ITEM 1 – BUSINESS
Overview
We are a biopharmaceutical company developing
targeted anticancer therapies by utilizing tumor-associated biomarkers. Our therapeutic strategy is based on targeting the patient’s
tumor(s) with treatments that will deliver drugs selectively based upon specific biochemical characteristics of the cancer cells
comprising the tumor. Through a combination of licensing agreements, as well as mergers and acquisitions, we have acquired the
rights to several technologies with the potential to more effectively treat cancers and significantly improve quality-of-life for
patients. We believe that the development of targeted approaches to the administration of anticancer agents should lead to improved
outcomes and reduced toxicity.
We expect to be a major participant in the
oncology arena through the successful development and commercialization of innovative therapies which, as a result of their lower
toxicity and greater efficacy, will increase patient survival rates and enhance patient quality of life. In targeting compounds
for acquisition, we focus on candidates that have been previously tested in human clinical trials or animal models, as well as
technologies that may improve the delivery or targeting of previously tested, and in some cases marketed, anticancer agents. Our
senior management team and our panel of internationally-recognized clinical advisors have made significant contributions to the
development of leading drugs currently used in cancer treatment. Management, in conjunction with our advisors, will evaluate in-licensing
candidates based on several criteria, including development and registration strategies to be employed, commercialization opportunities
and competitive technologies being developed elsewhere.
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In the second quarter of 2008, we launched the Phase I/II clinical
trial for Cordycepin (OVI-123) at two sites in the U.S. and, following completion of the Phase I portion of the trial, we planned
to collect initial Phase II efficacy data in a small cohort of refractory leukemia patients who express the marker, TdT. In October
2009, after enrolling five patients in this clinical trial, we placed the clinical trial on administrative hold until such time
that additional capital can be raised. We have engaged a clinical research organization (“CRO”) in France to do additional
pre-clinical in-vitro evaluations of Cordycepin and the ADA inhibitor Pentostatin with the intent of gaining a better understanding
of the inhibition effects of Pentostatin on Cordycepin. We are in the process of reinitiating the Phase I/II clinical trial to
determine the maximum tolerated dose, and expect to start enrolling patients in 2013 if additional financing is obtained.
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We have completed Good Laboratory Practice (“GLP”) animal
drug safety studies in two species for our lead drug candidate from the L-nucleoside conjugate program (OVI-117). We have accumulated
in vitro
and
in vivo
data indicating that several of the L-nucleoside conjugates are effective against various types
of cancer. To date, OVI-117 has undergone two proof-of-concept studies of human cancers in animal models, as both a single agent
and as a multi-agent combination therapy with oxaliplatin. The Investigational New Drug application (IND) was submitted to the
FDA on June 2, 2012 and approved by the FDA on July 5, 2012. We have engaged a contract manufacturer and a clinical batch of OVI-117
is available for use in our proposed Phase 1 trial. The clinical protocol has been written and a principal investigator engaged.
We believe that OVI-117 should be ready to enter Phase I clinical trials in 2013 if additional financing is available.
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We previously developed diagnostic kits through our former majority-owned
German operating subsidiary, AdnaGen AG (“AdnaGen”), for several cancer indications, and marketed diagnostic kits in
Europe for the detection of circulating tumor cells (“CTCs”) in patients with cancer. In October 2010,
we entered into a Stock Purchase Agreement with Alere Holdings Bermuda Limited Canon's Court (“Alere Holdings”), whereby
we sold all of our shares, representing approximately 78% of the total issued and outstanding shares of AdnaGen. Under
the terms of the agreement, we and the other AdnaGen shareholders agreed to sell our respective shares of AdnaGen, and all AdnaGen
related business assets, to Alere Holdings for: (i) a $10 million up-front payment; (ii) $10 million in potential milestone payments
contingent upon the achievement of various balance sheet objectives within 24 months; and (iii) up to $63 million in potential
milestone payments contingent upon the achievement of various clinical, regulatory and sales objectives within the next 36 months. We
are entitled to receive our pro rata portion of the up-front and potential milestone payments. No milestone payments were received
in 2012.
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To date, we have financed our operations
principally through offerings of securities exempt from the registration requirements of the Securities Act of 1933 (the “Securities
Act”). We are using the proceeds from the sale of our shares in AdnaGen to fund on-going development activities for our drug
candidate portfolio. We estimate that our cash reserves will be sufficient to permit us to continue at our anticipated
level of operations for at least 2 to 3 months. However, we anticipate we will need to raise additional capital to support our
current operations and fund in-licensing and research and development programs and will further require additional financing at
various intervals in the future. We can provide no assurance that additional funding will be available on a timely basis, terms
acceptable to us, or at all.
If we are unsuccessful raising additional
funding, our business may not continue as a going concern and if sufficient capital is not available, we may be required to delay,
further scale back or eliminate one or more of our research and development or acquisition and in-licensing programs or to enter
into license or other arrangements with third parties to commercialize products or technologies that we would otherwise seek to
develop and commercialize ourselves. In such event, our business, prospects, financial condition, and results of operations may
be adversely affected because we may be required to further scale back, eliminate, or delay development or acquisition efforts
or product introductions or enter into royalty, sales, or other agreements with third parties in order to commercialize our products.
Even if we do find additional funding sources, we may be required to issue securities with greater rights than those currently
possessed by holders of our common stock. We may also be required to take other actions that may lessen the value of our common
stock or dilute our common stockholders, including borrowing money on terms that are not favorable to us or issuing additional
equity securities. If we experience difficulties raising money in the future, our business, prospects, financial condition, and
results of operation will be materially adversely affected. See Note 3 of the consolidated financial statements.
During the last four fiscal years, we spent
approximately $4.2 million on research and development, excluding discontinued operations.
Our Corporate Strategy
We have implemented a comprehensive, multi-faceted
approach to candidate identification and product development in the oncology treatment. Our strategic plan consists of the following
elements:
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A Practical, Rational Approach to Drug Development
. Our management is well versed in the nuances associated with successful execution of the drug development and registration process. Registration strategies will be designed to address those issues which are critical to achieving success with respect to both the acceptability of a specific plan in the view of the FDA and the ability to achieve that plan with respect to the designated end points for that phase of the clinical trial. Furthermore, wherever possible these strategies will be designed to take advantage of the FDA’s accelerated approval paths for certain drugs and orphan drug designation.
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A Disciplined Internal Development Strategy for Therapeutics
. Besides opportunistically evaluating candidates for potential in-licensing or acquisition, we possess two proprietary technologies which we believe will produce candidates for potential out-licensing. Both technologies target aspects of cell biology specific to most cancer cells, but not found in healthy cells and we expect these technologies to produce an array of candidates. We believe that, in many instances, the potential candidates can address opportunities with unmet needs, such as cancers which are very resistant to therapy or have high recurrence rates. In other instances, we believe that the candidates may address opportunities where the effectiveness of existing chemotherapeutics is hampered by the toxic side effects which the drugs produce. In these circumstances, we believe that the use of our product candidates in combination with existing drug therapies administered at lower dosage levels could produce comparable or improved effectiveness with diminished side effects versus the single agent therapy.
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In-licensing Candidate Selection and Acquisition Program
. We believe that the relationships and reputation of the members of both our management and our clinical advisory board positions us to be exposed to many acquisition and in-licensing opportunities that would not normally be available to a company of our size. In many instances, the acquisition of biopharmaceutical companies by larger companies has resulted in drug programs being delayed or discontinued, due to such factors as loss of internal sponsorship (not created at the acquiring company), a perceived lack of market size (the desire for drugs with annual sales in excess of $1 billion) by the larger combined entity, or an overcrowded pipeline (too many product candidates to investigate, too many products to develop and a lack of sufficient resources). Indeed, the development of hundreds of potential oncology compounds that had been on the development track has been delayed or discontinued. We view many of these product candidates, together with some of the 400 plus compounds in the development pipeline, as potential candidates for in-licensing.
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By leveraging the experience of our management
team and clinical advisory board in selecting, developing and obtaining approval for many important chemotherapeutics, we believe
that we will be able to discern those opportunities that truly possess the potential to become approved drugs within a targeted
three-to-five year horizon. We involve our clinical advisory board in all major acquisition and in-licensing decisions. Given the
experience and the active network of our management team and clinical advisory board, we expect to uncover many other promising
candidates. Coupled with this, we generally attempt to structure our in-licensing deals so that if the in-licensed technology fails
to perform as represented, we are able to recover any payments made by us in acquiring the technology.
Our Drug Candidate Pipeline
The following table
summarizes the status of our various pre-clinical and clinical development programs underway:
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Program
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Indication
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Status
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Planned Activities
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Commercial Rights
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Cordycepin (OVI-123)
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Refractory TdT Positive Leukemias
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In Phase I/II Clinical Development; Open IND; Orphan Drug Designation Received
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Phase I/II Trial to be Reinitiated in 2013
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OncoVista-Sub
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L-Nucleoside Conjugates (OVI-117)
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Colon Cancer
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Pre-Clinical
Development; Initiated GLP animal safety studies
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Commence Phase I Trial in 2013
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OncoVista-Sub
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The following sections discuss various aspects
of our portfolio of drug candidates and their respective therapeutic characteristics in more detail.
Cordycepin (OVI-123) (TdT-Positive Refractory Leukemias)
The American Cancer Society estimated that
43,050 new leukemia cases were diagnosed in 2010 in the U.S. While almost 250,000 individuals are living with, or are in remission
from, leukemia in the U.S., the annual mortality rate is nearly 22,000. The four broad classifications of leukemia are:
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Acute lymphocytic leukemia (“
ALL
”);
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Chronic lymphocytic leukemia (“
CLL
”);
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Acute myelogenous leukemia (“
AML
”); and
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Chronic myelogenous leukemia (“
CML
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Cordycepin, which was obtained through acquisition
of Aengus Pharmaceuticals, Inc. in November 2005, was our first clinical-stage development compound. We are developing Cordycepin
as a treatment option for certain leukemia patients that are either refractory to currently-used chemotherapeutics or have experienced
a relapse. Cordycepin depends upon the presence of a DNA polymerase, known as terminal deoxynucleotidyl transferase (TdT), for
our therapeutic activity. Approximately 95% of ALL patients express TdT, and approximately 10% of the AML cases express TdT. The
range of CML cases that express TdT has been estimated at between 0% and 55% in scientific literature with an average of 21% among
the cited articles. Generally, the TdT-positive patients that would either be refractory or have experienced a relapse are older
adults.
Opportunity
Leukemia is a malignant cancer of the bone
marrow and blood. Leukemia is characterized by the uncontrolled accumulation of blood cells and is categorized as either lymphocytic
or myelogenous, either of which type can be acute or chronic. The terms lymphocytic and myelogenous denote the type of blood cell
affected (lymphocytic involving lymphocyte cells in bone marrow and myelogenous implicating other blood cells). Acute leukemia
is a rapidly progressing disease that results in the accumulation of immature, functionless cells in the marrow and blood, thereby
resulting in a condition whereby the marrow often can no longer produce enough normal red blood cells, white blood cells and platelets.
Anemia, a deficiency of red cells, develops in virtually all leukemia patients, and the lack of normal white cells impairs the
body’s ability to fight infections. A shortage of platelets results in bruising and easy bleeding. Chronic leukemia, on the
other hand, progresses more slowly and allows greater numbers of more mature, functional cells to be made.
Based on information obtained from the Surveillance,
Epidemiology, and End Results (“SEER”) Program of the National Cancer Institute, while AML and CML have been cancers
primarily of adults, with prevalence rates of 94% for AML in adults over the age of 20 and 97% for CML in adults over 20, ALL is
more evenly distributed between adults and children. Approximately 65% of new cases diagnosed with ALL are in children under the
age of 20, and while the treatment outcomes for ALL in children have generally been favorable with a five-year survival rate of
86% for children under the age of 15, the treatment response rates for adults have resulted in a lower overall five-year survival
rate of 65%. Given the toxic profile of the treatment regimens for both adults and children, we believe that Cordycepin, as a TdT-dependent
agent, could be used as part of a combination therapy regimen in order to minimize toxicities to both age groups while maintaining
effectiveness.
Market
Currently, approximately 50 different drugs
are being used to treat leukemia. In the past decade, several important new drugs and new uses for existing drugs have greatly
improved cure rates or remission duration for some patients. Because of the likelihood of increased toxicity for standard- or lower-risk
childhood ALL patients, most centers treat these patients with a less intense treatment regimen than the four- or five-dose treatment
regimen used for higher risk patients. This regimen generally results in a complete remission rate of 95%. For adult ALL patients,
the treatment regimen is similar to the childhood treatment regimen; however, for the 60% to 80% demonstrating remission during
induction, the median remission duration is approximately 15 months. Unfortunately, those patients experiencing a relapse can succumb
within one year.
AML treatment should be sufficiently aggressive
to achieve complete remission since partial remission offers no substantial survival benefit. Initial therapy typically results
in 60% to 70% of adults attaining complete remission during the induction phase. However, with an overall five year survival rate
of 20%, the long-term prognosis in general is not good for adult AML patients. Unfortunately, while AML is a cancer of older adults,
because of the therapy’s toxicity (from myelosuppression and increased risk of infection), induction chemotherapy is not
generally offered to the very elderly.
Gleevec®, the standard primary course
of treatment in CML, inhibits an enzyme (bcr-abl tyrosine kinase) resulting from the defective gene translocation. By selectively
inhibiting the activity of this enzyme, Gleevec® offers dramatic advantages to patients, including decreased side effects,
few adverse effects on normal tissues and a very high response rate. The effectiveness and tolerance of older patients and the
projections from the first several years of clinical trials suggest that the drug will prolong the duration of hematological remission
and extend the patient’s life, when compared to former therapies.
Similar to Gleevec®, our Cordycepin
selectively targets cells expressing a specific enzyme involved in the disease’s pathway. In this case, Cordycepin is targeting
cells expressing TdT. With an addressable patient population consisting primarily of 46,000 individuals with CML, Gleevec®
/Glivec® full year sales for 2010 were $4.3 billion, according to Novartis. With an addressable patient population for Cordycepin
in leukemia patients nearly half the addressable population of Gleevec®, we believe that our product possesses a significant
market.
Clinical Development
Cordycepin has been studied in a National
Cancer Institute-sponsored Phase I clinical trial for treating TdT-positive ALL leukemia patients. TdT is a polymerase expressed
in immature, pre-B, pre-T lymphoid cells, and acute lymphoblastic leukemia/lymphoma cells. TdT, and similar enzymes found in fungi
and parasites, recognize Cordycepin and its analogues and add them onto growing nucleic acid chains thereby terminating synthesis
of the nucleic acid and replication of the cell. Importantly, TdT expression in normal human tissue is limited to primitive lymphoid
cells in the bone marrow and thymus, so most normal cells in the body are unaffected by the drug. In addition to effectively treating
TdT-positive ALL and CML, Cordycepin can also be used to treat diffuse high-grade lymphoblastic lymphoma, which also expresses
TdT.
In a biological system, Cordycepin is converted
to 3’-deoxyinosine by the enzyme adenosine deaminase (“
ADA
”), so Cordycepin must be administered with
an ADA inhibitor, such as deoxycoformycin (Nipent ® or pentostatin) to protect Cordycepin and allow it to maintain its antileukemic
activity. If the Phase I/II trial of Cordycepin demonstrates adequate safety and efficacy, we intend to develop an ADA-resistant
analog of Cordycepin in order to eliminate the need for co-administration of deoxycoformycin.
The initial Phase I clinical trial data
for the combination therapy was obtained in an ALL study of 14 patients between 1997 and 2000. No Cordycepin-related adverse events
were noted. Biological activity in the last three patients of the escalating dosing study was noted by the transient clearing of
peripheral blood blasts. Since May 2007, we have had an open IND and in addition, in July 2007, our request for Orphan
Drug designation for Cordycepin was granted by the FDA.
We initiated a Phase I/II trial based on
the “original” ADA-sensitive compound in the second quarter of 2008. The trial was being conducted at two U.S. centers
(The Dana Farber Cancer Institute in Boston, Massachusetts and the Cancer Therapy Research Center at the University of Texas Health
Sciences Center at San Antonio, Texas) and was designed to enroll up to 24 patients in the first stage and up to 20 patients in
the second stage. The primary objective of the 1
st
phase of the study is to determine the maximally tolerated dose (“
MTD
”)
and the recommended dose (RD) of Cordycepin, given one hour following a fixed dose of the ADA inhibitor Pentostatin, in patients
with refractory TdT-positive leukemia. The primary objectives of the 2
nd
phase of the study will be to determine the
single and multiple dose pharmacokinetics of Cordycepin given one hour following a fixed dose of Pentostatin and to measure and
quantify any clinical responses following administration of Cordycepin/Pentostatin at the recommended dose in 20 subjects Secondary
objectives will include assessing the pharmacokinetics efficacy and safety at the MTD. We anticipate a total time period of 18
months for the trial during which patients will receive Cordycepin for three consecutive days repeated every 28 days. Patients
will be eligible for re-treatment if all dose-related toxicities have been resolved by day 28 and there is no evidence of disease
progression. Subjects may receive treatment until disease progression and will be followed for at least 30 days after the last
administration of study drug. In October 2009, after enrolling five patients in this clinical trial, we placed the clinical
trial on administrative hold until such time that additional capital can be raised. We have engaged a clinical research organization
(“CRO”) in France to do additional pre-clinical in-vitro evaluations of Cordycepin and the ADA inhibitor Pentostatin
with the intent of gaining a better understanding of the inhibition effects of Pentostatin on Cordycepin. We are in the process
of reinitiating the Phase I/II clinical trial to determine the maximum tolerated dose, and expect to start enrolling patients in
2013 if additional financing is available.
L-Nucleoside Conjugate (OVI-117)
Our L-nucleoside conjugate technology selectively
targets certain cancer cell characteristics which make those cancer cells vulnerable to the actions of the drug, but leaves the
healthy cells unaffected. In effect a new drug is created by conjugating an L-nucleoside to an existing chemotherapeutic agent
that would be too toxic if delivered systemically. Several product candidates have been evaluated by us and one candidate (OVI-117)
has been tested in animal models. We believe OVI-117 is a thymidylate synthase (TS) inhibitor with enhanced pharmacological properties
which results in a retention of efficacy and a reduction of toxicity. OVI-117 has shown tumor growth inhibitory activity in human
colon, breast, and prostate tumors growing in animal models.
Compounds evolving from our L-nucleoside
conjugate technology may take advantage of cell membrane changes that differentiate cancerous cells from healthy cells. This anomalous
characteristic of cancer cell membranes may present a unique opportunity for targeting these cells with new products which are
uniquely designed cytotoxic nucleosides that selectively enter cancerous cells. After entering the cancer cells, these compounds
may be enzymatically cleaved to release their cytotoxic agents causing the death of the cancer cell. The membranes of healthy cells
may deny the L-nucleoside entry, so that cancerous cells are preferentially killed. As a result, we believe that there should be
reduced side effects associated with this class of drug. Drug candidates using L-nucleoside conjugate technology have demonstrated
efficacy in cell lines for colorectal, pancreas, melanoma, leukemia, and prostate cancers. OVI-117 has shown anti-tumor activity
in animal models of several human cancers (including breast, prostate and colon), and our initial target indication is expected
to be colorectal cancer.
The L-nucleoside conjugate technology was
obtained through an exclusive, world-wide, royalty and milestone-bearing right and license to utilize the patents and technologies
of Lipitek International, Inc. relating to L-nucleosides and their conjugates. Alexander L. Weis, Ph.D., Chairman of the Board
of Directors, Chief Executive Officer, President, CFO and Secretary, is the ultimate beneficial owner of Lipitek International,
Inc. and Lipitek Research LLC. Dr. Weis has agreed not to vote as a director in connection with any matter relating to Lipitek.
Opportunity
Colorectal cancer is the third most common
form of cancer, and diagnosis of localized colon cancer is typically made by means of colonoscopy. Symptoms of colorectal cancer
include:
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Change in bowel habits as seen by changes in frequency (due to either constipation or diarrhea), changes in stool caliber and changes in stool consistency;
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Blood in stools (melena, hematochezia);
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Bowel obstruction (rare) by the tumor;
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Anemia, with symptoms such as tiredness, malaise, pallor; and
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Unexplained weight loss.
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The absence of discernible symptoms in the
early stages of this disease is one reason why periodic screening with fecal occult blood testing and colonoscopy is so widely
recommended.
For 2010, in the United States, the American
Cancer Society estimated there would be 142,570 new colorectal cancer cases of which colon cancer accounted for 102,900 cases.
Colon cancer is a highly treatable and often curable disease when diagnosed early and localized to the bowel. When detected at
its earliest stage (Dukes’ A) as an in situ tumor, the curative rate for colon cancer approaches 90%, or five times the curative
rate for colon cancers detected at a later stage. Unfortunately, 40% to 50% percent of patients have metastatic disease at the
time of diagnosis after many of the above symptoms have been exhibited. Surgery is the primary form of treatment and is typically
followed by a regimen of chemotherapy. Despite the fact that a majority of patients have the entire tumor removed by surgery, as
many as 50% to 60% will ultimately die from either the metastatic colon cancer or from a recurrence. Deaths from colorectal cancer
were estimated to be 51,370 in 2010 in the United States.
Market
Standard treatment for patients with colon
cancer has been open surgical resection of the primary and regional lymph nodes for localized disease. Surgery alone is curative
in 25% to 40% of highly selected patients who develop resectable metastases in the liver and lung.
For 60% to 75% of the patients with colorectal
cancer for whom surgery alone is insufficient to achieve a cure, adjuvant chemotherapy utilizing such extremely cytotoxic regimens
as 5-FU based therapies, irinotecan or oxaliplatin are employed. However, due to the non-specific nature of these drugs (which
attack both healthy and cancerous cells), the side effects profile includes severe diarrhea, neuropathy, nausea, neutropenia and
fatigue. The median survival of these patients has improved from approximately 12 months in the mid-1990s to more than 20 months
in 2003. The industry continues to research treatment methods that can improve upon both the length of survival and reduce the
toxicity profiles.
Clinical Development
One
of our L-nucleoside conjugate candidates, OVI-117, is a conjugate of an L-nucleoside (L-uridine) and the highly toxic
compound 5’-fluorodeoxyuridine monophosphate (FdUMP), a thymidylate synthase (TS) inhibitor. We have accumulated
in vitro
and
in vivo
data indicating that several of the L-nucleoside conjugates are effective against various types of cancer. To
date, OVI-117 has undergone two proof-of-concept studies in animals, as both a single agent and as a multi-agent combination therapy
with oxaliplatin. We have completed Good Laboratory Practice (“GLP”) animal drug safety studies in two species for
OVI-117.
The Investigational New Drug application (IND) was submitted
to the FDA on June 2, 2012 and approved by the FDA on July 5, 2012. We engaged a contract manufacturer and a clinical batch of
OVI-117 is available for use in our proposed Phase 1 trial. The clinical protocol has been written and a principal investigator
engaged. We believe that OVI-117 should be ready to enter Phase I clinical trials in 2013 if additional financing is available.
Drug Development Expertise and Capabilities
Dr. Alexander L. Weis, Ph.D., our Chief
Executive Officer, and our clinical advisory board have extensive experience in developing chemotherapeutics. Dr. Weis brings over
26 years of extensive experience in the biotechnology and pharmaceutical industries and is the founder of OncoVista-Sub and co-founder
of ILEX Oncology.
Michael Moloney, our Chief Operating Officer
brings more than 26 years experience as a seasoned pharmaceutical and biopharma executive with experience in clinical research,
drug development, operations, and information technology.
Our clinical advisory board includes industry
opinion leaders and oncologists with practical, relevant regulatory expertise, who can map out the very efficient registration
strategies. Many individuals on the clinical advisory board have been instrumental in the development of such primary chemotherapeutics
as Taxol®, Taxotere®, Oxaliplatin, Hycamtin®, Paraplatin®, Campath®, and Tarceva®.
Cancer drug development presents unique
challenges in clinical development and registration. Obtaining marketing approval for a new drug depends upon the drug’s
successful attainment of significant clinical endpoints such as increased overall survival and improvement in quality of life.
According to the National Cancer Institute, less than 5% of cancer patients participate in clinical trials. This causes intense
competition for trial participants, particularly in indications with the largest market potential (breast, lung, colon, and prostate
cancer). The failure rate for drugs in clinical development is high. Fewer than one in 12 of all drugs entering clinical trials
eventually gains approval according to the FDA. Not surprisingly, the attrition rate for anti-cancer drugs is even higher with
roughly only one in 20 eventually getting to market from the clinic. Thus, successful clinical development and registration of
a new drug depends, in large part, upon judicious selection of the lead compound, designation of demonstrable clinical end points
and the availability of a sufficient pool of patients with appropriate characteristics. Our clinical advisory board gives us a
critical advantage in these essential areas. Furthermore, in order to formulate a successful clinical development plan, it is imperative
to know which drugs have already been approved and which drugs currently in clinical development are likely to be approved, since,
ultimately, any newly approved drug will need to prove itself superior to, or at least equal to, previously-approved or about-to-be-approved
therapies. Well constructed clinical development plans aimed at rapid marketing approval often take advantage of the FDA’s
accelerated approval process which applies solely to diseases for which there is an unmet medical need. For cancers in which there
are few treatment options and prognosis is poor, a new drug which shows even a small improvement in clinical endpoints may be approved
based on Phase II clinical trial data. Taking advantage of this development path can save significant time and money in getting
a drug to market. Our team is familiar with this path and plans to follow it as a part of our registration strategy when viable.
We believe that we will be able to monetize
our product pipeline by efficiently identifying candidates, performing due diligence, negotiating in-license agreements and developing
innovative clinical development and registration plans for strong product candidates. Before either acquiring or in-licensing any
candidate, our Chief Executive Officer reviews the opportunity thoroughly with the clinical advisory board to determine
the likelihood of successful product registration.
Collaborative Relationships and Partnerships
We anticipate that we will enter into strategic
relationships with respect to the research and development, testing, manufacture, and commercialization of our product candidates.
There are significant expenses, capital expenditures, and infrastructure involved in these activities. We believe that working
together with strategic partners will expedite product formulation, production, and approval.
We
have relationships with the University of Texas Health Science Center at San Antonio (UTHSCSA), the Cancer Therapy and Research
Center (CTRC), the Dana-Farber Cancer Institute, the Cedars-Sinai Medical Center
and
MD Anderson Cancer Center, one of the leading cancer research institutes in the nation.
Intellectual Property
As of March 29, 2013, we held eight issued
US and worldwide patents and 2 patent applications. Our ability to protect and use our intellectual property in the continued development
and commercialization of our technologies and products and to prevent others from infringing on our intellectual property is crucial
to our success. Our basic patent strategy is to augment our current portfolio by continually applying for patents on new developments
and obtaining licenses to promising product candidates and related technologies. We also maintain various trade secrets which we
have chosen not to reveal by filing for patent protection. Our issued patents and patent applications provide protection for our
core technologies. In addition to the foregoing patent activity, several continuations-in-part, and international patents have
been filed.
We also rely on trade secrets and unpatentable
know-how that we seek to protect, in part, by confidentiality agreements. Our policy is to require our employees, consultants,
contractors, manufacturers, outside scientific collaborators and sponsored researchers, board of directors, technical review board
and other advisors to execute confidentiality agreements upon the commencement of employment or consulting relationships with us.
These agreements provide that all confidential information developed or made known to the individual during the course of the individual’s
relationship with us are to be kept confidential and not disclosed to third parties except in specific limited circumstances. We
also require signed confidentiality or material transfer agreements from any company that is to receive our confidential information.
In the case of employees, consultants and contractors, the agreements provide that all inventions conceived by the individual while
rendering services to us shall be assigned to us as our exclusive property. There can be no assurance, however, that all persons
who we desire to sign such agreements will sign, or if they do, that these agreements will not be breached, that we would have
adequate remedies for any breach, or that our trade secrets or unpatentable know-how will not otherwise become known or be independently
developed by competitors.
Our success will also depend in part on
our ability to commercialize our technology without infringing the proprietary rights of others. Although we have conducted freedom
of use patent searches, no assurance can be given that patents do not exist or could not be filed which would have an adverse affect
on our ability to market our technology or maintain our competitive position with respect to our technology. If our technology
components, products, processes or other subject matter are claimed under other existing U.S. or foreign patents or are otherwise
protected by third party proprietary rights, we may be subject to infringement actions. In such event, we may challenge the validity
of such patents or other proprietary rights or we may be required to obtain licenses from such companies in order to develop, manufacture
or market our technology. There can be no assurances that we would be able to obtain such licenses or that such licenses, if available,
could be obtained on commercially reasonable terms. Furthermore, the failure to either develop a commercially viable alternative
or obtain such licenses could result in delays in marketing our proposed technology or the inability to proceed with the development,
manufacture, or sale of products requiring such licenses, which could have a material adverse effect on our business, financial
condition, and results of operations. If we are required to defend ourselves against charges of patent infringement or to protect
our proprietary rights against third parties, substantial costs will be incurred regardless of whether or not we are successful.
Such proceedings are typically protracted with no certainty of success. An adverse outcome could subject us to significant liabilities
to third parties and force us to curtail or cease our development and commercialization of our technology.
We aggressively seek U.S. and international
patent protection for the chemical compounds, processes, and other commercially important technologies which we develop. While
we own specific intellectual property, we also in-license related technologies determined to be of strategic importance to the
commercialization of our products or to have commercial potential of their own. For example, to continue developing and commercializing
our current products, we may license intellectual property from commercial or academic entities to obtain technology rights that
are required for our research and development or commercialization activities.
Government Regulation
The Drug and Therapeutic Product Development
Process
The FDA requires that pharmaceutical and
certain other therapeutic products undergo significant clinical experimentation and clinical testing prior to their marketing or
introduction to the general public. Clinical testing, known as
clinical trials
or
clinical studies
, is either conducted
internally by life science, pharmaceutical, or biotechnology companies or is conducted on behalf of these companies by contract
research organizations.
The process of conducting clinical studies
is highly regulated by the FDA, as well as by other governmental and professional bodies. Below is a description of the principal
framework in which clinical studies are conducted, as well as a description of the number of the parties involved in these studies.
Protocols.
Before commencing human
clinical studies, the sponsor of a new drug or therapeutic product must submit an investigational new drug application, or IND,
to the FDA. The application contains what is known in the industry as a
protocol
. A protocol is the blueprint for each drug
study. The protocol sets forth, among other things, the following:
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who must be recruited as qualified participants;
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how often to administer the drug or product;
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what tests to perform on the participants; and
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what dosage of the drug or amount of the product to give to the participants.
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Institutional Review Board
. An institutional
review board is an independent committee of professionals and lay persons which reviews clinical research studies involving human
beings and is required to adhere to guidelines issued by the FDA. The institutional review board does not report to the FDA, but
its records are audited by the FDA. Its members are not appointed by the FDA. All clinical studies must be approved by an institutional
review board. The institutional review board’s role is to protect the rights of the participants in the clinical studies.
It approves the protocols to be used, the advertisements which we or contract research organization conducting the study proposes
to use to recruit participants, and the form of consent which the participants will be required to sign prior to their participation
in the clinical studies.
Clinical Trials
. Human clinical studies
or testing of a potential product are generally done in three stages known as phase I through phase III testing. The names of the
phases are derived from the regulations of the FDA. Generally, there are multiple studies conducted in each phase.
Phase I
. Phase I studies involve
testing a drug or product on a limited number of participants, typically 24 to 100 people at a time. Phase I studies determine
a product’s basic safety and how the product is absorbed by, and eliminated from, the body. This phase lasts an average of
six months to one year.
Phase II
. Phase II trials involve
testing up to 200 participants at a time who may suffer from the targeted disease or condition. Phase II testing typically lasts
an average of one to two years. In Phase II, the drug is tested to determine its safety and effectiveness for treating a specific
illness or condition. Phase II testing also involves determining acceptable dosage levels of the drug. If Phase II studies show
that a new drug has an acceptable range of safety risks and probable effectiveness, a company will continue to review the substance
in phase III studies.
Phase III
. Phase III studies involve
testing large numbers of participants, typically several hundred to several thousand persons. The purpose is to verify effectiveness
and long-term safety on a large scale. Phase III studies generally last two to three years. Phase III studies are conducted at
multiple locations or sites. Like the other phases, phase III requires the site to keep detailed records of data collected and
procedures performed.
New Drug Approval.
The results of
the clinical trials are submitted to the FDA as part of a new drug application (“
NDA
”).
Following
the completion of phase III studies, assuming, the sponsor of a potential product in the United States believes it has sufficient
information to support the safety and effectiveness of a product, it submits an NDA to the FDA requesting that the product be approved
for marketing. The application is a comprehensive, multi-volume filing that includes the results of all clinical studies, information
about the drug’s composition, and the sponsor’s plans for producing, packaging, and labeling the product. The FDA’s
review of an application can take a few months to many years, with the average review lasting 18 months. Once approved, drugs and
other products may be marketed in the United States, subject to any conditions imposed by the FDA.
Phase IV
. The FDA may require that
the sponsor conduct additional clinical trials following new drug approval. The purpose of these trials, known as phase IV studies,
is to monitor long-term risks and benefits, study different dosage levels, or evaluate safety and effectiveness. In recent years,
the FDA has increased its reliance on these trials. Phase IV studies usually involve thousands of participants. Phase IV studies
also may be initiated by the company sponsoring the new drug to gain broader market value for an approved drug. For example, large-scale
trials may also be used to prove effectiveness and safety of new forms of drug delivery for approved drugs. Examples may be using
an inhalation spray versus taking tablets or a sustained-release form of medication versus capsules taken multiple times per day.
Biologics License Application.
Once
clinical trials are completed and the results tabulated and analyzed, a Biologics License Application (“
BLA
”)
is submitted to the FDA. The application presents to FDA reviewers the entire history or the “whole story” of the drug
product including animal studies/human studies, manufacturing, and labeling/medical claims. Before the FDA applies its scientific
technical expertise to the review of the application, it will decide if the application gets a “priority review” or
a “standard review.” This classification determines the review timeframe. A priority review is for a drug that appears
to represent an advance over available therapy, whereas, a standard review is for a drug that appears to have therapeutic qualities
similar to those of an already marketed product. Generally, an advisory committee (the Oncology Drug Advisory Committee, ODAC)
will review the BLA and make a recommendation to the FDA. This outside advice is sought so that the FDA will have the benefit of
wider expert input. The FDA usually agrees with the advisory committee decisions but they are not binding.
The FDA takes action on the BLA after their
review is complete. There are three possible actions to be taken by the review team:
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Approved
–
This indicates to a company that it may now market in the U.S.;
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Not Approved –This tells a company that the product may not be marketed in the U.S. and is accompanied by a detailed explanation as to why; and
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Approvable – This indicates that the FDA is prepared to approve the application upon the satisfaction of certain conditions. These drug products may not be legally marketed until the deficiencies have been satisfied, as well as any other requirements that may be imposed by the FDA.
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The drug approval process is time-consuming,
involves substantial expenditures of resources, and depends upon a number of factors, including the severity of the illness in
question, the availability of alternative treatments, and the risks and benefits demonstrated in the clinical trials.
Orphan Drug Act.
The Orphan Drug
Act provides incentives to develop and market drugs (“
Orphan Drugs
”) for rare disease conditions in the United
States. A drug that receives Orphan Drug designation and is the first product to receive FDA marketing approval for its product
claim is entitled to a seven-year exclusive marketing period in the United States for that product claim. A drug which is considered
by the FDA to be different than such FDA-approved Orphan Drug is not barred from sale in the United States during such exclusive
marketing period even if it receives approval for the same claim. We can provide no assurance that the Orphan Drug Act’s
provisions will be the same at the time of the approval, if any, of our products.
Other U.S. Regulations.
Various Federal and state laws, regulations,
and recommendations relating to safe working conditions, laboratory practices, the experimental use of animals, and the purchase,
storage, movements, import, export, use, and disposal of hazardous or potentially hazardous substances, including radioactive compounds
and infectious disease agents, used in connection with our research are applicable to our activities. They include, among others,
the United States Atomic Energy Act, the Clean Air Act, the Clean Water Act, the Occupational Safety and Health Act, the National
Environmental Policy Act, the Toxic Substances Control Act, and Resources Conservation and Recovery Act, national restrictions
on technology transfer, import, export, and customs regulations, and other present and possible future local, state, or federal
regulation. The extent of governmental regulation which might result from future legislation or administrative action cannot be
accurately predicted.
Other Regulatory Matters.
Regulations imposed by authorities in other countries are a
significant factor in the conduct of research, development, manufacturing, and eventual marketing of our products.
Competition
In addition to the specified therapies relative
to each cancer discussed earlier, we generally face competition from pharmaceutical and biotechnology companies, academic institutions,
governmental agencies, and private research organizations in recruiting and retaining highly qualified scientific personnel and
consultants and in the development and acquisition of technologies. The pharmaceutical and biotechnology industries are very competitive
and are characterized by rapid and continuous technological innovation. We believe there are a significant number of potential
drugs in preclinical studies and clinical trials to treat cancer that may result in effective, commercially successful treatments.
In addition to most of the large pharmaceutical companies having small molecule programs, we are aware of large biotechnology companies,
such as Amgen, Inc., Genentech, Inc., Biogen Idec Inc., and Eli Lilly & Co., which are developing small molecule therapeutics
as treatments for cancer. Other, smaller companies in this field include: Allos, EntreMed, Threshold Pharmaceuticals, and Sunesis.
We recognize that most of our competitors
have a broader range of capabilities and greater access to financial, technical, scientific, business development, recruiting,
and other resources. Additionally, third party-controlled technology, which may be advantageous to our business, could be acquired
or licensed by our competitors, thereby preventing us from obtaining technology on commercially reasonable terms, if at all. Because
part of our strategy is to target markets outside of the United States through collaborations with third parties, we will compete
for the services of third parties that may have already developed or acquired internal biotechnology capabilities or made commercial
arrangements with other biopharmaceutical companies to target the diseases on which we have focused.
Employees
As of the date hereof, we have three full-time
employees. Of our employees, two are executives and one is engaged in research and development. We have engaged the
services of experts in clinical/regulatory, quality assurance, and accounting as needed on an independent contractor basis to continue
to advance our drug candidates through clinical studies.
Corporate Information
We were originally incorporated in Nevada
on January 8, 1999 under the name, Aviation Upgrade Technologies, Inc. Our principal executive offices are located at 14785
Omicron Drive, Suite 104, San Antonio, Texas 78245 and our telephone number is (210) 677-6000.