Item 1A. Risk Factors 14
Item 1B. Unresolved Staff Comments 44
Item 2. Properties 44
Item 3. Legal Proceedings 44
Item 4. Mine Safety Disclosures 44
Item 6. Reserved 46
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 53
Item 8. Financial Statements and Supplementary Data F-1
Item 9A. Controls and Procedures 54
Item 9B. Other Information 54
Item 9C Disclosure Regarding Foreign Jurisdictions That Prevent Inspections 54
Item 10. Directors, Executive Officers and Corporate Governance 55
Item 11. Executive Compensation 68
Item 12. Security Ownership of Certain Beneficial Owners and Management 72
Item 14. Principal Accountant Fees and Services 74
Item 15. Exhibits, Financial Statement Schedules 75
Signature Page 80
i
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (this “Report”)
contains forward-looking statements that involve risks and uncertainties, principally in the sections entitled “Description of Business,”
“Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
All statements other than statements of historical fact contained in this Report, including statements regarding future events, our future
financial performance, business strategy and plans and objectives of management for future operations, are forward-looking statements.
We have attempted to identify forward-looking statements by terminology including “anticipates,” “believes,” “can,”
“continue,” “could,” “estimates,” “expects,” “intends,” “may,”
“plans,” “potential,” “predicts,” “should,” or “will” or the negative of these
terms or other comparable terminology. Although we do not make forward-looking statements unless we believe we have a reasonable basis
for doing so, we cannot guarantee their accuracy. These statements are only predictions and involve known and unknown risks, uncertainties
and other factors, including the risks outlined under “Risk Factors” or elsewhere in this Report, which may cause our or our
industry’s actual results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time and it is not possible
for us to predict all risk factors, nor can we address the impact of all factors on our business or the extent to which any factor, or
combination of factors, may cause our actual results to differ materially from those contained in any forward-looking statements. All
forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation
to update any such forward-looking statements.
You should not place undue reliance on any forward-looking
statement, each of which applies only as of the date of this Report. Before you invest in our securities, you should be aware that the
occurrence of the events described in the section entitled “Risk Factors” and elsewhere in this Report could negatively affect
our business, operating results, financial condition and stock price. Except as required by law, we undertake no obligation to update
or revise publicly any of the forward-looking statements after the date of this Report to conform our statements to actual results or
changed expectations.
ii
PART I
Item 1. BUSINESS.
Business Overview
Actinium Pharmaceuticals, Inc.
is a clinical-stage, biopharmaceutical company applying its proprietary platform technology and deep understanding of radiobiology to
the development of novel targeted radiotherapies for patients with unmet needs. Our targeted radiotherapies combine the cell-killing ability
of radiation via a radioisotope payload with a targeting agent, such as a monoclonal antibody, to deliver radiation in a precise manner
inside the body to specific, targeted cells, to potentially achieve greater efficacy with lower toxicity than with external beam radiation.
They also enable a broader usage of radiation than external beam radiation as they can be used in the treatment of both solid tumors and
blood cancers, which generally cannot be treated with external radiation given their diffuse nature. Our clinical pipeline is focused
on targeting the antigens CD45 and CD33, both of which are expressed in multiple hematologic cancers, which are known to be highly sensitive
to radiation. Our clinical programs are focused on two primary areas: (1) targeted conditioning prior to a bone marrow transplant (“BMT”),
adoptive cell therapy (“ACT”) such as CAR-T or gene therapy with Iomab-B and (2) targeted radiotherapy combinations with Actimab-A
and other therapeutic agents. Our product development strategy is actively informed by clinical data with Iomab-B and Actimab-A in approximately
600 patients, including our ongoing Pivotal Phase 3 SIERRA trial, which completed its targeted enrollment of 150 patients in the third
quarter of 2021, with the last patient receiving their BMT in the fourth quarter of 2021. Our clinical pipeline has emanated from our
Antibody Warhead Enabling (“AWE”) technology platform, which is protected by over 170 issued and pending patents, trade secrets
and know-how that we are applying to the development of targeted radiotherapies for blood and solid tumor indications, independently and
with collaborators. Ongoing collaborations include a research partnership with Astellas Pharma, Inc. (“Astellas”) focused
on the development of theranostics, which enable the diagnosis and treatment, for solid tumor indications, a collaboration with EpicentRx,
Inc, focused on a novel CD47 immunotherapy targeted radiotherapy combination, leveraging EpicentRx’s RRx-01, that is being studied
in a Phase 3 trial in non-small cell lung cancer, with our clinical stage Actimab-A in AML models, and a collaboration with AVEO Oncology,
focused on developing a HER3 targeting ARC or Antibody Radiation Conjugate for solid tumors leveraging with their clinical stage antibody.
We are also utilizing our AWE technology platform to advance our research objectives focused on developing next-generation targeted radiotherapies
with our expanded research and development organization and research laboratories leveraging our drug development experience.
Targeted Conditioning
To the best of our knowledge, we are advancing the only multi-target, multi-indication, clinical-stage pipeline for targeted conditioning.
Our targeted conditioning agents are intended to potentially enable improved access and outcomes to cell-based therapies with curative
potential, including BMT, ACT, and gene therapy Conditioning in the context of BMT, ACT or gene therapy is the act of depleting certain
blood and immune-forming cells, including bone marrow stem cells and, in some cases, cancer cells prior to transplanting new cells into
a patient. Currently, conditioning is accomplished using a combination of cytotoxic chemotherapeutic agents and external radiation. These
non-targeted conditioning regimens are highly toxic and may prevent a patient from receiving a potentially curative therapy and hinder
outcomes. We believe our targeted conditioning agents have the potential to increase patient access and outcomes by way of their ability
to selectively deplete targeted cells while sparing normal healthy cells, resulting in potentially lower systemic and off-target toxicities.
We use our ARCs both at high isotope dose levels to achieve myeloablation, which fully depletes bone marrow stem cells and at lower isotope
dose levels to achieve lymphodepletion, which spares bone marrow stem cells from depletion. In addition, dosing may be titrated downward
from myeloablative doses to achieve partial myeloablation, which may be appropriate for certain gene therapy programs.
1
CD45 Targeted Conditioning Program
Iomab-B (I-131 apamistamab),
our lead candidate and targeted conditioning agent is comprised of the anti-CD45 monoclonal antibody known as apamistamab (formerly BC8)
and the radioisotope Iodine-131 (“I-131”). CD45 is an antigen expressed on leukemia, lymphoma and myeloma cancer cells, as
well as nucleated immune cells including bone marrow stem cells, but is not expressed outside of the hematopoietic, or blood forming,
system. This unique expression on blood cancer and immune cells enables simultaneous depletion of both cell types, making CD45 an optimal
antigen for targeted conditioning applications. CD45 is a cell surface antigen with an average expression of 200,000 copies per cell,
however, it only internalizes at a rate of 10-15%. We believe our ARC approach is the most effective method to target CD45 positive cells,
as the radioisotope payload linear energy transfer can readily ablate a targeted cell without requiring payload internalization like an
antibody drug conjugate or without relying on biological effector function processes like a naked antibody. Furthermore, since CD45 expression
level varies from low to high antigen density as the immune cells become more terminally differentiated, we can selectively condition
depending on the therapeutic application, from full myeloablation to transient lymphodepletion, by adjusting the dose or intensity of
the I-131 isotope payload. Full myeloablation can be achieved with high doses of I-131, as its energy pathlength and crossfire effect
can penetrate into bone marrow niches to target and deplete blood and immune system forming bone marrow stem cells. Myeloablation is applicable
to autologous or allogeneic BMT and to autologous gene-edited or modified therapies that can reconstitute a patient’s blood and
immune systems. Alternatively, low doses of I-131 can be transiently lymphodepleting and spare a patient’s bone marrow stem cells,
which we believe is ideal for ACT applications such as CAR-T. We intend to develop our CD45 targeted conditioning program for BMT, ACT
and gene therapy applications for malignant and non-malignant diseases and believe that multiple radioisotopes beyond I-131 may be utilized
including alpha and beta emitters.
Iomab-B uses high doses of
I-131 to achieve myeloablative conditioning prior to a BMT, is currently being studied in the pivotal Phase 3 Study of Iomab-B in Elderly
Relapsed or Refractory AML (“SIERRA”), clinical trial for targeted conditioning prior to an allogeneic BMT for patients with
active, relapsed or refractory (“r/r”) Acute Myeloid Leukemia, (“AML”), who are age 55 or older. Enrollment of
the planned 150 patients in the SIERRA trial was completed in the third quarter of 2021 with the last patient receiving their BMT in the
fourth quarter of 2021. Patients with active, r/r AML are not normally considered eligible for BMT and the SIERRA trial is the only randomized
Phase 3 trial to offer BMT as a treatment option for this patient population. The SIERRA trial compares outcomes of patients randomized
to receive Iomab-B and a BMT (the “study arm”) to those patients randomized to receive physician’s choice of salvage
therapy (the “control arm”). The control arm is also defined as conventional care, as no standard of care exists for this
patient population and includes over 20 agents that may be used as single agents or in combination including venetoclax, a targeted Bcl-2
inhibitor, Midostaurin and Sorafenib, targeted FLT3 inhibitors, hypomethylating agents and cytotoxic chemotherapies. Patients who fail
to achieve a Complete Remission (“CR”) on the control arm are ineligible to proceed to a BMT, but the trial design permits
these patients to “cross over” to receive the study arm treatment if they meet the eligibility criteria. The primary endpoint
of the SIERRA trial is durable Complete Remission (“dCR”) of 180 days and the secondary endpoint is Overall Survival (“OS”).
When the crossover patients receive Iomab-B and BMT, they have not achieved remission with their salvage therapy and are considered to
be failures for the primary endpoint of the study. The SIERRA trial recruited patients at 24 sites in the United States and Canada, which
includes many of the leading BMT sites based on volume. If approved, we expect our initial commercial launch would target the leading
50-100 BMT and medical centers that perform the vast majority of BMT’s in the United States. In the European Union (“EU”),
we received favorable feedback from the European Medicines Agency (“EMA”) via their scientific advice program that the trial
design, primary endpoint and planned statistical analysis from the SIERRA trial are acceptable as the basis for a Marketing Authorization
Application, or MAA. Additionally, the EMA commented that it does not anticipate the need for further standalone preclinical toxicology
or safety studies. Overall, transplant procedures in the EU are approximately fifty percent higher than in the United States with a similar
market dynamic, with a majority of BMT volume being conducted in a concentrated number of leading medical centers. Currently we intend
to secure a partner for Iomab-B in the EU.
2
Data from full patient enrollment in the SIERRA trial (151 patients), was presented at the American Society of Hematology (“ASH”)
Annual Meeting in December 2021. The data presented includes rates of BMT access and engraftment, 100-day non-relapse transplant-related
mortality (100-day TRM) and adverse events, which has been reported from interim analyses conducted at 25%, 50% 75% and 100% of patient
enrollment pursuant to the study protocol. The data presented at ASH highlighted that 100% of patients (59/59) on the study arm that received
a therapeutic dose of Iomab-B received a BMT, with a median time to BMT of 30 days, and all patients achieved neutrophil and platelet
engraftment in a median time of 18 days despite a high median blast count of 29%. On the control arm, only 17% of patients (13/76) achieved
remission after salvage therapy, and then received a BMT with a median time to BMT of 67 days and median blast count of 20%. Of the 83%
of patients failing to achieve a CR with conventional care (47/57), 30 patients were eligible to cross over to receive Iomab-B followed
by transplant. These patients are considered as having failed the primary endpoint of the study. All crossover patients who received the
therapeutic dose of Iomab-B (30/30) received a BMT, with a median time to BMT of 24 days and they achieved engraftment in a median time
of 19 days despite high median blast count of 22% at time of crossover. It was also reported that 100-day TRM of the study or Iomab-B
arm was 10% (6/59) of patients that received a BMT compared to 15% of patients (2/13) who received a BMT after salvage therapy on the
control arm. The universal engraftment rate and low 100-day TRM rate of the Iomab-B arm resulted in 53 patients potentially evaluable
for the primary endpoint compared to 11 patients in the control arm, an approximate five times difference. At each of the interim analyses
throughout the SIERRA trial, this approximate five times difference has been consistent in favor of the Iomab-B arm as a result of higher
rates of BMT engraftment and lower rates of 100-day TRM.
Data from the SIERRA trial has
also been accepted for presentation at the upcoming Transplantation & Cellular Therapy (“TCT”) Tandem Meetings of the
American Society for Transplantation and Cellular Therapy (“ASTCT”) and Center for International Bone & Marrow Transplant
Research (“CIBMTR”), which has been postponed from February to April 2022. At TCT, we expect to present additional data from
the SIERRA trial to include patients who have matured for BMT engraftment and 100-day TRM analysis, for which data was not available at
time of the submission cutoff for ASH in December of 2021. Top-line data for the primary endpoint of durable Complete Remission is expected
to be presented in the third quarter of 2022. We believe topline data from SIERRA will support the submission of a Biologics License Application
(“BLA”) with the U.S. Food and Drug Administration (“FDA”), which we expect to file in the first half of 2023.
Our Iomab-ACT program is intended
for targeted conditioning prior to ACT or gene therapy and uses the same I-131-apamistamab construct as Iomab-B at varying doses. At lower
doses of one-eighth to one-sixth of the myeloablative dose, it is applicable for lymphodepletion prior to CAR-T or certain gene therapy
applications where stem cell myeloablation is not necessary. At higher doses it is applicable for gene therapy applications where stem
cell myeloablation is necessary.
We believe our Iomab-ACT program
is highly differentiated when compared to Fludarabine and Cyclophosphamide (“Flu/Cy”) or other chemotherapy-based regimens
that are used as the standard of practice today for lymphodepletion prior to CAR-T. CD45 is an antigen expressed on certain immune cell
types that are relevant to the mechanism of CAR-T therapies including lymphocytes, regulatory T-cells and macrophages that have been associated
with clinical responses that may limit the safety, efficacy and durability of response of these CAR-T therapies including cytokine release
syndrome (“CRS”) and neurotoxicity. Some of these limitations may be attributable to the chemotherapy-based conditioning agents
that are being used prior to CAR-T therapies. Preclinical data supporting the rational for our Iomab-ACT program was presented at multiple
medical conferences in 2019. Unlike chemotherapy, Iomab-ACT is targeted in nature and, due to this CD45-directed targeting, we expect
we can improve CAR-T cell expansion, potentially resulting in responses that are more durable, but also resulting in reduced CAR-T related
toxicities. Importantly, we expect the Iomab-ACT program construct to enable lymphodepletion through a single-dose, outpatient administration
versus Flu/Cy or other chemotherapy-based lymphodepletion regimens that can require multiple infusion cycles over several days. Because
of this potentially superior profile, the Iomab-ACT construct could result in improved access to CAR-T therapy and better outcomes.
3
We are studying Iomab-ACT in a
clinical collaboration with Memorial Sloan Kettering Cancer Center (“MSKCC”) for targeted conditioning prior to administration
of MSKCC’s 19-28z CD19 targeting CAR-T in patients with relapsed or refractory B-cell acute lymphoblastic leukemia (“ALL”)
or diffuse large B-cell lymphoma (“DLBCL”). We received grant funding from the National Institute of Health (“NIH”)
to fund this trial with MSKCC being a co-recipient on this grant. This is a first of its kind study to use an ARC-based conditioning regimen
with CAR-T therapy. The hypothesized rationale for this study is that Iomab-ACT will exert an anti-tumor effect on the chemotherapy-refractory
B-ALL cells that are sensitive to radiation resulting in reduced disease burden and simultaneously deplete CD45 expressing immune cells
implicated in CAR-T related toxicities, resulting in an optimal homeostatic environment for the CAR-T cells. Results with MSKCC’s
19-28z CD-19 CAR-T in 53 patients with r/r B-ALL published in the New England Journal of Medicine reported complete remissions in 83%
(44/53) of patients, which compares favorably to standard chemotherapy regimens that have complete remission rates of 18% - 45% in this
patient population. Median event-free survival (EFS) was 6.1 months and median overall survival (OS) was 12.9 months at a median follow
up period of 29 months (range 1 – 65 months). There was a 26% (14/53) rate of Grade 3 or greater CRS and a 42% rate of Grade 3 or
4 neurotoxicity reported. The study will evaluate the feasibility of using an ARC-based conditioning regimen with CAR-T therapy and will
evaluate safety measures including incidence of CRS and neurotoxicity and efficacy measures including responses and survival outcomes.
In March 2021, we announced that patient enrollment was initiated, and the first patient was administered Iomab-ACT followed by their
19-28z CAR-T therapy. We expect proof of concept data from this study in the second half of 2022.
In addition, we are working
in collaboration with the University of California Davis to utilize Iomab-ACT conditioning with a novel anti-HIV autologous gene therapy.
We continue to identify additional gene therapies for which Iomab-ACT can be used for targeted conditioning with the goal of collaborating
with multiple academic or industry developers to establish Iomab-ACT as a non-chemotherapy universal targeted conditioning solution.
CD33 Program: Combinations and Therapeutics
Our CD33 program is evaluating
the clinical utility of Actimab-A, comprised of the anti-CD33 mAb lintuzumab linked to the potent alpha-emitting radioisotope Actinium-225
(“Ac-225”). CD33 is expressed in the majority of patients with AML and myelodysplastic syndrome (“MDS”) as well
as approximately one-third of patients with multiple myeloma. Ac-225 emits four alpha particles and can kill a cell with one alpha-particle
hit, making it one of the most powerful cell-killing agents with no know resistance mechanism to the double strand DNA breaks it can cause.
We source Ac-225 from the Department of Energy’s Oak Ridge National Laboratory.
Our CD33 development program
is driven by data obtained from nearly one hundred fifty treated patients, including results from a Phase 1/2 trial that studied Actimab-A
as a single agent at multiple dose levels in 58 patients with newly diagnosed AML, which was completed in 2018, as well as trials studying
Actimab-A in combination with other agents.
We believe that radiation delivered
internally via a targeting moiety can be synergistic when used in combination with chemotherapy, targeted agents and immunotherapy based
on mechanistic rationales supported by our own clinical data, preclinical research and scientific and clinical evidence in the literature.
We have prioritized our efforts and resources in favor of combination trials for our CD33 program development strategy rather than single
agent trials at this time as we believe Actimab-A can be a backbone therapy in AML when combined with other therapeutic modalities. Our
CD33 development program encompasses the following ongoing trials:
4
Actimab -A Combination Trials:
Actimab-A + CLAG-M
The combination of Actimab-A with CLAG-M has been
studied in a Phase 1 combination trial that was conducted in collaboration with the Medical College of Wisconsin (“MCW”) in
patients age 18 and above with r/r AML who are fit for intensive therapy. Patient enrollment was completed in November 2021. CLAG-M (cladribine,
cytarabine, filgrastim and mitoxantrone) is a salvage chemotherapy regimen that produced a 55% remission rate in patients with r/r AML
in a previous study conducted by MCW that compared outcomes of patients receiving either CLAG-M, MEC or CLAG salvage therapy regimens.
Data from the Phase 1 combination trial of Actimab-A + CLAG-M were presented at ASH in December 2021. After completion of dose-escalation
in the Phase 1 trial, the recommended Phase 2 dose was determined to be 0.75 μCi/kg of Actimab-A. 3 patients were enrolled in the
0.75 μCi/kg dose cohort, which had a 100% remission rate comprised of 1 complete remission (“CR”) and 2 complete remissions
with incomplete platelet recovery (“CRp”), there were no dose limiting toxicities (“DLTs”) or 30-day mortality
reported. Overall, a 67% (12/18) overall response rate (“ORR”) was reported across all dose cohorts (0.25 – 1.0 μCi/kg)
and remissions were achieved in every dose cohort including the 0.25 and 0.50 μCi/kg doses of Actimab-A, which have been shown to
be subtherapeutic as a single agent. In addition, there was a 72% minimal residual disease (“MRD”) negativity rate, which
compares favorably to the 39% MRD negativity rate reported by MCW with CLAG-M alone. This study enrolled patients who previously failed
Venetoclax, a targeted Bcl-2 inhibitor, and efficacy was similar in patients Venetoclax naïve and those that previously failed Venetoclax,
with a 60% response rate in previous Venetoclax failures. We are working to develop a regulatory and development pathway for the Actimab-A
CLAG-M combination and will be evaluating potential registration enabling strategies. In addition, we believe this Actimab-A + CLAG-M
combination study has provided proof of principle that the addition of Actimab-A to other AML therapies can lead to well-tolerated regimens
with improved responses, which supports our Actimab-A backbone therapy in AML strategy.
Actimab-A + Venetoclax
We are also conducting a Phase
1/2 Actimab-A combination trial with the Bcl-2 inhibitor Venetoclax in fit and unfit patients age 18 and above with relapsed or refractory
AML. This multi-center trial is being led by UCLA Medical Center. This combination is supported by mechanistic evidence in preclinical
studies using Venetoclax -resistant AML tumor cell lines. In these models, we have demonstrated that Actimab-A can deplete Mcl-1 and Bcl-XL,
two proteins implicated in mediating resistance to Venetoclax, in addition to causing potentially lethal double-stranded DNA breaks in
these CD33 expressing cells. Furthermore, in vivo studies in animal models of Venetoclax-resistant AML demonstrated robust tumor regression
and improved survival in cohorts receiving the Actimab-A Venetoclax combination compared to Venetoclax alone. The rationale for this clinical
study is that the addition of Actimab-A will; 1) have a direct anti-tumor effect via double-stranded DNA breaks and 2) deplete Mcl-1 and
Bcl-XL making the AML cells more susceptible to Venetoclax. Updated data from the Phase 1 dose escalation portion of this study was presented
at ASH in December 2021 from three dose cohorts of 0.50, 0.75 and 1.0 μCi/kg of Actimab-A in a total of 12 patients. 50% of patients
received Venetoclax therapy prior to enrollment on the Actimab-A combination trial. And 67% of patients had poor risk cytogenetics, of
which, 3 had a TP53 mutation, which is associate with poorer response rates and survival outcomes. Of the patients with a TP53 mutation,
67% achieved a remission including a patient that achieved a CR and at the time of data cutoff for ASH, the patient was in follow-up 230
days (~7.5 months). The combination of Actimab-A with Venetoclax was reported to be well-tolerated with no 30-day mortality. The data
to date support advancing to the Phase 2 portion of the trial and we expect to provide an update on the development strategy, including
consideration of patients with a TP53 mutation, after the Phase 1 dose finding portion of the trial is complete and the recommended Phase
2 dose is determined.
In addition to these ongoing
trials, we actively seek and evaluate additional modalities and agents that can be the basis for Actimab-A therapeutic combinations such
as the CD47 immunotherapy magrolimab combinations we announced at the Society for Immunotherapy of Cancer in November 2021 to leverage
our clinical experience, supply chain and AWE technology platform.
5
CD47 Based ARC Combinations in Solid Tumors
and Blood Cancers
CD47 is a macrophage checkpoint
that is upregulated in multiple cancers including blood cancers such as AML and MDS as well as solid tumors. CD47 acts as a “don’t
eat me” signal on cancer cells to suppress phagocytosis and evade detection and destruction by the immune system. It has become
an immunotherapy target of significant interest with multiple biopharmaceutical companies actively developing CD47 targeting agents across
a wide range of oncology and hematology indications. CD47 targeting agents have shown limited efficacy as single agent monotherapies in
AML/MDS or solid tumors, which has led to combinations such as with hypomethylating agents in AML/MDS. We hypothesized that targeted radiotherapy
via ARCs could synergize with CD47 targeting agents via the direct cytotoxic and immunogenic effect of ARCs without overlapping toxicities.
To explore this synergy and the potential to improve patient outcomes and we have initiated a program in AML with our Actimab-A ARC, consistent
with our strategy to establish Actimab-A a backbone AML therapy, and in solid tumors with a HER-2 targeting ARC, which emanated from our
AWE technology platform. To our knowledge, these are the first and only ARC-based targeted radiotherapy combinations with CD47 immunotherapy.
Data from these novel combinations were presented at the 36th Annual Meeting of the Society for Immunotherapy for Cancer.
The most advanced CD47 development
programs are being studied in patients with AML and MDS. Leveraging our clinical experience with Actimab-A in these indications we have
begun studying Actimab-A with the anti-CD47 antibody immunotherapy magrolimab, which is owned by Gilead Sciences, Inc., in preclinical
models of AML. In preclinical models, it was shown that in multiple AML cell lines, the combination of Actimab-A with magrolimab led to
increased phagocytosis of AML cells compared to magrolimab alone. Our studies also demonstrated that AML cell lines exposed to Actimab-A
had an upregulation of calreticulin, which is a pro-phagocytic or “eat me” signal, which we hypothesize makes Actimab-A potentially
synergistic with magrolimab and other anti-CD47 antibodies. The Actimab-A and magrolimab combination showed a significant increase in
survival compared to Actimab-A alone in a disseminated AML animal tumor model. We intend to continue to study preclinically this combination
with the goal of advancing to human clinical trials.
In January 2022, we announced
a research collaboration with EpicentRx that will evaluate Actimab-A in combination with EpicentRx’s RRx-001in AML. EpicentRx’s
RRx-001, currently under investigation in a Phase 3 trial for Small Cell Lung Cancer and in other oncology and non-oncology indications,
is a versatile next generation small molecule immunotherapeutic that targets the CD47-SIRPα axis and the NLRP3 inflammasome to
alter the tumor microenvironment and optimize immune response. This collaboration will explore the mechanistic synergy of RRx-001’s
CD47–SIRPα downregulation with Actinium’s targeted radiotherapy calreticulin upregulation to increase the immune detection
and destruction of cancer cells. Preclinical experiments have begun exploring this combination in AML models. We intend to leverage our
experience with CD47 targeting agents such as magrolimab in this collaboration. Based on Actimab-A and RRx-001 both being clinical-stage
assets, we believe there is a potentially faster pathway to clinical trials with this novel combination, particularly if the preclinical
safety and efficacy profile are in line with what was observed with Actimab-A and magrolimab.
6
Antibody Warhead Enabling Technology Platform
Our proprietary AWE technology
platform is supported by intellectual property, know-how and trade secrets that cover the generation, development, methods of use and
manufacture of targeted radiotherapies and certain of their components. Our AWE technology patent portfolio presently includes 39 patent
families comprised of 173 issued patents and pending patent applications, of which 8 are issued and 30 are pending in the United States,
and 135 are issued or pending internationally. The effective lives of the issued patents in our portfolio, or patents that may issue from
the pending applications in our portfolio, ranges from expirations between 2024 and 2042. Our technology enables the direct labeling,
or conjugation and labeling, of a biomolecular targeting agent to a radionuclide warhead and its development and use as a therapeutic
regimen for the treatment of diseases such as cancer. Our AWE intellectual property covers various methods of use in multiple diseases,
including indication, dose and scheduling, radionuclide warhead, and therapeutic combinations. We have particular expertise in utilizing
the alpha emitting isotope Ac-225 including clinical experience in treating approximately 150 patients with our alpha-emitter-based therapies,
“gold standard” linker technology and 5 issued patents in the United States and 49 patents internationally related to the
manufacturing or Ac-225 in a cyclotron, which we believe has the potential to produce higher quantities of Ac-225 than currently utilized
methods.
In 2021 we have enhanced our
research and development capabilities around AWE by securing and staffing research facilities. Our research laboratories are focused on
applying our AWE technology platform to the development of radiation conjugates and to execute on research collaborations. Our R&D
efforts employ a multidisciplinary approach leveraging our team’s knowledge and experience in cancer cell biology, radiochemistry,
radiation sciences, immunology and oncology drug development. We intend to focus on generating targeted radiotherapies using our existing
intellectual property, evaluating assets for in-licensing to complement our existing clinical pipeline and securing collaborations and
partnerships with biopharmaceutical companies. By adding research and development capabilities to our clinical development and clinical
supply chain capabilities, we seek to enable the rapid translation of radiotherapies.
Our AWE technology platform
is being utilized in our ongoing research collaboration with Astellas to arm select targeting agents owned by Astellas with the alpha-emitting
radioisotope Ac-225 for the development of theranostics for solid tumor indications, which combine the ability of radioisotopes to be
used for both diagnostic and therapeutic purposes.
We also utilized AWE to create aHER2-targeting radiotherapy using
the antibody Trastuzumab with either Ac-225 or Lu-177 radioisotopes to study in combination with magrolimab for solid tumors. Anti-CD47
monotherapies, such as magrolimab, have not shown meaningful responses in clinical studies in solid tumors. We hypothesized that radiation
directed at HER2 expressing cells would upregulate cell surface calreticulin, a pro-phagocytic “eat me” signal, that when
combined with an anti-CD47 blockade therapy would enhance antitumor activity. Data from this combination was presented at the Annual Meeting
of the Society for Immunotherapy for Cancer in November 2021. In vitro studies showed that immunogenicity, determined by binding to HER2
expressing cells, remained intact after radiolabeling Trastuzumab with Ac-225 or Lu-177. In multiple cells lines radiolabeled Trastuzumab
increased cell surface calreticulin and the combination with magrolimab increased phagocytosis. The combination of the Ac-225 or Lu-117
Trastuzumab with magrolimab slowed tumor growth in animal models of solid tumors compared to either the radiolabeled Trastuzumab or magrolimab
as single agents. We are continuing to evaluate this combination in additional tumor models, and we intend to continue to study this combination
with the goal of advancing to human clinical trials.
We are also collaborating
with AVEO Oncology (“AVEO”) to develop a targeted radiotherapy against ErbB3, also known as HER3, with the Ac-225 isotope
for solid tumor indications. HER3 is overexpressed in several solid tumor indications with high unmet needs, including colorectal, gastric,
head and neck, breast, ovarian, melanoma, prostate and bladder cancers with HER3 agents under development demonstrating activity in preclinical
and clinical studies. To our knowledge, this is the first HER3 targeting radiotherapy in development. AVEO is developing high affinity
antibodies including HER3 targeting AV-203, which has demonstrated preclinical activity across a number of solid tumor indications and
was studied in a Phase 1 open-label trial in patients with advanced solid tumors where it was found to be safe and generally well tolerated.
In March 2022, we announced that data from studies of Ac-225 radiolabeled HER3 antibody have been accepted for presentation at the American
Association for Cancer Research (“AACR”) Annual Meeting. Preliminary results contained in the AACR abstract showed potent
tumor cell cytotoxicity, complete anti-tumor response in a HER3 tumor xenograft models and significantly prolonged survival compared to
control groups (p<0.0001). Additional data from these studies will be presented at AACR in April 2022. We believe these preliminary
results support our collaboration with AVEO and given that AV-203 has clinical safety data, a potentially accelerated regulatory pathway
to clinical studies with an Ac-225 HER3 targeted radiotherapy.
Intellectual Property Portfolio and Regulatory Protections
Intellectual Property
We have developed or in-licensed
numerous patents and patent applications and possess substantial know-how and trade secrets related to the development and manufacture
of our products. As of March 2022, our patent portfolio includes 39 patent families comprised of 174 issued patents and pending patent
applications, of which 8 are issued and 30 are pending in the United States, and 135 are issued or pending internationally. Several non-provisional
patent applications are expected to be filed in 2022 based on provisional patent applications filed in 2021. More than 90% of our patents
are Actinium-owned and the remainder are in-licensed from third parties. These patents cover key areas of our business, including the
use of actinium-225 and other alpha- or beta-emitting isotopes attached to cancer targeting carriers like monoclonal antibodies in the
treatment of cancers and non-malignant medical disorders, methods for manufacturing key components of our product candidates including
actinium-225, an alpha particle emitting radioisotope and carrier antibodies, or Iodine-131, a beta particle emitting radioisotope, and
methods for manufacturing finished product candidates for use in cancer treatment.
We own two issued patents
in the United States and issued patents in Europe and Japan that relate to the composition of our Iomab-B product candidate. The basis
patent terms of these patents expire in 2036 and 2037. Four related patent applications are also currently pending in the U.S. and internationally.
In addition, we own both U.S. and international pending patent applications that relate to the use of Iomab-B or Iomab-ACT in the treatment
of cancers and non-malignant conditions. We also own five issued patents in the United States and 49 patents outside the United States
that relate to the manufacturing of actinium-225, the radionuclide used in our Actimab-A product candidate, in a cyclotron. These
patents will expire in the years 2024 through 2027. In addition, we also own U.S. and international patents and pending patent applications
that relate to the manufacturing of Actimab-A and its use in the treatment of cancers.
7
Regulatory Protections
The indications for which we
are developing our product candidates for are orphan drug designations, which are disease indications that affect fewer than 200,000 patients
in the United States and less than 5 in 10,000 patients in the EU. We have received orphan drug designation for Iomab-B and Actimab-A
for patients with AML in both the United States and the EU. As a result, if our products are to be approved, they may receive 7 years
and 10 years of market exclusivity in the United States and EU, respectively. In addition, our product candidates are biologics combined
with radioisotopes. We believe that the nature of radioisotopes having half-lives combined with the complexities of biologic drugs would
make it difficult for a manufacturer to demonstrate bioequivalence to our product candidates. The Hatch-Waxman Act requires that a manufacturer
of generic drugs, for which a biologic drug is called a biosimilar, demonstrate bioequivalence to the innovator. However, we are not aware
of any existing or pending regulations or legislation that pertains to generic radiopharmaceutical products such as our antibody radiation-conjugate
product candidates
Competition
The biopharmaceutical industry
in which we operate, specifically, the field of oncology drug development is rapidly evolving and highly competitive. Radiopharmaceuticals
for the treatment of cancer has received considerable interest from major and specialty pharmaceutical companies, biotechnology companies,
academic research institutions and other public and private entities, particularly in recent years.
For the targeted radiotherapies
we are developing, we face competition from biopharmaceuticals companies who are developing alpha particle-based therapies utilizing Actinium-225,
Radium-223 and Thorium-227. Companies developing targeted alpha therapies include Bayer AG, who owns Xofigo, the only approved alpha therapy,
that is used in the treatment of metastatic prostate cancer, Novartis AG, Telix Pharmaceuticals Limited, Point Biopharma, Inc., Fusion
Pharmaceuticals, Inc., RayzeBio, Inc., Aktis Oncology, Curie Therapeutics, RadioMedix, Inc. and Orano Med. Significant attention and resources
is being applied to Ac-225 based therapies given its high linear energy and short path length. Fusion Pharmaceuticals is studying FPI-1434,
targeting IFG-1R with Ac-225 in a Phase 1 trial in solid tumors and has recently initiated a Phase 1 study to test FGFR3 targeting agent
in development. Point Biopharma is studying PNT2002, a PSMA targeting agent for metastatic prostate cancer in a Phase 1 trial, PNT2004,
a preclinical agent targeting solid tumors expressing FAP, and PNT2001, a preclinical agent also targeting PSMA in prostate cancer, which
all utilize Ac-225. Novartis is also developing a PSMA targeting agent utilizing Ac-225 for prostate cancer. RayzeBio, Aktis Oncology
and Curie Therapeutics are all pursuing Ac-225 based therapies but have not yet disclosed cancer targets or indications.
To our knowledge, our Actimab-A
product candidate is the only clinical stage Ac-225 based therapy in active development for hematologic indications.
There are also several companies
developing beta particle-based therapies such as Bayer, Novartis, Lantheus Holdings, Inc. and Q BioMed, Inc., who all own approved products.
Beta particles used for oncology therapeutics includes Iodine-131, Lutetium-177, Strontium-89 and Yttrium-90. Companies developing beta
particle-based therapies includes Cellectar Biosciences, Inc., Clovis Oncology, Inc., Y-mAbs Therapeutics, Inc., Ipsen S.A., and Novartis.
In the field of conditioning,
pharmaceuticals currently used for myeloablation prior to a bone marrow transplant, lymphodepletion prior to CAR-T and other adoptive
cell therapies and conditioning for gene therapy are largely generic, non-targeted chemotherapeutic agents like fludarabine or busulfan
and/or total body irradiation.
In targeted conditioning,
we face competition from companies developing agents targeting CD117 (Jasper Therapeutics and Magenta Therapeutics), CD45 (Magenta Therapeutics)
and CD66 (Telix Pharmaceuticals). CD117 is expressed in normal CNS, GI, reproductive, kidney and skin tissue, which could result in on-target
toxicity to these organs. CD117 is not expressed on mature circulating immune cells and thus cannot be targeted for lymphodepletion for
adoptive cell therapy. Jasper Therapeutics, Inc, is developing JSP191, an anti-CD117 unconjugated monoclonal antibody that is being studied
in a Phase 1b trial in combination with fludarabine and total body irradiation in patients with MDS and AML. Magenta has initiated a Phase
1/2 trial for its MGTA-117 CD117 ADC and will conduct this first in human dose finding study in patients with r/r AML MDS with excess
blasts and is exploring MGTA-117 for gene therapy conditioning in preclinical studies. Magenta is also developing its CD45 ADC, which
is has not yet been studied in humans and is being evaluated in IND enabling studies.
Forty Seven, Inc.(acquired
by Gilead) announced a conditioning regimen comprised of its anti-CD47 monoclonal antibody Magrolimab with its preclinical stage FSI-174
anti-CD117 monoclonal antibody in a preclinical collaboration with bluebird bio, Inc. for conditioning prior to gene therapy.
Molecular Templates announced
a collaboration with Vertex focused on targeted conditioning using its Engineered Toxin Bodies (ETBs) with two targets that were not disclosed.
In October 2021, Vertex terminated the research collaboration with Molecular Templates. Molecular Templates has a preclinical stage CD45
ETB in development.
Telix Pharmaceuticals is developing
TLX66, a CD66 targeting antibody radio conjugated with Yttrium-90, for BMT conditioning in patients with Systemic Amyloid Light-Chain
Amyloidosis (SALA). TLX66 is also being studied in a Phase 2 investigator sponsored trial in the U.K in patients with childhood leukemia.
Allogene Therapeutics is developing
an anti-CD52 monoclonal antibody for use as a lymphodepletion agent in conjunction with CAR-T therapies. CD52 is not expressed on stem
cells and therefore cannot be used for myeloablation for a bone marrow transplant.
To our knowledge, we are the
only company with an anti-CD45 radio conjugate in clinical development and the only company with a targeted conditioning agent that has
completed enrollment of a pivotal Phase 3 trial.
8
Our Actimab-A product candidate
faces competition from several major pharmaceutical companies and biotechnology companies who are also developing multiple types of therapies
including chemotherapy, targeted agents, ADCs, monoclonal antibodies, bispecific antibodies, immunotherapies and cellular therapies for
patients with AML. The standard of care for patients with AML has long been “7+3”, which is 7 days of treatment with cytarabine
with an anthracycline on the first 3 days for patients who can tolerate intensive therapy and hypomethylating agents, azacitidine or decitabine,
for patients who are “unfit” and cannot tolerate intensive therapy. Since 2017, 9 agents have been approved for patients with
AML. These approved agents include Vyxeos (liposomal cytarabine and daunorubicin) owned by Jazz Pharmaceuticals, venetoclax, a Bcl-2 inhibitor
owned by Abbvie, FLT3 inhibitors midostaurin (owned by Novartis) and gilteritinib (owned by Astellas), Daurismo, a hedgehog pathway inhibitor
owned by Pfizer, IDH inhibitors Tibsovo (IDH1) and Idhifa (IDH2) owned by Servier, Onureg (oral azacitidine) owned by Bristol Myers Squibb
and Mylotarg, a CD33 targeting ADC owned by Pfizer.
These agents are approved in
various AML patient segments including secondary or treatment related AML (Vyxeos), patients over the age of 75 or patients unfit for
intensive therapy (venetoclax and Daurismo) and patients with a specific cytogenetic mutation such as FLT3 or IDH1/2. Despite these 9
approved agents, outcomes for patients with r/r AML remain dismal and it remains an area of high medical need that could accommodate many
new products with favorable safety and efficiency profiles.
We are pursuing CD33 because
it is expressed in virtually all patients with AML. AML is known to be highly sensitive to radiation, which lends itself to our targeted
radiotherapy approach. Also, AML has high cytogenetic and mutational heterogeneity, which targeted radiotherapy is agnostic to. Combination
therapies are commonly used in hematologic indications, but we believe we are the only clinical stage Ac-225 based product candidate that
is being explored in hematologic indications in combination with other modalities, including with the salvage chemotherapy regimen CLAG-M
in fit patients with relapsed or refractory AML as well as in combination with the Bcl-2 inhibitor venetoclax in fit and unfit patients
with relapsed or refractory AML.
In addition to developing
targeted radiotherapies, we also own patents related to the manufacturing of Ac-225 in a cyclotron. Medical grade Ac-225 is largely supplied
by the U.S. Department of Energy (“DOE”) derived from the natural decay of thorium-229 from so-called “thorium-cows”.
Additional routes of Ac-225 production are being pursued by the DOE including the generation of new thorium cows and production via a
cyclotron to increase supply. The DOE’s cyclotron production method for Ac-225 production leverages Actinium’s proprietary
technology and know-how and presents an additional path towards production of high-quality Ac-225. Previously, we utilized our cyclotron
production IP to create highly pure Ac-225. We are aware of at least six other government and non-government entities globally that have
or expect to have ability to supply Ac-225 using various methods including ITM, Niowave, Terrapower, NorthStar Medical Radioisotopes,
IONETIX Corporation, TRIUMF and Canadian Nuclear Laboratories that could be competitors should we elect to manufacture Ac-225 in the future.
We believe our cyclotron method has the potential to produce robust amounts of highly pure Ac-225, which could address potential future
Ac-225 supply constraints should multiple Ac-225 products gain regulatory approval.
Government Regulation
Governmental authorities in
the United States and other countries extensively regulate, among other things, the research, development, testing, manufacture, labeling,
promotion, advertising, distribution and marketing of radioimmunotherapy pharmaceutical products such as those being developed by us.
In the United States, the FDA regulates such products under the Federal Food, Drug and Cosmetic Act (“FDCA”) and implements
regulations. Failure to comply with applicable FDA requirements, both before and after approval, may subject us to administrative and
judicial sanctions, such as a delay in approving or refusal by the FDA to approve pending applications, warning letters, product recalls,
product seizures, total or partial suspension of production or distribution, injunctions and/or criminal prosecution.
U.S. Food and Drug Administration Regulation
Our research, development
and clinical programs, as well as our manufacturing and marketing operations, are subject to extensive regulation in the United States
and other countries. Most notably, products that may in the future be sold in the United States are subject to regulation by the FDA.
Certain of our product candidates in the United States will require FDA approval of a BLA prior to marketing. Foreign countries may require
similar or more onerous approvals to manufacture or market these products.
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FDA Approval Process for Biologics License
Applications
Prior to testing a biological
product on humans, the product must clear the preclinical testing stage. The goal of preclinical testing is to perform laboratory evaluations
of the product’s chemistry and formulation as well as evaluate the product’s potential for adverse events by performing in
vitro and animal studies. This information is packaged together and submitted to the FDA as part of an investigational new drug (“IND”)
application, which must be approved by the FDA before administering the product to human subjects in clinical trials.
From there, the product moves
to the clinical stage, where it is administered to healthy volunteers or patients. The data gathered from the preclinical testing and
clinical trials is used to support the BLA submission. The FDA must approve the BLA prior to commercial marketing of a biological product.
The BLA must include information about product development, laboratory and animal studies, human trials, manufacturing information, the
composition of the product, and proposed labeling. The approval process requires significant time and financial resources and does not
guarantee that FDA will accept the BLA filing or ultimately approve the BLA.
The Prescription Drug User
Fee Act, as amended (“PDUFA”), requires each BLA to be accompanied by a substantial user fee. The amount of the user fee changes
on an annual basis. In addition to the BLA user fee, PDUFA also imposes an annual program fee for biological products. The FDA will waive
or reduce the fee under limited circumstances, such as for first applications filed by small businesses.
Within 60 days following submission
of the BLA, the FDA reviews the BLA submission for completion to determine if it will accept it for filing. The FDA may refuse to file
the BLA if it deems the submission incomplete or not properly reviewable at the time of submission. For the BLA review process to proceed,
the BLA must be resubmitted with the necessary additional information. After the BLA is accepted for filing, the FDA commences its substantive
review of the BLA. The FDA reviews the BLA to determine, among other things, whether the proposed product is safe, potent, and/or effective
for its intended use, has an acceptable purity profile, and whether the product’s manufacturing is consistent with current Good
Manufacturing Processes (“cGMPs”) to ensure that the product meets the appropriate standards for identity, safety, strength,
quality, potency and purity.
The FDA may involve an advisory
committee for novel biological products that present complex questions of safety or efficacy. The advisory committee typically consists
of a panel that includes clinicians and other subject matter experts that assist with the reviewing and evaluating the product. While
the advisory committee provides a recommendation for whether the product should be approved and under what conditions, the FDA is not
bound to follow the recommendations. However, the advisory committee’s recommendations are usually given significant consideration.
The FDA may also consider
requiring a risk evaluation and mitigation strategy (“REMS”) if it determines that one is necessary to ensure that the biological
product is used safely. If the FDA requires a REMS, the BLA sponsor must develop and submit a proposed REMS for the BLA review process
to move forward.
The manufacturer of the biological
product is also subject to FDA inspection prior to the approval of the BLA. The purpose of the inspection is to determine whether the
manufacturer adequately complies with the applicable cGMP requirements to ensure that the biological product is manufactured safely and
within the required specifications. Additionally, the FDA may choose to inspect one or more clinical sites to assess compliance with IND
trial requirements and good clinical practices (“GCPs”). Compliance with cGMP and GCP requirements involves significant expenditures
of time, money, and effort for BLA sponsors due to associated training, recordkeeping, production, and quality control needs.
If the FDA decides not to
approve the BLA in the form submitted, it will issue what is called a complete response letter that outlines the specific deficiencies
it would like to see addressed. The deficiencies identified can be minor (e.g., labeling changes) or major (e.g., the need for additional
clinical trials). The complete response letter may also include recommended actions the applicant may take to move closer towards securing
an approval. At this point, applicants may choose to resubmit the BLA to address FDA’s concerns or withdraw the application.
In addition, under the Pediatric
Research Equity Act, a BLA or supplement to a BLA must contain data to assess the safety and effectiveness of the product 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. The FDA may grant deferrals for submission of data or full or partial waivers.
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Post-Approval Requirements
If the BLA is approved, the
FDA may include additional conditions as part of its approval, such as limiting the approval by designating specific diseases for which
the product may be used. Additionally, conditions may include requiring the labeling to include specific contraindications, warnings,
or precautions, requiring post marketing clinical trials (sometimes referred to as Phase 4 clinical trials), and implementation of surveillance
program to monitor the approved product once commercialized.
Products approved by the FDA
under a BLA are subject to ongoing regulatory requirements, including, among other things, record-keeping requirements, adverse event
reporting requirements, responsibility for reporting updated safety and efficacy information to FDA, sampling and distribution requirements,
complying with advertising and promotion requirements, and complying with cGMPs.
Quality control and manufacturing
procedures must continue to comply with cGMP requirements even after the BLA is approved. The cGMP regulations include, but are not limited
to, requirements to ensure quality control, maintain appropriate manufacturing records and documentation, and the obligation to investigate
and address deviations from cGMPs, when identified. Manufacturers are also required to register their establishments with the FDA and
certain state agencies. The establishments are also subject to unannounced inspections by regulators.
The advertising and promotion
of drug and biologic products are also subject to specific laws and regulations. These authorities provide standards for direct-to-consumer
advertising, restrictions on promoting products for uses or to patient populations that are not described in the product’s approved
uses, known as “off-label” use, limitations on industry-sponsored scientific and educational activities, and requirements
for promotional activities involving the internet.
Regulatory Enforcement
Failure to comply with applicable
regulatory requirements can result in enforcement action by the FDA, the Nuclear Regulatory Commission or other regulatory authorities,
which may result in sanctions, including but not limited to, untitled letters, warning letters, fines, injunctions, consent decrees and
civil penalties; customer notifications or repair, replacement, refunds, recall, detention or seizure of our products; operating restrictions
or partial suspension or total shutdown of production; refusing or delaying our requests for BLA premarket approval of new products or
modified products; withdrawing BLA approvals that have already been granted; and refusal to grant export.
Additional Healthcare Laws
In addition to FDA regulations,
several other types of state and federal laws may restrict our business activities, including certain healthcare laws. These laws include,
without limitation, anti-kickback laws, false claims laws, data privacy and security laws, as well as transparency laws regarding payments
or other items of value provided to healthcare providers.
The federal Anti-Kickback
Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in
return for purchasing, leasing, ordering or arranging for the purchase, lease or order of any healthcare item, good, facility or service
reimbursable under Medicare, Medicaid or other federal healthcare programs. The term “remuneration” has been broadly interpreted
to include anything of value. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one
hand and prescribers, purchasers and formulary managers on the other hand. Although there are a number of statutory exceptions and regulatory
safe harbors protecting certain common activities from prosecution or other regulatory sanctions, the exceptions and safe harbors are
drawn narrowly and arrangements must meet every element to qualify for an exception or safe harbor. Failure to meet all of the requirements
of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the federal
Anti-Kickback Statute. Instead, the arrangement will be evaluated on a case-by-case basis based on the facts and circumstances involved.
Courts have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration
is to induce referrals of federal healthcare program business, the federal Anti-Kickback Statute has been violated. Additionally, the
intent standard under the federal Anti-Kickback Statute was amended by the Patient Protection and Affordable Care Act of 2010, as amended
by the Health Care and Education Reconciliation Act of 2010, collectively the “Affordable Care Act,” to a stricter standard
such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have
committed a violation. In addition, the Affordable Care Act codified case law that a violation of the federal Anti-Kickback Statute constitutes
a false or fraudulent claim for purposes of the federal False Claims Act.
11
Federal false claims laws,
including the federal False Claims Act, and civil monetary penalties laws, prohibit any person or entity from, among other things, knowingly
presenting, or causing to be presented, a false claim for payment to the federal government, or knowingly making, or causing to be made,
a false statement to have a false claim paid. Whistleblower or qui tam provisions under the False Claims Act permit whistleblowers to
sue in the name of the federal government for False Claims Act violations, and to share in the recovery from any award. Pharmaceutical
and other healthcare companies have been prosecuted under these laws for, among other things, allegedly inflating drug prices they report
to pricing services, which in turn were used by the government to set Medicare and Medicaid reimbursement rates, and for allegedly providing
free product to customers with the expectation that the customers would bill federal programs for the product. In addition, certain marketing
practices, including off-label promotion, may also violate false claims laws.
The federal Health Insurance
Portability and Accountability Act of 1996, or HIPAA, created additional federal civil and criminal statutes that prohibit among other
actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private
third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal
investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any
materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.
Like the federal Anti-Kickback Statute, the Affordable Care Act amended the intent standard for certain healthcare fraud under HIPAA such
that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed
a violation.
In addition, if we engage
in certain activities, we may be subject to data privacy and security regulation under HIPAA, as amended by the Health Information Technology
for Economic and Clinical Health Act, or HITECH. HIPAA imposes certain requirements on covered entities, which include certain healthcare
providers, health plans and healthcare clearinghouses, and their business associates and covered subcontractors that receive or obtain
protected health information in connection with providing a service on behalf of a covered entity that involves the use or disclosure
of individually identifiable health information.
Additionally, the federal
Physician Payments Sunshine Act, created under the Affordable Care Act, and its implementing regulations, require certain manufacturers
of drugs, devices, biologicals and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health
Insurance Program (with certain exceptions) to report annually information related to certain payments or other transfers of value provided
to physicians and any ownership and investment interests held by physicians or their immediate family members. Beginning in 2022, applicable
manufacturers also will be required to report such information regarding payments and other transfers of value to physician assistants,
nurse practitioners, clinical nurse specialists, anesthesiologist assistants, certified registered nurse anesthetists and certified nurse
midwives during the previous year.
The majority of states also
have statutes or regulations similar to the aforementioned federal healthcare laws, including fraud and abuse laws, some of which are
broader in scope and apply to items and services reimbursed under Medicaid and other state programs, or, in some states, apply regardless
of the payor. Many states also have some form of health information privacy or data security laws that could apply. Further, some state
laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant