atxi20221231_10k.htm

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM10-K

For the FiscalYear Ended December 31, 2023

For the Transition Period from to .

Commission File Number 001-38114

AVENUE THERAPEUTICS,INC.

(Exact name of registrant as specified in its charter)

1111 Kane Concourse, Suite 301, Bay Harbor Islands, FL33154

(Address of principal executive offices and zip code)

(781) 652-4500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section12(b)of the Act:

(Title of Class) Trading Symbol(s) (Name of exchange on which registered)

Common Stock, par value $0.0001 per share ATXI Nasdaq Capital Market

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 Section 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 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, 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. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The aggregate market value of the voting stock held by non-affiliates of the registrant the last business day of the registrant’s most recently completed second fiscal quarter: $8,522,013.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

Class of Common Stock Outstanding Shares as of March 1, 2024

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AVENUE THERAPEUTICS, INC.

ANNUAL REPORT ON FORM 10-K

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Page

PART I

Item 1. Business 4

Item 1A. Risk Factors 25

Item 1B. Unresolved Staff Comments 52

Item 1C. Cybersecurity 52

Item 2. Properties 52

Item 3. Legal Proceedings 52

Item 4. Mine Safety Disclosures 52

PART II

Item 8. Consolidated Financial Statements and Supplementary Data 62

Item 9A. Controls and Procedures 62

Item 9B. Other Information 62

PART III

Item 10. Directors, Executive Officers and Corporate Governance 63

Item 11. Executive Compensation 63

Item 14. Principal Accountant Fees and Services 63

PART IV

Item 15. Exhibits and Consolidated Financial Statement Schedules 64

Item 16. Form 10-K Summary 67

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain matters discussed in this report may constitute forward-looking statements for purposes of the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of current or historical fact contained in this report, including statements that express our intentions, plans, objectives, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “should,” “project,” “will,” “would,” and similar expressions are generally intended to identify forward-looking statements. These statements are based on current expectations, estimates and projections made by management about our business, our industry and other conditions affecting our financial condition, results of operations or business prospects. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in, or implied by, the forward-looking statements due to numerous risks and uncertainties. Factors that could cause such outcomes and results to differ include, but are not limited to, risks and uncertainties arising from:

● our reliance on third parties for several aspects of our operations;

● our exposure to potential product liability claims;

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The forward-looking statements contained in this report reflect our views and assumptions as of the effective date of this report. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. Except as required by law, we assume no responsibility for updating any forward-looking statements to reflect events or circumstances that may arise after the date of this report, except as required by applicable law.

We qualify all of our forward-looking statements by these cautionary statements. In addition, with respect to all of our forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

SUMMARY RISK FACTORS

Our business is subject to risks of which you should be aware before making an investment decision. The risks described below are a summary of the principal risks associated with an investment in us and are not the only risks we face. You should carefully consider these risk factors, the risk factors described in Item 1A, and the other reports and documents that we have filed with the Securities and Exchange Commission (“SEC”).

Risks Pertaining to Our Business and Influence

Risks Pertaining to Our Finances

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Risks Pertaining to Reliance on Third Parties

Risks Pertaining to Regulatory Approval Process

Risks Pertaining to the Commercialization of Product Candidates

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Risks Pertaining to Intellectual Property and Potential Disputes Thereof

Risks Pertaining to the Influence of Fortress Biotech, Inc. (“Fortress”)

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PART I

Item 1.Business

Overview

Avenue Therapeutics, Inc. (“Avenue” or the “Company”) is a specialty pharmaceutical company focused on the development and commercialization of therapies for the treatment of neurologic diseases. Our current product candidates include AJ201 for the treatment of spinal and bulbar muscular atrophy (“SBMA”), intravenous tramadol (“IV tramadol”) for the treatment of post-operative acute pain, and BAER-101 for the treatment of epilepsy and panic disorders. We may in the future acquire additional product candidates.

In February 2023, we announced that we entered into a license agreement with AnnJi Pharmaceutical Co., Ltd. (“AnnJi”) whereby the Company obtained an exclusive license from AnnJi to intellectual property rights pertaining to the molecule known as JM17, which activates Nrf1 and Nrf2, enhances androgen receptor degradation and underlies AJ201, a clinical product candidate currently in a Phase 1b/2a clinical trial in the United States (“U.S.”) for the treatment of SBMA, also known as Kennedy’s Disease.

In November 2022, we completed a Share Contribution Agreement, dated May 11, 2022 (the “Share Contribution Agreement”) with Fortress Biotech, Inc (“Fortress”) to acquire the shares in Baergic Bio, Inc. (“Baergic”), which is developing BAER-101, a novel α2/3–subtype-selective gamma-aminobutyric acid ("GABA") A positive allosteric modulator (“PAM”). As a result, Baergic is a majority-controlled and owned subsidiary company of Avenue.

We have been developing IV tramadol since inception of the Company and prior to our initial public offering in 2017.

As used throughout this filing, the words “we”, “us” and “our” may refer to Avenue individually or together with our subsidiary, Baergic, each as dictated by context.

We are a majority-controlled subsidiary of Fortress.

Product Candidates Under Development

AJ201

AJ201 is a novel, first-in-class asset in development for the treatment of SBMA. It was designed to modify SBMA through multiple mechanisms, including degradation of the mutant androgen receptor ("AR") protein and stimulation of the Nrf1 and Nrf2 pathways, which are involved in protecting cells from oxidative stress that can lead to cell death.

AJ201 is currently being studied in a Phase 1b/2a multicenter, randomized, double-blind clinical trial in six clinical sites across the U.S., which aims to evaluate the safety, pharmacokinetic (“PK”) and pharmacodynamic (“PD”) data and clinical response of AJ201 in patients suffering from SBMA. In July 2023, we announced the first patient was dosed in the Phase 1b/2a trial of AJ201. The 12-week, multicenter, randomized, double-blind Phase 1b/2a clinical trial of AJ201 enrolled 25 patients, randomly assigned to AJ201 (600 mg/day) or placebo. The primary endpoint of the study is to assess the safety and tolerability of AJ201 in subjects with clinically and genetically defined SBMA. Secondary endpoints include pharmacodynamic data measuring change from baseline in mutant AR protein levels in skeletal muscle and changes in the fat and muscle composition as seen on MRI scans, which are believed to be biomarkers indicating likelihood for longer term clinical improvement. Further details about this study can be found at ClinicalTrials.gov (Identifier: NCT05517603). Information on clinicaltrials.gov does not constitute part of this Annual Report on Form 10-K.

In January 2024, we announced the completion of enrollment for the Phase 1b/2a trial with topline data anticipated in the second quarter of 2024.

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IV Tramadol

Under the terms of certain agreements described herein, we have an exclusive license with Revogenex to develop and commercialize IV tramadol in the United States. In 2016, we completed a pharmacokinetic study for IV Tramadol in healthy volunteers as well as an end of phase 2 meeting with the U.S. Food and Drug Administration (“FDA”). In the third quarter of 2017, we initiated a Phase 3 development program of IV Tramadol for the management of post-operative pain. In December 2019, we submitted a New Drug Application (“NDA”) under the 505(b)(2) regulatory pathway for IV tramadol and received a Complete Response Letter (the “First CRL”) from the FDA in October 2020. In February 2021, we resubmitted the NDA for IV Tramadol. The FDA assigned a Prescription Drug User Fee Act (“PDUFA”) goal date of April 12, 2021 for the resubmitted NDA for IV Tramadol. On June 14, 2021, we announced that we had received a second Complete Response Letter (the “Second CRL”) from the FDA regarding our NDA for IV tramadol. We submitted a formal dispute resolution request (“FDRR”) with the Office of Neuroscience of the FDA on July 27, 2021. On August 26, 2021, we received an Appeal Denied Letter from the Office of Neuroscience of the FDA in response to the FDRR submitted on July 27, 2021. On August 31, 2021, we submitted a FDRR with the Office of New Drugs (“OND”) of the FDA. On October 21, 2021, we received a written response from the OND of the FDA stating that the OND needed additional input from an Advisory Committee in order to reach a decision on the FDRR. On February 15, 2022, a Joint Meeting of the Anesthetic and Analgesic Drug Products Advisory Committee and the Drug Safety and Risk Management Advisory Committee was held. In the final part of the public meeting, the Advisory Committee voted yes or no on the following question: “Has the Applicant submitted adequate information to support the position that the benefits of their product outweigh the risks for the management of acute pain severe enough to require an opioid analgesic in an inpatient setting?” The results were 8 yes votes and 14 no votes. On March 18, 2022, we received an Appeal Denied Letter from the OND in response to the FDRR. On August 31, 2022, the Company disclosed that, on June 17, 2022, following the receipt of the Appeal Denial Letter, the Company submitted a Type A Meeting Request and related briefing documents to the FDA. The meeting was granted by the Division of Anesthesia, Analgesia, and Addiction Products (“DAAAP”) on June 27, 2022, and scheduled for August 9, 2022. The Company submitted a briefing document presenting a study design that the Company believed has the potential to address the comments and deficiencies noted in the Letter and sought the DAAAP’s guidance to refine the study design that would support a resubmission of a New Drug Application for the Company’s current lead product candidate, IV tramadol. The meeting on August 9, 2022 was a collaborative discussion on the study design and following the meeting, we incorporated the FDA’s suggestions from the meeting minutes and submitted a detailed study protocol that could form the basis for the submission of a complete response to the Second CRL.

The Company participated in a Type C meeting with the FDA in March 2023 to discuss a proposed study protocol to assess the risk of respiratory depression related to opioid stacking on IV tramadol relative to an approved opioid analgesic. We announced in April 2023 that the Company received official meeting minutes from the Type C meeting with the FDA. The Type C meeting minutes indicate that the FDA and the Company are in agreement with a majority of the proposed protocol items and are in active discussion about remaining open items. The minutes also indicated that the FDA agreed that a successful study would support the submission of a complete response to the second Complete Response Letter for IV tramadol pending final agreement on a statistical analysis plan and a full review of the submitted data in the complete response as well as concurrence from the DAAAP.

In January 2024, we announced that we reached final agreement with the FDA on the Phase 3 safety study protocol and statistical analysis approach, including the primary endpoint. The final non-inferiority study is designed to assess the theoretical risk of opioid-induced respiratory depression related to opioid stacking on IV tramadol compared to IV morphine. The study will randomize approximately 300 post-bunionectomy patients to IV tramadol or IV morphine for pain relief administered during a 48-hour post-operative period. Of note, IV tramadol demonstrated safety and efficacy in this same surgical model in two Phase 3 efficacy trials. Patients will have access to IV hydromorphone, a Schedule II opioid, for rescue of breakthrough pain. The primary endpoint is a composite of elements indicative of opioid induced respiratory depression.

We plan to initiate the study as soon as possible, subject to having the necessary financing.

BAER-101 (novel α2/3–subtype-selective GABA A PAM)

Baergic is a clinical-stage pharmaceutical company founded in December 2019 that focuses on the development of pharmaceutical products for the treatment of neurologic disorders. Baergic was acquired by the Company in 2022 pursuant to a stock contribution agreement (the “Contribution Agreement”) with Fortress, in order to strategically align with Avenue’s goals of building a pipeline of product candidates designed to treat neurologic diseases. Baergic’s pipeline currently consists of a single compound, BAER-101, a novel α2/3–subtype-selective GABA A positive allosteric modulator. BAER-101 (formerly known as AZD7325) was originally developed by AstraZeneca in clinical trials including over 700 patients.

In August 2023, we reported preclinical data for BAER-101 from an in vivo evaluation in SynapCell’s Genetic Absence Epilepsy Rate from Strasbourg (“GAERS”) model of absence epilepsy. The GAERS model mimics behavioral, electrophysiological and pharmacological features of human absence seizures and has been shown to be an early informative indicator of efficacy in anti-seizure drug development. In the model, BAER-101 demonstrated full suppression of seizure activity with a minimal effective dose of 0.3 mg/kg administered orally.

Under the Contribution Agreement, Fortress also agreed to assign to us certain intercompany agreements existing between Fortress and Baergic, including a Founders Agreement and Management Services Agreement.

Our Strategy

Our primary objective is to establish each of our product candidates as an invaluable part of a treating physician’s repertoire of available pharmaceutical options for the treatment of patients with neurologic diseases. The key elements of our strategy include:

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AJ201 and the SBMA Treatment Market

SBMA Background

We are currently focused on developing AJ201 for the treatment of SBMA, a rare, inherited, X-linked genetic neuromuscular disease primarily affecting men. Onset of the disease is typically in adulthood, between the ages of 30 and 50, and results in significant debilitating symptoms and decreased quality of life issues.

The condition is caused by a polyglutamine expansion in the AR which leads to production of an abnormal AR protein that forms aggregates responsible for muscle atrophy focused in the spinal-bulbar region of the body. The weakening of the bulbar muscles affects chewing, speech and swallowing, with patients prone to choking or inhaling foods or liquids, resulting in airway infection. SBMA also affects muscles in the limbs, leading to difficulty walking and injury caused by falling. Although there is a range of cited prevalence rates in the literature, a recent study using genetic analysis to estimated disease prevalence of 1:6,887 males. (Zanovello M et al.Brain. 2023; doi:10.1093/brain/awad050).

Currently, there is no FDA approved treatment for SBMA, and patients are managed with physical therapy, steroids, and pain management in the United States. Therapies in development focus on the reduction of aggregated mutant androgen receptors and resultant neurotoxicity.

AJ201 Overview

AJ201 is a pleiotropic small molecule that was designed to modify multiple mechanisms including degradation of the abnormal AR protein and stimulation of Nrf1 and Nrf2, which are involved in protecting cells form oxidative stress which can lead to cell death. We believe AJ201 may treat SBMA by enhancing mutant protein degradation and decreasing neuroinflammation. Based on the mechanism of action, AJ201 may also be able to treat other polyQ diseases such as Huntington’s disease, and spinocerebellar ataxias.

AJ201 has been granted Orphan Drug Designation by the FDA for SBMA, Huntington’s disease, and spinocerebellar ataxia.

Development History and Strategy

Preclinical efficacy data has shown that AJ201: (1) reduces levels and accumulation of the mutant AR protein in mouse muscle tissues; (2) enhances degradation of mutant AR in SBMA patient fibroblasts; and (3) leads to improved motor function in symptomatic animals compared with vehicle control based on a grip test in a transgenic mouse model of SBMA disease.

In 2021, a Phase 1 single ascending dose and multiple ascending dose study was conducted with AJ201 in healthy volunteers in Australia. A total of 72 subjects were enrolled and none were withdrawn due to safety concerns. The drug was shown to be well tolerated with no serious adverse events and no significant food effect on drug absorption. The drug-proportional exposure was over 40-fold of the dose ranging from 15 mg to 600 mg and drug absorption plateaued above 600 mg. No drug accumulation was seen over repeated daily treatment.

A Phase 1b/2a multicenter double-blind randomized clinical trial, which is currently fully enrolled, is designed to assess the tolerability of AJ201 in patients with clinically and genetically defined SBMA with a secondary objective of assessing the pharmacokinetics and pharmacodynamics of AJ201. The study has been conducted in the U.S. across six sites including Stanford University, University of California, Irvine, the National Institutes of Health, Mayo Clinic Jacksonville, Mayo Clinic Rochester, and Washington University in St. Louis. The patients are dosed once daily orally with 600 mg of AJ201 for 12 weeks with a four-week follow-up period.

Further details on the study can be found using the ClinicalTrials.gov identifier NCT05517603. Information on clinicaltrials.gov does not constitute part of this Annual Report on Form 10-K.

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Tramadol and The U.S. Postoperative Pain Market

Postoperative Pain Market

We are currently focused on developing IV tramadol for the management of postoperative acute pain. Even though the postoperative pain market is entrenched with low cost, generic pain relievers, we believe that there remains a significant unmet medical need for safer and better-tolerated analgesics.

The major goal in the management of postoperative pain is minimizing the dose of medications to lessen side effects while still providing adequate pain relief. Understanding the range of available interventions and considering the type of surgery is essential in order to provide safe and effective pain management. The general consensus among pain management practitioners is that use of more than one modality (i.e., molecules with different mechanisms or with different routes of administration) is optimal for successful postoperative pain management. The most commonly prescribed agents in the immediate postoperative pain market are typically acetaminophen, NSAIDS, and opioid analgesics. Acetaminophen and NSAIDs are not sufficiently effective as the sole agent for pain management after major surgery in most patients. However, when used in conjunction with opioids, acetaminophen and NSAIDs offer substantial benefits as the quality of analgesia is often improved or enhanced due to their differentiated mechanism of action.

Traditional opioids offer safe and effective postoperative pain control and can be used in combination with other pain management agents and techniques. However, the side effects of opioids, such as morphine, include sedation, dizziness, nausea, vomiting, constipation, physical dependence, tolerance, and respiratory depression. Physical dependence and addiction are clinical concerns that may prevent proper prescribing and, in turn, lead to inadequate pain management. Less common side effects include delayed gastric emptying, hyperalgesia, immunologic and hormonal dysfunction, muscle rigidity, and myoclonus.

Tramadol

Tramadol, a synthetic dual-acting opioid, is a centrally acting analgesic with weak opioid agonist properties. It also works via the inhibition of serotonin and noradrenaline re-uptake and blocking nociceptive impulses at the spinal level. These opioid and non-opioid modes of action are synergistic, essentially providing “multimodal therapy” with the use of a single drug. Tramadol is also commonly combined with acetaminophen or NSAIDS in clinical practice. Tramadol has a well-established efficacy and safety profile and has been used throughout the world for more than 30 years. In the United States, tramadol is approved and marketed as an oral agent indicated in adults for the management of pain severe enough to require an opioid analgesic and for which alternative treatments are inadequate. Tramadol was first approved in the United States in 1995, under the trade name Ultram® immediate release tablet (Ortho-McNeil-Janssen). Ultracet®, a combination oral product containing tramadol and acetaminophen, is also marketed in the United States (Ortho-McNeil-Janssen). According to Symphony Health Solutions, approximately 30 million prescriptions for tramadol and tramadol-containing drugs were filled in retail pharmacies in the United States in 2020.

Tramadol is a Schedule IV controlled substance, which are defined by the DEA as drugs with a low potential for abuse and low risk of dependence. For comparison, many, but not all, other opioids are scheduled by the DEA as Schedule II which are defined by the DEA as drugs with a high potential for abuse.

The clinical trials from our development program are summarized below:

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Below is a summary of the available intravenous analgesic options in postoperative pain management currently available in the United States:

Advantages of IV Tramadol

Parenteral tramadol is approved and used for the management of postoperative acute pain throughout much of the world. Parenteral formulations include IV, intramuscular, or IM, and subcutaneous, or SC, formulations. During the 10-year period from 2010 to 2019, approximately 370 million doses of parenteral tramadol were used in Europe, according to data from IQVIA (a third-party prescription data provider). There is no parenteral formulation currently approved in the United States.

We believe that IV tramadol, if approved, can fill the unmet need in the post-surgical setting and could be an effective alternative to traditional opioids. We believe that the introduction of an IV formulation of tramadol in the United States will address many of the shortcomings of other opioid agonists, and acetaminophen, and NSAIDs, all of which are currently used in the postoperative setting. We believe IV tramadol’s potential advantages compared to current standard-of-care agents, along with the known efficacy, safety and tolerability profile for oral tramadol support the use of an IV formulation in the post-operative setting. We believe that the risks associated with the use of IV tramadol will be benign compared to other opioids, and consistent with that of the currently marketed oral tramadol products. Consequently, IV tramadol’s unique profile could position it to become an invaluable part of a treating physician’s repertoire of available pharmaceutical options in the management of postoperative pain.

We administered IV tramadol over approximately 15 minutes in our Phase 3 efficacy trials. We believe that our method of administration of IV tramadol may provide significant benefits such as a potentially more favorable tolerability profile, compared to previously approved methods of administration of IV tramadol in Europe, which is typically accomplished via a slow push over 2 to 3 minutes. In addition, our IV tramadol dosing regimen produces a similar Cmax (maximal blood level) and AUC (overall systemic exposure) to those of oral tramadol at steady state, which we believe helps with the transition from IV to oral therapy in the post-surgical setting.

Based on the trials performed in Europe and the data generated with oral tramadol, we believe that IV tramadol, if approved, will be an attractive option for physicians who treat postoperative pain in the U.S., due to the following attributes:

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Clinical Development History

Revogenex, our Licensor, completed multiple nonclinical PK and toxicology studies in dogs, a Phase 1 dose proportionality study and a thorough QT/QTc (“TQT”) study of IV tramadol in healthy volunteers, or the TQT Study. The dose proportionality study was designed to compare maximum exposure and cumulative exposures of IV tramadol to that of oral tramadol, and to assess the dose proportionality of IV tramadol in healthy adult volunteers. The TQT Study was done to evaluate whether IV tramadol has the potential to affect the “corrected QT interval”, or QTc, in healthy volunteers. The QTc represents electrical depolarization and repolarization of the heart ventricles. A lengthened QTc is a marker for the potential of ventricular arrhythmias. The results of these studies are consistent with oral tramadol’s known toxicology profile, pharmacokinetics and pharmacology.

PK Study for IV Tramadol

In general, Phase 2 clinical trials include initial proof-of-concept efficacy studies, dose-finding studies, and initial safety assessments in the target (i.e., to-be-treated) population. We did not conduct Phase 2 clinical trials for IV tramadol because tramadol is a known analgesic, and oral tramadol is labeled “for the management of pain severe enough to require an opioid analgesic and for which alternative treatments are inadequate” in the United States. Instead, we completed pharmacokinetic (“PK”) simulations and conducted a pharmacokinetic and safety study in healthy volunteers, in order to select a Phase 3 dose and dosing regimen designed to achieve exposure to tramadol similar to that provided by oral tramadol. In 2016, we completed a Phase 1 PK study for IV tramadol in healthy volunteers. A PK study generally involves dosing an experimental medicine in healthy volunteers and taking a series of blood measurements from the study participants to understand how the body handles the drug. A PK study provides information on important parameters such as systemic exposure, maximal and minimal levels of drug concentration in the blood and their time courses. The PK study we conducted was used to select a dose and dosing regimen of IV tramadol that achieves similar exposure to that provided by oral tramadol at steady state.

The PK study was designed as a three-way cross over study in 18 healthy volunteers. Each subject in the study served as his/her own control and received oral tramadol as well as two different doses of IV tramadol. Based on the results of the PK study, we decided to use a 50 mg dose in our Phase 3 program.

Our Clinical Development Strategy for IV Tramadol

At our EOP2 meeting with FDA in 2016, we discussed Phase 3 program requirements for IV tramadol and confirmed the key elements of the Phase 3 program design. We conducted two Phase 3 trials to evaluate the safety and efficacy of IV tramadol, and one additional safety study. All three trials enrolled patients who required IV analgesia following surgery. Over 1,000 patients were enrolled in the Phase 3 program. We believe that the design of our Phase 3 program is consistent with the design of Phase 3 programs for other analgesics being developed.

Postoperative pain following bunionectomy (orthopedic surgery model). The first Phase 3 trial was conducted in patients undergoing bunionectomy surgery, which is considered an orthopedic surgical model. 409 patients were randomized and treated in a 1:1:1 ratio to one of two doses of IV tramadol, or placebo, for 48 hours. The primary efficacy endpoint was Sum of Pain Intensity Difference over 48 hours (SPID 48), which is a measure of the overall effectiveness of the drug in reducing pain intensity during the 48-hour period. This trial commenced in the third quarter of 2017. In May 2018, we announced the trial met its primary endpoint and all key secondary endpoints.

Postoperative pain following abdominoplasty (soft tissue model). The second Phase 3 safety and efficacy trial was conducted in patients undergoing abdominoplasty surgery, which is considered a soft-tissue surgical model. 370 patients were randomized and treated in a 3:3:2 ratio to IV tramadol, placebo or a standard-of-care comparator arm. The primary efficacy endpoint was Sum of Pain Intensity Difference over 24 hours (SPID 24). The trial commenced in December 2018. In June 2019, we announced the trial met its primary endpoint and all key secondary endpoints.

Open-label safety study. We initiated the safety study in December 2017 and ran this study concurrently with the two Phase 3 trials. 251 patients were enrolled in the safety study, which had an open label, single arm design. We completed this study in May 2019 and the results showed that IV tramadol was well-tolerated in multiple surgical models with an adverse event profile consistent with known pharmacology.

In subsequent discussions with the FDA following our Complete Response Letters, we reached final agreement with the FDA in January 2024 on a final Phase 3 non-inferiority safety study designed to assess the theoretical risk of opioid-induced respiratory depression related to opioid stacking on IV tramadol compared to IV morphine. The study will randomize approximately 300 post post-bunionectomy patients to IV tramadol or IV morphine for pain relief administered during a 48-hour post-operative period. Of note, IV tramadol demonstrated safety and efficacy in this same surgical model in two Phase 3 efficacy trials. Patients will have access to IV hydromorphone, a Schedule II opioid, for rescue of breakthrough pain. The primary endpoint is a composite of elements indicative of opioid induced respiratory depression. We intend to initiate the study as soon as possible, subject to having the necessary financing.

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License Agreement with Revogenex Ireland Ltd.

Effective as of February 17, 2015, Fortress obtained a worldwide (with the exception of Canada, Central America and South America with respect to 50 mg and 100 mg IV tramadol HCl injections) exclusive license to make, market and sell IV tramadol pursuant to an agreement with Revogenex, a privately held company in Dublin, Ireland, (the "Tramadol License Agreement"). Under the terms of the Tramadol License Agreement, Fortress paid Revogenex an up-front licensing fee of $2.0 million upon execution and an additional $1.0 million on June 17, 2015. A $1.0 million milestone payment was due upon NDA submission in December 2019 which was incurred by Avenue. There is also an additional milestone totaling $3.0 million due upon the FDA approval of IV tramadol. Additional high single-digit to low double-digit royalty payments on net sales of licensed products are due. Royalties will be paid on a product-by-product and country-by-country basis until the expiration in each country of the valid patent claim. In return, Fortress obtained the exclusive worldwide rights to three U.S. patents related to the “Intravenous Administration of tramadol”: U.S. Patent No. 8,895,622 (the ’622 patent), which issued on November 25, 2014; U.S. Patent No. 9,561,195 (the ’195 patent), which issued on February 7, 2017; and U.S. Patent No. 9,566,253 (the ’253 patent), which issued on February 14, 2017 (all with the exception of Canada, Central America and South America with respect to 50 mg and 100 mg IV tramadol HCl injections). Additionally, Fortress acquired the rights to an open U.S. Investigational New Drug Application pertaining to IV tramadol, as well as all supporting documentation and relevant correspondence with the FDA. Further, under the Tramadol License Agreement, Fortress assumed the rights and obligations of Revogenex under its current manufacturing agreement with Zaklady Farmaceutyczne Polpharma ("Polpharma"), or (the "Manufacturing Agreement"). Fortress transferred all its rights and obligations under the Tramadol License Agreement and the Manufacturing Agreement to us pursuant to an Asset Transfer Agreement, dated as of May 13, 2015.

The Tramadol License Agreement will expire on a product-by-product and country-by-country basis upon the expiration of the last licensed patent right, unless the agreement is earlier terminated. In addition to standard early termination provisions, the Tramadol License Agreement may also be terminated early by: (i) Revogenex if the FDA does not issue an approval or otherwise issues a “not approvable” notice for the NDA within 27 months after the NDA has been filed with the FDA (Avenue submitted the NDA to the FDA in December 2019), although this termination right will be tolled if we are using commercial reasonable efforts in our negotiations with the FDA for approval and if we receive a “not approvable” notice (Avenue announced the receipt of the First CRL from the FDA in October 2020), we will have a 15 month period to correct any issues and re-submit the NDA for approval, (ii) us if we reasonably determine prior to NDA approval that the development of IV tramadol is not economically viable, or (iii) either Revogenex or us (provided we are using or have used commercially reasonable efforts to commercialize IV tramadol) if, after the third anniversary date of the commercial launch, we fail to achieve annual net sales with respect to IV tramadol of at least $20 million in any given calendar year, with certain exceptions.

BAER-101 and the Addressable Market

BAER-101 Overview and Strategy

BAER-101 (formerly known as AZD7325) is a novel selective oral GABA-A α2 and α3 PAM. Modulators of GABA-A receptors ("GABA-ARs") have entered a new age in their clinical development with multiple assets moving forward since the 2019 U.S. FDA approval of brexanolone (Zulresso®) and 2022 U.S. FDA approval of ganaxolone (ZTALMY®). These compounds are being developed for a host of therapeutic indications including epilepsy, panic disorders, pain, depression, and other disease states. BAER-101 is a small molecule potentiator of GABA-ARs with oral bioavailability that preferentially activates α2- and α3-containing GABA-ARs.

Preclinical data support the efficacy of BAER-101 as a novel anxiolytic and antiepileptic. Consistent with its selectivity over α1-preferring GABA-ARs, we believe BAER-101 may have a low risk of producing sedation and memory impairment.

BAER-101 has demonstrated efficacy in several preclinical models which we believe supports clinical trial development. BAER-101 produced potent anxiolytic-like effects in rodents, anticonvulsant activity in certain rodent seizure models, efficacy in rodent models of Dravet syndrome and in a rodent model of Fragile X syndrome. In studies in rodents, BAER-101 was well-tolerated, with minimal motor and memory impairment. In preclinical studies, BAER-101 was also well-tolerated with respect to physical dependence and abuse.

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Diseases Currently Treated with Nonselective GABA-A Drugs: Benzodiazepines

Epilepsy Background

Epilepsy is a chronic disease that manifests as recurrent unprovoked seizures from abnormal electrical discharge in the brain. An epilepsy diagnosis requires at least 2 unprovoked seizures.

The current standard of care treatment involves use of one or more anti-epileptic drugs (“AED”). Side effects of approved therapies include dizziness, nausea, headache, vomiting, fatigue, vertigo, ataxia, blurred vision, and tremor. Even with the availability of approved drugs, 30% of patients do not achieve seizure control with two or more AEDs and these patients are characterized as drug-resistant. The consequences of poorly controlled epilepsy can be quite severe and include shortened lifespan, excessive bodily injury, neuropsychological and psychiatric impairment, and social disability.

Benzodiazepines are a class of AED that are used to treat seizures (convulsions). The use of benzodiazepines for chronic diseases such as epilepsy is limited by the adverse event profile including drowsiness, confusion, dizziness, impaired coordination, increased risk of falls and accidents, and depression. More serious risks associated with the use of benzodiazepines include profound sedation, respiratory depression, coma, and death when used in combination with opioids; risks of abuse, misuse, and addiction; and the risk of life-threatening acute withdrawal reactions following abrupt discontinuation or rapid dose reduction.

Studies have shown that people with seizures have a deficit in GABA neurotransmission. GABA, a major inhibitory neurotransmitter, inhibits the activity of nerves that could initiate seizures. Benzodiazepines mainly work by affecting the GABA neurotransmitters in the brain. Specifically, benzodiazepines enhance the activity of GABA by binding to its receptor, and opening its chloride channel, enabling release of GABA, resulting in anticonvulsant activity.

Benzodiazepines act non-selectively by enhancing the inhibitory effects of gamma-amino butyric acid (GABA) at GABA-A receptors containing either an α1, α2, α3, or α5 subunit. The field has progressed with the development of selective GABA-A receptor modulators that preferentially target one or more receptor subunits and BAER-101 is such a modulator. BAER-101 is selective for the α2, α3 receptor subunits and, as a result we believe it could potentially provide an anti-convulsant effect while limiting adverse events associated with the α1 receptor.

Panic Disorder Background

Panic disorder is a common form of acute anxiety disorder manifesting as frequent panic attacks unrelated to specific situations. Panic attacks involve sudden, intense episodes of apprehension, terror, feelings of impending doom and intense urge to flee, with symptoms reaching peak intensity within ten minutes. Patients can end up presenting to the emergency room simulating physical symptoms which can include labored breathing, heart palpitations, nausea, upset stomach, chest pain, feelings of choking and smothering, dizziness, sweating, lightheadedness, chills, heat sensations, and trembling. Other symptoms may include depersonalization, derealization, and fears of mental illness, losing control, or dying.

Panic disorder is treated with a combination of cognitive behavioral therapy and anxiolytics (drugs that reduce anxiety). These drugs include the following classes: benzodiazepines, tricyclics, selective serotonin reuptake inhibitors (SSRIs), and serotonin-norepinephrine reuptake inhibitors (SNRIs). Adverse events can be problematic with existing medications, especially with benzodiazepines, that have the potential for symptom exacerbation and abuse.

BAER-101 and AZD7325 Development History

BAER-101 (AZD7325) has been studied in various preclinical studies demonstrating:

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A total of 722 male and female subjects have been exposed to BAER-101 in clinical trials and the drug was well tolerated across multiple clinical studies. Studies completed to date include a single ascending dose (SAD) study, a multiple ascending dose (MAD) study, a Japanese SAD study, a 11C-flumazenil-labeled PET study, an exploratory study specifically designed to address cognition and sedation, a study to evaluate drug abuse potential, a study exploring BAER-101’s cytochrome P450 (CYP) induction potential, a study investigating the co-administration of BAER-101 with an oral contraceptive (OC), and two Phase 2 efficacy studies in patients with generalized anxiety disorder (GAD), all performed by AstraZeneca. BAER-101 has been administered as a single dose up to 100 mg and repeated doses up to 50 mg administered once daily (QD) for 7 days or 15 mg twice daily (BID) for 28 days. Cincinnati Children’s Hospital Medical Center has also completed an investigator-initiated pilot trial in patients with Fragile X Syndrome.

In August 2023, we reported preclinical data for BAER-101 from an in vivo evaluation in SynapCell’s GAERS model of absence epilepsy. The GAERS model mimics behavioral, electrophysiological and pharmacological features of human absence seizures and has been shown to be an early informative indicator of efficacy in anti-seizure drug development. In the model, BAER-101 demonstrated full suppression of seizure activity with a minimal effective dose of 0.3 mg/kg administered orally.

Competition

The pharmaceutical industry is characterized by rapidly advancing technologies, intense competition and a strong emphasis of proprietary products. We face competition and potential competition from a number of sources, including pharmaceutical and biotechnology companies, generic drug companies, drug delivery companies and academic and research institutions. In addition, companies that are active in different but related fields represent substantial competition for us. Many of our competitors have significantly greater capital resources, larger research and development staffs and facilities and greater experience in drug development, regulation, manufacturing and marketing than we do. These organizations also compete with us to recruit qualified personnel, attract partners for joint ventures or other collaborations, and license technologies that are competitive with ours. To compete successfully in this industry, we must identify novel and unique drugs or methods of treatment and then complete the development of those drugs as treatments before our competitors do so.

We believe that IV tramadol, if approved, will compete with a number of opioid and non-opioid drugs that are currently available for the management of acute pain or in development. The most commonly used opioids in the postoperative and acute pain settings are morphine, hydromorphone and fentanyl. In 2020, the FDA also approved OLINVYK (oliceridine), an intravenous opioid agonist for the management of moderate to severe acute pain in adults, where the pain is severe enough to require an intravenous opioid and for whom alternative treatments are inadequate. The non-opioid drugs used in this setting include Combogesic (combination IV acetaminophen and ibuprofen), Ofirmev (IV acetaminophen) and IV formulations of NSAIDs such as Dyloject (diclofenac), Toradol (ketorolac), Anjeso (meloxicam) and Caldolor (ibuprofen). In addition, we also expect to compete with agents such as Exparel (bupivacaine lipsome injectable suspension), Zynrelef (bupivacaine and meloxicam) and Xaracoll (bupivacaine implant).

In addition to approved products, there are a number of product candidates in development for the management of acute pain. In addition to reformulations and fixed-dose combination products of already available therapies, there are also several novel agents in clinical development such as VX-548 (Vertex Pharmaceuticals), LTG-001 (Latigo Biotherapeutics), STC-004 (SiteOne Therpaeutics), NTM-001 (Neumentum) and CA-008 (Concentric Analgesics).

We believe that BAER-101, if approved, will compete with a number of selective and non-selective GABA A receptor agonists. The most commonly used therapies for anxiety and epilepsy are benzodiazepines. Commonly prescribed benzodiazepine therapies are Valium (diazepam), Ativan (lorazepam), Alepam (oxazepam), Alodorm (nitrazepam), Euhypnos (temazepam), Xanax (alprazolam), Clonazepam (klonopin). There are other selective GABA A receptor agonists in clinical development such as darigabat (Cerevel Therapeutics), ENX101 (Engrail Therapeutics), and SAN711 (Saniona).

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We believe that AJ201, if approved, will compete with a number of programs targeting various neurologic pathways. There are no FDA approved therapies to treat SBMA. Product candidates in development for the treatment of SBMA include NIDO-361 (Nido Biosciences) and AAV gene therapy targeting mutant androgen receptor (University of Pennsylvania). In Japan, Leuprorelin (Takeda) is approved for the treatment of SBMA but is not approved outside of Japan.

Intellectual Property

General

Our goal is to obtain, maintain and enforce patent protection for our proprietary technologies, including methods of treatment, to preserve our trade secrets, and to operate without infringing on the proprietary rights of other parties, both in the United States and in other countries. Our policy is to actively seek to obtain, where appropriate, the broadest intellectual property protection possible for our product candidates, proprietary information and proprietary technology through a combination of contractual arrangements and patents in the United States.

Patents and other proprietary rights are crucial to the development of our business. We will be able to protect our proprietary technologies from unauthorized use by third parties only to the extent that our proprietary rights are covered by valid and enforceable patents, are supported by regulatory exclusivity, or are effectively maintained as trade secrets. We have several patents and patent applications related to our proprietary technologies, but we cannot guarantee the scope of protection of the issued patents, or that such patents will survive a validity or enforceability challenge, or that any of the pending patent applications will issue as patents.

Generally, patent applications in the United States are maintained in secrecy for a period of 18 months or more. The patent positions of biotechnology and pharmaceutical companies are highly uncertain and involve complex legal and factual questions. Therefore, we cannot predict the breadth of claims allowed in biotechnology and pharmaceutical patents, or their enforceability. To date, there has been no consistent policy regarding the breadth of claims allowed in biotechnology patents. Third parties or competitors may challenge or circumvent our patents or patent applications, if issued. If our competitors prepare and file patent applications in the United States that claim technology also claimed by us, we may have to participate in interference proceedings declared by the USPTO to determine priority of invention, which could result in substantial cost, even if the eventual outcome is favorable to us. In the case of inventorship contests relating to patent applications filed on or after March 16, 2013, we may have to participate in derivation proceedings initiated at the Patent Trial and Appeal Board (PTAB), which could also result in substantial cost. Because of the extensive time required for development, testing and regulatory review of a potential product, it is possible that before we commercialize any of our products, any related patent may expire or remain in existence for only a short period following commercialization, thus reducing any advantage of the patent. However, the life of a patent covering a product that has been subject to regulatory approval may have the ability be extended through the patent restoration program, although any such extension could still be minimal.

If a patent is issued to a third party containing one or more preclusive or conflicting claims, and those claims are ultimately determined to be valid and enforceable, we may be required to obtain a license under such patent or to develop or obtain alternative technology, neither of which may be possible. In the event of litigation involving a third-party claim, an adverse outcome in the litigation could subject us to significant liabilities to such third party, require us to seek a license for the disputed rights from such third party, and/or require us to cease use of the technology. Moreover, our breach of an existing license or failure to obtain a license to technology required to commercialize our products may seriously harm our business. We also may need to commence litigation to enforce any patents issued to us or to determine the scope and validity of third-party proprietary rights. Litigation would involve substantial costs.

IV Tramadol

Pursuant to the Tramadol License Agreement described above, we have exclusive, worldwide commercialization rights to all Revogenex patents, including patent applications, divisionals, continuations, and continuations-in-part, that are directed to IV tramadol (with the exception of Canada, Central America, or South America with respect to 50 mg and 100 mg IV tramadol HCl injections). Currently, this includes U.S. Patent No. 8,895,622 (“the ’622 patent”), U.S. Patent No. 9,561,195 (“the ’195 patent”), U.S. Patent 9,566,253 (“the ’253 patent”), U.S. Patent No. 9,962,343 (“the ’343 patent”), U.S. Patent No. 10,406,122 (“the ’122 patent”), U.S. Patent No. 9,693,949 (“the ’949 patent”), U.S. Patent 9,968,551 (“the ’551 patent”), U.S. Patent No. 9,980,900 (“the ’900 patent”), U.S. Patent No. 10,022,321 (“the ’321 patent”), U.S. Patent No. 10,537,521 (“the ’521 patent”), U.S. Patent No. 10,624,842 (“the ’842 patent”), U.S. Patent No. 10,751,279 (the ‘279 patent), U.S. Patent No. 10,729,644 (the ‘644 patent), U.S. Patent No. 10,646,433 (“the ‘433 patent”), U.S. Patent No. 10,617,635 (“the ‘635 patent”), U.S. Patent No. 10,729,645 (”the ‘645 patent”), U.S. Patent No. 10,751,277 (“the ‘277 patent”) and U.S. Patent No. 10,751,278 (“the ‘278 patent”), and any related patent applications or future patents, including divisionals, continuations, and continuations-in-part.

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The ’622 patent is directed to and claims methods of: treating pain by administering a therapeutically effective dose of tramadol intravenously over a time period from 10 minutes to about 45 minutes (i.e., the rate of IV tramadol administration); treating pain in humans by intravenously administering tramadol in solution at a range of concentrations over the same time period; treating acute pain in humans by administering IV tramadol over 10 to 30 minutes, such that at least one side effect is reduced; and treating acute postoperative pain by administering tramadol to a human patient intra-operatively at wound closure, or from first demand of analgesia postoperatively, intravenously over a time period from 10 to 30 minutes, in conjunction with administering further tramadol doses post-operatively and administering a different intravenous opioid analgesic which is not tramadol. Further claims of the ’622 patent are directed to various effective doses, including 50 mg. These methods of treatment may provide significant benefits (e.g., reduced side effects) over previously approved methods of administration of IV tramadol, in which the dose was typically accomplished over a two to three-minute period. Additional claims of the ’622 patent focus on the intravenous administration of tramadol over 15 (±2) minutes, which represents the preferred method of administration that we will be pursuing in obtaining approval of our product through the FDA. The ’622 patent further describes and claims pharmacokinetic properties of our proprietary method of treatment (e.g., Tmax, Cmax and AUC), which are different from the previously achieved pharmacokinetics of prior IV tramadol formulations, such as Tramal® solution for injection (available outside the U.S.). This patent is scheduled to expire on October 20, 2032, absent possible regulatory patent term extensions.

In view of additional prior art discovered after the issuance of the ’622 patent, we have focused efforts on obtaining further patent coverage for the technology. Pursuant to the Tramadol License Agreement, we have exclusive commercialization rights to all continuation patent filings of the ’622 patent. As a first step, we have prosecuted further claims in multiple continuation patent applications of the ’622 patent, in which extensive searches were conducted and all information known to be material to patentability was brought to the attention of the USPTO. The goal was to obtain further patent claims which patentably differentiate over the prior art. To date, our efforts have resulted in the issuance of the ’195 patent, which issued from U.S. Application Serial No. 14/550,279 on February 7, 2017; the ’253 patent, which issued from U.S. Application Serial No. 14/713,775 on February 14, 2017; the ’343 patent, which issued from U.S. Application Serial No. 14/550,279 on May 8, 2018; and the ’122 patent, which issued from U.S Application Serial No. 15/972,684 on September 10, 2019; all of which are entitled “Intravenous Administration of tramadol,” and all of which contain the same disclosure (specification) as that of the ’622 patent. The ’195, ’253, ’343 and ’122 patents are scheduled to expire on the same day as the expiration of the ’622 patent (October 20, 2032 absent possible regulatory patent term extensions).

The ’253 patent includes claims directed to a method of treating moderate to severe acute pain in a human patient by a dose of about 50 mg of IV tramadol over a time period from 10 minutes to 20 minutes and administering further doses of tramadol at two to six-hour time intervals (each dose being administered intravenously over the same time period).

The ’343 patent includes claims directed to similar subject matter but varies from the ’253 patent in that it specifically claims treating acute post-operative pain. There is also a continuation patent application pending with the USPTO.

The ’195 patent includes claims directed to a method of treating moderate to severe acute pain by administering to a human patient a dose of about 50 mg of IV tramadol over 10 to 20 minutes, and administering further doses of IV tramadol at two to six hour time intervals to treat pain in said patient, (each dose administered over 10 to 20 minutes), such that the Cmax does not exceed the Cmax of 100 mg oral tramadol administered every six hours for nine doses. The term Cmax refers to the maximum plasma concentration of tramadol achieved during a dosing interval. The claims of the ’195 patent therefore further focus on a goal of the technology — that the blood plasma levels of tramadol resulting from our 50 mg intravenous dose to a patient would not be significantly greater than the blood plasma level of the blood plasma levels of tramadol that are already routinely experienced by patients in the United States who are administered oral doses of 100 mg tramadol. Tramadol hydrochloride is approved in the United States for oral administration in an amount from 50 mg to 100 mg administered every four to six hours, not to exceed 400 mg/day.

The ’122 patent includes claims directed to a method of treating moderate to severe acute pain or acute post-operative pain by administering to a human patient undergoing an operation a dose of about 50 mg of tramadol at about 2 to about 6 hour time intervals for at least about 48 hours to treat pain in said patient, wherein each dose of tramadol is administered intravenously over a time period from 10 minutes to 20 minutes, such that the patient is treated for acute postoperative pain. Further claims call for at least one dose of tramadol to be administered over 15 (±2) minutes.

The ’253, ’195, ’343 and ’122 patents include further claims to the treatment method, including also administering one or more doses of an IV opioid analgesic that is not tramadol as rescue medicine to the patient to treat breakthrough pain. The claims are further directed to the use of the treatment method for postoperative pain, and claims in the ’195, ’343, and ’122 patents are also directed to the treatment method resulting in a reduction in a side-effect associated with tramadol therapy selected from nausea, vomiting, or both.

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The ’278 and ’277 patents are directed to the treatment method, for example, where acute pain is treated.

Other patents are directed to tramadol doses other than about 50 mg. For example, the patents include the ’279 patent and the ’433 patent (about 60 mg tramadol), and the ’521 patent and the ’321 patent (about 25 mg tramadol).

The ’645, ’644, and ’635 patents are directed to various aspects of the treatment method wherein tramadol is co-administered with another analgesic: ketorolac (the ’645 patent), another analgesic selected from NSAIDs, acetaminophen, and another opioid (the ’644 patent), or acetaminophen (the ’635 patent).

We believe that the administration of, e.g., a 50 mg IV tramadol dose over the prolonged time interval is efficacious and also may advantageously lead to a lower incidence of side effects and increased drug tolerability. Additionally, we believe that the claims of these patents patentably differentiate over all prior art that we are aware of and which was made of record with the USPTO.

The Tramadol License Agreement also grants us the exclusive commercialization rights to the ’949 patent and any related patent applications or future patents, including divisionals, continuations, and continuations-in-part. The ’949 patent is directed to an IV tramadol dosing regimen and issued on July 4, 2017. This new patent describes and claims a dosing regimen in which our IV tramadol product is dosed to a human patient(s) for treating acute pain in a manner such that the plasma levels obtained (including but not limited to Cmax and AUC) are very similar to treatment with a 100 mg oral dose of tramadol hydrochloride to a human patient(s) every six hours at steady state. This is accomplished by intravenously administering a first dose of tramadol 50 mg to a human patient; then intravenously administering a second dose of tramadol 50 mg about 2 hours after the first dose; intravenously administering a third dose of tramadol 50 mg about 2 hours after the second dose; and thereafter intravenously administering doses of tramadol 50 mg at dosage intervals of about 4 hours. It is believed that this dosing regimen may provide advantages over the commercially available oral doing regimen, and further allows the patient to be stepped down from the IV tramadol dosing regimen to an oral dosing regimen with less concern about deleterious effects which might occur from a switch from IV to oral analgesic medicine (e.g., as would be the case where the switch to an oral version of the drug provides a much different Cmax and AUC than the IV dose provides at steady state). This new dosing regimen is the result of considerable experimentation by us, and a prior art search has not revealed any similar dosing regimen being used or published with respect to IV tramadol infusions. The patent term of the ’949 patent is scheduled to expire on May 24, 2036, absent possible regulatory patent term extensions.

A continuation of the ’949 patent issued as the ’551 patent on May 18, 2018, claiming the same dosing regimen except that it includes claims that specify that the mean Cmax after the third administered dose of tramadol is similar to the mean Cmax at steady-state for a dosing regimen of 100 mg tramadol HCl administered orally every 6 hours, and/or specifies pharmacokinetic parameters for Cmax and/or AUC at steady-state. The ’551 patent is scheduled to expire on the same day as the ’949 patent (May 24, 2036, absent possible regulatory patent term extensions).

The ’900 patent (a continuation-in-part of the ’949 patent) issued on May 29, 2018 and is directed to the same dosing regimen, except that it includes claims that specify the pharmacokinetic parameters after the third administered dose of tramadol. Further continuation patent applications are pending for (i) the 50 mg dosing regimen to human patients experiencing acute pain or acute post-operative pain; (ii) the 50 mg dosing regimen directed to administering a first dose of tramadol 50 mg to a human patient and thereafter intravenously administering additional doses of tramadol to the human patient(s) in an amount of about 50 mg tramadol at dosage intervals of about 4 hours, except that a second dose is intravenously administered as a loading dose at a shortened interval as compared to the dosage interval of about 4 hours, and (iii) administering the 50 mg dosing regimen as described with an NSAID as well. The ’900 patent is scheduled to expire on the same day as the ’949 patent (May 24, 2036, absent possible regulatory patent term extensions).

The License Agreement also grants us the exclusive commercialization rights to continuation applications of the ’949, ’551, and ’900 patents (and related applications) that are currently pending at the USPTO. This includes, but is not limited to, U.S. Application Serial No. 15/976,503 (“the ’503 application”), a continuation of the ’551 patent and filed on May 10, 2018; U.S. Application Serial No. 16/223,522 (“the ’522 application”), a continuation of the ’199 application and filed on December 18, 2018; U.S. Application Serial No. 15/986,199 (“the ’199 application”), a continuation of the ’900 patent and filed on May 22, 2018; and U.S. Application Serial No. 16/223,556 (“the ’556 application”), a continuation of the ’503 application and filed on December 18, 2018. The ’503, ’522, and ’199 applications are directed to various dosing regimens for intravenous administration of a 50 mg dose of tramadol. The ’556 application is directed to various dosing regimens for intravenous administration of a 60 mg dose of tramadol.

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The Tramadol License Agreement further grants us exclusive commercialization rights to new patents/patent applications pending with the USPTO directed to the intravenous administration of tramadol co-administered with other analgesics. Currently, these patent applications include U.S. Application Serial No. 16/269,213 (“the ’213 application”, now the ’279 patent), a continuation of the ’556 application and filed February 6, 2019; U.S. Application Serial No. 16/269,124 (“the ’124 application”; now U.S. Patent No. 10,729,644), a continuation of the ’522 application and filed on February 6, 2019; U.S. Application Serial No. 16/375,363 (“the ’363 application”, now the ’635 patent), a continuation of the ’213 application and filed on April 4, 2019 (now U.S. Patent No. 10,751,279); and U.S. Application Serial No. 16/376,382 (“the ’382 application”, now the ’645 patent), a continuation of the ’213 application and filed on April 5, 2019. The ’213 application is directed to intravenously administering a first dose of 60 mg of tramadol, later administering doses every 6 hours (except for the second dose, which is a loading dose administered in a shorter time period), and also administering another analgesic. The ’124 application (now the ’644 patent) is similar, but it claims a dosage of 50 mg. The ’363 application is also similar to the ’213 application, in that it claims 60 mg, but it varies in that it specifies acetaminophen as the other analgesic. The ’382 application is similar to the ’124 application, in that it claims 50 mg, but it varies in that it specifies ketorolac as the other analgesic.

The Tramadol License Agreement also grants us the exclusive commercialization rights to the ’321 patent, which is directed to an IV tramadol dosing regimen and issued on July 17, 2018. This new patent describes and claims a dosing regimen in which our IV tramadol product is dosed to a human patient(s) for treating acute pain by intravenously administering a first dose of tramadol 25 mg to a human patient; then intravenously administering a second dose of tramadol 25 mg about 2 hours after the first dose; intravenously administering a third dose of tramadol 25 mg about 2 hours after the second dose; and thereafter intravenously administering doses of tramadol 25 mg at dosage intervals of about 4 hours. The ’321 patent is scheduled to expire on April 13, 2037, absent possible regulatory patent term extensions.

A continuation of the ’321 patent issued as the ’521 patent on January 21, 2020, claiming the same dosage as the ’321 patent (25 mg), but over dosing intervals of about 4 hours, where the second dose is intravenously administered as a loading dose at a shortened interval as compared to the interval of about 4 hours. It further claims this method of treatment, where the at least one side effect, selected from nausea, vomiting, and seizure, is reduced. The ’521 patent is scheduled to expire on the same day as the ’321 patent (April 13, 2037, absent possible regulatory patent term extensions).

With the exception of 50 mg and 100 mg dosages of IV tramadol HCl in Canada, Central America, and South America, the Tramadol License Agreement also grants us the exclusive commercialization rights to certain foreign patents and patent applications, including PCT applications. With the exception of the territory constraint listed above, we have the exclusive commercialization rights to PCT Application No. US/2012/033304 and any related patents or patent applications.

In sum, we believe that our patent filings will prevent third parties from marketing a generic version of our product without infringing claims of the patent(s) we are seeking. Further, we have conducted clearance searches of U.S. and foreign issued patents, and have not identified any bars to the commercialization of our tramadol technology.

BAER-101

In December 2019, Baergic licensed intellectual property related to BAER-101 (formerly known as AZD7325) from AstraZeneca Plc (“AZ”) and Cincinnati Children’s Hospital Medical Center (“CCHMC”) relating to AZD7325 including four issued U.S. patents and related foreign patents. Two of the issued U.S. patents claim the compound itself, related cinnoline compounds, and pharmaceutical preparations thereof and related foreign patents, including in Canada, China, France, Germany, Italy, Japan, Spain, Sweden, Switzerland, and United Kingdom. Two additional US patents claim methods of use of the compound as it relates to an orphan disease. The compound-related patents may first begin to expire as early as December 2026 and the method of use patents may first begin to expire as early as 2036.

AJ201

In February 2023, we licensed intellectual property rights pertaining to the molecule known as JM17 which underlies the final product form AJ201. The intellectual property licensed includes issued patents in the US relating to the compound itself, and methods of use for treating various medical conditions associated with the androgen receptor. The compound-related patent may first begin to expire as early as 2029 and the method patent as early as 2028. There is also an additional issued patent relating to methods of treating various neurodegenerative disorders which may first begin to expire in 2040.

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Other Intellectual Property Rights

We depend upon trademarks, trade secrets, and continuing technological advances to develop and maintain our competitive position. We also depend upon the skills, knowledge and experience of our scientific and technical personnel, as well as that of our advisors, consultants and other contractors. This knowledge and experience we call “know-how.” To help protect our proprietary know-how which is not patentable, and for inventions for which patents may be difficult to enforce, we rely on trade secret protection and confidentiality agreements to protect our interests. To this end, we require all employees, scientific advisors, consultants, collaborators and other contractors, upon commencement of a relationship with us, to enter into confidentiality agreements, which prohibit the disclosure of confidential information and, in the case of parties other than our research and development collaborators, require disclosure and assignment to us of the ideas, developments, discoveries and inventions important to our business. These agreements are designed to protect our proprietary information and to grant us ownership of technologies that are developed in connection with their relationship with us. These agreements may not, however, provide protection for our trade secrets in the event of unauthorized disclosure of such information.

Supply and Manufacturing

The chemical name for tramadol hydrochloride is cis-2-[(dimethyl amino) methyl]-1-(3-methyoxyphenyl) cyclohexanol hydrochloride. Unless otherwise specified, the term tramadol refers to the racemic mixture of the (±) cis isomers. IV tramadol (Tramadol Hydrochloride Injection) is a sterile solution formulation of tramadol HCl 50 mg/1 mL, for IV administration. Each unit of IV tramadol consists of glass ampoules of 50 mg of tramadol HCl and sodium acetate as buffering agent in 1 mL of water for injection. The final drug product is stable at room temperature.

We do not own or operate manufacturing facilities for the production of our product candidates, nor do we have plans to develop or own manufacturing operations in the foreseeable future. Currently, we have one manufacturer, Polpharma, who subcontracts several activities to another manufacturer, to provide us clinical and commercial supply of IV tramadol in accordance with current Good Manufacturing Practice ("CGMP") requirements. We also may plan to qualify a backup manufacturer. We will be obligated to purchase a minimum amount of final packaged drug product from our current manufacturer over the course of five years commencing upon the approval of our NDA for IV tramadol. We will pay a fixed per dose unit fee to our current manufacturer in addition to a low single digit royalty on net sales revenue for a certain period of time and a milestone payment amount of $2.0 million upon FDA approval of IV tramadol.

We and our manufacturers, as well as their key subcontractors, are and will be subject to extensive government regulation in connection with the manufacture of any pharmaceutical product, including ongoing periodic and unannounced inspections by the FDA, the DEA and corresponding state, European and other foreign agencies to ensure strict compliance with CGMPs and other applicable state, federal and foreign regulations. We do not have control over third party manufacturers’ compliance with these regulations and standards, other than through contractual obligations and audit oversight. If they are deemed out of compliance with CGMPs, product recalls could result, inventory could be destroyed, production could be stopped and supplies could be delayed or otherwise disrupted.

If we need to change manufacturers after commercialization, the FDA and some corresponding foreign regulatory agencies must approve these new manufacturers in advance, which will involve testing and additional inspections to ensure compliance with CGMPs and other FDA regulations and standards and may require significant lead times and delay. Furthermore, switching manufacturers may be difficult because the number of potential manufacturers is limited. It may be difficult or impossible for us to find a replacement manufacturer quickly or on terms acceptable to us, or at all.

Government and Industry Regulations

Government authorities in the United States, at the federal, state and local level, and other countries extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing and export and import of products such as those we are developing.

U.S. Drug Development

In the United States, the FDA regulates drugs under the Food, Drug and Cosmetic Act ("FDCA"), and its implementing regulations. Since IV tramadol is an opioid, such drugs are also regulated by the DEA as controlled substances under the Controlled Substances Act, even at the drug development stage. Drugs are also subject to other federal, state and local statutes and regulations. The process of obtaining regulatory approval and maintaining subsequent compliance with applicable federal, state and local statutes and regulations require the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during product development, the approval process or after approval may subject an applicant to administrative or judicial sanctions. These sanctions could include, among other actions, the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold, untitled or warning letters, voluntary product recalls or market withdrawals, product seizures, total or partial suspension of production or distribution injunctions, fines, consent decrees, refusals of government contracts, restitution, disgorgement or civil and criminal penalties. Any regulatory, compliance or enforcement action by any agency or judicial enforcement action could have a material adverse effect on our product candidates during development and after regulatory approval, or our Company. If we fail to manufacture IV tramadol in sufficient quantities and at acceptable quality and pricing levels, fail to comply with additional DEA requirements related to controlled substances, or fail to fully comply with CGMP regulations, we may face delays in the commercialization of IV tramadol, if approved, or be unable to meet market demand, and may be unable to generate potential revenues.

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Our product candidates must be approved by the FDA through one of FDA’s available drug approval processes before they may be legally marketed in the United States – (1) an NDA submitted under section 505(b)(1) of the FDCA; (2) an abbreviated new drug application (“ANDA”) under section 505(j); or (3) a new drug application submitted under section 505(b)(2) of the FDCA (505(b)(2) application). We have already submitted our first 505(b)(2) application and intend to utilize the 505(b)(2) regulatory approval pathway for any additional product candidates. Development and approval of drugs generally involves the following:

● Submission of an application (NDA, ANDA or 505(b)(2)) to the FDA;

● FDA review and approval of the NDA.

The nonclinical testing, clinical trials and review process requires substantial time, effort and financial resources, and we cannot be certain that any approvals for our product candidates will be granted on a timely basis, if at all. The data required to support an NDA are generated in two distinct developmental stages: nonclinical and clinical. The nonclinical development stage generally involves synthesizing the active component, developing the formulation and control procedures and determining the manufacturing process, as well as carrying out non-human toxicology, pharmacology and drug metabolism studies in the laboratory, which may support subsequent clinical testing in humans. In the case of documentation to support a 505(b)(2) NDA, this nonclinical data may be referenced in literature or the FDA’s previous findings of safety and efficacy for a listed drug. The sponsor must submit the results of the nonclinical studies, together with manufacturing information, analytical data, any available clinical data or literature and a proposed clinical protocol, to the FDA as part of the IND. An IND is a request for authorization from the FDA to administer an investigational drug product to humans, and must become effective before clinical trials may begin. An IND automatically becomes effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions related to one or more proposed clinical trials and places the IND on clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. As a result, submission of an IND may not result in the FDA allowing clinical trials to commence.

The clinical stage of development involves the administration of the product candidate to healthy volunteers and patients under the supervision of qualified investigators, generally physicians not employed by or under the sponsor’s control, in accordance with GCPs, which include the requirement that all research subjects provide their informed consent for their participation in any clinical trial. Clinical trials are conducted under protocols detailing, among other things, the objectives of the trial, dosing procedures, subject selection and exclusion criteria and the parameters to be used to monitor subject safety and assess efficacy. Each protocol, and any subsequent amendments to the protocol, must be submitted to the FDA as part of the IND. Further, each clinical trial must be reviewed and approved by an independent IRB for each institution where the trial will be conducted to ensure that the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the informed consent form that must be provided to each subject or his or her legal representative and must monitor the clinical trial until completed.

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Clinical Trials

Clinical trials are generally conducted in three sequential phases, known as Phase 1, Phase 2 and Phase 3, and may overlap.

Post-approval trials, sometimes referred to as Phase 4, may be conducted after initial marketing approval. These trials are used to gain additional experience from the management of patients in the intended therapeutic indication. In certain instances, the FDA may mandate the performance of Phase 4 clinical trials as a condition of approval of an NDA.

Before approval, progress reports detailing the results of the clinical trials, among other information, must be submitted at least annually to the FDA, and written IND safety reports must be submitted to the FDA and investigators for serious and unexpected suspected adverse events, findings from other studies suggesting a significant risk to humans exposed to the same or similar drugs, findings from animal or in vitro testing suggesting a significant risk to humans, and any clinically important rate increase of a serious suspected adverse reaction compared to that listed in the protocol or investigator brochure. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, if at all. The FDA or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the trial is not being conducted in accordance with the IRB’s requirements or the use of the drug raises any safety concerns. Additionally, some clinical trials are overseen by an independent group of qualified experts organized by the sponsor, known as a data safety monitoring board or committee. Depending on its charter, this group may determine whether a trial may move forward at designated check points based on access to certain data from the trial.

There are also requirements governing the reporting of ongoing clinical trials and completed trial results to public registries. Sponsors of certain clinical trials of FDA-regulated products are required to register and disclose specified clinical trial information, which is publicly available at www.clinicaltrials.gov. Information related to the product, patient population, phase of investigation, study sites and investigators and other aspects of the clinical trial is then made public as part of the registration. Sponsors are also obligated to discuss the results of their clinical trials after completion. Disclosure of the results of these trials can be delayed until the new product or new indication being studied has been approved. However, there are evolving rules and increasing requirements for publication of all trial-related information, and it is possible that data and other information from trials involving drugs that never garner approval could require disclosure in the future.

Concurrent with clinical trials, companies usually develop additional information about the chemistry and physical characteristics of the drug as well as finalize a process for manufacturing it in commercial quantities in accordance with CGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate, and, among other things, a drug manufacturer must develop methods for testing the identity, strength, quality, and purity of the final drug product. Appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.

NDA and FDA Review Process

The results of nonclinical studies and clinical trials, together with other detailed information, including extensive information on manufacturing and drug composition and proposed labeling, are submitted to the FDA in the form of an NDA requesting approval to market the drug for one or more specified indications. The FDA reviews an NDA to determine, among other things, whether a drug is safe and effective for its intended use and whether the product is being manufactured in accordance with CGMPs to assure and preserve the product’s identity, strength, quality, and purity. FDA approval of an NDA must be obtained before a drug may be legally marketed in the United States.

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Under the PDUFA as amended in 2017, each NDA must be accompanied by a user fee. The FDA adjusts the PDUFA user fees on an annual basis. According to the FDA’s current fee schedule for fiscal year (FY) 2024, effective through September 30, 2024, the user fee for an application requiring clinical data, such as an NDA, is $4,048,695. Clinical data, as interpreted by the FDA to assess fees under PDUFA, include (1) study reports or literature reports of what are explicitly or implicitly represented by the applicant to be adequate and well-controlled trials for safety or effectiveness or (2) reports of comparative activity (other than bioequivalence and bioavailability studies), immunogenicity, or efficacy, where those reports are necessary to support a claim of comparable clinical effect. The term does not include bioequivalence and bioavailability studies submitted in support of an NDA. PDUFA also imposes an annual Prescription Drug Program Fee ($416,734 per approved prescription drug product for FY 2024) for establishments named as the applicant in a human drug application. An establishment is not to be assessed more than five (5) prescription drug program fees in a given fiscal year. Fee waivers or reductions are available in certain circumstances, including waiver of the application fee for the first application filed by a small business.

The FDA performs an administrative review of an NDA before accepting it for filing and may request additional information rather than accepting the applications. The FDA must make a decision on accepting an NDA for filing within 60 days of receipt. Once the submission is accepted for filing, the FDA begins an in-depth scientific and technical review of the NDA. Under the goals and policies agreed to by the FDA under PDUFA, the FDA has ten months from the filing date in which to complete its initial review of a standard NDA and respond to the applicant, and six months from the filing date for an NDA designated for priority review. The FDA does not always meet its PDUFA goal dates for standard and priority NDAs, and the review process is often significantly extended by FDA requests for additional information or clarification.

Before approving an NDA, the FDA will conduct a pre-approval inspection of the manufacturing facilities for the new product to determine whether they comply with CGMPs. The FDA will not approve the product unless it determines that the manufacturing processes and facilities are in compliance with CGMP requirements and adequate to assure consistent production of the product to specifications. The FDA may also audit data from clinical trials to ensure compliance with GCP requirements. Additionally, the FDA may refer applications for novel drug products or drug products which present difficult questions of safety or efficacy to an Advisory Committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation regarding whether the application should be approved and, if so, under what conditions. The FDA is not bound by the recommendations of an Advisory Committee, but it considers them carefully when making decisions. NDAs submitted under Section 505(b)(2) are typically not referred to an Advisory Committee for consideration unless new safety information is revealed in the review cycle. The FDA likely will re-analyze the clinical trial data, which could result in extensive discussions between the FDA and the applicant during the review process. The review and evaluation of an NDA by the FDA is extensive and time consuming and may take longer than originally planned to complete, and we may not receive a timely approval, if at all.

After the FDA evaluates an NDA, it will issue an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing of the drug with prescribing information for specific indications. A Complete Response Letter indicates that the review cycle of the application is complete and the application will not be approved in its present form. A Complete Response Letter usually describes the specific deficiencies in the NDA identified by the FDA, and may require additional clinical data, such as an additional pivotal Phase 3 clinical trial, and other significant and time-consuming requirements related to clinical trials, nonclinical studies or manufacturing. If a Complete Response Letter is issued, the applicant may resubmit the NDA, addressing all of the deficiencies identified in the letter, or withdraw the application. Even if such data and information are submitted, the FDA may decide that the NDA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive, and the FDA may interpret data differently than the sponsor interprets the same data.

There is no assurance that the FDA will approve a product candidate for marketing, and the sponsor may encounter significant difficulties or costs during the review process. If a product receives marketing approval, the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited, which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings or precautions be included in the product labeling, or it may condition approval on changes to the proposed labeling. The FDA also may condition approval on the development of adequate controls and specifications for manufacturing and a commitment to conduct post-marketing testing and surveillance to monitor the potential effects of approved products. For example, the FDA may require Phase 4 trials designed to further assess a drug’s safety and efficacy.

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The FDA may also place other conditions on approval including the requirement for a risk evaluation and mitigation strategy, or REMS, to assure the safe use of the drug. If the FDA concludes a REMS is needed, the sponsor of the NDA must submit a proposed REMS. The FDA will not approve the NDA without an approved REMS, if required. A REMS could include medication guides, physician communication plans or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. Any of these limitations on approval or marketing could restrict the commercial promotion, distribution, prescription or dispensing of products. Marketing approval may be withdrawn for non-compliance with regulatory requirements or if problems occur following initial marketing.

Section 505(b)(2) Regulatory Approval Pathway

Section 505(b)(2) was added to the Act by the Drug Price Competition and Patent Term Restoration Act of 1984 (Hatch-Waxman Amendments). Section 505(b)(2) of the FDCA provides an alternate regulatory pathway for approval of a new drug by allowing the FDA to rely on data not developed by the applicant. Specifically, Section 505(b)(2) permits the submission of an NDA where one or more of the investigations relied upon by the applicant for approval was not conducted by or for the applicant and for which the applicant has not obtained a right of reference. The applicant may rely upon published literature and/or the FDA’s findings of safety and effectiveness for an approved drug already on the market. Approval or submission of a 505(b)(2) application, like those for abbreviated new drugs, or ANDAs, may be delayed because of patent and/or exclusivity rights that apply to the previously approved drug.

Under the 505(b)(2) regulatory approval pathway, the applicant may reduce some of the burdens of developing a full clinical program by relying on investigations not conducted by the applicant and for which the applicant has not obtained a right of reference, such as prior investigations involving the listed drug. In such cases, some clinical trials may not be required or may be otherwise limited.

A 505(b)(2) application may be submitted for a new chemical entity (NCE), when some part of the data necessary for approval is derived from studies not conducted by or for the applicant and when the applicant has not obtained a right of reference. Such data are typically derived from published studies, rather than FDA’s previous findings of safety and effectiveness of a previously approved drug. For changes to a previously approved drug however, an applicant may rely on the FDA’s finding of safety and effectiveness of the approved drug, coupled with information needed to support the change from the approved drug, such as new studies conducted by the applicant or published data. When based on an approved drug, the 505(b)(2) drug may be approved for all of the indications permitted for the approved drug, as well as any other indication supported by additional data.

Section 505(b)(2) applications also may be entitled to marketing exclusivity if supported by appropriate data and information. As discussed in more detail below, three-year new data exclusivity may be granted to the 505(b)(2) application if one or more clinical investigations conducted in support of the application, other than bioavailability/bioequivalence studies, were essential to the approval and conducted or sponsored by the applicant. Five years of marketing exclusivity may be granted if the application is for an NCE, and pediatric exclusivity is likewise available.

Special FDA Expedited Review and Approval Programs

The FDA has various programs, including fast track designation, accelerated approval, priority review and breakthrough therapy designation, that are intended to expedite or simplify the process for the development and FDA review of drugs that are intended for the treatment of serious or life-threatening diseases or conditions and demonstrate the potential to address unmet medical needs. The purpose of these programs is to provide important new drugs to patients earlier than under standard FDA review procedures. To be eligible for fast track designation, the FDA must determine, based on the request of a sponsor, that a drug is intended to treat a serious or life-threatening disease or condition and based on preclinical or preliminary clinical data demonstrates the potential to address an unmet medical need. The FDA will determine that a product will fill an unmet medical need if it will provide a therapy where none exists or provide a therapy that may be potentially superior to existing therapy based on efficacy or safety factors.

The FDA may give a priority review designation to drugs that offer major advances in treatment or provide a treatment where no adequate therapy exists. A priority review means that the goal for the FDA to review an application is six months, rather than the standard review of ten months under current PDUFA guidelines. These six- and ten-month review periods are measured from the “filing” date rather than the receipt date for NDAs for new molecular entities, which typically adds approximately two months to the timeline for review and decision from the date of submission. Products that are eligible for fast track designation are also likely to be considered appropriate to receive a priority review.

In addition, drugs studied for their safety and effectiveness in treating serious or life-threatening illnesses and that provide meaningful therapeutic benefit over existing treatments may receive accelerated approval and may be approved on the basis of adequate and well-controlled clinical trials establishing that the drug has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity or prevalence of the condition and the availability or lack of alternative treatments. As a condition of approval, the FDA may require a sponsor of a drug receiving accelerated approval to perform post-marketing studies to verify and describe the predicted effect on irreversible morbidity or mortality or other clinical endpoint and under the Food and Drug Omnibus Reform Act of 2022 (FDORA), the FDA is now permitted to require, as appropriate, that such trials be underway prior to approval or within a specific time period after the date of approval for a product granted accelerated approval. Under FDORA, the FDA has increased authority for expedited procedures to withdraw approval of a drug or indication approved under accelerated approval if, for example, the confirmatory trial fails to verify the predicted clinical benefit of the product. In addition, the FDA generally requires, unless otherwise informed by the agency, pre-approval of promotional materials, which could adversely impact the timing of the commercial launch of the product.

Moreover, a sponsor can request designation of a drug candidate as a “breakthrough therapy.” A breakthrough therapy is defined as a drug that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. Drugs designated as breakthrough therapies are also eligible for accelerated approval and priority review. The FDA must take certain actions, such as holding timely meetings and providing advice, intended to expedite the development and review of an application for approval of a breakthrough therapy.

Additionally, under FDORA, a platform technology incorporated within or utilized by a drug or biological product is eligible for designation as a designated platform technology if (1) the platform technology is incorporated in, or utilized by, a drug approved under an NDA; (2) preliminary evidence submitted by the sponsor of the approved or licensed drug, or a sponsor that has been granted a right of reference to data submitted in the application for such drug, demonstrates that the platform technology has the potential to be incorporated in, or utilized by, more than one drug without an adverse effect on quality, manufacturing, or safety; and (3) data or information submitted by the applicable person indicates that incorporation or utilization of the platform technology has a reasonable likelihood to bring significant efficiencies to the drug development or manufacturing process and to the review process. A sponsor may request the FDA to designate a platform technology as a designated platform technology concurrently with, or at any time after, submission of an IND application for a drug that incorporates or utilizes the platform technology that is the subject of the request. If so designated, the FDA may expedite the development and review of any subsequent original NDA for a drug that uses or incorporates the platform technology. Designated platform technology status does not ensure that a drug will be developed more quickly or receive FDA approval.

Even if a product candidate or our platform qualifies for one or more of these programs, the FDA may later decide that the product candidate no longer meets the conditions for qualification or decide that the time period for FDA review or approval will not be shortened. Furthermore, fast track designation, priority review, accelerated approval and breakthrough therapy designation, do not change the standards for approval and may not ultimately expedite the development or approval process.

Orange Book Listing and Paragraph IV Certification

For NDA submissions, including 505(b)(2) applications, applicants are required to list with the FDA certain patents with claims that cover the applicant’s product. Upon approval, each of the patents listed in the application is published in Approved Drug Products with Therapeutic Equivalence Evaluations, commonly referred to as the Orange Book. Any applicant who subsequently files an ANDA or a 505(b)(2) application that references a drug listed in the Orange Book must certify to the FDA that (1) no patent information on the drug product that is the subject of the application has been submitted to the FDA; (2) such patent has expired; (3) the date on which such patent expires; or (4) such patent is invalid or will not be infringed upon by the manufacture, use or sale of the drug product for which the application is submitted. This last certification is known as a Paragraph IV certification.

If an applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification to the holder of the NDA for the approved drug and the patent owner once the application has been accepted for filing by the FDA. The NDA holder or patent owner may then initiate a patent infringement lawsuit in response to notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days of the receipt of a Paragraph IV certification prevents the FDA from approving the ANDA or 505(b)(2) application until the earlier of 30 months from the date of the lawsuit, the applicant’s successful defense of the suit, or expiration of the patent.

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Pediatric Information

Under the Pediatric Research Equity Act, or PREA, an NDA or supplement to an NDA must contain data to assess the safety and efficacy of the drug for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation in which the product is safe and effective. The FDA may grant deferrals for submission of pediatric data or full or partial waivers.

The Food and Drug Administration Safety and Innovation Act, or FDASIA, requires that a sponsor who is planning to submit an NDA for a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration submit an initial Pediatric Study Plan, or PSP, within 60 days of an end-of-Phase 2 meeting or, if there is no such meeting, as early as practicable before the initiation of the Phase 3 or Phase 2/3 trial. The initial PSP must include an outline of the pediatric trial(s) that the sponsor plans to conduct, including objectives and design, age groups, relevant endpoints and statistical approach, or a justification for not including such information and any request for a deferral of pediatric assessments or a full or partial waiver of the requirement to provide data from pediatric trials. The FDA and the sponsor must reach an agreement on the PSP, but the sponsor can submit amendments to an agreed-upon initial PSP at any time if changes to the pediatric plan need to be considered based on data collected from nonclinical studies, early phase clinical trials and other clinical development programs.

Post-Marketing Requirements

Following approval, the company and the new product are subject to continuing regulation by the FDA, which include monitoring and recordkeeping activities, reporting of adverse experiences and complying with promotion and advertising requirements, which include prohibitions on the promotion of the drugs for unapproved, or “off-label” uses. Although physicians may prescribe legally available drugs for off-label treatments, manufacturers may not promote such non-FDA approved uses. Prescription drug promotional materials must be submitted to the FDA in conjunction with their first use on an on-going basis. Further, if there are any modifications to the drug, including changes to indications, labeling, or manufacturing processes or facilities, the applicant may be required to submit and obtain FDA approval of a supplemental NDA or new NDA, which may require the applicant to develop additional data or conduct additional nonclinical studies or clinical trials.

The FDA regulations require that products be manufactured in specific approved facilities and in accordance with CGMPs. These regulations require, among other things, quality control and quality assurance, the maintenance of records and documentation and the obligation to investigate and correct any deviations from CGMPs. Drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and certain state agencies, and are subject to periodic, unannounced inspections by the FDA and certain state agencies for compliance with CGMPs and other laws. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain compliance with CGMPs. The discovery of violative conditions, including failure to conform to CGMPs, could result in enforcement actions, and the discovery of problems with a product after approval may result in restrictions on a product, manufacturer or holder of an approved NDA, including voluntary recalls and product seizures.

Discovery of previously unknown problems with a product or the failure to comply with applicable FDA requirements can have negative consequences, including adverse publicity, judicial or administrative enforcement, untitled or warning letters from the FDA, mandated corrections to advertising or communications to doctors and civil or criminal penalties, among others. Newly discovered or developed safety or effectiveness data may require changes to a product’s approved labeling, including the addition of new warnings and contraindications, and also may require the implementation of other risk management measures. New government requirements, including those resulting from new legislation, may be established, or the FDA’s policies may change, which could delay or prevent regulatory approval of our products under development.

U.S. Marketing Exclusivity and Patent Term Extensions

Depending upon the timing, duration and specifics of the FDA approval of our drug candidates, some of our U.S. patents may be eligible for limited patent term extension (“PTE”) under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a PTE of up to five years as compensation for patent term lost during product development and the FDA regulatory review process. However, PTE cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date. The PTE period is generally one-half the time between the effective date of an IND and the submission date of an NDA plus the time between the submission date of an NDA and the approval of that application. Only one patent applicable to an approved drug is eligible for the extension and the application for the extension must be submitted prior to the expiration of the patent. The USPTO, in consultation with the FDA, reviews and approves the application for any patent term extension. In the future, we intend to apply for PTE for one of our currently owned or licensed patents to add patent life beyond its current expiration date, depending on the expected length of the clinical trials and other factors involved in the filing of the relevant NDA.

Marketing exclusivity provisions under the FDCA can also delay the submission or the approval of certain marketing applications. The FDCA provides a five-year period of non-patent marketing exclusivity within the U.S. to the first applicant to obtain approval of an NDA for a new chemical entity. A drug is a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance. During the exclusivity period, the FDA may not accept for review an abbreviated new drug application, or ANDA, or a 505(b)(2) NDA submitted by another company for another drug based on the same active moiety, regardless of whether the drug is intended for the same indication as the original innovator drug or for another indication, where the applicant does not own or have a legal right of reference to all the data required for approval. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement to one of the patents listed with the FDA by the innovator NDA holder. The FDCA also provides three years of marketing exclusivity for an NDA, or supplement to an existing NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example new indications, dosages or strengths of an existing drug. This three-year exclusivity covers only the modification for which the drug received approval on the basis of the new clinical investigations and does not prohibit the FDA from approving ANDAs for drugs containing the active agent for the original indication or condition of use. Five-year and three-year exclusivity will not delay the submission or approval of a full NDA. However, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness. Orphan drug exclusivity, as described below, may offer a seven-year period of marketing exclusivity, except in certain circumstances. Pediatric exclusivity is another type of regulatory market exclusivity in the U.S. which, if granted, adds six months to existing exclusivity periods for all formulations, dosage forms, and indications of the active moiety and patent terms. This six month exclusivity, which runs from the end of other exclusivity protection or patent term, may be granted based on the voluntary completion of a pediatric trial in accordance with an FDA issued “Written Request” for such a trial, provided that at the time pediatric exclusivity is granted there is not less than nine months of term remaining.

Orphan Drug Designation and Exclusivity

The FDA may grant orphan drug designation (“ODD”) to drugs intended to treat a rare disease or condition that affects fewer than 200,000 individuals in the U.S., or if it affects more than 200,000 individuals in the U.S., there is no reasonable expectation that the cost of developing and marketing the drug for this type of disease or condition will be recovered from sales in the U.S. In the EU, the European Commission, after receiving the opinion of the EMA’s Committee for Orphan Medicinal Products (“COMP”), grants orphan medicinal product designation in respect of products that are intended for the diagnosis, prevention, or treatment of a life threatening or chronically debilitating condition affecting not more than five in 10,000 persons in the EU. In addition, designation may be granted for products intended for the diagnosis, prevention, or treatment of a life threatening, seriously debilitating, or serious and chronic condition when, without incentives, it is unlikely that sales of the drug in the EU would be sufficient to justify the necessary investment in developing the drug or biological product. In each case, there must be no satisfactory method of diagnosis, prevention, or treatment of the applicable condition authorized for marketing in the EU, or, if such a method exists, the sponsor must establish that its product would be of significant benefit to those affected by the condition.

In the U.S., ODD entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages and user-fee waivers. In addition, if a product receives the first FDA approval for the indication for which it has orphan designation, the product is entitled to orphan drug exclusivity, which means the FDA may not approve any other application to market the same drug for the same indication for a period of seven years, except in limited circumstances, such as a showing of clinical superiority over the product with orphan exclusivity.

In the EU, orphan medicinal product designation also entitles a party to financial incentives such as reduction of fees or fee waivers and ten years of market exclusivity is granted following drug or biological product approval. This period may be reduced to six years if, at the end of the fifth year, it is established that the orphan designation criteria are no longer met, including where it is shown that the product is sufficiently profitable not to justify maintenance of market exclusivity.

Orphan drug designation must be requested before submitting an application for marketing approval. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.

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DEA Regulation

Because IV tramadol is subject to the Controlled Substances Act ("CSA") we must comply with various statutory requirements set forth by the CSA, as amended, and its implementing regulations as enforced by the DEA. The CSA imposes various registration, record-keeping and reporting requirements, procurement and manufacturing quotas, labeling and packaging requirements, security controls, prescription and order form requirements and restrictions on prescription refills for certain kinds of pharmaceutical products. A principal factor for determining the particular requirements of the CSA applicable to a product, if any, is its actual or potential abuse profile, which is classified into a DEA schedule. A product may be listed as a Schedule I, II, III, IV or V controlled substance, with Schedule I presenting the highest perceived risk of abuse and Schedule V presenting the least. For example, Schedule I controlled substances have no currently accepted medical use in treatment in the United States and a lack of accepted safety for use under medical supervision. The active ingredient in IV tramadol is classified as a Schedule IV controlled substance which are defined by the DEA as drugs with low potential for abuse and low risk of dependence.

Annual registration is required for any facility that manufactures, distributes, dispenses, imports, or exports any controlled substance. The registration is specific to the particular location, activity, and controlled substance schedule. For example, separate registrations are needed for import and manufacturing, and each registration will specify which schedules of controlled substances are authorized. Similarly, separate registrations are also required for separate facilities.

The DEA typically inspects a facility to review its security measures prior to issuing a registration and on a periodic basis. Security requirements vary by controlled substance schedule, with the most stringent requirements applying to Schedule I and Schedule II controlled substances and less stringent requirements for Schedules III, IV, and V. Required security measures include background checks on employees and physical control of inventory through measures such as vaults and inventory reconciliations. Records must be maintained for the handling of all controlled substances, and periodic reports made to the DEA. Reports must also be made for thefts or losses of any controlled substance, and to obtain authorization to destroy any controlled substance.

In addition, a DEA quota system controls and limits the availability and production of controlled substances in Schedule I or II. Distributions of any Schedule I or II controlled substance must also be accompanied by special order forms, with copies provided to the DEA. Because the active ingredient in IV tramadol is currently regulated as a Schedule IV controlled substances, it should not be subject to the DEA’s production and procurement quota scheme. However, as an opioid, the DEA may consider re-classifying the active ingredient in IV tramadol from Schedule IV to Schedule II which would require compliance with the DEA security requirements and quota system controls.

To enforce these requirements, the DEA conducts periodic inspections of registered establishments that handle controlled substances. Failure to maintain compliance with applicable requirements, particularly as manifested in loss or diversion, can result in administrative, civil, or criminal enforcement action. The DEA may seek civil penalties, refuse to renew necessary registrations or initiate administrative proceedings to revoke those registrations. In some circumstances, violations could result in criminal proceedings.

In addition to federal scheduling, some drugs may be subject to state-controlled substance regulation and thus more extensive requirements than those determined by the DEA and FDA.

Other Healthcare Laws and Compliance Requirements

Manufacturing, sales, promotion and other activities following product approval are also subject to regulation by numerous regulatory authorities in addition to the FDA, including the Centers for Medicare & Medicaid Services, other divisions of the Department of Health and Human Services, the U.S. Department of Justice, the DEA, the Consumer Product Safety Commission, the Federal Trade Commission, the Occupational Safety & Health Administration, the Environmental Protection Agency and state and local governments.

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We will also be subject to various federal and state laws targeting fraud and abuse in the healthcare industry. These laws may impact, among other things, our proposed sales, marketing, and educational programs. In addition, we may be subject to patient privacy regulation by both the federal government and the states in which we conduct our business. The laws that may affect our ability to operate include:

The ACA broadened the reach of the fraud and abuse laws by, among other things, amending the intent requirement of the federal Anti-Kickback Statute and the applicable criminal healthcare fraud statutes contained within 42 U.S.C. Section 1320a-7b. Pursuant to the statutory amendment, a person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it in order to have committed a violation. In addition, the ACA provides that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act or the civil monetary penalties statute. Many states have adopted laws similar to the federal Anti-Kickback Statute, some of which apply to the referral of patients for healthcare items or services reimbursed by any source, not only the Medicare and Medicaid programs.

As noted above, the federal False Claims Act prohibits anyone from, among other things, knowingly presenting, or causing to be presented, false or fraudulent claims for payment from federal programs, including Medicare and Medicaid. Although we would not submit claims directly to payors, manufacturers can be held liable under these laws if they are deemed to “cause” the submission of false or fraudulent claims by, for example, providing inaccurate billing or coding information to customers. In addition, our future activities relating to the reporting of wholesaler or estimated retail prices for our products, the reporting of prices used to calculate Medicaid rebate information and other information affecting federal, state, and third-party reimbursement for our products, and the sale and marketing of our products are subject to scrutiny under this law. For example, pharmaceutical companies have been prosecuted under the federal False Claims Act in connection with their off-label promotion of drugs. Penalties for such violations could include three times the actual damages sustained by the government, mandatory civil penalties between $13,946 and $27,894 for each separate false claim, exclusion from participation in federal healthcare programs, and the potential implication of various federal criminal statutes. Private individuals also have the ability to bring actions under the federal False Claims Act, or qui tam actions, and certain states have enacted laws based on the federal False Claims Act.

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Pharmaceutical Coverage, Pricing and Reimbursement

In the United States and markets in other countries, sales of any products for which we receive regulatory approval for commercial sale will depend in part on the availability of reimbursement from third party payors, including government health administrative authorities, managed care providers, private health insurers and other organizations. Third party payors are increasingly examining the medical necessity and cost-effectiveness of medical products and services, in addition to their safety and efficacy, and, accordingly, significant uncertainty exists as to the reimbursement status of newly approved therapeutics. Adequate third-party reimbursement may not be available for any products for which we obtain regulatory approval to enable us to realize an appropriate return on our investment in research and product development. We are unable to predict the future course of federal or state health care legislation and regulations, including any changes, repeal, or judicial invalidation of some or all of the provisions of the Affordable Care Act. The Affordable Care Act and further changes in the law or regulatory framework could have a material adverse effect on our business.

International Regulation

In addition to regulations in the United States, there are a variety of foreign regulations governing clinical trials and commercial sales and distribution of any product candidates. The approval process varies from country to country, and the time may be longer or shorter than that required for FDA approval.

Employees

As of December 31, 2023, we had 3 full-time employees. None of our employees are represented by a labor union and we consider our employee relations to be good. We have also retained a number of expert advisors and consultants who help navigate us through different aspects of our business.

Corporate Information

Avenue Therapeutics, Inc. was incorporated in Delaware in 2015. Our executive offices are located at 1111 Kane Concourse, Suite 301, Bay Harbor Islands, Florida 33154. Our telephone number is (781) 652-4500, and our email address is info@avenuetx.com.

We maintain a website with the address www.avenuetx.com. We make available free of charge through our website our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and any amendments to these reports, as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the SEC. We are not including the information on our website as a part of, nor incorporating it by reference into, this report. Additionally, the SEC maintains a website that contains annual, quarterly, and current reports, proxy statements, and other information that issuers (including us) file electronically with the SEC. The SEC’s website address is http://www.sec.gov.

Item 1A. Risk Factors

Our business, financial condition, results of operations, and the industry in which we operate are subject to various risks. You should carefully consider the risks described below, in addition to the other information contained in this Form 10-K, before making an investment decision. The risks and uncertainties described below are not the only ones we face and you should not interpret the disclosure of a risk to imply that the risk has not already materialized. Additional risks not presently known to us or other factors not perceived by us to present significant risks to our business at this time also may impair our business operations.

Risks Pertaining to Our Business and Industry

We currently have no drug products for sale, but we are developing three drug product candidates, AJ201, IV tramadol and BAER-101. We are dependent on the success of our product candidates, and cannot guarantee that these product candidates will receive regulatory approval or be successfully commercialized.

Our business success depends on our ability to obtain regulatory approval to successfully commercialize, market and sell our product candidates, and any significant delays in obtaining approval to commercialize, market and sell our product candidates will have a substantial adverse impact on our business and financial condition.

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If the applications for any of our product candidates are approved, our ability to generate revenues from such product candidates will depend on our ability to:

● hire, train, deploy, and support our sales force;

We may not receive regulatory approval for our product candidates, or their approvals may be delayed, which would have a material adverse effect on our business and financial condition.

Our product candidates and other future product candidates and the activities associated with their development and with their commercialization, if approved, including their design, testing, manufacture, safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale, and distribution, are subject to premarket approval and comprehensive regulation by the FDA, DEA, and other regulatory agencies in the United States and potentially foreign governmental authorities. Failure to obtain marketing approval for our product candidates will prevent us from commercializing our product candidates. We have not received approval to market any of our product candidates from regulatory authorities in any jurisdiction. We have only limited experience in conducting preclinical and clinical studies and filing and supporting the applications necessary to gain marketing approvals and expect to continue to rely on third party contract research organizations as well as consultants and vendors to assist us in the process. Securing marketing approval requires the submission of extensive preclinical and clinical data and supporting information to regulatory authorities for each therapeutic indication to establish the product candidate’s safety and efficacy. Securing marketing approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the regulatory authorities.

Our product candidates must meet FDA’s standards for safety and efficacy, but may be determined not to be effective, to be only moderately effective, to not be safe for use in its intended population, or may prove to have undesirable or unintended side effects, toxicities, or other characteristics that may preclude our obtaining marketing approval or prevent or limit commercial use.

The process of obtaining marketing approvals, both in the United States and abroad, is expensive, may take many years if approval is granted at all, and can vary substantially based upon a variety of factors, including the type, complexity, and novelty of the product candidates involved. Changes in marketing approval policies during the development period, changes in or the enactment of additional statutes or regulations, or changes in the regulatory review process for each submitted product application, may cause delays in the approval or rejection of an application. Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that our data is insufficient for approval and require additional preclinical studies or clinical trials. In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay, limit, or prevent marketing approval of a product candidate. Any marketing approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable.

If we experience delays in obtaining approval or if we fail to obtain approval of any of our product candidates or any future product candidates, the commercial prospects for our product candidates may be harmed and our ability to generate revenue will be materially impaired, thereby negatively impacting our business, financial condition, and results of operations.

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In addition, even if we were to obtain approval, the approval of the indication for any of our product candidates by such regulatory authorities may, among other things, be more limited than we request. Such regulatory authorities may not approve the price we intend to charge for our product, may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate. These regulatory authorities may also require the label to contain warnings, contraindications, or precautions that limit the commercialization of that product. Our third-party suppliers may be subject to inspections by the FDA that identifies deficiencies in their manufacturing facilities and concludes they are not operating in compliance with CGMP requirements, which in turn, may force us to identify, qualify, and rely upon additional suppliers. Any of these scenarios could compromise the commercial prospects for our product candidates, or any future product candidates.

If serious adverse or unacceptable side effects are identified during the development of our product candidates, we may need to abandon or limit our development of some of our product candidates.

If our product candidates or future product candidates are associated with undesirable side effects in clinical trials or have characteristics that are unexpected, we may need to abandon their development or limit development to more narrow uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe, or more acceptable from a risk-benefit perspective. In our industry, many compounds that initially showed promise in early-stage testing have later been found to cause undesirable side effects that prevented further development of the compound. In the event that our preclinical or clinical trials reveal a high and unacceptable severity and prevalence of side effects, our trials could be delayed, suspended, or terminated and the FDA or comparable foreign regulatory authorities could order us to cease further development or deny approval of our product candidates or future product candidates for any or all targeted indications. The FDA could also issue a letter requesting additional data or information prior to making a final decision regarding whether or not to approve a product candidate. The number of requests for additional data or information issued by the FDA in recent years has increased and resulted in substantial delays in the approval of several new drugs. Undesirable side effects caused by our product candidates or future product candidates could also result in the inclusion of serious risk information in our product labeling, application of burdensome post-market requirements, or the denial of regulatory approval by the FDA or other regulatory authorities for any or all targeted indications, and in turn, prevent us from commercializing and generating revenues from the sale of our product candidates. Drug-related side effects could affect patient recruitment or the ability of enrolled patients to complete the trial and could result in potential product liability claims.

For example, some of the most common adverse events observed in the IV tramadol clinical trials completed to date include nausea, dizziness, drowsiness, tiredness, sweating, vomiting, dry mouth, somnolence, and hypotension. With respect to BAER-101, some of the most common adverse events observed in clinical trials completed to-date include dizziness, somnolence, headache, and euphoric mood. With respect to AJ201, some of the most common adverse events observed in clinical trials completed to-date include nausea, diarrhea, headache, and abdominal distension.

Additionally, if one or more of our current or future product candidates receives marketing approval, and we or others later identify undesirable adverse events caused by this product, a number of potentially significant negative consequences could result, including:

● our reputation may suffer.

Any of these events could prevent us from achieving or maintaining marketing approval and market acceptance of our product candidates or future product candidates or could substantially increase our development and commercialization costs and expenses, which in turn could delay or prevent us from generating significant revenues from its sale.

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We may not be able to manage our business effectively if we are unable to attract and retain key personnel.

We may not be able to attract or retain qualified management and commercial, scientific and clinical personnel in the future due to the intense competition for qualified personnel among biotechnology, pharmaceutical and other businesses. If we are not able to attract and retain necessary personnel to accomplish our business objectives, we may experience constraints that will significantly impede the achievement of our development objectives, our ability to raise additional capital, and our ability to implement our business strategy, any of which may have a material adverse effect on our business, financial condition, and results of operations.

Our employees, consultants, or third-party partners may engage in misconduct or other improper activities, including those that result in noncompliance with certain regulatory standards and requirements, which could have a material adverse effect on our business.

We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees, consultants, or third-party partners could include intentional failures to comply with FDA regulations, provide accurate information to the FDA, comply with manufacturing standards we have established, comply with federal and state healthcare fraud and abuse laws and regulations or comparable applicable foreign laws and regulations, report financial information or data accurately, or disclose unauthorized activities to us. In particular, sales, marketing, and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing, and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs, and other business arrangements. Employee, consultant, or third-party misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation, as well as civil and criminal liability. The precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, financial condition, and results of operations, including the imposition of significant fines or other civil and/or criminal sanctions.

If we fail to comply with environmental, health, and safety laws and regulations, we could become subject to fines or penalties or incur costs that could harm our business.

We are subject to numerous environmental, health, and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment, and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemicals and biological materials. Our operations also produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. Although we believe that the safety procedures for handling and disposing of these materials comply with the standards prescribed by these laws and regulations, we cannot eliminate the risk of accidental contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties for failure to comply with such laws and regulations.

Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological, hazardous, or radioactive materials.

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In addition, we may incur substantial costs in order to comply with current or future environmental, health, and safety laws and regulations. These current or future laws and regulations may impair our research, development, or production efforts. Our failure to comply with these laws and regulations also may result in substantial fines, penalties, or other sanctions.

We are a “smaller reporting company” and the reduced disclosure requirements applicable to smaller reporting companies may make our common stock less attractive to investors.

We are a smaller reporting company, and we will remain a smaller reporting company until the fiscal year following the determination that our voting and non-voting common equity held by non-affiliates is more than $250 million measured on the last business day of our second fiscal quarter, or our annual revenues are more than $100 million during the most recently completed fiscal year and our voting and non-voting common equity held by non-affiliates is more than $700 million measured on the last business day of our second fiscal quarter. Smaller reporting companies are allowed to provide simplified executive compensation disclosure, are exempt from the auditor attestation requirements of the Sarbanes-Oxley Act, and have certain other reduced disclosure obligations, including, among other things, being required to provide only two years of audited financial statements and not being required to provide selected financial data, supplemental financial information, or risk factors.

We have elected to take advantage of certain of the reduced reporting obligations. We cannot predict whether investors will find our common stock less attractive if we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be reduced or more volatile.

We are a “controlled company” within the meaning of Nasdaq listing standards and, as a result, qualify for, and rely on, exemptions from certain corporate governance requirements. You will not have the same protections afforded to stockholders of companies that are subject to such requirements.

We are a “controlled company” within the meaning of Nasdaq listing standards. Under these rules, a company of which more than 50% of the voting power is held by an individual, a group, or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements of Nasdaq, including (i) the requirement that a majority of the Board of Directors consist of independent directors, (ii) the requirement that we have a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities, and (iii) the requirement that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities. We have in the past relied on, and intend to continue to rely on, some or all of these exemptions.

Accordingly, you will not have the same protections afforded to stockholders of companies subject to all of the corporate governance requirements of Nasdaq.

Certain of our directors currently serve, and in the past, certain officers and directors have served, in similar roles with our parent company, affiliates, related parties, and other parties with whom we transact business; ongoing and future relationships and transactions between these parties could result in conflicts of interest.

We sometimes share directors and/or officers with certain of our parent company, affiliates, related parties, or other companies with which we transact business, and such arrangements could create conflicts of interest in the future, including with respect to the allocation of corporate opportunities. While we believe that we have put in place policies and procedures to identify such conflicts, and that any existing agreements that may give rise to such conflicts and any such policies or procedures, were negotiated at arm’s length in conformity with fiduciary duties, such conflicts of interest may nonetheless arise. The existence and consequences of such potential conflicts could expose us to lost profits, claims by our investors and creditors, violations of Nasdaq’s director and audit committee independence rules, and harm to our business, financial condition, and results of operations.

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Risks Pertaining to Our Finances

We have incurred significant losses since our inception. We expect to incur losses for the foreseeable future, and may never achieve or maintain profitability.

We have a limited operating history. We have focused primarily on in-licensing and developing IV tramadol, with the goal of supporting regulatory approval for this product candidate. We also recently acquired two new product candidates, BAER-101 and AJ201, which we are developing. We have incurred losses since our inception in February 2015.

These losses, among other things, have had and will continue to have an adverse effect on our stockholders’ equity and working capital. We expect to continue to incur significant operating losses for the foreseeable future. We also do not anticipate that we will achieve profitability for a period of time after generating material revenues, if ever. If we are unable to generate revenues, we will not become profitable and may be unable to continue operations without continued funding. Because of the numerous risks and uncertainties associated with developing pharmaceutical products, we are unable to predict the timing or amount of increased expenses or when or if, we will be able to achieve profitability. In addition, the Company cannot be certain that additional funding will be available on acceptable terms, or at all.

Our net losses may fluctuate significantly from quarter to quarter and year to year. We anticipate that our expenses will increase substantially if:

Our ability to become profitable depends upon our ability to generate revenue. To date, we have not generated any revenue from our development stage products, and we do not know when, or if, we will generate any revenue.

Our ability to generate revenue depends on a number of factors, including, but not limited to, our ability to:

Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would depress our value and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our product offerings or even continue our operations, which would have a material adverse effect on our business, financial condition, cash flows, and results of operations and could cause the market value of our securities to decline. A decline in our value could also cause you to lose all or part of your investment.

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Our short operating history makes it difficult to evaluate our business and prospects.

We were incorporated on February 9, 2015, and until our acquisition of Baergic had only been conducting operations with respect to IV tramadol since February 17, 2015. We have not yet demonstrated an ability to successfully obtain regulatory approvals, manufacture a commercial scale product, or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization. Consequently, any predictions about our future performance may not be as accurate as they could be if we had a history of successfully developing and commercializing pharmaceutical products.

In addition, as a young business, we may encounter unforeseen expenses, difficulties, complications, delays, and other known and unknown factors. We will need to expand our capabilities to support commercial activities and the recent acquisitions of AJ201 and BAER-101. We may not be successful in adding such capabilities.

We expect our financial condition and operating results to continue to fluctuate significantly from quarter to quarter and year to year due to a variety of factors, many of which are beyond our control. Accordingly, you should not rely upon the results of any past quarterly period as an indication of future operating performance.

There is substantial doubt about our ability to continue as a going concern, which may hinder our ability to obtain future financing.

Our audited consolidated financial statements as of December 31, 2023 have been prepared under the assumption that we will continue as a going concern for the next twelve months. As of December 31, 2023, we had cash and cash equivalents of $1.8 million and an accumulated deficit of $90.9 million. We do not believe that our cash and cash equivalents are sufficient for the next twelve months. As a result of our financial condition and other factors described herein, there is substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern will depend on our ability to obtain additional funding, as to which no assurances can be given. We continue to analyze various alternatives, including potentially obtaining lines of credit, debt or equity financings, or other arrangements. Our future success depends on our ability to raise capital and/or implement the various strategic alternatives discussed above. We cannot be certain that these initiatives or raising additional capital, whether through selling additional debt or equity securities or obtaining a line of credit or other loan, will be available to us or, if available, will be on terms acceptable to us. If we issue additional securities after the closing of this offering to raise funds, these securities may have rights, preferences, or privileges senior to those of our common stock, and our current shareholders may experience dilution. If we are unable to obtain funds when needed or on acceptable terms, we may be required to curtail our current development programs, cut operating costs, forego future development and other opportunities, or even terminate our operations.

We do not have any products that are approved for commercial sale and therefore do not expect to generate any revenues from product sales in the foreseeable future, if ever.

We have not generated any product related revenues to date. To obtain revenues from sales of our product candidates, we must succeed, either alone or with third parties, in developing, obtaining regulatory approval for, manufacturing, and marketing products with commercial potential. We may never succeed in these activities, and we may not generate sufficient revenues to continue our business operations or achieve profitability.

We will require substantial additional funding, which may not be available to us on acceptable terms, or at all. If we fail to raise the necessary additional capital, we may have to delay, reduce, or eliminate our product development programs or commercialization efforts.

ATXI US Equity

ATXI · 10-K · period ended 2023-12-31

Item 1.Business

Item 1A. Risk Factors

ATXI US Equity☆

ATXI · 10-K · period ended 2023-12-31

Item 1.Business

Item 1A. Risk Factors

ATXI US Equity