UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2021
Or
☐TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 001-41031
Bluejay Diagnostics, Inc.
(Exact Name of Registrant as Specified in
Its Charter)
(Address of Principal Executive Offices) (Zip Code)
(844)327-7078
(Registrant’s Telephone Number, Including
Area Code)
Securities registered pursuant to Section 12(b)
of the Exchange Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock BJDX The NASDAQ Stock Market LLC
Securities registered pursuant to Section 12(g)
of the Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
☐ No
☒
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or 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 electronically every Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). Yes ☒ No ☐
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s
knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ☐
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large
accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company”
in Rule 12b-2 of the Exchange Act.
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. Yes ☐ No ☒
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐
No ☒
As of June 30, 2021, the last business day of
the registrant’s most recently completed second fiscal quarter, the registrant’s securities were not publicly traded. The
registrant’s common stock began trading on The Nasdaq Stock Market LLC on November 10, 2020.
The registrant had 20,151,244 shares of the Common Stock outstanding
at February 28, 2022.
DOCUMENTS INCORPORATED BY REFERENCE
The definitive proxy statement relating to the registrant’s Annual
Meeting of Stockholders to be filed within 120 days of the registrant’s fiscal year ended December 31, 2021 and is incorporated
by reference in Part III to the extent described therein.
TABLE OF CONTENTS
PART I 1
ITEM 1. BUSINESS 1
ITEM 1A. RISK FACTORS 17
ITEM 1B. UNRESOLVED STAFF COMMENTS 34
ITEM 2. PROPERTIES 34
ITEM 3. LEGAL PROCEEDINGS 34
ITEM 4. MINE SAFETY DISCLOSURES 34
ITEM 6. RESERVED 36
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 41
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 41
ITEM 9A. CONTROLS AND PROCEDURES 41
ITEM 9B. OTHER INFORMATION 42
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS 42
PART III 43
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 43
ITEM 11. EXECUTIVE COMPENSATION 43
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 43
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 44
i
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
We make forward-looking statements
under the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in other sections
of this Form 10-K. In some cases, you can identify these statements by forward-looking words such as “may,” “might,”
“should,” “would,” “could,” “expect,” “plan,” “anticipate,” “intend,”
“believe,” “estimate,” “predict,” “potential” or “continue,” and the negative
of these terms and other comparable terminology. These forward-looking statements, which are subject to known and unknown risks, uncertainties
and assumptions about us, may include projections of our future financial performance based on our growth strategies and anticipated trends
in our business. These statements are only predictions based on our current expectations and projections about future events. There are
important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results,
level of activity, performance or achievements expressed or implied by the forward-looking statements.
While we believe we have identified
material risks, these risks and uncertainties are not exhaustive. Other sections of this Form 10-K may describe additional factors that
could adversely impact our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment.
New risks and uncertainties emerge from time to time, and it is not possible to predict all risks and uncertainties, nor can we assess
the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements.
Although we believe the expectations
reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements.
Moreover, neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events. We are under no duty to update any of these forward-looking
statements after the date of this Form 10-K to conform our prior statements to actual results or revised expectations, and we do not intend
to do so.
We caution you not to
place undue reliance on the forward-looking statements, which speak only as of the date of this Form 10-K in the case of forward-looking
statements contained in this Form 10-K.
You should not rely upon forward-looking
statements as predictions of future events. Our actual results and financial condition may differ materially from those indicated in the
forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements. Although we believe that
the expectations reflected in the forward looking-statements are reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. Therefore, you should not rely on any of the forward-looking 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.
SPECIAL NOTE REGARDING COMPANY REFERENCES
In this annual report on Form
10-K, and unless the context otherwise requires, the “Company,” “we,” “us” and “our” refer
to Bluejay Diagnostics, Inc. and its wholly-owned subsidiary Bluejay Spinco, LLC, taken as a whole.
ii
PART I
ITEM 1. BUSINESS
Overview
We are a late-stage pre-revenue
company focused on improving patient outcomes through a more cost efficient, rapid, near patient product for triage, diagnosis and monitoring
of disease progression. We believe there is a market need for an on-site and rapid diagnostic system that can be employed for testing
and monitoring. Our diagnostic system, which we refer to as “Symphony,” is an exclusively licensed, patented, low-cost, system
that consists of a small footprint instrument and single-use indication specific test cartridges, that we believe, if cleared, authorized,
or approved by the U.S. Food and Drug Administration (“FDA”), can provide a solution to this market need rapidly and with
laboratory quality results in approximately 24 minutes, in the clinic, Intensive Care Unit (“ICU”), Emergency Room (“ER”)
and in other hospital and clinical setting settings where rapid and reliable results are required. Currently, testing is generally performed
in a laboratory, and the transportation and logistics of transporting the samples to the lab and obtaining the result takes between 8-48 hours.
Our platform is a sample-to-result system that has been shown in a clinical study to provide results in approximately 24 minutes. Our
business model is to generate revenue from the sale of the table-top Symphony instrument, and from the sale of single-use indication specific
cartridges that are used by the Symphony instrument for the diagnostic test. Once the test material (generally a small volume blood sample)
is transferred to a single-use indication specific Symphony cartridge, no additional sample preparation or pre-processing is required.
Based on the results of the clinical study described below, we believe Symphony may be able to eliminate the time required for transportation
and logistics, and may be able to eliminate the number of operational ‘touch-points’ from ‘sample-to-result’ from
six to two.
Our technology is the result of more than 12 years of development by
our development partner and investor, Toray Industries, Inc. (“Toray”). For the past three years, Toray has used the technology
successfully in Japan by selected clinical institutions for measurement of Interleukin-6 (“IL-6”) in rheumatoid arthritis
to monitor disease progression. Based in part on this extensive development, we believe we are now positioned to complete the last stages
of development needed for commercialization in the US.
In a 2016 study conducted in
Japan (the “Japan Study”), which was sponsored by Toray, it was shown that the Symphony system (known as the RAY-FAST system
in Japan) can provide accurate results within 24 minutes. The Japan Study was conducted at the University of Yamanashi Hospital in Yamanashi,
Japan to evaluate the accuracy and efficacy of the Symphony system in rheumatoid arthritis patients. The results of the study were published
in Cytokine, “Development of a quick serum IL-6 measuring system in rheumatoid arthritis” (Volume 95. July 2017). In the Japan
Study, 150 blood samples were collected from 76 rheumatoid arthritis patients, of which 16 samples were lower than the detection limit
of the Symphony system. The Japan Study then examined the correlation between the results from the Symphony system and the chemiluminescent
enzyme immunoassay (CLEIA) method. The serum IL-6 concentrations measured by the Symphony system were positively correlated with those
measured by the CLEIA method. The correlation between the Symphony system and CLEIA method for IL-6 was r = 0.941 (the closer the r-value
is to 1, the more closely the two variables are related). As such, the Japan Study concluded that the Symphony system was as accurate
as CLEIA methods. In addition, the Japan Study confirmed the time required for the measurement of the IL-6 concentration to be 24 minutes.
Our first diagnostic test in
development is for triage of sepsis in patients utilizing IL-6 as the target biomarker. According to a report by Market Data Forecast
(February 2020), the total market for IL-6 testing for sepsis triage was $934 million in 2020 and is estimated to reach $1.4 billion by
2025 growing at a CAGR of 8.5%. IL-6 has important roles in both innate and adaptive immunity. It is an inflammatory biomarker, also considered
as a ‘first-responder,’ that is elevated in patients with infection, sepsis, and septicemia. Reports have shown IL-6 concentrations
correlate with severity of sepsis, progression of cancer, rheumatoid arthritis and many other severe conditions as defined by clinical
and laboratory parameters. IL-6 is a clinically established biomarker for assessment of severity of infection and inflammation across
many disease indications. IL-6 appears early in the blood circulation as a ‘first responder’ during infection or inflammation.
One factor that is a challenge for healthcare professionals to overcome is the amount of time it takes to determine if a patient is septic.
It usually takes about several hours to receive the lab results of a patient who may be in a very critical state, and the risk of dying
increases every hour a patient is not treated for sepsis. We believe early measurement of IL-6 can enable physicians to make better therapeutic
and treatment decisions. Due to its clinical significance hospital systems and centralized testing labs routinely utilize IL-6 testing.
1
The importance of IL-6 testing has been further highlighted during
the COVID-19 pandemic, and IL-6 concentrations in blood have been found to be elevated in patients with COVID-19-associated systemic inflammation
and hypoxic respiratory failure.
We are further developing a
pipeline of diagnostic tests for Symphony including triage of myocardial infarction (“MI”), congestive heart failure (“CHF”),
neutropenic sepsis in cancer, and other disease diagnostic indications using the same Symphony platform. We intend to pursue the general
diagnostic marketplace following a sufficient clinical trial to support a 510(k) submission with the FDA, with the initial indication
as a general diagnostic test for sepsis in triage of patients. We do not currently have any regulatory clearance for our Symphony products
and our Symphony products will need to receive regulatory authorization from FDA, in order to be marketed as a diagnostic product in the
United States.
Our operations to date have
been funded primarily through sales of preferred stock and convertible notes. We expect to incur increasing expenses over the next two
years to develop additional diagnostic tests, to expand our sales and marketing infrastructure, and our research and development activities.
We believe the proceeds from our Initial Public Offering (“IPO”) on November 10, 2021 will be sufficient to reach commercialization.
We were incorporated under
the laws of Delaware on March 20, 2015. Our headquarters are located in Acton, Massachusetts.
Symphony Advantages
We believe there is a fast-growing
market for near-patient, low-cost diagnostic platforms that are used for time-sensitive patient testing in life-threatening situation
in hospitals, Long-Term Acute Care facilities (“LTACs”), intensive-care units (“ICUs”) and clinics to replace
legacy testing formats and processes. We believe our platform is well positioned to meet this need. Based on the results of the Japan
Study, we believe Symphony may be able to provide results within approximately 24 minutes. In addition, based on the results of the Japan
Study, we believe Symphony may be able to reduce test result time from days to minutes and to provide results that appear to be as accurate
as those performed in a laboratory, allowing for more frequent testing, which we believe may lead to shortened hospital stays and improved
patient outcomes, all of which also leads to reduced patient care costs.
Symphony is an automated diagnostic
system, consisting of a fluorescence immuno-analyzer which uses a single-use diagnostic test cartridge with reagents integrated in the
cartridge. Symphony utilizes a ‘sample-to-result’ format, which means that once a specimen is taken from the patient, it is
placed in the cartridge and then the cartridge is placed inside the analyzer where the test is run without further technician intervention
or additional reagent. This reduces test complexity and eliminates the need for highly trained and expensive laboratory technicians to
run the tests. Our platform is designed to enable simple, rapid, and cost-effective analysis from a single clinical sample, which will
allow LTACs, hospitals and clinics that traditionally could not afford more expensive or complex diagnostic testing platforms to modernize
their laboratory testing and provide better patient testing at an affordable cost in time sensitive, life-threatening situations. We believe
our on-site testing may also help avoid potential penalties often imposed on LTACs by insurance companies for failure to monitor for potential
sepsis.
Based on the results of the
Japan Study, we believe Symphony IL-6 can make a significant impact with turn-around time. As the whole blood samples do not need to be
pre-processed, this medical device can be run at the patient’s bedside, effectively eliminating the extended turn-around time for
lab results.
If incorporated in the hospital
workflow, this medical device can provide assistance with monitoring patients post-surgery, and monitoring patients admitted in the emergency
room who are suspected to have acute symptoms of sepsis.
2
We believe our technology can
provide the following advantages over traditional diagnostic systems:
Our Market
According to research published
by Allied Market Research (Global Invitro Diagnostics Market, 2020-2027), the global in vitro diagnostics market was $67.1 billion in
2019; projected to reach $91.1 billion by 2027, a compound annual growth rate (“CAGR”) of 4.8% over 7 years driven by prevalence
of chronic diseases including cancer, autoimmune diseases, and other inflammatory conditions. We believe the Symphony sample-to-result
platform is well suited to address a subset of this market, including sepsis, cardio-metabolic diseases, cancer and other diseases that
require time-sensitive, near-patient testing.
According to a report by Market
Data Forecast (February 2020), the total market for IL-6 testing for sepsis triage was $934 million in 2020 and is estimated to reach
$1.4 billion by 2025 growing at a CAGR of 8.51%. Our platform is designed to provide on-site and rapid test results, with no pre-processing
of the blood, and as such, we intend to pursue the following markets for triage:
3
The CDC National Center for
Health Statistics estimates that the market for the diagnostic cardiac triage tests will increase by more than 20% per year over
the next several years. Many factors are driving the growth of these markets, particularly the accelerating adoption of near-patient testing
inside hospitals, LTACs and ICUs. According to the 2021 edition of American Hospital Association Hospital Statistics, there were approximately
6,090 hospitals in the United States in 2019, approximately 5,000 of which are considered community hospitals. According to outside research,
fewer than half of these facilities have the capabilities, technology and products for near-patient diagnoses for triage of either sepsis
or cardiac conditions. We believe these facilities are candidates for our diagnostic platform.
Our Business Model
Our goal is to become a leading
provider of sample-to-result, ‘near-patient’ diagnostic testing in infectious, inflammatory and metabolic diseases by leveraging
the strengths of our Symphony platform. We intend to market the use of Symphony by targeting our sales and marketing to LTACs, clinics,
and community hospitals in the United States. We believe that the format of our low-cost, ‘near-patient’ platform will be
attractive to these institutions which may not otherwise have the financial resources, laboratory space, or trained personnel to justify
the purchase of a diagnostic solution. Our business model relies on the following:
Our Symphony Platform
Symphony
The Symphony platform is an
innovative and proprietary technology platform that in the Japan Study appeared to provide rapid and accurate measurements of key diagnostic
biomarkers found in whole blood. Symphony is compact and portable as compared with current laboratory diagnostic platforms that we believe,
based on the Japan Study, provide comparable sensitivity. In the Japan Study, Symphony appeared to provide lab-quality results in a near-patient
setting. Symphony is designed for usability; all sample preparation and reagents are integrated into the disposable Symphony Cartridges.
Symphony only needs a few hundred femtograms (10-10 grams) of the target to provide quantitation directly from whole blood.
Therefore, Symphony only requires a few drops of blood to generate a result in approximately 24 minutes.
4
Symphony is comprised of the
Symphony Fluorescence Immuno-analyzer and the Symphony Cartridge Library, shown in Figure 1. The Symphony analyzer orchestrates whole
blood processing, biomarker isolation, and immunoassay preparation using non-contact centrifugal force. All necessary reagents and components
are integrated into the Symphony Cartridges. Utilizing precision microchannel technology and high specificity antibodies, whole blood
is processed, and the biomarker is isolated within the Symphony Cartridge. Intermitted centrifugation cycles enable complex fluid movements,
enabling sequential reagent additions and independent reaction steps inside the hermitically sealed Symphony Cartridge. At the conclusion
of the test, the Symphony analyzer measures the fluorescence signature correlating to a highly sensitive quantitation of the biomarker.
Figure 1. Photograph of the Symphony Fluorescence
Immuno-analyzer and a Symphony IL-6 Cartridge. Barcode reader (not pictured) is included to streamline clinical workflow.
Although our first commercial
offering will be focused on the detection and quantitation of IL-6, we believe the flexibility of our technology will allow us to deploy
new biomarkers for additional indications. Every Symphony Cartridge inserted in the analyzer has a unique code which programs the Symphony
to perform the specific test. This unique feature will enable the release of new tests without the need for system redesigns or updates.
Furthermore, this automated feature will eliminate the need for system recalibrations for every product lot, further streamlining the
clinical workflow and enhancing usability.
5
The Symphony IL-6 test principle
employs direct sandwich Enzyme Linked Immunosorbent Assay (“ELISA”) for the quantitation of human IL-6 by fluorescence enzyme
immunoassay (“FEIA”), as shown in Figure 2. Within the single-use Symphony IL-6 Cartridge, the assay separates plasma from
whole blood and forms complexes through reaction of any IL-6 present in the sample with highly specific IL-6 binding antibodies. After
the IL-6 sandwich is formed, a fluorescent substrate is enzymatically decomposed to generate fluorescent molecules. The fluorescence intensity
is measured and converted to IL-6 concentration, and the entire process is enclosed within the Symphony IL-6 Cartridge and is controlled
and measured by the Symphony Fluorescence Immuno-analyzer.
Figure 2. Overview of the Symphony IL-6 test principle.
The Symphony Test Cartridge
To perform a Symphony test,
the test operator adds three drops of blood to the Symphony Cartridge. The volume does not have to be precise because the cartridge is
able to work with a range of 0.1 — 0.2 cc, which can be visualized with a fill-gauge on the Symphony Cartridge as shown in Figure
3. After scanning in the patient ID, the Symphony Cartridge is inserted into the Symphony and the test proceeds automatically. Up to six
Symphony Cartridges can be tested simultaneously, enabling up to six different patients or six different biomarkers to be tested at once
on a single machine. In approximately 24 minutes, the measurement results are produced, and a clinical decision can be made.
The disposable cartridge contains
the reagents required to run the applicable test. The three steps of the test (sample preparation, chemical reaction, and detection) are
performed in chambers present on the cartridge. All waste is collected in a chamber in the cartridge significantly reducing the risk of
lab contamination that is often cited as a concern of molecular diagnostic testing. After the test is completed and the result is obtained,
the cartridge is disposed of with the hospital’s other medical waste.
6
Figure 3. Photograph of the Symphony IL-6 Cartridge
loaded with a whole blood specimen.
Manufacturing
We plan to manufacture both
our devices and cartridges through Contract Manufacturing Organizations (“CMOs”). We have contracts with Toray to manufacture
our cartridges and Sanyoseiko to manufacture both our devices and cartridges. Pursuant to our agreement with Toray, we are required to
use Toray to manufacture test cartridges for a period of three years. We believe both companies are well-known and well-established global
manufacturing companies with capabilities to scale up, re-design and supply our devices and cartridges globally when needed. Therefore,
we believe we will have the capability to supply globally, when required. Both Toray and Sanyoseiko facilities are located in Japan.
We outsource our manufacturing
due to a number of factors; including,
● It would take significant time to establish our own manufacturing facilities,
In the first quarter of 2021,
we established Sanyoseiko as our large-scale contract manufacturing organization. Toray will continue to develop, validate and manufacture
our current IL-6 cartridges and other cartridges in our product pipeline as our pilot-manufacturing partner.
Regulatory Strategy
We license the technology for
Symphony from Toray. Our license grants us exclusive world-wide use with the exception of Japan. Toray started developing the Symphony
(known as RAY-FAST in Japan) to complement one of its sepsis related products for blood purification during sepsis. Development of RAY-FAST
begin in 2006. For the past 3-4 years, RAY-FAST has been used successfully in Japan by selected clinical institutions for measurement
of IL-6 in rheumatoid arthritis to monitor disease progression for the purpose of clinical validation, efficacy, monitoring potential
adverse conditions reporting, robustness, durability and customer feedback on usability.
Our initial regulatory pathway is to label and distribute Symphony
as an Research Use Only, or RUO product in the U.S. An RUO product is an in-vitro diagnostic device that is in the laboratory research
phase of development. RUO devices are not authorized for use in clinical or diagnostic applications. However, it is possible that certain
laboratories may choose to independently utilize the RUO Symphony as part of their own Laboratory Developed Test, or LDT. An LDT is a
type of in vitro diagnostic test that is designed, manufactured and used within a single laboratory. In parallel, we are pursuing
510(k) clearance from FDA to use Symphony for in vitro diagnostic use.
7
Symphony IL-6
Our Symphony IL-6 product candidate
is intended for early and rapid identification of sepsis during Emergency Department (“ED”), critical care triage, and neutropenic
sepsis in oncology patients. Our Symphony IL-6 product candidate is also intended for monitoring disease progression during such treatment
regimen.
We are conducting a multi-center
clinical study at The University of Texas, Southwestern Medical Center (William P. Clements Jr. University Hospital (CUH) and Zale Lipshy
Pavilion Hospital) and Parkland Memorial Hospital under a single protocol. Our clinical study will involve:
In parallel to these studies,
we intend to capture the necessary analytical data required for FDA submission. These studies will be performed using patient samples
with natural IL-6 and will be performed in accordance with the Clinical & Laboratory Standards Institute (“CLSI”)
guidelines.
We plan to start clinical studies
at other clinical sites to support additional indications and possibly additional FDA premarket submissions. In addition to ICUs, we plan
to add both adult and pediatric oncology patients. We plan to perform blood collections by both venipuncture and capillary collection,
which includes both finger stick and heel stick, in our studies so we can support these indications for use.
Blood collection for pediatric
patients is often faced with many challenges due to their limited supply of blood and the difficulty of performing venipuncture collections.
We believe the small amount of blood needed for Symphony will be very attractive for pediatric healthcare. Furthermore, we have planned
in our clinical studies to include finger stick and heel stick blood collection to further reduce the clinical burden of performing tests
in pediatric patients.
We submitted a pre-submission
application to the FDA presenting our study design and the data from our first set of studies. We will use their feedback, if necessary,
to modify the ongoing studies and to construct the FDA clearance application. We plan to submit our FDA clearance application at the end
of the third quarter of 2022.
The importance of IL-6 testing
has been further highlighted during the COVID-19 pandemic, and IL-6 concentrations in blood have been found to be heightened in patients
with COVID-19-associated systemic inflammation and hypoxic respiratory failure. If clinical studies are successful, our Symphony IL-6
product candidate could also be used with confirmed COVID-19 illness to aid in determining the risk of intubation with mechanical ventilation,
in conjunction with clinical findings and the results of other laboratory testing. In our ongoing clinical studies, we have performed
prospective Symphony IL-6 tests on the whole blood of 90 subjects admitted to either William P. Clements Jr. University Hospital, Zale
Lipshy Pavilion Hospital, or Parkland Memorial Hospital with confirmed COVID-19, confirmed by an FDA Emergency Use Authorization, or EUA
PCR SARS-CoV-2 test. Once completed, we believe our planned study design can be used to apply for an EUA for use with confirmed COVID-19
illness to aid in determining the risk of intubation with mechanical ventilation, in conjunction with clinical findings and the results
of other laboratory testing. There is no assurance that we will be successful in obtaining EUA for this indication.
8
Symphony hsTNT/I and NT-proBNP
We have two other product candidates
that are in development: (i) hsTNT/I for myocardial injury or myocardial infarction (MI) and (ii) NT-proBNP for cardiac heart failure
(“CHF”). These product candidates will follow a similar regulatory pathway as identified for our Symphony IL-6 product candidate
which we believe will result in obtaining 510(k) clearance for diagnostic use.
For the clinical trial, we
plan to have both retrospective samples and prospective subjects to power the study to have a statistically significant result. For retrospectively
collected samples, we will utilize clinical information recorded during the original sample collection. For prospectively collected samples,
clinical information will be collected initially during admission or ER triage, and will be considered as baseline samples. Clinical information
will also be collected on discharge, shift or admission to ICU. Our clinical plan also allows us to monitor ER or admitted patients during
their treatment regimen.
Sales and Marketing
Initially, we plan to have
four major sales territories; Northeast, Northwest, Central (South central and North central) and West (North west and South west). These
territories will be served and supported by territory sales managers and technical sales support managers. A centralized sales and technical
support team will support the regional groups. We intend to focus our initial sales efforts on the large institutions, hospitals, and
LTACs that operate multiple facilities and therefore might purchase multiple units. This ‘Waterfall’ strategy, focusing on
sales within those institutions, may lower salesforce costs.
Our sales representatives will
typically have experience in molecular diagnostic testing and a network of customer contacts within their respective territories. We will
utilize our teams’ knowledge along with market research databases to target and qualify our customers. We intend to execute a variety
of sales campaigns and strategies to meet the buying criteria of the different customer segments we intend to pursue.
In the United States, our sales
cycle will typically include customer evaluations, a decision to use our platform and then validation of our platform. Upon successful
validation a hospital or reference lab may choose to become a customer. The analyzer will be available to the customer by purchase or
third-party lease for their use with our diagnostic test. The customer will buy our proprietary test cartridge from us and utilize one
disposable test cartridge each time they run a diagnostic test.
We have deployed the Symphony
and test cartridges in the United States in selected medical institutions and LTAC facilities for evaluation. Our goal is to convert these
facilities into paying customers if we receive FDA authorization.
Customers
Our initial focus is on the
following types of customers:
Medical Institution and
Hospitals with Intensive Care Unit (ICUs): ICUs treat patients with severe or life-threatening illnesses and
injuries, which require constant care, close supervision from life support equipment and medication to ensure normal bodily functions.
ICUs are staffed by highly trained physicians, nurses and respiratory therapists who specialize in caring for critically ill patients.
ICUs are also distinguished from general hospital wards by a higher staff-to-patient ratio and access to advanced medical resources and
equipment that is not routinely available elsewhere. The types of patients typically seen in ICUs are those with acute and advanced respiratory
distress syndrome, septic shock, and patients requiring support for an acute reversible failure of one or more organs.
Long-term Acute Care facilities
(LTACs): LTACs are facilities that specialize in the treatment of patients with serious medical conditions
that require care on an on-going basis but no longer require intensive care or extensive diagnostic procedures. These patients are typically
discharged from the intensive care units and require more care than they can receive in a rehabilitation center, skilled nursing facility,
or at home. The types of patients typically seen in LTACs include those requiring prolonged ventilator use or weaning, ongoing dialysis
for chronic renal failure, intensive respiratory care, multiple IV medications or transfusions, and complex wound care/care for burns.
Outpatient Clinics: A
clinic (or outpatient or ambulatory care clinic) is a health care facility that is primarily focused on the care of outpatients. Clinics
can be privately operated or publicly managed and funded. They typically cover the primary care needs of populations in local communities.
Typical large outpatient clinics house general medical practitioners such as doctors and nurses to provide ambulatory care and some acute
care services including patient triage for sepsis and cardiac patients. The types of patient care they perform include blood tests, triage
with chest pain complaints, triage with septic shock, biopsies, chemotherapy, colonoscopy, CT scan, mammograms, minor surgical procedures,
radiation treatments, ultrasound imaging and x-rays.
9
License Agreement
We have an exclusive license
with Toray for the entire world, excluding Japan, to use their patents and know-how related to Symphony and the detection cartridges for
the manufacturing, marketing and sale of the products (as defined in the agreement). We also have a nonexclusive license for the same
purposes in Japan. The term of this license agreement extends until the expiration of all the patents associated with the licensed patent
rights, which are between 2029 and 2036. If we do not generate commercial sales within five years of the date of the license, Toray has
the right to terminate the agreement or make it non-exclusive. In addition, we are required to make commercially reasonable efforts to
obtain market approval for the products in the United States and the European Union by October 2023. Pursuant to the agreement, we are
required to use Toray to manufacture the sample cartridges. The agreement terminates upon expiration of the last of the patents included
in the license.
In connection with entering
into the agreement, we paid Toray $240,000 in licensing fees. We are required to pay a 15% royalty fee for the period that any underlying
patents exist or for 5 years after the first sale for the licensing of this technology based on a percentage of our “Net Sales”
of products using these technologies (as defined in the license agreement) with a minimum royalty of $60,000 for the initial year that
royalties are payable increasing to a minimum of $100,000 thereafter.
Intellectual Property, Proprietary Technology
We do not currently hold any
patents directly. We rely on a combination either directly or through our license agreement with Toray of patent, copyright, trade secret,
trademark, confidentiality agreements, and contractual protection to establish and protect our proprietary rights. We have licensed U.S.
Patent Nos. 8,409,447 (“the ‘447 patent”) and 8,821,813 (“the ‘813 patent”). The ‘447 patent
is valid through at least February 2029 and is generally directed to a separation chip and a method for separating an insoluble component
from a suspension with the separation chip. The ‘813 patent is valid through at least March 2028 and is generally directed to a
liquid-feeding chip, a liquid feeding method and analysis method. We have also licensed use or process patents covering the inventions
and/or subject matter of the ‘447 and ‘813 patents in various international territories including Japan, Canada, China, Europe
and South Korea, which are valid through at least February 2027.
These measures may not be adequate
to safeguard the technology underlying our products. For example, employees, consultants and others who participate in the development
of our products may breach their agreements with us regarding our intellectual property, and we may not have adequate remedies for the
breach. We also may not be able to effectively protect our intellectual property rights in some foreign countries, as many countries do
not offer the same level of legal protection for intellectual property as the United States. Furthermore, for a variety of reasons, we
may decide not to file for patent, copyright or trademark protection outside of the United States. Our trade secrets could become known
through other unforeseen means. Notwithstanding our efforts to protect our intellectual property, our competitors may independently develop
similar or alternative technologies or products that are equal or superior to our technology. Our competitors may also develop similar
products without infringing on any of our intellectual property rights or design around our proprietary technologies. Furthermore,
any efforts to enforce our proprietary rights could result in disputes and legal proceedings that could be costly and divert attention
from our business. We could also be subject to third-party claims that we require additional licenses for our products, and such claims
could interfere with our business. If our products infringe the intellectual property rights of others, we could face costly litigation,
which could cause us to pay substantial damages and limit our ability to sell some or all of our products. Even if our products were determined
not to infringe the intellectual property rights of others, we could incur substantial costs in defending any such claims.
Competition
Our primary competition is
laboratory size equipment including the Roche Cobas®, Siemens ADVIA Centaur® and Beckman Coulter Access
2®.
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Our competitors have substantially
greater financial, technical, research and other resources and larger, more established marketing, sales and distribution organizations
than we do. Our competitors also offer broader product lines and have greater brand recognition than we do. Moreover, our existing and
new competitors may make rapid technological developments that may result in our technologies and products becoming obsolete before we
recover the expenses incurred to develop them or before they generate significant revenue. We may encounter potential customers that,
due to existing relationships with our competitors, are committed to or prefer the products offered by these competitors. There can be
no assurance that competitors, many of which have made substantial investments in competing technologies, will not prevent, limit or interfere
with our ability to make, use or sell our products either in the United States or in international markets.
Government Regulation
The design, development, manufacture,
testing and sale of our diagnostic products are subject to regulation by numerous governmental authorities, principally the FDA, and corresponding
state and foreign regulatory agencies.
FDA Regulation
Research Use Only Technologies
Symphony will initially be
commercialized as an RUO tool in the United States. RUO products belong to a separate regulatory classification under a long-standing
FDA regulation. From an FDA perspective, products that are intended for research use only and are labeled as RUO are not regulated by
the FDA as in vitro diagnostic devices and are therefore not subject to the regulatory requirements discussed below for
clinical diagnostic products. Thus, RUO products may be used or distributed for research use without first obtaining FDA clearance, authorization
or approval. The products must bear the statement: “For Research Use Only. Not for Use in Diagnostic Procedures.” RUO products
cannot make any claims related to safety, effectiveness or diagnostic utility, and they cannot be intended by the manufacturer for human
clinical diagnostic use. Accordingly, a product labeled RUO but intended or promoted for clinical diagnostic use may be viewed by the
FDA as false or misleading and thereby adulterated and misbranded products under the Federal Food, Drug, and Cosmetic Act (“FDCA”)
and subject to FDA enforcement action. The FDA’s 2013 Guidance for Industry and Food and Drug Administration Staff on “Distribution
of In Vitro Diagnostic Products Labeled for Research Use Only or Investigational Use Only,” explains that the FDA will
consider the totality of the circumstances surrounding distribution and use of an RUO product, including how the product is marketed and
to whom, when determining its intended use. Merely including a labeling statement that a product is intended for research use only will
not necessarily exempt the device from the FDA’s 510(k) clearance, premarket approval, or other requirements, if the circumstances
surrounding the distribution of the product indicate that the manufacturer intends its product to be used for clinical diagnostic use.
These circumstances may include written or verbal marketing claims or links to articles regarding a product’s performance in clinical
applications, a manufacturer’s provision of technical support for clinical validation or clinical applications, or solicitation
of business from clinical laboratories, all of which could be considered evidence of intended uses that conflict with RUO labeling. If
the FDA disagrees with a company’s RUO status for its product, the company may be subject to FDA enforcement activities, including,
without limitation, removal of the product, or requiring the company to seek clearance, authorization or approval for the products.
Medical Devices
Generally, in vitro diagnostic
products we develop must be cleared by the FDA before they are marketed in the United States. Before and after approval, authorization,
or clearance in the United States, our products are subject to extensive regulation by the FDA, as well as by other regulatory bodies.
FDA regulations govern, among other things, the development, testing, manufacturing, labeling, safety, storage, recordkeeping, market
clearance, authorization or approval, advertising and promotion, import and export, marketing and sales, and distribution of medical devices,
including in vitro diagnostic devices (“IVDs”). IVDs are a type of medical device and include reagents and instruments
used in the diagnosis or detection of diseases, conditions or infections, including, without limitation, the presence of certain chemicals
or other biomarkers. Predictive, prognostic and screening tests can also be IVDs.
In the United States, medical
devices are subject to varying degrees of regulatory control and are classified in one of three classes depending on the extent of controls
the FDA determines are necessary to reasonably ensure their safety and effectiveness:
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After a medical device is placed
on the market, numerous regulatory requirements apply. These include:
Failure to comply with applicable
regulatory requirements can result in enforcement action by the FDA, which may include sanctions, including but not limited to, warning
letters; fines, injunctions, and civil penalties; recall or seizure of the device; operating restrictions, partial suspension or total
shutdown of production; refusal to grant 510(k) clearance, de novo authorization, or approval of a PMA application for new devices;
withdrawal of clearance, authorization, or approval; and civil or criminal prosecution.
Premarket Authorization and Notification
While most Class I and some
Class II devices can be marketed without prior FDA authorization, most medical devices can be legally sold within the U.S. only if the
FDA has: (i) approved a PMA application prior to marketing, generally applicable to Class III devices; or (ii) cleared the device in response
to a premarket notification, or 510(k) submission, generally applicable to Class II and some Class I devices. Some devices that have been
classified as Class III are regulated pursuant to the 510(k) requirements because FDA has not yet called for PMAs for these devices. Other
less common regulatory pathways to market medical devices include Emergency Use Authorization or the EUA process which is only available
during public health emergencies, humanitarian device exception (“HDE”) or a product development protocol (“PDP”).
510(k) Notification
Product development in the
U.S. for most Class II and limited Class I devices typically follows a 510(k) pathway. To obtain 510(k) clearance, a manufacturer must
submit a premarket notification demonstrating that the proposed device is substantially equivalent to a legally marketed device, referred
to as the predicate device. A predicate device may be a previously 510(k) cleared device or a device that was in commercial distribution
before May 28, 1976 for which the FDA has not yet called for submission of PMA applications. The manufacturer must show that the proposed
device has the same intended use as the predicate device, and it either has the same technological characteristics, or it is shown to
be equally safe and effective and does not raise different questions of safety and effectiveness as compared to the predicate device.
There are three types of 510(k)s:
traditional; special, for devices that are modified and the modification needs a new 510(k) but the modification does not affect the intended
use or alter the fundamental scientific technology of the device; and abbreviated, for devices that conform to a recognized standard.
The special and abbreviated 510(k)s are intended to streamline review. The FDA intends to process special 510(k)s within 30 FDA days of
receipt, and abbreviated 510(k)s within 90 FDA days of receipt. The clearance pathway for traditional 510(k)s can, however, take from
four to 12 months, or even longer if FDA has questions during the review.
After a device receives 510(k)
clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute a major change in its
intended use, requires a new 510(k) clearance or could require a de novo authorization approval of a PMA application. The FDA requires
each manufacturer to make this determination in the first instance, but the FDA can review any such decision. If the FDA disagrees with
a manufacturer’s decision not to seek a new 510(k) clearance, the agency may retroactively require the manufacturer to seek 510(k)
clearance, de novo authorization, or PMA approval. The FDA also can require the manufacturer to cease marketing and/or recall the
modified device until 510(k) clearance, de novo authorization, or PMA approval is obtained.
During the review of a 510(k)
submission, the FDA may request more information or additional studies and may decide the indications for which we seek clearance should
be limited. In addition, laws and regulations and the interpretation of those laws and regulations by the FDA may change in the future.
We cannot foresee what effect, if any, such changes may have on us.
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De Novo Classification
Devices of a new type that
FDA has not previously classified based on risk are automatically classified into Class III by operation of section 513(f)(1) of the FDCA,
regardless of the level of risk they pose. To avoid requiring PMA review of low- to moderate-risk devices classified in Class III by operation
of law, Congress enacted section 513(f)(2) of the FDCA. This provision allows FDA to classify a low- to moderate-risk device not previously
classified into Class I or II. After de novo authorization, an authorized device may be used as a predicate for future devices
going through the 510(k) process.
PMA Application
A product not eligible for
510(k) clearance or de novo authorization must follow the PMA approval pathway, which requires proof of the safety and effectiveness of
the device to the FDA’s satisfaction.
Results from adequate and well-controlled
clinical trials are required to establish the safety and effectiveness of a Class III PMA device for each indication for which FDA approval
is sought. After completion of the required clinical testing, a PMA including the results of all preclinical, clinical, and other testing,
and information relating to the product’s marketing history, design, labeling, manufacture, and controls, is prepared and submitted
to the FDA.
The PMA approval process is
generally more expensive, rigorous, lengthy, and uncertain than the 510(k) premarket notification process and requires proof of the safety
and effectiveness of the device to the FDA’s satisfaction. As part of the PMA review, the FDA will typically inspect the manufacturer’s
facilities for compliance with the QSR requirements, which impose elaborate testing, control, documentation and other quality assurance
procedures. The FDA’s review of a PMA application typically takes one to three years, but may last longer. If the FDA’s evaluation
of the PMA application is favorable, the FDA will issue a PMA for the approved indications, which can be more limited than those originally
sought by the manufacturer. The PMA can include post-approval conditions that the FDA believes necessary to ensure the safety and effectiveness
of the device including, among other things, restrictions on labeling, promotion, sale and distribution. Failure to comply with the conditions
of approval can result in material adverse enforcement action, including the loss or withdrawal of the approval and/or placement of restrictions
on the sale of the device until the conditions are satisfied.
Even after approval of a PMA,
a new PMA or PMA supplement is required in the event of a modification to the device, its labeling or its manufacturing process. Supplements
to a PMA often require the submission of the same type of information required for an original PMA, except that the supplement is generally
limited to that information needed to support the proposed change from the product covered by the original PMA.
EUA Process
The program for authorizations
of products through an Emergency Use Authorization (“EUA”) is established when the Secretary of Health and Human Services
declares a public health emergency. This process remains in effect only as long the declared public health emergency is in effect. An
EUA authorization is granted by FDA using similar analytical and clinical validation metrics similar to what may be required for 510(k),
PMA or de novo authorizations but are based on a reduced amount of data. The process to obtain an EUA typically consists of two phases,
an initial Pre-EUA submission that is used to identify and resolve any significant problems that would preclude issuance of an EUA and
a final EUA submission. The final EUA submission addresses the details that the FDA will require to demonstrate that the Symphony IL-6
test will have acceptable analytical and clinical performance. FDA has granted EUA for the Roche Elecsys IL-6 test, the Siemens ADVIA
Centaur IL-6 test and the Beckman Coulter Access IL-6 test. FDA publishes summaries of the testing performed to support these EUAs, which
will serve as guidance as we prepare our EUA. There are no required timelines for review and authorization of an EUA. Moreover, FDA has
prioritized those IVD EUA that the agency will review to include molecular and antigen tests that may be used at the POC or completely
at home; the manufacturer has the capacity to scale up to a production of >500,00 tests per week within 3 months of authorization;
or tests that are from or supported by US government stakeholder, e.g. BARDA or NIH’s RADx program. For serology tests, FDA intends to
focus on quantitative and neutralizing antibody tests. There is no guarantee that the Symphony IL-6 assay will be a priority for FDA
review.
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Clinical Trials of Medical Devices
Clinical trials are almost
always required to support a PMA, are often required for a de novo authorization, and are sometimes required for 510(k) clearance. Clinical
trials may also be conducted or continued to satisfy post-approval requirements for devices with PMAs. Clinical studies of unapproved
or uncleared medical devices or devices being studied for uses for which they are not approved or cleared (investigational devices) must
be conducted in compliance with FDA requirements. If an investigational device could pose a significant risk to patients, the sponsor
company must submit an Investigational Device Exemption (“IDE”) application to the FDA prior to initiation of the clinical
study. An IDE application must be supported by appropriate data, such as animal and laboratory test results, showing it is safe to test