Overview
We are a biopharmaceutical company focused on
acquiring, developing and commercializing clinical-stage drugs for
dermatological and gastrointestinal indications with clear unmet
medical needs. Our lead product candidate, EB01, is an
sPLA2
inhibitor for the topical treatment of
chronic allergic contact dermatitis (ACD), a common, potentially
debilitating condition and occupational illness. EB01 employs a
novel, non-steroidal mechanism of action and in two clinical
studies has demonstrated statistically significant improvement of
multiple symptoms in ACD patients. Our investigational new
drug (IND) application for EB01 was accepted by the U.S. Food and
Drug Administration (FDA) in November 2018 and we initiated patient
enrollment for a Phase 2B clinical study evaluating EB01 in October
2019.
We also intend to expand the utility of our sPLA2
inhibitor technology, which forms the
basis for EB01, across multiple indications. For example, in
September 2019, we received approval from Health Canada to begin a
proof-of-concept clinical study of EB02, an sPLA2
inhibitor, as a potential treatment
for patients with hemorrhoids disease (HD). In addition to EB01 and
EB02, we plan to expand our portfolio with drug candidates to treat
other skin and gastrointestinal conditions.
Competitive Strengths
We believe that we possess a number of competitive strengths that
position us to become a leading biopharmaceutical company focused
on dermatological and gastrointestinal diseases,
including:
●
Novel pipeline addressing
large underserved markets. Our
product candidates are novel clinical-stage compounds that have
significant scientific rationale for effectiveness. By initially
targeting large markets that have significant unmet medical needs,
we believe that we can drive adoption of new products and improve
our competitive position. For example, we believe that the novel,
non-steroidal mode of action of our lead product candidates will be
an appealing alternative for managing the symptoms of ACD and HD.
These diseases impact millions of people in the United States and
Canada, and can have significant effects on patients’ quality
of life and, in the case of many chronic ACD patients and their
employers, significant workplace-related costs and
limitations.
●
Intellectual property
protection and market exclusivity. We have opportunities to develop our competitive
position through patents, trade secrets, technical know-how and
continuing technological innovation. We have exclusive license
rights in our target indications to multiple patents and pending
patent applications in the United States and in various foreign
jurisdictions. In addition to patent protection, we intend to
utilize trade secrets and market exclusivity afforded to a New
Chemical Entity, where applicable, to enhance or maintain our
competitive position.
●
Experienced management and
drug development capabilities. Our leadership team possesses core capabilities in
dermatology, gastrointestinal medicine, drug development and
commercialization, chemistry, manufacturing and controls, public
company management and finance. Our founder, Chief Executive
Officer, Pardeep Nijhawan, MD, FRCPC, AGAF, is a board-certified
gastroenterologist and hepatologist with a successful track record
of building life science businesses, including Medical Futures,
Inc., which was sold to Tribute Pharmaceuticals in 2015. In
addition to our internal capabilities, we have also established a
network of key opinion leaders, contract research organizations,
contract manufacturing organizations and consultants. As a result,
we believe we are well positioned to efficiently develop novel
dermatological and gastrointestinal treatments.
Our Business Strategy
Our business strategy is to develop and commercialize innovative
drug products that address unmet medical needs for large,
underserved markets where there is limited competition. Key
elements of our strategy include:
●
Establish EB01 as the leading
treatment for chronic ACD. Our
primary goal is to obtain regulatory approval for EB01 and
commercialize EB01 for use in the treatment of ACD. Based on
promising clinical trial results in which patients treated with
EB01 experienced statistically significant improvements of their
symptoms with minimal side effects, we initiated a Phase 2B
clinical study evaluating EB01 in the United
States.
●
Selectively targeting
additional indications within the areas of dermatology and
gastroenterology. In addition
to our ACD program, we plan to efficiently generate
proof-of-concept data for other programs where the inhibition of
sPLA2
activity may have a therapeutic benefit. For example, given
sufficient funding, we are planning a clinical study to evaluate
EB02 for internal hemorrhoids.
●
In-license promising product
candidates. We are applying our
cost-effective development approach to advance and expand our
pipeline. Our current product candidates are in-licensed from
academic institutions or other pharmaceutical companies, and we
plan to continue to identify, evaluate and potentially obtain
rights to and develop additional assets. Our objective is to
maintain a well‑balanced
portfolio with product candidates across various stages of
development. In general, we seek to identify product candidates and
technology that represent a novel therapeutic approach to
dermatological and gastrointestinal diseases, are supported by
compelling science, target an unmet medical need, and provide a
meaningful commercial opportunity. We do not currently intend to
invest significant capital in basic research, which can be
expensive and time-consuming.
●
Capture the full commercial
potential of our product candidates. If our product candidates are successfully
developed and approved, we may build commercial infrastructure
capable of directly marketing the products in North America and
potentially other major geographies of strategic interest. We also
plan to evaluate strategic licensing arrangements with
pharmaceutical companies for the commercialization of our drugs,
where applicable, such as in territories where a partner may
contribute additional resources, infrastructure and
expertise.
Allergic Contact Dermatitis
Contact dermatitis is one of the most common occupational and
work-related skin conditions in the United States. The disease can
be either irritant contact dermatitis or ACD. Together, these
conditions have been estimated to cost up to $2 billion annually as
a result of lost work, reduced productivity, medical care and
disability payments. Based on published reports and U.S. insurance
claims data, we estimate that there are more than 2.5 million
people in the United States with ACD, including more than 1 million
people who have chronic ACD. Since primary care physicians do not
always distinguish between irritant and allergic contact
dermatitis, a potentially larger undiagnosed patient population may
also be present.
ACD is caused by an allergen interacting with skin and usually
occurs on areas of the body that have been directly exposed to the
environment, with a high prevalence on the hands and face. Common
allergens associated with ACD include plants, metals, plastics and
resins, rubber additives, dyes, biocides, and various cosmetics.
The disease is characterized by inflammation, erythema (redness),
pruritus (itchiness), and blistering of the skin. Inflammation can
vary from mild irritation and redness to open sores, depending on
the type of irritant, the body part affected and the degree of
sensitivity. ACD can become chronic if not treated or if the
causative allergen is not removed. In many chronic cases, the
causative allergen is unknown or difficult to avoid (as an example,
the allergen is present in the workplace).
The immune mechanisms involved in ACD are well documented. During
the initial contact with the offending allergen, the immune system
is sensitized. Upon subsequent contact, a delayed-type
hypersensitivity reaction (Type IV) occurs at the point of contact
between the skin and the allergen. As a cell-mediated response, the
immune reaction primarily involves the interaction of T cells with
antigens rather than an antibody response. More specifically, ACD
involves an exogenous substance binding a cell surface protein to
form a hapten that is recognized as a foreign antigen by the immune
system. Haptens are known to signal through toll-like receptors, a
family of receptors involved in the innate immune system
recognizing pathogens, leading to the induction of pro-inflammatory
cytokines such as interleukin (IL)-1b. EB01 has been shown in
preclinical studies to inhibit the production of pro-inflammatory
cytokines induced via toll-like receptor signaling (IL-1b, IL-6,
IL-8, MIP-1a, and TNFa), suggesting that EB01 may address the
underlying disease mechanism of ACD.
Current Treatments
Diagnosis of ACD is typically based upon the appearance of the skin
and the history of exposure to an allergen. Currently, patch
testing is the standard for identifying the allergen causing the
reaction; however, it is a lengthy procedure that only identifies
the offending allergen approximately half of the time according to
our market research.
Generally, dermatologists view chronic ACD from both a duration and
recurrence perspective, considering how often and how long symptoms
persist. Chronic disease affects patients over a prolonged period,
typically greater than six months or even years. These chronic
patients have either frequent intermittent exposure or continuous
exposure. Since inflammation in ACD is driven by external exposure
to an allergen, the severity of ACD does not necessarily correlate
with body surface area, as is often the case with other
dermatological diseases.
The current mainstay of treatment is to identify and remove
exposure to the allergen. However, in approximately 70% of cases,
allergen exposure cannot be eliminated, according to our market
research. To our knowledge, there are no drug treatment options
specifically indicated for ACD. As such, physicians must utilize
agents approved for other dermatological conditions. Topical
corticosteroids are the most commonly used therapeutic intervention
for ACD but cannot be used continuously since they have well-known
side-effects including skin thinning, stretch marks, acne,
testicular atrophy, nosebleeds, stinging, burning and dryness.
Other topical treatments for ACD include immunomodulators such as
topical calcineurin inhibitors. However, these are less efficacious
than topical corticosteroids and have an FDA “black box
warning” for risk of malignancies. Systemic corticosteroids
can be used for acute control of severe cases of ACD but have
safety concerns including hypothalamic-pituitary-adrenal axis
suppression, growth suppression and loss of bone-density, thereby
limiting the utility of steroids for treating chronic disease. The
last resort for patients is systemic immunomodulators which have a
series of “black box warnings” and associated safety
issues. Systemic therapies also need to be tapered off each time
the physician wants to patch test allergens to identify the source
of a patient’s ACD.
EB01
Overview and Status
Our lead product candidate, EB01, is a topical vanishing cream
containing a novel, non-steroidal anti-inflammatory compound. EB01
exerts its anti-inflammatory activity through the inhibition of
certain pro-inflammatory enzymes known as secretory phospholipase
2, or sPLA2.
These enzymes are secreted by immune cells upon their activation
and produce arachidonic acid via phospholipid hydrolysis, which, in
turn, initiates a broad inflammatory cascade. The
sPLA2 enzyme
family plays a key role in initiating inflammation associated with
many diseases, and we believe that targeting the
sPLA2 enzyme
family with enzyme inhibitors will have a superior
anti-inflammatory therapeutic effect because the inflammatory
process will be inhibited at its inception rather than after
inflammation has occurred.
In October 2019, we initiated patient enrollment for a multi-center
Phase 2B clinical study evaluating EB01 as a monotherapy for
patients with moderate to severe chronic ACD. In the first cohort,
ACD patients will be treated for 28 days with EB01cream. The
double-blind, vehicle-controlled study will primarily evaluate the
safety and efficacy of EB01 in ACD patients. Investigators will
also evaluate symptom reduction, quality of life and
dose-relationships among various strengths of EB01 cream as
secondary and exploratory measures. We plan to perform a blinded
interim analysis following the completion of the first cohort to
determine the total number of patients for the second part of the
study. The sample size adaptive protocol contemplates up to 166
total subjects.
Previous Results
EB01 has demonstrated anti-inflammatory activity in a variety
of in
vitro and in vivo preclinical pharmacology models. In addition, EB01
has demonstrated efficacy for the treatment of ACD in two previous
clinical trials.
A variety of in vitro and in vivo preclinical pharmacology models were used to
assess the anti-inflammatory activity of EB01. Using a model for
hapten signaling indicative of ACD, lipopolysaccharide-stimulated
peripheral blood mononuclear cells were treated with EB01 and shown
to inhibit pro-inflammatory cytokines including IL-1b, IL-6, IL-8,
MIP-1a, and TNFa at the protein and mRNA expression levels.
Additionally, the safety of EB01 has been established in several
Good Laboratory Practice toxicology studies, including an
eight-week study involving topical application of 2.0% EB01 cream
to minipigs and a 6-week continuous infusion study in rats.
Overall, EB01 was well-tolerated and systemic exposure was
negligible (below the limit of detection). No genotoxicity has been
demonstrated in bacterial reverse mutation and micronucleus
testing.
Clinical experience with EB01 includes five clinical studies
involving a total of 176 subjects. No serious adverse reactions
were encountered during these clinical studies. Healthy volunteers
were treated with EB01 under occlusion. EB01 was classified as a
weak sensitizer by maximization assay (Grade 1) and is, therefore,
considered safe to use under any conditions. EB01 has demonstrated
efficacy for the treatment of ACD in two separate clinical trials.
Both studies were double-blind, vehicle-controlled bilateral
comparison studies to assess the safety, tolerability and efficacy
of EB01 cream applied twice daily for the treatment of ACD of the
hand and forearm as determined by the Contact Dermatitis Severity
Index (CDSI), a physician’s visual assessment. The CDSI is a
composite endpoint, which grades each symptom of the disease
(dryness, scaling, redness, pruritus, and fissures) scored from 0
(none) to 3 (severe), with a maximum severity score of 15. A
diagnosis of ACD was confirmed by a positive patch test deemed to
be clinically relevant by the investigator.
The first study (n=11) was a double-blind, placebo-controlled
clinical study to assess the safety and efficacy of topical 1.0%
EB01 cream for the treatment of ACD. Subjects selected for inclusion had bilateral
ACD. Prior to randomization,
subjects were patch tested. Patch tests were applied to the upper
part of each subjects’ back for 2 days and were read on Days
2 and 4. Only “++” reactions were considered clinically
relevant and positive for the study. The study was bilateral in
design with one lesion treated with 1.0% EB01 cream twice daily,
while a comparable lesion was treated with placebo cream. Disease
severity was assessed before treatment (Day 0) and at Day 30 by the
investigator using the CDSI. For each individual patient, the change in disease
score in the drug-treated hand was compared to that in the
placebo-treated hand, thus making the latter an internal control
for each patient. The mean
change from baseline for 1.0% EB01 cream treated lesions was 69.9%,
compared to 36.5% in the placebo cream lesions (p = 0.0024). No serious adverse events were
reported.
A second, larger (n=30) bilateral study was conducted to assess
2.0% EB01 cream applied twice daily for 21 consecutive days in
connection with the treatment of ACD. To be included in the study,
patients had to have bilateral ACD with a CDSI score of at least 10
on each side, with no more than a 1-point difference between
lesions. At Day 21, EB01-treated lesions had a mean improvement
from baseline of 56%, compared to 24% for those treated with
placebo cream (p < 0.001). Efficacy of the 2.0% EB01 cream
was maintained through Day 42 (21-days after ending treatment) with
a 49% decrease in total CDSI score for 2.0% EB01 cream-treated
hands, compared to 15% in the vehicle-treated hands (p
< 0.001).
Within the total CDSI score, EB01 demonstrated statistically
significant reductions for each of the individual CDSI components
(dryness, scaling, redness, pruritus, and fissures), as shown
in the following table:
Mean Percent Reduction in Individual Symptoms from Baseline to Day
21
|
|
|
P-Value
|
Scaling
|
-48%
|
-20%
|
<0.001
|
Redness
|
-47%
|
-20%
|
<0.001
|
Pruritis
|
-62%
|
-25%
|
<0.001
|
Fissures
|
-81%
|
-46%
|
<0.001
|
Dryness
|
-45%
|
-15%
|
<0.001
|
Hemorrhoids
Disease
Hemorrhoids disease (HD) is a common disorder, characterized by
itching, inflammation, pain, tenderness, bleeding and difficulty
defecating. According to National Institutes of Health reports, HD
affects approximately 5% of the U.S. adult population, or
approximately 12.5 million adults in the U.S. Almost half of
individuals 50 years and older have experienced symptomatic
hemorrhoids. Despite the high prevalence of hemorrhoids, we are not
aware of any prescription drugs with an approved New Drug
Application for the treatment of hemorrhoids. While there are
commonly used prescription and over-the-counter products for HD,
none has been approved by the FDA through the NDA process because
they entered the market prior to 1962. The mechanism of action of
these treatments is either general, such as steroids, or unknown,
in the case of herbal remedies, and we are not aware of any reports
published in medical journals on the efficacy of safety of any
product currently marketed in the U.S. As a result of these
factors, we believe that HD remains a significant unmet medical
need and market opportunity.
Confusion often arises because the term hemorrhoid has been used to
refer to both normal anatomic structures and pathologic structures.
Hemorrhoids are cushions of fibromuscular tissue that line the anal
canal. With HD, the muscle fibers that anchor the cushions become
attenuated, the hemorrhoids slide, become congested, bleed, and
eventually prolapse or protrude into the anal canal. The two types
of hemorrhoids, external and internal, refer to their location.
Internal hemorrhoids are typically classified as first degree
(grade I) – hemorrhoids bleed but do not protrude; second
degree (grade II) – hemorrhoids protrude but reduce on their
own; third degree (grade III) – hemorrhoids protrude and
require manual re-insertion; and fourth degree (grade IV) –
hemorrhoids are permanently prolapsed and cannot be
re-inserted.
The treatment of HD typically begins with conservative therapy
consisting of diet and lifestyle modification, fiber supplements,
sitz baths and stool softeners. In addition to this conservative
therapy, physicians may prescribe topical steroids and analgesics.
Because of the lack of effective prescription products, most
hemorrhoid patients will use over-the-counter preparations or the
prescription drugs available, which are similar to the
over-the-counter treatment, but formulated with a higher dose.
Based on public filings and reports, we estimate that as many as
4.0 million prescriptions are written and more than 20 million
over-the-counter units are sold each year in the U.S. for the
treatment of HD. Alternatives are invasive procedures, including
rubber band ligation, the injection of a sclerosing agent,
electrocoagulation, light therapy and
hemorrhoidectomy.
EB02
Overview and Status
EB02 represents a potential extension of our
sPLA2
anti-inflammatory technology. Based on
our analysis of clinical data in dermatitis, we believe that EB02,
which is currently formulated as a cream, may be effective in
treating the erythema, swelling and exudation associated with HD.
Specifically, sPLA2
has been demonstrated to be a mediator
of processes that characterize hemorrhoidal pathophysiology,
including inflammation and
micro-vascularization.
In September 2019, we received approval from Health Canada to begin
a clinical study of EB02 as a potential treatment for patients with
grade I-III internal hemorrhoids. Health Canada reviewed our
clinical trial application (CTA) and approved it by issuing a "no
objection letter," a standard guidance document that allows us to
proceed with our study. We believe this approval represents a
significant milestone in our goal of demonstrating the broad
potential of our novel non-steroidal anti-inflammatory
technology.
Our exploratory Phase 2a study is designed to assess the safety and
efficacy of EB02 among hemorrhoid patients at investigational
centers in Canada. The study plan includes up to 48 subjects in a
randomized, double-blind, vehicle-controlled design. Should the
initial results be encouraging, we plan to transition from a proof
of concept study to a Phase 2 study of up to 80 to 400 subjects. We
are currently evaluating the timing of the initiation of the study
based in part on other company priorities and available
funding.
Other Product Candidates
We have exclusive worldwide licensed rights to an additional
product candidate for the topical treatment of anal fissures. This
potential development program is part of our long-term growth
opportunities. In addition, we plan to continue to identify,
evaluate and potentially obtain rights to and develop additional
clinical assets across various stages of development, focusing
primarily on dermatological and gastrointestinal
diseases.
Intellectual Property
We have an exclusive license from Yissum Research Development
Company, the technology transfer company of Hebrew University of
Jerusalem Ltd. (Yissum), for patents and patent applications that
cover our product candidates EB01 and EB02 in the United States,
Canada, Australia and various countries in Europe. Method of use
patents, for which we hold an inbound license from Yissum, have
been issued for use in dermatologic and gastrointestinal conditions
and infections that will expire in 2024. We expect to seek patent
life extension in the United States related to time under our IND,
which could add another three to five years of protection.
Additional patents subject to the license agreement have been filed
by Yissum which we believe, if issued, could potentially prevent
generic substitution until after 2033.
We also rely on trade secrets, know-how, continuing technological
innovation and other in-licensing opportunities to develop and
maintain our proprietary position. In the event we are successful
in commercializing a new drug candidate, we believe we would be
eligible for regulatory exclusivity, in addition to exclusivity
rights granted through patent protection. We would be eligible for
five years of regulatory exclusivity after approval in the United
States, eight years of regulatory exclusivity in Canada and ten
years of regulatory exclusivity in the European Union.
We expect patents and other proprietary intellectual property
rights to be an essential element of our business. Our intention is
to seek to protect our proprietary positions by, among other
methods, filing U.S. and foreign patent applications related to our
proprietary technology, inventions, and improvements. Our success
will depend, in part, on our ability to obtain and maintain
proprietary protection for our product candidates, technology, and
know-how, to operate without infringing on the proprietary rights
of others, and to prevent others from infringing our proprietary
rights.
Material Licenses
License Agreement with Yissum
On June 29, 2016, our wholly owned subsidiary, Edesa Biotech
Research, Inc., entered into an exclusive license agreement
with Yissum, which agreement
was subsequently amended on each of April 3, 2017 and May 7, 2017.
Pursuant to the license agreement as amended, we
obtained exclusive rights throughout
the world to certain know-how, patents and data relating to a
pharmaceutical product. We will use the exclusive rights to develop
the product for therapeutic, prophylactic and diagnostic uses in
topical dermal applications and anorectal applications. Unless
earlier terminated, the term of the license agreement will expire
on a country by country basis on the later of (i) the date of
expiry of the last valid licensed patent in such country; (ii) the
date of expiry of any period of exclusivity granted to a product by
a regulatory authority in such country or (iii) the date that is 15
years after the first commercial sale of a product in such
country.
Under the license agreement, we are exclusively responsible, at our
expense, for the development of the product, including conducting
clinical trials and seeking regulatory approval for the product,
and once regulatory approval has been obtained, for the
commercialization of the product. We are required to use our
commercially reasonable efforts to develop and commercialize the
product in accordance with the terms of a development plan
established by the parties. Subject to certain conditions, we are
permitted to engage third parties to perform our activities or
obligations under the agreement.
In exchange for the exclusive rights to develop and commercialize
the product topical dermal applications and anorectal applications,
we are committed to payments of various amounts to Yissum upon
meeting certain milestones outlined in the license agreement up to
an aggregate amount of $18.6 million. In addition, upon divestiture
of substantially all of our assets, we are obligated to pay Yissum
a percentage of the valuation of the licensed technology sold as
determined by an external objective expert.
We also have a commitment to pay Yissum a royalty based on net
sales of the product in countries where we, or an affiliate of
ours, directly commercializes the product and a percentage of
sublicensing revenue received by us and our affiliates in the
countries where we do not directly commercialize the
product.
The license agreement provides that Yissum shall remain the
exclusive owner of the licensed technology and that we are
responsible for preparing, filing, prosecuting and maintaining the
patents on the licensed technology in Yissum’s name.
Notwithstanding the foregoing, we will be the exclusive owner of
all patents and other intellectual property that is made by or on
our behalf after the date of the agreement, including all
improvements to the licensed technology.
If we default or fail to perform any of the terms, covenants,
provisions or our obligations under the license agreement, Yissum
has the option to terminate the license agreement, subject to
providing us with an opportunity to cure such default. We have the
right to terminate the agreement if we determine that the
development and commercialization of the product is no longer
commercially viable.
Subject to certain exceptions, we have undertaken to indemnify
Yissum against any liability, including product liability, damage,
loss or expense derived from the use, development, manufacture,
marketing, sale or sublicensing of the licensed product and
technology.
License Agreement with Cipher
On June 15, 2016, our wholly owned subsidiary, Edesa Biotech
Research, Inc., entered into an exclusive license agreement
with Cipher Pharmaceuticals
Inc., an Ontario corporation. Pursuant to the license agreement,
we obtained exclusive rights
throughout the world to certain know-how, patents and data relating
to a pharmaceutical product. We will use the exclusive rights to
develop the product for therapeutic, prophylactic and diagnostic
uses in human and veterinary anorectal applications. Unless earlier
terminated, the term of the license agreement will expire on the
date that is 20 years after the first commercial sale of the
product, subject to automatic renewal for successive one-year
periods.
Under the license agreement, we are exclusively responsible, at our
expense, for the development of the product, including conducting
clinical trials and seeking regulatory approval for the product,
and once regulatory approval has been obtained, for the
commercialization of the product. We are required to use our
diligent efforts to develop and commercialize the product in
accordance with the terms of the agreement and with a goal to
maximize profits from net sales of the product. Subject to certain
conditions, we are permitted to engage third parties to perform our
activities or obligations under the agreement.
In exchange for the exclusive rights to develop and commercialize
the product for therapeutic, prophylactic and diagnostic uses in
human and veterinary anorectal applications, we are committed to
payments of various amounts to Cipher upon meeting certain
milestones outlined in the license agreement up to an aggregate
amount of $18.5 million.
We also have a commitment to pay Cipher a royalty based on net
sales of the product in countries where we, or an affiliate of
ours, directly commercializes the product and a percentage of
sublicensing revenue received by us and our affiliates in the
countries where we do not directly commercialize the
product.
The license agreement provides that Cipher shall remain the
exclusive owner of the licensed technology. Notwithstanding the
foregoing, we will be the exclusive owner of all patents and other
intellectual property that is made by or on our behalf after the
date of the agreement, including all improvements to the licensed
technology.
If we default or fail to perform any of the terms, covenants,
provisions or our obligations under the license agreement, Cipher
has the option to terminate the license agreement, subject to
providing us with an opportunity to cure such default. We have the
right to terminate the agreement without cause upon 60 days prior
written notice to Cipher.
Subject to certain exceptions, we have undertaken to indemnify
Cipher against any liability, including product liability, damage,
loss or expense derived from the use, development, manufacture,
marketing, sale or sublicensing of the licensed product and
technology.
License and Development Agreement with Pendopharm
On August 27, 2017, our wholly owned subsidiary, Edesa Biotech
Research, Inc. entered into an exclusive license and development
agreement with Pendopharm, a division of Pharmascience Inc.
Pursuant to the license and development agreement, we granted to
Pendopharm an exclusive license throughout Canada to certain
know-how, patents and data for the sole purpose of obtaining
regulatory approval for certain pharmaceutical products to allow
Pendopharm to distribute, market and sell the licensed products for
human therapeutic use in the conditions of HD and anal
fissures.
On a licensed product by licensed product basis, we are required to
use reasonable commercial efforts to develop the licensed products
in the indications of HD and anal fissures for the purposes of
obtaining regulatory approval with the FDA and provide to
Pendopharm, on a licensed product by licensed product basis, the
data package submitted to the FDA. Upon receipt of the data
package, Pendopharm will elect whether it desires to seek
regulatory approval in Canada of the applicable product. If
Pendopharm elects not to seek regulatory approval of the applicable
product, the applicable product will be removed from the license
rights granted to Pendopharm and will revert to us. If Pendopharm
elects to seek regulatory approval in Canada for the sale and
marketing of the applicable product, Pendopharm will be responsible
for obtaining regulatory approval for the applicable licensed
product in Canada.
In exchange for the exclusive rights to market, import, distribute,
and sell the pharmaceutical products, Pendopharm is required to pay
us a royalty in respect of aggregate annual net sales for each
pharmaceutical product sold in Canada.
Unless earlier terminated, the term of the license and development
agreement will expire, on a licensed product by licensed product
basis, on the later to occur of (i) the date that is 13 years after
the first commercial sale of the licensed product in Canada; (ii)
the date of expiry of the last valid licensed patent in Canada
relating to the licensed product; or (iii) the date of expiry of
any period of exclusivity granted to the licensed product by a
regulatory authority in Canada. The license and development
agreement shall also terminate upon the termination of the license
agreement with Yissum or the license agreement with Cipher, each
described above. Pendopharm also has the right to terminate the
license and development agreement for any reason upon 120 days
notice to us.
The license and development agreement provides that we will remain
the exclusive owner of the licensed technology and any improvements
to the licensed technology made by us alone or jointly with
Pendopharm.
Manufacturing and Marketing
We rely on third parties for the synthesis, formulation and
manufacturing, including optimization, technology transfers and
scaling up of clinical scale quantities of our product candidates.
We believe that this strategy will enable us to direct operational
and financial resources to the development of our product
candidates rather than diverting resources to establishing
manufacturing infrastructure. Our arrangements with our
manufacturers are subject to industry-standard terms and conditions
and manufacturing is performed on an as-requested basis. We believe
there is sufficient manufacturing capacity with our current
manufacturers, as well as others, to service our current and future
product needs. We do not have current plans to establish
laboratories or manufacturing facilities for significant clinical
production.
Synthetic drugs, such as those being developed by Edesa, are based
on a chemical manufacturing process that requires raw materials,
such as various solvents, sugars, fats and polymers. There are many
suppliers of raw materials for these products and, in recent years,
no material changes have occurred with respect to the prices of
these raw materials that are required for the research, development
and manufacturing of the drugs we are developing.
Because we are focused on the discovery and development of drugs,
we do not have any marketing or distribution capabilities, nor are
we at a stage where we would have any customers for our
investigational medicines.
If we receive marketing approval in the United States, Canada or
Europe for EB01 to treat ACD or approval of any other product
candidate, we plan to build the capabilities to commercialize the
product candidate in the applicable region with our own focused,
specialized sales force. Outside of the United States and Canada,
we plan to selectively utilize collaboration, distribution or other
marketing arrangements with third parties to commercialize our
product candidates. Also, we intend to selectively seek licensing,
collaboration or similar arrangements to assist us in furthering
the development or commercialization of product candidates, such as
EB01, targeting large primary care markets that must be served by
large sales and marketing organizations.
Competition
The pharmaceutical and biotechnology industry is highly
competitive, and the development and commercialization of new drugs
is influenced by rapid technological developments and innovation.
We face competition from companies developing and commercializing
products that will be competitive with our drug candidates,
including large pharmaceutical and smaller biotechnology companies,
many of which have greater financial and commercial resources than
we do. For our EB01 and EB02 product candidates, our potential
competitors include Aclaris Therapeutics, Inc., Brickell Biotech,
Inc., Citius Pharmaceuticals Inc., Dermavant Sciences, Inc. and Leo
Pharma A/S. Some of the competing product development programs may
be based on scientific approaches that are similar to our approach,
and others may be based on entirely different approaches. Potential
competitors also include new entrants to the market, academic
institutions, government agencies and other public and private
research organizations that conduct research, seek patent
protection and establish collaborative arrangements for research,
development, manufacturing and commercialization of products
similar to ours or that otherwise target indications that we are
pursuing. Key factors affecting the success of any approved product
will be its efficacy, safety profile, drug interactions, method of
administration, pricing, reimbursement and level of promotional
activity relative to those of competing drugs. We believe that our
product candidates will compete favorably with respect to such
factors. However, we may not be able to maintain our competitive
position against current and potential competitors.
Government Regulation
We plan to seek approvals for our product candidates in the United
States from the FDA and in Canada from Health Canada. Therefore, we
currently are, and may in the future be, subject to a variety of
national and regional regulations governing clinical trials as well
as commercial sales and distribution of our products, if
approved.
To conduct clinical trials for our product candidates, we rely on
third parties, such as contract research organizations, medical
institutions, and clinical investigators. Although we have entered
into agreements with these third parties, we continue to be
responsible for confirming that each of our clinical trials are
conducted in accordance with our general investigational plan and
protocol, as well as regulations and standards, commonly referred
to as good clinical practices, for conducting, recording and
reporting the results of clinical trials.
United States
The FDA and comparable regulatory agencies in foreign, state and
local jurisdictions impose substantial requirements upon the
clinical development, manufacturing, marketing and distribution of
drugs. These agencies and other applicable federal, state and local
entities regulate research and development activities and the
testing, manufacture, quality control, safety, effectiveness,
labeling, storage, record keeping, approval, advertising and
promotion of our product candidates and commercialized
drugs.
In the United States, the FDA regulates drugs under the federal
Food, Drug and Cosmetic Act. The process required by the FDA before
our product candidates may be marketed in the United States
generally involves the following:
●
completion
of extensive pre-clinical laboratory tests, animal studies and
formulation studies, performed in accordance with the FDA’s
good laboratory practice regulations and other applicable
requirements;
●
submission
to the FDA of an IND which must become effective before clinical
trials may begin;
●
performance
of adequate and well-controlled clinical trials to establish the
safety and efficacy of the product candidate for each proposed
indication;
●
submission
of a New Drug Application, NDA, to the FDA;
●
satisfactory
completion of an FDA pre-approval inspection of the manufacturing
facilities at which the product is produced to assess compliance
with current good manufacturing practice, or cGMP,
regulations;
●
FDA
review and approval of the NDA prior to any commercial marketing,
sale or shipment of the drug; and
●
regulation
of commercial marketing and sale of drugs.
The testing and review processes require substantial time, effort
and financial resources. Pre-clinical tests include laboratory
evaluation of product chemistry, formulation and stability, as well
as studies to evaluate toxicity in animals. The results of
pre-clinical tests, together with manufacturing information and
analytical data, are submitted as part of an IND to the FDA. The
IND automatically becomes effective 30-days after receipt by the
FDA, unless the FDA, within the 30-day time frame, raises concerns
and/or questions about the conduct of the clinical trial, including
concerns that human research subjects will be exposed to
unreasonable health risks. In such a case, the IND sponsor and the
FDA must resolve any outstanding concerns before the clinical trial
can begin. A separate submission to an existing IND must also be
made for each successive clinical trial conducted during product
development. Further, an independent Institutional Review Board
(IRB) for each medical center proposing to conduct the clinical
trial must review and approve the plan for any clinical trial
before it commences at that center and it must monitor the clinical
trial until completed. The FDA, the IRB or the clinical trial
sponsor may suspend a clinical trial at any time on various
grounds, including a finding that the subjects or patients are
being exposed to an unacceptable health risk. Clinical testing also
must satisfy extensive good clinical practice regulations for
informed consent.
Clinical Trials
For purposes of an NDA submission and approval, clinical trials are
typically conducted in the following three sequential phases, which
may overlap:
●
Phase 1: The clinical trials are
initially conducted in a limited population to test the product
candidate for safety, dose tolerance, absorption, metabolism,
distribution and excretion in healthy humans or, on occasion, in
patients, such as cancer patients. Phase 1 clinical trials can be
designed to evaluate the impact of the product candidate in
combination with currently approved drugs.
●
Phase 2: These clinical trials are
generally conducted in a limited patient population to identify
possible adverse effects and safety risks, to determine the
efficacy of the product candidate for specific targeted indications
and to determine dose tolerance and optimal dosage. Multiple Phase
2 clinical trials may be conducted by the sponsor to obtain
information prior to beginning a larger and more expensive Phase 3
clinical trial.
●
Phase 3: These clinical trials are
commonly referred to as pivotal clinical trials. If the Phase 2
clinical trials demonstrate that a dose range of the product
candidate is effective and has an acceptable safety profile, Phase
3 clinical trials are then undertaken in large patient populations
to further evaluate dosage, to provide substantial evidence of
clinical efficacy and to further test for safety in an expanded and
diverse patient population at multiple, geographically dispersed
clinical trial sites.
In some cases, the FDA may conditionally approve an NDA for a
product candidate on the sponsor’s agreement to conduct
additional clinical trials to further assess the drug’s
safety and effectiveness after NDA approval.
New Drug Application
The results of product candidate development, pre-clinical testing
and clinical trials are submitted to the FDA as part of an NDA. The
NDA also must contain extensive manufacturing information. Once the
submission has been accepted for filing, by law the FDA has
180-days to review the application and respond to the applicant.
The review process is often significantly extended by FDA requests
for additional information or clarification. The FDA may refer the
NDA to an advisory committee for review, evaluation and
recommendation as to whether the application should be approved.
The FDA is not bound by the recommendation of an advisory
committee, but it generally follows such recommendations. The FDA
may deny approval of an NDA if the applicable regulatory criteria
are not satisfied, or it may require additional clinical data. Even
if such data are submitted, the FDA may ultimately decide that the
NDA does not satisfy the criteria for approval. Data from clinical
trials are not always conclusive and the FDA may interpret data
differently than we or our collaborators do. Once issued, the FDA
may withdraw a drug approval if ongoing regulatory requirements are
not met or if safety problems occur after the drug reaches the
market. In addition, the FDA may require further testing, including
Phase 4 clinical trials, and surveillance programs to monitor the
effect of approved drugs which have been commercialized. The FDA
has the power to prevent or limit further marketing of a drug based
on the results of these post-marketing programs. Drugs may be
marketed only for the approved indications and in accordance with
the provisions of the approved label. Further, if there are any
modifications to a drug, including changes in indications, labeling
or manufacturing processes or facilities, we may be required to
submit and obtain FDA approval of a new NDA or NDA supplement,
which may require us to develop additional data or conduct
additional pre-clinical studies and clinical trials.
Satisfaction of FDA regulations and requirements or similar
requirements of state, local and foreign regulatory agencies
typically take several years, and the actual time required may vary
substantially based upon the type, complexity and novelty of the
product or disease. Typically, if a product candidate is intended
to treat a chronic disease, as is the case with some of our product
candidates, safety and efficacy data must be gathered over an
extended period of time.
Other regulatory requirements
Any products manufactured or distributed by us or our collaborators
(pursuant to FDA approval) are subject to continuing regulation by
the FDA, including recordkeeping requirements and reporting of
adverse experiences associated with the drug. Drug manufacturers
and their subcontractors are required to register their
establishments with the FDA and certain state agencies and are
subject to periodic unannounced inspections by the FDA and certain
state agencies for compliance with ongoing regulatory requirements,
including cGMP, which impose certain procedural and documentation
requirements upon us and our third-party manufacturers. Failure to
comply with the statutory and regulatory requirements can subject a
manufacturer to possible legal or regulatory action, such as
warning letters, suspension of manufacturing, seizure of product,
injunctive action or possible civil penalties.
The FDA closely regulates the post-approval marketing and promotion
of drugs, including standards and regulations for
direct-to-consumer advertising, off-label promotion,
industry-sponsored scientific and educational activities and
promotional activities involving the Internet. A company can make
only those claims relating to safety and efficacy that are approved
by the FDA. Failure to comply with these requirements can result in
adverse publicity, warning letters, corrective advertising and
potential civil and criminal penalties. Physicians may prescribe
legally available drugs for uses that are not described in the
drug’s labeling and that differ from those tested by us and
approved by the FDA. Such off-label uses are common across medical
specialties. Physicians may believe that such off-label uses are
the best treatment for many patients in varied circumstances. The
FDA does not regulate the behavior of physicians in their choice of
treatments. The FDA does, however, impose stringent restrictions on
manufacturers’ communications regarding off-label
use.
The federal anti-kickback statute prohibits, among other things,
persons from knowingly and willfully soliciting, offering,
receiving or paying remuneration, directly or indirectly, in cash
or in kind, to induce or reward either the referral of an
individual for, or the purchase, order or recommendation of, any
good or service, for which payment may be made, in whole or in
part, under a federal healthcare program such as Medicare and
Medicaid. This statute has been broadly interpreted to apply to
manufacturer arrangements with prescribers, purchasers and pharmacy
benefit managers, among others. Several other countries, including
the United Kingdom, have enacted similar anti-kickback laws and
regulations.
The federal Health Insurance Portability and Accountability Act of
1996, or HIPAA, imposes criminal and civil liability for executing
a scheme to defraud any healthcare benefit program or for knowingly
and willfully falsifying, concealing or covering up a material fact
or making any materially false statement in connection with the
delivery of or payment for healthcare benefits, items or services.
HIPAA, as amended by the Health Information Technology for Economic
and Clinical Health Act, or HITECH Act, and its implementing
regulations, also imposes obligations, including mandatory
contractual terms, with respect to safeguarding the privacy,
security and transmission of individually identifiable health
information.
The federal Physician Payments Sunshine Act requirements under the
Patient Protection and Affordable Care Act of 2010, as amended by
the Health Care and Education Reconciliation Act of 2010, referred
to together as the Affordable Care Act, require manufacturers of
FDA-approved drugs, devices, biologics and medical supplies covered
by Medicare or Medicaid to report to the Department of Health and
Human Services information related to payments and other transfers
of value made to or at the request of covered recipients, such as
physicians and teaching hospitals, and physician ownership and
investment interests in such manufacturers. Among other payments,
the law requires payments made to physicians and teaching hospitals
for clinical trials be disclosed.
Analogous state laws and regulations, such as state anti-kickback
and false claims laws, may apply to future potential sales or
marketing arrangements and claims involving healthcare items or
services reimbursed by nongovernmental third-party payors,
including private insurers. Some state laws require pharmaceutical
companies to comply with the pharmaceutical industry’s
voluntary compliance guidelines, or the relevant compliance
guidance promulgated by the federal government, in addition to
requiring drug manufacturers to report information related to
payments to physicians and other health care providers or marketing
expenditures to the extent that those laws impose requirements that
are more stringent than the Physician Payments Sunshine Act. State
and foreign laws also govern the privacy and security of health
information in some circumstances, many of which differ from each
other in significant ways and often are not preempted by HIPAA,
thus complicating compliance efforts.
Employees
As of December 12, 2019, we had 10 full-time employees: five
employees are engaged in research and development, and five
employees are engaged in management, administration, business
development and finance. All employees are located in the U.S. or
Canada. None of our employees are members of any labor
unions.
Business Combination
On June
7, 2019, we completed a business combination with Edesa Biotech
Research, Inc., formerly known as Edesa Biotech Inc. (“Edesa
Research”), a company organized under the laws of the
province of Ontario, in accordance with the terms of a Share
Exchange Agreement, dated March 7, 2019, by and among the Company,
Edesa Research and the shareholders of Edesa Research. At the
closing of the transaction, we acquired the entire issued share
capital of Edesa Research, with Edesa Research becoming a wholly
owned subsidiary of ours. Also on June 7, 2019, in connection with
and following the completion of the reverse acquisition, we
effected a 1-for-6 reverse split of our Common Shares and changed
our name to “Edesa Biotech, Inc.” At the closing of the
transaction, the Edesa Research shareholders exchanged their shares
for 88% of our outstanding shares on a fully diluted
basis.
At the closing of the transaction, the Edesa Research
shareholders received 6,249,780 of our
Common Shares in exchange for the capital shares of Edesa
Research and the holders of
unexercised Edesa Research share options immediately prior to the closing of
the transaction were issued replacement share options
(“Replacement Options”) to purchase an aggregate of
297,422 of our Common Shares.
On July 26, 2019, pursuant to the post-closing adjustment
contemplated by the Share Exchange Agreement, we issued an
additional 366,234 of our Common Shares to the Edesa
Research shareholders and the holders
of unexercised Edesa Research stock options immediately prior to the closing of
the transaction were issued 17,701 additional Replacement Options
to purchase our Common Shares. Following the completion of
the transactions contemplated by the Share Exchange Agreement and
the reverse split, there were approximately 7,504,468, of our
Common Shares issued and outstanding and approximately 7,876,292 of
our Common Shares outstanding on a fully-diluted basis, and the
former Edesa Research shareholders and option holders owned
approximately 6,931,137 of our Common Shares on a fully-diluted
basis, or 88% of our Common Shares on a fully-diluted basis, and
our shareholders and option holders prior to the transactions
contemplated by the Share Exchange Agreement owned approximately
945,155 of our Common Shares on a fully-diluted basis, or 12% of
our Common Shares on a fully-diluted basis.
Corporate Information
We are incorporated under the laws of British Columbia, Canada, and
operate through our wholly owned subsidiaries, Edesa Biotech
Research, Inc., an Ontario, Canada corporation founded in 2015; and
Stellar Biotechnologies, Inc., a California, USA corporation
founded in 1999. As further described above under the heading
“Business Combination”, in June 2019, we acquired the
Ontario corporation through a reverse acquisition and changed our
name from Stellar Biotechnologies, Inc. to Edesa Biotech, Inc. We
subsequently changed the name of the Ontario subsidiary to Edesa
Biotech Research, Inc. (formerly Edesa Biotech Inc.). The
California subsidiary was acquired through a reverse merger in
April 2010, when the company was organized as a Canadian capital
pool company.
Our executive offices are located at 100 Spy Court, Markham,
Ontario, L3R 5H6, Canada. Our phone number is 289-800-9600. Our
registered and records office is 2900 - 550 Burrard Street,
Vancouver, British Columbia, V6C 0A3, Canada. Our website address
is www.edesabiotech.com. The contents of our website are not part
of this annual report on Form 10-K for any purpose or otherwise
incorporated by reference. Any references to website addresses
contained in this report are intended to be inactive textual
references only.
Available Information
We file or furnish periodic reports and amendments thereto,
including our annual reports on Form 10-K, our quarterly reports on
Form 10-Q and current reports on Form 8-K, proxy statements and
other information with the U.S. Securities and Exchange Commission
(SEC). Such reports and other information filed or furnished by us
with the SEC are available free of charge on our website at
www.edesabiotech.com/investors/sec-filings as soon as reasonably
practicable after such reports are available on the SEC’s
website at www.sec.gov. Our filings are also available at the
Canadian Securities Administrators’ SEDAR website at
www.sedar.com.
Smaller Reporting Company
We are currently a “smaller reporting company” as
defined by Rule 12b-2 of the Securities Exchange Act of 1934
(Exchange Act), and are thus allowed to provide simplified
executive compensation disclosures in our filings, are exempt from
the provisions of Section 404(b) of the Sarbanes-Oxley Act
requiring that an independent registered public accounting firm
provide an attestation report on the effectiveness of internal
control over financial reporting and have certain other reduced
disclosure obligations with respect to our SEC
filings.
Certain factors may have a material adverse effect on our business,
prospects, financial condition and results of operations. You
should carefully consider the risks and uncertainties described
below together with all of the other information contained in this
Annual Report on Form 10-K, including our financial statements and
the related notes, before deciding to invest in our common shares.
The risks and uncertainties described below are not the only ones
we face. Additional risks and uncertainties not presently known to
us or that we currently believe to be immaterial may also adversely
affect our business. If any of the following risks actually occurs,
our business, financial condition, results of operations and future
prospects could be materially and adversely affected.
Risks Related to Our Business
We have incurred significant losses since our inception and expect
to continue to incur losses and may never generate profits from
operations or maintain profitability.
Since
inception, we have incurred significant operating losses. As of
September 30, 2019, we have an accumulated deficit of $6.73
million. We have historically financed operations primarily through
issuances of preferred shares that were converted into common
shares, loans that were converted into common shares and government
grants. We have devoted substantially all of our efforts to
research and development, including clinical trials, and have not
completed the development of any of our drug
candidates.
We
expect to continue to incur significant expenses and operating
losses for the foreseeable future as we continue the development
of, and seek marketing approvals for our product candidates,
prepare for and begin the commercialization of any approved
products, and add infrastructure and personnel to support our
product development efforts and operations as a public company in
the United States and Canada. The net losses we incur may fluctuate
significantly from quarter to quarter and year to
year.
Our
ability to generate profits from operations and thereafter to
remain profitable depends heavily on, among other
things:
●
the scope, number,
progress, duration, cost, results and timing of clinical trials and
nonclinical studies of our current or future product
candidates;
●
our ability to
raise sufficient funds to support the development and potential
commercialization of our product candidates;
●
the outcomes and
timing of regulatory reviews, approvals or other
actions;
●
our ability to
obtain marketing approval for our product candidates;
●
our ability to
establish and maintain licensing, collaboration or similar
arrangements on favorable terms and whether and to what extent we
retain development or commercialization responsibilities under any
new licensing, collaboration or similar arrangement;
●
the success of any
other business, product or technology that we acquire or in which
we invest;
●
our ability to
maintain, expand and defend the scope of our intellectual property
portfolio;
●
our ability to
manufacture any approved products on commercially reasonable
terms;
●
our ability to
establish a sales and marketing organization or suitable
third-party alternatives for any approved product; and
●
the number and
characteristics of product candidates and programs that we
pursue.
Based
on our current plans, we do not expect to generate significant
revenue unless and until we or a current or potential future
licensee obtains marketing approval for, and commercializes, one or
more of our product candidates, which may require several years.
Neither we nor a licensee may ever succeed in obtaining marketing
approval for, or commercializing our product candidates and, even
if marketing approval is obtained, we may never generate revenues
that are significant enough to generate profits from operations.
Even if we do generate profits from operations, we may not be able
to sustain or increase profitability on a quarterly or annual
basis. Our failure to generate profits from operations and remain
profitable would decrease the value of the company and could impair
our ability to raise capital, expand our business, maintain our
research and development efforts, diversify our product offerings
or continue our operations. A decline in the value of the company
could also cause you to lose all or part of your
investment.
We will need substantial additional funding to finance our
operations through regulatory approval of one or more of our
product candidates. If we are unable to raise capital when needed,
we could be forced to delay, reduce or eliminate our product
development programs or commercialization efforts.
We
expect our research and development expenses to increase
substantially in the future, particularly if we advance any drug
candidates beyond Phase 2 clinical development or expand the number
of drug candidates in clinical studies. In addition, if we obtain
marketing approval for any of our product candidates that are not
then subject to licensing, collaboration or similar arrangements
with third parties, we expect to incur significant
commercialization expenses related to product sales, marketing,
distribution and manufacturing. If we are unable to raise capital
when needed, or on attractive terms, we could be forced to delay,
reduce or eliminate research and development programs or future
commercialization efforts.
We depend heavily on the success of our lead product candidate,
EB01, which we are developing for the treatment of chronic ACD. If
we are unable to obtain regulatory approval or commercialize EB01,
or experience significant delays in doing so, our business will be
materially harmed.
EB01 is
in Phase 2B clinical development. Our ability to generate product
revenues, which may not occur for multiple years, if at all, will
depend heavily on the successful development and commercialization
of EB01 as a treatment for chronic ACD. The success of our product
candidates, including EB01, will depend on a number of factors,
including the following:
●
our ability to
obtain additional capital from potential future licensing,
collaboration or similar arrangements or from any future offering
of our debt or equity securities;
●
our ability to
identify and enter into potential future licenses or other
collaboration arrangements with third parties and the terms of the
arrangements;
●
successful
completion of clinical development;
●
the ability to
provide acceptable evidence demonstrating a product
candidates’ safety and efficacy;
●
receipt of
marketing approvals from applicable regulatory authorities and
similar foreign regulatory authorities;
●
the availability of
raw materials to produce our product candidates;
●
obtaining and
maintaining commercial manufacturing arrangements with third-party
manufacturers or establishing commercial-scale manufacturing
capabilities;
●
obtaining and
maintaining patent and trade secret protection and regulatory
exclusivity;
●
establishing sales,
marketing and distribution capabilities;
●
generating
commercial sales of the product candidate, if and when approved,
whether alone or in collaboration with others;
●
acceptance of the
product candidate, if and when approved, by patients, the medical
community and third-party payors;
●
effectively
competing with other therapies; and
●
maintaining an
acceptable safety profile of the product candidate following
approval.
If we
do not achieve one or more of these factors in a timely manner or
at all, we could experience significant delays or an inability to
successfully commercialize EB01 or any of our other product
candidates, which would materially harm our business. Many of these
factors are beyond our control. Accordingly, we may never be able
to generate revenues through the license or sale of any of our
product candidates.
Our limited operating history may
make it difficult for you to evaluate the success of our business
to date and to assess our future viability.
Our
primarily operating entity, Edesa Biotech Research, Inc. was formed
in July 2015. To date, our operations have been limited to
organization and staffing, developing and securing our technology,
entering into licensing arrangements, raising capital and
undertaking preclinical studies and clinical trials of our product
candidates. We have not yet demonstrated our ability to
successfully complete development of any product candidate, obtain
marketing approval, manufacture a commercial scale product, or
arrange for a third-party to do so on our behalf, or conduct sales
and marketing activities necessary for successful product
commercialization. Assuming we obtain marketing approval for any of
our product candidates, we will need to transition from a company
with a research and development focus to a company capable of
supporting commercial activities. We may encounter unforeseen
expenses, difficulties, complications and delays and may not be
successful in such a transition. Any predictions made about our
future success or viability may not be as accurate as they could be
if we had a longer operating history.
We may not be successful in our efforts to identify and acquire or
in-license additional product candidates.
Part of
our strategy involves diversifying our product development risk by
identifying and acquiring or in-licensing novel product candidates.
We may fail to identify and acquire or in-license promising product
candidates. The competition to acquire or in-license promising
product candidates is fierce, especially from large multinational
companies that have greater resources and experience than we have.
If we are unable to identify and acquire or in-license suitable
product candidates, we will be unable to diversify our product
risk. We believe that any such failure could have a significant
negative impact on our prospects because the risk of failure of any
particular development program in the pharmaceutical field is
high.
We may expend our limited resources to pursue a particular product
candidate and fail to capitalize on product candidates that may be
more profitable or for which there is a greater likelihood of
success.
Because
we have limited financial and managerial resources, we focus on
specific product candidates. As a result, we may forego or delay
pursuit of opportunities with other product candidates that later
could prove to have greater commercial potential. Our resource
allocation decisions may cause us to fail to capitalize on viable
commercial products or profitable market opportunities. If we do
not accurately evaluate the commercial potential or target market
for a particular product candidate, our business may be negatively
impacted.
Our future success depends on our ability to retain key executives
and to attract, retain and motivate qualified
personnel.
We are
highly dependent on Dr. Pardeep Nijhawan, our Chief Executive
Officer and Secretary; and Michael Brooks, our President; as well
as other principal members of our management and scientific teams.
Although we have employment agreements with each of our executive
officers, these agreements do not prevent our executives from
terminating their employment with the company at any time. The
unplanned loss of the services of any of these persons could
materially impact the achievement of our research, development,
financial and commercialization objectives. Recruiting and
retaining qualified personnel, including in the United States and
Canada, 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 biotechnology and pharmaceutical
companies for similar personnel. In addition, we rely on
consultants and advisors, including scientific and clinical
advisors, to assist us in formulating our research and development
and commercialization strategy. Our consultants and advisors may
have commitments with other entities that may limit their
availability to us.
We expect to expand our capabilities, and as a result, we may
encounter difficulties in managing our growth, which could disrupt
our operations.
We
expect to experience growth in the number of our employees and the
scope of our operations, particularly in the areas of drug
development, regulatory affairs, finance and administration and,
potentially, sales and marketing. 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
may not be able to effectively manage the expansion of our
operations or recruit and train additional qualified personnel. 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.
We are exposed to risks related to currency exchange
rates.
We
conduct a significant portion of our operations outside of the
United States. Because our financial statements are presented in
U.S. dollars, changes in currency exchange rates have had and could
have in the future a significant effect on our operating results
when our operating results are translated into U.S.
dollars.
We are subject to anti-corruption laws, as well as export control
laws, customs laws, sanctions laws and other laws governing our
operations. If we fail to comply with these laws, it could be
subject to civil or criminal penalties, other remedial measures and
legal expenses, which could adversely affect our business, results
of operations and financial condition.
Our
operations are subject to anti-corruption laws, including the U.S.
Foreign Corrupt Practices Act, or the FCPA, and other
anti-corruption laws that apply in countries where we do business
and may do business in the future. The FCPA and these other laws
generally prohibit us, our officers, and our employees and
intermediaries from bribing, being bribed or making other
prohibited payments to government officials or other persons to
obtain or retain business or gain some other business advantage. We
may in the future operate in jurisdictions that pose a high risk of
potential FCPA violations, and we may participate in collaborations
and relationships with third parties whose actions could
potentially subject us to liability under the FCPA or local
anti-corruption laws. We are also subject to other laws and
regulations governing our international operations, including
regulations administered by the government of the United States and
authorities in the European Union, including applicable export
control regulations, economic sanctions on countries and persons,
customs requirements and currency exchange regulations,
collectively referred to as the Trade Control laws. There is no
assurance that we will be completely effective in ensuring our
compliance with all applicable anti-corruption laws, including the
FCPA or other legal requirements, including Trade Control laws. If
we are not in compliance with the FCPA and other anti-corruption
laws or Trade Control laws, it may be subject to criminal and civil
penalties, disgorgement and other sanctions and remedial measures,
and legal expenses, which could have an adverse impact on our
business, financial condition, results of operations and liquidity.
Likewise, any investigation of any potential violations of the
FCPA, other anti-corruption laws or Trade Control laws by U.S. or
other authorities could also have an adverse impact on our
reputation, our business, results of operations and financial
condition.
Our employees, principal investigators, consultants and commercial
partners may engage in misconduct or other improper activities,
including noncompliance with regulatory standards and requirements
and insider trading, which could cause significant liability for us
and harm our reputation.
We are
exposed to the risk of fraud or other misconduct by our employees,
principal investigators, consultants and collaborators, including
intentional failures to comply with FDA or Office of Inspector
General regulations or similar regulations of comparable non-U.S.
regulatory authorities, provide accurate information to the FDA or
comparable non-U.S. regulatory authorities, comply with
manufacturing standards we have established, comply with federal
and state healthcare fraud and abuse laws and regulations and
similar laws and regulations established and enforced by comparable
non-U.S. regulatory authorities, report financial information or
data accurately or disclose unauthorized activities to us.
Misconduct by these parties could also involve the improper use of
information obtained in the course of clinical trials, which could
result in regulatory sanctions and serious harm to our reputation.
It is not always possible to identify and deter employee
misconduct, and the precautions we take to detect and prevent this
activity may not be effective in controlling unknown or unmanaged
risks or losses or in protecting us from governmental
investigations or other actions or lawsuits stemming from a failure
to be in compliance with such laws, standards or regulations. If
any such actions are instituted against us, and we are not
successful in defending ourselves or asserting our rights, those
actions could have a significant impact on our business and results
of operations, including the imposition of significant fines or
other sanctions.
We rely significantly on information technology and any failure,
inadequacy, interruption or security lapse of that technology,
including any cyber security incidents, could harm our ability to
operate our business effectively.
Despite
the implementation of security measures, our internal computer
systems and those of third parties with which we contract are
vulnerable to damage from cyber-attacks, computer viruses,
unauthorized access, natural disasters, terrorism, war and
telecommunication and electrical failures. System failures,
accidents or security breaches could cause interruptions in our
operations, and could result in a material disruption of ours
clinical and commercialization activities and business operations,
in addition to possibly requiring substantial expenditures of
resources to remedy. The loss of clinical trial data could result
in delays in our regulatory approval efforts and significantly
increase our costs to recover or reproduce the data. To the extent
that any disruption or security breach were to result in a loss of,
or damage to, our data or applications, or inappropriate disclosure
of confidential or proprietary information, we could incur
liability and our product research, development and
commercialization efforts could be delayed.
The wind down or spinoff of our Stellar subsidiary’s legacy
business may not deliver the expected results.
Following
the business combination with Edesa Biotech Research, Inc.,
formerly known as Edesa Biotech Inc., we refocused our primary
business on the development of innovative therapeutics for
dermatological and gastrointestinal indications with clear unmet
medical needs. Over the course of the next 12 months, we intend to
sell or wind down the principal assets and operations of our
Stellar subsidiary’s legacy business, which includes leased
aquaculture facilities, equipment and office space located in Port
Hueneme, California. The sale or wind down of the legacy business
operations may require additional time, may interfere with our
ability to achieve our business objectives and may be difficult to
manage. In addition, we cannot be sure that the sale and wind down
will be as successful in providing meaningful cash proceeds, if at
all; reducing or eliminating costs related to the legacy business;
or result in any unplanned expenditures or unknown, contingent or
other liabilities, including litigation arising in connection with
the wind down or sale of the legacy business assets and operations.
If our plans do not achieve the expected results, our business and
results of operations will be adversely impacted.
Risks Related to Clinical Development, Regulatory Approval and
Commercialization
If clinical trials of our product candidates fail to demonstrate
safety and efficacy to the satisfaction of the FDA, Health Canada
(HC) or the European Medicines Agency (EMA), or do not otherwise
produce favorable results, we may incur additional costs or
experience delays in completing, or ultimately be unable to
complete, the development and commercialization our product
candidates.
In
connection with obtaining marketing approval from regulatory
authorities for the sale of any product candidate, we must complete
preclinical development and then conduct extensive clinical trials
to demonstrate the safety and efficacy of our product candidates in
humans. Clinical trials are expensive, difficult to design and
implement, can take many years to complete and are uncertain as to
outcome. A failure of one or more clinical trials can occur at any
stage of testing. The outcome of preclinical testing and early
clinical trials may not be predictive of the success of later
clinical trials. In particular, the small number of subjects and
patients in early clinical trials of our product candidates may
make the results of these clinical trials less predictive of the
outcome of later clinical trials. The design of a clinical trial
can determine whether our results will support approval of a
product, and flaws in the design of a clinical trial may not become
apparent until the clinical trial is well advanced or completed.
There is no assurance that we will be able to design and execute a
clinical trial to support marketing approval. Moreover, preclinical
and clinical data are often susceptible to varying interpretations
and analyses, and many companies that have believed their product
candidates performed satisfactorily in preclinical studies and
clinical trials have nonetheless failed to obtain marketing
approval of their products.
Positive
results in pre-clinical studies of a product candidate may not be
predictive of similar results in humans during clinical trials, and
promising results from early clinical trials of a product candidate
may not be replicated in later clinical trials. A number of
companies in the pharmaceutical and biotechnology industries have
suffered significant setbacks in late-stage clinical trials even
after achieving promising results in early-stage development.
Accordingly, the results from completed pre-clinical studies and
clinical trials for our product candidates may not be predictive of
the results we may obtain in later stage trials or studies.
Pre-clinical studies or clinical trials may produce negative or
inconclusive results, and we may decide, or regulators may require
us, to conduct additional pre-clinical studies or clinical trials,
or to discontinue clinical trials altogether. Ultimately, we may be
unable to complete the development and commercialization of any of
our product candidates.
Interim results, top-line, initial data may not accurately reflect
the complete results of a particular study or trial.
We may
publicly disclose interim, top-line or initial data from time to
time that is based on a preliminary analysis of then-available
efficacy and safety data, and the results and related findings and
conclusions are subject to change following a more comprehensive
review of the data related to the particular study or trial. We
also make assumptions, estimates, calculations and conclusions as
part of our analyses of data, and we may not have received or had
the opportunity to fully evaluate all data. Interim, top-line and
initial data should be viewed with caution until the final data are
available. In addition, the information we may publicly disclose
regarding a particular preclinical or clinical study is based on
what is typically extensive information, and you or others may not
agree with what we determine is the material or otherwise
appropriate information to include in our disclosure, and any
information we determine not to disclose may ultimately be deemed
significant with respect to future decisions, conclusions, views,
activities or otherwise regarding a particular drug, drug candidate
or our business. If the interim, top-line or initial data that we
report differ from actual results, or if others, including
regulatory authorities, disagree with the conclusions reached, our
ability to obtain approval for, and commercialize, our product
candidates may be harmed or delayed, which could harm our business,
financial condition, operating results or prospects.
If clinical trials for our product candidates are prolonged or
delayed, we may be unable to commercialize our product candidates
on a timely basis, which would require us to incur additional costs
and delay our receipt of any revenue from potential product
sales.
We
cannot predict whether we will encounter problems with any of our
ongoing or planned clinical trials that will cause us or any
regulatory authority to delay or suspend those clinical trials. A
number of events, including any of the following, could delay the
completion of our ongoing and planned clinical trials and
negatively impact our ability to obtain regulatory approval for,
and to market and sell, a particular product
candidate:
●
conditions imposed
by the FDA or any foreign regulatory authority regarding the scope
or design of our clinical trials;
●
delays in
obtaining, or the inability to obtain, required approvals from
institutional review boards, or IRBs, or other reviewing entities
at clinical sites selected for participation in our clinical
trials;
●
insufficient supply
or deficient quality of product candidates supply or materials to
produce our product candidates or other materials necessary to
conduct our clinical trials;
●
delays in obtaining
regulatory agreement for the conduct of the clinical
trials;
●
lower than
anticipated enrollment and retention rate of subjects in clinical
trials for a variety of reasons, including size of patient
population, nature of trial protocol, the availability of approved
effective treatments for the relevant disease and competition from
other clinical trial programs for similar indications;
●
serious and
unexpected drug-related side effects experienced by patients in
clinical trials;
●
failure of
third-party contractors to meet their contractual obligations in a
timely manner;
●
pre-clinical or
clinical trials may produce negative or inconclusive results, which
may require us or any potential future collaborators to conduct
additional pre-clinical or clinical testing or to abandon projects
that we expect to be promising;
●
even if
pre-clinical or clinical trial results are positive, the FDA or
foreign regulatory authorities could nonetheless require
unanticipated additional clinical trials;
●
regulators or
institutional review boards may suspend or terminate clinical
research for various reasons, including noncompliance with
regulatory requirements;
●
product candidates
may not have the desired effects; and
●
the lack of
adequate funding to continue clinical trials.
Additionally,
changes in standard of care or regulatory requirements and guidance
may occur and we may need to amend clinical trial protocols to
reflect these changes. Such amendments may require us to resubmit
our clinical trial protocols to IRBs for re-examination, which may
impact the cost, timing or successful completion of a clinical
trial. Such changes may also require us to reassess the viability
of the program in question.
We do
not know whether our clinical trials will begin as planned, will
need to be restructured or will be completed on schedule, if at
all. Delays in clinical trials will result in increased development
costs for our product candidates. In addition, if we experience
delays in completion of, or if we terminate, any of our clinical
trials, the commercial prospects for our product candidates may be
affected and our ability to generate product revenues will be
delayed. Furthermore, 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.
The clinical trial designs, endpoints and outcomes that will be
required to obtain marketing approval of a drug to treat chronic
ACD or any other indication are uncertain. We may never receive
marketing approval for EB01 as a treatment for chronic
ACD.
To our
knowledge, there are currently no FDA-approved treatment options
specifically indicated for chronic ACD. Accordingly, there is not a
well-established development path that, with positive outcomes in
clinical trials, would be reasonably assured of receiving marketing
approval for chronic ACD. In particular, if our Phase 2B clinical
trial of EB01 in individuals with chronic ACD is successful, we
plan to use the trial to support pivotal clinical trials designed
to establish the efficacy of EB01 to support, together with
additional long-term safety data, an application for regulatory
approval as a treatment for chronic ACD. The FDA or any regulatory
authority outside of the United States may determine that the
designs or endpoints of any potentially pivotal trial that we
conduct, or that the outcome shown on any particular endpoint in
any potentially pivotal trial that we conduct, are not sufficient
to establish a clinically meaningful benefit for EB01 in the
treatment of chronic ACD or otherwise to support approval, even if
the primary endpoint or endpoints of the trial is or are met with
statistical significance. If this occurs, our business could be
materially harmed. Moreover, if the FDA requires us to conduct
additional clinical trials beyond the ones that we currently
contemplate in order to support regulatory approval in the United
States of EB01 for the treatment of chronic ACD, our finances and
results from operations will be adversely impacted.
Likewise,
if we conduct any future clinical trials designed to support
marketing approval of EB02 as a treatment for HD or clinical trials
designed to support marketing approval of any other of our product
candidates, the FDA or any regulatory authority outside of the
United States may determine that the designs or endpoints of the
trial, or that the outcomes shown on any particular endpoint in the
trial, are not sufficient to establish a clinically meaningful
benefit or otherwise to support approval, even if the primary
endpoint of the trial is met with statistical
significance.
Our Phase 2B clinical trial of EB01 in individuals with chronic ACD
will not be sufficient to be considered a pivotal trial to support
an application for marketing approval of EB01. Even if our Phase 2B
study meets our primary endpoints, it is not certain that
additional pivotal Phase 3 studies, together with additional
long-term safety data will have positive outcomes and or will be
sufficient to enable EB01 to gain regulatory approval as a
treatment for chronic ACD.
If our
Phase 2B clinical trial of EB01 in individuals with chronic ACD
meets our primary endpoints, we plan to request an end of Phase 2
meeting with the FDA and regulatory authorities outside the United
States to seek guidance on the requirements for a new drug
application. We cannot predict the requirements for each of these
regulatory agencies and the requirements set forth by the agencies
could delay and/or negatively impact our ability to obtain
regulatory approval for, and to market and sell a particular
product candidate. We expect to be required by the FDA to conduct
two Phase 3 pivotal clinical trials in patients with chronic ACD to
establish the efficacy of EB01 to support, together with additional
long-term safety data, an application for regulatory approval of
EB01 as a treatment for chronic ACD. The likelihood that the FDA or
any regulatory authority outside the United States will concur with
our plan is uncertain. The FDA or any other regulatory authority
may instead determine that additional clinical and/or non-clinical
trials are required to establish the efficacy of EB01 as a
treatment for chronic ACD, even if the outcome of our Phase 2B
study in individuals is favorable. The risk that the FDA or any
other regulatory authority will determine that additional clinical
and/or non-clinical trials are required to establish the efficacy
of EB01 as a treatment for chronic ACD may be even higher if we
select a primary endpoint for our planned pivotal Phase 3 trials in
chronic ACD for which there is only limited data generated in our
Phase 2 studies. In addition, we intend to enroll in our study
individuals with chronic ACD caused by any of a number of different
conditions (allergens). This may also increase the risk of the FDA
or another regulatory authority determining that additional
clinical and/or non-clinical trials are required to establish the
efficacy of EB01 as a treatment for chronic ACD. If the FDA or a
regulatory authority outside of the United States makes the
determination that additional clinical and/or non-clinical trials
are required, it would result in a more expensive and potentially
longer development program for EB01 than we currently contemplate,
which could delay our ability to generate product revenues with
EB01, interfere with our ability to enter into any potential
licensing or collaboration arrangements with respect to this
program, cause the value of the company to decline, and limit our
ability to obtain additional financing.
If we experience new or additional delays or difficulties in the
enrollment of patients in our clinical trial of EB01 or any other
product candidate, our application and or receipt of marketing
approvals could be delayed or prevented.
Recruiting
patients with moderate to severe chronic ACD may be challenging as
there have not been recent clinical studies conducted with this
patient population. If we are unable to locate and enroll a
sufficient number of eligible patients to participate in clinical
trials of our product candidates including, in particular, our
ongoing trial of EB01 and our planned pivotal trials of EB01 as a
treatment for ACD, we may not be able to initiate or complete the
clinical trials.
Enrollment
delays in our ongoing or planned clinical trials may result in
increased development costs for our product candidates, which would
cause the value of the company to decline and limit our ability to
obtain additional financing. Our inability to enroll a sufficient
number of patients in our ongoing or planned clinical trials of
EB01, or any other Edesa product candidate, would result in
significant delays or may require us to abandon one or more
clinical trials altogether.
If the commercial opportunity in chronic ACD is smaller than we
anticipate, or if we elect to develop EB01 to treat only a specific
subpopulation of patients with chronic ACD, our future revenue from
EB01 will be adversely affected and our business will
suffer.
It is
critical to our ability to grow and become profitable that we
successfully identify patients with chronic ACD. Our projections of
the number of people who have chronic ACD as well as the subset who
have the potential to benefit from treatment with EB01, are based
on a variety of sources, including third-party estimates and
analyses in the scientific literature, and may prove to be
incorrect. Further, new information may emerge that changes our
estimate of the prevalence of these diseases or the number of
patient candidates for EB01. The effort to identify patients with
chronic ACD or our other potential target indications is at an
early stage, and we cannot accurately predict the number of
patients for whom treatment might be possible. Additionally, the
potentially addressable patient population for EB01 may be limited
or may not be amenable to treatment with EB01, and new patients may
become increasingly difficult to identify or access. If the
commercial opportunity in chronic ACD is smaller than we
anticipate, or if we elect to develop EB01 to treat only a specific
subpopulation of patients with chronic ACD, our future financial
performance may be adversely impacted.
While we have chosen to test our product candidates in specific
clinical indications based in part on our understanding of their
mechanisms of action, our understanding may be incorrect or
incomplete and, therefore, our product candidates may not be
effective against the diseases tested in our clinical
trials.
Our
rationale for selecting the particular therapeutic indications for
each of our product candidates is based in part on our
understanding of the mechanism of action of these product
candidates. However, our understanding of the product
candidates’ mechanism of action may be incomplete or
incorrect, or the mechanism may not be clinically relevant to the
diseases treated. In such cases, our product candidates may prove
to be ineffective in the clinical trials for treating those
diseases, and adverse clinical trial results would likely
negatively impact our business and results from
operations.
A successful sPLA2 drug has not been
developed to date and we can provide no assurances that we will be
successful or that there will be no adverse side
effects.
Our
unique lead product candidates are first-in-class, novel,
non-steroidal, synthetic anti-inflammatory products that address
the need to target sPLA2 in a broad-ranged
manner while avoiding any interference with the homeostatic
sPLA2
family. To date no drug companies have successfully commercialized
an sPLA2 inhibitor and as
a result the efficacy and long-term side effects are not known.
There is no guarantee that we will successfully develop and/or
commercialize an sPLA2 inhibitor and/or
that our product candidates will have no adverse side
effects.
Even if one of our product candidates receives marketing approval,
it may fail to achieve the degree of market acceptance by
physicians, patients, third-party payors and others in the medical
community necessary for commercial success.
If any
product candidate receives marketing approval, the approved product
may nonetheless fail to gain sufficient market acceptance by
physicians, patients, third-party payors and others in the medical
community. If an approved product does not achieve an adequate
level of acceptance, we may not generate significant product
revenues or any profits from operations. Our ability to negotiate,
secure and maintain third-party coverage and reimbursement for our
product candidates may be affected by political, economic and
regulatory developments in the United States, Canada, the European
Union and other jurisdictions. Governments continue to impose cost
containment measures, and third-party payors are increasingly
challenging prices charged for medicines and examining their cost
effectiveness, in addition to their safety and efficacy. These and
other similar developments could significantly limit the degree of
market acceptance of any of our future product candidates that
receive marketing approval.
If we are unable to establish
sales and marketing capabilities or enter into agreements with
third parties to market and any of our other current or future
product candidates, we may not be successful in commercializing the
applicable product candidate if it receives marketing
approval.
We do
not have a sales or marketing infrastructure and have no experience
as a company in the sale or marketing of pharmaceutical products.
To achieve commercial success for any approved product, we must
either develop a sales and marketing organization or outsource
these functions to third parties. There are risks involved with
establishing our own sales and marketing capabilities and entering
into arrangements with third parties to perform these services. For
example, recruiting and training a sales force is expensive and
time consuming and could delay any product launch. If the
commercial launch of a product candidate for which we recruit a
sales force and establish marketing capabilities is delayed or does
not occur for any reason, we would have prematurely or
unnecessarily incurred these commercialization expenses. This may
be costly, and our investment would be lost if we cannot retain or
reposition our sales and marketing personnel. If we enter into
arrangements with third parties to perform sales and marketing
services, our product revenues or the profitability of these
product revenues to us could be lower than if we were to market and
sell any products that we develop ourselves. In addition, we may
not be successful in entering into arrangements with third parties
to sell and market our product candidates or may be unable to do so
on terms that are acceptable to us. We likely will have little
control over such third parties, and any of them may fail to devote
the necessary resources and attention to sell and market our
products effectively. If we do not establish sales and marketing
capabilities successfully, either on our own or in collaboration
with third parties, we will not be successful in commercializing
our product candidates.
We face substantial competition, which may result in others
discovering, developing or commercializing products to treat our
target indications or markets before or more successfully than we
do.
The
development and commercialization of new drug products is highly
competitive. We face competition with respect to our current
product candidates and any products we may seek to develop or
commercialize in the future from major pharmaceutical companies,
specialty pharmaceutical companies and biotechnology companies
worldwide.
Competitors
may also include academic institutions, government agencies and
other public and private research organizations that conduct
research, seek patent protection and establish collaborative
arrangements for research, development, manufacturing and
commercialization. Many of our competitors have significantly
greater financial resources and expertise in research and
development, manufacturing, preclinical testing, conducting
clinical trials, obtaining approvals from regulatory authorities
and marketing approved products than we do. Mergers and
acquisitions in the pharmaceutical and biotechnology industries may
result in even more resources being concentrated among a smaller
number of our competitors. Smaller and other early-stage companies
may also prove to be significant competitors, particularly through
collaborative arrangements with large and established companies.
These third parties compete with us in recruiting and retaining
qualified scientific and management personnel, establishing
clinical trial sites and patient registration for clinical trials,
as well as in acquiring technologies that may be complementary to
or necessary for our programs. Our commercial opportunities could
be reduced or eliminated if our competitors develop and
commercialize products that are more effective, safer, have fewer
or less severe side effects, are approved for broader indications
or patient populations, or are more convenient or less expensive
than any products that we develop and commercializes. Our
competitors may also obtain marketing approval for their products
more rapidly than we may obtain approval for our products, which
could result in our competitors establishing a strong market
position before we are able to enter the market. If approved, our
product candidates will compete for a share of the existing market
with numerous other products being used to treat ACD.
Even if we are able to commercialize one of our product candidates,
the product may become subject to unfavorable pricing regulations,
third-party reimbursement practices or healthcare reform
initiatives, which would harm our business.
The
regulations that govern marketing approvals, pricing, coverage and
reimbursement for new drug products vary widely from country to
country. Current and future legislation may significantly change
the approval requirements in ways that could involve additional
costs and cause delays in obtaining approvals. Some countries
require approval of the sale price of a drug before it can be
marketed. In many countries, the pricing review period begins after
marketing or product licensing approval is granted and, in some
markets, prescription pharmaceutical pricing remains subject to
continuing governmental control even after initial approval is
granted. As a result, we might obtain marketing approval for a
product in a particular country, but then be subject to price
regulations that delay our commercial launch of the product,
possibly for lengthy time periods, and negatively impact the
revenues we are able to generate from the sale of the product in
that country. Adverse pricing limitations may hinder our ability to
recoup our investment in one or more product candidates, even if
our product candidates obtain marketing approval.
Our
ability to commercialize EB01 or any other product candidate
successfully also will depend in part on the extent to which
coverage and adequate reimbursement for these products and related
treatments will be available from government health administration
authorities, private health insurers and other organizations.
Government authorities and other third-party payors, such as
private health insurers and health maintenance organizations,
decide which medications they will pay for and establish
reimbursement levels. Our inability to promptly obtain coverage and
adequate reimbursement rates from both government-funded and
private payors for any approved products that we develop could have
a material adverse effect on our operating results, our ability to
raise capital needed to commercialize products and our overall
financial condition.
Product liability lawsuits against us could cause us to incur
substantial liabilities and to limit commercialization of any
products that we may develop.
We face
an inherent risk of product liability exposure related to the
testing of our product candidates in human clinical trials and will
face an even greater risk if we commercially sell any products that
we may develop. If we cannot successfully defend ourselves against
claims that our product candidates or products caused injuries, we
will incur substantial liabilities.
We have
separate liability insurance policies that cover each of our
ongoing clinical trials, which provide coverage in varying amounts.
The amount of insurance that we currently hold may not be adequate
to cover all liabilities that we may incur. We will need to
increase our insurance coverage when and if we begin conducting
more expansive clinical development of our product candidates.
Insurance coverage is increasingly expensive. We may not be able to
maintain insurance coverage at a reasonable cost or in an amount
adequate to satisfy any liability that may arise.
We will be dependent on third parties for the synthesis,
formulation, and manufacturing, including optimization, technology
transfers and scaling up of clinical scale quantities of all of our
product candidates.
We have
no direct experience in synthesizing, formulating and manufacturing
any of our product candidates, and currently lack the resources or
capability to synthesize, formulate and manufacture any of our
product candidates on a clinical or commercial scale. As a result,
we will be dependent on third parties for the synthesis,
formulation, and manufacturing, including optimization, technology
transfers and scaling up of clinical scale quantities of all our
product candidates. We believe that this strategy will enable us to
direct operational and financial resources to the development of
our product candidates rather than diverting resources to
establishing manufacturing infrastructure; however our use of third
parties to manufacture our product candidates may increase the risk
that we will not have sufficient quantities of our product
candidates or products or such quantities at an acceptable cost,
which could delay, prevent or impair our development or
commercialization efforts.
We do
not currently have any agreements with third-party manufacturers
for the long-term clinical or commercial supply of any of our
product candidates and may in the future be unable to scale-up
and/or conclude agreements for commercial supply with commercial
third-party manufacturers on acceptable terms, or at all. Even if
we are able to establish and maintain arrangements with third-party
manufacturers, they may encounter difficulties in achieving volume
production, laboratory testing, quality control or quality
assurance or suffer shortages of qualified personnel, any of which
could result in our inability to manufacture sufficient quantities
to meet clinical timelines for a particular product candidate, to
obtain marketing approval for the product candidate or to
commercialize the product candidate. In addition, third-party
manufacturers may not be able to comply with current good
manufacturing practice, or GMP, 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 products, operating restrictions and
criminal prosecutions, any of which could significantly and
adversely affect supplies of our product candidates.
Our
product candidates and any products that we may develop may compete
with other product candidates and products for access to
manufacturing facilities. There are a limited number of
manufacturers that operate under cGMP regulations and that might be
capable of manufacturing for us. If the third parties that we
contract to manufacture product for our preclinical tests and
clinical trials cease to continue to do so for any reason or if we
elect to change suppliers, we likely would experience delays in
advancing these clinical trials while we identify and qualify
replacement suppliers and we may be unable to obtain replacement
supplies on terms that are favorable to us. In addition, if we are
not able to obtain adequate supplies of our product candidates or
the drug substances used to manufacture them, it will be more
difficult for us to develop our product candidates and compete
effectively. Our current and anticipated future dependence upon
others for the manufacture of our product candidates may adversely
affect our future profit margins and our ability to develop product
candidates and commercialize any products that receive marketing
approval on a timely and competitive basis.
We depend on third-party suppliers for key raw materials used in
our manufacturing processes, and the loss of these third-party
suppliers or their inability to supply us with adequate raw
materials could harm our business.
We rely
on third-party suppliers for the raw materials required for the
production of our product candidates. Our dependence on these
third-party suppliers and the challenges we may face in obtaining
adequate supplies of raw materials involve several risks, including
limited control over pricing, availability, quality, and delivery
schedules. We cannot be certain that our current suppliers will
continue to provide us with the quantities of these raw materials
that we require to satisfy our anticipated specifications and
quality requirements. Any supply interruption in limited or sole
sourced raw materials could materially harm our ability to
manufacture our products until a new source of supply, if any, can
be identified and qualified. Although we believe there are several
other suppliers of these raw materials, we may be unable to find a
sufficient alternative supply channel in a reasonable time or on
commercially reasonable terms. Any performance failure on the part
of our suppliers could delay the development and commercialization
of our product candidates, including limiting supplies necessary
for clinical trials and regulatory approvals, or interrupt
production of the existing products that are already marketed,
which would have a material adverse effect on our
business.
We rely on third parties to conduct our clinical trials and those
third parties may not perform satisfactorily, including failing to
meet deadlines for the completion of such clinical
trials.
We do
not independently conduct clinical trials for our product
candidates. We rely on third parties, such as contract research
organizations, clinical data management organizations, medical
institutions, drug distributers, clinical investigators and
government agencies, to perform this function. 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 development activities. 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 product candidates and will not be able to, or may be
delayed in our efforts to, successfully commercialize our product
candidates. Our product development costs will increase if we
experience delays in testing or obtaining marketing
approvals.
Our
reliance on these third parties for clinical development activities
reduces our control over these activities but does not relieve us
of our responsibilities. For example, we remain responsible for
ensuring that each of our clinical trials is conducted in
accordance with the general investigational plan and protocols for
the clinical trial. Moreover, the FDA and foreign regulatory
authorities require us to comply with standards, commonly referred
to as Good Clinical Practice, or GCP, 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 of data and confidentiality of clinical trial
participants are protected.
We may depend on additional collaborations, licenses or similar
arrangements with third parties for the development and
commercialization of some of our product candidates. If those
collaborations are not successful, we may not be able to capitalize
on the market potential of these product candidates.
We may
in the future enter into other licensing, collaboration or similar
arrangements for the development and commercialization of our
product candidates for any or all indications and for any or all
territories. Our likely counterparties for any licensing,
collaboration or similar arrangement include large and mid-size
pharmaceutical companies, regional and national pharmaceutical
companies and biotechnology companies. However, if we do enter into
any such arrangements with any third parties in the future, we will
likely have limited control over the amount and timing of resources
that our collaborators dedicate to the development or
commercialization of the applicable product candidate. Our ability
to generate revenues from these arrangements will depend on our
collaborators’ abilities and efforts to successfully perform
the functions assigned to them in these arrangements. Collaboration
agreements may not lead to development or commercialization of
product candidates in the most efficient manner or at all. If a
collaborator of ours were to be involved in a business combination,
the continued pursuit and emphasis on our product development or
commercialization program could be delayed, diminished or
terminated.
If we are not able to establish additional collaborations, we may
have to alter our development and commercialization
plans.
We may
decide to collaborate with pharmaceutical and biotechnology
companies for the development and potential commercialization of
EB01 or other product candidates. Collaborations are complex and
time-consuming to negotiate and document and we face significant
competition in seeking appropriate collaborators. In addition,
there have been a significant number of business combinations among
large pharmaceutical companies that have resulted in a reduced
number of potential future collaborators. 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 a product candidate, reduce or delay our development
program or one or more of our other development programs, delay our
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 would likely 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.
Even if we complete the necessary clinical trials, the marketing
approval process is expensive, time consuming and uncertain and may
prevent us from obtaining approvals for the commercialization of
some or all of our product candidates. If we are not able to
obtain, or if there are delays in obtaining, required marketing
approvals, we will not be able to commercialize our product
candidates, and our ability to generate revenue will be materially
impaired.
Our
product candidates and the activities associated with their
development and commercialization, including their design, testing,
manufacture, safety, efficacy, recordkeeping, labeling, storage,
approval, advertising, promotion, sale and distribution, are
subject to comprehensive regulation by the FDA and by comparable
authorities in other countries. Failure to obtain marketing
approval for a product candidate will prevent us from
commercializing the product candidate. We have not received
approval to market EB01 or any other Edesa product candidate from
regulatory authorities in any jurisdiction.
We have
only limited experience in filing and supporting the applications
necessary to obtain marketing approvals for product candidates and
expect to rely on third-party contract research organizations to
assist us in this process. Securing marketing approval requires the
submission of extensive preclinical and clinical data and
supporting information to regulatory authorities for each
therapeutic indication to establish the product candidate’s
safety and effectiveness. Securing marketing approval also requires
the submission of information about the product manufacturing
process to, and inspection of manufacturing facilities by, the
regulatory authorities. Regulatory authorities may determine that
EB01, or any of our other product candidates is not effective, is
only moderately effective or has undesirable or unintended side
effects, toxicities, safety profiles or other characteristics that
preclude us from obtaining marketing approval or that prevent or
limit commercial use.
The
process of obtaining marketing approvals is expensive, may take
many years, if approval is obtained at all, and can vary
substantially based upon a variety of factors, including the type,
complexity and novelty of the product candidates involved. Changes
in marketing approval policies during the development period,
changes in or the enactment of additional statutes or regulations,
or changes in regulatory review for each submitted product
application, may cause delays in the approval or rejection of an
application. Regulatory authorities have substantial discretion in
the approval process and may refuse to accept any application or
may decide that our data are insufficient for approval and require
additional preclinical studies, clinical trials or other trials. In
addition, varying interpretations of the data obtained from
preclinical and clinical testing could delay, limit or prevent
marketing approval of a product candidate. Any marketing approval
we ultimately obtain may be limited or subject to restrictions or
post-approval commitments that render the approved product not
commercially viable. If we experience delays in obtaining approval
or if we fail to obtain approval of our product candidates, the
commercial prospects for our product candidates may be harmed and
our ability to generate revenues will be materially
impaired.
Even if we obtain marketing approval for our product candidates,
the terms of approvals and ongoing regulation of our products may
limit how we manufacture and market our products, and compliance
with such requirements may involve substantial resources, which
could materially impair our ability to generate
revenue.
Even if
marketing approval of a product candidate is granted, an approved
product and our manufacturer and marketer are subject to ongoing
review and extensive regulation, including the possible requirement
to implement a risk evaluation and mitigation strategy or to
conduct costly post-marketing studies or clinical trials and
surveillance to monitor the safety or efficacy of the product. We
must also comply with requirements concerning advertising and
promotion for any of our product candidates for which we obtain
marketing approval. Promotional communications with respect to
prescription drugs are subject to a variety of legal and regulatory
restrictions and must be consistent with the information in the
product’s approved labeling. Thus, we will not be able to
promote any products we develop for indications or uses for which
they are not approved. In addition, manufacturers of approved
products and those manufacturers’ facilities are required to
ensure that quality control and manufacturing procedures conform to
cGMP, which include requirements relating to quality control and
quality assurance as well as the corresponding maintenance of
records and documentation and reporting requirements. We and our
contract manufacturers could be subject to periodic unannounced
inspections by the FDA to monitor and ensure compliance with
cGMP.
Accordingly,
assuming we receive marketing approval for one or more of our
product candidates, we and our contract manufacturers will continue
to expend time, money and effort in all areas of regulatory
compliance, including manufacturing, production, product
surveillance and quality control. If we are not able to comply with
post-approval regulatory requirements, we could have the marketing
approvals for our products withdrawn by regulatory authorities and
our ability to market any future products could be limited, which
could adversely affect our ability to achieve or sustain
profitability. Thus, the cost of compliance with post-approval
regulations may have a negative effect on our operating results and
financial condition.
Our relationships with customers, healthcare providers and
professionals and third-party payors will be subject to applicable
anti-kickback, fraud and abuse and other healthcare laws and
regulations, which could expose us to criminal sanctions, civil
penalties, contractual damages, reputational harm and diminished
profits and future earnings.
Healthcare
providers, physicians and third-party payors play a primary role in
the recommendation and prescription of any product candidate for
which we may obtain marketing approval. Our future arrangements
with customers, healthcare providers and professionals, and
third-party payors may expose us to broadly applicable federal
anti-kickback, federal and state fraud and abuse and other
healthcare laws and regulations that may constrain the business or
financial arrangements and relationships through which we market,
sell and distribute any product candidate for which we obtain
marketing approval.
Efforts
to ensure that our business arrangements with third parties will
comply with applicable healthcare laws and regulations will involve
substantial costs. It is possible that governmental authorities
will conclude that our business practices may not comply with
current or future statutes, regulations or case law involving
applicable fraud and abuse or other healthcare laws and
regulations. If our operations are found to be in violation of any
of these laws or any other governmental regulations that may apply
to us, we may be subject to significant civil, criminal and
administrative penalties, damages, fines, exclusion from government
funded healthcare programs, such as Medicare and Medicaid, and the
curtailment or restructuring of our operations. Violation of
certain of these laws could also result in exclusion, suspension
and debarment from government funded healthcare programs.
Exclusion, suspension or debarment would significantly impact our
ability to commercialize, sell or distribute any product candidate
for which we obtain regulatory approval. If any of the physicians
or other providers or entities with whom we expect to do business
are found to be not in compliance with applicable laws, they may be
subject to criminal, civil or administrative sanctions, including
exclusions from government funded healthcare programs.
Use of social media platforms presents new risks.
We
believe that our potential patient population is active on social
media. Social media practices in the pharmaceutical and
biotechnology industries are evolving, which creates uncertainty
and risk of noncompliance with regulations applicable to our
business. For example, patients may use social media platforms to
comment on the effectiveness of, or adverse experiences with, a
product candidate, which could result in reporting obligations. In
addition, there is a risk of inappropriate disclosure of sensitive
information or negative or inaccurate posts or comments about us or
our product candidates on any social networking website. If any of
these events were to occur or we otherwise fail to comply with
applicable regulations, we could incur liability, face restrictive
regulatory actions or incur other harm to our
business.
Risks Related to Our Intellectual Property
We are dependent on a license relationship with Yissum for our EB01
and EB02 programs
In
2016, we entered into an exclusive license agreement with Yissum
Research Development Company of the Hebrew University of Jerusalem
to obtain exclusive rights to certain know-how, patents and data
relating to a pharmaceutical product. We are using the exclusive
rights to develop the product for therapeutic, prophylactic and
diagnostic uses in topical dermal applications and anorectal
applications, including for the development of EB01 to treat ACD
and EB02 to treat HD. Concurrently, we also entered into a
consulting agreement with an individual associated with Yissum for
the development of the product. If we default or fail to perform
any of the terms, covenants, provisions or our obligations under
the License Agreement, Yissum has the option to terminate the
License Agreement, subject to advance notice to cure such default.
Any termination of this license agreement would have a materially
adverse impact on our business and results from
operations.
If we are unable to obtain and maintain patent protection for our
licensed technology and products, or if the scope of the patent
protection is not sufficiently broad, our competitors could develop
and commercialize technology and products similar or identical to
ours, and our ability to successfully commercialize our licensed
technology and products may be adversely affected.
Our
success will partially depend on our ability to obtain and maintain
patent protection in the United States and other countries with
respect to our proprietary technology and products. We intend to
protect our proprietary position by filing patent applications in
the United States, in Europe and in certain additional
jurisdictions related to our novel technologies and product
candidates that are important to our business. This process is
expensive and time-consuming, and we may not be able to file and
prosecute all necessary or desirable patent applications at a
reasonable cost or in a timely manner. It is also possible that we
will fail to identify patentable aspects of our research and
development output before it is too late to obtain patent
protection. Moreover, if we license technology or product
candidates from third parties in the future, these license
agreements may not permit us to control the preparation, filing and
prosecution of patent applications, or to maintain or enforce the
patents, covering the licensed technology or product candidates.
These agreements could also give our licensors the right to enforce
the licensed patents without our involvement, or to decide not to
enforce the patents at all. Therefore, in these circumstances,
these patents and applications may not be prosecuted or enforced in
a manner consistent with the best interests of our
business.
The
patent position of biotechnology and pharmaceutical companies
generally is highly uncertain, involves complex legal and factual
questions and has been the subject of much litigation. As a result,
the issuance, scope, validity, enforceability and commercial value
of any patents issued to us will likely be highly uncertain. Patent
applications that we file may not result in patents being issued
which protect our technology or products, in whole or in part, or
which effectively prevent others from commercializing competitive
technologies and products. Changes in either the patent laws or
interpretation of the patent laws in the United States and other
countries may also diminish the value of patents issued to us,
narrow the scope of our patent protection or make enforcement more
difficult or uncertain.
We may become involved in lawsuits or other enforcement proceedings
to protect or enforce our patents or other intellectual property,
which could be expensive, time consuming and potentially
unsuccessful.
Competitors
may infringe our patents, trademarks, copyrights or other
intellectual property. To counter infringement or unauthorized use,
we may be required to file claims, which can be expensive and time
consuming to prosecute. Any claims we assert against perceived
infringers could provoke these parties to assert counterclaims
against us alleging that we infringe their intellectual property or
that our patent and other intellectual property rights are invalid
or unenforceable, including for antitrust reasons. As a result, in
a patent infringement proceeding, a court or administrative body
may decide that a patent of ours is invalid or unenforceable, in
whole or in part, or may construe the patent’s claims
narrowly and so refuse to stop the other party from using the
technology at issue on the grounds that our patents do not cover
the competitor technology in question. Even if we are successful in
a patent infringement action, the unsuccessful party may
subsequently raise antitrust issues and bring a follow-on action
thereon. Antitrust issues may also provide a bar to settlement or
constrain the permissible settlement terms.
Third parties may initiate legal proceedings alleging that we are
infringing their intellectual property rights, the outcome of which
would be uncertain and could have a material adverse effect on the
success of our business.
Our
commercial success depends upon our ability and the ability of our
collaborators to develop, manufacture, market and sell our product
candidates and use our proprietary technologies without infringing
the intellectual property and other proprietary rights of third
parties. There is considerable intellectual property litigation in
the biotechnology and pharmaceutical industries, and we may become
party to, or threatened with, future adversarial proceedings or
litigation regarding intellectual property rights with respect to
our products and technology, including interference,
derivation, inter partes
review, reexamination, reissue or post-grant review proceedings
before the USPTO. The risks of being involved in such litigation
and office proceedings may also increase as our product candidates
approach commercialization, and as our business gains greater
visibility operating as a publicly traded company in the United
States. Third parties may assert infringement claims against us
based on existing or future intellectual property rights and to
restrict our freedom to operate. Third parties may also seek
injunctive relief against us, whereby they would attempt to prevent
us from practicing our technologies altogether pending outcome of
any litigation against us. We may not be aware of all such
intellectual property rights potentially relating to our product
candidates prior to their assertion against us. For example, we
have not conducted an in-depth freedom-to-operate search or
analysis of any of our product candidates. Any freedom-to-operate
search or analysis previously conducted may not have uncovered all
relevant patents and pending patent applications, and there may be
pending or future patent applications that, if issued, would block
us from commercializing any of our product candidates. Thus, we do
not know with certainty whether our product candidates or our
commercialization thereof, does not and will not infringe any third
party’s intellectual property.
If we
are found to infringe a third party’s intellectual property
rights, to avoid or settle litigation, we could be required to
obtain a license to enable us to continue developing and marketing
our products and technology. However, we may not be able to obtain
any required license on commercially reasonable terms, or at all.
Even if we were able to obtain a license, it could be nonexclusive,
thereby giving our competitors access to the same technologies as
are licensed to us, and could require us to make substantial
payments. Absent a license, we could be forced, including by court
order, to cease commercializing the infringing technology or
product. In addition, we could be found liable for monetary
damages, including treble damages and attorneys’ fees if we
are found to have willfully infringed a patent or other
intellectual property right. A finding of infringement could
prevent us from commercializing our product candidates or force us
to cease some of our business operations, which could materially
harm our business.
We may be subject to claims by third parties asserting that the
company or our employees have misappropriated their intellectual
property, or claiming ownership of what we regard as our own
intellectual property.
Many of
our employees were previously employed at universities or other
biotechnology or pharmaceutical companies. Although we try to
ensure that our employees do not use the proprietary or otherwise
confidential information or know-how of others in their work for
us, we may be subject to claims that the company or these employees
have without authorization used or disclosed intellectual property,
including trade secrets or other proprietary or confidential
information, of any such employee’s former employer.
Litigation may be necessary to defend against these
claims.
In
addition, while we typically require our employees and contractors
who may be involved in the development of intellectual property to
execute agreements assigning such intellectual property to us and
agree to cooperate and assist us with securing and defending our
intellectual property, we may be unsuccessful in executing such an
agreement with each party who in fact develops intellectual
property that we regard as our own. These assignment agreements may
not be self-executing or may be breached, and we may be forced to
bring claims against third parties, or defend claims they may bring
against us, to determine the ownership of what we regard as our
intellectual property.
If we
fail in prosecuting or defending any such claims, in addition to
paying monetary damages, we may lose valuable intellectual property
rights or personnel. Even if we are successful in prosecuting or
defending against such claims, litigation could result in
substantial costs and be a distraction to management.
Intellectual property litigation could cause us to spend
substantial resources and could distract our personnel from their
normal responsibilities.
Even if
resolved in our favor, litigation or other legal proceedings
relating to intellectual property claims may cause us to incur
significant expenses and likely would distract our technical and
management personnel from their normal responsibilities. In
addition, there could be public announcements of the results of
hearings, motions or other interim proceedings or developments that
could have a substantial adverse effect on the price of our common
shares. Such litigation or proceedings could substantially increase
our operating losses and reduce the resources available for
development, sales, marketing or distribution activities. We may
not have sufficient financial or other resources to adequately
conduct such litigation or proceedings. Some of our competitors may
be able to sustain the costs of such litigation or proceedings more
effectively than we can because of their greater financial
resources. Accordingly, costs and lost management time, as well as
uncertainties resulting from the initiation and continuation of
patent litigation or other proceedings, could have a material
adverse effect on our ability to compete in the
marketplace.
If we are unable to protect the confidentiality of our trade
secrets, our business and competitive position would be
harmed.
We
partially rely on trade secrets and know-how, including unpatented
know-how, technology and other proprietary and confidential
information, to maintain our competitive position. We seek to
protect these trade secrets, in part, by entering into
nondisclosure and confidentiality agreements with parties who have
access to them, such as our employees, corporate collaborators,
outside scientific collaborators, contract manufacturers,
consultants, advisors and other third parties. However, we cannot
guarantee that we have executed these agreements with each party
that may have or have had access to our trade secrets or that the
agreements we have executed will provide adequate protection. Any
party with whom we have executed such an agreement may breach that
agreement and disclose our proprietary or confidential information,
including our trade secrets, and we may not be able to obtain
adequate remedies for such breaches. Enforcing a claim that a party
illegally disclosed or misappropriated a trade secret is difficult,
expensive and time-consuming, and the outcome is unpredictable. In
addition, some courts inside and outside the United States are less
willing or unwilling to protect trade secrets. If any of our trade
secrets were to be lawfully obtained or independently developed by
a competitor, we would have no right to prevent them, or those to
whom they communicate it, from using that technology or information
to compete with us. If any of our trade secrets, particularly
unpatented know-how, were to be obtained or independently developed
by a competitor, our competitive position would be
harmed.
Risks Related to Owning Our Securities
The price of our common shares may continue to be
volatile.
Market
prices for securities of early stage pharmaceutical, biotechnology
and other life sciences companies have historically been
particularly volatile, and the market price of our common shares
has been subject to significant fluctuations. This volatility can
be exacerbated by low trading volume. Some of the factors that may
cause the market price of our shares to fluctuate
include:
●
sales or potential
sales of substantial amounts of our common shares;
●
announcements about
us or our competitors, including funding announcements, corporate
or business updates, updates on manufacturing of our products,
clinical trial results, regulatory approvals or new product
introductions;
●
developments
concerning our product manufacturers;
●
litigation and
other developments relating to our licensed patents or other
proprietary rights or those of our competitors;
●
governmental
regulation and legislation;
●
change in
securities analysts’ estimates of our performance, or failure
to meet analysts’ expectations;
●
the terms and
timing of any future collaborative, licensing or other arrangements
that we may establish;
●
Our ability to
raise additional capital to carry through with our development
plans and current and future operations;
●
the timing of
achievement of, or failure to achieve, our manufacturing,
pre-clinical, clinical, regulatory and other milestones, such as
the commencement of clinical development, the completion of a
clinical trial or the receipt of regulatory approval;
●
actions taken by
regulatory agencies with respect to our product
candidates;
●
uncontemplated
problems in the supply of the raw materials used to produce our
product candidates;
●
introductions or
announcements of technological innovations or new products
candidates by us, our potential future collaborators, or our
competitors, and the timing of these introductions or
announcements;
●
market conditions
for equity investments in general, or the biotechnology or
pharmaceutical industries in particular;
●
we may have limited
or very low trading volume that may increase the volatility of the
market price of our common shares;
●
actual or
anticipated fluctuations in our results of operations;
●
hedging or
arbitrage trading activity that may develop regarding our common
shares;
●
regional or
worldwide recession;
●
sales of large
blocks of our common shares;
●
sales of our common
shares by our executive officers, directors and significant
shareholders;
●
managerial costs
and expenses;
●
changes in
accounting principles; and
●
the loss of any of
our key scientific or management personnel.
Moreover,
the stock markets in general have experienced substantial
volatility that has often been unrelated to the operating
performance of individual companies. These broad market
fluctuations may also adversely affect the trading price of our
common shares. In the past, following periods of volatility in the
market price of a company’s securities, shareholders have
often instituted class action securities litigation. Such
litigation, if instituted, could result in substantial costs and
diversion of management attention and resources, which could
significantly harm our profitability and reputation.
If we fail to meet all applicable Nasdaq Capital Market
requirements and Nasdaq determines to delist our common shares, the
delisting could adversely affect the market liquidity of our common
shares and the market price of our common shares could
decrease.
Our
common shares are listed on The Nasdaq Capital Market. To maintain
our listing, we must meet minimum financial, operating and other
requirements, including requirements for a minimum amount of
capital, a minimum price per share, and active operations. If we
are unable to comply with Nasdaq’s listing standards, Nasdaq
may determine to delist our common shares. If our common shares are
delisted for any reason, it could reduce the value of our common
shares and their liquidity. Delisting could also adversely affect
our ability to obtain financing for the continuation of our
operations, or to use our common shares in acquisitions. Delisting
may also result in the loss of confidence by suppliers, investors
and employees.
Raising additional capital may cause dilution to our investors,
restrict our operations or require us to relinquish rights to our
technologies or product candidates
Until
such time, if ever, as we can generate substantial product
revenues, we expect to finance our cash needs through a combination
of equity offerings, licensing, collaboration or similar
arrangements, grants and debt financings. We do not have any
committed external source of funds. To the extent that the we raise
additional capital through the sale of equity or convertible debt
securities, your ownership interest will be diluted, and the terms
of these securities may include liquidation or other preferences
that adversely affect your rights as a holder of our common shares.
Debt financing, if available, may involve agreements that include
covenants limiting or restricting our ability to take specific
actions, such as incurring additional debt, making capital
expenditures or declaring dividends or other
distributions.
If we
raise additional funds through licensing, collaboration or similar
arrangements, we may have to relinquish valuable rights to our
technologies, future revenue streams, research and development
programs or product candidates or to grant licenses on terms that
may not be favorable to us. If we are unable to raise additional
funds through equity or debt financings or other arrangements when
needed, we may be required to delay, limit, reduce or terminate our
product development or future commercialization efforts or grant
rights to develop and market product candidates that we would
otherwise prefer to develop and market ourselves.
Failure to maintain effective internal control over financial
reporting in accordance with Section 404 of the Sarbanes-Oxley Act
of 2002 could have a material adverse effect on our share
price.
Section
404 of the Sarbanes-Oxley Act of 2002 and the related rules and
regulations of the SEC require an annual management assessment of
the effectiveness of our internal control over financial reporting.
If we fail to maintain the adequacy of our internal control over
financial reporting, we may not be able to ensure that we can
conclude on an ongoing basis that we have effective internal
control over financial reporting in accordance with Section 404 of
the Sarbanes-Oxley Act of 2002 and the related rules and
regulations of the SEC. If we cannot in the future favorably assess
the effectiveness of our internal control over financial reporting,
investor confidence in the reliability of our financial reports may
be adversely affected, which could have a material adverse effect
on our share price.
The ownership of our common shares is highly concentrated, which
may prevent you and other shareholders from influencing significant
corporate decisions and may result in conflicts of interest that
could cause our common shares price to decline.
The
ownership of our common shares is highly concentrated among
insiders and affiliates. Accordingly, these shareholders will have
substantial influence over the outcome of corporate actions
requiring shareholder approval, including the election of
directors, any merger, consolidation or sale of all or
substantially all of the company’s assets or any other
significant corporate transaction. These shareholders may also
delay or prevent a change of control of the company, even if such a
change of control would benefit the other shareholders of the
company. The significant concentration of share ownership may
adversely affect the trading price of our common shares due to
investors’ perception that conflicts of interest may exist or
arise.
We qualify as a foreign private issuer, and as a result,
shareholders may receive less information and be afforded less
protection under the U.S. federal securities laws.
We
believe we qualify as a foreign private issuer within the meaning
of rules promulgated under the Securities and Exchange Act of 1934,
as amended. If we qualify as a foreign private issuer, we may be
exempt from certain Exchange Act rules and requirements that apply
to U.S. public companies, including: (i) the requirement to file
with the SEC quarterly reports on Form 10-Q and current reports on
Form 8-K; (ii) rules regulating the solicitation of proxies in
connection with shareholder meetings; (iii) Regulation FD
prohibiting selective disclosures of material information; and (iv)
rules requiring insiders to disclose stock ownership and trading
activities and establishing liability for profits realized from
“short-swing” trading transactions (i.e., a purchase
and sale, or sale and purchase, of the issuer’s equity
securities within less than six months). If in the future we elect
to be treated as a foreign private issuer, shareholders will
receive less information about the company and trading in our
shares by our affiliates, and will be afforded less protection
under the U.S. federal securities laws than would be afforded to
shareholders of a domestic U.S. company.
We may be deemed a passive foreign investment company, and as a
result, shareholders may be subject to special taxation rules that
restrict capital gains treatment, unless the shareholders make a
timely tax election to treat the company as a qualified electing
fund.
A
special set of U.S. federal income tax rules applies to a foreign
corporation that is deemed a passive foreign investment company
(“PFIC”) for U.S. federal income tax purposes. Based on
our audited financial statements, income tax returns, and relevant
market and shareholder data, we believe that we likely will not be
classified as a PFIC in the September 30, 2019 taxable year. There
can be no assurance, however, that we will not be considered to be
a PFIC for any particular year in the future because PFIC status is
factual in nature, depends upon factors not wholly within our
control, generally cannot be determined until the close of the
taxable year in question, and is determined annually.
If we
are deemed to be a PFIC during the current or any future taxable
year, U.S. shareholders would be subject to special taxation rules
related to gain on sale or disposition of our shares and excess
distributions unless they make a timely election to treat our
shares as a qualified electing fund (“QEF election”). A
QEF election cannot be made unless we provide U.S.
shareholders the information and computations needed to report
income and gains pursuant to a QEF election. Without a QEF
election, U.S. shareholders may not be able to use capital gains
tax treatment and may be subject to potentially adverse tax
consequences. Given the complexities of the PFIC and QEF election
rules, U.S. shareholders may need to incur the time and expense of
consulting a tax adviser about these rules.