiated and confidential hourly rate.
Vin-de-Bona Consulting Agreement requires that Dr. Günzburg and Dr. Salmons not disclose or use our confidential information
for any purpose, other than performing services under the Consulting Agreement, without our prior written consent. In addition,
during the term of the Vin-de-Bona Consulting Agreement and for a period of twelve months after termination or expiration of the
agreement, Dr. Günzburg and Dr. Salmons are prohibited from soliciting any of our customers, employees, suppliers or other
persons with whom they had dealings during the tenure of their consultancy with us.
September 2014, Dr. Günzburg was appointed as our Chief Scientific Officer. Dr. Günzburg was compensated by our issuing
Vin-de-Bona 500,000 shares of our common stock. Dr. Günzburg is compensated in the same way and in the same amount for each
succeeding year during which he serves as our Chief Scientific Officer.
Matthias Löhr (“Dr. Löhr”), a noted European oncologist and gastroenterologist, also participates in the
development of our pancreatic cancer therapy. Dr. Löhr, currently with the Karolinska Institute in Stockholm, Sweden, served
as Principal Investigator of the earlier Phase 1/2 and Phase 2 clinical trials (discussed below) of the combination of CapCell®
(now known as and hereinafter referred to as “Cell-in-a-Box®”) with low-dose ifosfamide in patients
with advanced, inoperable pancreatic cancer. Like Dr. Günzburg and Dr. Salmons, Dr. Löhr is involved in planning and
overseeing much of our planned clinical trial in LAPC. Dr. Löhr is the Chairman of our Medical and Scientific Advisory Board
(“Advisory Board”) and a consultant to us. Dr. Löhr received 500,000 shares of our common stock to serve on the
Advisory Board and has received a like amount under a Professional Services Agreement with us that became effective in May 2016.
He also receives fees to provide professional consulting services to us through his consulting company based upon a confidential
of the Business
were incorporated in 1996. In 2013, we restructured our operations to focus on biotechnology, having been a nutraceutical products
company before then. The restructuring occurred so we could develop a unique, effective and safe way to treat cancer and diabetes.
On January 6, 2015, we changed our name from “Nuvilex, Inc.” to “PharmaCyte Biotech, Inc.” to reflect
the nature of our business.
mentioned above, we are now a clinical stage biotechnology company focused on developing and preparing to commercialize cellular
therapies for cancer and diabetes using our live cell encapsulation technology. This resulted from entering into the following
May 26, 2011, we entered an Asset Purchase Agreement with SG Austria (“SG Austria APA”) to purchase 100% of the assets
and liabilities of SG Austria. Under the SG Austria APA, Austrianova and Bio Blue Bird AG ("Bio Blue Bird"), then wholly-owned
subsidiaries of SG Austria, were to become wholly-owned subsidiaries of ours on the condition that we pay SG Austria $2.5 million
and 100,000,000 shares of our common stock. We were to receive 100,000 shares of common stock of Austrianova and nine bearer shares
of Bio Blue Bird representing 100% of the ownership of Bio Blue Bird.
two addenda to the SG Austria APA, the closing date of the SG Austria APA was extended twice by agreement between the parties.
June 2013, we and SG Austria entered a Third Addendum to the SG Austria APA (“Third Addendum”). The Third Addendum
materially changed the transaction contemplated by the SG Austria APA. Under the Third Addendum, we acquired 100% of the equity
interests in Bio Blue Bird and received a 14.5% equity interest in SG Austria. We paid: (i) $500,000 to retire all outstanding
debt of Bio Blue Bird; and (ii) $1.0 million to SG Austria. We also paid SG Austria $1,572,193 in exchange for the 14.5% equity
interest of SG Austria. The transaction required SG Austria to return to us the 100,000,000 shares of our common stock held by
SG Austria and for us to return to SG Austria the 100,000 shares of common stock of Austrianova we held.
as of the same date we entered the Third Addendum, we and SG Austria also entered a Clarification Agreement to the Third Addendum
(“Clarification Agreement”) to clarify and include certain language that was inadvertently left out of the Third Addendum.
Among other things, the Clarification Agreement confirmed that the Third Addendum granted us an exclusive, worldwide license to
use, with a right to sublicense, the Cell-in-a-Box® technology and trademark for the development of therapies for
respect to Bio Blue Bird, Bavarian Nordic A/S (“Bavarian Nordic”) and GSF-Forschungszentrum für Umwelt u. Gesundheit
GmbH (collectively, “Bavarian Nordic/GSF”) and Bio Blue Bird entered into a non-exclusive License Agreement (“Bavarian
Nordic/GSF License Agreement”) in July 2005, whereby Bio Blue Bird was granted a non-exclusive license to further develop,
make, have made (including services under contract for Bio Blue Bird or a sub-licensee, by Contract Manufacturing Organizations,
Contract Research Organizations, Consultants, Logistics Companies or others), obtain marketing approval, sell and offer for sale
the clinical data generated from the pancreatic cancer clinical trials that used the cells and capsules developed by Bavarian
Nordic/GSF (then known as “CapCells”) or otherwise use the licensed patent rights related thereto in the countries
in which patents had been granted. Bio Blue Bird was required to pay Bavarian Nordic a royalty of 3% of the net sales value of
each licensed product sold by Bio Blue Bird and/or its Affiliates and/or its sub-licensees to a buyer. The term of the Bavarian
Nordic/GSF License Agreement continued on a country by country basis until the expiration of the last valid claim of the licensed
Nordic/GSF and Bio Blue Bird amended the Bavarian Nordic License Agreement in December 2006 (“First Amendment”) to
reflect: (i) the license granted was exclusive; (ii) a royalty rate increased from 3% to 4.5%; (iii) Bio Blue Bird assumed the
patent prosecution expenses; and (iv) to make clear that the license will survive as a license granted by one of the licensors
if the other licensor rejects performance under the Bavarian Nordic License Agreement due to any actions or declarations of insolvency.
June 2013, we acquired from Austrianova an exclusive, worldwide license to use the Cell-in-a-Box® technology and
trademark for the development of a therapy for Type 1 and insulin-dependent Type 2 diabetes (“Diabetes Licensing Agreement”).
This allows us to develop a therapy to treat diabetes through encapsulation of a human cell line that has been genetically modified
to produce, store and release insulin in response to the levels of blood sugar in the human body.
October 2014, we entered into an exclusive, worldwide license agreement with the UTS (“Melligen Cell License Agreement”)
in Australia to use insulin-producing genetically engineered human liver cells developed by UTS to treat Type 1 diabetes and insulin-dependent
Type 2 diabetes. These cells, named “Melligen,” were tested by UTS in mice and shown to produce insulin in direct
proportion to the amount of glucose in their surroundings. In those studies, when Melligen cells were transplanted into immunosuppressed
diabetic mice, the blood glucose levels of the mice became normal. In other words, the Melligen cells reportedly reversed the
December 2014, we acquired from Austrianova an exclusive, worldwide license to use the Cell-in-a-Box® technology
in combination with genetically modified non-stem cell lines which are designed to activate cannabinoid prodrug molecules for
development of therapies for diseases and their related symptoms using of the Cell-in-a-Box® technology and trademark
(“Cannabis Licensing Agreement”). This allows us to develop a therapy to treat cancer through encapsulation of genetically
modified cells designed to convert cannabinoids to their active form using the Cell-in-a-Box® technology.
July 2016, we entered into a Binding Memorandum of Understanding with Austrianova (“Austrianova MOU”). Pursuant to
the Austrianova MOU, Austrianova will actively work with us to seek an investment partner or partners who will finance clinical
trials and further develop products for our therapy for cancer, in exchange for which we, Austrianova and any future investment
partner will each receive a portion of the net revenue of cancer products.
October 2016, Bavarian Nordic/GSF and Bio Blue Bird further amended the Bavarian Nordic License Agreement (“Second Amendment”)
in order to: (i) include the right to import in the scope of the license; (ii) reflect ownership and notification of improvements;
(iii) clarify which provisions survive expiration or termination of the Bavarian Nordic License Agreement; (iv) provide rights
to Bio Blue Bird to the clinical data after the expiration of the licensed patent rights; and (v) change the notice address and
recipients of Bio Blue Bird.
August 2017, we entered into a Binding Term Sheet (“Term Sheet”) with SG Austria and Austrianova pursuant to which
the parties reached an agreement to amend certain provisions in the SG Austria APA, the Diabetes Licensing Agreement, the Cannabis
Licensing Agreement and the Vin-de-Bona Consulting Agreement.
Term Sheet provides that our obligation to make milestone payments to Austrianova will be eliminated in their entirety under;
(i) the Cannabis License Agreement; (ii) the Diabetes License Agreement; and (iii) the SG Austria APA. The Term Sheet also provides
that the scope of the Diabetes License Agreement will be expanded to include all cell types and cell lines of any kind or description
now or later identified, including, but not limited to, primary cells, mortal cells, immortal cells and stem cells at all stages
of differentiation and from any source specifically designed to produce insulin for the treatment of diabetes.
addition, the Term Sheet provides that the Company will have a 5-year right of first refusal in the event that Austrianova chooses
to sell, transfer or assign at any time during such period the Cell-in-a-Box® tradename and its associated
technology, intellectual property, trade secrets and know-how, which includes the right to purchase any manufacturing facility
used for the Cell-in-a-Box® encapsulation process and a non-exclusive license to use the special cellulose
sulfate utilized with the Cell-in-a-Box® encapsulation process (collectively, “Associated Technologies”); provided,
however, that the Associated Technologies subject to the right of first refusal do not include Bac-in-a-Box®. Additionally,
for a period of one year following the date of the Term Sheet, the Term Sheet provides that Austrianova will not solicit, negotiate
or entertain any inquiry regarding the potential acquisition of the Cell-in-a-Box® and its Associated Technologies.
Term Sheet further provides that: (i) the royalty payments on gross sales as specified in the SG Austria APA, the Cannabis License
Agreement and the Diabetes License Agreement will be changed to 4%; and (ii) the royalty payments on amounts received by us from
sublicensees on sublicensees’ gross sales under the same agreements will be changed to 20% of the amount received by the
us from our sublicensees, provided, however, that in the event the amounts received by us from sublicensees is 4%
or less of sublicensees’ gross sales, Austrianova will receive 50% of what we receive (up to 2%) and then additionally 20%
of any amount we receive over the 4%.
Term Sheet provides that Austrianova will receive 50% of any other financial and non-financial consideration received from the
our sublicensees of the Cell-in-a-Box® technology. The Term Sheet also provides that we will pay Austrianova
$150,000 per month for a period of six months upon the execution of the amendments to the Term Sheet.
Term Sheet provides that Dr. Günzburg, who currently serves as our Chief Scientific Officer, will not receive any cash compensation
from us for services rendered as our Chief Scientific Officer for a period of six months beginning September 1, 2017.
the parties are obligated to negotiate in good faith, using reasonable commercial efforts, to negotiate the terms and conditions
of amendments to the Agreements (defined in the Term Sheet), which upon execution will supersede the Term Sheet.
May 14, 2018, the parties to the Term Sheet entered into amendments to the agreements referenced in the Term Sheet. See “—Details
of the Company’s Material Agreements—Subsequent Event” for a description of these amendments.
Goal and Strategies to Implement
goal is to become an industry-leading biotechnology company using the Cell-in-a-Box® technology as a platform upon
which therapies for cancer and diabetes are developed and obtain marketing approval for these therapies from regulatory agencies
in the U.S., the European Union, Australia and Canada.
strategies to implement our goal consist of the following:
||Submission of our
IND to the FDA and for the FDA to allow us to commence a clinical trial in LAPC;|
||Completion of preclinical
studies and clinical trials that demonstrate the effectiveness of our cancer therapy in reducing the production and accumulation
of malignant ascites fluid in the abdomen that is characteristic of pancreas and other abdominal cancers;|
||Completion of preclinical
studies and clinical trials that involve the encapsulation of the Melligen cells and/or beta islet or islet-like cells using
the Cell-in-a-Box® technology to develop a therapy for Type 1 diabetes and insulin-dependent Type 2 diabetes;|
||Enhancement of our
ability to expand into the biotechnology arena through further research and partnering agreements with one or more third parties
involved in cancer and diabetes;|
||Acquisition of contracts
that generate revenue or provide research and development capital utilizing our sublicensing rights;|
development of uses of the Cell-in-a-Box® technology platform through contracts, licensing agreements and
joint ventures with other companies; and
||Completion of testing,
expansion and marketing of existing and newly derived product candidates.|
Therapy Product Development
our efforts to bring potential treatments to bear on pancreatic and other solid tumor cancers, we acquired Bio Blue Bird. This
subsidiary holds our exclusive license, as amended, to a certain type of genetically modified call line we use with the Cell-in-a-Box®
live cell encapsulation technology for use in oncology. We have also entered into license agreements (discussed above and
below) to use Cell-in-a-Box® technology to develop a therapy for Type 1 and insulin-dependent Type 2 diabetes,
as well as cancer therapies where the Cell-in-a-Box® technology is combined with certain Cannabinoids.
focus is placed currently on the preparations for our planned Phase 2b clinical trial in LAPC. These preparations include the
live cell encapsulation of cancer prodrug-activating cells, namely cells that convert the prodrug ifosfamide into its cancer-killing
form. For our trial, as in the earlier Phase 1/2 and Phase 2 clinical trials that were done using live cell encapsulation plus
ifosfamide, live cells expressing a cytochrome P450 isozyme will be encapsulated using the Cell-in-a-Box®. These
capsulated cells are implanted as close to the patient’s tumor as possible. Once implanted, ifosfamide, a chemotherapy drug
that is normally activated in the liver will be given intravenously at approximately one-third the normal dose. The ifosfamide
will be carried by the circulatory system to where the encapsulated cells have been implanted. When the ifosfamide flows through
the porous capsules with the live cells inside, they act as a “bio-artificial liver” and convert the inactive form
of the chemotherapy prodrug ifosfamide to its active form at or near the actual cancerous tumor. The results of this “targeted
chemotherapy” are discussed in more detail above and below.
Cell-in-a-Box® encapsulation technology potentially enables genetically engineered live human cells to be used
as miniature factories. The technology results in the formation of pin-head sized cellulose-based porous capsules in which genetically
modified live human cells can be encapsulated and maintained. In the laboratory setting, which involves the large-scale amplification
and production of useful biotech products outside the body of a person or animal, the proprietary live cell encapsulation technology
has been shown to create a micro-environment in which these encapsulated cells survive and flourish. They are protected from environmental
challenges, such as the sheer forces associated with bioreactors, passage through catheters and needles, etc., enabling greater
growth and production of the end-product. The capsules are largely composed of cellulose (cotton) and are bio-inert.
encapsulation technology has the potential to enable live cells to survive in the human host and function like any other living
cell in the body. The capsules contain small pores. The pores are big enough to allow nutrients in and waste product out, and
small enough to keep the cells inside. Small molecules (such as ifosfamide, nutrients, oxygen and waste products) can pass through
the pores of the capsules. The cells of the human’s immune system cannot. The live cells inside the capsules do not protrude
through the pores of the capsules, for if they did so they would be subject to immune system attack. The encapsulated cells live
in the body and behave like a miniature organ of the body without any inflammatory response or rejection. Furthermore, the cellulose-based
capsules do not appear to irritate nearby tissues.
Opportunity and the Competitive Landscape
two areas we are currently developing for live cell encapsulation-based therapies are cancer and diabetes.
Cell-in-a-Box® capsules are comprised of cotton’s natural component - cellulose. Other materials used by
competitors include alginate, collagen, chitosan, gelatin and agarose. Alginate appears to be the most widely used of these. We
believe the inherent strength and durability of our cellulose-based capsules provides us with advantages over the competition.
For example, the Cell-in-a-Box® capsules have remained intact for approximately two years in humans and for several
months in animals during clinical trials and preclinical studies, respectively. They do so with no evidence of rupture, damage,
degradation, fibrous overgrowth or immune system response. The cells within the capsules also remained alive and functioning during
these studies. Other encapsulating materials degrade in the human body over time, leaving the encapsulated cells open to immune
system attack. Damage to surrounding tissues has also been reported to occur over time when other types of encapsulation materials
begin to degrade
have also shown that cells encapsulated using the Cell-in-a-Box® technology can be frozen for extended periods
of time and when thawed, the cells are recovered with approximately 90% viability. We are unaware of any other cell encapsulation
methodology that is capable of protecting their encapsulated cells to this degree. The implications of this property of the Cell-in-a-Box®
technology are obvious - long-term storage of encapsulated cells and shipment of encapsulated cells over long distances.
believe our live cell encapsulation technology may have significant new advantages and opportunities to market for us in numerous
and developing ways. For example:
may be treated by placing encapsulated drug-converting cells that convert a chemotherapy prodrug near the cancerous tumor;|
maintenance of therapeutic cells that activate a chemotherapy prodrug at the site of implantation in a blood vessel near the
cancerous tumor results in “targeted chemotherapy;”|
of a chemotherapy prodrug may allow for lower doses of the drug to be given to a patient, significantly reducing or even eliminating
side effects from the chemotherapy;|
modified live cells has the potential for the treatment of systemic diseases of various types, including diabetes;|
and trade secret protection and marketing exclusivity for our technology exists and is being expanded;|
||Capsules can prevent
immune system attack of functional cells without the need for immunosuppressive drug therapy; and|
||Safety and effectiveness
of the Cell-in-a-Box® technology and the cells used with that technology have already been shown in both human
and animal clinical trials.|
field of diabetes cell therapy development is competitive. There are numerous companies developing cell based therapies for diabetes.
These competitors include companies such as Viacyte, Inc. (“Viacyte”) in collaboration with Gore, Semma Therapeutics,
Inc. in collaboration with Defymed, SAS, Diabetes Research Institute Foundation, Beta-O2 Technologies Ltd., Diatranz Otsuka Ltd.,
Sernova Corp. and BetaCell NV; all these entities are developing some form of encapsulation-based disease therapies. Although
such competition exists, we believe these other companies are developing encapsulation-based therapies using encapsulation materials
and methodologies that produce capsules or devices that are far less robust than ours or that are associated with other problems,
such as extremely short shelf-life of the product and/or fibrotic overgrowth of their encapsulation products when implanted in
the body; these properties are not characteristic of the Cell-in-a-Box® capsules.
cancer is increasing in most industrialized countries. There were an estimated 55,440 new cases and 44,330 deaths as a result
of pancreatic cancer in the U.S in 2017, and an estimated 338,000 deaths worldwide in 2012. A diagnosis of pancreatic ductal carcinoma
is associated with poor prognosis due to early micrometastatic spread. The five-year survival rate for metastatic pancreatic cancer
is approximately 2%.
with the best available therapy, patients with advanced pancreatic cancer can only expect median survival times of about 8.5 months.
The percentage of one-year survivors is in the order of approximately 38%. The disease is operable in about only 10% of patients
after being diagnosed. This is largely because pancreatic cancer shows no symptoms until it is at an advanced stage (stage III
or IV) of development. However, over the past few years, radiologic techniques have advanced to the point where some pancreatic
cancers may be detectable somewhat sooner. A new definition of “borderline operable” has been coined, and a greater
number of pancreatic cancers are now being detected when they are “locally advanced” rather than after they have metastasized
and spread to other organs in the body.
goal is to satisfy a clear unmet medical need for patients with LAPC whose tumors no longer respond after 4-6 months of treatment
with the chemotherapy combination of Abraxane® plus gemcitabine or FOLFIRINOX. For these patients, there is currently
no effective therapy. We believe there will be no therapy comparable to our Cell-in-a-Box® plus low dose of ifosfamide
combination therapy when it is used in these patients.
face intense competition in the field of treating pancreatic cancer. In addition to commercial entities such as Halozyme, Inc.,
OncoMed Pharmaceuticals, Inc., and Boston Biomedical, Inc., to name a few of the smaller entities, several academic institutions
and cancer centers are trying to improve the outcome for pancreatic cancer patients. There are several drugs already available
and in the pipelines of pharmaceutical companies worldwide, not the least of which is the combination of the drugs of Abraxane®
and gemcitabine. This is the primary FDA-approved combination of drugs for treating advanced pancreatic cancer. In Europe,
and more recently in the U.S., the 4-drug combination known as FOLFIRINOX has also found use as a first-line treatment for advanced
pancreatic cancer. Some of our competitive strengths include the Orphan Drug Designation we have been granted by the FDA and the
EMA for our pancreatic cancer therapy, our trade secrets, the patents we are seeking and the licensing agreements we have that
are described in this Report. Yet many of our competitors have substantially greater financial and marketing resources than we
do. They also have stronger name recognition, better brand loyalty and long-standing relationships with customers and suppliers.
Our future success will be dependent upon our ability to compete.
believe our therapy for pancreatic cancer has already shown promise through the completion of a Phase 1/2 and a Phase 2 clinical
trial in advanced, inoperable pancreatic cancer. Our therapy for diabetes has also shown promise. Completed research studies have
resulted in positive responses in animal models using the Melligen cells. We believe we are in a strong competitive position considering
our unique encapsulation technology and the genetically modified cells that we have the exclusive worldwide license to use in
most industrialized countries.
discussed above in the section on Cannabinoids, PharmaCyte has several major competitors developing Cannabis-based therapies
Clinical Trials Using Our Encapsulation Technology
previous clinical trials using what is now our encapsulation technology were carried out in Europe in 1998-1999 and 2000, respectively.
Both employed the combination of the cellulose-based live cell encapsulation technology with low doses of the anticancer drug
ifosfamide. The results of the two clinical trials have appeared in the peer-reviewed scientific literature and are summarized
1/2 Clinical Trial
of Trial and Location: This clinical trial was opened on July 28, 1998 and closed on September 20, 1999. It was carried out
at the Division of Gastroenterology, University of Rostock, Germany.
of Trial Sponsors: The clinical trial was sponsored by Bavarian Nordic.
Design: The clinical trial was an open-label, prospective, single-arm and single center trial.
Information: A total of 17 patients were enrolled in the clinical trial (51 were screened). A total of 14 patients were treated
because two of the original 17 patients developed severe infections before the start of the clinical trial and had to be treated
by other means. For the other patient, angiography was not successful, causing the patient to be disqualified from participating
in the clinical trial.
Criteria: Criteria for enrolling in the clinical trial included inoperable pancreatic adenocarcinoma stage III-IV (IUCC) as
determined by histology and measured by computerized tomography (“CT”) scan and no prior chemotherapy.
of Treatment and Dosage Information: On day 0, celiac angiography was performed and 300 (in 13 patients, 250 in one) of the
capsules containing the ifosfamide-activating cells were placed by supraselective catheterization of an artery leading to the
tumor. Each capsule (~0.8 mm in diameter) contained about 10,000 cells. The cells overexpressed CYP2B1 (a cytochrome P450 isoform),
which catalyzed the conversion of the anticancer prodrug ifosfamide into its “cancer-killing” form.
day 1, patients were monitored for evidence of any clinically relevant adverse reactions, e.g. allergy and/or pancreatitis. On
days 2-4, each patient received low-dose (1 g/m2 body surface area) ifosfamide in 250 ml of normal saline administered
systemically as a 1-hour infusion. This was accompanied by a 60% dose equivalent of the uroprotective drug Mesna, which is used
to reduce the side effects of ifosfamide chemotherapy, given as three intravenous injections. This regimen was repeated on days
23-25 for all but two patients who received only one round of ifosfamide. A total of only two cycles of ifosfamide were given
to the remainder of the patients.
Clinical Endpoints: Median survival time from the time of diagnosis, the percentage of patients who survived one year or more
and the quality of life of each patient were examined in the clinical trial.
Metrics Utilized and Actual Results Observed: Standard NCI criteria for evaluating tumor growth were used to assess
||stable disease (tumors
50-125% of initial size) (“SD”);|
(more than 50% reduction in tumor volume) (“PR”); and|
||minor response (tumor
reduction of between 25% and 50%) (“MR”).|
of the treatment on tumor size were measured by CT scans. Control CT scans were scheduled for weeks 10 and 20, respectively. During
the final visit a control angiography was performed. On the initial CT scan, the scan demonstrating the largest diameter of the
primary tumor was identified and the area measured. Using appropriate landmarks, an identical scan was used for comparison. CT
scans were evaluated by two unrelated radiologists, one of whom was not involved in the clinical trial. After formally finishing
the clinical trial, patients were followed on an ambulatory basis with visits once every three months.
was measured based on WHO/NCI guidelines on common toxicity criteria. The WHO and the National Cancer Institute (“NCI”)
use standardized classifications of the adverse events associated with the use of cancer drugs. In cancer clinical trials, these
are used to determine if a drug or treatment causes unwanted side effects (“Adverse Events”) when used under specific
conditions. For example, the most commonly used classification is known as the “Common Terminology Criteria for Adverse
Events” developed by the NCI in the U.S. Most clinical trials carried out in the U.S. and the United Kingdom code their
Adverse Event. This system consists of five grades. These are: 1 = mild; 2 = moderate; 3 = severe; 4 = life-threatening; 5 = death.
In the studies reported for Cell-in-a-Box® plus low-dose ifosfamide combination in pancreatic cancer patients,
the study investigators noted 11 Serious Adverse Events (“SAEs”) in 7 patients, none of which were believed to be
patient’s need for pain medication and the quality of life (“QOL”) was monitored using a questionnaire established
for diseases of the pancreas. A QOL questionnaire for cancer patients, QLQ-C30, had been validated in several languages, but the
module for pancreatic cancer per se was still under development at the time of the study with respect to reliability, sensibility
against changes and multicultural validation. Accordingly, a version of the core questionnaire and a German QOL scale (published
in 1995) for pancreatic cancer patients was used. QOL data were documented independently from safety and efficacy data by having
patients complete an independent questionnaire. Assessment of QOL data did not interfere with routine documentation of Adverse
Events reported by the patients. QOL questionnaires were analyzed according to the criteria developed by the European Organization
for Research and Treatment of Cancer (“EORTC”). As used in the description of the QOL results discussed in the published
report of the Phase 1/2 trial of the Cell-in-a-Box® plus low-dose ifosfamide combination in pancreatic cancer patients,
the questionnaire was used to assess the QOL of patients undergoing treatment. The QOL was analyzed in a similar manner to the
way that a QOL questionnaire developed by the EORTC is usually analyzed. This latter questionnaire is known as EORTC QLQ-C30.
QOL data were available from the baseline evaluation for 14 patients and for analysis of change for 8 patients.
clinical benefit score based on variables, including the “Karnofsky Score” and body weight, was determined. Pain and
analgesic consumption were calculated from the QOL questionnaires. The Karnofsky Score is a scale that is used to attempt to quantify
a cancer patient’s general well-being and activities of daily life. It is often used to judge the suitability of patients
for inclusion into clinical trials. As a clinical trial progresses, a patient’s Karnofsky Score can change. It is also used
to assess a patient’s QOL as a clinical trial progresses. The scale starts at 100 (normal, no complaints, no evidence of
disease) and decreases in decrements of 10 down through 50 (requires considerable assistance and frequent medical care) all the
way to 10 (moribund, fatal processes progressing rapidly) and finally to 0 (deceased). Pain intensity was measured on a visual
analog scale ranging from 0 (no pain) to 100 (the most intensive pain imaginable) in increments of 10. Analgesic consumption was
assessed using a separate scale in which 0 indicated no regular consumption of analgesics and 25, 50 and 100 indicated administration
of non-steroidal anti-inflammatory drugs or opiates several times per year, per month or per week, respectively.
primary tumor did not grow in any of the 14 patients. Two patients had PR; 12 patients exhibited SD; and two patients showed a
survival time of patients in this clinical trial was 39 weeks. The one-year survival rate was 36%.
the 20-week study period, three patients died from disease progression (on days 9, 85 and 132). Upon postmortem examination, the
patient who died on day 9 from recurrent pulmonary embolism was found to have extensive tumor necrosis.
chemotherapy regimen was well tolerated. No toxicity beyond Grade 2 (moderate adverse effect) was detected in any of the 14 patients.
SAEs were seen in 7 patients during the study period. None of them were treatment-related (due to capsule implantation or ifosfamide
administration). These SAEs were attributed to underlying disease and/or the effects associated with the disease.
the capsules did not result in any obvious allergic or inflammatory response, and no patients developed pancreatitis during the
trial. Some patients exhibited elevated amylase levels, presumably due to tumor infiltration of the pancreas and limited obstructive
chronic pancreatitis. However, no further increase in amylase levels was seen after angiography and capsule implantation.
accordance with the report of the study, only one Adverse Event (increased lipase activity on day 15 after installation of the
capsules), which was a Grade 1 Adverse Event, “may” have been linked to implanting the capsules.
of 14 patients experienced a “clinical benefit” which means either no increase or a decrease in pain intensity. For
7 of the patients, this was confirmed by their analgesic consumption. None of these “benefited” patients registered
an increased analgesic usage either in terms of dosage or WHO levels.
of the patients showed an increased Karnofsky Score after treatment. However, 7 of the 14 patients had stable Karnofsky Scores
at the week 10 assessment. For 4 of these patients, their indices were still stable at the week 20 assessment.
patient’s body weight increased at both weeks 10 and 20 and another patient showed increased weight at week 10 (this patient
withdrew from the clinical trial and no week 20 weight was obtained). Two patients showed stable body weights at week 10, one
of whom dropped out of the clinical trial and the other showed weight loss at week 20.
scenarios were used to establish the overall integrative clinical benefit response, where each patient was given a +2 score for
an improved value, a +1 score for a stable value and a -1 score for a worsened value for each of four criteria (pain, analgesic
consumption, Karnofsky Score and body weight) as compared to the relevant week 0 values.
“worst case scenario” required a pain relief score of 20 points or more to be judged an improvement and a decrease
in the Karnofsky Score of 10 points or more to indicate worsening. Using this scenario, 50% or 7 of the treated patients experienced
clinical benefit; 21.4% or 3 patients were neutral (benefits were offset by impairments); and 28.6% or 4 patients had no clinical
benefit. The latter included those passing away before the median survival time.
the “best case scenario,” a pain relief score of 10 points or more was an improvement. A decrease in Karnofsky Score
of 20 points or more was considered a worsening. In this scenario, 71.4% or 10 patients had clinical benefit, 14.2% of patients
showed neither benefit nor deterioration and 14.3% patients had no benefit.
of Care: At the time this clinical trial was conducted, only one FDA-approved treatment for advanced, inoperable pancreatic
cancer was available. That was gemcitabine, first approved by the FDA in 1996.
examination of the prescribing information for gemcitabine reflects that the median survival seen in the Phase 3 pancreatic cancer
clinical trial for gemcitabine was approximately 23 weeks (5.7 months). The percentage of one-year survivors was approximately
18%. In the Phase 3 clinical trial of Celgene’s Abraxane® plus gemcitabine combination that was approved
by the FDA in September 2013, the median survival time for patients was about 8.5 months and the percentage of one-year survivors
was approximately 35%.
treatment with gemcitabine of patients with pancreatic cancer is often associated with severe side effects. According to the prescribing
information for gemcitabine, for use to treat pancreatic cancer the recommended dose is 1000 mg/m2 given intravenously
over 30 minutes. The schedule of administration is: weeks 1-8, weekly dosing for 7 weeks followed by one-week rest and then after
week 8, weekly dosing on days 1, 8 and 15 of 28-day cycles.
in the doses of gemcitabine are necessitated by the occurrence of myelosuppression. Permanent discontinuation of gemcitabine is
necessary for any of the following:
or other evidence of severe pulmonary toxicity;|
||capillary leak syndrome;
should be withheld or its dose reduced by 50% for other severe (Grade 3 or 4) non-hematologic toxicity until that toxicity is
In the opinion of the trial’s investigators, in this Phase 1/2 clinical trial the use of the combination of Cell-in-a-Box®
capsules plus low-dose ifosfamide was both safe and effective. This assessment was not based on the opinion of any drug
regulatory authority and does not guarantee that that this assessment will be maintained in any late-phase clinical trial or that
any drug regulatory authority will ultimately determine that the Cell-in-a-Box® plus low-dose ifosfamide combination
is safe and effective for the purposes of granting marketing approval.
the Phase 1/2 clinical trial only a small number of patients were evaluated. Statistical parameters were not used in the published
reports of the Phase 1/2 trial to validate the anticancer efficacy of the Cell-in-a-Box® plus low-dose ifosfamide
combination in patients with advanced, inoperable pancreatic cancer. In the opinion of the investigators, the results indicate
a trend towards efficacy; accordingly, the results should not be viewed as absolute numbers. It should be noted, however, that
because the results were not statistically significant, any observations of efficacy must be weighed against the possibility that
the results were due to chance alone. The purpose of the clinical trial was not to obtain data so that marketing approval could
be obtained from regulatory authorities. Rather, the clinical trial allowed the investigators to determine whether the Cell-in-a-
Box® plus low-dose ifosfamide combination holds promise as a therapy for advanced pancreatic cancer. In the cancer
arena, Phase 1/2 clinical trials are used to: (i) establish the safety of the drug or treatment being investigated; and (ii) determine
if a trend towards efficacy exists. In accordance with FDA guidance, as well as similar guidance from other regulatory authorities
in countries other than the U.S., we realize that a large, multicenter, randomized, comparative study needs to be conducted and
the results from such a trial would have to confirm the results from this previous Phase 1/2 trial before an application for marketing
approval could be filed with the FDA or EMA. We are currently engaged in preparing an IND for submission to the FDA to conduct
a new clinical trial,
our cancer therapy is approved by the regulatory agencies, we believe it could provide a significant benefit to those with this
devastating and deadly disease, not only in terms of life-span but also in terms of increased quality of life. Also, we believe
that success of the live cell encapsulation technology in the pancreatic cancer setting may lead to its successful use in developing
therapies for other forms of solid cancerous tumors after preclinical studies and clinical trials have been completed.
2 Clinical Trial
of Trial: The clinical trial was opened on November 16, 1999 and closed on December 1, 2000. This clinical trial was carried
out at four centers in two countries in Europe. These were in Berne, Switzerland, and in Rostock, Munich and Berlin, Germany.
Sponsor: The clinical trial was sponsored by Bavarian Nordic.
Design: This was an open-label, prospective, single-arm multi-site study.
Information: All 13 patients enrolled in the trial were treated. Twelve patients exhibited Stage IV disease. The remaining
patient had Stage III disease. Ten of the 13 patients exhibited metastases.
of Treatment and Dosage Information: The number of capsules implanted varied from 221 to 300 with a mean of 244. On day 1,
patients were monitored for any allergic reactions to capsule implantation and or pancreatitis. The administration schedule of
the treatment was the same as in the earlier Phase 1/2 trial, except that in this Phase 2 trial the dose of ifosfamide was doubled
to 2 g/m2. In the Phase1/2 trial, it was 1g/m2. On days 2-4, patients received 2 g/m2 in normal
saline as a one-hour infusion. The urinary tract protector Mesna was also given as 3 intravenous injections. This regimen was
repeated on days 23-25.
Clinical Endpoints: The primary endpoint of the trial was to determine response rate as defined by SD, PR and MR as well as
the clinical benefit (Karnofsky score) of the treatment. The timing of the tumor size measurements and determination of tumor
sizes by CT scans were done by independent radiologists. A secondary endpoint was to determine time to progression, tumor response,
duration of partial or complete remission, length of symptom-free survival, survival time and quality of life. Another secondary
endpoint was to evaluate the safety and tolerability of the treatment regimen, with attention being paid to the appearance of
pancreatitis or immediate allergic reactions.
Analysis of Angiography, Capsule Implantation and Chemotherapy: On average, angiography took approximately 40 minutes. For
5 of the patients in this clinical trial, more than one blood vessel had to be used for placement of the capsules. The administration
of the capsules was well tolerated. There were no signs of allergic reactions or hemorrhagic cystitis after implantation of the
capsules. Two patients had increased levels of serum lipase at baseline. After additional measurements, these were not considered
to be clinically relevant. The dose of ifosfamide (2 g/m2) used was found to be toxic in most patients. This resulted
in one patient having to reduce the ifosfamide dose in the second of the two cycles of treatment with the drug. The most common
toxic effects were nausea, vomiting, malaise, anorexia and mild hematuria.
Adverse Events: A total of 16 SAEs were documented in eight patients, including 3 SAEs leading to death. None of these SAEs
were attributed to placement of the encapsulated cells. One patient experienced neurological impairment (drowsiness, nocturnal
enuresis, mild somnolence) which was attributed to treatment with the 2 g/m2 dose of ifosfamide. All patients experienced
between 5 and 19 SAEs. Six SAEs were rated as life-threatening; 10.2% were rated as severe; 28.7% were rated as moderate; and
53.7% were rated as mild. None of the SAEs was thought to be related to placement of the encapsulated cells, but 44% were related
to the administration of ifosfamide at the elevated dose given. Most frequent SAEs were alopecia, anemia, leucopenia, nausea and
vomiting or encephalopathy. Other SAEs were new or worse symptoms of the patients’ underlying disease. A total of 65 events
met the NCI’s common toxicity criteria. Of these, 46.2% had Grade 1, 40% had Grade 2, 9.2% had Grade 3 and 4.6% had Grade
Reductions and Patient Survival Results: The size of the primary tumor was measured before starting the live cell encapsulation
plus ifosfamide therapy and at weeks 10 and 20 post-treatment. No PRs were observed, but 4 patients exhibited tumor size reductions,
4 patients showed tumor growth and the remaining 5 patients had SD over the “follow-up” period after chemotherapy.
median survival of patients was 40 weeks. Most the survival benefit was shown early during the entire observation period. However,
as time progressed, these patients succumbed at the same rate as historical controls. This observation suggested to the investigators
that prolongation of the survival benefit might be achieved if additional courses of ifosfamide chemotherapy were given. The one-year
survival rate was 23%. It was thought that this may be attributable to the higher dose of ifosfamide used in this clinical trial.
of Life: An assessment of the quality of life of the patients was performed in this clinical trial. Quality of life data were
available for all the patients. According to this quality of life assessment, although pain during the night decreased, patients
felt themselves to be less attractive and lost interest in sex. No additional improvements in patients’ quality of life
The opinions of the investigators were are follows: (i) the lack of “problems” associated with the implanted encapsulated
cells was noted as in the Phase 1/2 trial; (ii) administering more than two courses of treatment with ifosfamide might have beneficial
effects on survival; and (iii) since doubling the dose of ifosfamide from that used in the Phase 1/2 trial had no beneficial antitumor
or survival effect but was associated with increased side effects from the treatment, the dose of ifosfamide to be used in combination
with the encapsulated cells for all future trials should be 1g/m2.
are outsourcing all cell growth, processing and encapsulation services needed for our future clinical trials of the encapsulated
cell-based cancer and diabetes therapies. The Cell-in-a-Box® encapsulation will be done by Austrianova at its current
good manufacturing practices (“cGMP”)--compliant manufacturing facility in Bangkok, Thailand.
initially engaged ViruSure GmbH (“ViruSure”), a professional cell growing and adventitious agent testing company that
has had extensive experience with the CYP2B1-expressing cancer prodrug-activating cells that will be needed for our pancreatic
cancer therapy. We did so to recover them from frozen stocks of similar cells developed by Bavarian Nordic and regenerate new
stocks for use by us in our preclinical studies and clinical trials. ViruSure cloned new cells from a selected clone. We planned
to use the clones to populate a Master Cell Bank (“MCB”) and a Working Cell Bank (“WCB”) for our future
March 2014, we entered a Manufacturing Framework Agreement with Austrianova (“Manufacturing Framework Agreement”)
pursuant to which Austrianova will encapsulate the genetically engineered live cells that will be used for our cancer therapy.
We have also contracted with Austrianova to provide encapsulated insulin-producing cells for our preclinical studies in diabetes.
At the appropriate time, we intend to enter into a similar manufacturing framework agreement with Austrianova for the encapsulated
cells we will need for our diabetes therapy.
April 2014, we entered an agreement with ViruSure pursuant to which ViruSure agreed to clone cells from the 22P1G cell line (the
cells that express the CYP2B1 isoform of cytochrome P450 that converts ifosfamide into its cancer-killing form). In August 2014
we entered into a revised proposal with ViruSure pursuant to which ViruSure modified certain testing recommendations and banking
procedures. ViruSure was engaged in the process of cloning cells for some time and conducted various tests of the cells it had
grown for us.
June 2017, we entered into an agreement with Eurofins Lancaster Laboratories, Inc. (“Eurofins”) for the preparation
and characterization of a cGMP MCB for use in our therapy for pancreatic cancer. The agreement includes pre-bank testing, MCB
preparation, MCB characterization, WCB preparation, WCB characterization, end of production characterization and related analysis,
as well as optional testing. The MCB was initially planned to be used as a “safe” repository of the cloned cells we
will use in our cancer therapy. The WCB was planned to be used to supply the large numbers of cells needed for our preclinical
studies, clinical trials and other purposes related to the development of our therapy for LAPC and other forms of solid tumor
January 2018, we modified our agreement with Eurofins to exclude the WCB preparation and characterization, as well as end of production
characterization and related analysis, to expedite the availability of the cells needed for encapsulation by Austrianova to conduct
our planned clinical trial and to save the costs associated therewith for the time being.
to the terms of the Austrianova MOU, Austrianova and we have agreed to negotiate a new Manufacturing Framework Agreement pursuant
to which Austrianova will provide us with Phase 3 clinical material utilizing the genetically engineered cells designed to activate
ifosfamide that have been encapsulated using the Cell-in-a-Box® technology to conduct a late phase clinical trial
in the United States with possible study sites in Europe.
Regulation and Product Approval
a development stage biotechnology company that operates in the U.S., we are subject to extensive regulation by the FDA and other
federal, state, and local regulatory agencies. The federal Food, Drug, and Cosmetic Act (“FDCA”) and its implementing
regulations set forth, among other things, requirements for the research, testing, development, manufacture, quality control,
safety, effectiveness, approval, labeling, storage, record keeping, reporting, distribution, import, export, advertising and promotion
of our product candidates. Although the discussion below focuses on regulation in the U.S., we anticipate seeking approval for,
and marketing of, our product candidates in other countries. Generally, our activities in other countries will also be the subject
of extensive regulation, although there can be important differences with the U.S. The process of obtaining regulatory marketing
approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations will require
the expenditure of substantial time and financial resources and may not be successful.
approval, when obtained, may be limited in scope which may significantly limit the uses for which a product may be placed into
the market. Further, approved drugs or biologic products, as well as their manufacturers, are subject to ongoing post-marketing
review, inspection and discovery of previously unknown problems with such products or the manufacturing or quality control procedures
used in their production. These may result in restrictions on their manufacture, sale or use or in their withdrawal from the market.
Any failure or delay by us, our suppliers of manufactured drug product, collaborators or licensees in obtaining regulatory approvals
could adversely affect the marketing of our product candidates and our ability to receive product revenue, license revenue or
profit sharing payments. For more information, see Item 1A. “Risk Factors.”
FDA is the main regulatory body that controls pharmaceuticals and biologics in the U.S. Its regulatory authority is based in the
FDCA and the Public Health Service Act (“PHSA”). Pharmaceutical products and biologics are also subject to other federal,
state and local statutes. A failure to comply explicitly with any requirements during the product development, approval, or post-approval
periods, may lead to administrative or judicial sanctions. These sanctions could include the imposition by the FDA or an Institutional
Review Board (“IRB”) of a hold on clinical trials, refusal to approve pending marketing applications or supplements,
withdrawal of approval, warning letters, product recalls, product seizures, total or partial suspension of production or distribution,
injunctions, fines, civil penalties or criminal prosecution.
steps required before a new drug or biologic may be marketed in the U.S. generally include:
||completion of preclinical
studies and formulation studies in compliance with the FDA’s Good Laboratory Practices (“GLP”) protocols
of an FDA inspection of the manufacturing facilities at which the investigational product candidate is produced to assess
compliance with cGMP and proof that the facilities, methods and controls are adequate;|
||submission to the
FDA of an IND to support human clinical testing in the U.S.;|
||approval by an IRB
at each clinical site before a trial may be initiated at that site;|
||performance of adequate
and well-controlled clinical trials in accordance with federal regulations and with Good Clinical Practices (“GCPs”)
standards to establish the safety and efficacy of the investigational product candidate for each target indication;|
||Submission to the
FDA of a New Drug Application (“NDA”) for a drug or Biologics License Application (“BLA”) for
of an FDA Advisory Committee review, if applicable; and|
||FDA review and approval
of the NDA or BLA.|
a drug or biologic product may be given to humans, it must undergo preclinical testing. Preclinical tests include laboratory evaluation
of a product candidate’s chemical and biological activities and animal studies to assess potential safety and efficacy in
humans. The results of these studies must be submitted to the FDA as part of an IND which must be reviewed by the FDA for safety
and other considerations before even an initial (Phase 1) clinical trial in humans can begin.
IND is a request for authorization from the FDA to administer an investigational product candidate to humans. This authorization
is required before interstate shipping and administration can commence of any new drug or biologic product destined for use in
humans in the U.S. A 30-day waiting period after the submission of each IND is required before commencement of clinical
testing in humans. If the FDA has neither commented on nor questioned the IND within this 30-day period after submission of the
IND, the clinical trial proposed in the IND may begin. A clinical trial involves the administration of the investigational product
candidate to patients under the supervision of qualified investigators following GCP standards. These international standards
are meant to protect the rights and health of patients and to define the roles of clinical trial sponsors, administrators and
monitors. A clinical trial is conducted under protocols that detail the parameters to be used in monitoring safety, and the efficacy
criteria to be evaluated. Each protocol involving testing on U.S. patients and subsequent protocol amendments must be submitted
to the FDA as part of the IND.
devote significant resources to research and development programs to discover and develop potential future product candidates.
The product candidates in our pipeline are at various stages of preclinical and clinical development. The path to regulatory approval
includes three phases of clinical trials in which we collect data to support an application to regulatory agencies to allow us
to ultimately market a product for treatment of a specified disease. There are many difficulties and uncertainties inherent in
research and development of new products, resulting in a high rate of failure. To bring a drug from the discovery phase to regulatory
approval, and ultimately to market, takes years and the costs to do so are significant. Failure can occur at any point in the
process, including after the product is approved, based on post-marketing factors. New product candidates that appear promising
in development may fail to reach the market or may have only limited commercial success because of efficacy or safety concerns,
inability to obtain necessary regulatory approvals, limited scope of approved uses, reimbursement challenges, difficulty or excessive
costs of manufacture, alternative therapies or infringement of the patents or intellectual property rights of others. Uncertainties
in the approval process of the regulatory agencies can result in delays in product launches and lost market opportunities. Consequently,
it is very difficult to predict which products will ultimately be submitted for approval, which have the highest likelihood of
obtaining approval and which will be commercially viable and generate profits. Successful results in preclinical or clinical studies
may not be an accurate predictor of the ultimate safety or effectiveness of a product candidate.
1 Clinical Trial: A Phase 1 clinical trial begins when a regulatory agency, such as the FDA, allows initiation of the
clinical investigation of a new product candidate. The clinical trial studies a product candidate’s safety profile and may
include a preliminary determination of a product candidate’s safe dosage range. The Phase 1 clinical trial can also
determine how a drug is absorbed, distributed, metabolized and excreted by the body and, therefore, the potential duration of
2 Clinical Trial: A Phase 2 clinical trial is conducted on a limited number of patients; these patients can have a specific
targeted disease. An initial evaluation of the product candidate’s effectiveness on patients is performed. Additional information
on the product candidate’s safety and dosage range is obtained. For many diseases, a Phase 2 clinical trial can include
up to several hundred patients.
3 Clinical Trial: A Phase 3 clinical trial is typically rigorously controlled, conducted in multiple centers and involves
a larger target patient population that can consist of from several hundred to thousands of patients (depending on the disease
being studied) to ensure that study results are statistically significant. During a Phase 3 clinical trial, physicians monitor
patients to determine efficacy and to gather further information on safety. A Phase 3 clinical trial is designed to generate all
the clinical data necessary to apply for marketing approval to a regulatory agency.
decision to terminate development of an investigational product candidate may be made by either a health authority body, such
as the FDA, by IRB/ethics committees, or by a company for various reasons. The 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 patients enrolled in the trial. In some cases, a clinical
trial is overseen by an independent group of qualified experts organized by the trial sponsor, or the clinical monitoring board.
This group provides authorization for whether a trial may move forward at designated check points. These decisions are based on
the limited access to data from the ongoing trial. The suspension or termination of development can occur during any phase of
a clinical trial if it is determined that the patients are being exposed to an unacceptable health risk. There are also requirements
for the registration of an ongoing clinical trial of a product candidate on public registries and the disclosure of certain information
pertaining to the trial, as well as clinical trial results after completion.
sponsor may be able to request a special protocol assessment (“SPA”), the purpose of which is to reach agreement with
the FDA on the Phase 3 clinical trial protocol design and analysis that will form the primary basis of an efficacy claim.
A sponsor meeting the regulatory criteria may make a specific request for an SPA and provide information regarding the design
and size of the proposed clinical trial. An SPA request must be made before the proposed trial begins. All open issues must be
resolved before the trial begins. If a written agreement is reached, it will be documented and made part of the record. The agreement
will be binding on the FDA and may not be changed by the sponsor or the FDA after the trial begins, except with the written agreement
of the sponsor and the FDA or if the FDA determines that a substantial scientific issue essential to determining the safety or
efficacy of the product candidate was identified after the testing began. An SPA is not binding if new circumstances arise, and
there is no guarantee that a study will ultimately be adequate to support an approval even if the study is subject to an SPA.
Having an SPA does not guarantee that a product candidate will receive FDA approval.
successful completion of all required testing in accordance with all applicable regulatory requirements, detailed investigational
product candidate information is submitted to the FDA in the form of an NDA or BLA to request regulatory approval for the product
in the specified indications.
Drug Applications and Biologic Licensing Applications
obtain approval to market a drug or biologic in the U.S., a marketing application must be submitted to the FDA that provides data
establishing the safety and effectiveness of the product candidate for the proposed indication. The application includes all relevant
data available from pertinent preclinical studies and clinical trials, including negative or ambiguous results as well as positive
findings, together with detailed information relating to the product’s chemistry, manufacturing and controls, as well as
the proposed labeling for the product, among other things. Data can come from company-sponsored clinical trials intended to test
the safety and effectiveness of a product, or from several alternative sources, including studies initiated by investigators.
To support marketing approval, the data submitted must be sufficient in quality and quantity to establish the safety and effectiveness
of the investigational product candidate to the satisfaction of the FDA.
most cases, the NDA, in the case of a drug, or BLA, in the case of a biologic, must be accompanied by a substantial user fee.
There may be some instances in which the user fee is waived. The FDA will initially review the NDA or BLA for completeness before
it accepts the application for filing. The FDA has 60 days from its receipt of an NDA or BLA 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. After the NDA or BLA submission is accepted for filing, the FDA begins an in-depth review. The FDA has agreed to certain
performance goals in the review of NDAs and BLAs. During a normal review cycle, a product is given an FDA action or PDUFA date
within 12 months of the submission, if the submission is accepted. The FDA can extend this review by three months to consider
certain late-submitted information or information intended to clarify information already provided in the submission. The FDA
may also issue a complete response, which may delay approval for several months or even years. The FDA reviews the NDA or BLA
to determine, among other things, whether the proposed product is safe and effective for its intended use, and whether the product
is being manufactured in accordance with cGMP standards. The FDA may refer applications for novel product candidates which present
difficult questions of safety or efficacy to an advisory committee. This is typically a panel that includes clinicians and other
experts for review, evaluation and a recommendation as to whether the application should be approved and under what conditions.
The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making
approving an NDA or BLA, the FDA will inspect the facilities at which the product is manufactured. The FDA will not approve the
product candidate unless it determines that the manufacturing processes and facilities follow cGMP requirements and are adequate
to assure consistent production of the product within required specifications. Also, before approving an NDA or BLA, the FDA will
typically inspect one or more clinical sites to assure compliance with cGMP standards. Manufacturers of human cellular or tissue-based
biologics also must comply with the FDA’s Good Tissue Practices, as applicable, and with the general biological product
standards. After the FDA evaluates the NDA or BLA 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 for the FDA to reconsider the application. If, or when, those deficiencies have been addressed
to the FDA’s satisfaction in a resubmission of the NDA or BLA, the FDA will issue an approval letter. Notwithstanding the
submission of any requested additional information, the FDA ultimately may decide that the application does not satisfy the regulatory
criteria for approval.
approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications.
As a condition of NDA or BLA approval, the FDA may require risk evaluation and mitigation strategies (“REMS”) to help
ensure that the benefits of the product 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 REMS can materially affect the potential market and profitability of the
product. 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.
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/BLA or NDA/BLA supplement before the change can be implemented.
An NDA/BLA supplement for a new indication typically requires clinical data like that in the original application, and the FDA
uses the same procedures and actions in reviewing NDA/BLA supplements as it does in reviewing NDAs/BLAs.
of Clinical Trial Information
sponsor of a clinical trial of certain FDA-regulated products, including prescription drugs and biologics, is required to register
and disclose certain clinical trial information on a public website. Information related to the product, patient population, phase
of investigation, study sites and investigator involved and other aspects of the clinical trial are made public as part of the
registration. A sponsor is also obligated to disclose the results of a clinical trial after completion. Disclosure of the results
can be delayed until the product or new indication being studied has been approved. Competitors may use this publicly-available
information to gain knowledge regarding the design and progress of our development programs.
FDA and other federal regulatory agencies closely regulate the marketing and promotion of drugs and biologics through, among other
things, standards and regulations for direct-to-consumer advertising, communications regarding unapproved uses, industry-sponsored
scientific and educational activities, and promotional activities involving the internet. A product cannot be commercially promoted
before it is approved. After approval, product promotion can include only those claims relating to safety and effectiveness that
are consistent with the labeling approved by the FDA. Healthcare providers are permitted to prescribe drugs or biologics for “off-label”
uses (uses not approved by the FDA and therefore not described in the drug’s labeling) because the FDA does not regulate
the practice of medicine. However, FDA regulations impose stringent restrictions on manufacturers’ communications regarding
off-label uses. Broadly speaking, a manufacturer may not promote a product for off-label use, but may engage in non-promotional,
balanced communication regarding off-label use under specified conditions. Failure to comply with applicable FDA requirements
and restrictions in this area may subject a company to adverse publicity and enforcement action by the FDA, the U.S. Department
of Justice (“DOJ”), the Office of the Inspector General of Health & Human Services (“HHS”) and state
authorities. This could subject a company to a range of penalties that could have a significant commercial impact, including civil
and criminal fines and/or agreements that materially restrict the manner in which a company promotes or distributes drug products.
regulatory approval of a drug or biologic is obtained, a company is required to comply with certain post-approval requirements.
For example, as a condition of approval of an NDA or BLA, the FDA may require post-marketing testing, including a Phase 4
clinical trial and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization
has begun. Also, as a holder of an approved NDA or BLA, a company is required to: (i) report adverse reactions and production
problems to the FDA; (ii) provide updated safety and efficacy information; and (iii) comply with requirements concerning advertising
and promotional labeling for any of its products. Also, quality control and manufacturing procedures must continue to conform
to cGMP standards after approval to assure and preserve the long-term stability of the drug or biological product. The FDA periodically
inspects manufacturing facilities to assess compliance with cGMP standards, which imposes extensive procedural and substantive
record keeping requirements. Also, changes to the manufacturing process are strictly regulated, and, depending on the significance
of the change, may require prior FDA approval before being implemented. In addition, FDA regulations require investigation and
correction of any deviations from cGMP standards and impose reporting and documentation requirements upon a company and any third-party
manufacturers that a company may decide to use. Manufacturers must continue to expend time, money and effort in production and
quality control to maintain compliance with cGMP standards and other aspects of regulatory compliance.
Patent Extension and Marketing Exclusivity
Biologics Price Competition and Innovation Act (“BPCIA”) amended the PHSA to authorize the FDA to approve similar
versions of innovative biologics, commonly known as biosimilars. A competitor seeking approval of a biosimilar must file an application
to establish its product as highly like an approved innovator biologic, among other requirements. The BPCIA bars the FDA from
approving biosimilar applications for 12 years after an innovator biological product receives initial marketing approval.
upon the timing, duration and specifics of the FDA approval of the use of our product candidates, some of our U.S. patents, if
granted, may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of
1984 (“Hatch-Waxman Act”). The Hatch-Waxman Act permits a patent extension term of up to five years, as compensation
for patent term lost during product development and the FDA regulatory review process. However, patent term extension cannot extend
the remaining term of a patent beyond a total of 14 years from the product’s approval date. The length of the patent term
extension is related to the length of time the drug, biologic or medical device is under regulatory review. It is calculated as
half of the testing phase (the time between the IND submission becoming effective and the NDA, BLA or premarket approval (“PMA”)
submission) and all the review phase (the time between NDA, BLA or PMA submission and approval) up to a maximum extension of five
years. The time can be shortened if the FDA determines that the applicant did not pursue approval with due diligence. Only one
patent applicable to an approved product is eligible for the extension and the application for the extension must be submitted
prior to the expiration of the patent. The U.S. Patent and Trademark Office (“USPTO”), in consultation with the FDA,
reviews and approves the application for any patent term extension. Similar provisions are available in Europe and other foreign
jurisdictions to extend the term of a patent that covers an approved drug, biologic or medical device. In the future, if any of
our product candidates receive FDA approval, we expect to apply for patent term extension on patents covering those products that
may be eligible for such patent term restoration.
Corrupt Practices Act
Foreign Corrupt Practices Act (“FCPA”) prohibits any U.S. individual or business from paying, offering, or authorizing
payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for influencing
any act or decision of the foreign entity to assist the individual or business in obtaining or retaining business. The FCPA also
obligates companies whose securities are listed in the U.S. to comply with accounting provisions requiring such companies to maintain
books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries,
and to devise and maintain an adequate system of internal accounting controls for international operations.
and Other International Government Regulation
addition to regulations in the U.S., we will be subject to a variety of regulations in other jurisdictions governing, among other
things, clinical trials and any commercial sales and distribution of our product candidates. Whether we obtain FDA approval for
a product, we must obtain the requisite approvals from regulatory authorities in foreign countries prior to the commencement of
clinical trials or marketing of the product in those countries. Some countries outside of the U.S. have a similar process that
requires the submission of a clinical trial application (“CTA”) much like the IND prior to the commencement of human
clinical trials. In Europe, for example, a CTA must be submitted to each country’s national health authority and an independent
ethics committee, much like the FDA and an IRB. Once the CTA is approved in accordance with a country’s requirements, a
clinical trial may proceed.
obtain regulatory approval to commercialize a new drug or biologic under European Union regulatory systems, we must submit a marketing
authorization application (“MAA”) with the EMA. It is like the NDA or BLA, except for, among other things, country-specific
of the European Union, the requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement
vary from country to country. Internationally, clinical trials are generally required to be conducted in accordance with cGMP
standards, applicable regulatory requirements of each jurisdiction and the medical ethics principles that have their origin in
the Declaration of Helsinki.
a product candidate successfully completes a Phase 3 clinical trial and is submitted to regulatory agencies, such as the
FDA in the U.S. and the EMA in Europe, the time to final marketing approval can vary from months to years, depending on several
variables. These variables can include such things as the disease type, the strength and complexity of the data presented, the
novelty of the target or compound, risk-management approval and whether multiple rounds of review are required for the agency
to evaluate the submission. There is no guarantee that a potential treatment will receive marketing approval or that decisions
on marketing approvals or treatment indications will be consistent across geographic areas. In some cases, further studies beyond
the three-phase clinical trial process described above are required as a condition for approval of a NDA, a MAA or a BLA. Each
country-specific regulatory agency requires monitoring of all aspects of a clinical trial and reporting all adverse events in
the trial. A regulatory agency may also require the conduct of pediatric studies for the product and indication either before
or after submission of a NDA or a BLA.
by Regulatory Agencies
results of the preclinical testing, production parameters and a clinical trial are submitted to the regulatory agency as part
of a NDA, a MAA or a BLA for evaluation to determine if there is substantial evidence that the product is sufficiently safe and
effective to warrant approval. In responding to a NDA, a MAA or a BLA, the regulatory agency may grant market approval, deny approval
or request additional information.
all phases of development (pre- and post-marketing), failure to comply with applicable regulatory requirements may result in administrative
or judicial sanctions. These sanctions could include the FDA’s imposition of a clinical hold on a trial, refusal to approve
pending applications, withdrawal of an approval, warning letters, product recalls, product seizures, total or partial suspension
of production or distribution, product detention or refusal to permit the import or export of products, injunctions, fines, civil
penalties or criminal prosecution. Any agency or judicial enforcement action could have a material adverse effect on us.
FDA has developed distinct approaches to make new drugs and biologics available as rapidly as possible in cases where there is
no available treatment or there are advantages over existing treatments. For example, the FDA may grant “Accelerated Approval”
to products that have been studied for their safety and effectiveness in treating serious or life-threatening illnesses and that
provide meaningful therapeutic benefit to patients over existing treatments. For Accelerated Approval, the product must influence
a surrogate endpoint or an intermediate clinical endpoint that is considered reasonably likely to predict the clinical benefit
of a product candidate, such as an effect on irreversible morbidity and mortality. When approval is based on surrogate endpoints
or clinical endpoints, other than survival or morbidity, the sponsor will be required to conduct additional post-approval clinical
studies to verify and describe clinical benefit. These studies are known in as confirmatory trials. Accelerated Approval of a
product may be withdrawn or the labeled indication of the drug changed if these trials fail to verify clinical benefit
or do not demonstrate sufficient clinical benefit to justify the risks associated with the product candidate.
FDA may grant “Fast Track” status to products that treat serious diseases or conditions and fill an unmet medical
need. Fast Track is a process designed to facilitate the development and expedite the review of such products by providing, among
other things, more frequent meetings with the FDA to discuss the product’s development plan, more frequent written correspondence
from the FDA about trial design, eligibility for Accelerated Approval if relevant criteria are met and rolling review, which allows
submission of individually completed sections of a NDA or a BLA for regulatory agency review before the entire submission is completed.
Fast Track status does not ensure that a product will be developed more quickly or receive regulatory agency approval.
FDA’s “Breakthrough Therapy” designation for a product candidate is designed to expedite the development and
review of drugs and biologics that are intended to treat a serious condition and preliminary clinical evidence indicates that
the product candidate may demonstrate substantial improvement over available therapy on a clinically significant endpoint. For
drugs and biologics that have been designated as Breakthrough Therapies, robust FDA-sponsor interaction and communication can
help to identify the most efficient and expeditious path for clinical development while minimizing the number of patients placed
in ineffective “control” regimens.
FDA may grant “Priority Review” status to product candidates that, if approved, would provide significant improvement
in the safety or effectiveness of the treatment, diagnosis or prevention of serious conditions. Priority Review is intended to
reduce the time it takes for the FDA to review a NDA or a BLA, with the goal to act on the application within six months.
accordance with laws and regulations pertaining to regulatory agencies, a sponsor may request that the regulatory agencies designate
a drug or biologic intended to treat a “Rare Disease or Condition” as an “Orphan Drug.” For example, in
the U.S., a “Rare Disease or Condition” is defined as one which affects less than 200,000 people in the U.S., or which
affects more than 200,000 people but for which the cost of developing and making available the product is not expected to be recovered
from sales of the product in the U.S. Upon the approval of the first NDA or BLA for a drug or biologic designated as an Orphan
Drug for a specified indication, the sponsor of that NDA or BLA is entitled to 7 years of exclusive marketing rights in the U.S.
for the drug or biologic for the particular indication unless the sponsor cannot assure the availability of sufficient quantities
to meet the needs of persons with the disease. In Europe, this exclusivity is 10 years. However, Orphan Drug status for an approved
indication does not prevent another company from seeking approval of a drug that has other labeled indications that are not under
orphan or other exclusivities. An Orphan Drug may also be eligible for federal income tax credits for costs associated with the
disease state, the strength and complexity of the data presented, the novelty of the target or compound, the risk-management approval
and whether multiple rounds of review are required for the agency to evaluate the submission. There is no guarantee that a potential
treatment will receive marketing approval or that decisions on marketing approvals or treatment indications will be consistent
across geographic areas.
Review and Accelerated Review
on results of a Phase 3 clinical trial submitted in a NDA or a BLA, upon the request of an applicant, a priority review designation
may be granted to a product by the FDA, which sets the target date for FDA action on the application at six months from the FDA’s
decision on priority review application, or eight months from the NDA filing. Priority review is given where preliminary estimates
indicate that a product, if approved, has the potential to provide a safe and effective therapy where no satisfactory alternative
therapy exists, or a significant improvement compared to marketed products is possible. If criteria are not met for priority review,
the standard FDA review period is ten months from the FDA’s decision on priority review application, or 12 months from
the NDA or BLA filing. Priority review designation does not change the scientific/medical standard for approval or the quality
of evidence necessary to support approval.
a centralized procedure in the European Union, the maximum timeframe for the evaluation of a MAA is 210 days (excluding “clock
stops,” when additional written or oral information is to be provided by the applicant in response to questions asked by
the Committee for Medicinal Products for Human Use (“CHMP”)). Accelerated evaluation might be granted by the CHMP
in exceptional cases, for example, when a medicinal product is expected to be of a major public health interest, which takes into
consideration: (i) the seriousness of the disease (e.g., heavy disabling or life-threatening diseases) to be treated; (ii)
the absence or insufficiency of an appropriate alternative therapeutic approach; and (iii) anticipation of high therapeutic benefit.
In this circumstance, the EMA ensures that the opinion of the CHMP is given within 150 days.
March 2010, former President Obama signed into law the Patient Protection and Affordable Care Act, as amended by the Health Care
and Education Reconciliation Act of 2010 (collectively, “Affordable Care Act”). The Affordable Care Act substantially
changes the way healthcare will be delivered and financed by both governmental and private insurers and significantly impacts
the pharmaceutical and biotechnology industries. The Affordable Care Act is a sweeping law intended to broaden access to health
insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency
requirements for healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional
health policy reforms. Among the Affordable Care Act’s provisions of importance to the pharmaceutical industry are the following:
||an annual, nondeductible
fee on any covered entity engaged in manufacturing or importing certain branded prescription drugs and biological products,
apportioned among such entities in accordance with their respective market share in certain government healthcare programs;|
||an increase in the
statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program, to 23.1% and 13.0% of the Average
Manufacturer Price (“AMP”), for most branded and generic drugs, respectively;|
||expansion of the
scope of healthcare fraud and abuse laws, including the False Claims Act and the Anti-Kickback Statute, new government investigative
powers and enhanced penalties for noncompliance;|
||a partial prescription
drug benefit for Medicare recipients, or Medicare Part D, coverage gap discount program, in which manufacturers must agree
to offer 50.0% point of sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their
coverage gap period, as a condition for the manufacturers’ outpatient drugs to be covered under Medicare Part D;|
||extension of manufacturers’
Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;|
||expansion of eligibility
criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals
and by adding new mandatory eligibility categories for individuals with income at or below 133.0% of the Federal Poverty Level,
thereby potentially increasing manufacturers’ Medicaid rebate liability;|
||expansion of the
entities eligible for discounts under the Public Health Service pharmaceutical pricing program;|
report annually specified financial arrangements with physicians and teaching hospitals, as defined in the Affordable Care
Act and its implementing regulations, including reporting any “payments or transfers of value” made or distributed
to prescribers, teaching hospitals, and other healthcare providers and reporting any ownership and investment interests held
by physicians and other healthcare providers and their immediate family members and applicable group purchasing organizations
during the preceding calendar year, with data collection required beginning August 1, 2013 and reporting to the Centers for
Medicare and Medicaid Services (“CMS”) required beginning March 31, 2014 and by the 90th day of each subsequent
||a requirement to
annually report drug samples that manufacturers and distributors provide to physicians;|
Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along
with funding for such research; and|
||a mandatory nondeductible
payment for employers with 50 or more full time employees (or equivalents) who fail to provide certain minimum health insurance
coverage for such employees and their dependents, beginning in 2015 (pursuant to relief enacted by the Treasury Department).|
Affordable Care Act also established an Independent Payment Advisory Board (“IPAB”) to reduce the per capita rate
of growth in Medicare spending. Beginning in 2014, the IPAB was mandated to propose changes in Medicare payments if it determines
that the rate of growth of Medicare expenditures exceeds target growth rates. The IPAB has broad discretion to propose policies
to reduce expenditures that may have a negative impact on payment rates for pharmaceutical and biologic products. A proposal made
by the IPAB is required to be implemented by the CMS unless Congress adopts a proposal with savings greater than those proposed
by the IPAB. The IPAB has not yet been called upon to act as the annual determinations by the CMS Office of the Actuary have not
identified a savings target for implementation.
addition, other legislative changes have been proposed and adopted since passage of the Affordable Care Act. The Budget Control
Act of 2011, among other things, created the Joint Select Committee on Deficit Reduction (“Joint Select Committee”)
to recommend proposals for spending reductions to Congress. The Joint Select Committee did not achieve its targeted deficit reduction
of an amount greater than $1.2 trillion for the fiscal years 2012 through 2021, triggering the legislation’s automatic reductions
to several government programs. These reductions included aggregate reductions to Medicare payments to healthcare providers of
up to 2.0% per fiscal year, which went into effect in April 2013. In January 2013, former President Obama signed into law the
American Taxpayer Relief Act of 2012, which, among other things, reduced Medicare payments to several categories of healthcare
providers and increased the statute of limitations period for the government to recover overpayments to providers from three to
five years. These laws may result in additional reductions in Medicare and other healthcare funding, which could have a material
adverse effect on our future customers, patients and third-party payors and, accordingly, our financial operations.
January 2016, the CMS issued a final rule regarding the Medicaid drug rebate program. The final rule, effective April 1, 2016,
among other things, revises the way the “average manufacturer price” is to be calculated by manufacturers participating
in the program and implements certain amendments to the Medicaid rebate statute created under the Affordable Care Act. Also, there
has been significant negative publicity and increasing legislative and enforcement interest in the U.S. with respect to drug pricing
practices. Specifically, there have been several recent U.S. Congressional inquiries and proposed bills designed to, among other
things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs and
reform government program reimbursement methodologies for drugs. It is possible that there will be further legislation or regulation
that could harm our business, products financial condition and results of operations.
anticipate that the Affordable Care Act and other legislative reforms will result in additional downward pressure on the price
that we receive for any approved product, if covered, and could seriously harm our business, though we are still unsure what its
full impact will be. There have been judicial and Congressional challenges to certain aspects of the Affordable Care Act, and
we expect such challenges and amendments to continue in the future. Any reduction in reimbursement from Medicare and other government
programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or
other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our products.
reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private
payors. The implementation of cost containment measures or other healthcare reforms may compromise our ability to generate revenue,
attain profitability or commercialize our products. At the same time, there have been significant ongoing efforts to modify or
eliminate the Affordable Care Act. For example, the “Tax Cuts and Jobs Act” (“Tax Act”), enacted on December
22, 2017, repealed the shared responsibility payment for individuals who fail to maintain minimum essential coverage under section
5000A of the Internal Revenue Code, commonly referred to as the individual mandate, beginning in 2019. The Joint Committee on
Taxation estimates that the repeal will result in over 13 million Americans losing their health insurance coverage over the next
ten years and is likely to lead to increases in insurance premiums. Further legislative changes to and regulatory changes under
the Affordable Care Act remain possible. It is unknown what form any such changes or any law proposed to replace the Affordable
Care Act would take, and how or whether it may affect our business in the future. Newly enacted FDA regulations may require us
to expend additional resources to obtain or maintain regulatory approval. For example, in August 2017 President Trump signed into
law the Food & Drug Administration Reauthorization Act (“FDARA”). This legislation imposes significant new requirements
for clinical trial sponsors which will affect, among other things, the development of drugs and biological products for pediatric
use. This legislation may result in new regulations, which may affect future options or timelines for regulatory approval.
uncertainty exists as to the coverage and reimbursement status of any drug products for which we obtain regulatory approval. In
the U.S. and markets in other countries, sales of any products for which we receive regulatory approval for commercial sale will
depend in part on the availability of reimbursement from third-party payors. Third-party payors include government health administrative
authorities, managed care providers, private health insurers and other organizations. The process for determining whether a payor
will provide coverage for a drug product may be separate from the process for setting the price or 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 the FDA-approved drugs for a certain indication. Third-party payors are increasingly challenging the
price and examining the medical necessity and cost-effectiveness of medical products and services, in addition to their safety
and efficacy. We may need to conduct expensive pharmacoeconomic studies in to demonstrate the medical necessity and cost-effectiveness
of our product candidates, in addition to the costs required to obtain FDA approvals. Our product candidates, if approved, may
not be considered medically necessary or cost-effective. A payor’s decision to provide coverage for a drug product does
not imply that an adequate reimbursement rate will be approved. Adequate third-party reimbursement may not be available to enable
us to maintain price levels sufficient to realize an appropriate return on our investment in product development.
federal law requires pharmaceutical manufacturers to pay rebates to state governments, based on a statutory formula, on covered
outpatient drugs reimbursed by the Medicaid program as a condition of having their drugs paid for by AMP. AMP is determined by
a statutory formula that is based on prices defined in the statute. AMP must be calculated for all products that are covered outpatient
drugs under the Medicaid program and be the “best price.” Best price must be calculated only for those covered outpatient
drugs that are a single source drug or innovator multiple source drug, such as biologic products. Manufacturers are required to
report AMP and best price for each of their covered outpatient drugs to the government on a regular basis. Additionally, some
state Medicaid programs have imposed a requirement for supplemental rebates over and above the formula set forth in federal law
as a condition for coverage. In addition to the Medicaid rebate program, federal law also requires that if a pharmaceutical manufacturer
wishes to have its outpatient drugs covered under Medicaid as well as under Medicare Part B, it must sign a “Master
Agreement” obligating it to provide a formulaic discount of approximately 24%, known as the federal ceiling price for drugs
sold to the U.S. Departments of Defense, Veterans Affairs, the Public Health Service and the Coast Guard, and also provide discounts
through a drug pricing agreement meeting the requirements of Section 340B of the PHSA for outpatient drugs sold to certain
specified eligible healthcare organizations. The formula for determining the discounted purchase price under the 340B drug pricing
program is defined by statute and is based on the AMP and rebate amount for a product as calculated under the Medicaid drug rebate
program discussed above.
pricing and reimbursement schemes exist in other countries. In the European Union, governments influence the price of pharmaceutical
products through their pricing and reimbursement rules and control of national healthcare systems that fund a large part of the
cost of those products to consumers. Some jurisdictions operate positive and negative list systems under which products may only
be marketed once a reimbursement price has been agreed upon. To obtain reimbursement or pricing approval, some of these countries
may require the completion of clinical trials that compare the cost-effectiveness of a product candidate to currently available
therapies. Other member states allow companies to fix their own prices for medicines, but monitor and control company profits.
The downward pressure on healthcare costs in general, particularly prescription drugs, has become more intense. Thus, increasingly
high barriers are being erected to the entry of new products. The European Union provides options for its member states to restrict
the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices
of medicinal products for human use. A member state may approve a specific price for the medicinal product or it may instead adopt
a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market. We may
face competition for our product candidates from lower-priced products in foreign countries that have placed price controls on
pharmaceutical products. In addition, in some countries, cross-border imports from low-priced markets exert a commercial pressure
on pricing within a country.
marketability of any product for which we receive regulatory approval for commercial sale may suffer if the government and third-party
payors fail to provide adequate coverage and reimbursement. Also, an increasing emphasis on managed care in the U.S. has increased
and will continue to increase the pressure on pharmaceutical pricing. Coverage policies and third-party reimbursement rates may
change at any time.
if favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval,
less favorable coverage policies and reimbursement rates may be implemented in the future.
U.S. Healthcare Laws and Compliance Requirements
the U.S., our activities are potentially subject to additional regulation by various federal, state and local authorities in addition
to the FDA, including the CMS, other divisions of the HHS and its Office of Inspector General, the Office for Civil Rights that
has jurisdiction over matters relating to individuals’ privacy and protected health information, the DOJ, individual U.S.
Attorney offices within the DOJ and state and local governments.
federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving
any remuneration, directly or indirectly, 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
program. The Anti-Kickback Statute has been interpreted broadly to proscribe arrangements and conduct where only one purpose of
the remuneration between the parties was to induce or reward referrals. The term remuneration has been interpreted broadly to
include anything of value. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers, on
one hand, and prescribers, purchasers and formulary managers on the other. Although there are several statutory exemptions and
regulatory safe harbors protecting some business arrangements from prosecution, the exemptions and safe harbors are drawn narrowly
and practices that involve remuneration intended to induce prescribing, purchasing or recommending may be subject to scrutiny
if they do not qualify for an exemption or safe harbor. Our practices may not in all cases meet all the criteria for safe harbor
protection from federal Anti-Kickback Statute liability. Failure to meet all the requirements of an applicable safe harbor or
statutory exemption, however, does not make the arrangement or conduct per se unlawful under the Anti-Kickback Statute;
instead, in such cases, the legality of the arrangement would be evaluated on a case-by-case basis based on a consideration of
all the facts and circumstances to ascertain the parties’ intent.
the intent standard under the Anti-Kickback Statute was amended by the Affordable Care Act to a stricter standard such that a
person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it to have committed a
violation. In addition, the Affordable Care Act codified case law that a claim including items or services resulting from a violation
of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act, as
federal Civil Monetary Penalties Law imposes penalties against any person or entity that, among other things, is determined to
have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item
or service that was not provided as claimed or is false or fraudulent.
federal False Claims Act prohibits any person from knowingly presenting, or causing to be presented, a false claim for payment
to the federal government or knowingly making, using or causing to be made or used a false record or statement material to a false
or fraudulent claim to the federal government. Through a modification made to the Fraud Enforcement and Recovery Act of 2009,
a claim includes “any request or demand” for money or property presented to the U.S. government. Pharmaceutical and
other healthcare companies have been prosecuted under these laws for allegedly providing free product to customers with the expectation
that the customers would bill federal programs for the product. Other companies have been prosecuted for causing false claims
to be submitted because of the companies’ marketing of the product for unapproved—and thus non-reimbursable—uses. The
Federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) created additional federal criminal
statutes that prohibit knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private
third-party payors and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially
false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.
Also, many states have additional similar fraud and abuse statutes or regulations that apply to items and services reimbursed
under Medicaid and other state programs, or, in several states, apply regardless of the type of payor.
addition, we may be subject to data privacy and security regulation by both the federal government and the states in which we
conduct our business. 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. Among other things, HITECH makes HIPAA’s privacy and security standards directly applicable to “business
associates,” such as independent contractors or agents of covered entities that receive or obtain protected health information
with providing a service on behalf of a covered entity. HITECH also increased the civil and criminal penalties that may be imposed
against covered entities, business associates and possibly other persons. It also 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 attorney’s fees
and costs associated with pursuing these 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
federal Physician Payments Sunshine Act under the Affordable Care Act and its implementing regulations also require that certain
manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the
Children’s Health Insurance Program, with certain exceptions, to report information related to certain payments or other
transfers of value made or distributed to physicians and teaching hospitals, or to entities or individuals at the request of,
or designated on behalf of, the physicians and teaching hospitals. It also requires reporting annually certain ownership and investment
interests held by physicians and their immediate family members and payments or other “transfers of value” made to
such physician owners. Failure to submit timely, accurately and completely the required information may result in civil monetary
penalties of up to an aggregate of $150,000 per year and up to an aggregate of $1 million per year for “knowing failures”.
Manufacturers were required to begin collecting data on August 1, 2013 and submit reports on aggregate payment data to the
government for the first reporting period of August 1, 2013 to December 31, 2013, by March 31, 2014. They are also
required to report detailed payment data for the first reporting period and submit legal attestation to the accuracy of such data
by June 30, 2014. Thereafter, manufacturers must submit reports by the 90th day of each subsequent calendar year. The CMS
made all reported data publicly available starting on September 30, 2014. Certain states also mandate implementation of compliance
programs, impose additional restrictions on pharmaceutical manufacturer marketing practices and/ or require the tracking and reporting
of gifts, compensation and other remuneration to healthcare providers and entities.
distribute products commercially, we must comply with state laws that require the registration of manufacturers and wholesale
distributors of pharmaceutical products in a state, including, in some states, manufacturers and distributors who ship products
into the state even if such manufacturers or distributors have no place of business within the state. Some states also impose
requirements on manufacturers and distributors to establish the pedigree of product in the chain of distribution, including some
states that require manufacturers and others to adopt new technology capable of tracking and tracing products as they move through
the distribution chain. Several states have enacted legislation requiring pharmaceutical companies to, among other things, establish
marketing compliance programs, file periodic reports with the state, make periodic public disclosures on sales, marketing, pricing,
clinical trials and other activities, and/or register their sales representatives. They also prohibit pharmacies and other healthcare
entities from providing specified physician prescribing data to pharmaceutical companies for use in sales and marketing, and to
prohibit other specified sales and marketing practices. All our activities are potentially subject to federal and state consumer
protection and unfair competition laws.
of the breadth of these laws and the narrowness of available statutory and regulatory exemptions, it is possible that some of
our business activities could be subject to challenge under one or more of such laws. If our operations are found to be in violation
of any of the federal and state laws described above or any other governmental regulations that apply to us, we may be subject
to penalties. These include criminal and civil monetary penalties, damages, fines, imprisonment, exclusion from participation
in government programs, injunctions, recall or seizure of products, total or partial suspension of production, denial or withdrawal
of pre-marketing product approvals, private “qui tam” actions brought by individual whistleblowers in the name of
the government or refusal to allow us to enter supply contracts and the curtailment or restructuring of our operations. Any of
these could adversely affect our ability to operate our business and our results of operations. To the extent any of our products
are sold in a foreign country, we may be subject to similar foreign laws and regulations, which may include, for instance, applicable
post-marketing requirements, including safety surveillance, anti-fraud and abuse laws, and implementation of corporate compliance
programs and reporting of payments or transfers of value to healthcare professionals.
product candidates involving Cannabis contain controlled substances, as defined in the federal Controlled Substances Act
of 1970 (“CSA”). The CSA and its implementing regulations establish a “closed system” of regulations for
controlled substances. The CSA imposes registration, security, recordkeeping and reporting, storage, manufacturing, distribution,
importation and other requirements under the oversight of the U.S. Drug Enforcement Administration (“DEA”). The DEA
is the federal agency responsible for regulating controlled substances. It requires those individuals or entities that manufacture,
import, export, distribute, research, or dispense controlled substances to comply with the regulatory requirements to prevent
the diversion of controlled substances to illicit channels of commerce.
DEA categorizes controlled substances into one of five schedules—Schedule I, II, III, IV or V—with varying qualifications
for listing in each schedule. Schedule I substances 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 be used only in federally approved
research programs and may not be marketed or sold for dispensing to patients in the U.S. Pharmaceutical products having a currently
accepted medical use that are otherwise approved for marketing may be listed as Schedule II, III, IV or V substances, with Schedule
I substances presenting the highest potential for abuse and physical or psychological dependence. Schedule V substances present
the lowest relative potential for abuse and dependence. The regulatory requirements are more restrictive for Schedule II substances
than Schedule III substances. For example, all Schedule II drug prescriptions must be signed by a physician, physically presented
to a pharmacist in most situations and cannot be refilled.
NDA approval of a drug containing a Schedule I controlled substance, that substance must be rescheduled as a Schedule II, III,
IV or V substance before it can be marketed. On November 17, 2015, H.R. 639, Improving Regulatory Transparency for New Medical
Therapies Act, passed through both houses of Congress. On November 25, 2015, the bill was signed into law. The law removes uncertainty
associated with timing of the DEA rescheduling process after NDA approval. Specifically, it requires DEA to issue an “interim
final rule,” pursuant to which a manufacturer may market its product within 90 days of FDA approval. The law also preserves
the period of orphan marketing exclusivity for the full seven years such that this period only begins after DEA scheduling. This
contrasts with the previous situation whereby the orphan “clock” began to tick upon FDA approval, even though the
product could not be marketed until DEA scheduling was complete.
that manufacture, distribute, import or export any controlled substance must register annually with the DEA. The DEA registration
is specific to the location, activity and controlled substance schedule. For example, separate registrations are required for
importation and manufacturing activities, and each registration authorizes which schedules of controlled substances the registrant
may handle. However, certain coincident activities are permitted without obtaining a separate DEA registration, such as distribution
of controlled substances by the manufacturer that produces them.
DEA inspects all manufacturing facilities to review security, recordkeeping, reporting and handling 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. The most stringent requirements apply to manufacturers of Schedule I and Schedule II substances.
Required security measures commonly include background checks on employees and physical control of controlled substances through
storage in approved vaults, safes and cages, and through use of alarm systems and surveillance cameras. An application for a manufacturing
registration as a bulk manufacturer for a Schedule I or II substance must be published in the Federal Register, and is open for
30 days to permit interested persons to submit comments, objections or requests for a hearing. A copy of the notice of the Federal
Register publication is forwarded by DEA to all those registered, or applicants for registration, as bulk manufacturers of that
substance. Once registered, manufacturing facilities must maintain records documenting the manufacture, receipt and distribution
of all controlled substances. Manufacturers must submit periodic reports to the DEA of the distribution of Schedule I and II controlled
substances, Schedule III narcotic substances and other designated substances. Registrants must also report any controlled substance
thefts or significant losses and must obtain authorization to destroy or dispose of controlled substances. As with applications
for registration as a bulk manufacturer, an application for an importer registration for a Schedule I or II substance must also
be published in the Federal Register, which remains open for 30 days for comments. Imports of Schedule I and II controlled substances
for commercial purposes are generally restricted to substances not already available from domestic supplier or where there is
not adequate competition among domestic suppliers. In addition to an importer or exporter registration, importers and exporters
must obtain a permit for every import or export of a Schedule I and II substance or Schedule III, IV and V narcotic, and submit
import or export declarations for Schedule III, IV and V non-narcotics. In some cases, Schedule III non-narcotic substances may
be subject to the import/export permit requirement, if necessary to ensure that the U.S. complies with its obligations under international
drug control treaties.
drugs manufactured in the U.S., the DEA establishes annually an aggregate quota for substances within Schedules I and II that
may be manufactured or produced in the U.S. based on the DEA’s estimate of the quantity needed to meet legitimate medical,
scientific research and industrial needs. This limited aggregate amount of Cannabis that the DEA allows to be produced
in the U.S. each year is allocated among individual companies, which, in turn, must annually apply to the DEA for individual manufacturing
and procurement quotas. The quotas apply equally to the manufacturing of the active pharmaceutical ingredient and production of
dosage forms. The DEA may adjust aggregate production quotas a few times per year and individual manufacturing or procurement
quotas from time to time during the year, although the DEA has substantial discretion in whether to make such adjustments for
states also maintain separate controlled substance laws and regulations, including licensing, recordkeeping, security, distribution
and dispensing requirements. State authorities, including boards of pharmacy, regulate use of controlled substances in each state.
Failure to maintain compliance with applicable requirements, particularly as manifested in the loss or diversion of controlled
substances, can result in enforcement action that could have a material adverse effect on our business, operations and financial
condition. The DEA may seek civil penalties, refuse to renew necessary registrations, or initiate proceedings to revoke those
registrations. In certain circumstances, violations could lead to criminal prosecution.
Intellectual Property and Trade Secrets
property (“IP”) and patent protection are of paramount importance to our business, as are the trade secrets and other
strategies we have employed with Austrianova to protect the proprietary Cell-in-a-Box® technology. Although we
believe we take reasonable measures to protect our IP and trade secrets and those of Austrianova, we cannot guarantee we will
be able to protect and enforce our IP or obtain international patent protection for our product candidates as needed. We license
technology and trademarks relating to three areas: (i) live cell encapsulation with cells that express cytochrome P450 where the
capsule is permeable to prodrug molecules and the cells are retained within the capsules; (ii) treatment of solid cancerous tumors
and (ii) encapsulation of cells for producing retroviral particles for gene therapy. We also have exclusive worldwide licensing
rights to patents, trademarks and know-how using Cell-in-a-Box® technology in the diabetes field and in the treatment
of diseases and related conditions using Cannabinoids.
may be required to protect our product candidates, IP rights and trade secrets or to determine the validity and scope of the proprietary
rights of others. Maintenance of our IP utilizes financial and operational resources. In addition, the possibility exists that
our IP could be discovered to be owned by others, be invalid or be unenforceable, potentially bringing unforeseen challenges to
Property Agreements and Patent Applications
following patents and agreements constitute our material IP:
||We are a party to
the Bavarian Nordic/GSF License Agreement pursuant to which Bavarian Nordic/GSF are the licensors and Bio Blue Bird, our wholly
owned subsidiary, is the licensee. The Bavarian Nordic/GSF License Agreement was signed in July 2005 and amended in December
2006. Pursuant to the Bavarian Nordic/GSF License, the licensee is granted an exclusive license to use Bavarian Nordic’s
clinical data and know-how encapsulating genetically modified human cells to treat cancer. The licensors have rights to terminate
the license if the annuity and upkeep fees are not paid to Bavarian Nordic, there is not proper reporting or there is not
a clearly documented effort to commercialize this technology. The term of the Bavarian Nordic/GSF License Agreement expired
on March 27, 2017.|
||In October 2016,
Bavarian Nordic/GSF and Bio Blue Bird amended the Bavarian Nordic License Agreement to include, among other things, the right
to import within the scope of the license, reflect ownership and notification of improvements, clarify which provisions survive
expiration or termination of the Bavarian Nordic License Agreement and provide rights to Bio Blue Bird to the clinical data
and know-how after the expiration of the licensed patent rights. |
||The Third Addendum
and the Clarification Agreement provide us with an exclusive worldwide license, with a right to sublicense, to use the Cell-in-a-Box®
technology for the development of treatments for cancer and use of Austrianova’s Cell-in-a-Box®
trademark and its associated technology using genetically modified HEK293 cells overexpressing the cytochrome P450 2B1 gene
that are encapsulated using the licensed technology.|
||The Diabetes Licensing
Agreement provides us with an exclusive worldwide license, with a right to sublicense, to use the Cell-in-a-Box®
technology with genetically modified or non-modified non-stem cell lines and induced pluripotent stem (iPS) cells designed
to produce insulin or other critical components for the treatment of diabetes.|
||The Cannabis Licensing
Agreement provides us with an exclusive worldwide license, with a right to sublicense, to use the Cell-in-a-Box® trademark
and its associated technology with genetically modified non-stem cell lines which are designed to convert Cannabinoids to
their active form to develop therapies for diseases and their related symptoms.|
||The Melligen Cell
License Agreement provides us with an exclusive worldwide license, with a right to sublicense, to use genetically modified
human cells that have been modified to comprise pancreas islet cell glucokinase for use in developing a therapy for diabetes.
The Melligen cells are patent protected in the U.S. and Europe.|
March 21, 2017, we filed a provisional patent application with the USPTO to protect our therapy to treat cancer, including the
therapy that will be used in our planned clinical trial in LAPC. The patent application specifically includes methods of treating
all cancerous tumors, such as pancreas, liver, breast and colon, using the live-cell encapsulation of genetically modified human
cells that overexpress a form of the Cytochrome P450 enzyme system normally found in the liver. These cells are encapsulated using
the Cell-in-a-Box® technology. Together with low doses of ifosfamide, the encapsulated cells comprise our therapy
for cancerous tumors. The patent application also includes using our platform technology with cyclophosphamide, another chemotherapy
prodrug that must be converted to its active form by the Cytochrome P450 enzyme system.
March 21, 2018, we filed a U.S. patent application and a Patent Cooperation Treaty (“PCT”) application directed at
methods of treating cancerous tumors such as pancreas, liver, breast and colon, using the live-cell encapsulation of genetically
modified human cells that overexpress a form of the cytochrome P450 enzyme system normally found in the liver. The methods involve
administering encapsulated cells expressing the cytochrome P450 enzyme system along with a prodrug, such as an oxazaphosphorine
or ifosfamide, which gets converted to an active form by the cytochrome P450 enzyme system. This application, if approved, will
expire on March 21, 2038, subject to any applicable patent term adjustment or extension that may be available. We plan to prosecute
both patent applications.
of the Company’s Material Agreements
Addendum to the SG Austria APA
June 2013, we and SG Austria entered the Third Addendum and the Clarification Agreement. The Third Addendum requires us to make
the following payments for the purchased assets, which payments were timely made in full under the payment deadlines set forth
in the Third Addendum:
||A $60,000 payment
due under the SG Austria APA;|
||A payment of Stamp
Duty estimated to be $10,000-17,000 to the Singapore Government;|
||$500,000 to be used
to pay off the existing debt of Bio Blue Bird; and|
to the Third Addendum, we agreed to and have entered a manufacturing agreement with SG Austria for the manufacture of the pancreatic
cancer clinical trial material we will need. The Manufacturing Framework Agreement requires us to pay Austrianova a one-time manufacturing
setup fee in the amount of $647,000, of which 50% is required to be paid on the effective date of the Manufacturing Framework
Agreement and 50% is required to be paid three months later. We have paid the full amount of the one-time manufacturing setup
fee. The Manufacturing Framework Agreement also requires us to pay a fee for producing the final encapsulated cell product of
$647 per vial of 300 capsules after production, with a minimum purchased batch size of 400 vials of any Cell-in-a-Box®
product. The fees under the Manufacturing Framework Agreement are subject to annual increases according to the annual inflation
rate in the country in which the encapsulated cell products are manufactured. We have placed an order to produce 400 vials and
have paid Austrianova $172,533 of the total cost of $258,800 for the order.
Third Addendum also requires the Company to make future royalty and milestone payments as follows:
||Two percent royalty
on all gross sales received by us or our affiliates;|
||Ten percent royalty
on gross revenues received by us or our affiliates from a sublicense or right to use the patents or the licenses granted by
us or our affiliates;|
of $100,000 within 30 days after enrollment of the first human patient in the first clinical trial for each product; $300,000
within 30 days after enrollment of the first human patient in the first Phase 3 clinical trial for each product; and $800,000
within 60 days after having a NDA or a BLA approved by the FDA or a MAA approved by the EMA in Europe or its equivalent based
on the country in which it is accepted for each product; and|
of $50,000 due 30 days after enrollment of the first veterinary patient in the first trial for each product and $300,000 due
60 days after having a BLA, a NDA or a MAA or its equivalent is approved based on the country in which it is accepted for
each veterinary product.|
May 14, 2018, we entered into amendments to the Third Addendum. See “—Details of the Company’s Material Agreements—Subsequent
Event” for a description of these amendments.
the Diabetes Licensing Agreement, we are required to make a payment of $2,000,000 in two equal payments of $1,000,000 each. We
made our first $1,000,000 payment on October 30, 2013. Our second payment of $1,000,000 was made on February 25, 2014.
Diabetes Licensing Agreement requires us to pay Austrianova, pursuant to a manufacturing agreement to be entered between the parties,
a one-time manufacturing setup fee in the amount of approximately $600,000, of which 50% is required to be paid on the signing
of a manufacturing agreement for a product and 50% is required to be paid three months later. In addition, the Diabetes Licensing
Agreement requires us to pay a manufacturing production fee, which is to be defined in the manufacturing agreement, for producing
the final encapsulated cell product of approximately $600.00 per vial of 300 capsules after production, with a minimum purchased
batch size of 400 vials of any Cell-in-a-Box® product. All costs for encapsulated cell products will be subject to an annual
increase equal to the published rate of inflation in the country of manufacture of the vials.
Diabetes Licensing Agreement requires us to make future royalty and milestone payments as follows:
||Ten percent royalty
of gross sales of all products we sell;|
||Twenty percent royalty
of the amount received by us from a sub-licensee on its gross sales; and|
of $100,000 within 30 days of beginning the first pre-clinical experiments using the encapsulated cells; $500,000 within 30
days after enrollment of the first human patient in the first clinical trial; $800,000 within 30 days after enrollment of
the first human patient in the first Phase 3 clinical trial; and $1,000,000 within 90 days after having a NDA or a BLA approved
by the FDA or a MAA approved by the EMA in Europe or its equivalent based on the country in which it is accepted for each
license under the Diabetes Licensing Agreement, as amended, may be terminated and all rights will revert to Austrianova if any
of the following milestone events do not occur within the following timeframes, subject to all the necessary and required research
having been successful and the relevant product being sufficiently prepared to enter a clinical trial:
||If we fail to enter
a research program with technology in the scope of the license providing a total funding equal to or greater than $400,000
within three years of June 25, 2013, the effective date of the Diabetes Licensing Agreement (we have met this requirement);
||If we fail to enter
a clinical trial or its equivalent for a product within seven years of the effective date of the Diabetes Licensing Agreement.|
May 14, 2018, we entered into amendments to the Diabetes Licensing Agreement. See “—Details of the Company’s
Material Agreements—Subsequent Event” for a description of these amendments.
to the Cannabis Licensing Agreement, we acquired from Austrianova an exclusive worldwide license world to use the Cell-in-a-Box®
trademark and its associated technology with genetically modified non-stem cell lines which are designed to activate cannabinoids
to develop therapies involving Cannabis with a right to sublicense.
the Cannabis Licensing Agreement, we are required to pay Austrianova an initial upfront payment of $2,000,000 (“Upfront
Payment”). We have the right to make periodic monthly partial payments of the Upfront Payment in amounts to be agreed upon
between the parties prior to each such payment being made. Under the Cannabis Licensing Agreement, the Upfront Payment must be
paid in full by no later than June 30, 2015. The parties amended the Cannabis Licensing Agreement twice pursuant to which the
balance of the Upfront Payment is to be paid by June 30, 2016. We have paid the Upfront Payment of $2,000,000 in full.
Cannabis Licensing Agreement requires us to pay Austrianova, pursuant to a manufacturing agreement to be entered between the parties,
a one-time manufacturing setup fee in the amount of $800,000, of which 50% is required to be paid on the signing of a manufacturing
agreement for a product and 50% is required to be paid three months later. In addition, the Cannabis Licensing Agreement requires
us to pay a manufacturing production fee, which is to be defined in the manufacturing agreement, for producing the final encapsulated
cell product of $800 per vial of 300 capsules after production with a minimum purchased batch size of 400 vials of any Cell-in-a-Box®
product. All costs for encapsulated cell products, the manufacturing setup fee and the manufacturing production fee will
be subject to annual increases, in accordance with the inflation rate in the country in which the encapsulated cell products are
Cannabis Licensing Agreement requires us to make future royalty and milestone payments as follows:
||Ten percent royalty
of the gross sale of all products sold by us;|
||Twenty percent royalty
of the amount received by us from a sublicense on its gross sales; and|
of $100,000 within 30 days of beginning the first pre-clinical experiments using the encapsulated cells; $500,000 within 30
days after enrollment of the first human patient in the first clinical trial; $800,000 within 30 days after enrollment of
the first human patient in the first Phase 3 clinical trial; and $1,000,000 within 90 days after having a NDA or a BLA approved
by the FDA or a MAA approved by the EMA or its equivalent based on the country in which it is accepted for each product.|
license under the Cannabis Licensing Agreement, as amended, may be terminated and all rights will revert to Austrianova if any
of the following milestone events do not occur within the following timeframes:
||If we do not enter
a research program involving the scope of the license within three years of December 1, 2014, the effective date of the Cannabis
Licensing Agreement (we have met this requirement); or|
||If we do not enter
a clinical trial or its equivalent for a product within 7 years of the effective date of the Cannabis Licensing Agreement|
May 14, 2018, we entered into amendments to the Cannabis Licensing Agreement. See “—Details of the Company’s
Material Agreements—Subsequent Event” for a description of these amendments.
Cell License Agreement
Melligen Cell License Agreement requires that we pay royalty, milestone and patent costs to UTS as follows:
||Six percent of gross
exploitation revenue on product sales;|
of gross revenues if the product is sublicensed by us;|
of AU$ 50,000 at the successful conclusion of a preclinical study, AU$ 100,000 at the successful conclusion of a Phase 1 clinical
trial, AU$ 450,000 at the successful conclusion of a Phase 2 clinical trial, and AU$ 3,000,000 at the successful conclusion
of a Phase 3 clinical trial; and|
||Patent costs of fifteen percent of the costs
paid by UTS to prosecute and maintain patents related to the licensed intellectual property.|
the event of a default under the Melligen Cell License Agreement, the non-defaulting party may immediately terminate the agreement
by notice in writing to the defaulting party if: (i) the default has continued for not less than 14 days or occurred more than
14 days earlier and has not been remedied; (ii) the non-defaulting party serves upon the defaulting party notice in writing requiring
the default to be remedied within 30 days of such notice, or such greater number of days as the non-defaulting party may in its
discretion allow, and (iii) the defaulting party has failed to comply with the notice referred to in (ii) above.
Melligen Cell License Agreement was amended in April 2016 to change the name of the license to our current name and clarify certain
ambiguities in the agreement. We are required to pay the Melligen cell patent prosecution costs and to pay to UTS a patent administration
fee equal to 15% of all amounts paid by UTS to prosecute and maintain patents related to the Melligen cells.
May 14, 2018, we entered into the amendments contemplated by the Binding Term Sheet (“Amendments”). The Amendments
provide that our obligation to make milestone payments to Austrianova will be eliminated in their entirety under the Cannabis
Licensing Agreement and the Diabetes Licensing Agreement, as amended, and that our obligation to make milestone payments to SG
Austria pursuant to the SG Austria APA, as amended and clarified, will be eliminated in their entirety. One of the Amendments
also provides that the scope of the Diabetes License Agreement will be expanded to include all cell types and cell lines of any
kind or description now or later identified, including, but not limited to, primary cells, mortal cells, immortal cells and stem
cells at all stages of differentiation and from any source specifically designed to produce insulin for the treatment of diabetes.
addition, one of the Amendments provides that we will have a 5-year right of first refusal from August 30, 2017 in the event that
Austrianova chooses to sell, transfer or assign at any time during such period the Cell-in-a-Box® tradename and
its Associated Technologies (defined below), intellectual property, trade secrets and know-how, which includes the right to purchase
any manufacturing facility used for the Cell-in-a-Box® encapsulation process and a non-exclusive license to use
the special cellulose sulfate utilized with the Cell-in-a-Box® encapsulation process (collectively, “Associated
Technologies”); provided, however, that the Associated Technologies subject to the right of first refusal do not include
Bac-in-a-Box®. Additionally, for a period of one year from August 30, 2017 one of the Amendments provides that
Austrianova will not solicit, negotiate or entertain any inquiry regarding the potential acquisition of the Cell-in-a-Box®
and its Associated Technologies.
Amendments further provide that: (i) the royalty payments on gross sales as specified in the SG Austria APA, the Cannabis Licensing
Agreement and the Diabetes Licensing Agreement will be changed to 4%; and (ii) the royalty payments on amounts received by us
from sublicensees on sublicensees’ gross sales under the same agreements will be changed to 20% of the amount received by
us from our sublicensees, provided, however, that in the event the amounts received by us from our sublicensees is 4% or
less of sublicensees’ gross sales, Austrianova will receive 50% of what we receive (up to 2%) and then additionally 20%
of any amount we receive over that 4%.
of the Amendments requires us to pay $900,000 to Austrianova ratably over a nine-month period in the amount of two $50,000.00
payments each month during the nine-month period on the days of the month to be agreed upon between the parties, with a cure period
of 20 calendar days after receipt by us of written notice from Austrianova that we have failed to pay timely a monthly payment.
The $900,000 amount has been paid in full.
Amendments also provide that Austrianova will receive 50% of any other financial and non-financial consideration received from
our sublicensees of the Cell-in-a-Box® technology.
and Availability of Raw Materials
entire encapsulation process relating to the encapsulation of the cells for the oncology and diabetes based therapies we are developing
is to be carried out by Austrianova. Austrianova is responsible for acquiring all of the necessary raw materials used in this
process, including the cellulose sulfate necessary for encapsulating the live cells. As mentioned above, we engaged ViruSure to
clone new cells from a selected clone. Those cells have been grown by Eurofins to populate a MCB for our future clinical trials.
See also “—Manufacturing” in this Item 1. “Business.”
of April 30, 2018, we had four full-time employees and five consultants who devote substantial time to us and function as our
Chief Scientific Officer, Director of Diabetes Program Development, Director of Cannabis Program Development, Chairman of our
Medical and Scientific Advisory Board and Senior Strategic Advisor. We use several other consulting scientists, physicians and
academics for a great deal of our research and clinical development.
and Scientific Advisors
have established a Medical and Scientific Advisory Board. We regularly seek advice and input from these experienced clinical leaders
on matters related to our research and development programs. The members of our Advisory Board consist of experts across a range
of key disciplines relevant to our programs. We intend to continue to leverage the broad expertise of our advisors by seeking
their counsel on important topics relating to our product development and clinical development programs. Our Advisory Board members
are not our employees and may have commitments to, or consulting or advisory contracts with, other entities that may limit their
availability to us. In addition, our advisors may have arrangements with other companies to assist those companies in developing
products or technologies that may compete with ours. All the members of our Advisory Board are affiliated with other entities
and devote only a portion of their time to us. The members of our Advisory Board are not officers or directors of PharmaCyte.
Our current advisors are:
||Dr. Matthias Löhr
– Professor of Gastroenterology & Hepatology, Karolinska Institute, Stockholm, Sweden|
||Dr. Manuel Hidalgo
– Clinical Director of the Leon V. & Marilyn L. Rosenberg Clinical Cancer Center and Chief of the Division of Hematology-Oncology
at Beth Israel Deaconess Medical Center Boston, Massachusetts|
||Prof. Dr. Hans-Peter
Hammes – Professor of Internal Medicine and Endocrinology, Faculty of Clinical Medicine Mannheim of Heidelberg University
and Section Leader for Endocrinology and Diabetology, Mannheim, Germany|
||Dr. Brian Salmons
– Chief Executive Officer and President of Austrianova Pte. Ltd. and Co-Developer of Cell-in-a-Box®|
||Dr. Mark L. Rabe
– Chief Executive Officer of Rabe Medical Solutions, San Diego, California|
Information Concerning Geographic Areas
had no revenues in the fiscal years ended April 30, 2018 and 2017, including no revenues from foreign countries. We have long-lived
assets, other than financial instruments, located in the following geographical areas:
||FY 2018|| ||
||FY 2017|| |
|All foreign countries, in total:||
operate globally and are attempting to develop products in multiple countries. Consequently, we face complex legal and regulatory
requirements in multiple jurisdictions, which may expose us to certain financial and other risks. International operations are
subject to a variety of risks, including:
exchange rate fluctuations;|
in overseeing foreign operations;|
||logistical and communications
changes in laws and regulatory practices, including export license requirements, trade barriers, tariffs and tax laws;|
||burdens and costs
of compliance with a variety of foreign laws;|
||political and economic
||increases in duties
||foreign tax laws
and potential increased costs associated with overlapping tax structures;|
in protecting intellectual property;|
||the risk of third
party disputes over ownership of intellectual property and infringement of third party intellectual property by our product
economic and political conditions in these foreign markets.|
are dependent on business relationships with parties in multiple countries, as disclosed in Item 1A. “Risk Factors—Risks
Related to Our Dependence on Third Parties.”
1A. RISK FACTORS
should carefully consider these factors that may affect future results, together with all the other information included in this
Report in evaluating our business. The risks and uncertainties described below are those that we currently believe may materially
affect our business and results of operations. Additional risks and uncertainties that we are unaware of or that we currently
deem immaterial also may become important factors that affect our business and results of operations. Our shares of common
stock involve a high degree of risk and should be purchased only by investors who can afford a loss of their entire investment.
Prospective investors should carefully consider the following risk factors concerning our business before making an investment.
addition, you should carefully consider these risks when you read “forward-looking” statements elsewhere in this Report.
These are statements that relate to our expectations for future events and time periods. Generally, the words “anticipate,”
“expect,” “intend,” and similar expressions identify forward-looking statements. Forward-looking statements
involve risks and uncertainties, and future events and circumstances could differ significantly from those anticipated in the
forward-looking statements. For additional information, see “Cautionary Note Regarding Forward-Looking Statements.”
Related to Our Financial Position, Need for Additional Capital and Overall Business
have a short operating history, a relatively new business model and have not produced any revenues in our current business model.
This makes it difficult to evaluate our prospects and increases the risk that we will not be successful.
have a short operating history with our current business model. Our current operations have produced no revenues and may
not produce revenues in the near term or at all, which may harm our ability to obtain additional financing and may require us
to reduce or discontinue our operations. If we create revenues in the future, we will derive most of these revenues from the sale
of product candidates. You must consider our business and prospects considering the risks and difficulties we will encounter
as an early-stage biotech company in a new and rapidly evolving biotech sector. We may not be able to successfully address these
risks and difficulties, which could significantly harm our business, operating results and financial condition.
have incurred significant losses since our inception and anticipate that we will continue to incur losses in the future.
are a clinical stage biotechnology company focused on developing and preparing to commercialize cellular therapies for cancer
and diabetes based upon a proprietary cellulose-based live cell encapsulation technology known as “Cell-in-a-Box®.”
In recent years, we have devoted substantially all our resources to the development of our product candidates. We have generated
significant operating losses since our inception. Our net losses for the years ended April 30, 2018 and 2017 were approximately
$6.8 million and $4.4 million, respectively. As of April 30, 2018, we had an accumulated deficit of approximately $96 million.
Substantially all our losses have resulted from expenses incurred relating to our research and development programs and from general
and administrative costs associated with our operations.
expect to continue to incur significant expenses and operating losses for the foreseeable future. We anticipate these losses will
increase as we continue the research and development of, and clinical trials for, our product candidates. In addition to budgeted
expenses, we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely
affect our business. If either any of our product candidates fail in clinical trials or do not gain regulatory approval, or even
if approved, fail to achieve market acceptance, we may never become profitable. Even if we achieve profitability in the future,
we may not be able to sustain profitability in subsequent periods.
currently have no commercial revenue and may never become profitable.
if we can successfully achieve regulatory approval for our product candidates, we do not know what the reimbursement status of
our product candidates will be or when any of these products will generate revenue for us, if at all. We have not generated, and
do not expect to generate, any product revenue for the foreseeable future. We expect to continue to incur significant operating
losses for the foreseeable future due to the cost of research and development, preclinical studies and clinical trials and the
regulatory approval process for our product candidates. The amount of future losses is uncertain and will depend, in part, on
the rate of growth of our expenses.
ability to generate revenue from our product candidates also depends on numerous additional factors, including our ability to:
development activities, including the remaining preclinical studies and planned clinical trials for our product candidates;|
||complete and submit
NDAs to the FDA and MAAs to the EMA, and obtain regulatory approval for indications for which there is a commercial market;|
||complete and submit
applications to, and obtain regulatory approval from, other foreign regulatory authorities;|
approved products in commercial quantities and on commercially reasonable terms;|
||develop a commercial
organization, or find suitable partners, to market, sell and distribute approved products in the markets in which we have
retained commercialization rights;|
among patients, clinicians and advocacy groups for any products we develop;|
and adequate reimbursement from third parties, including government payors; and|
||set a commercially
viable price for any products for which we may receive approval.|
are unable to predict the timing or amount of increased expenses, or when or if we will be able to achieve or maintain profitability.
Even if we can complete the processes described above, we anticipate incurring significant costs associated with commercializing
our product candidates.
date, we have generated no revenue. Our ability to generate revenue and become profitable depends upon our ability to obtain regulatory
approval for, and successfully commercialize our product candidates that we may develop, in-license or acquire in the future.
will need additional capital to continue our business plans.
will need additional capital to continue our operations. There can be no assurance that we will obtain sufficient capital on acceptable
terms, if at all. Failure to obtain such capital would have an adverse impact on our financial position, operations and ability
to continue as a going concern. Our operating and capital requirements during the next fiscal year and thereafter will vary based
on several factors, including whether the FDA approves our IND when submitted allowing us to commence our clinical trials, how
quickly enrollment of patients in our planned clinical trials can be commenced, the duration of these clinical trials and any
change in the clinical development plans for our product candidates and the outcome, timing and cost of meeting regulatory requirements
established by the FDA and the EMA or other comparable foreign regulatory authorities. There can be no assurance that additional
private or public financing, including debt or equity financing, will be available as needed or if available, on terms favorable
to us. Additionally, any future equity financing may be dilutive to stockholders’ present ownership levels. It may also
have rights, preferences, or privileges that are senior to those of our existing common stock.
debt financing, if available, may require payment of interest and potentially involve restrictive covenants that could impose
limitations on our flexibility to operate. Any difficulty or failure to successfully obtain additional funding may jeopardize
our ability to continue the business and our operations.
future revenues are unpredictable which causes potential fluctuations in operating results.
of our limited operating history as a biotech company; we are currently unable to accurately forecast our revenues. Future expense
levels will likely be based largely on our marketing and development plans and estimates of future revenue. Any sales or operating
results will likely generally depend on volume and timing of orders, which may not occur and on our ability to fulfill such orders,
which we may not be able to do. We may be unable to adjust spending in a timely manner to compensate for any unexpected revenue
shortfall. Accordingly, any significant shortfall in revenues in relation to planned expenditures could have an immediate adverse
effect on our business, prospects, financial condition and results of operations. Further, as a strategic response to changes
in the competitive environment, we may from time to time make certain pricing, service or marketing decisions that could have
a material adverse effect on our business, prospects, financial condition and results of operations.
may experience significant fluctuations in future operating results due to a variety of factors, many of which are outside of
our control. Factors that may affect operating results include: (i) the ability to obtain and retain customers; (ii) our
ability to attract new customers at a steady rate and maintain customer satisfaction with products; (iii) our announcement
or introduction of new products by us or our competitors; (iv) price competition; (v) the level of use and consumer
acceptance of its products; (vi) the amount and timing of operating costs and capital expenditures relating to expansion of the
business, operations and infrastructure; (vii) governmental regulations; and (viii) general economic conditions.
face substantial competition, which may result in others discovering, developing or commercializing competing products before
or more successfully than we do.
development and commercialization of new drug products is highly competitive. We face competition with respect to our current
product candidates. We will face competition with respect to any product candidates that we may seek to develop or commercialize
in the future. Such competition may arise from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology
companies worldwide. There are several large pharmaceutical and biotechnology companies that currently market products or are
pursuing the development of products for the treatment of the disease indications for which we are developing our product candidates.
Some of these competitive products and therapies are based on scientific approaches that are the same as or are like our approach,
and others are based on entirely different approaches. Potential competitors also include academic institutions, government agencies
and other public and private research organizations that conduct research, seek patent protection and establish collaborative
arrangements for research, development, manufacturing and commercialization.
there are numerous companies developing or marketing therapies for cancer and diabetes, including many major pharmaceutical and
biotechnology companies. Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize
products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than
any products that we may develop. Our competitors also may obtain regulatory approval for their products more rapidly than we
may obtain approval for ours, which could result in our competitors establishing a strong market position before we can enter
of the companies against which we are competing or against which we may compete in the future have significantly greater financial
resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining
regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical and biotechnology
sectors may result in even more resources being concentrated among a smaller number of our competitors. Smaller and other early-stage
companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established
companies. These third parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing
clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary
for, our programs.
Related to FDA Approval of Our Planned Clinical Trial, Approval of Our Product Candidates and Other Legal Compliance Matters
the FDA does not approve our IND once we submit it to the FDA or places us on clinical hold, we will not be able to commence a
Phase 2b clinical trial for pancreatic cancer in the U.S. which would likely have a material adverse effect on us.
to FDA approval, we plan to commence a Phase 2b clinical trial in LAPC. A Pre-IND meeting with CBER was held on January 17, 2017,
at which the FDA provided us with guidance to complete the IND process and communicated its agreement with certain aspects of
our clinical development plan. We may be delayed in submitting our IND to the FDA, either due to guidance provided by the FDA
or due to our delay in preparing the materials necessary to submit our IND. No assurance can be given whether the FDA will approve
our IND once we submit it to the FDA. The FDA may put us on a clinical hold until we satisfy its requirements to commence our
clinical trial involving LAPC, which may never occur. We cannot provide assurance as to the timing of our IND submission to the
FDA and the FDA’s reaction to it. In the event the FDA does not approve our IND, we will not be able to commence our clinical
trial in LAPC which would likely have a material adverse effect on us.
plan to first pursue a Phase 2b clinical trial before a pivotal Phase 3 trial will likely result in additional costs to us and
resultant delays in the FDA review process and any future commercialization and marketing, if regulatory approval is obtained.
we can submit an IND, and that IND is approved, we have determined that the data contained in previous clinical trial reports
using the Cell-in-a-Box® technology are not enough to advance the program next to a Phase 3 pivotal trial. Therefore,
we are designing a Phase 2b clinical trial that, if successful, we believe will provide the information necessary to plan a Phase
3 pivotal trial. Our determination to first conduct a Phase 2b clinical trial before conducting a pivotal Phase 3 clinical trial
will likely result in additional costs to us and resultant delays in the regulatory review process and any future commercialization
and marketing, if regulatory approval is obtained.
ability to timely submit an IND to the FDA may depend on circumstances outside of our control.
ability to execute our current plan for the completion of all activities and submission of an IND to the FDA depends on a
variety of factors, some of which are outside of our control. We must submit the results of various preclinical tests, together
with manufacturing information, analytical data, any available clinical data or literature and a proposed clinical protocol to
the FDA as part of the IND. Preclinical tests include laboratory evaluations of product chemistry and formulation, as well
as other studies to assess the potential safety and activity of the pharmaceutical product candidate. The conduct of the preclinical
tests must comply with federal regulations and requirements. The FDA may require that we conduct additional preclinical testing
for any product candidate before it allows us to initiate the clinical testing under any IND, which may lead to additional delays
and increase the costs of our preclinical development. The preparation of the IND will also involve considerable work from our
employees and advisors. Should our employees and advisors not be able to complete the preparation of the IND in a timely manner,
the submission of the IND to the FDA could be delayed.
we are unable to obtain, or if there are delays in obtaining, required approval from the regulatory agencies, we will not be able
to commercialize our product candidates and our ability to generate revenue will be materially impaired.
product candidates must obtain marketing approval from the FDA and other regulatory agencies. The process of obtaining marketing
approvals in the countries in which we intend to sell and distribute our product candidates is expensive and can take several
years, if approval is obtained at all. This process can vary substantially based upon a variety of factors, including the type,
complexity and novelty of the product candidates involved. Failure to obtain marketing approval for a product candidate will prevent
us from commercializing that product candidate. To date, we have not received approval to market any of our product candidates
from regulatory agencies in any jurisdiction. We have no experience in filing and supporting the applications necessary to gain
marketing approvals and expect to rely on third-party contract research organizations to assist us in this process. Securing marketing
approval requires the submission of extensive preclinical and clinical data and supporting information to the regulatory agencies
for each product candidate to establish the product candidate’s safety and efficacy. Securing marketing approval also requires
the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the regulatory
product candidates may not be effective, may be only moderately effective or may prove to have undesirable or unintended side
effects, toxicities or other characteristics that may preclude our obtaining marketing approval or prevent or limit commercial
use. Regulatory agencies have substantial discretion in the approval process and may refuse to accept any application or may decide
that our data are insufficient for approval and require additional preclinical, clinical or other studies. In addition, varying
interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent marketing approval of
a product candidate. Changes in marketing approval policies during the development period, changes in or the enactment of additional
statutes or regulations, or changes in regulatory review for each submitted product application, may also cause delays in or prevent
the approval of an application. New cancer drugs frequently are indicated only for patient populations that have not responded
to an existing therapy or have relapsed after such therapies. If we experience delays in obtaining approval or if we fail to obtain
approval of our product candidates, the commercial prospects for our product candidates may be harmed and our ability to generate
revenues will be materially impaired.
drug development involves a lengthy and expensive process with an uncertain outcome. We may incur additional costs or experience
delays in completing or be unable to complete the development and commercialization of our product candidates.
Cell-in-a-Box® and ifosfamide product candidate is in clinical development, and, like others’ candidates
in a similar phase of development, the risk of failure is high. It is impossible to predict when or if this product candidate
or any other product candidate will prove effective or safe in humans or will receive regulatory approval. Before obtaining marketing
approval from regulatory agencies for the sale of any product candidate, we must complete preclinical development and then conduct
extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans. Clinical trials are expensive,
difficult to design and implement, can take several years to complete and are uncertain as to their outcome. A failure of one
or more clinical trials can occur at any stage of a clinical trial. The clinical development of our product candidates is susceptible
to the risk of failure inherent at any stage of drug development, including failure to demonstrate efficacy in a clinical trial
or across a broad population of patients, the occurrence of severe or medically or commercially unacceptable adverse events, failure
to comply with protocols or applicable regulatory requirements or determination by the regulatory agencies that a drug or biologic
product is not approvable. It is possible that even if one or more of our product candidates has a beneficial effect, that effect
will not be detected during clinical evaluation because of one or more of a variety of factors, including the size, duration,
design, measurements, conduct or analysis of our clinical trials. Conversely, because of the same factors, our clinical trials
may indicate an apparent positive effect of a product candidate that is greater than the actual positive effect, if any. Similarly,
in our clinical trials we may fail to detect toxicity of or intolerability caused by our product candidates, or mistakenly believe
that our product candidates are toxic or not well tolerated when that is not, in fact, the case.
outcome of preclinical studies and early and mid-phase clinical trials may not be predictive of the success of later clinical
trials, and interim results of a clinical trial do not necessarily predict overall results. Many companies in the pharmaceutical
and biotechnology sectors have suffered significant setbacks in late-stage clinical trials after achieving positive results in
earlier stages of development, and we cannot be certain that we will not face similar setbacks.
design of a clinical trial can determine whether its results will support approval of a product; however, flaws in the design
of a clinical trial may not become apparent until the clinical trial is well advanced or completed. We have limited experience
in designing clinical trials and may be unable to design and execute a clinical trial to support marketing approval. In addition,
preclinical and clinical data are often susceptible to varying interpretations and analyses. Many companies that believed their
product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing
approval for their product candidates. Even if we believe that the results of clinical trials for our product candidates warrant
marketing approval, the regulatory agencies may disagree and may not grant marketing approval of our product candidates or may
require that we conduct initial clinical studies; the latter would require that we incur significantly increased costs and would
significantly extend the clinical development timeline for our product candidates.
some instances, there can be significant variability in safety or efficacy results between different clinical trials of the same
product candidate due to numerous factors, including changes in trial procedures set forth in protocols, differences in the size
and type of the patient populations, changes in and adherence to the clinical trial protocols and the rate of dropout among clinical
trial participants. Any Phase 1, Phase 2 or Phase 3 clinical trial we may conduct may not demonstrate the efficacy and safety
necessary to obtain regulatory approval to market our product candidates.
intend to seek FDA approval to commence clinical trials in the U.S. of certain of our product candidates based on clinical data
that was obtained in trials conducted outside the U.S., and it is possible that the FDA may not accept data from trials conducted
in such locations or conducted nearly 20 years ago.
intend to seek FDA acceptance of an IND to commence a Phase 2b clinical trial in LAPC using genetically engineered live
human cells encapsulated using our Cell-in-a-Box® technology in combination with ifosfamide. A Phase 1/2
clinical trial and a Phase 2 clinical trial were previously conducted using the same technology in combination with
ifosfamide between 1998 and 1999 and between 1999 and 2000, respectively. The Phase 1/2 clinical trial was carried out at the
Division of Gastroenterology, University of Rostock, Germany, and the Phase 2 clinical trial was carried out at four centers
in two countries in Europe: Berne, Switzerland, and in Rostock, Munich and Berlin, Germany.
the FDA may accept data from clinical trials conducted outside the U.S., acceptance of this data is subject to certain conditions
imposed by the FDA. There is a risk that the FDA may not accept the data from the two previous trials. In that case, we may be
required to conduct a Phase 1 or a Phase 1/2b clinical trial rather than the planned Phase 2b clinical trial in LAPC. This may
result in additional costs to us and resultant delays in the regulatory review process and any future commercialization and marketing,
if regulatory approval is obtained. It is not known whether the FDA would be likely to reject the use of such clinical data due
to the significant time that has elapsed since the earlier clinical trials were conducted or because the clinical trial material
for our proposed Phase 2b clinical trial is different from that used in the earlier clinical trials because of cloning the cells
used in the earlier trials and certain other modifications and improvements that have been made to the Cell-in-a-Box®
technology since the time of the earlier trials.
intend to conduct clinical trials for certain of our product candidates at sites outside of the U.S., and the U.S. regulatory
agencies may not accept data from trials conducted in such locations.
the FDA may accept data from clinical trials conducted outside the U.S., acceptance of this data is subject to certain conditions
imposed by the regulatory agencies outside of the U.S. For example, the clinical trial must be well designed and conducted and
performed by qualified investigators in accordance with ethical principles. The trial population must also adequately represent
the population in the country in which the clinical trial is being conducted. The data must be applicable to the U.S. population
and medical practice in the U.S. in ways that the FDA deems clinically meaningful. Generally, the patient population for any clinical
trial conducted outside of the U.S. must be representative of the population for whom we intend to seek approval in the U.S.
addition, while these clinical trials are subject to the applicable local laws, the FDA acceptance of the data will be dependent
upon its determination that the trials also complied with all applicable U.S. laws and regulations. There can be no assurance
that the FDA will accept data from trials conducted outside of the U.S. If the FDA does not accept the data from any of our clinical
trials that we determine to conduct outside the U.S., it would likely result in the need for additional trials that would be costly
and time-consuming and delay or permanently halt the development of our product candidate.
addition, the conduct of clinical trials outside the U.S. could have a significant impact on us. Risks inherent in conducting
international clinical trials include:
requirements that could restrict or limit our ability to conduct our clinical trials;|
of conducting clinical trials under multiple foreign regulatory schemes;|
of intellectual property in some countries.|
clinical trials of our product candidates fail to demonstrate safety and efficacy to the satisfaction of the regulatory agencies,
we may incur additional costs or experience delays in completing or be unable to complete the development and commercialization
of these product candidates.
are not permitted to commercialize, market, promote or sell any product candidate in the U.S. without obtaining marketing approval
from the FDA. Comparable regulatory agencies outside of the U.S., such as the EMA in the European Union, impose similar restrictions.
We may never receive such approvals. We may be required to complete additional preclinical development and clinical trials to
demonstrate the safety and efficacy of our product candidates in humans before we will be able to obtain these approvals.
testing is expensive, difficult to design and implement, can take many years to complete and is inherently uncertain as to outcome.
We have not previously submitted an NDA, a BLA or a MAA to regulatory agencies for any of our product candidates.
inability to successfully complete preclinical and clinical development could result in additional costs to us and impair our
ability to generate revenues from product sales, regulatory and commercialization milestones and royalties. In addition, if: (i)
we are required to conduct additional clinical trials or other testing of our product candidates beyond the trials and testing
that we contemplate; (ii) we are unable to successfully complete our planned clinical trials of our product candidates or other
testing; (iii) the results of these trials or tests are unfavorable, uncertain or are only modestly favorable; or (iv) there are
unacceptable safety concerns associated with our product candidates, we, in addition to incurring additional costs, may:
||Be delayed in obtaining
marketing approval for our product candidates;|
||Not obtain marketing
approval at all;|
for indications or patient populations that are not as broad as we intended or desired;|
with labeling that includes significant use or distribution restrictions or significant safety warnings, including “black-box”
||Be subject to additional
post-marketing testing or other requirements; or|
||Be required to remove
the product from the market after obtaining marketing approval.|
results in previous clinical trials of our encapsulated live cell and ifosfamide combination for pancreatic cancer may not be
replicated in future clinical trials which could result in development delays or a failure to obtain marketing approval.
results in the previous Phase 1/2 and Phase 2 clinical trials of the encapsulated live cell and ifosfamide combination may not
be predictive of similar results in future clinical trials such as our planned Phase 2b clinical trial in LAPC. The previous Phase
1/2 and Phase 2 clinical trials had a relatively limited number of patients in each trial. These trials resulted in outcomes that
were not statistically significant and may not be representative of future results. In addition, interim results obtained after
a clinical trial has commenced do not necessarily predict results. Numerous companies in the pharmaceutical and biotechnology
industries have suffered significant setbacks in late-stage clinical trials even after achieving promising results in early-stage
clinical development. Our clinical trials may produce negative or inconclusive results and we may decide, or regulatory agencies
may require us, to conduct additional clinical trials. Moreover, clinical data are often susceptible to varying interpretations
and analyses, and many companies that believed their product candidates performed satisfactorily in preclinical studies and clinical
trials have nonetheless failed to obtain the approval for their products by the regulatory agencies.
we experience any unforeseen events in the clinical trials of our product candidates, potential marketing approval or commercialization
of our product candidates could be delayed or prevented.
may experience numerous unforeseen events during our clinical trials that could delay or prevent marketing approval of our product
of our product candidates may produce unfavorable or inconclusive results;|
||We may decide, or
regulators may require us, to conduct additional clinical trials or abandon product development programs or candidates;|
||The number of patients
required for clinical trials of our product candidates may be larger than we anticipate, patient enrollment in these clinical
trials may be slower than we anticipate or participants may drop out of these clinical trials at a higher rate than we anticipate;|
contractors, including those manufacturing our product candidates or components or ingredients thereof or conducting clinical
trials on our behalf, may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely
manner or at all;|
||Regulators or IRBs
may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial
||We may experience
delays in reaching or may fail to reach agreement on acceptable clinical trial contracts or clinical trial protocols with
prospective trial sites;|
||Patients who enroll
in a clinical trial may misrepresent their eligibility to do so or may otherwise not comply with the clinical trial protocol,
resulting in the need to drop the patients from the clinical trial, increase the needed enrollment size for the clinical trial
or extend the clinical trial’s duration;|
||We may have to suspend
or terminate clinical trials of our product candidates for various reasons, including a finding that the participants are
being exposed to unacceptable health risks, undesirable side effects or other unexpected characteristics of a product candidate;|
or IRBs may require that we or our investigators suspend or terminate clinical research for various reasons, including noncompliance
with regulatory requirements or their respective standards of conduct, a finding that the participants are being exposed to
unacceptable health risks, undesirable side effects or other unexpected characteristics of the product candidate or findings
of undesirable effects caused by a chemically or mechanistically similar drug or drug candidate;|
may disagree with our clinical trial design or our interpretation of data from preclinical studies and clinical trials;|
may fail to approve or subsequently find fault with the manufacturing processes or facilities of third party manufacturers
with which we enter agreements for clinical and commercial supplies;|
||The supply or quality
of raw materials or manufactured product candidates or other materials necessary to conduct clinical trials of our product
candidates may be insufficient, inadequate, delayed, or not available at an acceptable cost, or we may experience interruptions
in supply; and|
||The approval policies
or regulations of the regulatory agencies may significantly change in a manner rendering our clinical data insufficient to
obtain marketing approval.|
development costs for us will increase if we experience delays in testing or pursuing marketing approvals. We may also be required
to obtain additional funds to complete clinical trials and prepare for possible commercialization of our product candidates. We
do not know whether any preclinical studies or clinical trials will begin as planned, will need to be restructured or will be
completed on schedule or at all. Significant preclinical study or clinical trial delays also could shorten any periods during
which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market
before we do and impair our ability to successfully commercialize our product candidates and may harm our business and results
of operations. In addition, many of the factors that cause, or lead to, clinical trial delays may ultimately lead to the denial
of marketing approval of any of our product candidates.
we experience delays or difficulties in the enrollment of patients in clinical trials, we may not achieve our clinical development
timeline and our receipt of necessary regulatory approvals could be delayed or prevented.
may not be able to initiate or continue clinical trials for our product candidates if we are unable to locate and enroll enough
eligible patients to participate in our clinical trials. Patient enrollment is a significant factor in the overall duration of
a clinical trial and is affected by many factors, including:
||The size and nature
of the patient population;|
||The severity of
the disease under investigation;|
||The proximity of
patients to clinical sites;|
criteria for the trial;|
||The design of the
||Efforts to facilitate
trials for the same patient population; and|
and patients’ perceptions as to the potential advantages and risks of the drug being studied in relation to other available
therapies, including any new drugs that may be approved for the indications we are investigating.|
inability to enroll enough patients for our clinical trials could result in significant delays or may require us to abandon one
or more clinical trials altogether. Enrollment delays in our clinical trials may result in increased development costs for our
product candidates, delay or halt the development of and approval processes for our product candidates and jeopardize our ability
to achieve our clinical development timeline and goals, including the dates by which we will commence, complete and receive results
from clinical trials. Enrollment delays may also delay or jeopardize our ability to commence sales and generate revenues from
our product candidates. Any of the foregoing could cause the value of our company to decline and limit our ability to obtain additional
financing, if needed.
may request priority review for our product candidates in the future. The regulatory agencies may not grant priority review for
any of our product candidates. Moreover, even if the regulatory agencies designated such products for priority review, that designation
may not lead to a faster regulatory review or approval process and, in any event, may not assure approval by the regulatory agencies.
may be eligible for priority review designation for our product candidates if the regulatory agencies determine such product candidates
offer major advances in treatment or provide a treatment where no adequate therapy exists. A priority review designation means
that the time required for the regulatory agencies to review an application is less than the standard review period. The regulatory
agencies have broad discretion with respect to whether to grant priority review status to a product candidate, so even if we believe
a product candidate is eligible for such designation or status, the regulatory agencies may decide not to grant it. Thus, while
the regulatory agencies have granted priority review to other oncology and diabetes products, our product candidates, should we
determine to seek priority review of them, may not receive similar designation. Moreover, even if one of our product candidates
is designated for priority review, such a designation does not necessarily mean a faster overall regulatory review process or
necessarily confer any advantage with respect to approval compared to conventional procedures of the regulatory agencies. Receiving
priority review from the regulatory agencies does not guarantee approval within an accelerated timeline or thereafter.
some instances, we believe we may be able to secure approval from the regulatory agencies to use accelerated development pathways.
If we are unable to obtain such approval, we may be required to conduct additional preclinical studies or clinical trials beyond
those that we contemplate which could increase the expense of obtaining and delay the receipt of necessary marketing approvals.
anticipate that we may seek an accelerated approval pathway for certain of our product candidates. Under the accelerated approval
provisions or their implementing regulations of the regulatory agencies, they may grant accelerated approval to a product designed
to treat a serious or life-threatening condition that provides meaningful therapeutic benefit over available therapies upon a
determination that the product influences a surrogate endpoint or intermediate clinical endpoint that is reasonably likely to
predict clinical benefit. Regulatory agencies consider a clinical benefit to be a positive therapeutic effect that is clinically
meaningful in the context of a given disease, such as irreversible morbidity or mortality. For the purposes of accelerated approval,
a surrogate endpoint is a marker, such as a laboratory measurement, radiographic image, physical sign or other measure that is
thought to predict clinical benefit, but is not itself a measure of clinical benefit. An intermediate clinical endpoint is a clinical
endpoint that can be measured earlier than an effect on irreversible morbidity or mortality that is reasonably likely to predict
an effect on irreversible morbidity or mortality or other clinical benefit. The accelerated approval pathway may be used in cases
in which the advantage of a new drug over available therapy may not be a direct therapeutic advantage, but is a clinically important
improvement from a patient and public health perspective. If granted, accelerated approval is usually contingent on the sponsor’s
agreement to conduct, in a diligent manner, additional post-approval confirmatory studies to verify and describe the drug’s
clinical benefit. If such post-approval studies fail to confirm the drug’s clinical benefit, regulatory agencies may withdraw
their approval of the drug.
to seeking such accelerated approval, we will seek feedback from the regulatory agencies and will otherwise evaluate our ability
to seek and receive such accelerated approval. There can also be no assurance that after our evaluation of the feedback and other
factors we will decide to pursue or submit an NDA, a BLA or an MAA for accelerated approval or any other form of expedited development,
review or approval. Similarly, there can be no assurance that after subsequent feedback from regulatory agencies that we will
continue to pursue or apply for accelerated approval or any other form of expedited development, review or approval, even if we
initially decide to do so. Furthermore, if we decide to apply for accelerated approval or under another expedited regulatory designation
(such as the Breakthrough Therapy designation or Fast Track designation), there can be no assurance that such submission or application
will be accepted or that any expedited development, review or approval will be granted on a timely basis or at all. Regulatory
agencies could also require us to conduct further studies prior to considering our application or granting approval of any type.
A failure to obtain accelerated approval or any other form of expedited development, review or approval for any of our product
candidates that we determine to seek accelerated approval for would result in a longer time to commercialization of such product
candidate, could increase the cost of development of such product candidate and could harm our competitive position in the marketplace.
may seek Orphan Drug designation for some of our product candidates, and we may be unsuccessful.
agencies may designate drugs for relatively small patient populations as Orphan Drugs. Under the standards and requirements of
regulatory agencies, they may designate a product as an Orphan Drug if it is a drug intended to treat a rare disease or condition.
In the U.S., this is generally defined as a disease with a patient population of fewer than 200,000 individuals. If a product
with an Orphan Drug designation subsequently receives the first marketing approval for the indication for which it has such designation,
the product is entitled to a period of marketing exclusivity, which precludes the EMA or FDA from approving another marketing
application for the same drug for the same indication during the period of exclusivity. The applicable period is seven years in
the U.S. and ten years in Europe. The European exclusivity period can be reduced to six years if a drug no longer meets the criteria
for Orphan Drug designation or if the drug is sufficiently profitable so that market exclusivity is no longer justified.
have been granted Orphan Drug designation for our pancreatic cancer therapy in the U.S. and European Union. Orphan Drug exclusivity
may be lost if a regulatory agency determines that the request for designation was materially defective or if the manufacturer
is unable to assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition. Marketing
exclusivity for a product designated as an Orphan Drug may not effectively protect the product candidate from competition because
different drugs can be approved for the same condition. Even after an Orphan Drug is approved, the regulatory agency can subsequently
approve a different drug for the same condition if they conclude that the later drug is clinically superior in that it is shown
to be safer, more effective or makes a major contribution to patient care.
Fast Track by the FDA or similar designation by another regulatory agency, even if granted for any of our product candidates,
may not lead to a faster development or regulatory review or approval process and does not increase the likelihood that our product
candidates will receive marketing approval.
do not currently have Fast Track designation by the FDA or similar designation by another regulatory agency for any of our product
candidates, but intend to seek such designation based upon the data generated from our clinical trials, if successful. If a drug
or biologic is intended for the treatment of a serious or life-threatening condition and the product candidate demonstrates the
potential to address unmet medical needs for this condition, the sponsor may apply for Fast Track designation by the FDA or similar
designation by another regulatory agency. Regulatory agencies have broad discretion whether to grant this designation by the FDA
or similar designation by another regulatory agency. Even if we believe a product candidate is eligible for this designation,
we cannot assure you that a regulatory agency would decide to grant it. Even if we do receive Fast Track or similar designation,
we may not experience a faster development process, review or approval compared to conventional procedures adopted by a regulatory
agency. In addition, a regulatory agency may withdraw Fast Track designation if it believes that the designation is no longer
supported by data from our clinical development program. Many product candidates that have received Fast Track designation have
failed to obtain marketing approval.
Breakthrough Therapy designation by the FDA or similar designation by another regulatory agency, even if granted for any of our
product candidates, may not lead to a faster development or regulatory review or approval process and does not increase the likelihood
that our product candidates will receive marketing approval.
do not currently have Breakthrough Therapy designation by the FDA or similar designation by another regulatory agency for any
of our product candidates but intend seek such designation based upon the data we generate during our clinical trials, if successful.
Breakthrough Therapy or similar designation is within the discretion of the FDA and other regulatory agencies. Accordingly, even
if we believe, after completing early clinical trials, that one of our product candidates meets the criteria for designation as
a Breakthrough Therapy or other similar designation, a regulatory agency may disagree and instead determine not to make such designation.
In any event, the receipt of a Breakthrough Therapy or other similar designation for a product candidate may not result in a faster
development process, review or approval compared to drugs or biologics considered for approval under conventional procedures of
a regulatory agency and does not assure their ultimate approval. In addition, even if one or more of our product candidates receives
Breakthrough Therapy designation or other similar designations, a regulatory agency may later decide that such product candidates
no longer meet the conditions for the designation.
to obtain marketing approval in international jurisdictions would prevent our product candidates from being marketed abroad.
market and sell our product candidates in Europe and many other jurisdictions outside the U.S., we or our third-party collaborators
must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The approval procedure
varies among countries and can involve additional testing. The time required to obtain approval may differ substantially from
that required to obtain FDA approval in the U.S. The regulatory approval process outside the U.S. generally includes all the risks
associated with obtaining FDA approval. In addition, in many countries outside the U.S., it is required that the product be approved
for reimbursement before the product can be approved for sale in that country. We or these third parties may not obtain approval
from a regulatory agency outside the U.S. on a timely basis, if at all. Approval by FDA does not ensure approval by a regulatory
agency in other countries or jurisdictions, and approval by one regulatory agency outside the U.S. does not ensure approval by
a regulatory agency in other countries or jurisdictions or by the FDA. We may not be able to file for marketing approvals and
may not receive necessary approvals to commercialize our product candidates in any market.
product candidate for which we obtain marketing approval will be subject to extensive post-marketing regulatory requirements and
could be subject to post-marketing restrictions or withdrawal from the market. We may be subject to penalties if we fail to comply
with regulatory requirements or if we experience unanticipated problems with our products, when and if any of our product candidates
product candidates and the activities associated with their development and commercialization, including their testing, manufacture,
recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, are subject to comprehensive regulation
by regulatory agencies. The requirements that result from such regulations include submissions of safety and other post-marketing
information and reports, registration and listing requirements, cGMP requirements relating to manufacturing, quality control,
quality assurance and corresponding maintenance of records and documents, including periodic inspections by regulatory agencies,
requirements regarding the distribution of samples to physicians and recordkeeping.
addition, regulatory agencies may impose requirements for costly post-marketing studies or clinical trials and surveillance to
monitor the safety or efficacy of a product candidate. Regulatory agencies closely regulate the post-approval marketing and promotion
of drugs to ensure drugs are marketed only for the approved indications and in accordance with the provisions of the approved
labeling. They also impose stringent restrictions on manufacturers’ communications regarding use of their products. If we
promote our product candidates beyond their approved indications, we may be subject to enforcement action for off-label promotion.
Violations of the laws relating to the promotion of prescription drugs may lead to investigations alleging violations of federal
and state healthcare fraud and abuse laws, as well as state consumer protection laws.
later discovery of previously unknown adverse events or other problems with our product candidates, manufacturers or manufacturing
processes, or failure to comply with regulatory requirements, may yield various results, including:
such products, manufacturers or manufacturing processes;|
the labeling or marketing of a product;|
product distribution or use;|
conduct post-marketing studies or clinical trials;|
||Warning or untitled
||Withdrawal of the
products from the market;|
||Refusal to approve
pending applications or supplements to approved applications that we submit;|
or disgorgement of profits or revenues;|
||Suspension or withdrawal
of marketing approvals;|
||Refusal to permit
the import or export of our product candidates;|
||Injunctions or the
imposition of civil or criminal penalties|
with European requirements regarding safety monitoring or pharmacovigilance, and with requirements related to the development
of products for the pediatric population, can also result in significant financial penalties. Similarly, failure to comply with
the Europe’s requirements regarding the protection of personal information can also lead to significant penalties and sanctions.
relationships with customers and third-party payors will be subject to applicable anti-kickback, fraud and abuse and other healthcare
laws and regulations, which could expose us to criminal sanctions, substantial civil penalties, contractual damages, reputational
harm and diminished profits and future earnings.
providers, physicians and third-party payors will play a primary role in the recommendation and prescription of any product candidates
for which we obtain marketing approval. Our future arrangements with third-party payors and customers may expose us to broadly
applicable federal and state fraud and abuse and other healthcare laws and regulations that may constrain the business or financial
arrangements and relationships through which we market, sell and distribute any products for which we obtain marketing approval.
Restrictions under applicable healthcare laws and regulations include the following:
Statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing any
remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an
individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under a federal
healthcare program such as Medicare and Medicaid;|
||The False Claims
Act imposes criminal and civil penalties, including civil whistleblower or qui tam actions, against individuals or
entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false
or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the Federal governments;
||HIPAA imposes criminal
and civil liability for executing a scheme to defraud any healthcare benefit program or making false statements relating to
healthcare matters. HIPAA, as amended by HITECH and its implementing regulations, also imposes obligations, including mandatory
contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health
information. Federal law requires applicable manufacturers of covered drugs to report payments and other transfers of value
to physicians and teaching hospitals, which includes data collection and reporting obligations. The information is to be made
publicly available on a searchable website in September 2014. Analogous state and foreign laws and regulations, such as state
anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items or
services reimbursed by non-governmental third-party payors, including private insurers.|
state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines
and the relevant compliance guidance promulgated by the federal government and may require drug manufacturers to report information
related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures. State
and foreign laws also govern the privacy and security of health information in some circumstances, many of which differ from each
other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve
substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with
current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations.
If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us,
we may be subject to significant civil, criminal and administrative penalties, damages, fines, imprisonment, exclusion of our
product candidates from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring
of our operations. If any of the physicians or other healthcare providers or entities with whom we expect to do business is found
to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions
from government funded healthcare programs.
enacted and future legislation could increase the difficulty and cost for us to obtain marketing approval of and commercialize
our product candidates and affect the prices we may obtain.
the U.S. and some foreign jurisdictions, there have been a several legislative and regulatory changes and proposed changes regarding
the healthcare system that could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval
activities and affect our ability to profitably sell any product candidates for which we obtain marketing approval.
March 2010, former President Obama signed into law the Affordable Care Act, a sweeping law intended to broaden access to health
insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency
requirements for the healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional
health policy reforms. Among the provisions of the Affordable Care Act of importance to our potential product candidates are the
||An annual, nondeductible
fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents;|
||An increase in the
statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program;|
||Expansion of healthcare
fraud and abuse laws, including the False Claims Act and the Anti-Kickback Statute, new government investigative powers and
enhanced penalties for noncompliance;|
||A new Medicare Part D
coverage gap discount program in which manufacturers must agree to offer 50% point-of-sale discounts off negotiated prices;|
||Extension of manufacturers’
Medicaid rebate liability;|
||Expansion of eligibility
criteria for Medicaid programs;|
||Expansion of the
entities eligible for discounts under the Public Health Service pharmaceutical pricing program;|
to report financial arrangements with physicians and teaching hospitals;|
||A new requirement
to annually report drug samples that manufacturers and distributors provide to physicians; and|
||A new Patient-Centered
Outcomes Research Institute to oversee, identify priorities in and conduct comparative clinical effectiveness research, along
with funding for such research.|
addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. These changes included
aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, starting in 2013. In January 2013, former
President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, reduced Medicare payments
to several providers and increased the statute of limitations period for the government to recover overpayments to providers from
three to five years. These laws may result in additional reductions in Medicare and other healthcare funding.
expect that the Affordable Care Act, as well as other healthcare reform measures that may be adopted in the future, may result
in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approved product.
Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private
payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate
revenue, attain profitability or commercialize our product candidates.
reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private
payors. The implementation of cost containment measures or other healthcare reforms may compromise our ability to generate revenue,
attain profitability or commercialize our products. At the same time, there have been significant ongoing efforts to modify or
eliminate the Affordable Care Act. For example, the Tax Act, enacted on December 22, 2017, repealed the shared responsibility
payment for individuals who fail to maintain minimum essential coverage under section 5000A of the Internal Revenue Code, commonly
referred to as the individual mandate, beginning in 2019. The Joint Committee on Taxation estimates that the repeal will result
in over 13 million Americans losing their health insurance coverage over the next ten years and is likely to lead to increases
in insurance premiums. Further legislative changes to and regulatory changes under the Affordable Care Act remain possible. It
is unknown what form any such changes or any law proposed to replace the Affordable Care Act would take, and how or whether it
may affect our business in the future.
enacted FDA regulations may require us to expend additional resources to obtain or maintain regulatory approval. For example,
in August 2017 President Trump signed into law the FDARA. This legislation imposes significant new requirements for clinical trial
sponsors which will affect, among other things, the development of drugs and biological products for pediatric use. This legislation
may result in new regulations, which may affect future options or timelines for regulatory approval.
and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for
pharmaceutical products. We cannot be sure whether additional legislative changes will be enacted, or whether FDA regulations,
guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our product candidates,
if any, may be. In addition, increased scrutiny by the U.S. Congress of FDA’s approval process may significantly delay or
prevent marketing approval in the U.S., as well as subject us to more stringent product labeling and post-marketing testing and
outside the U.S. tend to impose strict price controls, which may adversely affect our revenues, if any.
some countries, particularly the countries of the European Union, the pricing of prescription pharmaceuticals is subject to governmental
control. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of
marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct
a clinical trial that compares the cost-effectiveness of our product candidate to other available therapies. If reimbursement
of our product candidates is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business
could be materially harmed.
Related to the Commercialization of Our Product Candidates
adverse events or undesirable side effects or other unexpected properties of our encapsulated live cell plus ifosfamide product
candidate or any of our other product candidates may be identified during development that could delay or prevent the product
candidates’ marketing approval.
adverse events or undesirable side effects caused by, or other unexpected properties of, our product candidates could cause us,
an IRB or a regulatory agency to interrupt, delay or halt clinical trials of one or more of our product candidates and could result
in a more restrictive label or the delay or denial of marketing approval by a regulatory agency. If any of our product candidates
is associated with serious adverse events or undesirable side effects or has properties that are unexpected, we may need to abandon
development or limit development of that product candidate to certain uses or subpopulations in which the undesirable side effects
or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. Many compounds that
initially showed promise in clinical or earlier stage testing have later been found to cause undesirable or unexpected side effects
that prevented further development of the compound.
if one of our product candidates receives marketing approval, it may fail to achieve the degree of market acceptance by physicians,
patients, third party payors and others in the medical community necessary for commercial success and the market opportunity for
the product candidate may be smaller than we anticipated.
have never commercialized a drug product. Even if one of our product candidates is approved by a regulatory agency for marketing
and sale, it may nonetheless fail to gain sufficient market acceptance by physicians, patients, third party payors and others
in the medical community. For example, physicians are often reluctant to switch their patients from existing therapies even when
new and potentially more effective or convenient treatments enter the market. Further, patients often acclimate to the therapy
that they are currently taking and do not want to switch unless their physicians recommend switching products or they are required
to switch therapies due to lack of reimbursement for existing therapies.
to educate the medical community and third-party payors on the benefits of our product candidates may require significant resources
and may not be successful. If any of our product candidates is approved but does not achieve an adequate level of market acceptance,
we may not generate significant revenues and we may not become profitable.
degree of market acceptance of our encapsulated live cell plus ifosfamide product candidate or any of our other product candidates,
if approved for commercial sale, will depend on several factors, including:
||The efficacy and
safety of the product;|
||The potential advantages
of the product compared to alternative treatments;|
||The prevalence and
severity of any side effects;|
||The clinical indications
for which the product is approved;|
||Whether the product
is designated under physician treatment guidelines as a first-line therapy or as a second- or third-line therapy;|
||Limitations or warnings,
including distribution or use restrictions, contained in the product’s approved labeling;|
||Our ability to offer
the product for sale at competitive prices;|
||Our ability to establish
and maintain pricing sufficient to realize a meaningful return on our investment;|
convenience and ease of administration compared to alternative treatments;|
of the target patient population to try, and of physicians to prescribe, the product;|
||The strength of
sales, marketing and distribution support;|
||The approval of
other new products for the same indications;|
||Changes in the standard
of care for the targeted indications for the product;|
||The timing of market
introduction of our approved products as well as competitive products and other therapies;|
amount of reimbursement from government payors, managed care plans and other third-party payors;|
about the product or favorable publicity about competitive products; and|
potential market opportunities for our product candidates are difficult to estimate precisely. Our estimates of the potential
market opportunities are predicated on many assumptions, including industry knowledge and publications, third party research reports
and other surveys. While we believe that our internal assumptions are reasonable, these assumptions involve the exercise of significant
judgment on the part of our management, are inherently uncertain and the reasonableness of these assumptions has not been assessed
by an independent source. If any of the assumptions proves to be inaccurate, the actual markets for our product candidates could
be smaller than our estimates of the potential market opportunities.
any of our product candidates receives marketing approval and we or others later discover that the therapy is less effective than
previously believed or causes undesirable side effects that were not previously identified, our ability to market the therapy
could be compromised.
trials of our product candidates are conducted in carefully defined subsets of patients who have agreed to enter a clinical trial.
Consequently, it is possible that our clinical trials may indicate an apparent positive effect of a product candidate that is
greater than the actual positive effect, if any, or alternatively fail to identify undesirable side effects. If, following approval
of a product candidate, we or others discover that the product candidate is less effective than previously believed or causes
undesirable side effects that were not previously identified, any of the following adverse events could occur:
||A regulatory agency
may withdraw its approval of the product candidate or seize the product candidate;|
||We may be required
to recall the product candidate or change the way the product is administered;|
may be imposed on the marketing of, or the manufacturing processes for, the product candidate;|
||We may be subject
to fines, injunctions or the imposition of civil or criminal penalties;|
||A regulatory agency
may require the addition of labeling statements, such as a “black box” warning or a contraindication;|
||We may be required
to create a Medication Guide outlining the risks of the previously unidentified side effects for distribution of our product
candidate to patients;|
||We could be sued
and held liable for harm caused to patients;|
||The product candidate
may become less competitive; and|
||Our reputation may
of these events could have a material and adverse effect on our operations and business and could adversely impact our stock price.
we are unable to establish sales, marketing and distribution capabilities or enter acceptable sales, marketing and distribution
arrangements with third parties, we may not be successful in commercializing any product candidate that we develop when a product
candidate is approved.
do not have any sales, marketing or distribution infrastructure and have no experience in the sale, marketing or distribution
of pharmaceutical products. To achieve commercial success for any approved product candidate, we must either develop a sales and
marketing organization, outsource these functions to third parties or license our product candidates to others. If approved by
the FDA, the EMA or comparable foreign regulatory agencies, we expect to license our encapsulated live cell plus ifosfamide product
candidate for pancreatic cancer to a large pharmaceutical company with greater resources and experience than us.
may not be able to license our encapsulated live cell plus ifosfamide product candidate on reasonable terms, if at all. If other
product candidates are approved for smaller or easily targeted markets, we expect to commercialize them in the U.S. directly with
a small and highly focused commercialization organization. The development of sales, marketing and distribution capabilities will
require substantial resources and will be time-consuming, which could delay any product candidate launch.
expect that we will commence the development of these capabilities prior to receiving approval of any of our product candidates.
If the commercial launch of a product candidate for which we recruit a sales force and establish marketing and distribution capabilities
is delayed or does not occur for any reason, we could have prematurely or unnecessarily incurred these commercialization costs.
Such a delay may be costly, and our investment could be lost if we cannot retain or reposition our sales and marketing personnel.
addition, we may not be able to hire or retain a sales force in the U.S. that is sufficient in size or has adequate expertise
in the medical markets that we plan to target. If we are unable to establish or retain a sales force and marketing and distribution
capabilities, our operating results may be adversely affected. If a potential partner has development or commercialization expertise
that we believe is particularly relevant to one of our product candidates, then we may seek to collaborate with that potential
partner even if we believe we could otherwise develop and commercialize the product candidate independently.
expect to seek one or more strategic partners for commercialization of our product candidates outside the U.S. Because of entering
arrangements with third parties to perform sales, marketing and distribution services, our product revenues or the profitability
of these product revenues may be lower, perhaps substantially lower, than if we were to directly market and sell products in those
markets. Furthermore, we may be unsuccessful in entering the necessary arrangements with third parties or may be unable to do
so on terms that are favorable to us. In addition, we may have little or no control over such third parties and any of them may
fail to devote the necessary resources and attention to sell and market our product candidates effectively.
we do not establish sales and marketing capabilities, either on our own or in collaboration with third parties, we will not be
successful in commercializing any of our product candidates that receive marketing approval.
Related to Our Dependence on Third Parties
rely and expect to continue to rely heavily on third parties to conduct our preclinical studies and clinical trials, and those
third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such studies and trials.
currently rely on third parties to conduct the planning for our clinical trials. We expect to continue to rely heavily on third
parties, such as a Contract Research Organization (“CRO”), a clinical data management organization, a medical institution,
a clinical investigator and others to plan for and conduct our clinical trials. Our agreements with these third parties generally
allow the third party to terminate our agreement with them at any time. If we are required to enter alternative arrangements because
of any such termination, the introduction of our product candidates to market could be delayed.
reliance on these third parties for research and development activities will reduce our control over these activities, but will
not relieve us of our responsibilities. For example, we design our clinical trials and will remain responsible for ensuring that
each is conducted in accordance with the general investigational plan and protocol for the trial. Moreover, regulatory agencies
require us to comply with cGMP standards for conducting, recording and reporting the results of clinical trials to assure that
data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are
protected. Our reliance on third parties that we do not control does not relieve us of these responsibilities and requirements.
We also are required to register ongoing clinical trials and post the results of completed clinical trials on a government-sponsored
database of regulatory agencies within specified timeframes. Failure to do so can result in fines, adverse publicity and civil
and criminal sanctions.
these third parties may also have relationships with other entities, some of which may be our competitors. If these third parties
do not successfully carry out their contractual duties, meet expected deadlines or conduct our clinical trials in accordance with
the requirements of a regulatory agency or our protocols, we will not be able to obtain, or may be delayed in obtaining, marketing
approvals for our product candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize
our product candidates.
expect to rely on third parties to store and distribute our product candidates for our clinical trials. Any performance failure
on the part of such third parties could delay clinical development or marketing approval of our product candidates or commercialization
of our products, producing additional losses and depriving us of potential product candidate revenue. Our existing collaboration
with universities and institutions is important to our business. If we are unable to maintain these collaborations, or if these
collaborations are not successful, our business could be adversely affected.
rely on the University of Veterinary Medicine Vienna, UTS, the University of Barcelona, University of Copenhagen, Ludwig Maximilian
University, Heidelberg University, VIVIT, Austrianova, Vin-de-Bona and University of Northern Colorado for a substantial portion
of our research and development, including reliance on their employees whom we fund to conduct preclinical development of our
product candidates. If there are delays or failures to perform their obligations, our product candidates would be adversely affected.
If our collaboration with these universities and institutions is unsuccessful or is terminated, we would need to identify new
research and collaboration partners for our preclinical and clinical development. If we are unsuccessful or significantly delayed
in identifying new collaboration and research partners, or unable to reach an agreement with such a partner on commercially reasonable
terms, development of our product candidates will suffer and our business would be materially harmed.
if any of these universities or institutions change their strategic focus, or if external factors cause any one of them to divert
resources from our collaboration, or if any one of them independently develops products that compete directly or indirectly with
our product candidates using resources or information it acquires from our collaboration, our business and results of operations
preclinical and clinical development collaborations may be important to us. If we are unable to maintain these collaborations,
or if these collaborations are not successful, our business could be adversely affected.
some of our product candidates, we may in the future determine to collaborate with pharmaceutical and biotechnology companies
for development of our product candidates. We face significant competition in seeking appropriate collaborators. Our ability to
reach a definitive agreement for any collaboration will depend, among other things, upon our assessment of the collaborator’s
resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation
of several factors. If we are unable to reach agreements with suitable collaborators on a timely basis, on acceptable terms, or
at all, we may have to curtail the development of a product candidate, reduce or delay its development program or one or more
of our other development programs, delay our potential development schedule or increase our expenditures and undertake preclinical
and clinical development activities at our own expense. If we fail to enter collaborations and do not have sufficient funds or
expertise to undertake the necessary development activities, we may not be able to further develop our product candidates or continue
to develop our product candidates and our business may be materially and adversely affected.
collaborations we may enter may involve the following risks:
have significant discretion in determining the efforts and resources that they will apply to these collaborations;|
not perform their obligations as expected;|
||Changes in the collaborators’
strategic focus or available funding, or external factors, such as an acquisition, may divert resources or create competing
delay discovery and preclinical development, provide insufficient funding for product development of targets selected by us,
stop or abandon preclinical or clinical development of a product candidate or must repeat or conduct new preclinical and clinical
development of a product candidate;|
independently develop, or develop with third parties, products that compete directly or indirectly with our products or product
candidates if the collaborators believe that competitive products are more likely to be successfully developed than ours;|
may be viewed by our collaborators as competitive with their own product candidates or products, which may cause collaborators
to cease to devote resources to the development of our product candidates;|
collaborators, including disagreements over proprietary rights, contract interpretation or the preferred course of development
might cause delays or termination of the preclinical or clinical development or commercialization of product candidates. This
might lead to additional responsibilities for us with respect to product candidates, or might result in litigation or arbitration,
any of which would be time-consuming and expensive;|
not properly maintain or defend our intellectual property rights or intellectual property rights licensed to us or may use
our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property
or proprietary information or expose us to potential litigation;|
infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability; and|
be terminated at the convenience of the collaborator and, if terminated, we could be required to raise additional capital
to pursue further development or commercialization of our product candidates.|
addition, subject to its contractual obligations to us, if a collaborator of ours is involved in a business combination, the collaborator
might deemphasize or terminate the development of any of our product candidates. If one of our collaborators terminates its agreement
with us, we may find it more difficult to attract new collaborators and our perception in the business and financial communities
could be adversely affected.
we are unable to maintain our collaborations, development of our product candidates could be delayed and we may need additional
resources to develop them.
rely on Dr. Günzburg, Dr. Salmons and Dr. Löhr for the development of our product candidates. If they decide to terminate
their relationship with us, we may not be successful in the development of our product candidates.
Günzburg, Dr. Salmons and Dr. Löhr are involved in almost all our scientific endeavors underway and being planned by
us. These endeavors include preclinical and clinical studies involving our cancer therapy to be conducted in the U.S. and elsewhere
on our behalf. In addition, they will be assisting us in the development of a treatment for diabetes. Dr. Günzburg, Dr. Salmons
and Dr. Löhr are fulfilling prominent roles in our Diabetes Consortium. They provide professional consulting services to
us through the respective consulting agreements we have entered with the consulting companies through which they provide services.
The consulting agreements may be terminated for any reason at any time upon one party giving the other a written notice prior
to the effective date of the termination. If that occurs, we may not be successful in the development of our product candidates
which could have a material adverse effect on us.
contract with third parties for the manufacture of our product candidates for preclinical studies and clinical trials and expect
to continue to do so for commercialization. This reliance on third parties increases the risk that we will not have sufficient
quantities of our product candidates or such quantities at an acceptable cost, which could delay, prevent or impair our development
or commercialization efforts.
do not currently own or operate manufacturing facilities to produce clinical quantities of our encapsulated live cell and ifosfamide
product for pancreatic cancer and other encapsulated product candidates, and have limited personnel with manufacturing experience.
We currently rely on and expect to continue to rely on third party contract manufacturers to manufacture supplies of our product
candidates for preclinical studies and clinical trials, as well as for commercial manufacture of our product candidates, and these
must be maintained for us to receive marketing approval for our product candidates.
encapsulated live cell and ifosfamide product and our other product candidates must be manufactured through complex, multi-step
synthetic processes that are time-consuming and involve special conditions at certain stages. Biologics and drug substance manufacture
requires high potency containment, and containment under aseptic conditions. Any performance failures on the part of our existing
or future manufacturers could delay clinical development or marketing approval of our product candidates. Moreover, the facilities
that produce our Cell-in-a-Box® capsules are unique to us and would not be replicable or replaceable promptly,
if at all, if those facilities become unavailable or are damaged or destroyed through an accident, natural disaster, labor disturbance
agreements with our third-party manufacturers can be terminated by us or such manufacturers on short notice. If any of our manufacturers
should become unavailable to us for any reason, we may incur additional cost or delay in identifying or qualifying replacements.
In addition, while we believe that our existing manufacturer, Austrianova, can produce our product candidates, if approved, in
commercial quantities, we may also need to identify a third-party manufacturer capable of providing commercial quantities of our
product candidates. If we are unable to arrange for such a third-party manufacturing source or fail to do so on commercially reasonable
terms and in a timely manner, we may not be able to successfully produce and market our encapsulated live cell and ifosfamide
product or any other product candidate or may be delayed in doing so.
if we can establish such arrangements with third party manufacturers, reliance on third party manufacturers entails additional
||Reliance on the
third party for regulatory compliance and quality assurance;|
||The possible breach
of the manufacturing agreement by the third party;|
||The possible misappropriation
of our proprietary information, including our trade secrets and know-how; and|
||The possible termination
or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us.|
manufacturers may not be able to comply with cGMP standards or the requirements of a regulatory agency. Our failure, or the failure
of our third-party manufacturers, to comply with these practices or requirements could result in sanctions being imposed on us,
including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation,
seizures or recalls of product candidates or products, operating restrictions and criminal prosecutions, any of which could significantly
and adversely affect supplies of our product candidates.
in the cGMP certification of the Austrianova manufacturing facility in Bangkok, Thailand could affect its ability to manufacture
encapsulated live cells on a timely basis and could adversely affect supplies of our product candidates for clinical trials and
product candidates that we may develop may compete with other product candidates and products for access to manufacturing facilities.
There are a limited number of manufacturers that operate under cGMP regulations and that might be capable of manufacturing for
addition, we expect to rely on our manufacturers to purchase from third-party suppliers the materials necessary to produce our
product candidates for our clinical studies. There are a small number of suppliers for certain equipment and raw materials that
are used in the manufacture of our product candidates. Such suppliers may not sell these raw materials to our manufacturers at
the times we need them or on commercially reasonable terms. For example, there is currently a limited supply of acceptable cell
media for production of our MCB and WCB. We do not have any control over the process or timing of the acquisition of these raw
materials by Eurofins or Austrianova. Moreover, we currently do not have any agreements for the commercial production of these
raw materials. Any significant delay in the supply of a product candidate or the raw material components thereof for an ongoing
clinical trial due to the need to replace a third-party supplier of these raw materials could considerably delay completion of
our clinical studies, product testing and potential regulatory approval of our product candidates. If Eurofins, Austrianova or
we are unable to purchase these raw materials after regulatory approval has been obtained for our product candidates, the commercial
launch of our product candidates would be delayed or there would be a shortage in supply, which would impair our ability to generate
revenues from the sale of our product candidates.
current and anticipated future dependence upon Austrianova and others for the manufacture of our product candidates may adversely
affect our future profit margins and our ability to commercialize any products that receive marketing approval on a timely and
Related to Our Intellectual Property
we are unable to obtain and maintain intellectual property protection for our technology and products, or if the scope of the
intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize technology
and products similar or identical to ours, and our ability to commercialize successfully our technology and products may be impaired.
success depends in large part on our ability to obtain and maintain patent protection in the U.S. and other countries with respect
to our proprietary technology and products. We seek to protect our proprietary position by filing patents in the U.S. and abroad
related to our product candidates. Our patent portfolio relating to the Cell-in-the-Box® technology was formerly
licensed from Bavarian Nordic/GSF. The Bavarian Nordic/GSF patents covered capsules encapsulating cells expressing cytochrome
P450 and treatment methods using the same. These patents expired on March 27, 2017. We exclusively license from UTS patented Melligen
cells, which cover our product candidate for the treatment of diabetes. Currently, we do not have any issued patents in any countries
covering our product candidate for the treatment of cancer, and we only have one pending U.S. provisional application, one patent
application and one PCT application relating to our product candidate for the treatment of cancer.
filed a provisional patent application with the USPTO on March 21, 2017 to protect our therapy to treat cancer. The application
is designed to cover the same countries in which Bavarian Nordic obtained patent protection, with a relation back date of March
21, 2017. On March 21, 2018, we filed a U.S. patent application and a PCT application to protect our therapy to treat cancer.
We do not know if any of the claims set forth in our patent applications will be granted patent protection by the USPTO or by
any other regulatory authority in other countries in which we seek patent protection.
cannot estimate the financial or other impact of the expiration of the Bavarian Nordic/GSF patents or the failure of the USPTO
or similar regulatory authorities in other countries denying the claims we pursue in the U.S. and other countries.
patent prosecution and/or patent maintenance process is expensive and time-consuming. We may not be able to file and prosecute
or maintain all necessary or desirable patent applications or maintain the existing patents at a reasonable cost or in a timely
manner. We may choose not to seek patent protection for certain innovations and may choose not to pursue patent protection in
certain jurisdictions. Under the laws of certain jurisdictions, patents or other intellectual property rights may be unavailable
or limited in scope. It is also possible that we will fail to identify patentable aspects of our discovery and preclinical development
output before it is too late to obtain patent protection.
in some circumstances, we do not have the right to control the preparation, filing and prosecution of patent applications, or
to maintain the patents, covering technology that we license from third parties. Therefore, these patents and applications may
not be prosecuted and enforced in a manner consistent with the best interests of our business.
patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual
questions and has in recent years been the subject of much litigation. In addition, the laws of foreign countries may not protect
our rights to the same extent as the laws of the U.S. For example, India does not allow patents for methods of treating the human
body. Publications of discoveries in the scientific literature often lag the actual discoveries, and patent applications in the
U.S. and other jurisdictions are typically not published until 18 or more months after filing, or in some cases not at all.
Therefore, we cannot know with certainty whether we were the first to make the inventions claimed in our licensed patents or pending
patent applications, or that we were the first to file for patent protection of such inventions. Consequently, the issuance, scope,
validity, enforceability and commercial value of our patent rights are highly uncertain. Any future patent applications may not
result in patents being issued which protect our technology or products, in whole or in part, or which effectively prevent others
from commercializing competitive technologies and products. Changes in either the patent laws or interpretation of the patent
laws in the U.S. and other countries may diminish the value of our patents or narrow the scope of our patent protection.
reform legislation could increase the uncertainties and costs surrounding the prosecution of our owned or licensed patent applications
and the enforcement or defense of our owned or licensed patents. On September 16, 2011, the Leahy-Smith America Invents Act
(“Leahy-Smith Act”) was signed into law. The Leahy-Smith Act includes several significant changes to patent law in
the U.S. These include provisions that affect the way patent applications are prosecuted and may also affect patent litigation.
The USPTO recently developed new regulations and procedures to govern administration of the Leahy-Smith Act. Many of the substantive
changes to patent law associated with the Leahy-Smith Act, such as the first to file provisions, only became effective on March 16,
2013. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the operation of our business. However,
the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our owned
or licensed patent applications and the enforcement or defense of our owned or licensed patents, all of which could have a material
adverse effect on our business and financial condition.
we may be subject to a third-party pre-issuance submission of prior art to the USPTO, or become involved in opposition, derivation,
reexamination, inter-party review, post-grant review or interference proceedings challenging our patent rights or the patent rights
of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate,
our patent rights, allow third parties to commercialize our technology or products and compete directly with us, without payment
to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights. In addition,
if the breadth or strength of protection provided by our patents and patent applications is threatened, it could dissuade companies
from collaborating with us to license, develop or commercialize current our future product candidates.
if our owned and licensed patent applications issue as patents, they may not issue in a form that will provide us with any meaningful
protection, prevent competitors from competing with us or otherwise provide us with any competitive advantage. Our competitors
may be able to circumvent our owned or licensed patents by developing similar or alternative technologies or products in a non-infringing
issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our owned and licensed patents
may be challenged in the courts or patent offices in the U.S. and abroad. Such challenges may result in loss of exclusivity or
freedom to operate or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit
our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of
the patent protection of our technology and products. Given the amount of time required for the development, testing and regulatory
review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are
commercialized. Thus, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from
commercializing products similar or identical to ours.
risks described elsewhere pertaining to our patents and other intellectual property rights also apply to the intellectual property
rights that we license, and any failure to obtain, maintain and enforce these rights could have a material adverse effect on our
business. In some cases, we may not have control over the prosecution, maintenance or enforcement of the patents that we license.
Moreover, our licensors may fail to take the steps that we believe are necessary or desirable in to obtain, maintain and enforce
the licensed patents. Any inability on our part to protect adequately our intellectual property may have a material adverse effect
on our business, operating results and financial position.
we do not obtain patent and/or data exclusivity for our product candidates, our business may be materially harmed.
commercial success will largely depend on our ability to obtain and maintain patent and other intellectual property protection
and/or data exclusivity under the BPCIA in the U.S. and other countries with respect to our proprietary technology, product candidates
and our target indications.
we are unable to obtain patents covering our product candidates or obtain data and/or marketing exclusivity for our product candidates,
our competitors may be able to take advantage of our investment in development and clinical trials by referencing our clinical
and preclinical data to obtain approval of competing products, such as a biosimilar, earlier than might otherwise be the case.
and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other
requirements imposed by governmental patent agencies. Our patent protection could be reduced or eliminated for non-compliance
with these requirements.
maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and/or applications will be due to
be paid to the USPTO and various governmental patent agencies outside of the U.S. in several stages over the lifetime of the patents
and/or applications. The USPTO and various non-U.S. governmental patent agencies require compliance with numerous procedural,
documentary, fee payment and other similar provisions during the patent application process. We employ reputable law firms and
other professionals to help us comply, and in many cases, an inadvertent lapse can be cured by payment of a late fee or by other
means in accordance with the applicable rules. However, there are situations in which non-compliance can result in abandonment
or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction.
In such an event, our competitors might be able to enter the market and this circumstance would have a material adverse effect
on our business.
may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time
consuming and unsuccessful.
competition in our industry is intense, competitors may infringe or otherwise violate our issued patents, patents of our licensors
or other intellectual property. To counter infringement or unauthorized use, we may be required to file infringement claims, which
can be expensive and time-consuming. Any claims we assert against perceived infringers could provoke these parties to assert counterclaims
against us alleging that we infringe their patents. In addition, in a patent infringement proceeding, a court may decide that
a patent of ours is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to stop
the other party from using the technology at issue because our patents do not cover the technology in question. An adverse result
in any litigation proceeding could put one or more of the patents associated with our business at risk of being invalidated or
interpreted narrowly. We may also elect to enter license agreements to settle patent infringement claims or to resolve disputes
prior to litigation, and any such license agreements may require us to pay royalties and other fees that could be significant.
Furthermore, because of the substantial amount of discovery required in intellectual property litigation, there is a risk that
some of our confidential information could be compromised by disclosure.
we breach any of our license or collaboration agreements, it could compromise our development and commercialization efforts for
our product candidates.
have licensed rights to intellectual property from third parties to commercialize our product candidates. If we materially breach
or fail to perform any provision under these license and collaboration agreements, including failure to make payments to a licensor
or collaborator when due for royalties and failure to use commercially reasonable efforts to develop and commercialize our product
candidates, such licensors and collaborators have the right to terminate our agreement, and upon the effective date of such termination,
our right to practice the licensed intellectual property would end. Any uncured, material breach under the agreements could result
in our loss of rights to practice the patent rights and other intellectual property licensed to us under the agreements.
may need to license certain intellectual property from third parties, and such licenses may not be available or may not be available
on commercially reasonable terms.
third party may hold intellectual property, including patent rights, which are important or necessary to the development of our
products. It may be necessary for us to use the patented or proprietary technology of third parties to commercialize our products,
in which case we would be required to obtain a license from these third parties on commercially reasonable terms, or our business
could be harmed, possibly materially. Although we believe that licenses to these patents may be available from these third parties
on commercially reasonable terms, if we were not able to obtain a license, or are not able to obtain a license on commercially
reasonable terms, our business could be harmed, possibly materially.
parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which
would be uncertain and could have a material adverse effect on the success of our business.
commercial success depends upon our ability, and the ability of our collaborators, to develop, manufacture, market and sell our
product candidates and use our proprietary technologies without infringing the proprietary rights of third parties. There is considerable
intellectual property litigation in the biotechnology and pharmaceutical industries. We may become party to, or threatened with,
future adversarial proceedings or litigation regarding intellectual property rights with respect to our products and technology,
including interference or derivation proceedings before the USPTO and various governmental patent agencies outside of the U.S.
Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future.
we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such
third party to continue developing and marketing our product candidates and technology. However, we may not be able to obtain
any required license on commercially reasonable terms or at all. Even if we could obtain a license, it could be non-exclusive,
thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, to
cease commercializing the infringing technology or product. In addition, we could be found liable for monetary damages, including
treble damages and attorneys’ fees if we are found to have willfully infringed a patent. A finding of infringement could
prevent us from commercializing our product candidates or force us to cease some of our business operations, which could materially
harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have
a similar negative impact on our business.
may not be successful in obtaining or maintaining necessary rights for its development pipeline through acquisitions and licenses
from third parties.
our programs may involve additional product candidates that may require the use of proprietary rights held by third parties, the
growth of our business may depend in part on our ability to acquire, in-license or use these proprietary rights. We may be unable
to acquire or in-license any compositions, methods of use or other third-party intellectual property rights from third parties
that we identify. The licensing and acquisition of third-party intellectual property rights is a competitive area, and numerous
established companies are also pursuing strategies to license or acquire third-party intellectual property rights that we may
consider attractive. These established companies may have a competitive advantage over us due to their size, cash resources and
greater clinical development and commercialization capabilities.
addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable
to license or acquire third-party intellectual property rights on terms that would allow us to make an appropriate return on our
investment. If we are unable to successfully obtain rights to required third-party intellectual property rights, our business,
financial condition and prospects for growth could suffer.
we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
addition to seeking patents for some of our technology and product candidates, we also rely on trade secrets, including unpatented
know-how, technology and other proprietary information, to maintain our competitive position. We seek to protect these trade secrets,
in part, by entering non-disclosure and confidentiality agreements with parties who have access to them, such as our employees,
corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors and other third parties.
We seek to protect our confidential proprietary information, in part, by entering confidentiality and invention or patent assignment
agreements with our employees and consultants; however, we cannot be certain that such agreements have been entered with all relevant
to the extent we enter such agreements, any of these parties may breach the agreements and disclose our proprietary information,
including our trade secrets to unaffiliated third parties. We may not be able to obtain adequate remedies for such breaches. Enforcing
a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming and the
outcome is unpredictable. In addition, some courts inside and outside the U.S. are less willing or unwilling to protect trade
secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no
right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us. If
any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be
may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential
information of their former employers or other third parties.
employ individuals and use consultants and independent contractors who were previously employed at other biotechnology or
pharmaceutical companies. Although we seek to ensure that our employees and our consultants and independent contractors do
not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our
employees, consultants or independent contractors have inadvertently or otherwise used or disclosed trade secrets, or other
confidential information of our employees’, consultants’ or independent contractors’ former employers,
clients or other third parties. We may also be subject to claims that former employers or other third parties have an
ownership interest in our patents. Litigation may be necessary to defend against these claims. There is no
guarantee of success in defending these claims, and if we fail in defending any such claims, in addition to paying monetary
damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable
intellectual property. Even if we are successful, litigation could result in substantial cost and be a distraction to our
management and others working for us.
addition, while it is our policy to require our employees, consultants and independent contractors who may be involved in the
development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful
in executing such an agreement with each party who in fact develops intellectual property that we regard as our own. Our and their
assignment agreements may not be self-executing or may be breached, and we may be forced to bring claims against third parties,
or defend claims they may bring against us, to determine the ownership of what we regard as our intellectual property.
we or our licensors fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable
intellectual property rights or personnel. Even if we and our licensors are successful in prosecuting or defending against such
claims, litigation could result in substantial costs and be a distraction to management.
trademarks we have obtained or may obtain may be infringed or successfully challenged, resulting in harm to our business.
expect to rely on trademarks as one means to distinguish any of our drug candidates that are approved for marketing from the products
of our competitors. Once we select new trademarks and apply to register them, our trademark applications may not be approved.
Third parties may oppose or attempt to cancel our trademark applications or trademarks, or otherwise challenge our use of the
trademarks. If our trademarks are successfully challenged, we could be forced to rebrand our drugs, which could result in loss
of brand recognition and could require us to devote resources to advertising and marketing new brands. Our competitors may infringe
our trademarks and we may not have adequate resources to enforce our trademarks.
property rights do not necessarily address all potential threats to our competitive advantage.
degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have
limitations, and may not adequately protect our business, or permit us to maintain our competitive advantage. The following examples
||others may be able to make formulations or compositions
that are the same as or like our product candidates, but that are not covered by the claims of any patents that we may own
or exclusively license;|
||others may be able to make product that is like
the product candidates we intend to commercialize that is not covered by any patents that we might own or exclusively license
and have the right to enforce;|
||we, our licensors or any collaborators might
not have been the first to make the inventions covered by issued patents or pending patent applications that we may own;|
||we, our licensors or any collaborators might
not have been the first to file patent applications covering certain of our inventions;|
||others may independently develop similar or
alternative technologies or duplicate any of our technologies without infringing our intellectual property rights;|
||it is possible that our pending patent applications
will not lead to issued patents;|
||issued patents that we may own may not provide
us with any competitive advantages, or may be held invalid or unenforceable because of legal challenges;|
||our competitors might conduct research and development
activities in the U.S. and other countries that provide a safe harbor from patent infringement claims for certain research
and development activities, as well as in countries where we do not have patent rights, and then use the information learned
from such activities to develop competitive products for sale in our major commercial markets; and|
||we may not develop additional proprietary technologies
that are patentable.|
Risks Related to Our Business Model and Operations
of brand awareness is critical to our success.
certain market segments that we plan to pursue, the development of our brand awareness is essential for us to reduce our marketing
expenditures over time and realize greater benefits from marketing expenditures. If our brand-marketing efforts are unsuccessful,
growth prospects, financial condition and results of operations would be adversely affected. Our brand awareness efforts have
required, and will most likely continue to require, additional expenses and time of the current senior management team.
weakness in our internal controls could have a material adverse effect on us.
discussed in Item 9A. “Controls and Procedures,” the senior management has identified material weaknesses in our internal
controls over financial reporting and cannot assure you that additional material weaknesses will not be identified in the future.
We cannot assure you that these steps will be successful in preventing material weaknesses or significant deficiencies in our
internal controls over financial reporting in the future. In addition, any such failure could adversely affect our ability to
report financial results on a timely and accurate basis, which could have other material effects on our business, reputation,
results of operations, financial condition or liquidity. Material weaknesses in internal controls over financial reporting or
disclosure controls and procedures could also cause investors to lose confidence in our reported financial information which could
have an adverse effect on the trading price of our securities.
success depends on additional states legalizing medical Cannabis.
development of the medical Cannabis market is dependent upon continued legislative authorization of Cannabis at
the state level for medical purposes. Any number of factors could slow or halt the progress. Further, progress, while encouraging,
is not assured and the process normally encounters set-backs before achieving success. While there may be ample public support
for legislative proposal, key support must be created in the legislative committee or a bill may never advance to a vote. Numerous
factors impact the legislative process. Any one of these factors could slow or halt the progress and adoption of Cannabis
for medical purposes, which would limit the market for our product candidates that are based on Cannabis constituents and
negatively impact our business in this area.
alternative medicine industry faces strong opposition.
well-funded and significant businesses may have a strong economic opposition to the medical Cannabis industry. Lobbying
by groups within the pharmaceutical industry or changes in the regulation of Cannabis-based therapies could affect our
ability to develop and market cannabinoid-based cancer therapies.
product candidates involving Cannabis will be subject to controlled substance laws and regulations. Failure to receive necessary
approvals may delay the launch of our products and failure to comply with these laws and regulations may adversely affect the
results of our business operations.
product candidates involving Cannabis contain controlled substances as defined in the CSA. Controlled substances that are
pharmaceutical products are subject to a high degree of regulation under the CSA, which establishes, among other things, certain
registration, manufacturing quotas, security, recordkeeping, reporting, import, export and other requirements administered by
the DEA. The DEA classifies controlled substances into five schedules: Schedule I, II, III, IV or V substances. Schedule I
substances by definition have a high potential for abuse, have no currently “accepted medical use” in the U.S., lack
accepted safety for use under medical supervision, and may not be prescribed, marketed or sold in the U.S. Pharmaceutical products
approved for use in the U.S. may be listed as Schedule II, III, IV or V, with Schedule II substances considered to present
the highest potential for abuse or dependence and Schedule V substances the lowest relative risk of abuse among such substances.
Schedule I and II drugs are subject to the strictest controls under the CSA, including manufacturing and procurement quotas,
security requirements and criteria for importation. In addition, dispensing of Schedule II drugs is further restricted. For
example, they may not be refilled without a new prescription.
Cannabis is a Schedule I controlled substance, products approved for medical use in the U.S. that contain Cannabis or Cannabis extracts
must be placed in Schedules II - V, since approval by the FDA satisfies the “accepted medical use”
requirement. If we receive FDA approval for a product candidate involving Cannabis, the DEA will make a scheduling determination
and place it in a schedule other than Schedule I for it to be prescribed to patients in the U.S. If approved by the FDA,
we expect the product candidates to be listed by the DEA as a Schedule II or III controlled substance. Consequently, their
manufacture, importation, exportation, domestic distribution, storage, sale and legitimate use will be subject to a significant
degree of regulation by the DEA. The scheduling process may take one or more years beyond FDA approval, thereby significantly
delaying the launch of our product candidates involving Cannabis. Furthermore, if the FDA, DEA or any foreign regulatory
authority determines that our product candidates involving Cannabis may have potential for abuse, it may require us to
generate more clinical data than that which is currently anticipated, which could increase the cost and/or delay the launch of
one or more of our product candidates contain active ingredients of Cannabis, which are Schedule I substances,
to conduct preclinical studies and clinical trials with these product candidates in the U.S. prior to approval, each of our research
sites must submit a research protocol to the DEA and obtain and maintain a DEA researcher registration that will allow those sites
to handle and dispense our product candidates and to obtain the product from our manufacturer. If the DEA delays or denies the
grant of a research registration to one or more research sites, the preclinical studies or clinical trials could be significantly
delayed, and we could lose and be required to replace clinical trial sites, resulting in additional costs.
states have also established controlled substance laws and regulations. Though state-controlled substance laws often mirror federal
law, because the states are separate jurisdictions, they may separately schedule our product candidates involving Cannabis
as well. While some states automatically schedule a drug based on federal action, other states schedule drugs through
rulemaking or a legislative action. State scheduling may delay commercial sale of any product for which we obtain federal regulatory
approval and adverse scheduling could have a material adverse effect on the commercial attractiveness of such product. We or our
partners must also obtain separate state registrations, permits or licenses to be able to obtain, handle, and distribute controlled
substances for clinical trials or commercial sale, and failure to meet applicable regulatory requirements could lead to enforcement
and sanctions by the states in addition to those from the DEA or otherwise arising under federal law.
of these risks, no assurance can be given that our Cannabis therapy under development will be successful.
insurance coverage and reimbursement status of newly-approved products is uncertain. Failure to obtain or maintain adequate coverage
and reimbursement for new or current products could limit our ability to market those products and decrease our ability to generate
availability and extent of reimbursement by governmental and private payors is essential for most patients to be able to afford
expensive treatments. Sales of our product candidates will depend substantially, both domestically and abroad, on the extent to
which the costs of our product candidates will be paid by health maintenance, managed care, pharmacy benefit and similar healthcare
management organizations, or reimbursed by government health administration authorities, private health coverage insurers and
other third-party payors. If reimbursement is not available, or is available only to limited levels, we may not be able to successfully
commercialize our product candidates. Even if coverage is provided, the approved reimbursement amount may not be high enough to
allow us to establish or maintain pricing sufficient to realize a sufficient return on our investment.
is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. In the U.S., the principal
decisions about reimbursement for new medicines are typically made by the CMS, an agency within the HHS. CMS decides whether and
to what extent a new medicine will be covered and reimbursed under Medicare. Private payors tend to follow CMS to a substantial
degree. It is difficult to predict what CMS will decide with respect to reimbursement for fundamentally novel products such as
ours, as there is no body of established practices and precedents for these new products. Reimbursement agencies in Europe may
be more conservative than CMS. For example, several cancer drugs have been approved for reimbursement in the U.S. and have not
been approved for reimbursement in certain European countries. Outside the U.S., international operations are generally subject
to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment
initiatives in Europe, Canada and other countries has and will continue to put pressure on the pricing and usage of our product
candidates. In many countries, the prices of medical products are subject to varying price control mechanisms as part of national
health systems. In general, the prices of medicines under such systems are substantially lower than in the U.S. Other countries
allow companies to fix their own prices for medicines, but monitor and control company profits. Additional foreign price controls
or other changes in pricing regulation could restrict the amount that we can charge for our product candidates. Accordingly, in
markets outside the U.S., the reimbursement for our products may be reduced compared with the U.S. and may be insufficient to
generate commercially reasonable revenues and profits.
increasing efforts by governmental and third-party payors, in the U.S. and abroad, to cap or reduce healthcare costs may cause
such organizations to limit both coverage and level of reimbursement for new products approved and, thus, they may not cover or
provide adequate payment for our product candidates. We expect to experience pricing pressures with the sale of any of our product
candidates, due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional
legislative changes. The downward pressure on healthcare costs in general, particularly prescription drugs and surgical procedures
and other treatments, has become very intense. Because of this, increasingly high barriers are being erected to the entry of new
products into the healthcare market.
addition to CMS and private payors, professional organizations such as the National Comprehensive Cancer Network and the American
Society of Clinical Oncology can influence decisions about reimbursement for new medicines by determining standards for care.
Many private payors may also contract with commercial vendors who sell software that provide guidelines that attempt to limit
utilization of, and therefore reimbursement for, certain products deemed to provide limited benefit to existing alternatives.
Such organizations may set guidelines that limit reimbursement or utilization of our products.
legislation, including potentially unfavorable pricing regulations or other healthcare reform initiatives, may increase the difficulty
and cost for us to obtain marketing approval of and commercialize our product candidates.
the U.S., there have been numerous legislative and regulatory changes and proposed changes regarding the healthcare system that
could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities or affect our
ability to profitably sell any product candidates for which we obtain marketing approval. The Affordable Care Act, among other
things, imposes a significant annual fee on companies that manufacture or import branded prescription drug products. It also contains
substantial provisions intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending,
enhance remedies against healthcare fraud and abuse, add new transparency requirements for the healthcare and health insurance
industries, impose new taxes and fees on pharmaceutical and medical device manufacturers, and impose additional health policy
reforms, any of which could negatively impact our business. A significant number of provisions are not yet, or have only recently
become effective, but the Affordable Care Act is likely to continue the downward pressure on pharmaceutical and medical device
pricing, especially under the Medicare program, and may also increase our regulatory burdens and operating costs.
addition, other legislative changes have been proposed and adopted since passage of the Affordable Care Act. The Budget Control
Act of 2011, among other things, created the Joint Select Committee to recommend to Congress proposals in spending reductions.
The Joint Select Committee did not achieve a targeted deficit reduction of an amount greater than $1.2 trillion for the fiscal
years 2012 through 2021, triggering the legislation’s automatic reduction to several government programs. This included
aggregate reductions to Medicare payments to healthcare providers of up to 2.0% per fiscal year, which went into effect in April
2013. In January 2013, former President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things,
reduced Medicare payments to several categories of healthcare providers and increased the statute of limitations period for the
government to recover overpayments to providers from three to five years. At the same time, there have been significant ongoing
efforts to modify or eliminate the Affordable Care Act. For example, the Tax Act, enacted on December 22, 2017, repealed the shared
responsibility payment for individuals who fail to maintain minimum essential coverage under section 5000A of the Internal Revenue
Code, commonly referred to as the individual mandate, beginning in 2019. The Joint Committee on Taxation estimates that the repeal
will result in over 13 million Americans losing their health insurance coverage over the next ten years and is likely to lead
to increases in insurance premiums. Further legislative changes to and regulatory changes under the Affordable Care Act remain
possible. It is unknown what form any such changes or any law proposed to replace the Affordable Care Act would take, and how
or whether it may affect our business in the future.
enacted FDA regulations may require us to expend additional resources to obtain or maintain regulatory approval. For example,
in August 2017 President Trump signed into law the Food & Drug Administration Reauthorization Act. This legislation imposes
significant new requirements for clinical trial sponsors which will affect, among other things, the development of drugs and biological
products for pediatric use. This legislation may result in new regulations, which may affect future options or timelines for regulatory
we ever obtain regulatory approval and successfully commercialize any of our product candidates, these laws may result in additional
reductions in Medicare and other healthcare funding, which could have a material adverse effect on our future customers, patients
and third-party payors and, accordingly, our financial operations.
expect that the Affordable Care Act, as well as other healthcare reform measures that have been and may be adopted in the future,
may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approved
product, and could seriously harm our future revenue. Any reduction in reimbursement from Medicare or other government programs
may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare
reforms may compromise our ability to generate revenue, attain profitability or commercialize our products.
employees, consultants and independent contractors may engage in misconduct or other improper activities, including noncompliance
with regulatory standards and requirements, which could subject us to significant liability and harm our reputation.
are exposed to the risk of fraud and other misconduct by those who work for us. Misconduct by employees, consultants or independent
contractors could include failures to comply with the FCPA or with the DEA, the FDA or the EMA regulations or similar regulations
of other foreign regulatory authorities or to provide accurate information to the DEA, the FDA, the EMA or other foreign regulatory
authorities. In addition, misconduct could include failures to comply with certain manufacturing standards, to comply with U.S.
federal and state healthcare fraud and abuse laws and regulations and similar laws and regulations established and enforced by
comparable foreign regulatory authorities, to report financial information or data accurately or to disclose unauthorized activities
to us. Misconduct by those who work for us could also involve the improper use of information obtained during our clinical trials,
which could result in regulatory sanctions and serious harm to our reputation. We have implemented and will enforce a Code of
Business Conduct and Ethics, but it is not always possible to identify and deter misconduct by those who work for us. The precautions
we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting
us from governmental investigations or other actions or lawsuits stemming from a failure to comply with such laws or regulations.
If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those
actions could have a significant impact on our business and results of operations, including the imposition of significant fines
or other sanctions.
transactions and relationships outside the U.S. will be subject to the FCPA and similar anti-bribery and anti-corruption laws.
we pursue international clinical trials, licensing and, in the future, sales arrangements outside the U.S., we will be heavily
regulated and expect to have significant interaction with foreign officials. Additionally, in many countries outside the U.S.,
the health care providers who prescribe pharmaceuticals are employed by the government and the purchasers of pharmaceuticals are
government entities; therefore, our interactions with these prescribers and purchasers would be subject to regulation under the
FCPA and similar anti-bribery or anti-corruption laws, regulations or rules of other countries in which we operate. The FCPA generally
prohibits paying, offering or authorizing payment or offering of anything of value, directly or indirectly, to any foreign official,
political party or candidate to influence official action, or otherwise obtain or retain business. The FCPA also requires public
companies to make and keep books and records that accurately and fairly reflect the transactions of the corporation and to devise
and maintain an adequate system of internal accounting controls.
with these laws and regulations may be costly, and may limit our ability to expand into certain markets. There is no certainty
that all our employees, agents, contractors, or collaborators, or those of our affiliates, will comply with all applicable laws
and regulations, particularly given the high level of complexity of these laws and regulations. Violations of these laws and regulations
could result in fines, criminal sanctions against us, our officers, or our employees, the closing down of our facilities, requirements
to obtain export licenses, cessation of business activities in sanctioned countries, implementation of compliance programs and
prohibitions on the conduct of our business. Any such violations could include prohibitions on our ability to offer our products
in one or more countries and could materially damage our reputation, our brand, our international expansion efforts, our ability
to attract and retain employees and our business, prospects, operating results and financial condition.
liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any products that
we may develop.
face an inherent risk of product liability exposure related to the testing of our product candidates in human clinical trials
and will face an even greater risk if we commercially sell any products that we may develop. If we cannot successfully defend
ourselves against claims that our product candidates or products caused injuries, we will incur substantial liabilities. Regardless
of merit or eventual outcome, liability claims may result in:
for any product candidates or products that we may develop;|
||Injury to our reputation
and significant negative media attention;|
||Withdrawal of clinical
to defend the related litigation;|
awards to trial participants or patients;|
of our management to pursue our business strategy; and|
||The inability to
commercialize any products that we may develop.|
currently do not have product liability insurance because we do not have any products to market. We will need such insurance as
we commence a clinical trial or if we commence commercialization of our product candidates. Insurance coverage is increasingly
expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability
that may arise.
incur increased costs because of operating as a public company, and our management is required to devote substantial time to new
a public company, we have incurred and are continuing to incur significant legal, accounting and other expenses. These expenses
may increase. We are subject to, among others, the reporting requirements of the Exchange Act of 1934, as amended (“Exchange
Act”), the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Protection Act, as well as rules adopted, and to be
adopted, by the Commission. Our management and other personnel devote a substantial amount of time to these compliance initiatives.
these rules and regulations have substantially increased our legal and financial compliance costs and made some
activities more time-consuming and costly. The increased costs have increased our net loss. These rules and regulations may make
it more difficult and more expensive for us to maintain sufficient director and officer liability insurance coverage.
We cannot predict or estimate the amount or timing of additional costs we may continue to incur to respond to these
requirements. The ongoing impact of these requirements could also make it more difficult for us to attract and retain
qualified persons to serve on our Board of Directors (“Board”), our Board committees or as executive officers.
Factors Related to Our Stock and Financial Condition
cannot predict the extent to which a trading market for our common stock will develop or how liquid that market might become.
common stock is currently listed on the OTC Link™ quotation platform of OTC Markets Group, Inc. We cannot predict the extent
to which a trading market will develop or how liquid that market might become. Accordingly, holders of our common stock may be
required to retain their shares for an indefinite period.
OTC Link™ quotation system provides significantly less liquidity than national stock exchanges. Quotes for stocks included
on the OTC Link™ quotation system are not listed in the financial sections of newspapers, as are those for the national
stock exchanges. Therefore, prices for securities traded solely on the OTC Link™ quotation system may be difficult to obtain,
and holders of our common stock may be unable to resell their shares at or near their original acquisition price or at any price. Market
prices for our shares of common stock will be influenced by several factors, including, but not limited to:
||The issuance of
new shares pursuant to future offering;|
||Changes in interest
||New services or
significant contracts and acquisitions;|
||Variations in quarterly
||Change in financial
estimates by securities analysts;|
||The depth and liquidity
of the market for the shares;|
of us and of investments based in the countries where we do business or conduct research; and|
and other national and international conditions.|
ability to access the capital markets is limited by inability to use a short form registration statement on Form S-3.
Registration Statement on Form S-3 permits an eligible company to incorporate by reference in the registration statement its prior
and subsequent filings and reports made under the Exchange Act. In addition, Form S-3 enables eligible companies to conduct primary
offerings "off the shelf" under Rule 415 of the Securities Act of 1933, as amended (“Securities Act”). The
shelf registration process under Form S-3 combined with the ability to incorporate information on a prospective basis allows eligible
companies to avoid additional delays and interruptions in the offering process that would be associated with the filing of a registration
statement and review by the staff of the Commission and to access the capital markets in a more expeditious and efficient manner
than raising capital in a standard “long form” offering on Form S-1. Thus, our ability to raise, and the cost of raising,
future capital could be adversely affected by any inability to use a short form registration statement on Form S-3.
be eligible to use Form S-3 for a registered offering of our securities to investors, either: (i) the aggregate market value of
our common stock held by non-affiliates must exceed $75 million; or (ii) our common stock must be listed and registered on a national
securities exchange. If we do not meet either of these eligibility requirements, we would be precluded from conducting a registered
offering of our securities to investors by means of filing a Form S-3 or effecting a “shelf” offering until we meet
one of these requirements.
stock rules may have an adverse effect on us.
securities sold as part of financing provided to us are currently subject to “penny stock rules” that impose additional
sales requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors,
the latter of which are generally people with assets more than $1,000,000 or annual income exceeding $200,000 (individually) or
$300,000 (jointly with a spouse). For transactions covered by these rules, we and/or broker-dealers must make a special suitability
determination for the purchase of such securities and have received the purchaser’s written consent to the transaction prior
to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the “penny stock rules”
require the delivery, prior to the transaction, of a disclosure schedule prescribed by the Commission relating to the penny stock
market. The broker-dealer must also disclose the commissions payable to both the broker-dealer and the registered representative
and current quotations for the securities. Finally, monthly statements must be sent disclosing recent price information on the
limited market in penny stocks. Consequently, the “penny stock rules” may restrict the ability of broker-dealers to
sell our securities. The foregoing required penny stock restrictions will not apply to our common stock if such securities maintain
a market price of $5.00 or greater. Therefore, the challenge for us is that the market price of our common stock may not reach
or remain at such a level.
should be aware that, according to the Commission, the market for penny stocks has suffered in recent years from patterns of fraud
and abuse. Such patterns include, but are not limited to:
||Control of the market
for the security by one or a few broker-dealers that are often related to the promoter or issuer;|
prices through prearranged matching of purchases and sales and false and misleading press releases and paid promotions;|
practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons;|
||Excessive and undisclosed
bid-ask differentials and markups by selling broker-dealers; and|
||The wholesale dumping
of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, leaving investors
executive officers are aware of these abuses that have occurred historically in the penny stock market. Although we are in no
position to dictate the behavior of the market or of broker-dealers or others that may engage in such abuses, management will
strive within the confines of practical limitations to prevent the described patterns from being established with respect to our
may experience volatility in our stock price, which may adversely affect the trading price of our common stock.
experience significant volatility from time to time in the market price of our shares of common stock. Factors that may affect
the market price include the following:
regulatory developments or technological innovations by us or our competitors;|
||Changes in our relationship
with our licensors and other strategic partners;|
||Our quarterly operating
or affecting us;|
||Shortfalls in our
actual financial results compared to our guidance or the forecasts of stock market analysts;|
patent or other technology ownership rights;|
strategic alliances by us or our competitors;|
||Public concern regarding
the safety of our products; and|
of drug pricing.|
price of our common stock is volatile, which substantially increases the risk that our investors may not be able to sell their
shares at or above the price that the investors have paid for their shares.
of the price volatility in our shares we have observed since its inception, investors in our common stock may not be able to sell
their shares when they desire to do so at a price the investors desire to attain. The inability to sell securities in a rapidly
declining market may substantially increase the risk of loss because the price of our common stock may suffer greater declines
due to the historical price volatility of our shares. Certain factors, some of which are beyond our control, that may cause our
share price to fluctuate significantly include, but are not limited to, the following:
||Variations in our
quarterly operating results;|
||Loss of a key relationship
or failure to complete significant product candidate milestones timely or at all;|
||Additions or departures
of key personnel; and|
the stock market price and volume.|
addition, in recent years the stock market in general, and the over-the-counter markets in particular, have experienced extreme
price and volume fluctuations. In some cases, these fluctuations are unrelated or disproportionate to the performance of the underlying
company. These market and industry factors may materially and adversely affect our share price, regardless of our performance
or whether we meet our business objectives. In the past, class action litigation often has been brought against companies following
periods of volatility in the market price of those companies’ common stock. If we become involved in this type of litigation
in the future, it could result in substantial costs and diversion of management attention and resources, which could have a material
adverse effect on us and the trading price of our common stock.
have no plans to pay dividends in the foreseeable future, and investors may not expect a dividend as a return of or on any investment
have not paid dividends on our shares of common stock and do not anticipate paying such dividends in the foreseeable future.
investors may suffer future dilution due to issuances of additional shares of our common stock in the future for various reasons.
may be substantial dilution to our shareholders because of future decisions of our Board to issue shares without shareholder approval
for cash transactions, services rendered, acquisitions, payment of debt, sale of shares under our Form S-3 Registration Statement
or other public or private offerings of our securities and other permissible reasons. We can give investors no assurance that
they will be able to sell their shares of our commons stock at or near the prices they ask or at all if they need money or otherwise
desire to liquidate their shares.
Related to Employee and Tax Matters, Managing Growth and Macroeconomic Conditions
have a limited number of employees and are highly dependent on our Chief Executive Officer, Chief Operating Officer and Chief
Financial Officer. Our future success depends on our ability to retain these officers and other key personnel and to attract,
retain and motivate other needed qualified personnel.
are an early-stage clinical development company with a limited operating history. As of April 30, 2018, we had four full-time
employees and several key consultants. We are highly dependent on the research and development, clinical and business development
expertise of the principal members of our management, scientific and clinical teams, specifically, on our Chief Executive Officer,
Chief Operating Officer and Chief Financial Officer. Recruiting and retaining qualified scientific, clinical, manufacturing and
sales and marketing personnel will also be critical to our success. The loss of the services of our Chief Executive Officer, Chief
Operating Officer and Chief Financial Officer or other key employees or consultants could severely impede the achievement of our
research, development and commercialization of our product candidates and seriously harm our ability to successfully implement
our business strategy.
replacing executive officers and key employees and consultants may be difficult and may take an extended period because of the
limited number of individuals in our industry with the breadth of skills and experience required to successfully develop, gain
regulatory approval of and commercialize products. Competition to hire from this limited pool is intense, and we may be unable
to hire, train, retain or motivate these key personnel on acceptable terms given the competition among numerous pharmaceutical
and biotechnology companies for similar personnel.
also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. In
addition, we rely on other consultants and advisors, including scientific and clinical advisors, to assist us in formulating our
discovery, preclinical and clinical development and commercialization strategy. Our consultants and advisors may be employed by
employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their
availability to us. If we are unable to continue to attract and retain high quality personnel, our ability to pursue our growth
strategy will be limited.
ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
Section 382 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change,” the
corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes (such as
research and development tax credits) to offset its post-change income and taxes may be limited. In general, an “ownership
change” occurs if there is a cumulative change in our ownership by “5% shareholders” that exceeds 50 percentage
points over a rolling three-year period. Similar rules may apply under state tax laws.
it is determined that we have in the past experienced an ownership change, or if we experience one or more ownership changes because
of this offering or future transactions in our stock, we may be limited in our ability to use our net operating loss carryforwards
and other tax assets to reduce taxes owed on the net taxable income that we earn. Any such limitations on the ability to use our
net operating loss carryforwards and other tax assets could potentially result in increased future tax liability to us.
expect to expand our development and regulatory capabilities and potentially implement sales, marketing and distribution capabilities.
Thus, we may encounter difficulties in managing our growth, which could disrupt our operations.
expect to experience significant growth in the number of our employees and the scope of our operations, particularly in the areas
of drug development, regulatory affairs and, if any of our product candidates receive marketing approval, sales, marketing and
distribution. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and
financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Due to our limited
financial resources and the limited experience of our management team in managing a company with such anticipated growth, we may
not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The expansion
of our operations may lead to significant costs and may divert our management and business development resources. Any inability
to manage growth could delay the execution of our business plans or disrupt our operations.
global economic conditions could adversely affect our business, financial condition or results of operations.
results of operations could be adversely affected by general conditions in the global economy and in the global financial markets.
The recent global financial crisis caused extreme volatility and disruptions in the capital and credit markets. A severe or prolonged
economic downturn, such as the recent global financial crisis, could result in a variety of risks to our business, including our
ability to raise additional capital when needed on acceptable terms, if at all. This is particularly true in Europe, which is
undergoing a continued severe economic crisis. A weak or declining economy could also strain our suppliers, possibly resulting
in supply disruption. Any of the foregoing could adversely impact our business.
business and operations would suffer in the event of system failures.
the implementation of security measures, our internal computer systems and those of our third-party service providers on whom
we rely are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication
and electrical failures. Furthermore, we have little or no control over the security measures and computer systems of our third-party
service providers. While we and, to our knowledge, our third-party service providers have not experienced any such system failure,
accident or security breach to date, if such an event were to occur and cause interruptions in our operations or the operations
of our third-party service providers, it could result in a material disruption of our drug development programs. If any disruptions
occur, they could have a material adverse effect on our business.
are subject to legal, regulatory, financial and other risks with our operations outside the U.S.
operate globally and are attempting to develop products in multiple countries. Consequently, we face complex legal and regulatory
requirements in multiple jurisdictions, which may expose us to certain financial and other risks. International operations are
subject to a variety of risks, including:
exchange rate fluctuations;|
in overseeing foreign operations;|
||logistical and communications
changes in laws and regulatory practices, including export license requirements, trade barriers, tariffs and tax laws;|
||burdens and costs
of compliance with a variety of foreign laws;|
||political and economic
||increases in duties
||foreign tax laws
and potential increased costs associated with overlapping tax structures;|
in protecting intellectual property;|
||the risk of third
party disputes over ownership of intellectual property and infringement of third party intellectual property by our products;
economic and political conditions in these foreign markets.|
recently passed comprehensive tax reform bill could adversely affect our business and financial condition.
December 22, 2017, President Trump signed into law the final version of the tax reform bill commonly known as the Tax Cuts and
Jobs Act (“Tax Act”). The Tax Act significantly reforms the Internal Revenue Code of 1986, as amended, with many of
its provisions effective for tax years beginning on or after January 1, 2018. The Tax Act, among other things, contains significant
changes to corporate taxation, including a permanent reduction of the corporate income tax rate, a partial limitation on the deductibility
of business interest expense, a limitation of the deduction for net operating loss carryforwards to 80% of current year taxable
income, an indefinite net operating loss carryforward and the elimination of the two-year net operating loss carryback, temporary,
immediate expensing for certain new investments and the modification or repeal of many business deductions and credits. We continue
to examine the impact this tax reform legislation may have on our business. Notwithstanding the reduction in the corporate income
tax rate, the overall impact of the Tax Act is uncertain and our business and financial condition could be adversely affected.
The impact of this reform on our stockholders is uncertain. Stockholders should consult with their tax advisors regarding the
effect of the Tax Act and other potential changes to the U.S. Federal tax laws on them.
1B. UNRESOLVED STAFF COMMENTS
principal office is located at 20156 Avenida de la Carlota, Suite 600, Laguna Hills, California 92653. The offices we lease (“Leased
Premises”) consist of approximately 600 square feet plus the use of certain shared facilities, such as a lobby, conference
rooms and a kitchen. The term of our lease expires on August 31, 2019.
3. LEGAL PROCEEDINGS
is no material litigation currently pending against us or any of our subsidiaries or to which any of our or our subsidiaries’
property is subject. To our knowledge, there is no material litigation against any of our officers or directors in their capacity
as such, and no such litigation is contemplated by any governmental authorities.
4. MINE SAFETY DISCLOSURES
5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
of our common stock are quoted and traded on the OTC Link™ quotation platform of OTC Markets Group, Inc. (“OTCQB”)
as a fully reporting Over-The-Counter Bulletin Board company under the classification of OTCQB utilizing the trading symbol “PMCB.”
following table sets forth the high and low bid quotations reported on the OTCQB for our shares for each quarter during the two
fiscal years (“FYs”) ended April 30, 2018 and 2017. The prices reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not necessarily represent actual transactions.
|| ||HIGH|| ||
|| ||LOW|| |
|| ||0.05|| |
|| ||0.05|| |
|| ||0.03|| |
|| ||0.05|| |
|| || || ||
|| || || |
|| ||0.05|| |
|| ||0.03|| |
|| ||0.02|| |
|| ||0.07|| |
of April 30, 2018, there were 1,013,260,644 issued and outstanding shares of common stock. We are informed these shares are held
by approximately 1,300 shareholders of record.
have not paid and do not plan to pay cash dividends now. Our Board will decide any future payment of dividends, depending on the
results of operations, financial condition, capital requirements and other relevant factors.
Purchases of Equity Securities
did not repurchase any of our securities registered under Section 12 of the Exchange Act during the year ended April 30, 2018.
information on securities authorized for issuance under equity compensation plans, see Item 12. “Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters.”
Issuance of Unregistered Securities
addition to issuances of unregistered securities by us to our officers and directors previously disclosed in our Quarterly Reports
on Form 10-Q, our Form 8-Ks and this Report, on July 3, July 10 and July 18, 2017 we issued an aggregate of 4.2 million shares
of common stock to consultants for services provided to us. The non-cash expense for these share issuances totals $209,730.
such shares were issued without registration under the Securities Act in reliance upon the exemption afforded by Section 4(a)(2)
of that Act based on the limited number of investors, the sophistication of the individuals involved and the use of restrictive
legends on the shares certificates issued to prevent a public distribution of the relevant securities. No underwriters were involved
in any of these issuances.
6. SELECTED FINANCIAL DATA
are a smaller reporting company. Therefore, we are not required to include information called for by this Item 6.
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
following discussion may contain forward-looking statements that involve risks and uncertainties. As described under the caption
“Cautionary Note Regarding Forward-Looking Statements,” our actual results could differ materially from those discussed
here. Factors that could cause or contribute to such differences include, but are not limited to, any factors discussed in this
section as well as factors described in Part II, Item 1A. “Risk Factors” and under the caption “Cautionary Note
Regarding Forward-Looking Statements.”
are a clinical stage biotechnology company focused on developing and preparing to commercialize cellular therapies for cancer
and diabetes based upon our proprietary cellulose-based live cell encapsulation technology we refer to as Cell-in-a-Box®.
We are working to advance clinical research and development of new cellular-based therapies in the oncology and diabetes arenas.
We are now actively engaged with Austrianova and other entities in preparation for a Phase 2b clinical trial in LAPC using encapsulated
live cells like those used in the previous Phase 1/2 and Phase 2 clinical trials discussed above. A Pre-IND meeting with CBER
was held on January 17, 2017, at which the FDA communicated its agreement with certain aspects of our development plan, charged
us with completing numerous tasks and provided us with the guidance we need to complete what we expect will be a successful IND
process. However, no assurance can be given that the FDA will approve our IND once it is submitted. We are involved in preclinical
studies to determine if our cancer therapy can slow the production or accumulation of malignant ascites fluid in the abdomen that
accompanies the growth of several types of abdominal cancers. We are also involved in preclinical studies for the development
of a cellular therapy for Type 1 and insulin-dependent Type 2 diabetes. Finally, we are conducting preliminary research relating
to the use of constituents of Cannabis, known as cannabinoids, in treating cancer and its symptoms.
performance indicators used by management to manage and assess how the business is progressing will include, but are not limited
to, the ability to: (i) acquire appropriate funding for all aspects of our operations; (ii) acquire and complete necessary contracts;
(iii) complete activities for producing genetically modified human cells and having them encapsulated for our preclinical studies
and the planned Phase 2b clinical trial in LAPC; (iv) have regulatory work completed to enable studies and trials to be submitted
to regulatory agencies; (v) complete all required tests and studies on the cells and capsules we plan to use in our clinical trial
in patients with LAPC; and (vi) ensure completion of the production of encapsulated cells according to cGMP
regulations to use in our planned clinical trial.
are numerous items required to be completed successfully to ensure our final product candidates are ready for use in our planned
clinical trial in LAPC and preclinical studies. The effects of material transactions with related parties, and certain other parties
to the extent necessary for such an undertaking, may have substantial effects on both the timeliness and success of our current
and prospective financial position and operating results. Nonetheless, we are actively working to ensure strong ties and interactions
to minimize the inherent risks regarding success. We do not believe there are factors which will cause materially different amounts
to be reported than those presented in this Report. We aim to assess this regularly to provide accurate information to our shareholders.
following table sets forth unaudited statements of operations data for each quarter during our most recent two fiscal years. This
quarterly information has been derived from our unaudited condensed financial statements and, in the opinion of management, includes
all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the information for the
periods covered. The quarterly financial data should be read in conjunction with our Consolidated Financial Statements and related
Notes. The operating results for any quarter are not necessarily indicative of the operating results for any future period.
|| || || ||
|| || || ||
|| || || ||
|| || || |
|Cost of revenue||
|| ||–|| ||
|| ||–|| ||
|| ||–|| ||
|| ||–|| |
|| ||–|| ||
|| ||–|| ||
|| ||–|| ||
|| ||–|| |
|| ||1,688,415|| ||
|| ||1,814,298|| ||
|| ||2,030,660|| ||
|| ||1,448,056|| |
|Other income (expenses), net||
|| ||–|| ||
|| ||–|| ||
|| ||–|| ||
|| ||152,588|| |
|Net loss per common share, Basic and Diluted||
|| || || ||
|| || || ||
|| || || ||
|| || || |
|Cost of revenue||
|| ||–|| ||
|| ||–|| ||
|| ||–|| ||
|| ||–|| |
|| ||–|| ||
|| ||–|| ||
|| ||–|| ||
|| ||–|| |
|| ||1,031,397|| ||
|| ||974,195|| ||
|| ||1,282,015|| ||
|| ||1,154,539|| |
|Other income (expenses), net||
|Net loss per common share, Basic and Diluted||
and Capital Resources
Consolidated Financial statements and related Notes have been prepared on a going-concern basis, which contemplates the realization
of assets and the satisfaction of liabilities in the normal course of business. Therefore, the Consolidated Financial Statements
do not include any adjustments that might be necessary should we be unable to continue in existence. We have not generated any
revenues and have not yet achieved profitable operations. There is no assurance that profitable operations, if ever achieved,
could be sustained on a continuing basis. Also, development activities, preclinical studies, clinical trials and commercialization
of our product candidates will require significant additional financing. Our deficit accumulated through April 30, 2018 was $95,964,143.
We expect to incur substantial and increasing losses in future periods. Our total cash was $1,059,798 and $3,464,229 as of April
30, 2018 and 2017, respectively. Our net loss was $6,828,841 and $4,443,685 for the years ended April 30, 2018 and 2017, respectively.
Cash flows from investing activities were $0 for the years ended April 30, 2018 and 2017. Net cash provided by financing activities
was $2,681,409 and $4,881,936 for the years ended April 30, 2018 and 2017, respectively. For more information, see the discussion
under the caption “—Discussion of Operating, Investing and Financing Activities” in this Item 7.
ability to successfully pursue our business is subject to certain risks and uncertainties, including, among other things, uncertainty
of product development, uncertainty regarding the timing of our submission of our IND to the FDA, uncertainty of FDA approval
of our IND once it is submitted to the FDA, need to raise capital to fund our various studies and FDA submissions, competition
from third parties, uncertainty of capital availability, in particular, if we lost the ability to utilize our S-3 registration
statement, uncertainty in our ability to enter agreements with collaborative partners, dependence on third parties and dependence
on key personnel. We plan to finance future operations with a combination of proceeds from the issuance of equity, debt, licensing
fees and revenues from future product sales, if any. We have not generated positive cash flows from operations. There are no assurances
that we will be successful in obtaining an adequate level of financing for the development and commercialization of our product
do not believe there are trends, events or uncertainties that have, or are reasonably likely to have, a material effect on our
short-term or long-term liquidity. Our research and development activities are scalable. This means that we can increase or decrease
the expenses associated with our planned preclinical studies and clinical trials based on our available cash. We have no contractual
obligations to perform preclinical studies or clinical trials. We anticipate that, during the latter part of this year or early
next year, we will conduct a clinical trial involving patients with LAPC based on the availability of our cash. For the time being,
the principal source of our cash is the sale of our common stock in registered offerings and private placements. However, there
are no assurances that such sales will be sufficient to fund our planned clinical trial and other research and development costs.
Statement of Cash Flow is the focal point for our liquidity, although the exercising of warrants and/or options at appropriate
times by our investors, consultants, officers and directors will have potentially important positive effects on our liquidity.
We also believe that the relationship between changes in operating results may induce changes in liquidity. For example, we may
experience material changes in working capital components due to the acquisition of new capital through the “at-the-market”
facility described below and the conversion of warrants and/or options by our investors, consultants, officers and directors.
We rely solely on working capital as our liquidity indicator, since we do not presently have any open credit lines; however, we
may try to obtain credit lines or other credit facility in the future. Further, as has often been a part of our mechanism to maintain
overall liquidity, internal sources of liquidity from others associated with us may be utilized when needed.
do not utilize any advanced methodology of cash management beyond paying our normal expenses.
May 28, 2014, we entered a financial advisory offering and an at the market offering engagement agreement (“Chardan Agreement”)
with Chardan Capital Markets, LLC (“Chardan”) pursuant to which Chardan agreed to use its reasonable best efforts
to act as our sales agent for the sale of our common stock in “at-the-market” or privately negotiated transactions
of up to $50,000,000, depending upon market conditions and at our discretion. In such transactions, we agreed to pay Chardan:
(i) a cash fee of 3% of the gross proceeds from the sale of any shares of common stock sold in an “at-the-market”
offering; and (ii) a cash fee of 7% of the aggregate sales price of any distinct blocks of common stock sold under the Chardan
Agreement, plus five-year warrants representing 5% of the number of shares of common stock sold. We also agreed to reimburse certain
expenses of Chardan in an amount not to exceed $15,000.
Chardan Agreement was amended December 15, 2016. The amendment provides for the termination of the Engagement Agreement for any
reason, with or without cause on five days’ written notice by either party. The amendment also provides that Chardan will
be entitled to collect transaction fees for common stock or other securities offered by us and sold to any parties introduced
to us by Chardan within nine months following expiration or termination of the Engagement Agreement.
January 26, 2018, we and Chardan entered into a Mutual Termination Agreement terminating the Chardan Agreement. The Company is
not subject to any termination penalties related to the mutual termination of the Chardan Agreement. The Company does not owe
any further fees to Chardan under any provision of the Chardan Agreement.
raised approximately $13 million through our initial Registration Statement on Form S-3 filed on October 17, 2014 (“First
S-3”) pursuant to which Chardan was our exclusive placement agent.
February 22, 2018, we entered into a financial advisory, offering and an “at the market offering” engagement agreement
(“Aeon Agreement”) with Aeon Capital, Inc. (“Aeon”) pursuant to which Aeon agreed to use its reasonable
best efforts to act as our agent for the sale of up to $25,000,000 of our common stock in “at-the-market,” or privately
negotiated transactions, or transactions structured as a public offering of a distinct block or blocks of the Shares (“Block
Trades”). In connection with a transaction deemed to be an “at the market offering”, we agreed to pay Aeon a
cash fee of 3% of the aggregate sales price from the sale of shares of our common stock. In connection with a transaction structured
as a Block Trade, we agreed to pay Aeon a cash fee of 7% of the aggregate sales price of any distinct blocks of common stock sold
under the Aeon Agreement unless the Company introduced the investor to Aeon, in which event the fee shall be 4%, plus five-year
warrants representing 5% of the number of shares of common stock sold at an exercise price equal to the price per share at which
the shares were sold in the Block Trade. We also agreed to reimburse certain expenses of Aeon in an amount not to exceed $10,000.
In addition, we agreed to provide Aeon with customary indemnification rights. The offering of the shares of our common stock will
terminate upon the earliest to occur of: (i) the sale of all of the shares to be sold; or (ii) the termination of the Aeon Agreement
by us or Aeon upon thirty days written notice prior to the effective date of the termination.
of our common stock will be made under our second Registration Statement on Form S-3 filed on September 13, 2017 (“Second
S-3”) allowing for offerings of up to $50,000,000 in transactions that are deemed to be “at the market offerings”
as defined in Rule 415 under the Securities Act or transactions structured as a public offering of a distinct block or blocks
of the shares of our common stock.
February 26, 2018 to April 30, 2018, the Company sold 33,333,333 shares of our common stock structured as a Block Trade. The issuance
of these shares resulted in gross proceeds of $1.0 million. Pursuant to the Aeon Agreement, we paid Aeon a fee of 7% ($70,000)
and provided warrant coverage of 5% of the number of shares sold with a five-year term of approximately 1.67 million warrant shares.
require substantial additional capital to finance our planned business operations and expect to incur operating losses in the
future due to the expenses related to our core businesses. We have not realized material revenue since we commenced doing business
as a biotechnology company, and there can be no assurance that we will be successful in generating revenues in the future in this
current cash expenditures are approximately $240,000 per month. As of April 30, 2018, we had approximately $1.1 million in cash.
As of the date of this Report, we have approximately $1.9 million in cash.
believe our cash on hand at April 30, 2018, sales of shares of our common stock using the Second S-3, assuming we remain eligible
to use the Second S-3, sales of unregistered shares of our common stock and any public offerings of common stock in which we may
engage in will provide sufficient capital to meet our capital requirements and to fund our operations through July 31, 2019.
will continue to be dependent on outside capital to fund our research and operating expenditures for the foreseeable future. If
we fail to generate positive cash flows or fail to obtain additional capital when required, we may need to modify, delay or abandon
some or all our business plans.
ended April 30, 2018 compared to year ended April 30, 2017
had no revenues in the fiscal years ended April 30, 2018 and 2017.
total operating expenses during the year ended April 30, 2018 increased by $2,539,283 to $6,981,429 from $4,442,146 in the year
ended April 30, 2017. The increase is mainly attributable to an increase in research and development costs, compensation expense,
director fees and in consulting expense as we awarded more stock based consulting fees, director fees and compensation in 2018
than in 2017.
||Year ended |
||Year ended |
|Research and development||
|| || || ||
|| ||69%|| ||
|| || || |
|| || || ||
|| || || ||
|| || || |
|| || || ||
|| ||13%|| ||
|| || || |
|| || || ||
|| || || ||
|| || || |
|| || || ||
|| ||399%|| ||
|| || || |
|| || || ||
|| || || ||
|| || || |
|General and administrative, legal and professional||
|| || || ||
|| ||99%|| ||
|| || || |
from operations during the year ended April 30, 2018 increased by $2,539,283 to $6,981,429 from $4,442,146 in the year ended April
30, 2017. The increase is mainly attributable to an increase in research and development costs, compensation expense, director
fees and in consulting expense as we awarded more stock based consulting fees in 2018.
Income (Expenses), Net
income, net for the year ended April 30, 2018 was $152,588 as compared to other expense, net of $1,539 in the year ended April
30, 2017. Other income, net for the year ended April 30, 2018, is attributable to the Australian research and development credit
and the value added tax (VAT) refund. Other expense, net for the year ended April 30, 2017 was $1,539 and was attributable to
of Operating, Investing and Financing Activities
following table presents a summary of our sources and uses of cash for the years ended April 30, 2018 and 2017.
||Year Ended |
|Net cash used in operating activities:||
|Net cash used in investing activities:||
|Net cash provided by financing activities:||
|Effect of currency rate exchange||
|Increase (decrease) in cash||
cash used in operating activities for the years ended April 30, 2018 and 2017 are a result of our net losses offset by securities
issued for services and compensation, changes to prepaid expenses, accounts payable, accrued expenses and license agreement obligations
for 2018 and for the year ended April 30, 2017.
Activities: We had no investing activities for the years ended April 30, 2018 and 2017.
cash provided from financing activities for the years ended April 30, 2018 and 2017 is mainly attributable to the proceeds from
the sale of our common stock.
as described below, we have no off-balance sheet arrangements that could have a material current effect or that are reasonably
likely to have a material adverse effect on our financial condition, changes in financial condition, revenues or expenses, results
of operations, liquidity, capital expenditures or capital resources.
we reach certain “milestones” in the progression of the live cell encapsulation technology towards the development
of our therapies for cancer and diabetes, payments are owed by us to SG Austria or Austrianova.
future royalty and milestone payments under the Third Addendum are: (i) royalty payments of 2% royalty on all gross sales by us;
(ii) 10% percent royalty on gross revenues we receive from sublicensing; and (iii) milestone payments of $100,000 after enrollment
of the first human patient in the first clinical trial for each product, $300,000 after enrollment of the first human patient
in the first Phase 3 clinical trial and $800,000 after obtaining a BLA or marketing authorization from the FDA or EMA. Additional
milestone payments of $50,000 are to be paid by us after the enrollment of the first veterinary patient for each product and $300,000
after obtaining marketing authorization for each veterinary product.
future royalty and milestone payments under the Diabetes License Agreement are: (i) royalty payments of 10% royalty on all gross
sales by the Company, (ii) 20% royalty on gross revenues by a sublicense; and (iii) milestone payments of $100,000 for the first
preclinical experiment using the encapsulated cells, $500,000 after enrollment of the first human patient in the first clinical
trial, $800,000 after enrollment of the first human patient in the first Phase 3 clinical trial and $1,000,000 after a NDA or
a BLA is approved by the FDA or a MAA is approved by the EMA or its equivalent based on the country in which it is accepted for
each product obtaining a marketing authorization.
future royalty and milestone payments under the Cannabis License Agreement are: (i) 10% royalty on all gross sales; (ii) 20% royalty
on gross revenues from sublicensing; (iii) milestone payments of $100,000 for the first preclinical experiment using the encapsulated
cells; (iv) $500,000 after enrollment of the first human patient in the first clinical trial; (v) $800,000 after enrollment of
the first human patient in the first Phase 3 clinical trial; and (vi) $1,000,000 after a NDA or a BLA is approved by the FDA or
a MAA is approved by the EMA or its equivalent based on the country in which it is accepted for each product obtaining a marketing
future royalty, milestone and patent prosecution costs under the Melligen Cell License Agreement are: (i) 6% royalty on gross
sales and 25% royalty on sublicense gross sales; (ii) milestone payments of $50,000 after the first preclinical study, $100,000
after the successful conclusion of a Phase 1 clinical trial, $450,000 after the successful conclusion of a Phase 2 clinical trial
and $3,000,000 after the successful conclusion of a Phase 3 clinical trial; and (iii) 15% of the costs paid by UTS to prosecute
and maintain patents related to the licensed intellectual property.
May 14, 2018, we entered into amendments to the Third Addendum. See “—Details of the Company’s Material Agreements–Subsequent
Event” for a description of these amendments.
Accounting Estimates and Policies
Consolidated Financial Statements are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).
We are required to make assumptions and estimates about future events and apply judgments that affect the reported amounts of
assets, liabilities, revenue and expenses and the related disclosures. We base our assumptions, estimates and judgments on historical
experience, current trends and other factors that management believes to be relevant at the time our consolidated financial statements
are prepared. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that
our consolidated financial statements are presented fairly and in accordance with U.S. GAAP. However, because future events and
their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates and such differences
could be material.
significant accounting policies are discussed in Note 2 of the notes to our Consolidated Financial Statements included in Item
8, “Financial Statements and Supplementary Data” of this Report. Management believes that the following accounting
estimates are the most critical to aid in fully understanding and evaluating our reported financial results and require management’s
most difficult, subjective or complex judgments, resulting from the need to make estimates about the effects of matters that are
inherently uncertain. Management has reviewed these critical accounting estimates and related disclosures with our Board.
and Development Expenses
and development expenses consist of costs incurred for direct and overhead-related research expenses and are expensed as incurred.
Costs to acquire technologies, including licenses, that are utilized in research and development and that have no alternative
future use are expensed when incurred. Technology developed for use in our product candidates is expensed as incurred until technological
feasibility has been established.
stock-based employee compensation plans are described in Note 5 of the Notes to our consolidated financial statements. We follow
the provisions of ASC 718, Compensation - Stock Compensation (“ASC 718”), which requires the measurement and
recognition of compensation expense for all stock-based awards made to employees.
stock warrants paid in consideration of services rendered by non-employees, we recognize compensation expense in accordance with
the requirements of ASC 505-50, Equity-Based Payments to Non-Employees (“ASC 505-50”).
Income (Loss) Per Share
net income (loss) per common share is computed using the weighted-average number of common shares outstanding. Diluted net income
(loss) per common share is computed using the weighted-average number of common shares and common share equivalents outstanding.
Potentially dilutive stock options and warrants to purchase 129,243,104 and 146,953,504 shares at April 30, 2018 and 2017, respectively,
were excluded from the computation of diluted net income (loss) per share because the effect would be anti-dilutive.
a discussion of all recently adopted and recently issued but not yet adopted accounting pronouncements, see “New Accounting
Pronouncements” in Note 2 of our Notes to our consolidated financial statements included in Item 8, “Financial Statements
and Supplementary Data” of this Report.
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
are a smaller reporting company and are not required to include information called for by this Item 7A.
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Balance Sheets, as of April 30, 2018 and 2017, and our Consolidated Statements of Operations, Comprehensive Loss,
Stockholders Equity and Cash Flows for each of the two years in the period ended April 30, 2018 and associated Notes and Schedules,
together with the reports thereon of our independent registered public accounting firm, are set forth on pages F-1 to F-25 of
this Report and are incorporated by reference herein.
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
principal independent public accountant is Armanino LLP (“Armanino”). During our fiscal year ended April 30, 2018
and 2017, there have been no disagreements with Armanino on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure which, if not resolved to Armanino’s satisfaction, would have caused Armanino
to refer to the subject matter in its report on our Consolidated Financial Statements for such periods.
our fiscal year ended April 30, 2018 and 2017, there were no “reportable events” requiring disclosure pursuant to
Item 304(a)(1)(v) of Regulation S-K. As used herein, the term “reportable event” means any of the items listed in
paragraphs (a)(1)(v)(A)-(D) of Item 304 of Regulation S-K.
9A. CONTROLS AND PROCEDURES
of Disclosure Controls and Procedures
Chief Executive Officer, President and General Counsel, as our principal executive officer (“Chief Executive Officer”),
and our Chief Financial Officer, as our principal financial officer (“Chief Financial Officer”), evaluated the effectiveness
of our “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) promulgated under the Exchange
Act. Disclosure controls and procedures are designed to ensure that the information required to be disclosed in the reports that
we file or submit to the Commission pursuant to the Exchange Act are recorded, processed, summarized and reported within the period
specified by the Commission’s rules and forms and are accumulated and communicated to our management, including our Chief
Executive Officer, as appropriate to allow timely decisions regarding required disclosures. Based upon this evaluation, our Chief
Executive Officer and our Chief Financial Officer have concluded that, as of April 30, 2018, our disclosure controls and procedures
were not effective due to the material weaknesses in internal control over financial reporting.
control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives
of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints,
and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems,
no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company
have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that
breakdowns can occur because of simple error or mistake. Also, controls can be circumvented by the individual acts of some persons,
by collusion of two or more people or by management override of the controls. The design of any system of controls is also based
in part upon certain assumptions about the likelihood of future events. There can be no assurance that any design will succeed
in achieving its stated goals under all potential future conditions.
Evaluation of Internal Control over Financial Reporting
management is responsible for establishing and maintaining adequate internal control over financial reporting as that term is
defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control over financial reporting is designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with U.S. GAAP.
the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, management conducted
an evaluation of the effectiveness of our internal control over financial reporting as of April 30, 2018 based on the criteria
outlined in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(“COSO”) and identified the following material weaknesses and management remedies in internal control over financial
segregation of duties of the Chief Financial Officer. We have delegated several of the duties of our Chief Financial Officer
to other personnel within the Company, and have added the review and approval processes performed by the Chief Executive Officer.|
technology controls and documentation. We currently use accounting software which we have determined is inadequate to provide
strong controls. We are in the process of initiating a review process to fully evaluate the deficiencies in our technology
controls and documentation. Based upon the results of such a review process, we will implement required remediation measures.|
of internal information with management and members of our Board. We remediated this weakness by having regularly scheduled
meetings with our Board, including our Audit Committee, on at least a quarterly basis. We have implemented management meetings
to discuss the status of Company events and improve communication among members of our management.|
||Procedures and control
documentation to implement control procedures. We have developed procedures to provide ample review time of financial information
by qualified accounting and finance personnel as well as management. We have fully implemented these procedures and will continue
to review these procedures to determine ways to further improve them.|
of these material weaknesses, our Chief Executive Officer and our Chief Financial Officer concluded that, as of April 30, 2018,
our internal control over financial reporting was not effective based on the COSO criteria.
continue the process of instituting additional procedures and controls for fiscal year 2019. We plan to make changes to our procedures
and controls that we believe are reasonably likely to strengthen and materially affect our internal control over financial reporting.
to the remediation of these material weaknesses, there remains risk that the processes and procedures on which we currently rely
will fail to be sufficiently effective, which could result in material misstatement of our financial position or results of operations
and require a restatement. Moreover, because of the inherent limitations in all control systems, no evaluation of controls-even
where we conclude the controls are operating effectively-can provide absolute assurance that all control issues, including instances
of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be
faulty and breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system
of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential future conditions. Over time, our control systems,
as we develop them, may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures
may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may
occur and not be detected and could be material to our financial statements.
Certifications of our Principal Executive and Principal Financial Officer required in accordance with Rule 13a-14(a) under the
Exchange Act and Section 302 of the Sarbanes-Oxley Act of 2002 (“Certifications”) are attached to this Report. The
disclosures set forth in this Item 9A contain information concerning: (i) the evaluation of our disclosure controls and procedures,
and changes in internal control over financial reporting, referred to in paragraph 4 of the Certifications; and (ii) material
weaknesses in the design or operation of our internal control over financial reporting, referred to in paragraph 5 of the Certifications.
The Certifications should be read in conjunction with this Item 9A for a more complete understanding of the matters covered by
in Internal Control over Financial Reporting
were no changes in our internal control over financial reporting during the most recent fiscal quarter that have materially affected,
or are reasonably likely to materially affect, our internal control over financial reporting.
9B. OTHER INFORMATION
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
directors, executive officers and significant consultants, as of July 20, 2018, are:
|Kenneth L. Waggoner,
||Chairman of the
Board, Chief Executive Officer, President and General Counsel|
|Gerald W. Crabtree,
||Director and Chief
|Carlos A. Trujillo,
||Director and Chief
|Thomas C. K. Yuen
|Michael M. Abecassis,
|Raymond C.F. Tong,
|Walter H. Günzburg,
Officer and Consultant|
|Linda S. Sher, M.D.
||Chief Medical Officer
L. Waggoner, J.D.
L. Waggoner began working for us as an independent contractor in September 2013. He became our Chief Executive Officer and President
in November 2013. Shortly thereafter, Mr. Waggoner assumed the additional position of General Counsel. In April 2014, Mr. Waggoner
became a full-time employee as the Chief Executive Officer, President and General Counsel of both PharmaCyte and Viridis Biotech,
a wholly owned subsidiary of PharmaCyte. Mr. Waggoner has been a member of the Board since September 2014. Mr. Waggoner has over
four decades of experience in management, business, operations and the practice of law. It was his education, training, experience
and leadership skills that led us to elect him to the Board and appoint him Chairman.
Waggoner began his professional career as an attorney in private practice. From 1986 to 2003, he was a senior partner with Brobeck,
Phleger and Harrison (“Brobeck”), where he was the Managing Partner of Brobeck’s Los Angeles office. While at
Brobeck, Mr. Waggoner served as a member of the Executive Committee and on the Policy Committee. Mr. Waggoner was the co-Chairman
of Brobeck’s worldwide Environmental Law Group.
Waggoner’s career included leadership and legal positions with Fortune 100 companies most of his professional career. From
2003 to 2005, Mr. Waggoner served as the Vice President and General Counsel of Chevron’s global downstream operations where
he was responsible for the overall management of legal services to the North American, Latin American, Europe and Asian Products
Companies. While at Chevron, Mr. Waggoner led the successful restructuring of Chevron’s global Legal Department following
Chevron’s acquisition of Texaco.
2005 until September 2013, Mr. Waggoner was the principal of the Law Offices of Kenneth L. Waggoner & Associates. During that
time, he held leadership and legal positions with several start-up companies and provided legal counsel and business advice to
Waggoner received his Juris Doctorate with honors from Loyola University School of Law in Los Angeles in 1973.
W. Crabtree, Ph.D.
Gerald W. Crabtree has served as our Chief Operating Officer since February 2011 and has been a member of the Board since February
2013. Given the major importance to developing treatments for cancer and diabetes coupled with Dr. Crabtree’s education,
training and experience, Dr. Crabtree was appointed to the Board.
Crabtree’s background in the biomedical sciences has been substantial, having been involved with various biopharmaceutical
companies where he has alternatively supervised and coordinated the development of multiple drug candidates, prepared clinical
protocols, investigator brochures, monographs, and research and review articles.
Crabtree has over 50 years of experience in the biomedical sciences sector with the majority of that being in the cancer area.
Dr. Crabtree served as the Director of Project Planning and Management (Oncology and Immunology) at Bristol-Myers Squibb (“BMS”)
from 1990 to 1997. While at BMS, Dr. Crabtree established and directed the department that coordinated the development of all
oncologic and immunologic drugs from initial discovery through regulatory approval. He also served as Project Manager for the
development of the major anticancer agent, Taxol. Taxol ultimately became a multi-billion-dollar drug for BMS and is still widely
used to treat a variety of cancers. From 1985 to 1990, Dr. Crabtree was the Director of Pharmacology at Viratek, a subsidiary
of ICN Pharmaceuticals, in Costa Mesa, California, where he worked on the development of anticancer drugs first developed at the
Nucleic Acid Research Institute, a joint venture between Eastman Kodak and ICN Pharmaceuticals. He also coordinated the development
of ribavirin, Viratek's landmark antiviral drug. From 1970 through 1985, Dr. Crabtree was a member of the faculty of Brown University
where he was involved in both basic and clinical cancer research.
Crabtree received his Ph.D. in Biochemistry from the University of Alberta, Edmonton, Alberta, Canada, and has published over
80 articles in peer-reviewed journals. He was a National Cancer Institute of Canada Research Fellow, is currently a member of
both the American Society of Clinical Oncology and the American Association for Cancer Research and has served on research grant
review committees for the National Institutes of Health and the American Cancer Society.
A. Trujillo, CPA
A. Trujillo began working for us as an independent contractor in September 2014. In January 2015, Mr. Trujillo became a full-time
employee as the Vice President of Finance of both us and Viridis Biotech, and in March 2017, Mr. Trujillo was appointed as our
Chief Financial Officer. Mr. Trujillo has been a member of the Board since March 2017. Mr. Trujillo has over three decades of
experience in management, business, operations and financial accounting. It was his education, experience and leadership skills
that led us to elect him to the Board.
Trujillo is a Certified Public Accountant with an active license by the State of California. He has 35 years of experience in
finance, accounting and management. Mr. Trujillo started his career in public accounting and was the manager of an audit department
a large regional public accounting firm. Mr. Trujillo then established a consulting and accounting practice which he operated
for ten years and provided services as the Chief Financial Accountant to numerous organizations in several different industries.
His experience has extended to companies in the biotechnology, telecommunications, manufacturing, construction and real estate
the last eleven years, Mr. Trujillo has been the Chief Financial Officer for both privately-held and publicly-traded and multinational
companies. From June 2008 through September 2014, Mr. Trujillo was the Chief Financial Officer of VelaTel Global Communications,
Inc. As a result, he brings extensive experience to us in preparing and filing periodic reports with the Commission, in mergers
and acquisitions and in the filing of comprehensive financial statements.
Trujillo received his Bachelor’s Degree in Accounting from California State University, Fullerton in 1982.
Liquard has been a member of the Board since April 2015. Mr. Liquard has more than a decade
of experience in the pharmaceutical industry, having held various commercialization, product development and leadership roles
with large pharmaceutical and biotechnology companies. It was his education, experience and leadership skills that led
us to elect him to the Board.
Liquard currently serves as an independent consultant to the biopharmaceutical industry. From August 2015 to August 2017, Mr.
Liquard was the Chief Executive Officer of Immuron, a Melbourne, Australia-based pharmaceutical company. Prior to Immuron, Mr.
Liquard served as the Chief Executive Officer and Chief Operating Officer of Alchemia, a major Australian pharmaceutical company.
Mr. Liquard worked for Alchemia from October 2013 to November 2014. Mr. Liquard spent the previous seven years with Pfizer, Inc.
based in New York, where he held various senior commercial positions. His last was as Senior Director, Portfolio Development Leader
and Emerging Markets for the Established Products portfolio. In that role, Mr. Liquard drove business development (M&A, licensing,
partnerships) and internal product development initiatives.
Liquard was appointed to the Board because of his experience and expertise in leading positions with life science-oriented biotech
and pharmaceutical companies. We believed that his seven-year tenure with Pfizer, one of the world’s leading pharmaceutical
companies, where he played leading roles in the development of that company’s portfolio development, was a needed asset