10-K
1
form10-k.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
10-K
(Mark One)
For the fiscal year ended June 30, 2021
or
For the transition period from ___________ to ___________
Commission File No. 001-40388
ANEBULO
PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
(Address of principal executive offices) (Zip Code)
(512) 598-0931
(Registrant’s telephone number, including
area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock ANEB Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of
the Act: None
Indicate by check mark if the registrant is
a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is
not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1)
has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has
submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of
this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒
No ☐
Indicate by check mark whether the registrant is a
large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See
the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and
“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
Emerging growth company ☒
If an emerging growth company, indicate by check mark
if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has
filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting
under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its
audit report. ☐
Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of December 31, 2020, the last day of the registrant’s
most recently completed second fiscal quarter, there was no public market for the registrant’s common stock. The registrant’s
common stock began trading on The Nasdaq Capital Market (“Nasdaq”) on May 7, 2021. The aggregate market
value of the voting and non-voting common stock held by non-affiliates of the registrant was $16,382,340 based on the closing
price of the registrant’s common stock on Nasdaq on September 15, 2021. In determining the market value of non-affiliate common
stock, share of the registrant’s common stock beneficially owned by officers, directors and affiliates have been excluded.
This determination of affiliate status is not necessarily a conclusive determination for other purposes.
The number of shares of the registrant’s common
stock, par value $0.001 per share, outstanding as of September 15, 2021 was 23,344,567 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy
statement that will be filed for the 2021 annual meeting of stockholders (the “2021 Proxy Statement”)
are incorporated by reference in Part III. The 2021 Proxy Statement will be filed with the U.S. Securities and Exchange Commission
within 120 days after the end of the fiscal year to which this report relates.
Anebulo Pharmaceuticals, Inc.
Table of Contents
Page Number
FORWARD-LOOKING STATEMENTS 3
RISK FACTORS 4
PART I
Item 1. Business 5
Item 1A. Risk Factors 22
Item 1B. Unresolved Staff Comments 42
Item 2. Properties 42
Item 3. Legal Proceedings 43
Item 4. Mine Safety Disclosures 43
PART II
Item 6. Selected Financial Data 44
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 52
Item 8. Financial Statements and Supplementary Data 52
Item 9A. Controls and Procedures 53
Item 9B. Other Information 53
PART III
Item 10. Directors, Executive Officers and Corporate Governance 53
Item 11. Executive Compensation 53
Item 14. Principal Accounting Fees and Services 53
PART IV
Item 15. Exhibits, Financial Statement Schedules 54
In this report, unless otherwise stated or as the
context otherwise requires, references to “Anebulo Pharmaceuticals,” “Anebulo,” “Company,” “we,”
“us,” “our” and similar references refer to Anebulo Pharmaceuticals, Inc. The Anebulo logo, and other trademarks
or service marks of Anebulo Pharmaceuticals, Inc. appearing in this report are the property of Anebulo Pharmaceuticals, Inc. This report
also contains registered marks, trademarks and trade names of other companies. All other trademarks, registered marks and trade names
appearing in this report are the property of their respective holders. We do not intend our use or display of other companies’ trade
names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, these other companies.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements about
us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained
in this report, including statements regarding our future financial condition, business strategy and plans, and objectives of management
for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such
as “believe,” “may,” “could,” “will,” “estimate,” “continue,”
“anticipate,” “intend,” “seek,” “plan,” “expect,” “should,” “would,”
“potentially” or the negative of these terms or similar expressions in this report.
We have based these forward-looking statements largely
on our current expectations and projections about future events and financial trends that we believe may affect our financial condition,
results of operations, business strategy and financial needs. These forward-looking statements include the following:
● ANEB-001, our lead drug candidate, may face competition sooner than expected.
You should not place undue reliance on these forward-looking
statements. Unless required by law, we undertake no obligation to update or revise any forward-looking statements to reflect new information
or future events or developments. Thus, you should not assume that our silence over time means that actual events are bearing out as expressed
or implied in such forward-looking statements. We qualify all of the forward-looking statements in this report by these cautionary statements.
SUMMARY OF MATERIAL RISKS ASSOCIATED WITH OUR BUSINESS
Our business is subject to numerous risks and uncertainties
that you should be aware, including those described in the section entitled “Risk Factors.” These risks include the following:
The summary risk factors described above should be
read together with the text of the full risk factors below, in the section entitled “Risk Factors” and the other information
set forth in this Annual Report on Form 10-K, including our financial statements and the related notes, as well as in other documents
that we file with the SEC. The risks summarized above or described in full below are not the only risks that we face. Additional risks
and uncertainties not precisely known to us, or that we currently deem to be immaterial may also materially adversely affect our business,
financial condition, results of operations and future growth prospects.
PART I
Item
1. Business
Overview
We are a clinical-stage biotechnology
company developing novel solutions for people suffering from acute cannabinoid intoxication (“ACI”) and substance addiction.
Our lead product candidate, ANEB-001, is intended to reverse the negative effects of ACI within 1 hour of administration. The signs and
symptoms of ACI range from profound sedation to anxiety and panic to psychosis with hallucinations. There is no approved medical treatment
currently available to specifically alleviate the symptoms of ACI and we are not aware of any competing products that are further along
in the development process than ANEB-001 in reversing the effects of tetrahydrocannabinol (“THC”), the principal psychoactive
constituent of cannabis. Clinical trials completed to date have shown that ANEB-001 is rapidly absorbed, well tolerated and leads to
weight loss, an effect that is consistent with central CB1 antagonism. In March 2021, our European clinical trial applications (which
is equivalent to an investigational new drug application in the United States) was accepted in the Netherlands to allow us to utilize
ANEB-001 in a Phase 2 proof-of-concept trial for ACI planned for the fourth quarter of 2021.
ACI has become a widespread health
issue in the United States, particularly in the increasing number of states that have legalized cannabis for personal and recreational
use. The ingestion of large quantities of THC is a major cause of ACI. Excessive ingestion of THC via edible products such as candies
and brownies, and intoxication from synthetic cannabinoids (also known as “synthetics,” “K2” or “spice”),
are two leading causes of THC-related emergency room visits. Synthetic cannabinoids are analogous to fentanyl for opioids insofar as they
are more potent at the cannabinoid receptor than their natural product congener THC.
In recent years, hospital emergency
rooms across the United States have seen a dramatic increase in patient visits with cannabis-related conditions. Before the legalization
of cannabis, an estimated 450,000 patients visited hospital emergency rooms annually for cannabis-related conditions. In 2014, this number
more than doubled to an estimated 1.1 million patients, according to data published in “Trends and Related Factors of Cannabis-Associated
Emergency Department Visits in the United States: 2006-2014,” Journal of Addiction Medicine (May/June 2019), which provided a national
estimate analyzing data from The Nationwide Emergency Department Sample (“NEDS”), the largest database of U.S. hospital-owned
emergency department visits. Based on our own analysis of the most recent NEDS data, we believe that the number of hospitalizations grew
to 1.74 million patients in 2018 and was growing at an approximately 15% compounded annual growth rate between 2012 and 2018. We believe
the number of cannabis-related hospitalizations and other health problems associated with ACI such as depression, anxiety and mental disorders
will continue to increase substantially as more states pass laws legalizing cannabis for medical and recreational use. Given the consequences,
there is an urgent need for a treatment to rapidly reverse the symptoms of ACI.
Our Lead Product Candidate
Our objective is to develop and
commercialize new treatments options for patients suffering from addiction. Our lead product candidate is ANEB-001, a potent, small molecule
cannabinoid receptor antagonist, to address the unmet medical need for a specific antidote for ACI. ANEB-001 is an orally bioavailable,
rapidly absorbed treatment that we anticipate will reverse the symptoms of ACI, in most cases within 1 hour of administration. Our proprietary
position in the treatment of ACI is protected by rights to two patent applications covering various methods of use of the compound and
delivery systems. We anticipate starting our first Phase 2 trial for ANEB-001 in the fourth calendar quarter of 2021.
Cannabinoids are a class of chemical
compounds that are naturally occurring and are primarily found in cannabis plant extracts. The two major cannabinoids found in cannabis
plant extracts include THC and cannabidiol (“CBD”). These compounds bind themselves to CB1 and CB2 cannabinoid receptors,
which are found throughout the body. Specifically, CB1 receptors are concentrated in the brain and central nervous system, while CB2
receptors are found mostly in peripheral organs and are associated with the immune system. When the chemical compounds bind themselves
to these cannabinoid receptors, the process elicits certain physiological responses. Physiological responses to cannabinoids may vary
among individuals. Some of the effects of cannabinoids have been shown to impact nervous system functions, immune responses, muscular
motor functions, gastrointestinal maintenance, blood sugar management, and the integrity of ocular functions.
Individuals can use or consume
cannabinoids in natural or unnatural formulations, orally or by inhalation, and intentionally and unintentionally, all of which can result
in intoxication. Natural formulations include edibles and marijuana cigarettes; unnatural formulations include synthetics. Individuals
consume cannabinoids orally by ingesting edibles or synthetics and by inhalation through smoking marijuana cigarettes or synthetics. Cannabinoids
can also be ingested unintentionally through these same methods where, for example, children consume edibles by mistaking them for common
consumer items like candy that would not otherwise contain THC. Symptoms of ACI produced by edibles and synthetics can include psychosis,
panic and anxiety, feelings of paranoia, agitation, hallucinations, nausea, vomiting, cardiac arrhythmias, seizures and death. Many of
these symptoms can require emergency medical attention and can take hours to days to resolve depending on the particular product and amount
ingested. Currently, there is no specific treatment to reverse ACI and physicians have to rely on supportive care, including benzodiazepines,
and wait for the body to metabolize the THC or synthetic cannabinoid.
Our Market Opportunity
ACI has become a widespread health
issue in the United States as an increasing number of states have legalized cannabis for personal and recreational use. As of June 30,
2021, cannabis was legal for recreational use in 19 states and the District of Columbia and legal for medical use in 38 states. Additionally,
the Centers for Disease Control and Prevention and recent news reports have described how the stress, anxiety and depression from the
prolonged stay-at-home conditions surrounding the Covid-19 pandemic appears to result in excessive drug and cannabis use by individuals,
whether in jurisdictions where such use is legal or not.
ACI frequently occurs due
to the ingestion of edibles, which can contain relatively large amounts of THC, and consumption of synthetics. Symptoms of ACI produced
by edibles and synthetics can include psychosis, panic and anxiety, feelings of paranoia, agitation, hallucinations, nausea, vomiting,
cardiac arrhythmias, seizures and death. These symptoms can require emergency medical attention and can take hours to days to resolve.
According to an article published in the Journal of Addiction Medicine that analyzed data from NEDS, an estimated 1.1 million emergency
department visits were associated with cannabis in 2014. We have performed our own independent analysis of all currently available NEDS
datasets and estimated that the number of cannabis-associated emergency department visits increased to 1.74 million patients in 2018.
The number of cannabis-associated emergency department visits has grown at a 15% compounded annual growth rate from 2012 to 2018, which
is when states first began legalizing recreational cannabis use.
Source for 2006-2014: Shen, J.
J., Shan, G., Kim, P. C., Yoo, J. W., Dodge-Francis, C., & Lee, Y.-J. (2018). Trends and Related Factors of Cannabis-Associated Emergency
Department Visits in the United States. Journal of Addiction Medicine, 1. doi:10.1097/adm.0000000000000479, Source for 2015-2018: Company
analysis of NEDS database.
We believe that both the number
of cannabis-associated emergency department visits and the unmet medical need will continue to grow due to the increasing availability
and consumption of edibles. In THC-containing edibles, the median dose of THC can be many times more potent than the recommended safe
dosage and as much as eight times more potent than a rolled marijuana cigarette. Edibles are frequently manufactured as common consumer
products, such as brownies, cookies, candies and gummy snacks with brightly-colored packaging. THC concentrations in edibles peak after
a delay of about two to four hours from ingestion. This contrasts with smoking cannabis, which causes THC concentrations to peak in about
three to 10 minutes from inhalation. Consumers possibly will approach edibles with the same serving size expectations as consumer products
without THC. Moreover, children are particularly at risk for accidentally consuming edibles due to their brightly-colored packaging and
formulation into candies and sweets. The confluence of these factors can be dangerous and increases the risk of ACI. Emergency department
visits were 33 times more likely for edibles as compared with other routes of cannabis consumption, according to the recent article “Mental
Health-related Emergency Department Visits Associated with Cannabis in Colorado,” published in Academic Emergency Medicine (May
2018). Sales of edibles are rapidly growing, according to data collected by Statista, and are expected to continue growing into the future.
In November 2020, we sponsored
a survey of U.S. physicians concerning patient emergency room visits for ACI within the past 12 months. Based on a survey of 27 emergency
room physicians throughout the United States, the surveyed physicians saw on average 10.5 patients (a range of two to 45 patients) with
cannabis intoxication per month. The survey asked these physicians to rank on a scale of 1 to 10 (i) the need for a cannabinoid antagonist
to treat cannabis intoxication; (ii) the likelihood of their prescribing a cannabinoid antagonist that reverses cannabis intoxication
within 30 minutes of administration; and (iii) the likelihood of such cannabinoid antagonist reducing the need for supportive medication
to manage certain cannabis intoxication symptoms, such as agitation and acute psychosis. In response to these questions, the surveyed
physicians ranked the need for a cannabinoid antagonist at an average of 7.52 out of 10, the likelihood of prescribing a cannabinoid antagonist
that reverses cannabis intoxication within 30 minutes of administration at an average of 7.44 out of 10, and the likelihood of a specific
cannabinoid antagonist reducing the need for supportive medication to manage certain ACI symptoms at an average of 7.48 out of 10.
We believe that the market opportunity
for our lead product candidate, ANEB-001, will continue to expand and accelerate if additional states pass laws to legalize recreational
cannabis use. In Colorado, one of the first states to legalize recreational marijuana, the Colorado Department of Health and Environment
reported that by 2018 marijuana use by adults one or more times during the past 30 days roughly doubled in the years following the state’s
legalization of cannabis. In July 2021, several U.S. Senators presented a draft bill in the Senate to decriminalize
marijuana at the federal level by removing cannabis from the list of controlled substances under the Controlled Substances Act. A
separate bill was reintroduced in May 2021 in the U.S. House of Representatives, also seeking to federally legalize marijuana. Although
it is currently uncertain whether these bills will be reconciled, passed and signed into law by the President, in the event
the use of cannabis is legalized in the United States at the federal level, we believe that the greater anticipated number of users will
significantly increase the potential need for our lead candidate.
We believe that overdose due to
synthetic cannabinoids is an area with particularly high unmet medical need. Synthetics are among the fastest growing class of psychoactive
drugs worldwide and can be as much as 85 times as potent as THC. Unlike edibles and other cannabis products, synthetics have low shipping
weights and can more readily evade traditional drug screening methods. This likely reflects the structural promiscuity of the CB1 receptor.
In addition, the negative effects of an overdose from synthetics can be longer lasting and more severe when compared with THC. These negative
effects could include seizures, and even death.
Our Growth Strategy
Our goal is to create a therapeutic
to treat the symptoms of ACI and substance addiction. As noted above, there are currently no FDA approved medical treatments on the market
to specifically alleviate the negative psychological effects of ACI. The absence and growing unmet need for such a treatment gives us
the unique opportunity to create a novel solution and become a leader in the cannabinoid treatment space. To achieve our goal, our strategy
will be guided by the following principles:
Our Clinical Trials and Milestones
We are developing ANEB-001 to
quickly and effectively combat the symptoms of ACI.
Preclinical Data
The preclinical characterization
of ANEB-001 was performed at Vernalis’ internal laboratory in the United Kingdom between 2003 and 2006. The compound was tested
as a displacer in established radioligand binding assays for the CB1 receptor. ANEB-001 displaced the antagonist radioligand, [3H]-SR141716A
from the human CB1 receptor with high affinity (0.55 nM) and was shown to be a competitive antagonist in cAMP assays. In vitro testing
as a displacer in 90 binding assays and 19 enzyme and functional assays, showed that ANEB-001 had >1000x selectivity with the human
CB1 receptor over all other tested receptors. Further, Vernalis demonstrated that oral administration of ANEB-001 reduced hypolocomotion
in mice after 30 minutes, effectively reversing the action of THC. C57 mice administered THC 3 mg/kg in 10 minutes pre-test exhibited
reduced locomotor activity when placed in automated locomotor activity cages for 15 minutes. Providing it orally at a dose of 30 mg/kg
30 minutes pre-test significantly revered the action of THC on the total activity time parameter (p<0.01 by one way ANOVA and Newman
Keuls test, n=7 per group).
In 2006 and 2007, two Phase 1
studies for the treatment of obesity were conducted by Vernalis for ANEB-001.
Phase 1 First Trial
The Phase 1 study (V24343-1Ob-01)
administered single (Part A) and multiple (Part B) ascending doses of ANEB-001 for up to 14 days in otherwise healthy overweight and
mildly obese subjects.
Pharmacokinetic measurements
in Part A of the Phase 1 study demonstrated that ANEB-001 was rapidly absorbed by the body following oral administration and achieved
blood concentrations anticipated to exceed those necessary to block the cannabinoid receptor (as indicated by the red line in the diagram
below).
Vernalis also measured the impact
of ANEB-001 on anxiety and depression in Part B of the Phase 1 study. Vernalis measured anxiety by using the Spielberger state score,
a commonly used measure of trait and state anxiety. Vernalis found no significant impact on anxiety, except for the 200/50 mg arm, which
showed increased anxiety at all assessment times. The change was driven by a single subject and may be explained by somatic adverse events,
which contributed to the Spielberger score. For depression, HAMD21 was used and small increases were noted in the 75/15 mg and 200/50
mg dose, which we believe were likely driven by somatic symptoms.
Summarizing the results from the
Phase 1 study, ANEB-001 doses between 1 mg and 150 mg were found to be very well tolerated in both single and multiple doses with an adverse
events profile similar to placebo. There was no observed effect on the cardiovascular system, ECGs, labs or physical exams and no significant
effects on anxiety or depression scores.
With regard to pharmacodynamics,
a marked reduction in test meal energy intake was seen even at the lowest dose level in Phase 1 Part B (p<0.01 on Day 14 for OD 100
mg, p<0.05 on Day 7 for OD 100 mg, not statistically significant for all other cohorts). Further, Vernalis observed statistically significant
decreases in body weight (p<0.001 on Day 14 for OD 100 mg, p<0.05 for OD 50/5 mg and OD 200/50 mg, not significant for OD75/15 mg)
indicating that ANEB-001 was able to cross the blood-brain barrier and antagonize central cannabinoid receptors. P-value is the probability
that the difference between two data sets was 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.
Phase 1 Second Trial
The second Phase 1 study (V24343-1Ob-02)
compared the pharmacokinetics of a single oral dose (1 to 200 mg) of ANEB-001 to eight subjects in fed and fasted states, and to eight
subjects that were lean and overweight. There were no apparent differences in the tolerability of ANEB-001 between the subjects that were
in fed and fasted states or subjects that were lean and overweight. Total AUC (or area under the curve) was approximately 30% higher in
subjects in the fed state compared to the subjects in the fasted state, with similar systemic exposure for the lean and overweight subjects.
The results of the Phase 1 studies
demonstrate that ANEB-001 was well tolerated among healthy and obese subjects. There were no serious adverse events. The most commonly
reported adverse event was gastrointestinal discomfort, which also occurred in subjects that were administered placebos. Based on the
promising results of the Phase 1 studies, we believe ANEB-001 may offer the following clinical and product benefits:
We plan to commence a Phase 2
proof-of-concept study in the fourth calendar quarter of 2021 at a center in the Netherlands to test the efficacy of a single dose of
ANEB-001 on a population of approximately 100 human subjects who have been administered 10 milligrams of THC that will then be randomized
to receive a placebo, low dose, medium dose or high dose of ANEB-001. We anticipate completing the Phase 2 study within approximately
six months after commencing the study and having data potentially available in the first half of 2022. We believe this study will lay
the foundation for us to engage with the FDA and/or comparable foreign regulatory authorities, file IND with the FDA in the United States
and conduct more extensive clinical trials with the goal of generating additional clinical data that will ultimately enable us to file
a marketing application with the FDA.
We have engaged CROs to assist us with conducting clinical trials and to provide us with consulting and development services
in the various phases of the drug development process. We currently have a consultancy agreement with Traxeus Pharma Services Limited
(“Traxeus”), which we entered into on July 15, 2020 (the “Consultancy Agreement”). Pursuant to the Consultancy
Agreement, Traxeus provides certain pharmaceutical development services and deliverables to us in relation to the retest of an existing
batch of drug substance. These services include the manufacturing and testing of a demonstration batch of the drug substance and the completion
of formulation and process development for the drug product. Under the Consultancy Agreement, Traxeus is permitted to provide services
to third parties that are not directly competitive to us and we are permitted to engage other CROs. The Consultancy Agreement can be terminated
immediately by either party if a material breach is committed and not remedied within 60 days or a party is unable to carry on business,
becomes insolvent or is subject to similar processes in any jurisdiction. In addition, we may terminate any statement of work arising
under the Consultancy Agreement by providing Traxeus at least 30 days’ written notice. We plan to continue to engage CROs like Traxeus
and other pharmaceutical services providers to assist us with clinical trials, the development of our lead product candidate ANEB-001.
Vernalis License Agreement
On May 26, 2020, we entered into
an exclusive license agreement (the “License Agreement”) with Vernalis. Pursuant to the License Agreement, Vernalis granted us an exclusive worldwide royalty-bearing license to develop
and commercialize a compound that we refer to as ANEB-001, as well as access to and a right of reference with respect to any regulatory
materials under its control. The License Agreement allows us to sublicense the rights thereunder to any person with similar or greater
financial resources and expertise without Vernalis’ prior consent, provided the proposed sublicensee is not developing or commercializing
a product that contains a CB1 antagonist or is for the same indication covered by the trials or market authorization for ANEB-001. In
exchange for the exclusive license, we agreed to pay Vernalis a non-refundable signature fee of $150,000, total potential developmental
milestone payments of up to $29,900,000, total potential sales milestone payments of up to $35,000,000, and low to mid-single digit royalties
on net sales.
Under the License Agreement, we
purchased the API for ANEB-001 from Vernalis on an “as is” basis for $20,000. We have the sole discretion to carry out the
development and commercialization of ANEB-001, including obtaining regulatory approvals, and we are responsible for all costs and expenses
in connection therewith. We have access to certain regulatory materials, including study reports from clinical and non-clinical trials,
under Vernalis’ control. We agreed to use commercially reasonable efforts to (i) develop and commercialize ANEB-001 in the United
States and certain European countries and (ii) conduct a Phase 2 and human clinical trial within specified periods, which periods could
be extended for a nominal fee. We also agreed to provide Vernalis with periodic reports of our activities and notice of market authorization
within specified timeframes.
With respect to intellectual property,
both parties agreed to retain sole ownership over their respective intellectual property as of the date of the License Agreement. In addition,
we retain the sole right over certain patent rights (including patent applications) and know-how controlled by us that are necessary or
reasonably useful to developing and commercializing ANEB-001 during the term of the License Agreement.
The License Agreement continues
for an indefinite term unless and until it is terminated or until such time as all royalties and other sums cease to be payable thereunder.
Our obligations to pay royalties commence upon the first commercial sale of our product and cease upon the later to occur of: (i) the
tenth anniversary of the first commercial sale of our product, or (ii) the expiration date of the regulatory exclusivity of our product.
We may terminate the License Agreement in its entirety at any time by providing 60 days’ prior notice to Vernalis. Moreover, a party
may terminate the License Agreement for cause (i) upon written notice when the other party commits a material breach not remedied within
the specified timeframes and defaults on its obligations thereunder, or (ii) when the other party is insolvent as more particularly described
therein. In the event of termination, all rights and licenses granted by Vernalis will revert immediately to Vernalis; all outstanding
sums as of the termination date will be immediately due and payable to Vernalis; and we will return or destroy, at Vernalis’ request,
any regulatory materials, information pertaining to ANEB-001, and any unused API purchased from Vernalis. If Vernalis terminates the License
Agreement due to our material breach or insolvency, or if we terminate the License Agreement at will, both parties will negotiate in good
faith to grant Vernalis a license to such intellectual property and regulatory materials needed to develop and commercialize ANEB-001
and provide appropriate compensation to us within six months of the termination date.
Competition
The clinical biotechnology industry
is a competitive industry characterized by technological innovation and growth. Our competitors include other biotechnology and pharmaceutical
companies, academic institutions, and public and private research institutions. These entities engage in efforts to research, discover
and develop new medicines and treatments for substance use. These entities also seek patent protection and licensing revenues for their
research results and may compete with us in recruiting skilled talent. Some of these entities are larger and better funded than us. Our
management can make no assurances that we can effectively compete with these competitors. Potential current competitors include Opiant
Pharmaceuticals, Inc., which is developing a drinabant injection to treat ACI, and Aelis Farma, which is developing a medication based
on a pregnanolone derivative to treat cannabis use disorders.
Research and Development
We are making, and expect to continue
to make, substantial expenditures to fund proprietary research and development of our ANEB-001 product candidate and to support preclinical
testing and clinical trials necessary for regulatory filings. Our research and development team, including a third-party contract research
organization, is continually undertaking efforts to advance research and development goals. During the year ended June 30, 2021 and the
period from April 23, 2020 (date of inception) to June 30, 2020, we incurred research and development expenses of approximately $2,270,000
and $150,000, respectively.
Regulation
Government Regulation and Product
Approval
We operate in an extensively regulated
industry. Governmental authorities at all levels in the United States and in other countries regulate aspects of bringing therapeutics,
drugs, and other biologics to market, including research, testing, safety, product approval, development, manufacture, efficacy, quality
control, packaging, storage, record-keeping, promotion, labeling, advertising, marketing, distribution, sales, imports and exports of
our products.
Under the Controlled Substances
Act (the “CSA”), cannabis is currently considered a Schedule I controlled substance and is, therefore, illegal under federal
law. A Schedule I controlled substance is defined as a drug or substance that has a high potential for abuse, has no currently accepted
medical use in the United States, and lacks accepted safety for use under medical supervision. Although an increasing number of states
have legalized cannabis under state laws, the use, possession and cultivation of cannabis remains a violation under federal law. The United
States Supreme Court has upheld the federal government’s right to regulate and criminalize cannabis, even for medicinal uses. Federal
law criminalizing the use of cannabis preempts contrary or conflicting state laws. As a result, if the federal government enforces the
CSA in states that have legalized cannabis for medicinal and/or recreational uses, individuals charged with distributing, possessing with
intent to distribute or cultivating cannabis could be subject to fines and/or terms of imprisonment. The maximum penalty is life imprisonment
and a $50 million fine.
As a therapeutic product for human
use, ANEB-001 will be subject to regulation in the United States by the FDA under the Federal Food, Drug and Cosmetic Act (“FDCA”)
and similar regulatory requirements in other countries. Regulatory requirements include, among other things, rigorous preclinical and
clinical testing. The processes for commercializing our product, obtaining regulatory approval and maintaining compliance with applicable
statutes and regulations require the substantial expenditure of time and financial resources and play a significant role in our research
and development, production, and marketing activities. Failure to comply with these regulatory processes and other requirements could
delay our ability to receive regulatory approvals, adversely affect the commercialization of our product, and hinder our ability to receive
royalties or revenues.
In the United States, the FDA
regulates drugs under the FDCA and its implementing regulations. Failure to comply with such regulations during and after the product
development and approval process could result in administrative or judicial sanctions. Such sanctions include the FDA’s refusal
to approve pending applications, withdrawal of an approval, placement a clinical hold, untitled or warning letters, product recalls, seizure
of products, partial or complete suspension of production or distribution, injunctions, fines, refusal of government contracts, restitution,
disgorgement, civil penalties and criminal penalties. The FDA generally requires the following before a drug can be marketed in the United
States:
● Preparation and submission of a New Drug Application (“NDA”);
● FDA review and approval of the NDA.
Given that the testing and approval
process requires a substantial commitment of time, effort and financial resources, we cannot ensure that our product will be granted approval
on a timely basis.
As part of the IND, an IND sponsor
must submit the preclinical test results, along with manufacturing information, analytical data and any available clinical data or literature,
to the FDA. The sponsor must also include a protocol detailing the objectives of the initial clinical study, the parameters for monitoring
safety, and the effectiveness criteria to be assessed (among other things) if the initial clinical study lends itself to an efficacy evaluation.
Some preclinical testing may continue after submission of the IND. The IND becomes automatically effective 30 days after receipt by the
FDA, unless the FDA raises questions or concerns in response to a proposed clinical study and places the study on a clinical hold within
the 30-day timeframe. In such a case, the IND sponsor and the FDA must resolve any outstanding issues before commencing the clinical study.
The FDA may impose clinical holds due to safety concerns or non-compliance on all product candidates within a certain pharmaceutical class
at any time before or during clinical studies. In addition, the FDA can impose partial clinical holds prohibiting the initiation of clinical
studies for a certain dose or of a certain duration.
In accordance with GCP regulations,
all clinical studies must be conducted under the supervision of one or more qualified investigators. These regulations require informed
consent in writing from all research subjects before their participation in any clinical study. An IRB must review and approve the plan
for any clinical study before it commences at any institution, and the IRB must continuously review and re-approve the study at least
annually. Among other things, the IRB considers whether the risks to individual participants in the clinical study are minimal and reasonable
in relation to the anticipated benefits. The IRB also approves the information regarding the clinical study and the consent form that
must be given to each clinical study subject or his or her legal representative. The IRB must also monitor the clinical study until completed.
Each new clinical protocol and any amendments thereto must be submitted to the FDA for review, and to the IRB for approval. The protocols
detail the objectives of the clinical study, dosing procedures, subject selection and exclusion criteria, and the parameters to be used
to monitor subject safety (among other things). Study sites are subject to inspection for compliance with GCP.
Information about certain clinical
trials must be submitted within specific timeframes to the National Institutes of Health, for public dissemination on the ClinicalTrials.gov
website.
Human clinical studies are typically
conducted in three sequential phases that may overlap or be combined:
Progress reports explaining the
results of the clinical studies must be submitted to the FDA at least annually. Safety reports must be submitted to the FDA and the investigators
for serious and unexpected suspected adverse events. There is no guarantee that Phase 1, Phase 2 and Phase 3 testing will be completed
successfully within any specified period, if at all. The FDA or the sponsor may suspend or terminate a clinical study at any time for
various reasons, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Likewise,
an IRB can suspend or terminate approval of a clinical study at its institution if the clinical study is not being conducted in accordance
with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients.
U.S. Review and Approval Processes
Upon the successful completion
of the required clinical testing, an NDA is submitted to the FDA requesting approval to market the product. The NDA reports the results
of product development, preclinical and clinical studies, descriptions of the manufacturing process, analytical tests conducted on the
drug, proposed labeling and other relevant information.
In connection with the submission
of an NDA, the payment of a substantial application user fee is required (although a waiver is available under limited circumstances,
including, for the first human drug application submitted by a small business or its affiliate). The sponsor of an approved NDA is also
required to pay annual program user fees.
Under the Pediatric Research Equity
Act of 2003, an NDA application (or supplements thereto) for a new active ingredient, new indication, new dosage form, new dosing regimen,
or new route of administration must contain adequate data to assess the safety and effectiveness of the drug for the claimed indications
in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product
is safe and effective, unless the applicant has obtained a waiver or deferral.
In 2012, the Food and Drug Administration
Safety and Innovation Act amended the FDCA to require submission of an initial Pediatric Study Plan (“PSP”) for any sponsor
that plans to submit a marketing application for a drug that includes a new active ingredient, new indication, new dosage form, new dosing
regimen or new route of administration. The initial PSP must be submitted within sixty days of an End-of-Phase 2 meeting or as may be
agreed between the sponsor and the FDA. The initial PSP must contain an outline of the pediatric study or studies that the sponsor plans
to conduct, including study objectives and design, age groups, relevant endpoints and statistical approach, or a justification for not
including such detailed information, and any request for a deferral of pediatric assessments or a full or partial waiver of the requirement
to provide data from pediatric studies along with supporting information. The FDA may grant deferrals for submission of data or full or
partial waivers on its own volition or at the applicant’s request. The FDA and the sponsor must agree on the PSP. A sponsor can
amend an initial PSP at any time (even if initially agreed upon) if changes to the pediatric plan must be considered based on data collected
from preclinical studies, early phase clinical studies, and/or other clinical development programs.
The FDA may also require a Risk
Evaluation and Mitigation Strategy (“REMS”) to mitigate any identified or suspected serious risks. The REMS typically includes
risk minimization tools, medication guides, assessment plans, physician communication plans, and elements to ensure safe use, including
restricted distribution methods, and patient registries.
The FDA reviews all NDA’s
submitted to ensure they are sufficiently complete for substantive review before it accepts them for filing. Rather than accept an application
for filing, the FDA may request additional information. In such a case, an applicant must re-submit the application along with the additional
information, which remains subject to further FDA review. Once an application is accepted for filing, the FDA performs an in-depth substantive
review to determine whether the product is safe and effective for its intended use.
The FDA may refer the NDA to an
advisory committee consisting of experts for review, evaluation and recommendation regarding its approval and any conditions that may
apply thereto. The FDA, while not bound by the recommendation of an advisory committee, considers such recommendations when making decisions.
Before approving an NDA, the FDA will also inspect one or more clinical sites to ensure clinical data supporting the submission comply
with GCP.
The FDA may refuse to approve
an NDA if regulatory requirements are not satisfied or additional clinical data and information is required. Even after such data and
information is furnished, the FDA may refuse to approve an NDA for failure to satisfy regulatory requirements. Data from clinical studies
may not always be conclusive. Moreover, the FDA may disagree with the applicant’s interpretation of the data.
After evaluating an application,
the FDA may issue an approval letter or a complete response letter indicating completion of the review cycle. A complete response letter
typically sets forth specific conditions that must be satisfied to secure final approval of the application and may require additional
clinical or preclinical testing for the FDA to reconsider the application. The FDA may identify minor deficiencies, such as requiring
labeling changes, or major deficiencies, such as requiring additional clinical studies. The complete response letter may also recommend
actions to ready the application for approval. An applicant can respond to a complete response letter by correcting all deficiencies and
re-submitting the application, withdrawing the application or requesting a hearing.
Even after additional information
is submitted, the FDA may determine that an application does not satisfy regulatory requirements and reject it. Once all conditions have
been met to the FDA’s satisfaction, the FDA will typically issue an approval letter authorizing commercial marketing of the drug
with specific prescribing information for specific indications.
Even after regulatory approval
is obtained, approval may be restricted to specific diseases and dosages or limited indications for use. Such limitations could affect
the commercial value of the product. On the product labeling, the FDA may require certain contraindications, warnings or precautions.
In addition, the FDA may require post-approval studies, including Phase 4 clinical studies, to further evaluate safety and effectiveness.
The FDA may also require testing and surveillance programs to monitor the safety of approved commercialized products. After approval,
certain changes to the approved product remain subject to additional testing requirements, FDA review and approval. Such changes to the
approved product include adding new indications, manufacturing changes, and additional labeling claims.
Abbreviated New Drug Applications
(“ANDAs”)
Most drug products receive FDA
marketing approval pursuant to an NDA for innovator products, or an ANDA for generic products. The Hatch-Waxman amendments to the FDCA
established a statutory procedure for submission and FDA review and approval of ANDA’s for generic versions of branded drugs previously
approved or listed by the FDA. Because brand companies (otherwise known as “innovators”) have already demonstrated the safety
and efficacy of listed drugs, the FDA does not require the same demonstration for generic products. Nevertheless, the FDA requires the
manufacturer of generic drugs to perform bioequivalence studies of its test product against the listed drug. The bioequivalence studies
for orally administered, systemically available drug products evaluate the rate and extent to which the active pharmaceutical ingredient
is absorbed into the bloodstream from the drug product and becomes available at the site of action. Bioequivalence is achieved when there
is no significant difference in the rate and extent for absorption of the generic product and the listed drug. An ANDA must contain chemistry,
manufacturing, labeling and stability data as well as patent certifications.
Approved products manufactured
or distributed in accordance with the FDA regulatory process remain subject to continuing FDA oversight post-approval. Continuing regulatory
requirements include periodic reporting, record-keeping, product sampling, product distribution, and advertising and reporting on adverse
experiences, deviations, and other issues with the product. In addition, most post-approval changes to the approved product, including
adding new indications or other labeling claims, remain subject to prior FDA review and approval. There are also continuing obligations
to pay annual user fees for marketed products, as well as new application fees for supplemental applications with clinical data.
The FDA strictly regulates the
information presented on products on the market, including information on labeling, advertising, and promotion of products. Products may
only be promoted for the approved indications and in accordance with the provisions of the approved label. The FDA and other agencies
actively enforce the rules prohibiting the promotion of off-label uses. A company that improperly promotes off-label uses may be subject
to significant liability. Manufacturers must also continue to comply with extensive CGMP regulations, which requires a commitment of time
and financial resources. FDA review and approval is generally required for post-approval changes to the manufacturing process and other
changes to the approved product, including the addition of new indications and additional labeling claims.
Manufacturers and others involved
in the manufacturing and distribution of approved products must register their establishments with the FDA and certain state agencies.
The FDA and state agencies may periodically inspect these establishments, sometimes without prior notice, to ensure compliance with CGMP
regulations and other obligations. CGMP requirements apply to all stages of the product manufacturing process, including processing, production,
sterilization, packaging, labeling, storage and shipment.
Prior FDA approval is often required
for changes to the manufacturing process are implemented. FDA regulations require investigation and correction of departures from CGMP
requirements. The FDA may also impose reporting and documentation obligations upon the sponsor and any third party manufacturers used
by the sponsor. As a result, to remain compliant with CGMP regulations, manufacturers must continue to commit time, effort and financial
resources to production and quality control.
The FDA may impose other post-approval
requirements as a condition to approving an application, such as post-marketing testing (including Phase 4 clinical trials) and surveillance
to monitor and assess the product’s safety and effectiveness upon commercialization.
The FDA may withdraw approval
of a product if an applicant fails to maintain compliance with regulatory requirements or if certain issues arise after the product is
introduced to the market. For instance, a subsequent discovery of previously unknown issues, including adverse events of unexpected frequency
or severity, problems with the manufacturing process, or failure to comply with regulatory requirements, could result in restrictions
on the product or a complete withdrawal from the market.
In such cases, potential consequences
include revisions to the approved labeling to include new safety information; post-market studies or clinical trials to evaluate new safety
risks; and imposition of restrictions under a REMS program. Other potential consequences include:
● Warning letters or holds on post-approval clinical trials;
● FDA’s refusal to approve pending NDAs or supplements to approved NDAs;
● Suspension or revocation of product license approvals;
● Product seizures or detentions;
● FDA’s refusal to allow imports or exports of products; or
● Civil penalties, criminal penalties or injunctions.
Manufacturers and distributors
must also comply with the Prescription Drug Marketing Act (“PDMA”) and state laws that regulate distribution of prescription
products. The PDMA regulates the distribution of prescription drugs, products and product samples at the federal level and sets minimum
standards for the registration and regulation of distributors by the states. The PDMA and state laws restrict the distribution of prescription
product samples and impose requirements to ensure accountability in distribution.
In addition, new federal legislation
and guidance could substantially alter the statutory provisions governing approval, manufacturing and marketing of products regulated
by the FDA. New legislation, FDA regulations, guidance, and policies are periodically revised or reinterpreted in ways that could significantly
impact our business and our products. We cannot predict the enactment, implementation and potential consequences of any future legislative,
regulatory or policy changes.
Pharmaceutical Coverage, Pricing and
Reimbursement
In the United States, commercial
sales of any products subject to regulatory approval could be conditioned on whether third-party payors (such as government authorities,
managed care providers, private health insurers and other organizations) are able to provide coverage and reimbursement in connection
with the products.
Coverage and reimbursement of
costs are areas of significant uncertainty for any products subject to regulatory approval. The process for determining coverage versus
reimbursement may vary widely among third-party payors. Third-party payors may also impose additional requirements on and restrictions
to coverage and reimbursement, which could influence the purchase of certain healthcare services and products.
Third-party payors may limit coverage
to specific drugs on an approved list, or formulary, which could omit some FDA-approved drugs for a particular indication. Third-party
payors may also place drugs at certain formulary levels that result in a lower reimbursement and higher cost-sharing obligation for patients.
A third-party payor’s decision to provide coverage for a product may not necessarily imply approval of an adequate reimbursement
rate. In addition, the unavailability of third-party reimbursement may affect our ability to maintain price levels sufficient to realize
an appropriate return on our investment in product development. Coverage by one third-party payor may not necessarily indicate or imply
coverage or reimbursement by other third-party payors. Also, the level or scope of coverage and reimbursement may vary significantly among
third-party payors. In addition to scrutinizing the safety and efficacy of medical products and services, third-party payors have increasingly
begun to examine and challenge the price, cost-effectiveness and necessity of certain products and services. Thus, to obtain and maintain
coverage and reimbursement for any products approved for sale, the conducting of expensive pharmacoeconomic studies may be required to
demonstrate the medical necessity and cost-effectiveness of such products. There is a chance that third-party payors may not consider
our product medically necessary or cost-effective. If third-party payors make such a determination, they may not cover the product after
approval as a benefit under their plans. If third-party payors do cover the product, the returns from sales of our product may not sufficiently
yield a profit.
Furthermore, federal and state
governmental authorities have increasingly shown an interest in implementing cost containment programs to limit government-paid healthcare
costs. Such cost containment programs include restrictions on coverage and reimbursement, price controls and requirements to substitute
branded prescription drugs with generic products. The adoption and expansion of such restrictive policies and controls could impose limitations
or exclusions from coverage for our product.
In the United States, we expect
third-party payors and government authorities to increase emphasis on managed care and cost containment measures, which will impact the
pricing and coverage for pharmaceutical products. Coverage policies and third-party reimbursement rates may change at any time. Even if
we achieve favorable coverage and reimbursement status for an approved product, less favorable coverage policies and reimbursement rates
could still be implemented in the future.
Protection of Intellectual Property
We strive to protect our intellectual
property in a variety of ways to promote the development of our product candidate and business. Our strategy to safeguard this intellectual
property includes the following:
● Patents and patent