Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the information contained in the financial statements of the Company and the notes thereto appearing elsewhere herein and in conjunction with the Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth in the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2018, and the Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth in the Company’s Annual Report on Form 10-K for the year ended June 30, 2018. Readers should carefully review the risk factors disclosed in this Form 10-Q, Form 10-K and other documents filed by the Company with the SEC.

As used in this report, the terms “Company”, “we”, “our”, “us” and “NNVC” refer to NanoViricides, Inc., a Nevada corporation.

PRELIMINARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Report contains forward-looking statements within the meaning of the federal securities laws. All statements other than statements of historical fact made in this report are forward looking. In particular, the statements herein regarding industry prospects and future results of operations or financial position are forward-looking statements. These include statements about our expectations, beliefs, intentions or strategies for the future, which we indicate by words or phrases such as “anticipate,” “expect,” “intend,” “plan,” “will,” “we believe,” “Company believes,” “management believes” and similar language. These forward-looking statements can be identified by the use of words such as “believes,” “estimates,” “could,” “possibly,” “probably,” “anticipates,” “projects,” “expects,” “may,” “will,” or “should,” or other variations or similar words. No assurances can be given that the future results anticipated by the forward-looking statements will be achieved. Forward-looking statements reflect management’s current expectations and are inherently uncertain. The forward-looking statements are based on the current expectations of NanoViricides, Inc. and are inherently subject to certain risks, uncertainties and assumptions, including those set forth in the discussion under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this report. Actual results may differ materially from results anticipated in these forward-looking statements.

Investors are also advised to refer to the information in our previous filings with the Securities and Exchange Commission (SEC), especially on Forms 10-K, 10-Q and 8-K, in which we discuss in more detail various important factors that could cause actual results to differ from expected or historic results. It is not possible to foresee or identify all such factors. As such, investors should not consider any list of such factors to be an exhaustive statement of all risks and uncertainties or potentially inaccurate assumptions.

Recent Developments

NanoViricides is pioneering a unique platform for developing anti-viral drugs based on the “bind-encapsulate-destroy” principles. Viruses would not be able to escape a properly designed nanoviricide® drug by mutations because in doing so they would lose the ability to bind their cognate cellular receptor(s) and thus fail to infect productively, becoming incompetent.

NanoViricides is a unique pre-clinical pharma company in that it fully owns its own lab and cGMP-capable flexible custom manufacturing facility where any of our drug candidates can be produced in multi-kilogram quantities to support corresponding IND-enabling tox package studies as well as initial human clinical trials. We believe this will enable rapid translation of our drug candidates to the clinic, saving years of manufacturing translation and set-up activities, as well as saving several millions of dollars of external costs, while ensuring requisite quality assurance, as compared to using a contract manufacturing organization (“CMO”) for our complex nanomedicine drugs.

The Company’s Drug Programs in Brief

Since its founding in 2005, the Company has developed drug candidates against a number of different viruses. In particular, in the FluCide™ program, the Company has previously demonstrated extremely high effectiveness in animal models against two unrelated influenza viruses, namely H1N1 and H3N2. In the HIVCide™ program, in the standard SCID-hy Thy/Liv mouse model of HIV infection, the Company’s drug candidates were found to maintain viral load to the same level as an approved triple combination drug therapy, beyond 40 days after the nanoviricide treatment was discontinued, although the combo therapy was continued daily. The Company intends to reactivate these programs upon appropriate collaborations or funding. The Company has also demonstrated preliminary successes in developing drug candidates against Dengue viruses, and Ebola virus, among others.

In December 2012, the Company purchased at cost the nanomedicines research and cGMP production facility that was designed and built by Dr. Diwan, its co-founder, who had used his personal funds and his privately raised financing. With this purchase, the Company became a unique company in the industry with its own cGMP manufacturing capability, and end-to-end discovery-to-drug-product drug development capability that is rare in the biopharma industry.

Since then, the Company has focused on drug programs that it believes it can execute on with the limited financing that it believes it can bring in to support the projects. Thus the Company decided to focus on the HerpeCide™ program. In particular, the Company decided to develop dermal topical treatments (skin creams) for HSV-1 and HSV-2. When the Company’s internal research showed that, surprisingly, the same drug candidates were effective against the VZV virus in cell culture, the Company extended the HerpeCide program to include VZV studies. Further, the Company has also demonstrated that some of these drug candidates were effective in viral-ARN (“Acute Retinal Necrosis”) in an animal model. Thus the Company has three immediate drug programs, namely dermal topical treatments for HSV-1, HSV-2 and VZV, and two additional drug programs, namely eye drops for treatment of Herpes Keratitis (an infection of the external eye), and intra-vitreal injection for the treatment of vARN, in the HerpeCide program alone.

The Company intends to take the VZV (shingles) treatment into clinical trials first, followed by topical treatment for HSV-1 and HSV-2. Additional indications for the same drugs are expected to expand the pipeline wider. As these programs mature, the Company intends to re-engage its FluCide and HIVCide programs.

The market size for HerpeCide programs is in several tens of billions of dollars because neither cures nor very effective treatments are available. Approved treatments have limited effectiveness, demonstrating a significant unmet medical need. The market size for Influenza drugs is estimated to be in tens of billions of dollars. The market size for HIV drugs is estimated to be more than $40 billions.

Thus the Company’s technology has substantial capabilities and applications, and the potential to attack as-yet-unsolved problems caused by viral infection, and thus lead to a great health benefit to individuals and societies. The Company has a bright future with expanding a pipeline, as we further the research programs driving towards cures beyond our current objectives of effective treatments.

The Company's most advanced pre-clinical drug candidate is our anti-VZV nanoviricide for the topical treatment of shingles, being developed as a skin cream. In cell culture studies, it was as much as five times more effective than acyclovir, the current standard of care. These anti-VZV drug candidates have also shown strong effectiveness in studies involving VZV infection of human skin patches ex vivo. These studies were conducted by Professor Jennifer Moffat at the SUNY Upstate Medical Center in Syracuse, NY, an internationally recognized expert on varicella-zoster virus (VZV) infection, pathogenesis, and anti-viral agent discovery. The work was presented at the 31st International Conference on Antiviral Research held June 11 - June 15, 2018 in Porto, Portugal.

There is a significant unmet medical need for the topical treatment of shingles rash. An effective therapy for shingles has been estimated to have a market size into several billions of dollars, if it reduces PHN incidence. An effective therapy against shingles rash reduction alone is estimated to have a market size of several hundred million dollars to low billion dollars. These market size estimates have taken into account the potential impact of the new Shingrix® GSK vaccine and the impact of the existing Zostavax® vaccine. Of note, the Shingrix vaccine has been found to cause significant, debilitating, side effects in as many as 15%-20% of the persons receiving it. Given that shingles is not a life-threatening disease (except under certain conditions), the uptake of such a vaccine with high incidence of adverse effects may be far more limited than what was originally estimated. Additionally, Shingrix is not yet widely available.

The Company is also developing drugs against HSV-1 “cold sores” and HSV-2 “genital ulcers”, both based on this same drug candidate, although final clinical candidates are in pre-clinical optimization stage for both of these indications as of now.

Existing drugs given systemically may not reach required concentrations at the site of shingles outbreak, limiting effectiveness. In addition, unlike HSV-1 and HSV-2, VZV does not have an effective TK enzyme that is required for producing active forms from the acyclovir class of drugs, requiring frequent administration of very large doses to treat shingles. While shingles presents with a debilitating “pins-and-needles” pain associated with the characteristic rash that is self-limiting within 2-3 weeks in most patients, in a substantial percentage of patients, it presents as a severe, debilitating disease that leads to complications including hospitalization(s) and in some cases may result in extended treatments including subsequent surgeries.

Limiting initial viral load is expected to minimize the occurrence of such complications, and is also expected to reduce the incidence of post-herpetic-neuralgia (“PHN”), which is defined as persistent pain six months or longer after the initial rash has subsided. Thus, we anticipate that NV-HHV-101 would have significant impact in reducing PHN incidence rates. We anticipate extending the NV-HHV-101 indication to include PHN after obtaining marketing approval for the first indication, namely effect on shingles rash. 

The Company is pleased to note that it has been executing on all milestones towards the IND filing for its first clinical candidate along a reasonable projected timeline, and is doing so with highly conservative expenditures. These continuing developments are substantially dependent on external collaborations as well as on continuing to achieve successful results.

The Company reported on February, 4, 2019 that it has formally commenced the IND-Enabling Non-GLP Safety/Toxicology studies for its first drug candidate in the HerpeCide™ Program. These studies are being conducted by BASi, Indiana, a Contract research Organization (“CRO”). The start of these IND-enabling studies marks a major milestone for the Company and an important step in establishing our nanoviricide® platform technology and validity of our approach. 

The drug candidate selected for advancing towards human clinical studies is designated as NV-HHV-101. The Company is presently advancing this selected drug candidate as a treatment for shingles rash. Shingles and chickenpox are caused by the same virus, namely Varicella Zoster Virus (“VZV”). Additionally, NV-HHV-101 or a closely related drug candidate is expected to be advanced as a clinical drug candidate against HSV-1 “cold sores” and against HSV-2 “genital ulcers” as these programs mature. All of these current candidates are being developed as skin creams for dermal topical applications. 

The Company has repeatedly demonstrated in a human skin organ culture model of VZV infection that NV-HHV-101 and several related candidates were highly effective against VZV infection in this ex vivo model of the VZV viral infection. These studies are being performed by Professor Jennifer Moffat at the Upstate Medical Center, SUNY, Syracuse, NY. Dr. Moffat is a leading researcher in this field and has developed this model based on infection of human skin. Since this model is based on human skin, it is anticipated to be predictive of effectiveness in human clinical trials. Additionally, the Company believes that the ex vivo and animal model effectiveness data that we obtain against a virus should be predictive of effectiveness in human clinical trials. This is because our nanoviricide® drug candidates are designed to attack the virus particle itself, and complete the task of dismantling or rendering the virus ineffective, irrespective of the host, whether animal or human. While these are reasonable expectations, there can be no assurance that they hold true in human clinical trials.

The Company has previously found that dermally applied nanoviricide drug candidates led to full survival of lethally infected animals in a severe infection with the highly pathogenic, neurotropic strain of HSV-1, namely H129c. Thus the nanoviricide drug candidates applied topically appear to demonstrate strong efficacy. Topical application has the advantage of being able to deliver very high drug concentrations locally to completely eradicate the virus. In contrast, the local concentrations and therefore effectiveness of orally delivered medications is limited by the toxicity and bioavailability of the oral drug, as is known for the existing antiviral therapies for HSV-1, HSV-2, and VZV. Therefore, treating the HSV-1 cold sores, HSV-2 genital ulcers, or VZV chicken pox lesions or shingles rash using dermal topical creams is expected to be highly beneficial.

NV-HHV-101 is a broad-spectrum nanomedicine designed to attack herpesviruses that use the HVEM (“herpesvirus entry mediator”) receptor on human cells. This drug candidate is composed of a flexible polymeric micelle “backbone” to which a number of small chemical ligands are chemically attached. The ligands in this case are designed to mimic the binding site of the herpesviruses on HVEM, based on molecular modeling. NV-HHV-101 is expected to bind to VZV (or HSV-1 or HSV-2) virus particle via a number of binding sites (i.e. the ligands), thereby encapsulating the virus particle and destroying its ability to infect human cells. This “Bind, Encapsulate, Destroy” nanoviricide® strategy is distinctly different from the mechanism of action of existing antiviral drugs against VZV, HSV-1, and HSV-2.

NanoViricides’ platform technology and programs are based on the TheraCour® nanomedicine technology of TheraCour Pharma, Inc. NanoViricides holds licenses for developing drugs against several different viruses from TheraCour, including HSV-1 and HSV-2. In addition, the Company and TheraCour have signed a Memorandum of Understanding of the terms of a license for VZV (shingles, chicken pox virus), and the remaining human herpesviruses from TheraCour. For this purpose, the Company has conducted a valuation for the shingles and PHN indications. A draft of the license agreement is currently in review. We are working to exchange drafts of the proposed license agreement with Theracour. TheraCour is owned substantially by the Company’s President and Executive Chairman of the Board, Anil R. Diwan, Ph.D. As of this writing, a draft of the ensuing license agreement is being prepared by the Company’s attorneys. The draft is expected to be provided to TheraCour’s attorney for further deliberations. 

The anti-VZV drug development program has moved rapidly towards clinical candidate declaration stage because of several factors, namely (a) that it was simply the existing HSV-1 drug program in which the existing candidates were re-tested for effectiveness against VZV, (b) that we have had a highly successful collaboration with Dr. Moffat Lab at SUNY Syracuse with rapid turnaround times, and (c) the drug candidates were found to be highly effective against VZV in these studies.

The first part of the IND-enabling Safety/Toxicology studies for the shingles drug candidate began towards the end of December, 2018. These studies are being conducted Bioanalytical Systems, Inc. (“BASi”) ,, Indiana, a Contract Research Organization specialized in IND-enabling safety/toxicology studies. The first of these studies, namely non-GLP Safety/Tolerability and Toxicity using Dermal Exposure in Mini-Pigs, began at the very end of December, 2018. Following initial observations on this mini-pigs study, the next non-GLP studies for Systemic Exposure using sub-cutaneous administration in Rats began in the second week of January, 2019. Another study of Systemic Exposure using sub-cutaneous administration in Dogs began around the same time.

The Company achieved large scale production in well controlled manufacturing processes for these non-GLP studies at a scale of approximately 100g-200g drug substance, with several steps already scaled to kilogram quantities. The Company achieved this in its own facilities with internal resources, thereby establishing itself as a leading expert in the field of nanomedicines manufacture. The Company developed final formulation of the drug substance into drug product in a highly scalable process in short time period of just about six weeks. This rapid formulation development was enabled by the very design characteristics of the TheraCour® polymeric micelles that form the backbone of the nanoviricides® drugs.

On March 5, 2019, the Company announced that its first drug candidate has successfully completed the first of the Safety/Toxicology studies moving towards human clinical trials. In this dermal safety/tolerability study, all dosage levels of the nanoviricide® drug product, including the maximum feasible dose, were well tolerated in all treated animals. All of the parameters evaluated in the study remained within normal ranges, and showed no adverse effects from the drug treatment.

On March 12, 2019, the Company announced that its first drug candidate has successfully completed another important step in its Safety/Toxicology studies moving towards human clinical trials. The broad-spectrum anti-herpes clinical candidate in the HerpeCide™ program, namely NV-HHV-101, was tested in this additional non-GLP study, formulated as a subcutaneous injection, to determine potential systemic safety and toxicological effects. While NV-HHV-101 is designed and developed as a dermal topical cream, it is important to determine if any systemically absorbed portion of the drug can have deleterious effects. NV-HHV-101 administered subcutaneously was well tolerated and there were no NV-HHV-101-related findings in this escalating dose study at all dosages up to the maximum feasible dose in dogs. This study was conducted at BASi, Evansville, IN, a Contract Research Organization that is specialized in IND-enabling safety/toxicology studies. This study was completed in February, 2019.

These strong safety results are consistent with our previous studies on two related drug candidates during drug candidate optimization. The Company has previously tested two related development candidates in the HerpeCide™ program in non-GLP Safety and Tolerability study in rats for dermal exposure as well as systemic exposure by subcutaneous and intravenous routes of administration. The Company previously reported that those candidates were both found to be safe based on multiple parameters in the completed non-GLP Tolerability study.

The success of these non-GLP studies allows advancing the drug candidate into the GLP portion of the Safety/Toxicology studies that are required for filing an IND. Safety Pharmacology studies are designed to investigate the potential undesirable pharmacodynamic effects of a substance on physiological functions in relation to exposure in the therapeutic range and above.

On March 26, 2019, the Company announced that it has requested a pre-IND meeting with the US FDA, as it progresses its lead drug candidate towards human clinical trials. The Company has submitted a request for a
“Type B” Pre-IND Meeting with the US FDA for this drug candidate. The Company believes that the resulting pre-IND meeting will provide valuable information for designing the Company’s clinical program for this drug candidate. The initial indication of this drug candidate will be for the treatment of shingles rash.

The Company is developing its clinical program for NV-HHV-101, formulated as a skin cream for topical application, with the help of regulatory affairs experts from the Biologics Consulting Group, Inc., Alexandria, VA.

The Company has conducted a drug candidate optimization program using an ex vivo human skin organ culture (“SOC”) model of VZV infection, together with cell culture based VZV infection studies, to arrive at NV-HHV-101. The SOC model of VZV infection has been developed by Professor Jennifer Moffat at the Upstate Medical Center, SUNY, Syracuse, NY. It is the only pre-clinical model suitable for evaluating a topical therapy against shingles because VZV infects only humans. There is no animal model available for the evaluation of topical drugs against VZV infection.

NV-HHV-101 is formulated as a dermal cream to be applied topically on the rash. It is expected to reduce viral load at the site, thereby arresting the progress of the shingles rash, and minimizing damage to nerve endings in the area. It is generally believed that the damage to nerve endings caused by VZV that is replicated locally after it is released from the nerves initially leads to the severe “pins-and-needles” debilitating pain of shingles. Thus NV-HHV-101 is expected to minimize the entire pathology of shingles, including the rash, skin damage, nerve damage, and associated pain. The Company intends to focus the initial clinical studies to evaluate the effect of application of NV-HHV-101 on the shingles rash.

Existing antivirals against VZV include oral derivatives of acyclovir. These drugs require activation by a viral enzyme, thymidilate kinase (vTK), for further cellular conversion to the active triphosphate form that interferes with the viral DNA polymerase. However, the vTK encoded by VZV has an extremely poor activity (compared to vTK from HSV-1 or HSV-2), and thus these drugs have very poor activity against VZV, and large oral dosages over extended periods are needed to be given for relatively small clinical benefit. Additionally, a dermal topical cream formulation of cidofovir is employed in very severe cases of shingles. Cidofovir is highly toxic, particularly towards kidneys. A safer, effective, drug is thus an unmet medical need for VZV.

Zostavax and other attenuated VZV (Oka strain) vaccines for chickenpox are available, but not widely adopted. These vaccines may lead to a less severe form of shingles in adulthood or at a later age, compared to the “wild type” chickenpox virus (“rebound shingles”). A new vaccine, Shingrix® has been introduced by GSK recently, based on subunits or protein fragments of the virus, which cannot lead to rebound shingles, but suffers from a very severe side effects profile, and has limited availability at present.

On April 9, 2019, the Company reported that US FDA has responded to its request for a pre-IND meeting and has asked for the briefing documents to be submitted by April 19th. In addition, consistent with current protocol, the FDA stated that they will provide a written response to the Company’s submission. This written response will guide the Company’s IND submission for this drug candidate and indication.

On April 16, 2019, the Company reported that it has submitted the required pre-IND Briefing Documents for its lead drug candidate NV-HHV-101 to the US FDA, ahead of schedule. Consultants from the Biologics Consulting Group, Inc., Alexandria, VA, helped the Company develop the briefing documents including the clinical studies plan presented by the Company.

On May 13th, 2019, the Company also reported that it has completed production of the drug product for the upcoming GLP Safety/Toxicology studies of its lead drug candidate in the HerpeCide™ program, namely NV-HHV-101. This production batch for the GLP studies was manufactured using cGMP-compliant procedures.

The Company reported that it has successfully completed the scale-up of the chemistries and production of kg-scale quantities of the drug substance or API, NV-HHV-101. The Company further reported that it has successfully scaled up and manufactured about 10kg of the drug product. All of the production, including that of the API and of the drug products was performed under stringent conditions meeting regulatory requirements for the GLP Tox Package study. 

The entire production was accomplished at the Company’s own cGMP-capable manufacturing facility at Shelton, CT. The Company has now demonstrated that it has multi-kilogram per batch drug production capability.

The Company has now demonstrated that it has unique expertise in the industry of performing cGMP manufacture of complex nanomedicine drugs, including cGMP manufacture of (a) drug substance from simple chemical starting materials, (b) the formulated drug product, and (c) the final packaged drug.

This establishment and execution of cGMP manufacturing is an extremely significant milestone for the Company. Our current multi-kg per batch scale of cGMP manufacturing capacity is expected to be more than sufficient for the anticipated Phase I and Phase II human clinical trials. In addition, we believe that this facility can supply required quantities of the drug for Phase III clinical trials as well. Thus, this in-house cGMP production capability is expected to result in significant cost savings across all our programs.

Manufacture of nanomedicines, especially under cGMP conditions, has been identified as a strong risk, and has led to failure of several nanomedicines programs. NanoViricides co-founder Dr. Diwan and his team have employed considerations for cGMP manufacture of our nanomedicines right from the design, development and optimization of the drug candidates, the polymers and ligands that go into them, as well as the processes employed right from the small research scale to the initial process verification batches. The rapid success of translating the research scale production of several grams drug substance in early CY-2018 to kg-scale cGMP manufacture in early CY-2019 was a result of the tremendous subject matter expertise of the team. External contract manufacturing organizations would likely have required at least three years to scale up these complex products, based on certain discussions we have had.

Thus the Company has been executing rapidly and efficiently, as well as in a cost-effective and productive manner, towards its goal of advancing the first drug candidate into human clinical trials as soon as possible. We believe that taking our first drug candidate into initial human clinical trials will be a very important milestone in that it would essentially validate our entire platform technology as being capable of producing drug candidates worthy of human clinical trials, and potentially of success in those clinical trials.

While the Company has been focused on cGMP production, scale-up, and establishment of required characterization and analytical tools, the Company had not raised any additional capital since mid-2014, except for conversion of certain convertible debt instruments into equity. With stringent execution, we have held down the cash burn rate to less than $8 Million per year. The burn rate has remained low due to reduction in workforce and due to stopping work on all other programs except the HerpeCide program. Nevertheless, our cash reserves are dwindling and therefore the Company performed an equity-based financing in February, 2019.

On February 27, 2019, the Company entered into a Securities Purchase Agreement (the “Agreement”) with certain institutional investors (the “Purchasers”), for a registered direct offering (the “Offering”) of 6,944,446 shares of Common Stock (“Shares”) at the purchase price of $0.36 (“Purchase Price”) per share for an aggregate of $2,500,000. The net proceeds were $2,35,000 after accounting for placement fees and legal expenses paid. The offer and sale of the Shares in the registered direct offering was registered under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to the Company’s shelf registration statement on Form S-3, as amended (File No. 333-216345), which became effective on April 25, 2017. Pursuant to Rule 424(b) under the Securities Act, the Company has filed a prospectus supplement in connection with such offering. In a concurrent private placement, the Purchasers received warrants (the “Warrants”) to purchase up to 6,944,446 shares of Common Stock. The Warrants have an exercise price of $0.61 per share, shall be exercisable on the six month anniversary of issuance and will expire five (5) years thereafter. The Warrants are exercisable for cash or, solely in the absence of an effective registration statement or prospectus, by cashless exercise.

With this raise, we believe that we now have sufficient cash in hand to enable us to file our first IND. The Company believes that it will need to raise additional capital by way of equity, debt, debentures, or other methods, to support the upcoming clinical trials and operational expenses.

Irach Taraporewala, PhD, resigned as CEO effective February 1, 2019 for personal reasons. As a result, Anil R. Diwan, PhD, President and Chairman, was elevated by the Board to the position of Executive Chairman. The Company has retained Dr. Taraporewala as a consultant to help with drug development into the regulatory stage for a period of two years.

Additionally, management has continued its efforts at investor outreach and communications.

Dr. Anil Diwan, President and Executive Chairman, presented the Company at the Planet Microcap Conference and Showcase in Las Vegas, NV, on May 1, 2019, subsequent to the reporting period. He also held meetings with several interested investors. The Planet MicroCap Showcase brings together the most promising companies and the top dealmakers in MicroCap Finance for three days of company presentations, one-on-one meetings, and networking in the nation’s #1 destination for meetings and entertainment.

On February 12, 2019, Dr. Diwan gave a corporate presentation at the BIO CEO & Investor Conference held at the New York Marriott Marquis. BIO CEO & Investor Conference is one of the largest investor conferences focused on established and emerging publicly traded and select private biotech companies.

Dr. Irach B. Taraporewala, then Chief Executive Officer of the Company, presented a corporate overview and discussed the Company’s progress in taking its first drug candidate into human clinical trials at the Biotech Showcase Meeting held in San Francisco, in parallel to the JP Morgan Life Sciences Conference, on January 7, 2019. Previous to that, he presented the Company overview at the MicroCap Investment Conference, held on October 1-2, 2018 at the Essex House Hotel in New York City.

Previously, the Company has reported that we have engaged The Money Channel NYC for the purpose of investor and brokerage outreach. The Company has elected to continue this engagement. 

Background - The Nanoviricide® Platform Technology

NanoViricides, Inc. is a globally leading company in the application of nanomedicine technologies to the complex issues of viral diseases. The nanoviricide® technology enables direct attacks at multiple points on a virus particle. It is believed that such attacks would lead to the virus particle becoming ineffective at infecting cells. Antibodies in contrast attack a virus particle at only a maximum of two attachment points per antibody. In addition, the nanoviricide technology also simultaneously enables attacking the rapid intracellular reproduction of the virus by incorporating one or more active pharmaceutical ingredients (APIs) within the core of the nanoviricide. The nanoviricide technology is the only technology in the world, to the best of our knowledge, that is capable of both (a) attacking extracellular virus, thereby breaking the reinfection cycle, and simultaneously (b) disrupting intracellular production of the virus, thereby enabling complete control of a virus infection.

Our anti-viral therapeutics, that we call “nanoviricides®” are designed to appear to the virus like the native host cell surface to which it binds. Since these binding sites for a given virus do not change despite mutations and other changes in the virus, we believe that our drugs will be broad-spectrum, i.e. effective against most if not all strains, types, or subtypes, of a given virus, provided the virus-binding portion of the nanoviricide is engineered appropriately. Viruses would not be able to escape the nanoviricide by viral mutations since they continue to bind to the same cellular receptor and thus would be captured by the nanoviricide. Virus escape by mutations is a major problem in the treatment of viral diseases using conventional drugs.  

The Company develops its class of drugs, that we call nanoviricides®, using a platform technology. This approach enables rapid development of new drugs against a number of different viruses. A nanoviricide is a “biomimetic” - it is designed to “look like” the cell surface to the virus. To accomplish this, we have developed a polymeric micelle structure composed of PEG and fatty acids that is designed to create a surface like the cell membrane, with the fatty acids going inside of the micelle. On this surface, we chemically attach, at regular intervals, virus-binding ligands. The virus is believed to be attracted to the nanomicelle by these ligands, and thereby binds to the nanoviricide using the same glycoproteins that it uses for binding to a host cell. Upon such binding, a “lipid mixing” interaction between the lipid envelope of the virus and the nanomicelle is thought to take place, leading to the virus attempting to enter the nanomicelle. We believe many different kinds of viruses are likely to get destroyed in this process.

We engineer the ligands to “mimic” the same site on the cell surface protein to which the virus binds. These sites do not change no matter how much a given virus mutates. Thus, we believe that if a virus so mutates that it is not attacked by our nanoviricide, then it also would not bind to the human host cell receptor effectively and therefore would be substantially reduced in its pathogenicity. Our success at developing broad-spectrum nanoviricides depends upon how successfully we can design decoys of the cell surface receptor as ligands, among other factors.

NanoViricides, Inc. is one of a few bio-pharma companies that has all the capabilities needed from research and development to marketable drug manufacture in the small quantities needed for human clinical trials. At our campus at 1 Controls Drive, Shelton, CT, we possess state of the art nanomedicines characterization facilities that we believe enable us to perform pre-IND nanomedicine analysis and characterization studies of any of our various drug candidates in house. In addition, we believe we now have the ability to scale up production of any of our drug candidates, and implement state of the art in-process controls as well as post-process analysis controls in order to establish robust c-GMP-capable production methodologies. We also have a Biological Safety Level 2 (BSL2) certified virological cell culture lab at this campus. We are able to perform initial cell culture based screening of large numbers of drug candidates for effectiveness and safety against certain of the viruses that we have targeted for drug development. This capability boosts our drug development capabilities significantly. Other than this limited initial screening, all of the biological testing and characterization of our drug candidates continues to be performed by external academic or institutional collaborators and contract research organizations (CRO). In particular, all of the animal studies are performed by our collaborators and CROs.

Our Product Pipeline

We have focused our efforts almost exclusively on the HerpeCide™ program, given our budgets and current financial condition.

We currently have at least 9 different drug development programs, attesting to the strength of our platform technology. Of these, 5 of the indications are under the HerpeCide™ program. We are currently working on 3 of these indications (VZV, HSV-1 and HSV-2) in parallel, as explained below (priority level 1). The HK program and v-ARN program (see below) are at a lower priority level. In addition, we continue to work on the FluCide™ program at the lower priority 3. HIVCide™ program is at priority level 4. We will continue to seek funding for further development in the remaining programs, namely Dengue and Ebola/Marburg antivirals.

The potential broad-spectrum nature of our anti-HSV drug candidates is enabling several anti-Herpes indications under our HerpeCide™ program. Of these, the (i) Topical Treatment for Shingles (VZV) is currently moving most rapidly towards clinical stage. We believe that the other anti-Herpes drug candidates, would follow this lead drug to the clinical stage, namely, (ii) skin cream for the treatment of orolabial herpes (“cold sores”) and recurrent herpes labialis (RHL) mostly caused by HSV-1, and (iii) skin cream for the treatment of genital herpes caused by HSV-2.

In addition, a fourth indication, (iv) ocular eye drops treatment for external eye herpes keratitis (HK), caused by HSV-1 or HSV-2, is expected to follow into further drug development. Further, we have announced that we have begun preclinical drug development work on a fifth indication under the HerpeCide program, namely (v) viral Acute Retinal Necrosis (v-ARN), intravitreal injection.

A preliminary safety and toxicology evaluation (Safety and Tolerability study) of the Company’s optimized nanoviricides® drug candidates in the HerpeCide™ program was performed at AR Biosystems, Beverly, MA in Dec 2017-March 2018. This preliminary safety/toxicology study in the rat animal model is an important step in the drug development pathway. It was conducted in order to provide information for designing the IND enabling non-GLP and GLP safety/toxicology (“Tox Package”) studies. It was designed to (i) evaluate the direct effects of topical delivery of the drug candidates on the skin, (ii) assess if the drugs attain detectable levels in the blood, and also (iii) evaluate whether there are any effects on the blood and primary organs, in uninfected animals. Dermal topical treatment of rats with formulated drug candidates was evaluated in this study as a primary objective, since skin is the primary breakout site of HSV-1, HSV-2, and VZV infections.

As a result of the success of its drug lead optimization process, the Company selected two clinical development candidates for further evaluation in this initial safety/toxicology study.

No clinically observable adverse safety and toxicology effects were seen in this study of the Company’s optimized topical dermal drug candidates. There were no adverse effects on the skin at the treatment sites. Equally importantly, the results of the non-GLP safety and toxicology study showed that there were no overall observable systemic effects either. There were no observable direct effects on the primary organ function whether the drug was administered to the skin or administered systemically. This includes liver and kidney function. This is important as the liver and kidneys are major organs involved in drug toxicity.

These results are consistent with the positive findings in a model of VZV (the shingles virus) infection of human skin in which no safety or toxicology concerns have been observed, further demonstrating the safety of these drug candidates.

Moreover, these drug candidates have shown strong effectiveness in the human skin organ culture model of VZV infection studies as well, as previously reported. Further, these candidates have demonstrated strong anti-viral activities against HSV-1, HSV-2, and VZV in cell culture studies using multiple cell lines.

These studies established that our optimized drug candidates were worthy of further development in the regulatory pathway for approval. Since then, we engaged in production scale-up and chemistry, manufacture and control studies (“CMC” studies) at our Shelton facility. This c-GMP capable facility has been designed to be able to manufacture any of our nanoviricides drug candidates from scratch in research quantities to multi-kilogram production quantities that would be needed for the regulatory Tox Package studies as well as for human clinical trials.

The success of our drug candidates in this preliminary rat safety/toxicology study cleared the path for taking these candidates into formal GLP safety/toxicology studies that are required for filing an IND. We believe that, additionally, the results of this preliminary rat safety/toxicology study give us confidence that the dermal topical treatments we are developing for the treatment of HSV-1 cold sores, and HSV-2 genital ulcers should also exhibit similar strong safety characteristics.

We have already begun to scale up production of these tested candidates to the larger amounts as estimated to be required for the ensuing Tox Package studies. We have estimated the amount of the candidate that will be needed to be supplied for such a study, based on discussions with BASi, Inc., IN, the service provider, and Biologics Consulting Group, VA, our regulatory consultants. We have increased the scale of production to meet this required quantity and have the ability to produce multi-kilogram quantities of materials. We are also working on detailed optimization of the manufacture and characterization of the materials at different synthetic steps as will be needed for the Chemistry, Manufacture, and Controls (CMC) section of an IND application.

The market size for an effective anti-shingles drug is currently estimated to be in the range of several billions of dollars, even after a new shingles vaccine, Shingrix® (GlaxoSmithKline) has been approved, based on a recent report by Dr. Myers of BioEnsemble, LLC, pharma industry consultants, commissioned by the Company. The current vaccine for prevention of chicken pox in children, i.e. the varicella vaccine, is based on the live attenuated virus derived from the Oka strain. Un-vaccinated children usually develop chicken pox at some point in their childhood, and the wild-type virus then remains latent in their bodies, in nerve ganglia. Similarly, Varicella vaccinated children may develop mild syndrome when vaccinated and the weakened Oka strain remains latent in their bodies, All of these children can develop shingles later in life. It is generally believed that the intensity of such disease would be much less severe with the weakened vaccine strain than with the natural or wild type strain. Nevertheless, the severity of the symptoms and overall effects depend upon the immune status of the individual. Pre-vaccination era, (i.e. before varicella vaccination was widely adopted in the USA), there were 3-4 million cases of chicken pox per year (matching the birth rate). Post-vaccination era, this rate has dropped to about 120,000-150,000 cases in the USA. However, in several developing and underdeveloped countries, the rates of chicken pox remain high due to limited access to the vaccine or limited adoption of the vaccine. As stated earlier, nearly every person may be expected to get shingles at some point in their lives, with varying severity. A preventive vaccine for adults, namely Zostavax® is available, based on the attenuated Oka strain. Its effectiveness is variously estimated at around 60-70%. Its coverage remains low, as most people do not get this vaccine. Shingrix is a subunit vaccine, that is it does not contain intact living virus particles but only certain proteins derived from the virus. As such, it is expected to not have the issue of “breakthrough disease” which occurs when the live latent virus from the vaccine itself causes disease. However, Shingrix has significantly greater severe side-effects than Zostavax in more than 10-15% of the persons taking it. This may keep its adoption rate much lower than expected by the manufacturer GSK. Currently, Shingrix is unavailable in most markets because the manufacturer has apparently not scaled up production more than one year since its introduction. Thus it appears that a significant market would continue to exist for an anti-shingles drug, at least for several years.

More specifically, the report estimated that the anti-shingles drug candidate could reach peak annual sales of as much as $2 Billion, depending upon the effectiveness determined in clinical trials, at an assumed 50% market penetration, if it is effective in reducing incidence of post-herpetic neuralgia (PHN). Based on current pre-clinical data, we believe that there is a very strong probability that the shingles treatment would significantly minimize the shingles pain, accelerate healing, and minimize nerve damage, thereby minimizing the occurrence and severity of post-herpetic neuralgia (PHN). Our pre-clinical drug design efforts have been aimed at developing a treatment for shingles that would have pain reduction effects as well as healing effects on skin.

Initially, we plan on performing clinical trials based on VZV related biomarkers and clinical pathology, which we believe would be sufficient for a first indication for approval of the drug for treatment of shingles by the US FDA. Sales of an effective drug against shingles with this limited indication are projected to reach several hundreds of millions of dollars. We plan on performing observations regarding PHN in these clinical trials so that an informed PHN clinical trial may be performed later to extend the drug indication.

We have developed strong chemical manufacturing process controls that enable us to produce the backbone polymers with highly restricted and reproducible molecular size range. In fact, we have achieved highly reproducible and scalable processes that have yielded the same polymer molecular sizes across production scales from 10g to 500g. In other words, we are now able to control the length of the backbone polymer to within one monomer unit, irrespective of production scale, at least up to about 1 kg scale.

We believe that this is a remarkable and possibly unmatched achievement in the field of nanomedicines. We have scaled up the production of the polymer backbone “nanomicelle” to kilogram scales, and do not anticipate any manufacturing constraints at present. We have also achieved kilogram-scale manufacture of the ligand in NV-HHV-101, and have further scaled up production of the nanoviricide NV-HHV-101, which is chemical conjugate of the ligand to the nanoviricide, in a well defined manner to kilogram scale. Additionally we have scaled up formulation of the resulting drug substance into the skin cream to multi-kilogram scales. The production of the drug substance and the drug product is achieved in a cGMP compatible fashion at our own facility.   

Our polymer backbone itself is designed based on the route of application. In the case of the shingles drug candidate, as well as for HSV-1 cold sores, and for HSV-2 genital ulcers, the route is dermal topical application.

In addition to VZV, we are also developing dermal topical drugs against HSV-1 cold sores and HSV-2 genital ulcers. Dr. Brandt’s Lab at CORL, the University of Wisconsin, Madison, WI, is validating animal models for the study and evaluation of relative efficacies of different treatments for HSV-1 infection in mice as well as for HSV-2 infection in mice. The goal of these developments is to develop animal models that would be able to discriminate an experimental drug that is more effective than the current standard of care drugs, from the standard of care. At present the existing animal models show maximal effectiveness with the standard of care and therefore cannot discriminate a drug that might be superior. If their animal models are successful in differentiating effectiveness of different drug candidates, then we will be able to evaluate our drug candidates for the treatment of HSV-1 cold sores as well as for the treatment of HSV-2 genital ulcers, in addition to the VZV testing being performed.

The ligands currently in use for the nanoviricide drug candidates against VZV shingles were actually developed using computer models of HSV binding to its cellular receptor, and not against VZV itself. Our program shifted to advance a VZV candidate as our first indication due to various considerations that led to the prioritization of the different drug indications. The Company identified certain advantages that would enable earlier entry into clinical trials for the shingles candidates. The shingles drug development program has been moving rapidly primarily because of the quick turnaround time and high responsiveness of the Dr. Moffat Lab at SUNY Syracuse, our critical collaborator for human skin effectiveness studies of our drug candidates. The Company is currently negotiating for a license for VZV, Shingles Virus, from the Company’s licensor, TheraCour Pharma, Inc. (“TheraCour”).

One of the advantages of the shingles program is that the pre-clinical drug development is performed directly in a human skin model, bypassing any animal model, providing significant confidence that a human clinical studies outcome would parallel the preclinical study outcome. VZV does not infect animals other than humans.  

Thus, we have made significant and substantial progress in the reporting quarter towards the goal of filing our first IND application, and we continue to build on this progress.

NanoViricides, Inc. reported in July 2017, that its anti-shingles nanoviricides® drug candidates achieved dramatic reduction in infection of human skin by the varicella-zoster virus (VZV), the shingles virus. These findings corroborate the previously reported findings of inhibition of VZV infection of human cells in culture. VZV is restricted to human tissue and only infects and replicates in human tissue.

Over the time course of VZV infection, the nanoviricides® drug candidates showed marked inhibition of VZV infection, replication and spread in human skin cultured ex vivo . The data suggest that select nanoviricides® drug candidates may have direct virucidal activity based on their antiviral effects within the first 24 hours after viral infection.

The antiviral effect of certain nanoviricide drug candidates was substantially greater than the effect of the standard positive control of cidofovir added into media. Even more remarkably, the effect of these nanoviricides drug candidates was equivalent to a topical formulation of 1% cidofovir applied directly onto the skin patch. A topical skin cream containing 2% cidofovir is clinically used in very severe cases of shingles. However, the cytotoxicity of cidofovir is known to cause ulceration of the skin to which it is applied, followed by natural wound healing.

Histopathology studies have demonstrated a lack of VZV-associated lesions in nanoviricide-treated skin patches. This work was presented as a poster presentation by the Moffat group at the 31st International Conference on Antiviral Research held June 11 - June 15, 2018 in Porto, Portugal, ( https://www.isar-icar.com/page/31icar ).

Since VZV causes skin lesions as a result of direct attack of the re-awakened virus released from nerve endings onto the human skin cells, this ex vivo human skin patch model involving VZV infection of cultured human skin ex vivo is considered to be a close representation of natural course of shingles.

The Company has previously reported that these same nanoviricides® compounds displayed potent inhibition of VZV infection of a human retinal epithelial pigment cell line in an in vitro cell culture virus infection model with no evidence of toxicity to the cells. These ex vivo and in vitro studies are a critical step in the selection of final clinical drug development candidates for safety and toxicology studies with the goal of an IND submission to the FDA for the topical treatment of shingles in humans.

These human skin studies were performed in the laboratory of Dr. Jennifer Moffat at SUNY Upstate Medical University in Syracuse, NY. The Company previously reported the collaboration with Dr. Moffat, an internationally recognized expert on varicella-zoster virus. She has extensive experience in varicella-zoster virus (VZV) infection, pathogenesis, and anti-viral agent discovery. The National Institutes of Health has a contract with Dr. Moffat’s lab for evaluating anti-viral compounds against VZV, although the Company chose to set up a direct collaboration with Dr. Moffat rather than going through the NIH program.

Dr. Vivien Boniuk, then Consultant in Ophthalmology at the Company, presented the successful results of certain anti-herpes nanoviricide treatments for v-ARN at the 2017 Annual meeting of the Ocular Microbiology and Immunology Group (OMIG) of the American Academy of Ophthalmology held in New Orleans, LA, on November 10, 2017. In this study, HSV-2 infection was given to mice as a single injection to cause v-ARN. The mice that received either of two nanoviricides drug candidates simultaneously with the virus in this single injection, showed significant improvements using a number of parameters. In contrast, mice that received foscarnet injection simultaneously with the virus did not show any improvements. Of note, foscarnet is a current standard of treatment, although the treatment is long in duration and arduous, being multiple intravitreal injections. In addition, another group of HSV-2 infected animals received acyclovir by intraperitoneal injection (50mg/kg), twice daily for 7 days, as a positive control. Acyclovir and its derivatives are also used currently for treating v-ARN, although the clinical efficacy is limited and generally requires long durations of treatment. Vehicle treated and untreated negative controls also were employed. These studies were performed in the lab of Dr. Curtis Brandt at CORL, University of Wisconsin, Madison, WI.

Both nanoviricides tested showed remarkable efficacy using multiple parameters.  In both nanoviricide A and nanoviricide B groups, the retina was protected fully from viral damage, which is very significant. In contrast, the acyclovir treated group showed retinal damage approximately similar to the vehicle treated group, in spite of reduced viral load in the acyclovir group, indicating that acyclovir may have been toxic. These results were also confirmed by histological staining of retinal sections. Both nanoviricide A and nanoviricide B had substantial effectiveness in protecting the retina, in spite of the high infectious dose of HSV-2 employed in this model. Significantly, they were both substantially more effective than foscarnet (single injection) or acyclovir (bid 7 days) in this particular study. If these results are reproducible, then the Company would be able to identify a clinical candidate for v-ARN as well.

Of note, both nanoviricides tested against v-ARN are closely chemically related to those that have shown significant efficacy against varicella zoster virus (VZV) in the human skin patch model in Professor Moffat’s lab at the Upstate Medical Center, SUNY, Syracuse, NY. We have previously shown that closely chemically related nanoviricides were also effective against HSV-1 in animal models as well as in cell culture models. This is important because about 50% of v-ARN cases are caused by VZV, about 40+% caused by HSV-2, with HSV-1 and CMV accounting for a small percentage of cases. VZV does not infect mice, and therefore the HSV-2 v-ARN model should be indicative model for our drug development. Thus the broad-spectrum activity of our nanoviricides against multiple different herpesvirus types has been instrumental in rapid expansion of our HerpeCide program.

Additional successful studies on v-ARN are expected to add a fifth indication to the Company’s growing portfolio of anti-herpes drug indications, further expanding the potential market. The Company intends to maximize shareholder value from its broad-spectrum anti-herpes nanoviricides asset by aggressively expanding its portfolio of herpesvirus indications.

v-ARN is a disease of the retina of the eye caused by various herpes viruses that leads to severe loss of vision and blindness. The infecting agent in this study was herpes simplex virus-2 (HSV-2), the type of herpes virus that also causes genital herpes.

Acute Retinal Necrosis is characterized by severe ocular inflammation, retinal necrosis, and a high incidence of retinal detachment (RD) leading to visual loss and blindness. This disease is caused by members of the herpesvirus family, including, herpes simplex virus-2 (HSV-2), varicella zoster virus (VZV), and herpes simplex virus (HSV-1). An estimated 50,000 new and recurrent cases of ocular herpes per year are reported in the United States alone, and in a small proportion of the patients, the disease escalates to v-ARN. We anticipate that ocular herpes or v-ARN may qualify for an orphan disease indication.

Our current development has focused on API suitable for formulating into a skin ointment for the treatment of VZV shingles, HSV-1 cold sores, or HSV-2 genital ulcers. As these drug candidates advance further, we plan on performing fully integrated drug development for developing eye drops for treatment of external eye infections such as herpes keratitis (a disease of the external eye). Thereafter we plan on undertaking the development of suitable materials for intravitreous or sub-retinal injections for the treatment of certain viral diseases involving the retina.

We have recently reported that we have extended the contracts with both the Moffat Lab, UMC, SUNY Syracuse, as well as the Brandt Lab, CORL, UW, Madison to continue to perform more advanced studies in preparation of an IND for shingles topical treatment and for v-ARN intravitreal treatment, respectively.

In addition, we have continued work on our other drug candidates albeit at a very low priority. These include (vi) Injectable FluCide™ for hospitalized patients with severe influenza, (vii) Oral FluCide™ for out-patients, (viii) DengueCide™, a broad spectrum nanoviricide designed to attack all types of dengue viruses and expected to be effective in the Severe Dengue Disease syndromes including Dengue Hemorrhagic Fever (DHS) and Dengue Shock Syndrome (DSS), and (ix) HIVCide™ for HIV/AIDS. In addition, the Company has research programs, enabled by the robust nanoviricides platform technology, to develop drugs against Rabies virus, Ebola and Marburg viruses, and other viruses.

To date, the Company does not have any commercialized products. The Company continues to add to its existing portfolio of products through our internal discovery and clinical development programs and also seeks to do so through an in-licensing strategy.

The Company received an “Orphan Drug Designation” for our DengueCide™ drug from the USFDA as well as the European Medicines Agency (EMA). This orphan drug designation carries significant economic benefits for the Company, upon approval of a drug.

We believe we have demonstrated that we can rapidly develop different types of formulations for different routes of administration, such as injectable, skin cream, lotion, gel, and even oral, because of the inherent strength of the nanoviricide platform tailorable technology. The technology also enables us to develop nasal sprays and bronchial aerosols. We plan to develop the appropriate formulations as necessary.