Item 1A. Risk Factors 21
Item 1B. Unresolved Staff Comments 45
Item 2. Properties 45
Item 3. Legal Proceedings 45
Item 4. Mine Safety Disclosures 46
PART II
Item 6. Selected Financial Data 46
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 55
Item 8. Financial Statements and Supplementary Data. 55
Item 9A. Controls and Procedures 55
Item 9B. Other Information 55
PART III
Item 10. Directors, Executive Officers and Corporate Governance 56
Item 11. Executive Compensation 60
Item 12. Security Ownership of Certain Beneficial Owners and Management 66
Item 14. Principal Accountant Fees and Services 70
PART IV
Item 15. Exhibits and Financial Statement Schedules. 72
Signatures 73
NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (the “Annual
Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E
of the Securities Exchange Act of 1934, as amended. These statements relate to future events or our future financial performance. We have
attempted to identify forward-looking statements by terminology including “anticipates,” “believes,” “expects,”
“can,” “continue,” “could,” “estimates,” “expects,” “intends,”
“may,” “plans,” “potential,” “predict,” “should” or “will” or
the negative of these terms or other comparable terminology. These statements are only predictions; uncertainties and other factors may
cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels or
activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations
reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.
Our expectations are as of the date this Annual Report is filed, and we do not intend to update any of the forward-looking statements
after the date this Annual Report is filed to confirm these statements to actual results, unless required by law.
This Annual Report also contains estimates and
other statistical data made by independent parties and by us relating to market size and growth and other industry data. This data involves
a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. We have not independently verified
the statistical and other industry data generated by independent parties and contained in this Annual Report and, accordingly, we cannot
guarantee their accuracy or completeness, though we do generally believe the data to be reliable. In addition, projections, assumptions
and estimates of our future performance and the future performance of the industries in which we operate are necessarily subject to a
high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors” and elsewhere
in this Annual Report. These and other factors could cause results to differ materially from those expressed in the estimates made by
the independent parties and by us.
PART I
ITEM 1. BUSINESS
In this Annual Report,
unless the context requires otherwise, references to the “Company,” “Alzamend,” “we,” “our company”
and “us” refer to Alzamend Neuro, Inc., a Delaware corporation.
Company Overview
We
are a preclinical stage biopharmaceutical company focused on developing novel products for the treatment of neurodegenerative diseases
and psychiatric disorders. With our two current and future product candidates, we aim to bring treatments or cures to market at a reasonable
cost as quickly as possible. Far too many individuals — patients and caregivers — suffer from the burden created by these
devastating, and often fatal, diseases. Our primary target, Alzheimer’s, was among the most-feared diseases (second only to cancer)
among Americans, according to a 2011 survey by the Harvard School of Public Health. Alzheimer’s is also the sixth leading cause
of death in the United States according to a 2021 report from the Alzheimer’s Association, a nonprofit that funds research. Existing
Alzheimer’s treatments only temporarily relieve symptoms but do not slow or halt the underlying worsening of the disease, which
currently affects roughly 6.2 million Americans and that number is expected to grow to 13 million individuals by 2050. Alzheimer’s
also impacts more than 11 million Americans who provide an estimated 15.3 billion hours of unpaid care per year, valued at $257 billion,
according to data provided by the Alzheimer’s Association. In 2021, the estimated healthcare costs for treating individuals with
Alzheimer’s in the United States will be $355 billion, including $239 billion in Medicare and Medicaid payments, according to data
provided by the Alzheimer’s Association. These costs could rise to as high as $1.1 trillion per year by 2050 if no permanent treatment
or cure for Alzheimer’s is found, the Alzheimer’s Association reported.
Our
current pipeline consists of two novel therapeutic drug candidates: (i) a patented ionic cocrystal technology delivering a therapeutic
combination of lithium, proline and salicylate, known as AL001 or LiProSal, through two royalty-bearing exclusive worldwide licenses from
the University of South Florida Research Foundation, Inc., as licensor, and (ii) a patented method using a mutant peptide sensitized cell
as a cell-based therapeutic vaccine that seeks to restore the ability of a patient’s immunological system to combat Alzheimer’s,
known as AL002 or CA022W, through a royalty-bearing exclusive worldwide license from the same licensor.
Our
lead product candidate that we have licensed and will initially move to clinical development in humans is an ionic cocrystal of lithium
for the treatment of Alzheimer’s and other neurodegenerative diseases and psychiatric disorders. Based on our preclinical data,
AL001 treatment prevents cognitive deficits, depression and irritability in APPSWE/PS1dE9 mice, and is superior in improving associative
learning and memory and irritability compared with lithium carbonate treatments, supporting the potential of this lithium formulation
for the treatment of Alzheimer’s and psychiatric disorders in humans. Lithium has been marketed for more than 35 years and human
toxicology regarding lithium use has been well characterized, potentially mitigating the regulatory burden for safety data.
The
results of randomized, placebo-controlled, clinical trials of lithium in the treatment of patients with Alzheimer’s dementia and
subjects with mild cognitive impairment have been widely published. Clinical studies have indicated that lithium administered at doses
lower than those used for affective disorders can favorably impact Alzheimer’s outcomes. A study by O.V. Forlenza, et al., entitled
“Disease-Modifying Properties of Long-Term Lithium Treatment for Amnestic Mild Cognitive Impairment: Randomized Controlled Trial,
appearing in the British Journal of Psychiatry (2011) reported that lithium was superior to a placebo, evidencing a slower decline of
cognitive function as measured by the Alzheimer’s Disease Assessment Scale cognitive subscale. Given the absence of adequate treatments
that can slow, halt or even reverse the decline of this highly prevalent disease, the potential efficacy of lithium in the long-term management
of Alzheimer’s may positively impact public health. There is an unmet medical need for safe and effective Alzheimer’s treatments,
particularly for treatments with neuroprotective properties.
There
is increasing evidence to suggest that depressive illness, particularly in the elderly, is associated with neuronal cell loss. These findings
suggest that lithium may exert some of its long-term beneficial effects in the treatment of affective disorders via underappreciated neuroprotective
effects. Molecular biology and animal studies have also suggested that lithium may offer protection against Alzheimer’s. Given the
absence of other adequate treatments, the potential efficacy of lithium in the long-term treatment of neurodegenerative disorders may
be warranted.
Following
Phase III clinical trials in humans, we intend to seek approval to commercialize AL001 via a New Drug Application (“NDA”).
As one of the initial steps of the NDA process, we submitted a Pre-Investigational New Drug (“PIND”) briefing package to the
U.S. Food and Drug Administration (“FDA”) in July 2019 that argued against the need for any further preclinical safety studies.
In the FDA’s response to our PIND package, the FDA asked us to provide a scientific bridge to a listed drug to support the adequacy
of the nonclinical program. According to the FDA, the adequacy of the nonclinical data will be a matter for review. If the adequacy of
the nonclinical data is not sufficient for the FDA, we will then be required to conduct a clinical pharmacokinetics animal study (an expected
six week study) of AL001 to be considered for FDA approval. We submitted an Investigational New Drug (“IND”) application to
the FDA on June 30, 2021. On July 28, 2021 the FDA responded to our IND that we are safe to proceed and we will be able to commence Phase
I clinical trials in humans.
A
product can be designated as a breakthrough therapy if it is intended to treat a serious condition and preliminary clinical evidence indicates
that the drug may demonstrate substantial improvement over available therapy on a clinically significant endpoint(s). For purposes of
breakthrough therapy designation, a clinically significant endpoint generally refers to an endpoint that measures an effect on irreversible
morbidity or mortality (“IMM”), or on symptoms that represent serious consequences of the disease. A clinically significant
endpoint can also refer to findings that suggest an effect on IMM or serious symptoms, including:
• an effect on an established surrogate endpoint;
Based
on our preclinical data, AL001 has a positive effect on the pharmacodynamic biomarkers of Alzheimer’s. As a result, if confirmed
clinically, we believe that AL001 is a candidate for breakthrough therapy designation because of its positive effect on a pharmacodynamic
biomarker (beta-amyloids) and potential for a clinically meaningful effect on Alzheimer’s. A drug that receives a breakthrough therapy
designation is eligible for fast- track designation features, intensive guidance on an efficient drug development program and FDA organizational
commitment involving senior managers. However, we have not received breakthrough therapy designation nor have we qualified for expedited
development. Our product candidate may not qualify for breakthrough therapy designation or, if it does qualify for breakthrough therapy
designation, it may not actually lead to faster development or expedited regulatory review and approval or necessarily increase the likelihood
that it will receive FDA approval.
Additionally,
we believe that AL001 is positioned for an expedited Section 505(b)(2) regulatory pathway for new drug. AL001’s active pharmaceutical
ingredients (lithium, proline and salicylate) are well documented and approved by the FDA. The provisions of 505(b)(2) were created, in
part, to help avoid unnecessary duplication of studies already performed on a previously approved (“reference” or “listed”)
drug. This section gives the FDA express permission to rely on data not developed by the NDA applicant. This can result in a much less
expensive and much faster route to approval, compared with a traditional development path such as 505(b)(1), while creating new, differentiated
products with tremendous commercial value. If we successfully obtain a breakthrough therapy designation and the Section 505(b)(2) regulatory
pathway for new drug approvals, we believe we can shorten the development timeline for AL001. However, our product candidate may not qualify
for expedited development or, if it does qualify for expedited development, it may not actually lead to faster development or expedited
regulatory review and approval.
We
believe that our ability to re-engineer lithium solid dosage forms in order to optimize performance has the potential to address a wide
range of clinical applications ranging from neurodegenerative disorders, such as Alzheimer’s, amyotrophic lateral sclerosis (known
as ALS and Lou Gehrig’s disease), Huntington’s disease, multiple sclerosis, Parkinson’s disease and traumatic brain
injury, to more psychiatric conditions such as bipolar disorder, depression, mania, post-traumatic stress disorder and suicidality. This
novel approach is intended to achieve the desired therapeutic outcome of enhanced penetration through the blood-brain barrier and sustained
brain lithium concentrations while systemic exposures (and toxicities) are mitigated for other organ systems. The optimal modified-release
lithium dosing approach should avoid acutely toxic peak concentrations in blood, as well as in the brain, and should maintain such blood
concentrations for a predictable, clinically relevant time, with overall low systemic exposures that mitigate the potential for adverse
events. We anticipate that the lithium delivery system will be adaptable to a dosing regimen that maintains therapeutic brain lithium
concentrations consistently for the longest possible time while allowing only modest exposures and providing adequate recovery periods
between doses for other organ systems.
We
have an additional preclinical candidate for Alzheimer’s, AL002, which has transitioned from early-stage development to an extensive
program of preclinical study and evaluation, which was completed on May 31, 2021 and was followed by a comprehensive report prepared by
Charles River Laboratories, Inc., an independent preclinical service provider, received on July 23, 2021. Our preclinical program included
a toxicologic evaluation, histopathology study and brain beta amyloid analysis and, after we received additional financing in March 2021,
was expanded to include an immunoglobulin analysis and biodistribution study.
Our Business Strategy
We
intend to develop and commercialize therapeutics with the potential to significantly improve the lives of individuals afflicted by Alzheimer’s
and other neurodegenerative diseases and psychiatric disorders. To achieve these goals, we are pursuing the following key business strategies:
Our Development Pipeline
The
following chart provides an overview of the current development stages of our therapeutic product candidates.
Our Proprietary Technology
AL001 Drug Candidate
Our
lead product candidate that we have licensed and will first move to clinical development in humans is an ionic cocrystal of lithium for
the treatment of Alzheimer’s and other neurodegenerative diseases and psychiatric disorders. Lithium salts have a long history of
human consumption beginning in the 1800s. In psychiatry, they have been used to treat mania and as a prophylactic for depression since
the mid-20th century. Today, lithium salts are used as a mood stabilizer for the treatment of bipolar disorder. Although the FDA has approved
no medications as safe and effective treatments for suicidality, lithium has proven to be the only drug that consistently reduces suicidality
in patients with neuropsychiatric disorders. Despite these effective medicinal uses, current FDA-approved lithium pharmaceutics (lithium
carbonate and lithium citrate) are limited by a narrow therapeutic window that requires regular blood monitoring of plasma lithium levels
and blood chemistry by a clinician to mitigate adverse events. Because conventional lithium salts (carbonate and citrate) are eliminated
relatively quickly, multiple administrations throughout the day are required to safely reach therapeutic plasma concentrations. Existing
lithium drugs, such as lithium chloride and lithium carbonate, suffer from chronic toxicity, poor physicochemical properties and poor
brain bioavailability. Because lithium is so effective at reducing manic episodes in patients with bipolar disorder, it is still used
clinically despite its narrow therapeutic index. This has led researchers to begin to look for alternatives to lithium with similar bioactivities.
Scientists
from the University of South Florida have developed a new lithium cocrystal composition and method of preparation that, under certain
clinical and/or testing conditions, have been shown to allow for lower dosages to achieve therapeutic brain levels of lithium for psychiatric
disorders, which could lead to a broadening of lithium’s therapeutic index. Our studies and/or testing have indicated that the compound
offers improved physiochemical properties compared to existing forms of lithium, giving it the potential to be developed as an anti-suicidal
drug or for use against mood disorders.
Recent
evidence suggests that lithium may be efficacious for both the treatment and prevention of Alzheimer’s. Unlike traditional medications
which only address a single therapeutic target, lithium appears to be neuroprotective through several modes of action. For example, recent
studies have indicated that it exerts neuroprotective effects, in part, by increasing a brain-derived neurotrophic factor leading to restoration
of learning and memory. Another neuroprotective mechanism of lithium indicated by recent studies is the attenuation of the production
of inflammatory cytokines like IL-6 and nitric oxide in activated microglia. Results from recent clinical studies suggest that lithium
treatment may reduce dementia development while preserving cognitive function and reducing biomarkers associated with Alzheimer’s.
The
novel ionic cocrystal of lithium (AL001), which was designed, synthesized and characterized by a team of inventors from the University
of South Florida has been shown to exhibit improved nonclinical pharmacokinetics compared to current FDA-approved lithium products, and
is also bioactive in many in vitro models of Alzheimer’s. AL001 may constitute a means of treating Alzheimer’s and other neurodegenerative
diseases and psychiatric disorders. Our preclinical studies encompassed the treatment of 28 transgenic (or genetically modified) and 10
non-transgenic mice with lithium carbonate and AL001. In particular, female APPSWE/PS1dE9 mice at 4 months of age were fed with either
regular chow (Tg-Ctrl,n= 8) or chow that contained lithium carbonate (LC, 0.05% equivalent to 83 mg/kg/day, n = 6), or lithium salicylate
(LS, 0.20% equivalent to 325 mg/kg/day, n = 6), or lithium salicylate proline co-crystal, AL001 (AL001, 0.35% equivalent to 583 mg/kg/day,
n = 8) for 9 months. In addition, aged-matched non- transgenic background control mice (B6C3F1/J, Non-Tg Ctrl, n = 10) were fed regular
chow for 9 months as control. Each treatment group was subject to a battery of behavioral tests at 12 months of age and mice were sacrificed
at 13 months of age. The results of our preclinical studies, conducted from May 2016 to June 2017, are summarized below:
In
analyzing the preclinical study results, a p-value is used to determine the probability as to whether the difference between two data
sets is due to chance. The smaller the p-value, the more likely the differences are not due to chance alone. In general, if the p-value
is less than or equal to 0.05, the outcome is considered statistically significant. The FDA’s evidentiary standard of efficacy generally
relies on a p-value of less than or equal to 0.05. A p-value greater than 0.05 is considered statistically non-significant. As shown above,
all of the results of our preclinical studies were statistically significant compared to the control group.
A
product can be designated as a breakthrough therapy if it is intended to treat a serious condition and preliminary clinical evidence indicates
that the drug may demonstrate substantial improvement over available therapy on a clinically significant endpoint(s). For purposes of
breakthrough therapy designation, clinically significant endpoint generally refers to an endpoint that measures an effect on irreversible
morbidity or mortality (“IMM”), or on symptoms that represent serious consequences of the disease. A clinically significant
endpoint can also refer to findings that suggest an effect on IMM or serious symptoms, including:
• an effect on an established surrogate endpoint;
Based
on our preclinical data, AL001 has a positive effect on the pharmacodynamic biomarkers of Alzheimer’s. As a result, we believe that
AL001 is candidate for breakthrough therapy designation because of its positive effect on a pharmacodynamic biomarker (beta-amyloids)
and potential for a clinically meaningful effect on Alzheimer’s. A drug that receives a breakthrough therapy designation is eligible
for fast- track designation features, intensive guidance on an efficient drug development program and FDA organizational commitment involving
senior managers. However, we have not received breakthrough therapy designation or have qualified for expedited development. Our product
candidate may not qualify for breakthrough therapy designation or, if it does qualify for breakthrough therapy designation, it may not
actually lead to faster development or expedited regulatory review and approval or necessarily increase the likelihood that it will receive
FDA approval.
Additionally,
we believe that AL001 is positioned for an expedited Section 505(b)(2) regulatory pathway for new drug. AL001’s active pharmaceutical
ingredients (lithium, proline and salicylate) are well documented and approved by the FDA. The provisions of Section 505(b)(2) were created,
in part, to help avoid unnecessary duplication of studies already performed on a previously approved (“reference” or “listed”)
drug. This section gives the FDA express permission to rely on data not developed by the NDA applicant. This can result in a much less
expensive and much faster route to approval, compared with a traditional development path such as Section 505(b)(1), while creating new,
differentiated products with tremendous commercial value. If we successfully obtain a breakthrough therapy designation and the Section
505(b)(2) regulatory pathway for new drug approvals, we believe we can shorten the development timeline for AL001. However, our product
candidate may not qualify for expedited development or, if it does qualify for expedited development, it may not actually lead to faster
development or expedited regulatory review and approval.
AL001
will require extensive clinical evaluation, regulatory review and approval, significant marketing efforts and substantial investment before
it or any successors are likely to provide us with any revenue. As a result, if we do not successfully develop, achieve regulatory approval
for and commercialize AL001, our long-term business plans will not be met, and we will be unable to generate the revenue we have forecast
for the foreseeable future, if any. We do not anticipate that we will generate our maximum revenue for several years, or that we will
achieve profitability for this therapeutic drug candidate until at least a few years after generating material revenue, if at all. If
we are unable to generate revenue or raise substantial additional capital, we will not be able to pursue any expansion of our business
or acquire additional intellectual property, we will not become profitable with this therapeutic drug candidate, and we will be unable
to continue our operations at the currently planned pace.
AL002 Drug Candidate
The
other product candidate that we have licensed to clinically develop in humans is AL002, a patented method using a mutant peptide sensitized
cell as a cell-based therapeutic vaccine which seeks to restore the ability of the patient’s immunological system to combat Alzheimer’s.
The proposed mechanism of action is through the pulsed-Dendritic Cell (“DC”) activation of T-cells that stimulates the immune
system, resulting in the clearance of brain amyloid. Preclinical studies conducted from April 2005 to July 2010 suggest that the infusion
of transgenic (or genetically modified) mice with AL002-pulsed DCs is associated with lower amyloid burden and improved neurobehavioral
performance. This is likely to be mediated by an anti-inflammatory effect in addition to the immunogenicity of this therapy.
AL002
is based on the theory that Alzheimer’s symptoms may be caused in large part by plaque deposits that can cluster in the brain composed
of protein fragments called beta-amyloids that build up between nerve cells. One hypothesis is that a special type of immune cell, natural
beta-amyloid antibodies, may play a role in preventing plaque build-up in people without Alzheimer’s. As people age, their immune
system may degrade, and some people may be unable to produce natural beta-amyloid antibodies which leads to the plaque build-up causing
Alzheimer’s.
AL002
is intended to elicit an immune response to product anti-amyloid antibodies, which can then neutralize circulated beta-amyloids and prevent
additional plaque build-up. The mutant antigen within AL002 was selected specifically for its high HLA binding affinity, thereby avoiding
the need for an adjuvant, which may cause an adverse (Th1) immune response.
AL002
is an autologous modified DC treatment. More precisely, it is a patient-specific therapy where the patient undergoes leukapheresis, a
nonsurgical treatment used to reduce the quantity of white blood cells in the bloodstream, to isolate peripheral blood monocytes that
are subsequently matured into DCs using an IL4+ GM-CSF cocktail. The DCs are incubated with a modified amyloid beta (Aβ) peptide
(“AL002 peptide”) to sensitize them, and then administered to the same patient.
Significant
evidence has accumulated recently suggesting that immunotherapy is a highly promising modality of treatment in Alzheimer’s. Most
current immune-based active investigations are focused on passive immunization by pre-prepared Aβ antibody administration. Active
immunization may offer additional or more lasting effects on the clearance of amyloid and a safer approach due to its reliance on autologous
immune mechanisms. Further, preliminary evidence suggests a recurrence of the amyloid accumulation after clearance with the immunoglobulins.
A prior attempt at engaging the immune system to treat Alzheimer’s was conducted using the immunization with pre-aggregated synthetic
Aβ (AN-1792) combined with the immunogenic adjuvant QS-21. The Phase IIa study with AN-1792 was terminated by the FDA due to severe
meningoencephalitis in approximately 6% of vaccinated subjects. We believe that this may have been caused by using a strong non-specific
antigenic determinant T-cell epitope in the Aβ 1-42 peptide and the inclusion of a QS21 adjuvant and polysorbate-80 stabilizing agent
in the vaccine formulation.
On
July 23, 2021 we announced that Alzamend received positive toxicology results for AL002 in a good laboratory practices (“GLP”)
toxicology study using a transgenic mouse model of Alzheimer’s disease. The study was conducted by Charles River Laboratories. AL002
is a patented method using a mutant-peptide sensitized cell as a cell-based therapeutic vaccine that seeks to restore the ability of a
patient’s immunological system to combat Alzheimer’s.
A
five-dose GLP study with AL002-sensitized cells was completed using a transgenic (or genetically modified) mouse model of Alzheimer’s
disease to investigate the tolerability of AL002. Single injections were administered on days 1, 30, 50, 70, and 90. The mice were evaluated
for potential toxicity and reversibility of any findings at 75 and 90 days after dosing.
Histopathology
results demonstrate that there was no indication of T-cell infiltration or meningoencephalitis suggesting that AL002 therapy is safe and
tolerable as there were no adverse findings over a 90-day period and 90 days after the last dose. There were no treatment-related mortalities
or reports of adverse effects on clinical observations, body weight parameters, organ weight parameters, clinical pathology parameters,
gross pathology observations, or histopathologic observations during the main study or the recovery phase.
Modified
cell therapies, especially DCs, may provide a safer and more patient-specific active immunization. Ex-vivo modification of DCs as a modality
of treatment has been previously used in oncological therapeutics. It has been shown to be relatively safe and capable of engaging the
immune system to attack the target tissues with success. Its use in Alzheimer’s therapeutics is relatively recent. We are proposing
to conduct a first-in-human Phase I study of autologous DC, pulsed with a modified Aβ epitope. Preclinical work supports that it
is associated with positive anti-inflammatory response and a decrease in brain amyloid contents.
A
product can be designated as a breakthrough therapy if it is intended to treat a serious condition and preliminary clinical evidence indicates
that the drug may demonstrate substantial improvement over available therapy on a clinically significant endpoint(s). A drug that receives
a breakthrough therapy designation is eligible for fast track designation features, intensive guidance on an efficient drug development
program and FDA organizational commitment involving senior managers. We believe that AL002 is positioned for a breakthrough therapy designation
because of its positive effect on a pharmacodynamic biomarker (beta-amyloids) and potential for a clinically meaningful effect on Alzheimer’s.
If we successfully acquire a breakthrough therapy designation for new drug approvals, we believe we can shorten the development timeline
for AL002. However, we have not received breakthrough therapy designation nor qualified for expedited development. Our product candidate
may not qualify for breakthrough therapy designation or, if it does qualify for breakthrough therapy designation, it may not actually
lead to faster development or expedited regulatory review and approval or necessarily increase the likelihood that it will receive FDA
approval.
AL002
will require extensive clinical evaluation, regulatory review and approval, significant marketing efforts and substantial investment before
it or any successors are likely to provide us with any revenue. As a result, if we do not successfully develop, achieve regulatory approval
for and commercialize AL002, our long-term business plans will not be met, and we will be unable to generate the revenue we have forecast
for the foreseeable future, if any. We do not anticipate that we will generate our maximum revenue for several years, or that we will
achieve profitability for this therapeutic drug candidate until at least a few years after generating material revenue, if at all. If
we are unable to generate revenue or raise substantial additional capital, we will not be able to pursue any expansion of our business
or acquire additional intellectual property, we will not become profitable with this therapeutic drug candidate, and we will be unable
to continue our operations at the currently planned pace.
Intellectual Property
and Licensing Agreements
On
May 1, 2016, we entered into a Standard Exclusive License Agreement with Sublicensing Terms with the University of South Florida Research
Foundation, Inc. (the “Licensor”) pursuant to which the Licensor granted us a royalty bearing exclusive worldwide license
limited to the field of Alzheimer’s Immunotherapy and Diagnostics, under United States Patent No. 8,188,046, entitled “Amyloid
Beta Peptides and Methods of Use” (AL002), filed April 7, 2009 and granted May 29, 2012.
In
addition to royalty payments of 4% on net sales of products developed from the licensed technology, we were required to pay a license
fee of $100,000 on each of June 25, 2016 and December 31, 2016. As an additional licensing fee for the license of the AL001 technologies,
the licensor received 2,227,923 shares of our common stock. Additionally, we are required to pay milestone payments on the due dates to
the Licensor for the license of the technology, as follows:
AL002 License:
Payment Due Date Event
The
Licensor was also granted a preemptive right to acquire such shares or other equity securities that may be issued from time to time by
us while Licensor remains the owner of any equity securities of our company.
Original
AL001 License:
There
are certain license fees and milestone payments required to be paid for the licensing of the AL001 technology, pursuant to the terms of
the Standard Exclusive License Agreements with Sublicensing Terms, both effective July 2, 2018 (the “AL001 License Agreements”)
with the licensor and the University of South Florida. In addition, a royalty payment of 3% is required pursuant to License #18110 while
License #18111 requires a royalty payment of 1.5% on net sales of products developed from the licensed technology. For the two AL001 licenses,
in the aggregate, we paid initial license fees of $200,000. As an additional licensing fee, the Licensor is entitled to receive that number
of shares of common stock equal to 3% of the sum of the total number of issued and outstanding shares. Additionally, we are required to
pay milestone payments on the due dates to the licensor for the license of the technology, as follows:
Payment Due Date Event
$ 50,000 Completed Pre-IND meeting
$ 65,000 Completed IND application filing
$ 10,000,000 8 years from the effective date of the agreement Upon FDA approval
We
have met the Pre-IND meeting and IND application filing milestones encompassing AL001. If we fail to meet a milestone payment by its specified
date, the Licensor may terminate the License Agreement.
On June 10, 2020,
we obtained two additional royalty-bearing exclusive worldwide licenses from the Licensor to a therapy named AL001. One of the additional
licenses is for the treatment of neurodegenerative diseases excluding Alzheimer’s and the other license is for the treatment of
psychiatric diseases and disorders. There are certain license fees and milestone payments required to be paid pursuant to the terms of
the Standard Exclusive License Agreements with Sublicensing Terms, both dated June 10, 2020 and effective as of November 1, 2019, with
the Licensor and the University of South Florida (the “June AL001 License Agreements”). Under each of the June AL001 License
Agreements, a royalty payment of 3% is required on net sales of products developed from the licensed technology. For the two additional
AL001 licenses, in the aggregate, we paid initial license fees of $20,000. Additionally, under each of the June AL001 License Agreements,
we are required to pay milestone payments on the due dates to the Licensor for the license of the technology, as follows:
Additional
AL001 Licenses:
Payment Due Date Event
$ 30,000 Upon first pre-IND meeting Pre-IND meeting
These
license agreements have an indefinite term that continue until the later of the date no licensed patent under the applicable agreement
remains a pending application or enforceable patent, the end date of any period of market exclusivity granted by a governmental regulatory
body, or the date on which the licensee’s obligations to pay royalties expire under the applicable license agreement.
Market Opportunity
The
Alzheimer’s Association estimates that the cost of caring for people with Alzheimer’s and other dementias will reach $355
billion in 2021, including $239 billion in Medicare and Medicaid payments, and that by 2050, these costs may rise as high as $1.1 trillion
per year. Currently, Alzheimer’s is the sixth leading cause of death in the U.S. and when extrapolated globally, the market for
preventions, treatments, and cures of this crippling disease is massive. We were formed to develop and commercialize patented intellectual
property and treatments for Alzheimer’s, by funding it from preclinical through clinical trials and ultimately, if successful, make
it available to the global market. Additionally, we are supporting ongoing research at the USF Health College of Medicine and plan to
support others with first rights of refusal on technologies for treating terminal diseases.
In
an article jointly issued on April 8, 2016, Allergan and Heptares cited currently significant unmet medical needs and a heavy economic
burden caused by cognitive impairment and dementia across multiple diseases, noting that currently available drugs for the treatment of
Alzheimer’s provide limited and transient effects on cognition. They cite projections of healthcare costs, including nursing home
care, associated with Alzheimer’s and dementia (currently estimated to be in excess of $640 billion for North America, Western Europe,
and Asia-Pacific), that are continuing to grow based on data from the World Health Organization, Alzheimer’s International, the
National Institute of Mental Health and the Lewy Body Dementia Association.
This
medical shortfall puts a spotlight on an urgent need for development of new therapies capable of treating the estimated more than 45 million
people worldwide suffering from Alzheimer’s today — 6.2 million in North America, 7.5 million in Western Europe and 3.6 million
in Asia-Pacific — a number expected to increase to more than 130 million by 2050. Alzheimer’s is the most common cause of
dementia, estimated to be associated with some 60 to 70% of cases. An additional estimated 1.4 million patients in the United States suffer
from Lewy body dementia. We believe that the potential marketplace for a commercialized therapy or treatment would be tremendously significant
with large financial support available from numerous national and international pharmaceutical companies and various governments and worldwide
agencies.
Industry Overview
Currently,
Alzheimer’s is the sixth leading cause of death in the United States and, when extrapolated globally, the market for preventions,
treatments and cures of this crippling disease is massive. Since 1990, life expectancy has increased by six years and the worldwide average
continues to increase. With the increase in the mean age of the population in developed countries, the prevalence of deteriorating neurological
diseases has also increased. According to the Alzheimer’s Association, in the United States alone, 1 in 9 persons over the age of
65 have Alzheimer’s, with roughly 6.2 million Americans currently living with it. It is estimated that this number will grow to
13 million by 2050 barring the development of medical breakthroughs to prevent, slow or cure the disease. Many Alzheimer’s related
associations believe the actual number of adults with Alzheimer’s may be much higher since current statistics do not take in account
deaths from complications or from related diseases like pneumonia or heart attack. These death certificates only list the most immediate
cause. The fastest growing age group in the United States is the “over 85” group within which one in three individuals have
Alzheimer’s.
Although
deaths from other major causes have decreased significantly, official records indicate that deaths from Alzheimer’s have increased
significantly. Between 2000 and 2019, the number of deaths from Alzheimer’s as recorded on death certificates has more than doubled,
increasing 145.2%, while the number of deaths from the number one cause of death (heart disease) decreased 7.3%.
Every
65 seconds, someone in the United States develops Alzheimer’s. Of the ten most fatal diseases in the United States, Alzheimer’s
is the only one with no cure, no known way of deceleration and no known means of prevention. We were formed to commercialize patented
intellectual property in this space, by funding it from its present state through human clinical trials administered by the FDA and ultimately,
if successful, potentially make it available to the global market.
Alzheimer’s
Alzheimer’s
average annual incidence for individuals ages 65 to 74 was 0.4%. In individuals ages 75 to 84, the annual incidence was 3.2%, and for
ages 85 and older (the “oldest-old”), the incidence was 7.6%. It is estimated that the cost of caring for people with Alzheimer’s
and other dementias will increase from an estimated $305 billion in 2020 to a projected $1.1 trillion per year by 2050 with Medicare and
Medicaid covering approximately 70% of such costs. Over 11 million Americans provide unpaid care for people with Alzheimer’s or
other dementias. The Alzheimer’s Association estimates that, in 2021, caregivers to individuals with Alzheimer’s will provide
15.3 billion hours of care valued at $257 billion.
The
cause and progression of Alzheimer’s are not well understood. Through 2020, more than 2,444 clinical trials have been or are being
conducted to find ways to treat the disease, but it is unknown if any of the tested treatments will work.
According
to the Alzheimer’s Association, it is widely accepted that, with the increasing trend towards a longer lifespan coupled with the
baby-boomer population approaching retirement, the incidence of Alzheimer’s is likely to double in the next 30 years. The exponential
increase in the expected number of patients presenting with Alzheimer’s not only represents a major area of unmet medical need,
but it also constitutes a significant market opportunity for diagnostics for this disease. Alzheimer’s biomarker sales in 2011 were
reported at $1.5 billion but are expected have doubled in 2018 to over $3 billion. (BCC research 2013, “Advances in biomarker and
monitoring diagnostics: Great markets, not so great health effects” by Bjørn Hofmann PhD and H. Gilbert Welch MD, MPH, 2017).
Current
clinical research focuses on the early phases of the disease. However, to our knowledge, no accurate and convenient tools are available
today for pre-dementia diagnosis of Alzheimer’s to support these efforts. Currently, Alzheimer’s is diagnosed using a process
that combines cognition assessments with imaging- and spinal-fluid tests. This diagnostic procedure may last for several months to a year
and is usually initiated late in the disease development.
Several
companies are focusing on blood as a test material. Typically, these companies employ a multi-assay strategy (multiple RNAs or proteins)
combined with advanced statistical tools/algorithms to develop disease-specific diagnostic models.
Alzheimer’s
Therapeutic Landscape
According
to the Alzheimer’s Association, the following is a pictorial representation of the more recent published data encompassing the Alzheimer’s
therapeutics landscape.
There
are currently several experimental therapeutic agents for Alzheimer’s in various stages of development with clinical testing directed
towards amyloid-beta, or Aβ, clearance, and inhibition of Tau protein aggregation or phosphorylated-Tau, or pTau, clearance. Recent
clinical failures involving Aβ clearance highlight the incomplete understanding of the pathological processes in Alzheimer’s
and clearly demonstrate the need for novel strategies to fight the disease.
Clinical Management
We
have retained TAMM Net, Inc., a ten-year old consulting firm based in Georgia for project management experienced with GMP to lead, develop
and manage our preclinical and clinical efforts, extending from the current status of each product candidate through the exit or commercialization
of the technologies that we have licensed. We may retain experienced Canadian and European Union consulting firms to commercialize these
same technologies for those geographic markets.
Manufacturing
Currently,
we do not have in-house manufacturing capabilities. We have outsourced and expect to continue to outsource the manufacturing of our products
to third party contractors, with special capabilities to manufacture chemical drugs and biologic drug candidates for submission and clinical
testing under FDA guidelines and, for AL001, have received GMP material manufactured for clinical trial. There are several sources of
manufacturing available once a therapy or treatment can achieve Phase II study as identified in a publication by Pharma.org released in
2013 (http://www.phrma.org/sites/default/files/Alzheimer’s%202013.pdf).
Distribution and Marketing
We
intend to develop AL001 and AL002 through successive de-risking milestones towards regulatory approval and seek marketing approval of
AL001 and AL002, or entering into partnering transactions with biopharmaceutical companies seeking to strategically fortify pipelines
and, in turn, receiving funding for the costly later-stage clinical development required to achieve successful commercialization. We do
not anticipate selling products directly into the marketplace, though we may do so depending on market conditions. Our focus is to strategically
effect partnering transactions which will provide distribution and marketing capabilities to sell products into the marketplace.
Government Regulation
Clinical
trials, the pharmaceutical approval process, and the marketing of pharmaceutical products, are intensively regulated in the United States
and in all major foreign countries.
Human
Health Product Regulation in the United States
In
the United States, the FDA regulates pharmaceuticals under the Federal Food, Drug, and Cosmetic Act and related regulations. Pharmaceuticals
are also subject to other federal, state, and local statutes and regulations. Failure to comply with applicable U.S. regulatory requirements
at any time during the product development process, approval process or after approval may subject an applicant to administrative or judicial
sanctions. These sanctions could include the imposition by the FDA of an Institutional Review Board, or IRB, a clinical hold on trials,
a refusal to approve pending applications, withdrawal of an approval, warning letters, product recalls, product seizures, total or partial
suspension of production or distribution, injunctions, fines, civil penalties or criminal prosecution. Any agency or judicial enforcement
action could have a material adverse effect on us.
The
FDA and comparable regulatory agencies in state and local jurisdictions impose substantial requirements upon the clinical development,
manufacture and marketing of pharmaceutical products. These agencies and other federal, state and local entities regulate research and
development activities and the testing, manufacture, quality control, safety, effectiveness, labeling, storage, distribution, record keeping,
approval, advertising and promotion of our products.
The
FDA’s policies may change, and additional government regulations may be enacted that could prevent or delay regulatory approval
of new disease indications or label changes. We cannot predict the likelihood, nature or extent of adverse governmental regulation that
might arise from future legislative or administrative action, either in the United States or elsewhere.
Marketing
Approval
The
process required by the FDA before human health care pharmaceuticals may be marketed in the U.S. generally involves the following:
• nonclinical laboratory and, at times, animal tests;
We
will need to successfully complete sufficient clinical trials in order to be in a position to submit a BLA or NDA to the FDA. We will
reach agreement with the FDA on the proposed protocols for our future clinical trials in the U.S. A separate submission to the FDA must
be made for each successive clinical trial to be conducted during product development. Further, an independent IRB for each site proposing
to conduct the clinical trial must review and approve the plan for any clinical trial before it commences at that site, and an informed
consent must also be obtained from each study subject. Regulatory authorities, a data safety monitoring board or the sponsor may each
suspend or terminate a clinical trial at any time on numerous grounds.
For
purposes of BLA or NDA approval for human health products, human clinical trials are typically conducted in phases that may overlap.
All
of these trials must be conducted in accordance with Good Clinical Practice (“GCP”), requirements in order for the data to
be considered reliable for regulatory purposes.
New
Drug and Biologics License Applications
In
order to obtain approval to market a pharmaceutical in the United States, a marketing application must be submitted to the FDA that provides
data establishing to the FDA’s satisfaction the safety and effectiveness of the investigational drug for the proposed indication.
Each NDA or BLA submission requires a substantial user fee payment unless a waiver or exemption applies (such as with the Orphan Drug
Designation discussed below). For fiscal year 2021, the FDA set the application fee at $2,875,842 for new drug applications that require
clinical data. The manufacturer and/or sponsor of certain drugs approved under an NDA or BLA is also subject to annual prescription drug
program fees, currently set at $336,432 per product for fiscal year 2021. These fees are typically increased annually. The NDA or BLA
includes all relevant data available from pertinent non-clinical studies and clinical trials, including negative or ambiguous results
as well as positive findings, together with detailed information relating to the product’s chemistry, manufacturing, controls and
proposed labeling, among other things. Data can come from company-sponsored clinical trials intended to test the safety and effectiveness
of the use of a product, or from a number of alternative sources, including studies initiated by investigators.
The
FDA will initially review the NDA or BLA for completeness before it accepts it for filing. The FDA has 60 days from its receipt of an
NDA or BLA to determine whether the application will be accepted for filing based on the agency’s threshold determination that the
application is sufficiently complete to permit substantive review. After the NDA or BLA submission is accepted for filing, the FDA reviews
the NDA or BLA to determine, among other things, whether the proposed product is safe and effective for its intended use, and whether
the product is being manufactured in accordance with current Good Manufacturing Practices, or cGMP, to assure and preserve the product’s
identity, strength, quality and purity. The FDA may refer applications for novel drug products or drug products that present difficult
questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation
and a recommendation as to whether the application should be approved and, if so, under what conditions. The FDA is not bound by the recommendations
of an advisory committee, but it typically considers such recommendations carefully when making decisions.
Based
on pivotal Phase III trial results submitted in an NDA or BLA, upon the request of an applicant, the FDA may grant a “Priority Review”
designation to a product, which sets the target date for FDA action on the application at six to eight months, rather than the standard
ten to 12 months. The FDA can extend these reviews by three months. Priority Review is given where preliminary estimates indicate that
a product, if approved, has the potential to provide a significant improvement compared to marketed products or offers a therapy where
no satisfactory alternative therapy exists. Priority Review designation does not change the scientific/medical standard for approval or
the quality of evidence necessary to support approval.
After
the FDA completes its initial review of an NDA or BLA, it will communicate to the sponsor that the drug will either be approved, or it
will issue a complete response letter to communicate that the NDA or BLA will not be approved in its current form and inform the sponsor
of changes that must be made or additional clinical, nonclinical or manufacturing data that must be received before the application can
be approved, with no implication regarding the ultimate approvability of the application.
Before
approving an NDA or BLA, the FDA will inspect the facilities at which the product is manufactured, even if such facilities are located
overseas. The FDA will not approve the product unless it determines that the manufacturing processes and facilities are in compliance
with cGMP requirements and adequate to assure consistent production of the product within required specifications.
Additionally,
before approving an NDA or BLA, the FDA may inspect one or more clinical sites to assure compliance with GCP. If the FDA determines that
any of the application, manufacturing process or manufacturing facilities is not acceptable, it typically will outline the deficiencies
and often will request additional testing or information. This may significantly delay further review of the application. If the FDA finds
that a clinical site did not conduct the clinical trial in accordance with GCP, the FDA may determine that the data generated by the clinical
site should be excluded from the primary efficacy analyses provided in the NDA or BLA. Additionally, notwithstanding the submission of
any requested additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for
approval.
The
testing and approval process for a drug requires substantial time, effort and financial resources, and this process may take up to several
years to complete. Data obtained from clinical activities are not always conclusive and may be susceptible to varying interpretations,
which could delay, limit or prevent regulatory approval. The FDA may not grant approval on a timely basis, or at all. We may encounter
difficulties or unanticipated costs in our efforts to secure necessary governmental approvals, which could delay or preclude us from marketing
our products.
The
FDA may require, or companies may pursue, additional clinical trials after a product is approved. These so-called Phase IV studies may
be made a condition that must be satisfied for continuing drug approval. The results of Phase IV studies can confirm the effectiveness
of a product candidate and can provide important safety information. In addition, the FDA has express statutory authority to require sponsors
to conduct post-market studies to specifically address safety issues identified by the agency. Any approvals that we may ultimately receive
could be withdrawn if required post-marketing trials or analyses do not meet the FDA requirements, which would materially harm the commercial
prospects for AL001 or AL002.
The
FDA also has authority to require a Risk Evaluation and Mitigation Strategy (“REMS”), from manufacturers to ensure that the
benefits of a drug or biological product outweigh its risks. A sponsor may also voluntarily propose a REMS as part of the NDA or BLA submission.
The need for a REMS is determined as part of the review of the NDA or BLA. Based on statutory standards, elements of a REMS may include
“dear doctor letters,” a medication guide, more elaborate targeted educational programs, and in some cases restrictions on
distribution. These elements are negotiated as part of the NDA or BLA approval, and in some cases if consensus is not obtained until after
the Prescription Drug User Fee Act review cycle, the approval date may be delayed. Once adopted, a REMS is subject to periodic assessment
and modification.
Even
if AL001 or AL002 receives regulatory approval, the approval may be limited to specific disease states, patient populations and dosages,
or might contain significant limitations on use in the form of warnings, precautions or contraindications, or in the form of onerous risk
management plans, restrictions on distribution, or post-marketing study requirements. Further, even after regulatory approval is obtained,
later discovery of previously unknown problems with a product may result in restrictions on the product or even complete withdrawal of
the product from the market. Any delay in obtaining, or failure to obtain, regulatory approval for AL001 or AL002, or obtaining approval
only for significantly limited use, would harm our business. In addition, we cannot predict what adverse governmental regulations may
arise from future U.S. or foreign governmental action.
Section
505(b)(2) New Drug Applications
Companies
may also consider seeking FDA approval through the Section 505(b)(2) NDA process if their product candidates are similar to previously
approved drugs but differ in dosage form, strength, route of administration, formulation or indication. Section 505(b)(2) of the Food,
Drug, and Cosmetic Act was enacted as part of the Drug Price Competition and Patent Term Restoration Act of 1984 and is also known as
the Hatch-Waxman Amendments. The purpose of Section 505(b)(2) is to allow companies to avoid duplicative testing by allowing applicants
to utilize data from previous clinical and non-clinical studies in the current NDA submission, when pertinent. The 505(b)(2) application
process requires, among other things, the submission of data from studies demonstrating the product’s safety and efficacy for the
new indication.
The
Hatch-Waxman Amendments permit companies to rely upon not only certain published nonclinical or clinical studies conducted for an approved
product, but also the FDA’s conclusions from a prior review of the studies. Additionally, the FDA may require companies to perform
further studies to support changes from the approved product. After completion of the review, the FDA may approve the new product for
all or some of the labeled indications for which the reference product has been approved, as well as for any new indication supported
by the NDA. While references to nonclinical and clinical data not created by the applicant or for which the applicant does not have a
right of reference are allowed, the applicant must still submit data related to the manufacturing and quality of the product candidate,
such as information about the development, process, stability, qualification and validation.
If
a company chooses to rely on the FDA’s conclusions regarding studies conducted for an already approved product, the company is required
to provide a certification statement for any patents listed for the approved product in the FDA’s Orange Book publication. Specifically,
the applicant must certify that: (i) the required patent information has not been filed; (ii) the listed patent has expired; (iii) the
listed patent has not expired but will expire on a particular date and approval is sought after patent expiration; or (iv) the listed
patent is invalid or will not be infringed by the new product. The FDA will also not approve a Section 505(b)(2) until any non-patent
exclusivity period for the reference product has expired, such as the exclusivity granted for obtaining approval of a new chemical entity.
Disclosure
of Clinical Trial Information
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