UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
☒ANNUAL REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31,
2022
OR
☐TRANSITION REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________
to ______________________
Commission file number: 001-34673
CORMEDIX INC.
(Exact name of Registrant as Specified in Its Charter)
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including
area code: (908)517-9500
Securities registered pursuant to Section 12(b)
of the Act:
Title of each class Trading Symbol Name of each exchange on which registered
Common Stock, $0.001 Par Value CRMD Nasdaq Global 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 electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether
the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting
company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
Emerging growth company ☐
If an emerging growth
company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any news 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 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 registrant’s voting common
equity held by non-affiliates of the registrant, based upon the closing price of the registrant’s common stock on the last business
day of the registrant’s most recently completed second fiscal quarter was approximately $163.9 million. Solely for the purpose of
this calculation, shares held by directors and executive officers of the registrant have been excluded.
The number of outstanding shares
of the registrant’s common stock was 44,499,788 as of March 28, 2023.
DOCUMENTS INCORPORATED BY REFERENCE
None
CORMEDIX
INC.
PART I 1
Item 1. Business 3
Item 1A. Risk Factors 20
Item 1B. Unresolved Staff Comments 42
Item 2. Properties 42
Item 3. Legal Proceedings 42
Item 4. Mine Safety Disclosures 44
Item 6. [RESERVED] 45
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 54
Item 8. Financial Statements and Supplementary Data 54
Item 9A. Controls and Procedures 54
Item 9B. Other Information 55
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 55
PART III 56
Item 10. Directors, Executive Officers, and Corporate Governance 56
Item 11. Executive Compensation 60
Item 14. Principal Accounting Fees and Services 72
Item 15. Exhibits, Financial Statement Schedules 73
Neutrolin® is our
registered trademark. DefenCathTM and CorMedix Inc. are our filed trademarks. All other trade names, trademarks and service marks
appearing in this Annual Report on Form 10-K are the property of their respective owners. We have assumed that the reader understands
that all such terms are source-indicating. Accordingly, such terms, when first mentioned in this report, appear with the trade name,
trademark or service mark notice and then throughout the remainder of this Annual Report on Form 10-K without trade name, trademark or
service mark notices for convenience only and should not be construed as being used in a descriptive or generic sense.
i
PART
I
Forward-Looking
Statements
This Annual Report on Form 10-K contains “forward-looking
statements” that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could
cause our results to differ materially from those expressed or implied by such forward-looking statements. The statements contained in
this Annual Report on Form 10-K that are not purely historical are forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”). Forward-looking statements are often identified by the use of words such as, but not limited
to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,”
“expect,” “intend,” “may,” “will,” “plan,” “project,” “seek,”
“should,” “target,” “will,” “would,” and similar expressions or variations intended to
identify forward-looking statements. These statements are based on the beliefs and assumptions of our management based on information
currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that
could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking
statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below in the
Risk Factor Summary and section titled “Item 1A. Risk Factors.” Furthermore, such forward-looking statements speak only as
of the date of this Annual Report on Form 10-K. Except as required by law, we undertake no obligation to update any forward-looking statements
to reflect events or circumstances after the date of such statements.
Risk
Factor Summary
The
following is a summary of material risks that could affect our business. This summary may not contain all of our material risks, and
it is qualified in its entirety by the more detailed risk factors set forth in Item 1.A “Risk Factors.”
Risks
Related to our Financial Position and Need for Additional Capital
Risks
Related to the Development and Commercialization of Our Product Candidates
7. Physician and patients may not accept and use our products.
1
Risks
Related to Our Business and Industry
5. We may not successfully manage our growth.
Risks
Related to Our Intellectual Property
Risks
Related to Dependence on Third Parties
Risks
Related to Our Common Stock
2
Item 1. Business
Overview
We
are a biopharmaceutical company focused on developing and commercializing therapeutic products for the prevention and treatment of life-threatening
diseases and conditions.
Our
primary focus is on the development of our lead product candidate, DefenCathTM, for potential commercialization in the
United States, or U.S., and other key markets. We have in-licensed the worldwide rights to develop and commercialize DefenCath and Neutrolin®.
The name DefenCath is the U.S. proprietary name conditionally approved by the U.S. Food and Drug Administration, or FDA, while the name
Neutrolin was used in the European Union, or EU, and other territories where we received CE-Mark approval for the commercial distribution
of Neutrolin as a catheter lock solution, or CLS, regulated as a medical device.
DefenCath is a novel anti-infective solution (a
formulation of taurolidine 13.5 mg/mL, and heparin 1000 USP Units/mL) intended for the reduction and prevention of catheter-related infections
and thrombosis in patients requiring central venous catheters, or CVCs, in clinical settings such as hemodialysis, total parenteral nutrition
and oncology. Infections and thrombosis represent key complications among hemodialysis, total parenteral nutrition and cancer patients
with CVCs. These complications can lead to treatment delays and increased costs to the healthcare system when they occur due to hospitalizations,
need for IV antibiotic treatment, long-term anticoagulation therapy, removal/replacement of the CVC, related treatment costs, as well
as increased mortality. We believe DefenCath, if approved, will address a significant unmet medical need and a potential large market
opportunity.
DefenCath
– United States
In
late 2013, we met with the FDA, to determine the pathway for obtaining U.S. marketing approval of DefenCath as a new drug. In January
2015, the FDA designated DefenCath as a Qualified Infectious Disease Product, or QIDP, for prevention of catheter-related blood stream
infections, or CRBSIs, in patients with end stage renal disease receiving hemodialysis through a CVC. CRBSIs and clotting can be life-threatening.
The QIDP designation provides five years of market exclusivity in addition to the five years granted for a New Chemical Entity, or NCE,
upon approval of a New Drug Application, or NDA. In addition, in January 2015 the FDA granted Fast Track designation to DefenCath Catheter
Lock Solution, a designation intended to facilitate development and expedite review of drugs that treat serious and life-threatening
conditions so that the approved drug can reach the market expeditiously. The Fast Track designation of DefenCath provides us with the
opportunity to meet with the FDA on a more frequent basis during the development process, and also ensures eligibility to request priority
review of the marketing application.
We
launched the Phase 3 clinical trial in patients with hemodialysis catheters in the U.S. in December 2015. The clinical trial, named Phase
3 Prospective, Multicenter, Double-blind, Randomized, Active Control Study to Demonstrate Safety and Effectiveness of DefenCath in Preventing
Catheter-related Bloodstream Infection in Subjects on Hemodialysis for End Stage Renal Disease, or LOCK-IT-100, was a prospective, multicenter,
randomized, double-blind, active control trial which was designed to demonstrate the safety and effectiveness of DefenCath compared to
the standard of care CLS, Heparin, in preventing CRBSIs, in subjects receiving hemodialysis therapy as treatment for end stage renal
disease. The primary endpoint for the trial assessed the incidence of CRBSI and time to CRBSI for each study subject. The trial evaluated
DefenCath relative to the active control heparin by documenting the incidence of CRBSI and the time until the occurrence of
CRBSI for each study subject. Secondary endpoints were catheter patency, which was defined as required use of tissue plasminogen activating
factor, or tPA, or removal of catheter due to dysfunction, and removal of catheter for any reason.
3
During
the course of the study, in consultation with the FDA, we established the Clinical Adjudication Committee, or CAC, to critically and
independently assess CRBSI while being blinded to treatment assignment. As announced in July 2018, the CAC reviewed potential cases of
CRBSI in our LOCK-IT-100 study that occurred through early December 2017 and identified 28 such cases. As previously agreed with the
FDA, an interim efficacy analysis was performed when the first 28 CRBSIs were identified. On July 25, 2018, we announced that the independent
Data Safety Monitoring Board, or DSMB, had completed its review of the interim analysis of the data from the LOCK-IT-100 study. Based
on the first 28 cases, there was a highly statistically significant 72% reduction in CRBSI relative to the control (p=0.0034). Because
the pre-specified level of statistical significance was reached for the primary endpoint and efficacy had been demonstrated with no safety
concerns, the DSMB recommended the study be terminated early.
Following
discussions with the FDA, we proceeded with an orderly termination of LOCK-IT-100. In late January 2019, we announced the topline results
of the full data set of the LOCK-IT-100 study. The study continued enrolling and treating subjects until study termination, and the final
efficacy analysis was based on a total of 795 subjects.
The
primary endpoint of the Phase 3 LOCK-IT-100 study was the reduction of the risk of occurrence of CRBSI by DefenCath relative to the active
control of heparin. In the analysis of the full data set, a total of 41 CRBSI events were determined by the CAC. There was a 71% reduction
in the risk of occurrence of CRBSIs compared with the active control of heparin, which was well in excess of the study’s assumed
treatment effect size of a 55% reduction. In the DefenCath arm, the CRBSI event rate was 0.13 per 1000 catheter days, which is significantly
lower than the event rate of 0.46 per 1000 catheter days in the control arm. The statistical significance of the primary endpoint in
the full data set (p=0.0006) was even more impressive than that of the interim analysis (p=0.0034).
The
FDA granted our request for a rolling submission and review of the New Drug Application, or NDA, that is designed to expedite the approval
process for products being developed to address an unmet medical need. Although the FDA usually requires two pivotal clinical trials
to provide substantial evidence of safety and effectiveness for approval of the NDA, the FDA will in some cases accept one adequate and
well-controlled trial, where it is a large multicenter trial with a broad range of subjects and investigation sites with procedures to
include trial quality that has demonstrated a clinically meaningful and statistically very persuasive effect on prevention of a disease
with potentially serious outcome.
In
March 2020, we began the modular submission process for the NDA for DefenCath for the prevention of CRBSI in hemodialysis patients, and
in August 2020, the FDA accepted for filing the DefenCath NDA. The FDA also granted our request for priority review, which provides for
a six-month review period instead of the standard ten-month review period. As we announced in March 2021, the FDA informed us in its
Complete Response Letter (“CRL”) that it could not approve the NDA for DefenCath in its present form. The FDA noted concerns
at the third-party manufacturing facility after a review of records requested by the FDA and provided by the contract manufacturing organization,
or CMO. Additionally, the FDA required a manual extraction study to demonstrate that the labeled volume can be consistently withdrawn
from the vials despite an existing in-process control to demonstrate fill volume within specifications.
In
April 2021, we and the CMO met with the FDA to discuss proposed resolutions for the deficiencies identified in the CRL to us and the
Post-Application Action Letter, or PAAL, received by the CMO from the FDA for the NDA for DefenCath. There was an agreed upon protocol
for the manual extraction study identified in the CRL, which now has been successfully completed. Addressing the FDA’s concerns
regarding the qualification of the filling operation necessitated adjustments in the process and generation of additional data on operating
parameters for manufacture of DefenCath. We and the CMO determined that additional process qualification was needed with subsequent validation
to address these issues.
4
The
FDA did not request additional clinical data and did not identify any deficiencies related to the data submitted on the efficacy or safety
of DefenCath from LOCK-IT-100. In draft labeling discussed with the FDA, the FDA added that the initial approval will be for the
limited population of patients with kidney failure receiving chronic hemodialysis through a central venous catheter. This is consistent
with our request for approval pursuant to the Limited Population Pathway for Antibacterial and Antifungal Drugs, or LPAD. LPAD, passed
as part of the 21st Century Cures Act, is a new program intended to expedite the development and approval of certain antibacterial
and antifungal drugs to treat serious or life-threatening infections in limited populations of patients with unmet needs. LPAD provides
for a streamlined clinical development program involving smaller, shorter, or fewer clinical trials and is intended to encourage the
development of safe and effective products that address unmet medical needs of patients with serious bacterial and fungal infections.
We believe that LPAD will provide additional flexibility for the FDA to approve DefenCath to reduce CRBSIs in the limited population
of patients with kidney failure receiving hemodialysis through a central venous catheter.
On
February 28, 2022, we resubmitted the NDA for DefenCath to address the CRL issued by the FDA. In parallel, our third-party manufacturer
submitted responses to the deficiencies identified at the manufacturing facility in the PAAL issued by the FDA concurrently with the
CRL. The FDA had stated that it expected all corrections to facility deficiencies to be complete at the time of resubmission so that
all corrective actions may be verified during an onsite evaluation of the manufacturing facility in the next review cycle. On March 28,
2022, we announced that the resubmission of the NDA for DefenCath had been accepted for filing by the FDA. The FDA considered the resubmission
as a complete, Class 2 response with a six-month review cycle. The CMO notified us that an onsite inspection by the FDA was conducted
that resulted in FORM FDA 483 observations that are being addressed. The CMO submitted responses to the inspectional observations along
with a corrective action plan and requested a meeting with the FDA to discuss. We were also notified by our supplier of heparin, an active
pharmaceutical ingredient, or API, for DefenCath, that an inspection by the FDA for an unrelated API, resulted in a Warning Letter due
to deviations from good manufacturing practices for the unrelated API.
On
August 8, 2022, we announced receipt of a second CRL from the FDA regarding the DefenCath NDA. The FDA stated that the DefenCath NDA
cannot be approved until deficiencies conveyed to the CMO and the heparin API supplier are resolved to the satisfaction of the FDA. There
were no other requirements identified by the FDA for us prior to resubmission of the NDA. Validation of manufacturing with heparin from
an alternative supplier is underway to prepare for resubmission of the NDA in the event that the Warning Letter at our current API supplier
remains unresolved. Corrective actions have been implemented to address the inspectional observations at the CMO and are under review
by the FDA.
As part of the NDA review process, the FDA has also notified us that
although the tradename DefenCath was conditionally approved, the FDA now has identified potential confusion with another pending product
name that is also under review. The ultimate acceptability of our proposed tradename is dependent upon which application is approved first.
As a precaution, we are preparing to submit an alternative proprietary name to the FDA which will undergo review.
We
intend to pursue additional indications for DefenCath use as a CLS in populations with unmet medical needs that may also represent potentially
significant market opportunities. While we are continuing to assess these areas, potential future indications may include use as a CLS
to reduce CRBSIs in total parenteral nutrition patients using a central venous catheter and in oncology patients using a central venous
catheter.
We
were granted a deferral by the FDA under the Pediatric Research Equity Act, or PREA, that requires sponsors to conduct pediatric studies
for NDAs for a new active ingredient, such as taurolidine in DefenCath, unless a waiver or deferral is obtained from the FDA. A deferral
acknowledges that a pediatric assessment is required but permits the applicant to submit the pediatric assessment after the submission
of an NDA. We have made a commitment to conduct the pediatric study after approval of the NDA for use in adult hemodialysis patients.
Pediatric studies for an approved product conducted under PREA may qualify for pediatric exclusivity, which, if granted, would provide
an additional six months of marketing exclusivity. DefenCath would then have the potential to receive a total marketing exclusivity period
of 10.5 years, including exclusivity pursuant to NCE and QIDP.
Neutrolin
– International
In
the EU, Neutrolin was regulated as a Class 3 medical device. In July 2013, we received CE Mark approval for Neutrolin. In December 2013,
we commercially launched Neutrolin in Germany for the prevention of CRBSI, and maintenance of catheter patency in hemodialysis patients
using a tunneled, cuffed central venous catheter for vascular access.
5
In
September 2014, the TUV-SUD and The Medicines Evaluation Board of the Netherlands, or MEB, granted a label expansion for Neutrolin for
these same expanded indications for the EU. In December 2014, we received approval from the Hessian District President in Germany to
expand the label to include use in oncology patients receiving chemotherapy, IV hydration and IV medications via central venous catheters.
The expansion also adds patients receiving medication and IV fluids via central venous catheters in intensive or critical care units
(cardiac care unit, surgical care unit, neonatal critical care unit, and urgent care centers). An indication for use in total parenteral
nutrition was also approved.
In
September 2019, our registration with the Saudi Arabia Food and Drug Administration, or the SFDA, expired. As a result, we cannot sell
Neutrolin in Saudi Arabia and do not intend to pursue renewal of our registration with the SFDA.
As
announced in May 2022, we began the process of winding down our operations in the EU and discontinued Neutrolin sales in both the EU
and the Middle East at the end of 2022.
Additional
Development Possibilities
In
addition to DefenCath, we have sponsored a pre-clinical research collaboration for the use of taurolidine as a possible treatment for
rare pediatric tumors. In February 2018, the FDA granted orphan drug designation to taurolidine for the treatment of neuroblastoma in
children. We may seek one or more strategic partners or other sources of capital to help us develop and commercialize taurolidine for
the treatment of neuroblastoma in children.
We
have previously filed intellectual property for expanded uses of taurolidine as a platform compound for use in certain medical devices.
Patent applications have been filed in several indications, including wound closure, surgical meshes, and wound management. We would
need to seek to establish development/commercial partnerships for these programs to advance.
The
FDA regards taurolidine as a new chemical entity and therefore it is currently regulated as an unapproved new drug. In the future, we
may pursue product candidates that would involve devices impregnated with taurolidine, and we believe that at the current time such products
would be combination products subject to device premarket submission requirements (while subject also, under review by the FDA, to the
standards for drug approvability). Consequently, given that there is no appropriate predicate medical device currently marketed in the
U.S. on which a 510(k) approval process could be based and that taurolidine is not yet approved in any application, we anticipate that
we would be required to submit a premarket approval application, or PMA, for marketing authorization for any medical device indications
that we may pursue for devices containing taurolidine. In the event that an NDA for DefenCath is approved by the FDA, the regulatory
pathway for these medical device product candidates may be revisited with the FDA. Although there may be no appropriate predicate, de
novo Class II designation can be proposed, based on a risk assessment and a reasonable assurance of safety and effectiveness.
DefenCath
Market
Opportunity
Central
venous catheters, or CVCs, and peripherally inserted central catheters, or Central Catheters, are an important and frequently used method
for accessing the vasculature in hemodialysis (a form of dialysis where the patient’s blood is circulated through a dialysis filter),
administering chemotherapy and basic fluids in cancer patients and for cancer chemotherapy, long term antibiotic therapy, and total parenteral
nutrition (complete or partial dietary support via intravenous nutrients).
Bloodstream infections resulting from the use of
central catheters, known as CRBSIs or Central Line Associated Bloodstream Infections, or CLABSIs, can result in significant morbidity
and increased rates of hospital admissions, readmissions and mortality. One of the major and common risk factors for all patients requiring
CVCs is CRBSIs and the clinical complications associated with them. The total annual cost for treating CRBSI episodes and their related
complications in the U.S. is up to $2.3 billion, with approximately 250,000 CRBSI episodes per year (Becker’s Hospital Review).
6
According to the 2022 United States Renal Disease System, reporting
data from 2020, there were nearly 808,000 End-Stage-Renal-Disease, or ESRD, patients on permanent hemodialysis in the U.S. Of these, nearly
108,000 hemodialysis patients were new patients diagnosed with ESRD during the year they were receiving dialysis through a CVC. Patients
are typically located in various care settings including inpatient hospitals and outpatient dialysis clinics. Kidney failure patients
can include ESRD, Acute Kidney Injury, or AKI and Chronic Kidney Disease, or CKD, populations that crash land into dialysis. Patients
that present in the hospital have an average length of stay of 13.3 days and additionally high 30-day readmission rates both for same
diagnosis and all-cause with the all-cause readmissions being higher.
Biofilm
build up is the pathogenesis of both infections and thrombotic complications in central venous catheters. Prevention of CRBSI and inflammatory
complications requires both removal of pathogens from the internal surface of the catheter to prevent the systemic dissemination of organisms
contained within the biofilm as well as an anticoagulant to retain blood flow during dialysis. Biofilm forms when bacteria adhere to
surfaces in aqueous environments and begin to excrete a slimy, glue-like substance that can anchor them to various types of materials,
including intravenous catheters. The presence of biofilm has many adverse effects, including the ability to release bacteria into the
blood stream. The current standard of catheter care is to instill a heparin lock solution at a concentration of 1000 u/mL into each catheter
lumen immediately following treatment, in order to prevent clotting between dialysis treatments. However, a heparin lock solution provides
no protection from the risk of infection.
Currently,
there are no pharmacologic agents approved in the U.S. for the prevention or reduction of CRBSI in CVCs. We believe there is a significant
need for prevention of CRBSI in the hemodialysis patient population as well as for other patient populations utilizing central venous
catheters and peripherally inserted central catheters, such as oncology/chemotherapy, and total parenteral nutrition.
DefenCath
is a non-antibiotic, broad-spectrum antibacterial, antifungal and anticoagulant combination that is active against common microbes including
antibiotic-resistant strains and in addition may prevent biofilm formation. DefenCath had been reviewed as a New Molecular Entity, or
NME, with priority review. In addition, DefenCath has been granted a QIDP designation by the FDA. We believe that using DefenCath as
an anti-infective catheter-lock solution will significantly reduce the incidence of life-threatening catheter-related blood stream infections,
thus reducing the need for local and systemic antibiotics while prolonging catheter function. There are currently no products approved
by the FDA with an indication for use as a catheter lock solution.
Competitive
Landscape
The
drug and medical device industries are highly competitive and subject to rapid and significant technological change. DefenCath’s
current and future competitors include large as well as specialty pharmaceutical and biotechnology companies and large and specialty
medical device companies. Many of our competitors have substantially greater financial, technical and human resources than we do and
significantly more experience in the development and commercialization of drugs and medical devices. Further, the development of new
treatment methods could render DefenCath non-competitive or obsolete.
We
believe that the key competitive factors that will affect the development and commercial success of DefenCath are efficacy and safety,
as well as pricing and reimbursement. Given that there are no approved catheter lock solutions with antimicrobial properties in the U.S.,
and that the current standard of care is heparin, we believe that with adequate reimbursement there is an opportunity for DefenCath to
become the new standard of care as a CLS in the U.S. market, if approved by FDA. We are not aware of any potentially competitive CLS
which are approved or under development by other companies in the U.S. A development stage product from Citius Pharmaceuticals Inc. is
being studied for use to salvage an infected CVC, causing a catheter related blood stream infection.
Manufacturing/Supply
Chain
We
do not own or operate any manufacturing facilities related to the production of our products. All our manufacturing processes currently
are, and we expect them to continue, to be outsourced to third parties. We rely on third-party manufacturers to produce sufficient quantities
of drug product for use both commercially and in clinical trials. We intend to continue this practice in the future.
7
With regards to taurolidine, an active pharmaceutical
ingredient, or API, of DefenCath, we have a Drug Master File filed with the FDA. There is a master commercial supply agreement between
the third-party manufacturer, and us in place from August 2018. We have two sources for the other key API, Heparin sodium.
We have historically utilized a European based
CMO for the production of DefenCath for the U.S. market. We have validated the manufacturing process for DefenCath at this CMO utilizing
one source of heparin API, and are in the process of validating a second source of heparin API.
We
are confident that this CMO has adequate capacity to produce the volumes needed, and that there exists a sufficient number of potential
alternate sources for the drug substances required to produce our products, as well as third-party manufacturers, that we will be able
to find alternate suppliers and third-party manufacturers in the event that our relationship with any supplier or third-party manufacturer
deteriorates. The process for selecting and qualifying an alternative contract manufacturer and for completing the technology transfer
to such a manufacturer to the point of enabling commercialization of the product may take several years.
We
previously announced an agreement with Alcami Corporation, or Alcami, a U.S. based contract manufacturer with proven capabilities for
manufacturing commercial sterile parenteral drug products. Alcami may function as an alternate manufacturing site for DefenCath for the
U.S. market. As part of the technology transfer and validation of the manufacturing process at Alcami, we would also expect to qualify
an alternate source of heparin API sourced from a major U.S. supplier.
United
States Government Regulation
The
research, development, testing, manufacture, labeling, promotion, advertising, distribution, and marketing, among other things, of our
products are extensively regulated by governmental authorities in the U.S. and other countries. Our products may be classified by the
FDA as a drug or a medical device depending upon the indications for use or claims. Because certain of our product candidates are considered
as medical devices and others are considered as drugs for regulatory purposes, we intend to submit applications to regulatory agencies
for approval or clearance of both medical devices and pharmaceutical product candidates.
In the U.S., the FDA regulates drugs and medical
devices under the Federal Food, Drug, and Cosmetic Act (“FDCA”) and the FDA’s implementing regulations. If we fail to
comply with the applicable U.S. requirements at any time during the product development process, clinical testing, and during the approval
process or after approval, we may become subject to administrative or judicial sanctions. These sanctions could include the FDA’s
refusal to approve pending applications, license suspension or revocation, withdrawal of an approval, warning letters, adverse publicity,
product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties or criminal
prosecution, among other actions. Any agency enforcement action and/or any related impact could have a material adverse effect on us.
Drug
Approval Process
The
research, development, and approval process in the United States and elsewhere is intensive and rigorous and generally takes many years
to complete. The typical process required by the FDA before a therapeutic drug may be marketed in the United States includes:
8
During
pre-clinical testing, studies are performed with respect to the chemical and physical properties of candidate formulations. These studies
are subject to GLP requirements. Biological testing is typically done in animal models to demonstrate the activity of the compound against
the targeted disease or condition and to assess the apparent effects of the new product candidate on various organ systems, as well as
its relative therapeutic effectiveness and safety. An IND application must be submitted to the FDA and become effective before studies
in humans may commence.
Clinical
trial programs in humans generally follow a three-phase process. Typically, Phase 1 studies are conducted in small numbers of healthy
volunteers or, on occasion, in patients afflicted with the target disease. Phase 1 studies are conducted to determine the metabolic and
pharmacological action of the product candidate in humans and the side effects associated with increasing doses, and, if possible, to
gain early evidence of effectiveness. In Phase 2, studies are generally conducted in larger groups of patients having the target disease
or condition in order to validate clinical endpoints, and to obtain preliminary data on the effectiveness of the product candidate and
optimal dosing. This phase also helps determine further the safety profile of the product candidate. In Phase 3, large-scale clinical
trials are generally conducted in patients having the target disease or condition to provide sufficient data for the statistical proof
of effectiveness and safety of the product candidate as required by United States and foreign regulatory agencies. Typically, two Phase
3 trials are required for marketing approval.
In
the case of products for certain serious or life-threatening diseases, the initial human testing may be done in patients with the disease
rather than in healthy volunteers. Because these patients are already afflicted with the target disease or condition, it is possible
that such studies will also provide results traditionally obtained in Phase 2 studies. These studies are often referred to as “Phase
1/2” studies. However, even if patients participate in initial human testing and a Phase 1/2 study is carried out, the sponsor
is still responsible for obtaining all the data usually obtained in both Phase 1 and Phase 2 studies.
Before
proceeding with a study, sponsors may seek a written agreement known as a Special Protocol Assessment, or SPA, from the FDA regarding
the design, size, and conduct of a clinical trial. Among other things, SPAs can cover clinical studies for pivotal trials whose data
will form the primary basis to establish a product’s efficacy. SPAs help establish up-front agreement with the FDA about the adequacy
of a clinical trial design to support a regulatory approval, but the agreement is not binding on the FDA if new circumstances arise.
An SPA may only be modified with the agreement of the FDA and the trial sponsor or if the director of the FDA reviewing division determines
that a substantial scientific issue essential to determining the safety or efficacy of the drug was identified after the testing began.
There is no guarantee that a study will ultimately be adequate to support an approval even if the study is subject to an SPA.
Additionally,
some clinical trials are overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a data
safety monitoring board or committee. This group regularly reviews accumulated data and advises the study sponsor regarding the continuing
safety of trial subjects, and the continuing validity and scientific merit of the clinical trial. The data safety monitoring board receives
special access to unblinded data during the clinical trial and may advise the sponsor to halt the clinical trial if it determined there
is an unacceptable safety risk for subjects or on other grounds, such as no demonstration of efficacy. The committee can also stop a
clinical trial for an overwhelming demonstration of efficacy, based on pre-defined, stringent statistical parameters and ethical considerations.
The
manufacture of investigational drugs for the conduct of human clinical trials is subject to current Good Manufacturing Practice, or cGMP,
requirements. Investigational drugs and active pharmaceutical ingredients imported into the United States are also subject to regulation
by the FDA relating to their labeling and distribution. Further, the export of investigational drug products outside of the United States
is subject to regulatory requirements of the receiving country as well as U.S. export requirements under the FDCA.
IND
sponsors are required to submit a number of reports to the FDA during the course of a development program. For instance, sponsors are
required to make annual reports to the FDA concerning the progress of their clinical trial programs as well as more frequent reports
for certain serious adverse events. Sponsors must submit a protocol for each clinical trial, and any subsequent protocol amendments to
the FDA. Investigators must also provide certain information to the clinical trial sponsors to allow the sponsors to make certain financial
disclosures to the FDA. Information about certain clinical trials, including a description of the study and study results, must be submitted
within specific timeframes to the National Institutes of Health, or NIH, for public dissemination on their clinicaltrials.gov website.
Moreover, under the 21st Century Cures Act, manufacturers or distributors of investigational drugs for the diagnosis, monitoring, or
treatment of one or more serious diseases or conditions must have a publicly available policy concerning expanded access to investigational
drugs.
9
United
States law requires that studies conducted to support approval for product marketing be “adequate and well controlled.” In
general, this means that either a placebo or a product already approved for the treatment of the disease or condition under study must
be used as a reference control. The recently passed 21st Century Cures Act, however, provides for FDA acceptance of new kinds of data
such as patient experience data, real world evidence, and, for appropriate indications sought through supplemental marketing applications,
data summaries. Studies must also be conducted in compliance with good clinical practice requirements, and informed consent must be obtained
from all study subjects.
In
addition, under the Pediatric Research Equity Act, or PREA, an NDA or supplement to an NDA for a new active ingredient, indication, dosage
form, dosage regimen, or route of administration must contain data that are adequate to assess the safety and effectiveness of the drug
for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation
for which the product is safe and effective. The FDA may, on its own initiative or at the request of the applicant, grant deferrals for
submission of some or all pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric
data requirements.
The
FDA also may require submission of a risk evaluation and mitigation strategy, or REMS, to ensure that the benefits of the drug outweigh
the risks of the drug. The REMS plan could include medication guides, physician communication plans, and elements to assure safe use,
such as restricted distribution methods, patient registries, or other risk minimization tools. An assessment of the REMS must also be
conducted at set intervals. Following product approval, a REMS may also be required by the FDA if new safety information is discovered
and the FDA determines that a REMS is necessary to ensure that the benefits of the drug outweigh the risks of the drug.
The
clinical trial process for a new compound can take ten years or more to complete. The FDA may prevent clinical trials from beginning
or may place clinical trials on hold at any point in this process if, among other reasons, it concludes that study subjects are being
exposed to an unacceptable health risk. Trials may also be prevented from beginning or may be terminated by institutional review boards,
or IRBs, who must review and approve all research involving human subjects and amendments thereto. The IRB must continue to oversee the
clinical trial while it is being conducted. This includes the IRB receiving information concerning unanticipated problems involving risk
to subjects. Side effects or adverse events that are reported during clinical trials can delay, impede, or prevent marketing authorization.
Similarly, adverse events that are reported after marketing authorization can result in additional limitations being placed on a product’s
use and, potentially, withdrawal of the product from the market.
Following
the completion of a clinical trial, the data are analyzed by the sponsoring company to determine whether the trial successfully demonstrated
safety and effectiveness and whether a product approval application may be submitted. In the United States, if the product is regulated
as a new drug, an NDA must be submitted and approved by the FDA before commercial marketing may begin. The NDA must include a substantial
amount of data and other information concerning the safety and effectiveness of the compound from laboratory, animal, and human clinical
testing, as well as data and information on manufacturing, product quality and stability, and proposed product labeling.
Each
domestic and foreign manufacturing establishment, including any contract manufacturers that we may decide to use, must be listed in the
NDA and must be registered with the FDA. The application generally will not be approved until the FDA conducts a manufacturing inspection,
approves the applicable manufacturing process for the drug product, and determines that the facility is in compliance with current cGMP
requirements. Moreover, FDA will also typically inspect one or more clinical trial sites to confirm that the applicable clinical trials
were conducted in accordance with GCPs.
Under
the Prescription Drug User Fee Act (PDUFA), as amended, the FDA assesses and receives application user fees for reviewing an NDA, as
well as annual program fees for commercial manufacturing establishments and for approved products. These fees can be significant. Fee
waivers, reductions or refunds are available in certain circumstances. One basis for a waiver or refund of the application user fee is
if the applicant is a “small business” generally defined as employing fewer than 500 employees, including employees of affiliates,
no approved marketing application for a product that has been introduced or delivered for introduction into interstate commerce, and
the applicant, including its affiliates, is submitting its first marketing application. Product candidates that are designated as orphan
drugs, which are further described below, are also not subject to application user fees unless the application includes an indication
other than the orphan indication. Under certain circumstances, orphan products may also be exempt from product and establishment fees.
Each
NDA submitted for FDA approval is usually reviewed for administrative completeness and reviewability. Following this review, the FDA
may request additional information rather than accept an NDA for filing. In this event, the application must be resubmitted with the
additional information. The resubmitted application is also subject to review before the FDA accepts it for filing.
10
Once
accepted for filing, the FDA’s review of an application may involve review and recommendations by an independent FDA advisory committee.
The FDA must refer applications for drugs that contain active ingredients, including any ester or salt of the active ingredients that
have not previously been approved by the FDA to an advisory committee or provide in an action letter a summary for not referring it to
an advisory committee. The FDA may also refer drugs to advisory committees when it is determined that an advisory committee’s expertise
would be beneficial to the regulatory decision-making process, including the evaluation of novel products and the use of new technology.
An advisory committee is typically a panel that includes clinicians and other experts, which review, evaluate, and make a recommendation
as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory
committee, but it considers such recommendations carefully when making decisions.
After
evaluating the NDA and all related information, including the advisory committee recommendation, if any, and inspection reports regarding
the manufacturing facilities and clinical trial sites, the FDA may issue an approval letter, or, in some cases, a Complete Response Letter,
or CRL. If a CRL is issued, the applicant may either resubmit the NDA, addressing all the deficiencies identified in the letter; withdraw
the application; or request an opportunity for a hearing. A CRL indicates that the review cycle of the application is complete, and the
application is not ready for approval and describes all the specific deficiencies that the FDA identified in the NDA. A CRL generally
contains a statement of specific conditions that must be met in order to secure final approval of the NDA and may require additional
clinical or pre-clinical testing in order for the FDA to reconsider the application. The deficiencies identified may be minor, for example,
requiring labeling changes; or major, for example, requiring additional clinical trials. Even with submission of this additional information,
the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval. If and when those conditions
have been met to the FDA’s satisfaction, the FDA may issue an approval letter. An approval letter authorizes commercial marketing
of the drug with specific prescribing information for specific indications.
Even
if the FDA approves a product, it may limit the approved therapeutic uses for the product as described in the product labeling, require
that warning statements be included in the product labeling, require that additional studies be conducted following approval as a condition
of the approval, impose restrictions and conditions on product distribution, prescribing, or dispensing in the form of a REMS or otherwise
limit the scope of any approval.
Special
FDA Expedited Review and Approval Programs
The
FDA has various programs, including Fast Track designation, priority review and breakthrough designation, that are intended to expedite
or simplify the process for the development and FDA review of certain drug products that are intended for the treatment of serious or
life-threatening diseases or conditions, and demonstrate the potential to address unmet medical needs or present a significant improvement
over existing therapy. The purpose of these programs is to provide important new drugs to patients earlier than under standard FDA review
procedures.
To
be eligible for a Fast Track designation, the FDA must determine, based on the request of a sponsor, that a product is intended to treat
a serious or life-threatening disease or condition and demonstrates the potential to address an unmet medical need. The FDA will determine
that a product will fill an unmet medical need if the product will provide a therapy where none exists or provide a therapy that may
be potentially superior to existing therapy based on efficacy, safety, or public health factors. If Fast Track designation is obtained,
drug sponsors may be eligible for more frequent development meetings and correspondence with the FDA. In addition, the FDA may initiate
review of sections of an NDA before the application is complete. This “rolling review” is available if the applicant provides
and the FDA approves a schedule for the remaining information. A Fast Track product is also eligible to apply for accelerated approval
and priority review.
The
FDA may give a priority review designation to drugs that are intended to treat serious conditions and, if approved, would provide significant
improvements in the safety or effectiveness of the treatment, diagnosis, or prevention of serious conditions. A priority review means
that the goal for the FDA is to review an application within six months, rather than the standard review of ten months under current
PDUFA guidelines, of the 60-day filing date for new molecular entities.
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Moreover,
under the provisions of the Food and Drug Administration Safety and Innovation Act, or FDASIA, enacted in 2012, a sponsor can request
designation of a product 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
eligible for the Fast Track designation features as described above, intensive guidance on an efficient drug development program beginning
as early as Phase 1 trials, and a commitment from the FDA to involve senior managers and experienced review staff in a proactive
collaborative, cross-disciplinary review.
Even
if a product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for
qualification or decide that the time period for FDA review or approval will not be shortened.
A
final new program to expedite the development of drug products is the LPAD, which was passed as part of the 21st Century Cures
Act. LPAD allows for the FDA’s determination of safety and effectiveness to reflect the risk-benefit profile of the drug in the
intended limited population, taking into account the severity, rarity, or prevalence of the infection and the availability of alternative
treatments in the limited population. Under LPAD, a sponsor may request drug approval for an antibacterial or antifungal drug if the
drug is intended to treat a serious life-threatening infection in a limited population of patients with unmet needs. The drug may be
approved for the limited population notwithstanding a lack of evidence to fully establish a favorable benefit-risk profile in a broader
population. The FDA must provide prompt advice to sponsors seeking approval under LPAD to enable them to plan a development program.
If approved under LPAD, certain post-marketing requirements would apply, such as required labeling and advertising statements and pre-distribution
submission of promotional materials to FDA. If after approval for a limited population, a product receives a broader approval, the FDA
may remove such post-marketing restrictions. While a drug may only be approved for a limited population under this program, the 21st
Century Cures Act states that it is not intended to restrict the prescribing of antimicrobial drugs or other products by healthcare
professionals.
Exclusivity
For
approved drug products, market exclusivity provisions under the FDCA provide periods of regulatory exclusivity, which gives the holder
of an approved NDA limited protection from new competition in the marketplace for the innovation represented by its approved drug.
Section 505