Item 1.
Business
OVERVIEW
CohBar,
Inc. (“CohBar,” “we,” “us,” “our,” “its” or the “Company”)
is a clinical stage biotechnology company and a leader in the research and development of mitochondria based therapeutics (MBTs),
an emerging class of drugs with the potential to treat a wide range of diseases associated with aging and metabolic dysfunction,
including non-alcoholic steatohepatitis (NASH), obesity, type 2 diabetes mellitus (T2D), cancer, atherosclerosis, cardiovascular
disease and neurodegenerative diseases such as Alzheimer’s disease.
MBTs
originate from almost two decades of research by our founders, resulting in their discovery of a novel group of
mitochondrial-derived peptides (MDPs) encoded within the mitochondrial genome. Some of these naturally occurring MDPs and
their analogs have demonstrated a range of biological activity and therapeutic potential in research models across multiple
diseases associated with aging.
We
believe CohBar is the first mover in exploring the mitochondrial genome for therapeutically relevant peptides, and has developed
a proprietary MBT technology platform, using cell-based assays and animal models of disease, to rapidly identify naturally occurring
MDPs with promising biological activity. Once identified, we deploy optimization techniques to improve the drug-like properties
of our MBT candidates, enabling us to match the most biologically promising peptides to disease indications that have substantial
unmet medical needs.
Our
lead MBT candidate for the potential treatment of NASH and obesity is CB4211, a novel optimized analog of the MOTS-c MDP. In July
2018, we announced the initiation of a Phase 1a/1b clinical study of CB4211. The double-blind, placebo-controlled clinical study,
which has been temporarily suspended, as described below, is designed to initially assess the safety, tolerability, and pharmacokinetics
of CB4211 following single and multiple-ascending doses in healthy subjects. The final Phase 1b stage of the study, which has
not yet started, is designed to assess the safety, tolerability, and activity of CB4211 in obese subjects with non-alcoholic fatty
liver diseases (NAFLD). Assessments will include changes in liver fat assessed by MRI-PDFF, body weight, and biomarkers relevant
to NASH and obesity.
In
November 2018, we announced the temporary suspension of our Phase 1 clinical study of CB4211 to address mild injection site reactions
that were unexpectedly persistent. These injection site reactions, which have been observed in the Phase 1a dose escalation part
of the study, were generally seen as painless bumps at the injection site that can be felt under the skin, but in most cases would
be otherwise undetectable. We believe, based on the data accumulated to this point, that some of the administered dose of CB4211
remains localized in the tissue at the injection site, thereby causing these bumps to occur. We are seeking regulatory feedback
for our plan to address this issue, with the goal of resuming the clinical dosing of CB4211 as soon as possible. However, we cannot
predict with certainty if we will be able to resume the trial, and, if so, what impact the suspension will have on the study timeline
or the availability of topline data, which was previously expected in early 2019.
In
addition to the original discovery by our founders of MOTS-c and other CohBar licensed peptides, CohBar’s scientific team
has discovered over 100 additional MDPs that have demonstrated a range of biological activities and therapeutic
potential and filed more than 65 provisional patent applications that cover these peptides and their analogs. Our ongoing research
and development activities focus on identifying and advancing novel improved MDP analogs that have the greatest therapeutic and
commercial potential for development into drugs.
Our
scientific team includes the expertise of our founders, Dr. Pinchas Cohen, Dean of the Davis School of Gerontology at the
University of Southern California, and Dr. Nir Barzilai, Professor of Medicine and Genetics and Director of the Institute
for Aging Research at the Albert Einstein College of Medicine, and is augmented by our co-founders, Dr. David Sinclair, Professor
of Genetics at Harvard Medical School, and Dr. John Amatruda, former Senior Vice President and Franchise Head for Diabetes
and Obesity at Merck Research Laboratories. Our research and development efforts are conducted under the leadership of our Chief
Scientific Officer, Dr. Kenneth Cundy, former Chief Scientific Officer at Xenoport, Inc. and Senior Director of Biopharmaceutics
at Gilead Sciences, Inc. Dr. Cundy is the co-inventor of several approved drugs, including tenofovir, an antiretroviral drug that
is marketed globally in various combinations with other drugs for the treatment of HIV infection (Atripla®, Viread®, Complera®,
Stribild®, Truvada®), gabapentin enacarbil (Horizant®) for the treatment of RLS and post-herpetic neuralgia, and Nanocrystal®
technology, employed in several other approved drugs.
We
are the exclusive licensee from the Regents of the University of California and the Albert Einstein College of Medicine of six
issued U.S. patents, four U.S. patent applications and several related international patent applications in various jurisdictions.
Our licensed patents and patent applications include claims that are directed to compositions comprising MDPs and their analogs
and/or methods of their use in the treatment of indicated diseases. We have also filed a non-provisional patent application under
the international patent cooperation treaty (PCT) and more than 65 provisional patent applications with claims directed to both
compositions comprising and methods of using our novel proprietary MDPs and their analogs.
We
believe that the proprietary capabilities of our technology platform combined with our scientific expertise and intellectual property
portfolio provides a competitive advantage in our mission to treat age-related diseases and extend healthy life spans through
the advancement of MBTs as a new class of transformative drugs.
We
were formed as a limited liability company in the state of Delaware in 2007, and converted to a Delaware corporation in 2009.
We completed our initial public offering of common stock in January 2015 and our common stock is listed for trading on the Nasdaq
Capital Market (CWBR).
Our
corporate headquarters and laboratory are located in Menlo Park, California.
BUSINESS
STRATEGY
Our
strategic objective is to secure, maintain and exploit a leading scientific, commercial and intellectual property position in
the arena of mitochondria based therapeutics, with best-in-class treatments for diseases associated with aging and metabolic dysfunction.
The key elements of our strategy include:
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Advancing
CB4211 through clinical trials;
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utilizing
our proprietary technology platform to continue identifying, assessing and optimizing new analogs of biologically active MDPs
and advancing research and development on those MBT candidates with the greatest therapeutic and commercial potential;
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developing
strategic partnerships with leading pharmaceutical companies and other organizations to advance our research programs and
future development and commercialization efforts;
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raising
capital to fund our operations, research and clinical development programs;
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minimizing
operating costs and related funding requirements for our research and development activities through careful program management
and cost-efficient relationships with academic partners, consultants and contract research organizations (CROs);
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continuing
to optimize our intellectual property portfolio to capture all novel therapeutically relevant peptides encoded within the
mitochondrial genome and improved analogs; and
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increasing
awareness and recognition of our team, assets, capabilities and opportunities within the investment and scientific communities.
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OUR
PIPELINE
Our research efforts are focused on identifying, assessing and optimizing new analogs of biologically
active MDPs and advancing those candidates with the greatest therapeutic and commercial potential. Our pipeline includes a number
of novel peptide analogs of MDPs in different stages of research evaluation as potential MBTs, and one MBT currently in clinical
development.
CB4211
In July 2018, we announced the initiation of a Phase 1a/1b clinical study of CB4211, a novel, optimized
analog of the MOTS-c MDP, and our first lead MBT candidate, with potential treatment of NASH and obesity. The double-blind, placebo-controlled
clinical study is designed to initially assess the safety, tolerability, and pharmacokinetics of CB4211 following single and multiple-ascending
doses in healthy subjects. The final Phase 1b stage of the study will be an assessment of safety, tolerability, and activity in
obese subjects with non-alcoholic fatty liver diseases (NAFLD). Assessments will include changes in liver fat assessed by MRI-PDFF,
body weight, and biomarkers relevant to NASH and obesity.
In
November 2018, we announced the temporary suspension of our Phase 1 clinical study of CB4211 to address mild injection site reactions
that were unexpectedly persistent. These injection site reactions, which were observed in the Phase 1a dose escalation part of
the study, were generally seen as painless bumps at the injection site that can be felt under the skin, but in most cases would
be otherwise undetectable. We believe, based on the data accumulated to this point, that some of the administered dose of CB4211
remained localized in the tissue at the injection site, thereby causing these bumps to occur. We are seeking regulatory feedback
for our plan to address this issue, with the goal of resuming the clinical dosing of CB4211 as soon as possible. However, we cannot
predict with certainty if we will be able to resume the trial, and, if so, how the suspension will affect the study timeline or
the availability of topline data, which was previously expected in early 2019.
CB4211
is our novel, optimized analog of MOTS-c, a naturally occurring mitochondrial peptide discovered by our founders and their academic
collaborators in 2012. Their research in cell-based assays and animal models indicated that MOTS-c plays a significant role in
the regulation of metabolism. Certain of the original MOTS-c studies were published in an article entitled “The Mitochondrial-Derived
Peptide, MOTS-c, Promotes Metabolic Homeostasis and Reduces Obesity and Insulin Resistance,” which appeared in the March
3, 2015 edition of the journal
Cell Metabolism
.
In
animal models, CB4211 demonstrated significant therapeutic potential for the treatment of NASH, showing improvements in triglyceride
levels, as well as favorable effects on liver enzyme markers associated with NAFLD and NASH. CB4211 also demonstrated significant
therapeutic potential for the treatment of obesity, demonstrating significantly greater weight loss together with more selective
reduction of fat mass versus lean mass in head-to-head comparison to a market-leading obesity drug in diet induced obese (DIO)
mice. The therapeutic effects of CB4211 have been further evaluated in the well-established STAM™ mouse model of NASH. In
this model, treatment with CB4211 resulted in a significant reduction of the non-alcoholic fatty liver disease activity score,
or NAS, a composite measure of steatosis (fat accumulation), inflammation and hepatocyte ballooning (cellular injury). Data from
these studies were presented at the American Association for the Study of Liver Disease (AASLD) 2017 Liver Meeting® in October,
2017.
In
addition to the therapeutic potential indicated by the pre-clinical research models described above, data were presented at
the 2018 American Diabetes Association meeting providing in vitro evidence that CB4211 inhibits adipocyte lipolysis, a
process that is foundational in the development of liver steatosis, through an insulin-dependent mechanism. These data
provide a potential mechanistic explanation for previous observations in vivo, including efficacy of CB4211 in animal models
of NASH, and anti-steatotic effects on livers of mice on a high fat diet, where a corresponding reduction in circulating fat
and biomarkers of liver damage was also observed. The activity of CB4211 appears to involve sensitizing insulin action on the
insulin receptor.
Research
Programs
Our R&D pipeline also includes a large number of additional MDPs discovered by CohBar, as well as
several MDPs previously discovered by CohBar’s founders, as further described below. Our research activities are focused
on identifying, optimizing, and prioritizing MDP analogs for development as potential MBTs. Our criteria includes examining MDP
analogs with the greatest commercial and therapeutic potential, the most suitable development and clinical resources, and the broadest
intellectual property protection and exploitation opportunities.
CohBar Discovered MDPs
and Analogs
: Our internal discovery efforts have resulted in the identification of more than 100 previously unidentified peptides
encoded within the mitochondrial genome. These MDPs and their analogs have demonstrated various degrees of biological activity
in cell based and/or animal models relevant to a wide range of diseases, such as NASH, obesity, T2D, cancer, cardiovascular disease
and neurodegenerative diseases. Our research efforts have further identified and focused on certain of these MDPs and their analogs
that have demonstrated therapeutic potential for treating indications related to those diseases.
SHLP
Analogs
: Our founders and their academic collaborators discovered several MDPs encoded within the mitochondrial genome; we
refer to these as small humanin-like peptides, or SHLPs. In cancer treatment models in cell culture and in mice, SHLP-6 demonstrated
suppression of cancer progression via mechanisms involving both suppression of tumor angiogenesis (blood vessel development) and
induction of apoptosis (cancer cell death). There is also research evidence to suggest that SHLP-2 has protective effects against
neuronal toxicity. Certain of the SHLP studies were published in a research paper entitled “Naturally occurring mitochondrial-derived
peptides are age-dependent regulators of apoptosis, insulin sensitivity, and inflammatory markers.”
Humanin
Analogs
: Our founders and others have demonstrated the protective effects of the humanin MDP in various animal models of age-related
diseases, including Alzheimer’s disease, atherosclerosis, myocardial and cerebral ischemia and T2D. Humanin levels in humans
have been shown to decline with age, and elevated levels of humanin together with lower incidence of age-related diseases have
been observed in centenarians as well as their offspring.
All
of our pipeline MDPs, except for CB4211, our clinical candidate, are in various stages of research. There is no guarantee that
any additional MDP analog will be advanced to clinical development, or that the activity demonstrated in pre-clinical research
models will be shown in human testing.
OUR
TECHNOLOGY PLATFORM
Our
proprietary technology platform is designed to rapidly identify therapeutically relevant peptides encoded within the mitochondrial
genome, to evaluate their biological activity, and to develop these peptides into novel MBTs that have the potential to treat
diseases with major unmet medical needs. We believe our technology platform provides multiple opportunities for value creation.
Our multiplexed peptide optimization process is designed to discover numerous potential drug candidate opportunities with near
term value. These drug candidates can be internally developed by CohBar or advanced through strategic partnerships with larger
pharmaceutical companies. At the same time, our strategy of capturing the most valuable MBT space by aggressively filing for broad
intellectual property coverage is designed to secure CohBar’s leadership role in the field and protect our ability to create
additional value in the future.
We
use a broad range of proprietary activity screens to assess the therapeutic potential of our novel peptides and to prioritize
our development opportunities. Some of our novel peptides have demonstrated promising biological effects in a variety of in vitro
and/or in vivo models of age-related diseases. We are prioritizing our novel peptides by assessing their activity in a variety
of areas such as metabolic regulation, oxidative stress, cellular energy levels, cell proliferation, cell death, cellular protection,
carbohydrate metabolism, lipid metabolism, body weight, regulation of body fat, insulin sensitivity, regulation of glucose, glucose
tolerance, and liver function.
Disease
Focus
Our
research and development focuses on diseases associated with aging and metabolic dysfunction. Our research to date suggests multiple
potential therapeutic indications for some of our pipeline MDPs. While we believe our current and any future MBT drug candidates
we identify would be advanced against one of the following diseases as a primary indication, it is possible that we may determine
to advance a drug candidate for treatment of a different disease as a primary indication. We may determine to advance any future
drug candidate against an alternative primary disease indication if, for example, additional data suggests greater therapeutic
potential for the drug candidate against the alternative indication, or we determine that the development, approval or commercialization
pathway may be more favorable for a drug candidate targeted against the alternative indication.
NAFLD
and NASH
– Non-alcoholic fatty liver disease (NAFLD) is the build-up of extra fat in liver cells that is not due to
alcohol consumption and tends to develop in people who are overweight or obese or have diabetes, high cholesterol or high levels
of triglycerides. Non-alcoholic steatohepatitis (NASH) is a more severe form of NAFLD characterized by swelling of the liver that
eventually may lead to scarring (cirrhosis) and over time to liver cancer or liver failure. NAFLD affects as much as 34% of the
U.S. population while as many as 12% of U.S. adults may have NASH. Currently, there are no FDA approved treatments for NAFLD/NASH.
Obesity
–– Obesity is now recognized as the most prevalent metabolic disease world-wide, reaching epidemic proportions
in both developed and developing countries and affecting all age groups. More than one-third of the U.S. adult population,
and over 40% of U.S. age groups between 45 and 75, have obesity. The prevalence of class III, or morbid, obesity (body mass
index ≥40) has increased dramatically in several countries and currently affects 6% of adults in the U.S., with an estimated
increase of 130% over the next two decades. Obesity is a major risk factor for age-related diseases such as heart disease, stroke,
T2D and certain types of cancer.
Type
2 diabetes mellitus
– T2D is a chronic disease characterized by a relative deficiency in insulin production and secretion
by the pancreas and an inability of the body to respond to insulin normally, i.e. insulin resistance. Hyperglycemia, or raised
blood sugar, is a common effect of uncontrolled diabetes and over time leads to serious damage to many of the body’s systems,
especially the nerves, kidneys, eyes and blood vessels.
Cancer
– Cancer is a generic term for a large group of diseases that can affect any part of the body. One defining feature
of cancer is the rapid creation of abnormal cells that grow beyond their usual boundaries, and which can then invade adjoining
parts of the body and spread to other organs. This process is referred to as metastasis. Metastases are a major cause of death
from cancer. Cancer is a leading cause of death worldwide. Cancer treatments such as chemotherapy, hormone therapy and other treatments
are used to destroy cancer cells. The goal of cancer drugs is to cure the disease or, when a cure is not possible, to prolong
life or improve quality of life for patients with incurable cancer.
Alzheimer’s
disease
– In the brain, neurons connect and communicate at synapses, where tiny bursts of chemicals called neurotransmitters
carry information from one cell to another. Alzheimer’s, a neurodegenerative disease, disrupts this process and eventually
destroys synapses and kills neurons, damaging the brain’s communication network. There is no cure, and medications on the
market today treat only the symptoms of Alzheimer’s disease and do not have the ability to stop its onset or its progression.
There is an urgent and unmet need for both a disease-modifying drug for Alzheimer’s disease as well as for better symptomatic
treatments.
Atherosclerosis
–
Atherosclerosis is a cardiovascular disease commonly referred to as a “hardening” or furring of the arteries.
It is caused by the formation of multiple atheromatous plaques within the arteries. This process is the major underlying risk
for developing myocardial infarction (heart attack) as those plaques will either narrow the vessel or rupture, preventing blood
flow in the coronary artery to parts of the heart muscle. Heart disease is the leading cause of death for both men and women.
Cholesterol lowering drugs are considered the main preventive approach to treat atherosclerosis, however these drugs are estimated
to prevent only one-third of incidences of myocardial infarction, and there is significant unmet need for additional therapeutic
options.
COMPETITION
The
biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong
emphasis on proprietary products. While we believe that our scientific knowledge, technology, and development experience provide
us with competitive advantages, we face potential competition from many different sources, including major pharmaceutical, specialty
pharmaceutical and biotechnology companies, academic institutions and governmental agencies, and public and private research institutions.
Many of our competitors may have significantly greater financial resources and capabilities for research and development, manufacturing,
pre-clinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do.
There
are numerous therapies currently marketed to treat obesity, T2D, cancer and Alzheimer’s disease. There are no currently
approved therapies for the treatment of NAFLD and NASH, but numerous therapies are in development. These therapies are varied
in their design, therapeutic application and mechanism of action and may provide significant competition for any of our product
candidates for which we obtain market approval. New products or therapies may also become available that provide efficacy, safety,
convenience and other benefits that are not provided by currently marketed products and therapies. As a result, they may provide
significant competition for any of our product candidates for which we obtain market approval.
If
a CohBar MBT is developed and approved for treatment of patients with obesity it may compete with products currently approved
for obesity, such as Saxenda, Belviq, Contrave and Qsymia, and investigational therapies that are currently being studied for
the treatment of obesity, such as CB1-receptor-antagonists, 5-HT receptor agonists, SGLT-2 antagonist, GLP-1 agonists, Adenylate
Cyclase 3 activators and generic drugs.
If
a CohBar MBT is developed and approved for treatment of patients with NASH, it may compete with several investigational therapies
that are currently being studied for the treatment of NAFLD/NASH including, for example, FXR activators, PXR activators, ACC1/2
inhibitors, PPAR-α, -γ and -δ activators, SREBP2/MIR-33a inhibitors, DGAT1 or 2 inhibitors, CCR2/5 antagonists,
TRbeta agonists and CXCR3 antagonists.
If
a CohBar MBT is developed and approved for treatment of patients with T2D, it would compete with several classes of drugs for
T2D that are approved to improve glucose control, including sulfonylureas, glinides, PPAR gamma agonists, biguanides, alpha glucosidase
inhibitors, DPP IV inhibitors, GLP1 agonists, SGLT2 inhibitors, bromocriptine and insulin. Insulin sensitizing agents approved
to treat T2D are the PPAR gamma agonists pioglitazone and rosiglitazone. Some of these agents are not generic, are oral once-daily
pills and are effective in lowering glucose and A1C. Metformin is also sometimes called an insulin sensitizer. It is available
as a generic and comes in a once-daily formulation. Drugs approved for obesity may also be used to treat T2D. In addition, there
are several investigational drugs being studied to treat T2D and if these investigational therapies were approved they would also
compete with an MBT developed and approved for T2D.
If
a CohBar MBT is developed and approved for the treatment of patients with cancer, it would compete with all approved therapies
for the cancer it is approved to treat. Since the specific cancer that these investigational therapies might be approved to treat
is unknown, they would theoretically compete with any pharmaceutical agent that is approved to treat cancer. In addition, there
are several investigational drugs being studied to treat cancer, and if these investigational therapies were approved, they would
also compete with an MBT developed and approved for the treatment of cancer.
If
a CohBar MBT is developed and approved for the treatment of patients with Alzheimer’s disease or other neurodegenerative
diseases, it would compete with all approved therapies to treat Alzheimer’s disease including donepezil (Aricept), galantamine
(Razadyne), memantine (Namenda), rivastigmine (Exelon) and tacrine (Cognex). In addition, there are several investigational drugs
being studied to treat Alzheimer’s and other neurodegenerative diseases that, if approved, would also compete with an MBT
developed and approved for the treatment of Alzheimer’s and other neurodegenerative diseases.
FINANCING
Our
business strategy and plans for research and development of our MDPs and MBT candidates includes periodic infusion of new capital
to our Company. We may seek to obtain funding for our business through partnership agreements with pharmaceutical and biotechnology
companies or through the issuance and sale of debt or equity securities in capital raising transactions.
EMPLOYEES
As
of March 13, 2019, we had 12 employees, eleven full-time and one part-time. In addition to our employees, our founders consult
directly with our employees and scientific staff from time to time to advance our research programs. Our founders provide advisory
services in the areas of peptide research, genetics, aging and age-related diseases, drug discovery, development and commercialization,
and other areas relevant to our business. Additionally, from time to time we engage other subject-matter experts on a consulting
basis in specific areas of our research and development efforts. None of our employees are represented by a labor union or covered
by a collective bargaining agreement. We have not experienced any work stoppages and we consider our relations with our employees
to be good.
RESEARCH
AND DEVELOPMENT
Research and development activities are central to our business model. Our research programs include activities
related to discovery of novel MDPs, investigational research to evaluate the potential therapeutic effects of certain discovered
MDPs in research and pre-clinical studies and engineering novel, improved analogs of certain discovered MDPs with characteristics
suitable for further development as potential MBT drug candidates and advancing our identified MBT candidate through clinical studies.
Depending on factors of capability, cost, efficiency and intellectual property rights we conduct our research programs independently
at our laboratory facility, pursuant to contractual arrangements with CROs or under collaborative arrangements with academic institutions.
Research and development expenses for the years ended December 31, 2018 and 2017 were $10,034,613 and $6,675,080, respectively.
INTELLECTUAL
PROPERTY
Patents
Our
commercial success depends in part on our ability to obtain and maintain proprietary protection for our novel biological discoveries
and therapeutic methods, to operate without infringing on the proprietary rights of others and to prevent others from infringing
our proprietary rights. We seek to protect our proprietary position by, among other methods, licensing and/or filing patent applications
related to our proprietary technology, inventions and improvements that are important to the development and implementation of
our business.
Our
intellectual property and patent strategy is focused on our MDPs, their analogs and our MBT candidates. Our strategy is
generally to seek patent protection in the United States and, where applicable, in those international jurisdictions we
identify as holding significant potential market opportunity for any drug we may develop and in which patent protection is
available. We also rely on trade secrets, know-how, continuing technological innovation and potential in-licensing
opportunities to develop and maintain our proprietary position. With respect to new biologically active MDPs that we identify
within the mitochondrial genome we typically file provisional patent applications and seek composition-of-matter and
method-of-treatment patents for our MDPs, their analogs, and prospective MBTs based on research and pre-clinical evaluation
of therapeutic potential. We intend to file non-provisional patent applications for those MDPs and analogs within our
pipeline based on further assessment of their therapeutic and commercial potential, as well as strategic and competitive
considerations. We believe that the opportunity to engineer analogs or create combination therapies will afford us the
opportunity to strengthen IP protection for our drug development candidates as they advance through our development pipeline
and to broaden our IP protection internationally.
We
are the exclusive worldwide licensee from the UC Regents of six issued patents, that will expire starting in 2028, along with
twelve pending patent applications. Additionally, CohBar has filed a PCT patent application with claims directed to both composition-of-matter
and methods-of-use of novel proprietary MDP analogs.
A
summary of our licensed, non-provisional patents and patent applications as they relate to specific MDPs and their analogs appears
below:
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Therapeutic Activities / Method of Use Claims
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Granted/
Filed
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Composition
Claims
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Type 1
Diabetes
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Type 2
Diabetes
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Obesity
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Fatty
Liver
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Cancer
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Alzheimer’s
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Atherosclerosis
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MOTS-c
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Two
Granted/
Ten Filed
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MOTS-c Analogs
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Two Filed
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SHLP-6
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Filed
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SHLP-2
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Humanin
and Humanin Analogs
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One Filed
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Terms
for individual patents extend for varying periods of time depending on the date of filing of the patent application or the date
of patent issuance and the legal term of patents in the countries in which they are obtained. Generally, patents issued from applications
filed in the United States are effective for twenty years from the earliest non-provisional filing date. In addition, in certain
instances, a patent term can be extended to recapture a portion of the term effectively lost as a result of the FDA regulatory
review period, however, the restoration period cannot be longer than five years and the total patent term, including the restoration
period, must not exceed fourteen years following FDA approval. The duration of foreign patents varies in accordance with provisions
of applicable local law, but typically is also twenty years from the earliest international filing date.
National
and international patent laws concerning peptide therapeutics remain highly unsettled. Policies regarding the patent eligibility
or breadth of claims allowed in such patents are currently in flux in the United States and other countries. Changes in either
the patent laws or in interpretations of patent laws in the United States and other countries can diminish our ability to protect
our inventions and enforce our intellectual property rights. Accordingly, we cannot predict the breadth or enforceability of claims
that may be granted in our patents or in third-party patents. The biotechnology and pharmaceutical industries are characterized
by extensive litigation regarding patents and other intellectual property rights. Our ability to maintain and solidify our proprietary
position for our drugs and technology will depend on our success in obtaining effective claims and enforcing those claims once
granted. We do not know whether any of the patent applications that we may file or license from third parties will result in the
issuance of any patents. The issued patents that we license, or may license or own in the future, may be challenged, invalidated
or circumvented, and the rights granted under any issued patents may not provide us with sufficient protection or competitive
advantages against competitors with similar technology. Furthermore, our competitors may be able to independently develop and
commercialize similar drugs or duplicate our technology, business model or strategy without infringing our patents. Because of
the extensive time required for clinical development and regulatory review of a drug we may develop, it is possible that, before
any of our drugs can be commercialized, any related patent may expire or remain in force for only a short period following commercialization,
thereby reducing any advantage of any such patent.
The
patent positions for our research peptides are described below:
MOTS-c
Patent Coverage
We
are the exclusive licensee from the Regents of the University of California (the “Regents”) to intellectual property
rights related to MOTS-c, including U.S. Patent No. 10,064,914, issued on September 4, 2018, two patent applications filed in
the United States (U.S. Application No. 14/213,617 and U.S. Divisional Application No. 16/113,996) and corresponding foreign
applications filed in multiple countries and regions. These applications include composition of matter claims directed to MOTS-c
and certain analogs of MOTS-c, as well as methods of use claims for MOTS-c or certain analogs of MOTS-c as a treatment for type
1 diabetes, type 2 diabetes, fatty liver, obesity and cancer.
MOTS-c
Analog Patent Coverage
CohBar
has also filed a PCT patent application and a patent application in a foreign territory that covers novel optimized analogs of
MOTS-c with improved properties, including claims directed to composition-of-matter and methods-of-use.
SHLP-2
and SHLP-6 Patent Coverage
We
are the exclusive licensee from the Regents to intellectual property for SHLP-2 and SHLP-6 and their analogs. This intellectual
property includes the following issued and pending patents:
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U.S.
Patent No. 8,637,470, issued on January 28, 2014, with composition of matter
claims directed to SHLP-2 and analogs.
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A
divisional patent application in the United States for SHLP-6 (U.S. Application No. 14/134,430),
with claims directed at the SHLP-6 composition of matter, and methods of use in treating
cancer.
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We
are pursuing intellectual property protection related to certain analogs of these peptides.
Humanin
and Humanin Analogs Patent Coverage
We
are the exclusive licensee from the Regents and the Albert Einstein College of Medicine of Yeshiva University to the following
U.S. patent applications and issued U.S. patents and covering humanin and humanin analogs for treatment of disease.
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U.S.
Patent No. 8,309,525, issued on November 13, 2012, with claims covering pharmaceutical
compositions of humanin analogs.
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U.S.
Patent No. 7,998,928, issued on August 16, 2011, with claims directed to methods
of using a humanin analog to treat type 1 diabetes.
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U.S.
Patent No. 8,653,027 issued on February 18, 2014 as a continuation of U.S.
Patent 7,998,928, with claims directed to methods of using an additional humanin analog
to treat type 1 diabetes.
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U.S.
Patent Application No. 13/526,309 (pending), with claims directed to methods of
using humanin or a humanin analog to treat atherosclerosis.
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CohBar
Identified MDPs and Analog Coverage
CohBar
has also filed more than 65 provisional patent applications that cover CohBar-identified MDPs and their novel, improved analogs,
including claims directed to composition-of-matter and methods-of-use. Provisional patent applications are not publicly available
and information regarding the specific MDPs and analogs identified in the provisional applications, and related claims, are held
confidential. We intend to file non-provisional patent applications for those MDPs and analogs within our pipeline based on further
assessment of their therapeutic and commercial potential, as well as strategic and competitive considerations.
Trade
Secrets
In
addition to patents, we rely upon unpatented trade secrets, know-how and continuing technological innovation to develop and maintain
our competitive position. We seek to protect our proprietary information, in part, using confidentiality agreements with our commercial
partners, collaborators, employees and consultants and invention assignment agreements with our employees. These agreements are
designed to protect our proprietary information and, in the case of the invention assignment agreements, to grant us ownership
of technologies that are developed through a relationship with a third party. These agreements may be breached, and we may not
have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently discovered
by competitors. To the extent that our commercial partners, collaborators, employees and consultants use intellectual property
owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.
Trademarks
We
consider COHBAR
TM
to be our common law trademark and are pursuing registration in the United States Patent & Trademark
Office.
In-licenses
MOTS-c
Exclusive License
On
August 6, 2013, we entered into an exclusive license agreement with the Regents to obtain worldwide, exclusive rights under
patent filings and other intellectual property rights in inventions developed by Dr. Cohen and academic collaborators at
the University of California, Los Angeles. The intellectual property includes the pending U.S. and international patent filings
described above under “
MOTS-c Patent Coverage
”.
We
agreed to pay the Regents specified development milestone payments aggregating up to $765,000 for the first product sold under
the license. Milestone payments for additional products developed and sold under the license are reduced by 50%. We are also required
to pay annual maintenance fees to the licensors. Aggregate maintenance fees for the first three years following execution of the
agreement are $7,500. Thereafter, we are required to pay maintenance fees of $5,000 annually until the first sale of a licensed
product. In addition, we are required to pay the Regents royalties equal to 2% of our worldwide net sales of drugs, therapies
or other products developed from claims covered by the licensed patent, subject to a minimum royalty payment of $75,000 annually,
beginning after the first commercial sale of a licensed product. We are required to pay the Regents royalties ranging from 8%
of worldwide sublicense sales of covered products (if the sublicense is entered after commencement of phase II clinical trials)
to 12% of worldwide sublicense sales (if the sublicense is entered prior to commencement of phase I clinical trials). The agreement
also requires us to meet certain diligence and development milestones, including filing of an Investigational New Drug (IND) Application
for a product covered by the agreement on or before the seventh anniversary of the agreement date.
Under
the agreement, the license rights granted to us are subject to any rights the U.S. Government may have in such licensed rights
due to its sponsorship of research that led to the creation of the licensed rights. The agreement also provides that if the Regents
become aware of a third-party’s interest in exploiting the licensed technologies in a field that we are not actively pursuing,
then we may be obligated either to issue a sublicense for use in the unexploited field to the third-party on substantially similar
terms or to actively pursue the unexploited field subject to appropriate diligence milestones. The agreement terminates upon the
expiration of the last valid claim of the licensed patent rights. We may terminate the agreement at any time by giving the Regents
advance written notice. The agreement may also be terminated by the Regents in the event of our continuing material breach after
notice of such breach and the opportunity to cure.
Humanin
and SHLPs Exclusive License
On
November 30, 2011, we entered into an exclusive license agreement with the Regents and the Albert Einstein College
of Medicine at Yeshiva University to obtain worldwide, exclusive rights under patent filings and other intellectual
property rights in inventions developed by Drs. Cohen and Barzilai and their academic collaborators. The intellectual
property subject to the agreement includes six issued and twelve pending U.S. patents including composition claims directed
to humanin analogs, SHLP-2 and SHLP-6 and methods of use claims directed to humanin, humanin analogs and SHLP-6. See
“Humanin and Humanin Analogs Patent Coverage” and “SHLP-2 and SHLP-6 Patent Coverage”.
We
agreed to pay the licensors specified development milestone payments aggregating up to $765,000 for the first product sold under
the license. Milestone payments for additional products developed and sold under the license are reduced by 50%. We are also required
to pay annual maintenance fees to the licensors. Aggregate maintenance fees for the first five years following execution of the
agreement are $80,000. Thereafter, we are required to pay maintenance fees of $50,000 annually until the first sale of a licensed
product. In addition, we are required to pay the licensors royalties equal to 2% of our worldwide net sales of drugs, therapies
or other products developed from claims covered by the licensed patents, subject to a minimum royalty payment of $75,000 annually,
beginning after the first commercial sale of a licensed product. We are required to pay royalties ranging from 8% of worldwide
sublicense sales of covered products (if the sublicense is entered after commencement of phase II clinical trials) to 12% of worldwide
sublicense sales (if the sublicense is entered prior to commencement of phase I clinical trials). The agreement also requires
us to meet certain diligence and development milestones, including filing of an IND for a product covered by the agreement on
or before the seventh anniversary of the agreement date.
Under
the agreement, the license rights granted to us are subject to any rights the U.S. Government may have in such licensed
rights due to its sponsorship of research that led to the creation of the licensed rights. The agreement terminates upon the
expiration of the last valid claim of the licensed patent rights. We may terminate the agreement at any time by giving the
Regents advance written notice. The agreement may be modified or terminated on a product by product basis by the Regents if
we materially fail to meet certain diligence requirements and development milestones. The agreement may also be terminated by
the Regents in the event of our continuing material breach after notice of such breach and the opportunity to cure. In
November 2018, the Regents accepted our payment for an additional year of license maintenance.
ENVIRONMENTAL
AND OTHER REGULATORY MATTERS
Government
Regulation
The
pre-clinical studies and clinical testing, manufacture, labeling, storage, record keeping, advertising, promotion, export, marketing
and sales, among other things, of our therapeutic candidates and future products, are subject to extensive regulation by governmental
authorities in the United States and other countries. In the United States, pharmaceutical products are regulated by the Food
and Drug Administration (the “FDA”) under the Federal Food, Drug, and Cosmetic Act (the “FDCA”) and other
laws. Biologics are subject to regulation by the FDA under the FDCA, the Public Health Service Act, and related regulations, and
other federal, state and local statutes and regulations. Biological products include, among other things, viruses, therapeutic
serums, vaccines and most protein products. Product development and approval within these regulatory frameworks takes a number
of years, and involves the expenditure of substantial resources.
Regulatory
approval will be required in all major markets in which we, or our licensees, seek to test our products in development. At a minimum,
such approval requires evaluation of data relating to quality, safety and efficacy of a product for its proposed use. The specific
types of data required and the regulations relating to these data differ depending on the territory, the drug involved, the proposed
indication and the stage of development.
In
general, new chemical entities are tested in animal models to determine whether the product is reasonably safe for initial
human testing. Additional pre-clinical testing continues during the clinical development stage. Clinical trials for new
products are typically conducted in three sequential phases that may overlap. Phase 1 trials typically involve the initial
introduction of the pharmaceutical into healthy human volunteers and focus on testing for safety, dosage tolerance,
metabolism, distribution, excretion and clinical pharmacology. In the case of serious or life-threatening diseases, such as
cancer, initial Phase 1 trials are often conducted in patients directly, with preliminary exploration of potential efficacy.
Phase 2 trials involve clinical trials to evaluate the effectiveness of the drug for a particular indication or indications
in patients with the disease or condition under study and to determine appropriate dosages and dose regimens and the common
short-term side effects and risks associated with the drug. Phase 2 trials are typically closely monitored and conducted in a
relatively small number of patients, usually involving no more than several hundred subjects. Phase 3 trials are generally
expanded, well-controlled clinical trials. They are performed after preliminary evidence suggesting effectiveness, as well as
the appropriate dose and dose ranges of the drug, have been obtained, and are intended to gather the additional information
about effectiveness and safety that is needed to evaluate the overall benefit-risk relationship of the drug and to provide an
adequate basis for physician labeling.
In
the United States, specific research and pre-clinical data, chemical data and a proposed clinical study protocol, as described
above, must be submitted to the FDA as part of an Investigational New Drug application, or IND, which, unless the FDA objects,
will become effective 30 days following receipt by the FDA. Phase 1 trials may commence only after the IND application becomes
effective. Following completion of Phase 1 trials, further submissions to regulatory authorities are necessary in relation to
Phase 2 and 3 trials to update the existing IND. Authorities may require additional data before allowing the trials to commence
and could demand discontinuation of studies at any time if there are significant safety issues. In addition to regulatory review,
a clinical trial involving human subjects has to be approved by an independent body. The exact composition and responsibilities
of this body differ from country to country. In the United States, for example, each clinical trial is conducted under the auspices
of an Institutional Review Board for any institution at which the clinical trial is conducted. This board considers among other
factors, the design of the clinical trial, ethical factors, the safety of the human subjects and the possible liability risk for
the institution.
Information
generated in this process is susceptible to varying interpretations that could delay, limit, or prevent regulatory approval at
any stage of the approval process. Failure to demonstrate adequately the quality, safety and efficacy of a therapeutic drug under
development would delay or prevent regulatory approval of the product.
In
order to gain marketing approval, we must submit a new drug application, or NDA, for review by the FDA. The NDA must include a
substantial amount of data and other information concerning safety and effectiveness of the drug compound from laboratory, animal
and clinical testing, as well as data and information manufacturing, product stability, and proposed product labeling.
There
can be no assurance that if clinical trials are completed that we or any future collaborative partners will submit an NDA or similar
applications outside of the United States for required authorizations to manufacture or market potential products, or that any
such applications will be reviewed or approved in a timely manner. Approval of an NDA, if granted at all, can take several months
to several years, and the approval process can be affected by a number of factors. Additional studies or clinical trials may be
requested during the review and may delay marketing approval and involve unbudgeted costs. Regulatory authorities may conduct
inspections of relevant facilities and review manufacturing procedures, operating systems and personnel qualifications. In addition
to obtaining approval for each product, in many cases each drug manufacturing facility must be approved. Further, inspections
may occur over the life of the product. An inspection of the clinical investigation sites by a competent authority may be required
as part of the regulatory approval procedure. As a condition of marketing approval, the regulatory agency may require post-marketing
surveillance to monitor adverse effects, or other additional studies as deemed appropriate. After approval for the initial indication,
further clinical studies are usually necessary to gain approval for additional indications. The terms of any approval, including
labeling content, may be more restrictive than expected and could affect product marketability.
Holders
of an approved NDA are required to report certain adverse reactions and production problems, if any, to the FDA, and to comply
with certain requirements concerning advertising and promotional labeling for their products. Moreover, quality control and manufacturing
procedures must continue to conform to cGMP after approval, and the FDA periodically inspects manufacturing facilities to assess
cGMP compliance. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality
control to maintain compliance with cGMP and other aspects of regulatory compliance. We expect to continue to rely upon third-party
manufacturers to produce commercial supplies of any products which are approved for marketing. We cannot be sure that those manufacturers
will remain in compliance with applicable regulations, or that future FDA inspections will not identify compliance issues at the
facilities of our contract manufacturers that may disrupt production or distribution, or require substantial resources to correct.
Any
of our future products approved by the FDA will likely be purchased principally by patients through a pharmacy benefit plan or
by pharmacies that typically bill various third-party payers, such as governmental programs (e.g., Medicare and Medicaid), private
insurance plans and managed care plans, for the pharmaceuticals provided to patients. The ability of customers to obtain appropriate
reimbursement for the products they purchase is crucial to the success of new drug and biologic products. The availability of
reimbursement affects which products customers purchase and the prices they are willing to pay. Reimbursement varies from country
to country and can significantly impact the acceptance of new products. Even if we were to develop a promising new product, we
may find limited demand for the product unless reimbursement approval is obtained from private and governmental third-party payers.
In
the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed
changes regarding the health care system and efforts to control health care costs, including drug prices, that could significantly
affect the development of our business, including preventing, limiting or delaying regulatory approval of our drug candidates
and reducing the sales and profits derived from our products once they are approved. For example, in the United States, the Patient
Protection and Affordable Care Act of 2010 (“ACA”) substantially changed the way health care is financed by both governmental
and private insurers and significantly affects the pharmaceutical industry. There is continued uncertainty about the implementation
of ACA, including the potential for further amendments to the ACA and legal challenges to or efforts to repeal the ACA. We cannot
be sure whether additional legislative changes will be enacted, or whether government regulations, guidance or interpretations
will be changed, or what the impact of such changes would be on the marketing approvals, sales, pricing, or reimbursement of our
drug candidates or products, if any, may be.
If
the FDA approves any of our future products and reimbursement for those products is approved by any federal or state healthcare
programs, then we will be subject to federal and state laws, such as the Federal False Claims Act, state false claims acts, the
illegal remuneration provisions of the Social Security Act, and federal and state anti-kickback laws that govern financial and
other arrangements among drug manufacturers and developers and the physicians and other practitioners or facilities that purchase
or prescribe products. Among other things, these laws prohibit kickbacks, bribes and rebates, as well as other direct and indirect
payments that are intended to induce the use or prescription of medical products or services payable by any federal or state healthcare
program, and prohibit presenting a false or misleading claim for payment under a federal or state program. Possible sanctions
for violation of any of these restrictions or prohibitions include loss of eligibility to participate in federal and state reimbursement
programs and civil and criminal penalties. If we fail to comply, even inadvertently, with any of these requirements, we could
be required to alter our operations, enter into corporate integrity, deferred prosecution or similar agreements with state or
federal government agencies, and could become subject to significant civil and criminal penalties.
AVAILABLE
INFORMATION
Our
common stock is listed on the Nasdaq Capital Market and trades under the symbol “CWBR.” Our principal executive
offices are located at 1455 Adams Drive, Suite 2050, Menlo Park, California 94025, and our telephone number is (650)
446-7888. The internet address of our corporate website is http://www.cohbar.com.
We
file annual reports, quarterly reports, current reports, proxy statements and other information with the Securities and Exchange
Commission (the “SEC”) under the Securities Exchange Act of 1934, as amended. You can inspect and obtain a copy of
our reports, proxy statements and other information filed with the SEC at the offices of the SEC’s Public Reference Room
at 100 F Street N.E., Washington, D.C. 20549, on official business days during the hours of 10 a.m. to 3 p.m. EST. Please call
the SEC at 1-800-SEC-0330 for further information on the Public Reference Room. The SEC maintains an internet website at http://www.sec.gov
where you can access copies of most of our SEC filings.
We
make our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments and exhibits
to those reports, available free of charge on our corporate website. In addition, our Code of Ethics and Business Conduct and
the charters of our Audit Committee, Compensation Committee and Governance and Nominating Committee are available on our corporate
website. The contents of our corporate website are not incorporated into, or otherwise to be regarded as part of, this Annual
Report on Form 10-K.
Item 1A.
Risk Factors
CohBar
operates in an environment that involves a number of risks and uncertainties. The risks and uncertainties described in this Annual
Report on Form 10-K are not the only risks and uncertainties that we face. Additional risks and uncertainties that presently are
not considered material or are not known to us, and therefore are not mentioned herein, may impair our business operations. If
any of the risks described in this Annual Report on Form 10-K actually occur, our business, operating results and financial position
could be adversely affected.
We
will need additional funding and may be unable to raise additional capital when needed, which would force us to delay, reduce
or eliminate our research and development activities.
Our
operations to date have consumed substantial amounts of cash, and we expect our capital and operating expenditures to continue
to increase in the next few years. We may not be able to generate significant revenues for several years, if at all. Until we
can generate significant revenues, if ever, we expect to satisfy our future cash needs through equity or debt financing, and/or
through any future development collaborations with commercial partners. We cannot be certain that additional funding will be available
on acceptable terms, or at all. If adequate funds are not available, we may be required to delay, reduce the scope of, or eliminate
one or more of our research and development activities.
We
have had a history of losses and no revenue.
We
have generated substantial accumulated losses since our inception. We have not generated any revenues from our operations to date
and do not expect to generate any revenue in the near future. As a result, our management expects the business to continue to
experience negative cash flow for the foreseeable future. We can offer no assurance that we will ever operate profitably or that
we will generate positive cash flow in the future.
Until
we can generate significant revenues, if ever, we expect to satisfy our future cash needs through equity or debt financing. We
will need to raise additional funds, and such funds may not be available on commercially acceptable terms, if at all. If we are
unable to raise funds on acceptable terms, we may not be able to execute our business plan, take advantage of future opportunities,
or respond to competitive pressures or unanticipated requirements. This may seriously harm our business, financial condition and
results of operations. In the event we are not able to continue operations investors will likely suffer a complete loss of their
investments in our securities.
We
are an early-stage biotechnology company and may never be able to successfully develop marketable products or generate any revenue.
We have a very limited relevant operating history upon which an evaluation of our performance and prospects can be made. There
is no assurance that our future operations will result in profits. If we cannot generate sufficient revenues, we may suspend or
cease operations.
We
are an early-stage company. Our operations to date have been limited to organizing and staffing our company, business planning,
raising capital, identifying MDPs for further research, developing our intellectual property portfolio, performing research on
identified MDPs and advancing our lead MBT candidate into clinical studies. We have not generated any revenues to date. All of
our MBTs are in the concept, research or early clinical stages. Moreover, we cannot be certain that our research and development
efforts will be successful or, if successful, that our MBTs will ever be approved by the United States Food and Drug Administration
(FDA). Typically, it takes 10-12 years to develop one new medicine from the time it is discovered to when it is available for
treating patients and longer timeframes are not uncommon. Even if approved, our products may not generate commercial revenues.
We have no relevant operating history upon which an evaluation of our performance and prospects can be made. We are subject to
all of the business risks associated with a new enterprise, including, but not limited to, risks of unforeseen capital requirements,
failure of potential drug candidates either in research, pre-clinical testing or in clinical trials, failure to establish business
relationships and competitive disadvantages against other companies. If we fail to become profitable, we may be forced to suspend
or cease operations.
If
we fail to demonstrate efficacy in our research and clinical trials, our future business prospects, financial condition and operating
results will be materially adversely affected.
The
success of our research and development efforts will be greatly dependent upon our ability to demonstrate efficacy of MBTs in
non-clinical studies, as well as in clinical trials. Non-clinical studies involve testing potential MBTs in appropriate non-human
disease models to demonstrate efficacy and safety. Regulatory agencies evaluate these data carefully before they will approve
clinical testing in humans. If certain non-clinical data reveals potential safety issues or the results are inconsistent with
an expectation of the potential drug’s efficacy in humans, the program may be discontinued or the regulatory agencies may
require additional testing before allowing human clinical trials. This additional testing will increase program expenses and extend
timelines. We may decide to suspend further testing on our potential drugs if, in the judgment of our management and advisors,
the non-clinical test results do not support further development.
Moreover,
success in research, pre-clinical testing and early clinical trials does not ensure that later clinical trials will be successful,
and we cannot be sure that the results of later clinical trials will replicate the results of prior clinical trials and non-clinical
testing. The clinical trial process may fail to demonstrate that our potential drug candidates are safe for humans and effective
for indicated uses. This failure would cause us to abandon a drug candidate and may delay development of other potential drug
candidates. Any delay in, or termination of, our non-clinical testing or clinical trials will delay the filing of an investigational
new drug application and new drug application with the FDA or the equivalent applications with pharmaceutical regulatory authorities
outside the United States and, ultimately, our ability to commercialize our potential drugs and generate product revenues. In
addition, we expect that our early clinical trials will involve small patient populations. Because of the small sample size, the
results of these early clinical trials may not be indicative of future results.
If
our current and any future clinical trials are delayed, suspended or terminated, we may be unable to develop our product candidates
on a timely basis, which would adversely affect our ability to obtain regulatory approvals, increase our development costs and
delay or prevent commercialization of any approved products.
We
cannot predict whether we will encounter problems with our ongoing, planned or any future clinical trials that will cause regulatory
agencies, institutional review boards, or us to suspend or delay a trial. For example, in November 2018, we announced the temporary
suspension of the Phase 1 clinical the trial for CB4211, our lead MBT candidate, in order to address injection site reactions
that have been unexpectedly persistent and we cannot provide any assurance that we will be able to resume the trial in a timely
manner, or at all. Clinical trials and clinical data collection protocols can be delayed for a variety of reasons, including:
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occurrence of unacceptable drug-related side effects or adverse events experienced by
participants in our clinical trials;
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discussions
with the FDA regarding the scope or design of our clinical trials and clinical data collection
protocols;
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delays
or the inability to obtain required approvals from institutional review boards or other
responsible entities at clinical sites selected for participation in our existing or
future clinical trials;
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adverse
findings in clinical or nonclinical studies related to the safety of our product candidates
in humans;
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the
amendment of clinical trial or data collection protocols to reflect changes in regulatory
requirements and guidance or other reasons as well as subsequent re-examination of amendments
of clinical trial or data collection protocols by institutional review boards or other
responsible bodies; and
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the
need to repeat or conduct additional clinical trials as a result of inconclusive or negative
results, failure to replicate positive early clinical data in subsequent clinical trials,
failure to deliver an efficacious dose of a product candidate, poorly executed testing,
a failure of a clinical site to adhere to the clinical protocol, an unacceptable study
design or other problems.
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In
addition, a clinical trial or development program may be suspended or terminated by us, institutional review boards, the FDA or
other responsible bodies due to a number of factors, including:
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failure
to conduct the clinical trial in accordance with regulatory requirements or our clinical
protocols;
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inspection
of the clinical trial operations or trial sites by the FDA or other regulatory authorities
resulting in the imposition of a clinical hold;
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inability
to resume a suspended trial in a timely manner (which we cannot predict with certainty),
if at all;
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unforeseen
safety issues or any determination that a trial presents unacceptable health risks;
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inability
to deliver an efficacious dose of a product candidate; or
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lack
of adequate funding to continue the clinical trial.
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If
the results of our clinical trials are not available when we expect or if we encounter any delay in the analysis of data from
our clinical trials, we may be unable to conduct additional clinical trials on the schedule we anticipate. Many of the factors
that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of
regulatory approval of a product candidate. Any delays in completing a clinical trial could increase our development costs, delay
or prevent the availability of topline data expected to be available from the trial, delay our product development and regulatory
submission process or make it difficult to raise additional capital.
We
may seek to establish development and commercialization collaborations, and, if we are not able to establish them on commercially
reasonable terms, we may have to alter our development and commercialization plans.
Our
potential drug development programs and the potential commercialization of our drug candidates will require substantial additional
cash to fund expenses. We may decide to collaborate with pharmaceutical or biotechnology companies in connection with the development
or commercialization of our potential drug candidates.
We
face significant competition in seeking appropriate collaborators. Whether we reach a definitive collaboration agreement 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 a number of factors. Those factors may include
the design or results of clinical trials, the likelihood of approval by the FDA or similar regulatory authorities outside the
United States, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering
such product candidate to patients, the potential of competing products, the existence of uncertainty with respect to our ownership
of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge and industry
and market conditions generally. The collaborator may also consider alternative product candidates or technologies for similar
indications that may be available to collaborate on, and whether such alternative collaboration project could be more attractive
than the one with us for our product candidate.
There
are a limited number of large pharmaceutical companies with whom we could potentially collaborate, and collaborations are complex
and time-consuming to negotiate and document. We may not be able to negotiate collaborations on a timely basis, on acceptable
terms, or at all. If we are unable to do so, we may have to curtail the development of the product candidate for which we are
seeking to collaborate, reduce or delay its development program or one or more of our other development programs, delay its potential
commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development
or commercialization activities at our own expense. If we elect to increase our expenditures to fund development or commercialization
activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms or at all.
If we do not have sufficient funds, we may not be able to further develop our product candidates or bring them to market and generate
product revenue.
We
may not be successful in our efforts to identify or discover potential drug development candidates.
A
key element of our strategy is to identify and test MDPs that play a role in cellular processes underlying our targeted disease
indications. A significant portion of the research that we are conducting involves emerging scientific knowledge and drug discovery
methods. Our drug discovery efforts may not be successful in identifying MBTs that are useful in treating disease. Our research
programs may initially show promise in identifying potential drug development candidates, yet fail to yield candidates for pre-clinical
and clinical development for a number of reasons, including:
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the
research methodology used may not be successful in identifying appropriate potential
drug development candidates; or
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potential
drug development candidates may, on further study, be shown not to be effective in humans,
or to have unacceptable toxicities, harmful side effects, or other characteristics that
indicate that they are unlikely to be medicines that will receive marketing approval
and achieve market acceptance.
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Research
programs to identify new product candidates require substantial technical, financial and human resources. We may choose to focus
our efforts and resources on a potential product candidate that ultimately proves to be unsuccessful. If we are unable to advance
our lead MBT candidate through clinical development or identify other MBTs that are suitable for pre-clinical and clinical development,
we will not be able to obtain product revenues in future periods, which likely would result in significant harm to our financial
position and negatively affect our ability to continue our operations.
Our
research and development plans will require substantial additional future funding which could impact our operational and financial
condition. Without the required additional funds, we will likely cease operations.
It
will take several years before we are able to develop potentially marketable products, if at all. Our research and development
plans will require substantial additional capital to:
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conduct
research, pre-clinical testing and human studies;
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manufacture
any future drug development candidate or product at pilot and commercial scale; and
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establish
and develop quality control, regulatory, and administrative capabilities to support these
programs.
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Our
future operating and capital needs will depend on many factors, including:
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the
pace of scientific progress in our research programs and the magnitude of these programs;
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the
scope and results of pre-clinical testing and human studies;
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the
time and costs involved in obtaining regulatory approvals;
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the
time and costs involved in preparing, filing, prosecuting, securing, maintaining and
enforcing intellectual property rights;
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competing
technological and market developments;
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our
ability to establish additional collaborations;
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changes
in any future collaborations;
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the
cost of manufacturing our drug products; and
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the
effectiveness of efforts to commercialize and market our products.
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We
base our outlook regarding the need for funds on many uncertain variables. Such uncertainties include the success of our research
and development initiatives, regulatory approvals, the timing of events outside our direct control such as negotiations with potential
strategic partners and other factors. Any of these uncertain events can significantly change our cash requirements as they determine
such one-time events as the receipt or payment of major milestones and other payments.
Additional
funds will be required to support our operations and if we are unable to obtain them on favorable terms, we may be required to
cease or reduce further research and development of our drug product programs, sell or abandon some or all of our intellectual
property, merge with another entity or cease operations.
Even
if we are able to develop our potential drugs, we may not be able to obtain regulatory approval, or if approved, we may not be
able to generate significant revenues or successfully commercialize our products, which will adversely affect our financial results
and financial condition and we will have to delay or terminate some or all of our research and development plans which may force
us to cease operations.
All
of our potential drug candidates will require extensive additional research and development, including pre-clinical testing and
clinical trials, as well as regulatory approvals, before we can market them. We cannot predict if or when any potential drug candidate
we intend to develop will be approved for marketing. There are many reasons that we may fail in our efforts to develop our potential
drug candidates. These include:
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the
possibility that pre-clinical testing or clinical trials may show that our potential
drugs are ineffective and/or cause harmful side effects or toxicities;
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our
potential drugs may prove to be too expensive to manufacture or administer to patients;
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our
potential drugs may fail to receive necessary regulatory approvals from the FDA or foreign
regulatory authorities in a timely manner, or at all;
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even
if our potential drugs are approved, we may not be able to produce them in commercial
quantities or at reasonable costs;
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even
if our potential drugs are approved, they may not achieve commercial acceptance;
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regulatory
or governmental authorities may apply restrictions to any of our potential drugs, which
could adversely affect their commercial success; and
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the
proprietary rights of other parties may prevent us or our potential collaborative partners
from marketing our potential drugs.
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If
we fail to develop our potential drug candidates, our financial results and financial condition will be adversely affected, we
will have to delay or terminate some or all of our research and development plans and may be forced to cease operations.
If
we do not maintain the support of qualified scientific collaborators, our revenue, growth and profitability will likely be limited,
which would have a material adverse effect on our business.
We
will need to maintain our existing relationships with leading scientists and/or establish new relationships with scientific collaborators.
We believe that such relationships are pivotal to establishing products using our technologies as a standard of care for various
indications. There is no assurance that our founders, scientific advisors or research partners will continue to work with us or
that we will be able to attract additional research partners. If we are not able to establish scientific relationships to assist
in our research and development, we may not be able to successfully develop our potential drug candidates. If this happens, our
business will be adversely affected.
We
expect to rely on third parties to conduct our clinical trials and some aspects of our research and pre-clinical testing. These
third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials, research
or pre-clinical testing.
We
currently rely on third parties to conduct some aspects of our research and expect to continue to rely on third parties to conduct
additional aspects of our research and pre-clinical testing, as well as any future clinical trials. Any of these third parties
may terminate their engagements with us at any time. If we need to enter into alternative arrangements, it would delay our product
research and development activities.
Our
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 will remain responsible for ensuring that each of our clinical trials
is conducted in accordance with the general investigational plan and protocols for the trial. Moreover, the FDA requires us to
comply with standards, commonly referred to as Good Clinical Practices, 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. We also are required to register ongoing clinical trials and post the results of completed
clinical trials on a government-sponsored database, ClinicalTrials.gov, within certain timeframes. Failure to do so can result
in fines, adverse publicity and civil and criminal sanctions.
Furthermore,
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
regulatory requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, marketing approvals
for our drug candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize our medicines.
We
currently rely, and expect to continue to rely, on other third parties to store and distribute drug supplies for our clinical
trials. Any performance failure on the part of our distributors could delay clinical development or marketing approval of our
drug candidates or commercialization of our products, producing additional losses and depriving us of potential product revenue.
We
contract with third parties for the manufacture of our peptide materials for research and pre-clinical testing and expect to continue
to do so for any future product candidate advanced to clinical trials and commercialization. This reliance on third parties increases
the risk that we will not have sufficient quantities of our research peptide materials, product candidates or medicines, or that
such supply will not be available to us at an acceptable cost, which could delay, prevent or impair our research, development
or commercialization efforts.
We
do not have manufacturing facilities adequate to produce our research peptide materials or supplies of any future product candidate.
We currently rely, and expect to continue to rely, on third-party manufacturers for the manufacture of our peptide materials,
our current and any future product candidates for pre-clinical and clinical testing, and for commercial supply of any of these
product candidates for which we or future collaborators obtain marketing approval. We do not have long term supply agreements
with any third-party manufacturers, and we purchase our research peptides on a purchase order basis.
We
may be unable to establish any agreements with third-party manufacturers or to do so on acceptable terms. Even if we are able
to establish agreements with third-party manufacturers, reliance on third-party manufacturers entails additional risks, including:
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reliance
on the third party for regulatory compliance and quality assurance;
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the
possible breach of the manufacturing agreement by the third party;
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the
possible termination or nonrenewal of the agreement by the third party at a time that
is costly or inconvenient for us; and
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reliance
on the third party for regulatory compliance, quality assurance, and safety and pharmacovigilance
reporting.
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Third-party
manufacturers may not be able to comply with current good manufacturing practices, or cGMP, regulations or similar regulatory
requirements outside the United States. Our failure, or the failure of our third-party manufacturers, to comply with applicable
regulations could result in sanctions being imposed on us, including fines, injunctions, civil penalties, delays, suspension or
withdrawal of approvals, license revocation, seizures or recalls of product candidates or medicines, operating restrictions and
criminal prosecutions, any of which could significantly and adversely affect supplies of our medicines and harm our business and
results of operations.
Any
drug candidate that we may develop may compete with other drug 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
us.
Our
current and anticipated future dependence upon others for the manufacture of our investigational materials or future product candidates
or medicines may adversely affect our future profit margins and our ability to commercialize any medicines that receive marketing
approval on a timely and competitive basis.
We
may not be able to develop drug candidates, market or generate sales of our products to the extent anticipated. Our business may
fail and investors could lose all of their investment in our Company.
Assuming
that we are successful in developing our potential drug candidates and receiving regulatory clearances to market our potential
products, our ability to successfully penetrate the market and generate sales of those products may be limited by a number of
factors, including the following:
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if
our competitors receive regulatory approvals for and begin marketing similar products
in the United States, the European Union, Japan and other territories before we do, greater
awareness of their products as compared to ours will cause our competitive position to
suffer;
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information
from our competitors or the academic community indicating that current products or new
products are more effective or offer compelling other benefits than our future products
could impede our market penetration or decrease our future market share; and
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the
pricing and reimbursement environment for our future products, as well as pricing and
reimbursement decisions by our competitors and by payers, may have an effect on our revenues.
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If
any of these happened, our business could be adversely affected.
Any
product candidate we are able to develop and commercialize would compete in the marketplace with existing therapies and new therapies
that may become available in the future. These competitive therapies may be more effective, less costly, more easily administered,
or offer other advantages over any product we seek to market.
Although
there are no currently approved therapies for the treatment of NAFLD and NASH, there are numerous therapies in development
including those in clinical trials that are more advanced than ours. Additionally, there are numerous therapies currently
marketed to treat diabetes, cancer, Alzheimer’s disease and other diseases for which our potential product candidates
may be indicated. For example, if we develop an approved treatment for type 2 diabetes, it would compete with several classes
of drugs for type 2 diabetes that are approved to improve glucose control. These include the insulin sensitizers pioglitazone
(Actos) and rosiglitazone (Avandia), which are administered as oral once daily pills, and metformin, which is sometimes
called an insulin sensitizer and is available as a generic once daily formulation. If we develop an approved treatment for
Alzheimer’s disease it would compete with approved therapies such as donepezil (Aricept), galantamine
(Razadyne), memantine (Namenda), rivastigmine (Exelon) and tacrine (Cognex). These therapies are varied in their design,
therapeutic application and mechanism of action and may provide significant competition for any of our product candidates for
which we obtain market approval. New products may also become available that provide efficacy, safety, convenience and other
benefits that are not provided by currently marketed therapies. As a result, they may provide significant competition for any
of our product candidates for which we obtain market approval. 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 FDA or other
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 are able to enter the market. In addition, our ability to compete
may be affected in many cases by insurers or other third-party payers seeking to encourage the use of existing products which
are generic or are otherwise less expensive to provide.
Our
future success depends on key members of our scientific team and our ability to attract, retain and motivate qualified personnel.
We
are highly dependent on our founders, Dr. Pinchas Cohen and Dr. Nir Barzilai, and the other principal members of our
management and scientific teams. Drs. Cohen and Barzilai are members of our board of directors and provide oversight and guidance
on scientific, research and development topics in that capacity. Other members of our key management and scientific teams, including
our Chief Scientific Officer, Dr. Kenneth Cundy, are employed “at will,” meaning we or they may terminate the employment
relationship at any time. Our consultants and advisors, including our founders, 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. In addition,
we rely on other consultants and advisors from time to time, including drug discovery and development advisors, to assist us in
formulating our research and development strategy. Agreements with these advisors typically may be terminated by either party,
for any reason, on relatively short notice. We do not maintain “key person” insurance for any of the key members of
our team. The loss of the services of any of these persons could impede the achievement of our research, development and commercialization
objectives.
Recruiting
and retaining qualified scientific, clinical, and managerial personnel will also be critical to our success. We may not be able
to attract and retain these personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology
companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities
and research institutions.
We
expect to expand our clinical development research, development and regulatory capabilities, and as a result, we may encounter
difficulties in managing our growth, which could disrupt our operations.
We
expect to experience significant growth in the scope of our operations, particularly in the areas of clinical development research,
drug development and regulatory affairs. 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.
We expect that if our drug candidates continue to progress in development, we may require significant additional investment in
personnel, management systems and resources, particularly in the build out of our commercial capabilities. Over the next several
years, we may 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 sales and marketing. Due to our limited financial resources and our limited
operating history, we may not be able to effectively manage the expected expansion of our operations. The physical 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.
The
use of any of our products in clinical trials may expose us to liability claims, which may cost us significant amounts of money
to defend against or pay out, causing our business to suffer.
The
nature of our business exposes us to potential liability risks inherent in the testing, manufacturing and marketing of our products.
If the clinical trial for our current drug candidate resumes, if any of our other drug candidates enter into clinical trials,
or if any of our drug candidates become marketed products, they could potentially harm people or allegedly harm people, possibly
subjecting us to costly and damaging product liability claims. Some of the patients who participate in clinical trials are already
ill when they enter a trial or may intentionally or unintentionally fail to meet the exclusion criteria. The waivers we obtain
may not be enforceable and may not protect us from liability or the costs of product liability litigation. Although we intend
to obtain product liability insurance which we believe is adequate, we are subject to the risk that our insurance will not be
sufficient to cover claims. The insurance costs along with the defense or payment of liabilities above the amount of coverage
could cost us significant amounts of money and management distraction from other elements of the business, causing our business
to suffer.
Compliance
with laws and regulations pertaining to the privacy and security of health information may be time consuming, difficult and costly,
particularly in light of increased focus on privacy issues in countries around the world, including the U.S. and the EU.
We
are subject to various domestic and international privacy and security regulations. The confidentiality, collection, use and disclosure
of personal data, including clinical trial patient-specific information, are subject to governmental regulation generally in the
country that the personal data were collected or used. In the United States we are subject, or expect to be subject, to various
state and federal privacy and data security regulations, including but not limited to the Health Insurance Portability and Accountability
Act of 1996, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009. HIPAA mandates,
among other things, the adoption of uniform standards for the electronic exchange of information in common health care transactions,
as well as standards relating to the privacy and security of individually identifiable health information, which require the adoption
of administrative, physical and technical safeguards to protect such information. In the EU personal data includes any information
that relates to an identified or identifiable natural person with health information carrying additional obligations, including
obtaining the explicit consent from the individual for collection, use or disclosure of the information. In addition, the protection
of and cross-border transfers of such data out of the EU has become more stringent with the EU’s General Data Protection
Regulation coming into effect in May 2018. Furthermore, the legislative and regulatory landscape for privacy and data protection
continues to evolve, and there has been an increasing amount of focus on privacy and data protection issues. The United States
and the EU and its member states continue to issue new privacy and data protection rules and regulations that relate to personal
data and health information. Compliance with these laws may be time consuming, difficult and costly. If we fail to comply with
applicable laws, regulations or duties relating to the use, privacy or security of personal data we could be subject to the imposition
of significant civil and criminal penalties, be forced to alter our business practices and suffer reputational harm.
The
patent positions of biopharmaceutical products are complex and uncertain and we may not be able to protect our patented or other
intellectual property. If we cannot protect this property, we may be prevented from using it or our competitors may use it and
our business could suffer significant harm. Also, the time and money we spend on acquiring and enforcing patents and other intellectual
property will reduce the time and money we have available for our research and development, possibly resulting in a slow down
or cessation of our research and development.
We
own or exclusively license patents and patent applications related to our MDPs and potential MBTs and we anticipate continuing
to develop our intellectual property portfolio. However, neither patents nor patent applications ensure the protection of our
intellectual property for a number of reasons, including the following:
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The
United States Supreme Court rendered a decision in Molecular Pathology vs. Myriad Genetics,
Inc., 133 S.Ct. 2107 (2013) (“Myriad”), in which the court held that
naturally occurring DNA segments are products of nature and not patentable as compositions
of matter. On March 4, 2014, the U.S. Patent and Trademark Office (“USPTO”)
issued guidelines for examination of such claims that, among other things, extended the
Myriad decision to any natural product. Since MDPs are natural products isolated from
cells, the USPTO guidelines may affect allowability of some of our patent claims (pertaining
to natural MDP sequences) that are filed in the USPTO but are not yet issued. Further,
while the USPTO guidelines are not binding on the courts, it is likely that as the law
of subject matter eligibility continues to develop Myriad will be extended to natural
products other than DNA. Thus, our issued U.S. patent claims directed to MDPs as compositions
of matter may be vulnerable to challenge by competitors who seek to have our claims rendered
invalid. While Myriad and the USPTO guidelines described above will affect our patents
only in the United States, there is no certainty that similar laws or regulations will
not be adopted in other jurisdictions.
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Competitors
may interfere with our patenting process in a variety of ways. Competitors may claim
that they invented the claimed invention prior to us. Competitors may also claim that
we are infringing their patents and restrict our freedom to operate. Competitors may
also contest our patents and patent applications, if issued, by showing in various patent
offices that, among other reasons, the patented subject matter was not original, was
not novel or was obvious. In litigation, a competitor could claim that our patents and
patent applications are not valid or enforceable for a number of reasons. If a court
agrees, we would lose some or all of our patent protection.
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As
a company, we have no meaningful experience with competitors interfering with our patents
or patent applications. In order to enforce our intellectual property, we may need to
file a lawsuit against a competitor. Enforcing our intellectual property in a lawsuit
can take significant time and money. We may not have the resources to enforce our intellectual
property if a third party infringes an issued patent claim. Infringement lawsuits may
require significant time and money resources. If we do not have such resources, the licensor
is not obligated to help us enforce our patent rights. If the licensor does take action
by filing a lawsuit claiming infringement, we will not be able to participate in the
suit and therefore will not have control over the proceedings or the outcome of the suit.
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Because
of the time, money and effort involved in obtaining and enforcing patents, our management
may spend less time and resources on developing potential drug candidates than they otherwise
would, which could increase our operating expenses and delay product programs.
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Our
licensed patent applications directed to the composition and methods of using MOTS-c,
and SHLP-6, which we consider as a research peptide for the potential treatment of cancer,
have not yet been issued. There can be no assurance that these or our other licensed
patent applications will result in the issuance of patents, and we cannot predict the
breadth of claims that may be allowed in our currently pending patent applications or
in patent applications we may file or license from others in the future.
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Issuance
of a patent may not provide much practical protection. If we receive a patent of narrow
scope, then it may be easy for competitors to design products that do not infringe our
patent(s).
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We
have limited ability to expand coverage of our licensed patent related to SHLP-2 and
our licensed patent application related to SHLP-6 outside of the United States. The lack
of patent protection in international jurisdictions may inhibit our ability to advance
MBT drug candidates in these markets.
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If
a court decides that the method of manufacture or use of any of our drug candidates infringes
on a third-party patent, we may have to pay substantial damages for infringement.
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A
court may prohibit us from making, selling or licensing a potential drug candidate unless
the patent holder grants a license. A patent holder is not required to grant a license.
If a license is available, we may have to pay substantial royalties or grant cross licenses
to our patents, and the license terms may be unacceptable.
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Redesigning
our potential drug candidates so that they do not infringe on other patents may not be
possible or could require substantial funds and time.
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It
is also unclear whether our trade secrets are adequately protected. While we use reasonable efforts to protect our trade secrets,
our employees or consultants may unintentionally or willfully disclose our information to competitors. Enforcing a claim that
someone illegally obtained and is using our trade secrets is expensive and time consuming, and the outcome is unpredictable. In
addition, courts outside the United States are sometimes less willing to protect trade secrets. Our competitors may independently
develop equivalent knowledge, methods and know-how. We may also support and collaborate in research conducted by government organizations,
hospitals, universities or other educational institutions. These research partners may be unable or unwilling to grant us exclusive
rights to technology or products derived from these collaborations prior to entering into the relationship.
If
we do not obtain required intellectual property rights, we could encounter delays in our drug development efforts while we attempt
to design around other patents or even be prohibited from developing, manufacturing or selling potential drug candidates requiring
these rights or licenses. There is also a risk that disputes may arise as to the rights to technology or potential drug candidates
developed in collaboration with other parties.
Significant
disruptions of information technology systems or security breaches could adversely affect our business.
We
are increasingly dependent upon information technology systems, infrastructure and data to operate our business. In the ordinary
course of business, we collect, store and transmit large amounts of confidential information (including, among other things, trade
secrets or other intellectual property, proprietary business information and personal information). It is critical that we do
so in a secure manner to maintain the confidentiality and integrity of such confidential information. We also have outsourced
elements of our operations to third parties, and as a result we manage a number of third-party vendors who may or could have access
to our confidential information. Attacks on information technology systems are increasing in their frequency, levels of persistence,
sophistication and intensity, and they are being conducted by increasingly sophisticated and organized groups and individuals
with a wide range of motives and expertise. The size and complexity of our information technology systems, and those of third-party
vendors with whom we contract, and the large amounts of confidential information stored on those systems, make such systems vulnerable
to service interruptions or to security breaches from inadvertent or intentional actions by our employees, third-party vendors,
and/or business partners, or from cyber-attacks by malicious third parties. Cyber-attacks could include the deployment of harmful
malware, ransomware, denial-of-service attacks, social engineering and other means to affect service reliability and threaten
the confidentiality, integrity and availability of information.
Significant
disruptions of our information technology systems, or those of our third-party vendors, or security breaches could adversely affect
our business operations and/or result in the loss, misappropriation and/or unauthorized access, use or disclosure of, or the prevention
of access to, confidential information, including, among other things, trade secrets or other intellectual property, proprietary
business information and personal information, and could result in financial, legal, business and reputational harm to us.
Any
failure or perceived failure by us or any third-party collaborators, service providers, contractors or consultants to comply with
our privacy, confidentiality, data security or similar obligations to third parties, or any data security incidents or other security
breaches that result in the unauthorized access, release or transfer of sensitive information, including personally identifiable
information, may result in governmental investigations, enforcement actions, regulatory fines, litigation or public statements
against us, could cause third parties to lose trust in us or could result in claims by third parties asserting that we have breached
our privacy, confidentiality, data security or similar obligations, any of which could have a material adverse effect on our reputation,
business, financial condition or results of operations. Moreover, data security incidents and other security breaches can be difficult
to detect, and any delay in identifying them may lead to increased harm. While we have implemented data security measures intended
to protect our information technology systems and infrastructure, there can be no assurance that such measures will successfully
prevent service interruptions or data security incidents.
Because
of our status as an emerging growth company, our independent registered public accountants are not required to provide an attestation
report as to our internal control over financial reporting for several years.
Our
independent registered public accounting firm will not be required to attest formally to the effectiveness of our internal control
over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act until we are no longer an “emerging growth
company” as defined in the Jumpstart our Business Startups Act of 2012 (“JOBS Act”). We will be an emerging
growth company until December 31, 2020, although circumstances could cause us to lose that status earlier, including if the market
value of our common stock held by non-affiliates exceeds $700 million as of any June 30th before that time, in which case we would
no longer be an emerging growth company as of the following December 31st. Accordingly, you will not likely be able to depend
on any attestation concerning our internal control over financial reporting from our independent registered public accountants
for several years.
If
securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or
if they change their recommendations regarding our stock adversely, our stock price and trading volume could decline.
The
trading market for our common stock will be influenced by the research and reports that industry or securities analysts may publish
about us, our business, our market, or our competitors. If any of the analysts who may cover us change their recommendation regarding
our stock adversely, or provide more favorable relative recommendations about our competitors, our stock price would likely decline.
If any analysts who may cover us were to cease coverage or our company or fail to regularly publish reports on us, we could lose
visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
The
market price of our common stock may be highly volatile.
The
market for our common stock will likely be characterized by significant price volatility when compared to more established issuers
and we expect that it will continue to be so for the foreseeable future. The market price of our common stock is likely to be
volatile for a number of reasons. First, our common stock is likely to be sporadically and/or thinly traded. As a consequence
of this lack of liquidity, the trading of relatively small quantities of common stock by our stockholders may disproportionately
influence the price of the common stock in either direction. The price of the common stock could, for example, decline precipitously
if even a relatively small number of shares are sold on the market without commensurate demand, as compared to a market for shares
of an established issuer which could better absorb those sales without adverse impact on its share price. Second, we are a speculative
investment due to our lack of profits to date and substantial uncertainty regarding our ability to develop and commercialize a
drug product from our new or existing technologies. As a consequence of this enhanced risk, more risk-adverse investors may, under
the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell
their shares on the market more quickly and at greater discounts than would be the case with the shares of an established issuer.
We cannot make any predictions or projections as to what the prevailing market price for our common stock will be at any time
or as to what effect the sale of common stock or the availability of common stock for sale at any time will have on the prevailing
market price.
Our
management owns a significant percentage of our outstanding common stock. If the ownership of our common stock continues to be
highly concentrated in management, it may prevent other stockholders from influencing significant corporate decisions.
As
of March 13, 2019, our executive officers and directors own, as a group, approximately 32.8% of the outstanding shares of our
common stock. Additionally, our executive officers and directors own, as a group, options and warrants exercisable for approximately
10.3% of our outstanding common stock, assuming exercise of such options and warrants. As a result, our management could exert
significant influence over matters requiring stockholder approval, including the election of our board of directors, the approval
of mergers and other extraordinary transactions, as well as the terms of any of these transactions. This concentration of ownership
could have the effect of delaying or preventing a change in our control or otherwise discouraging a potential acquirer from attempting
to obtain control of us, which could in turn have an adverse effect on the fair market value of our company and our common stock.
These actions may be taken even if they are opposed by our other stockholders.
The
requirements of being a public company may strain our resources, divert management’s attention and require us to disclose
information that is helpful to competitors, make us more attractive to potential litigants and make it more difficult to attract
and retain qualified personnel.
As
a public company, we are subject to the reporting requirements of the Securities Act, the Securities Exchange Act of 1934, as
amended (Exchange Act), the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act),
and applicable Canadian securities rules and regulations. Despite recent reforms made possible by the JOBS Act, compliance with
these rules and regulations creates significant legal and financial compliance costs and makes some activities difficult, time-consuming
or costly. The Exchange Act and applicable Canadian provincial securities legislation require, among other things, that we file
annual, quarterly, and current reports with respect to our business and operating results.
Additionally,
the Sarbanes-Oxley Act and the related rules and regulations of the SEC and the Nasdaq Capital Market require us to implement
particular corporate governance practices and adhere to a variety of reporting requirements and complex accounting rules. Among
other things, we are subject to rules regarding the independence of the members of our board of directors and committees of the
board and their experience in finance and accounting matters and certain of our executive officers are required to provide certifications
in connection with our quarterly and annual reports filed with the SEC. The perceived personal risk associated with these rules
may deter qualified individuals from accepting these positions. Accordingly, we may be unable to attract and retain qualified
officers and directors. If we are unable to attract and retain qualified officers and directors, our business and our ability
to maintain the listing of our shares of common stock on the Nasdaq or another stock exchange could be adversely affected.
