UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
10-K
(Mark
One)
For
the fiscal year ended June 30, 2022
or
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
☒
The aggregate market value of the voting and non-voting common stock held
by non-affiliates of the Registrant was $49,681,078 based on the closing price of the Registrant’s common stock on the Nasdaq Capital
Market on December 31, 2021. The calculation of the aggregate market value of voting and non-voting common stock excludes shares held
by executive officers, directors and stockholders that the Registrant concluded were affiliates of the Registrant on such date. Exclusion
of such shares should not be construed to indicate that any such person possesses the power, direct or indirect, to direct or cause the
direction of the management or policies of the Registrant or that such person is controlled by or under common control with the Registrant.
The number of shares of the Registrant’s common stock, par value
$0.001 per share, outstanding as of September 1, 2022 was 23,368,567 shares.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions of the Registrant’s definitive proxy statement (the “Proxy
Statement”) that will be filed for the 2022 Annual Meeting of Stockholders are incorporated by reference in Part III of this Annual
Report on Form 10-K. The 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 Annual Report relates.
Anebulo
Pharmaceuticals, Inc.
Table
of Contents
Page Number
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS 3
SUMMARY OF RISK FACTORS 4
PART I 5
Item 1. Business 5
Item 1A. Risk Factors 20
Item 1B. Unresolved Staff Comments 47
Item 2. Properties 47
Item 3. Legal Proceedings 47
Item 4. Mine Safety Disclosures 47
Item 6. [Reserved] 48
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 56
Item 8. Financial Statements and Supplementary Data 56
Item 9A. Controls and Procedures 56
Item 9B. Other Information 57
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevents Inspections 57
PART III 57
Item 10. Directors, Executive Officers and Corporate Governance 57
Item 11. Executive Compensation 57
Item 14. Principal Accounting Fees and Services 57
Item 15. Exhibits and Financial Statement Schedules 58
In
this Annual Report on Form 10-K (this “Annual Report”), unless otherwise stated or as the context otherwise requires, references
to “Anebulo Pharmaceuticals,” “Anebulo,” “the 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 Annual Report are the property of Anebulo Pharmaceuticals, Inc. This Annual Report also contains registered marks,
trademarks and trade names of other companies. All other trademarks, registered marks and trade names appearing in this Annual 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
Annual Report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject the “safe
harbor” created by those sections. These forward-looking statements about us and our industry involve substantial risks and uncertainties
and our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors,
including those set forth below under Part I, Item 1A, “Risk Factors” in this Annual Report. All statements other than statements
of historical facts contained in this Annual 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 Annual
Report.
We
have based these forward-looking statements largely on our current expectations, beliefs, estimates and projections, and various assumptions,
many of which, by their nature, are inherently uncertain and beyond our control. In addition, statements that “we believe”
and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available
to us as of the date of this Annual Report, and while we believe such information forms a reasonable basis for such statements, such
information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry
into, or review of, all potentially available relevant information. These forward-looking statements include, but are not limited to,
statements about:
● the timing or outcome of any of our regulatory submissions;
● our expectations regarding future growth;
● the performance of our third-party suppliers and manufacturers;
● the impact on our business of economic or political events or trends; and
● the impact of governmental laws and regulations.
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. You should carefully
read this Annual Report, including the section titled “Risk Factors” and the documents that we reference in this Annual Report
and have filed as exhibits to this Annual Report completely and with the understanding that our actual future results may be materially
different from what we expect. We qualify all of the forward-looking statements in this report by these cautionary statements.
SUMMARY
OF RISK FACTORS
Our
business is subject to numerous risks and uncertainties of which 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, 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 rapidly 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 THC, the principal psychoactive
constituent of cannabis. Previous clinical trials conducted by a third party have shown that ANEB-001 is rapidly absorbed, well tolerated and when administered
to obese subjects led to weight loss, an effect that is consistent with central CB1 antagonism. In March 2021, our European clinical
trial application (“CTA”), 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 (the “Netherlands Trial”) for potential use as a treatment for ACI. The study was designed to evaluate the safety, tolerability, pharmacokinetics,
and effectiveness of a single dose of ANEB-001 in treating healthy subjects challenged with delta-9-tetrahydrocannabinol, better known
as THC, the primary psychoactive constituent of cannabis. We announced on January 3, 2022 that the first patient had been dosed in the Netherlands Trial. On May
11, 2022, we announced the dosing of all 60 subjects in Part A of the Netherlands Trial. On June 30, 2022, we received positive initial data from Part A of the Netherlands Trial, which we reported on July
5, 2022 in a press release. We believe the progress in the Netherlands Trial
creates an opportunity to strengthen our development pathway.
ACI
has become a widespread health issue in the United States, particularly in the increasing number of states that have legalized cannabis
for medical 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 including 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 or 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 ACI and substance 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 one issued patent and rights
to one patent application covering various methods of use of the compound and delivery systems. We began a Phase 2 proof-of-concept trial
for ANEB-001 in December 2021 in the Netherlands.
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 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 medical or
recreational use. As of June 30, 2022, 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, 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 time to peak concentration 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 the edibles’ 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. Although the survey pertained specifically to a cannabinoid antagonist that reverses cannabis intoxication within
30 minutes, we believe the survey results are indicative of likely prescribing behavior for any otherwise comparable product that takes
effect rapidly even if not specifically within 30 minutes.
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. On April 1, 2022, the U.S. House of Representatives, for the
second time, voted in favor of a bill to decriminalize marijuana at the federal level by removing cannabis from the list of controlled
substances under the Controlled Substances Act. Although it is currently uncertain whether this bill will be subsequently approved by
the U.S. Senate 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 intoxication 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. This likely reflects the structural
promiscuity of the CB1 receptor. In addition, the negative effects of an intoxication from synthetics can be longer lasting and more
severe when compared with THC. These negative effects could include seizures and other dangerous outcomes. Compared with natural cannabis
products, synthetics have lower shipping weights and can more readily evade traditional drug screening methods.
Our
Growth Strategy
Our
goal is to create a therapeutic to treat the underlying cause of ACI. As noted above, there are currently no FDA approved medical
treatments on the market to specifically alleviate the negative neuropsychological 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 as an acute treatment to quickly and effectively combat the symptoms of ACI. ANEB-001 was originally under development
by Vernalis as a potential chronic treatment for obesity and other metabolic indications.
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 reversed 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).
Historical
Clinical Studies
In
2006 and 2007, two Phase 1 studies for the treatment of obesity were conducted by Vernalis for ANEB-001.
First
Phase 1 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 be sufficient to block the CB1 cannabinoid receptor.
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.
Second
Phase 1 trial
The
second Phase 1 study conducted by Vernalis (V24343-1Ob-02) compared the pharmacokinetics of a single oral dose (1 to 200 mg) of
ANEB-001 between fed and fasted states in eight subjects that were lean and in eight subjects that were overweight. There were no
apparent differences in the tolerability of ANEB-001 between the subjects that were in fed and fasted states or between 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 historical 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 historical Phase 1 studies, we believe ANEB-001 may offer the
following clinical and product benefits:
Anebulo Clinical Studies
Phase
2 THC Challenge Study in Healthy Volunteers
We
commenced a Phase 2 clinical proof-of-concept study in December 2021 at the Center for Human Drug Research (“CHDR”) in the Netherlands
to evaluate the safety, tolerability, pharmacokinetics, and effectiveness of a single dose of ANEB-001 in treating healthy subjects challenged
with delta-9-tetrahydrocannabinol, better known as THC, the primary psychoactive constituent of cannabis. Part A of the study was a randomized,
double-blind, placebo-controlled trial in 60 healthy adult occasional cannabis users randomized to three treatment arms of 20 subjects
per arm. All subjects were challenged with a single oral dose of 10.5 mg THC and then treated with single oral doses of 50 mg ANEB-001,
100 mg ANEB-001, or placebo. Subjects were monitored for 24 hours to assess safety, tolerability, and pharmacokinetics, and repeatedly
tested to determine potential effects on endpoints related to ACI symptoms. The tests also included a series of validated measures of
subjective CNS symptoms using visual analog scale (“VAS”) assessments, as well as objective measures of intoxication. We completed Part
A of the Phase 2 study in June 2022 and announced the data in a press release on July 5, 2022.
Subjects
challenged with THC and treated with placebo showed substantial CNS effects including feeling high, decreased alertness, increased body
sway, and increased heart rate. Compared to placebo, treatment of subjects with ANEB-001 led to a significant, robust, and sustained
reduction in the VAS feeling high score (p < 0.0001 at both dose levels) and improvement in the VAS alertness scale (p < 0.01).
In addition, the proportion of subjects reporting feeling high on the VAS was significantly reduced by ANEB-001 (p < 0.001). Although
THC-induced effects on body sway and heart rate in this study were small, there was also a trend towards statistical improvement of these
parameters with ANEB-001 treatment compared to placebo. The 50 mg and 100 mg doses had similar results, suggesting that lower doses should
be explored.
These
data demonstrated a highly statistically significant reduction in key symptoms of ACI, with only 10% of subjects in the 50 mg ANEB-001
group and 30% in the 100 mg group reporting feeling high compared to 75% of subjects in the placebo group (p < 0.001). ANEB-001 was
well tolerated in these healthy volunteers. Preliminary safety information showed all adverse events were mild and transient, except
in the case of one subject in the 50 mg ANEB-001 group who experienced moderate nausea and vomiting. Pharmacokinetic data are pending
and additional analyses of Part A data, including pharmacokinetic/pharmacodynamic (PK/PD) correlations, are planned.
Based on the encouraging data
from Part A, we plan to initiate Part B of the study at CHDR by the end of third quarter 2022 to evaluate lower doses of ANEB-001. We
are currently collaborating with the Model-Informed Drug Development (“MIDD”) group at the FDA to develop a PK/PD model that
will potentially allow prediction of optimal doses for treatment of ACI subjects. Preparations are ongoing for an observational study
in ACI subjects in the emergency department setting to further support the PK/PD model and ANEB-001 development. Submission of an Investigational
New Drug application (“IND”) for ANEB-001 to initiate U.S. trials is anticipated by the end of 2022.
We
believe the ongoing Phase 2 study will lay the foundation for us to engage with the FDA and/or comparable foreign regulatory authorities
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.
Contract Research Organizations
We
have engaged contract research organizations (“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 Development Limited,
formerly Vernalis (R&D) Limited (“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 Aelis Farma, which is developing
a medication based on a pregnenolone derivative to treat cannabis use disorders, and Opiant Pharmaceuticals, Inc., which is developing a drinabant injection to treat acute cannabis overdose.
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 CRO, is continually undertaking efforts to advance research and development goals. During the years ended June
30, 2022 and June 30, 2021, we incurred research and development expenses of approximately $2,962,000 and $2,270,000, 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.
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 obtaining regulatory approval, commercializing our product 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.
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 NDAs 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.
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 to be 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.