UNITED

STATES

SECURITIES

AND EXCHANGE COMMISSION

Washington,

D.C. 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 September 30, 2021

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission

File Number 001-38174

Citius

Pharmaceuticals, Inc.

(Exact

name of Registrant as specified in its Charter)

Commerce Drive, First Floor, Cranford, NJ07016

(Address

of principal executive offices) (Zip Code)

(908)967-6677

(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, par value $0.001 per share CTXR The NASDAQ Capital Market

Warrants to purchase Common Stock CTXRW The NASDAQ Capital Market

Indicate

by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No

Indicate

by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. ☐ Yes ☒ No

Indicate

by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the 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 ☐

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 by the registered public accounting firm

that prepared or issued its audit report. ☐

Indicate

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

The

aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which

the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s

most recently completed second fiscal quarter (March 31, 2021) was approximately $218 million.

Affiliates

for the purpose of this item refers to the issuer’s executive officers and directors and/or any persons or firms (excluding those

brokerage firms and/or clearing houses and/or depository companies holding issuer’s securities as record holders only for their

respective clients’ beneficial interest) owning 10% or more of the issuer’s common stock, both of record and beneficially.

Indicate

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

146,029,630

shares as of November 30, 2021, all of one class of common stock, $0.001 par value.

DOCUMENTS

INCORPORATED BY REFERENCE

Portions

of the Company’s Proxy Statement for the Annual Meeting of Stockholders expected to be held on February 8, 2022 are incorporated

by reference in Part III of this Report.

Citius

Pharmaceuticals, Inc.

FORM

10-K

September

30, 2021

TABLE

OF CONTENTS

Page

PART I

Item 1. Business 1

Item 1A. Risk Factors 21

Item 1B Unresolved Staff Comments 41

Item 2. Properties 41

Item 3. Legal Proceedings 41

Item 4. Mine Safety Disclosures 41

PART II

Item 6. [Reserved] 42

Item 7A. Quantitative and Qualitative Disclosures About Market Risk 48

Item 8. Financial Statements and Supplementary Data F-1 to F-21

Item 9A. Controls and Procedures 49

Item 9B. Other Information 49

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 49

PART III

Item 10. Directors, Executive Officers and Corporate Governance 50

Item 11. Executive Compensation 50

Item 14. Principal Accountant Fees and Services 50

PART IV

Item 15. Exhibits and Financial Statement Schedules 51

Signatures 55

NOTES

this annual report on Form 10-K, and unless the context otherwise requires, the “Company,” “we,” “us”

and “our” refer to Citius Pharmaceuticals, Inc. and its wholly-owned subsidiaries

Citius Pharmaceuticals, LLC, Leonard-Meron Biosciences, Inc. and Citius Acquisition Corp., and

its majority-owned subsidiary, NoveCite, Inc., taken as a whole.

Mino-Lok®

is our registered trademark. All other trade names, trademarks and service marks appearing in this prospectus 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

report 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.

FORWARD-LOOKING

STATEMENTS

This

Annual Report on Form 10-K contains “forward-looking statements.” Forward-looking statements include, but are not limited

to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future

activities or other future events or conditions. These statements are based on current expectations, estimates and projections about

our business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve

risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may, and are likely to, differ

materially from what is expressed or forecasted in the forward-looking statements due to numerous factors discussed from time to time

in this report, including the risks described under Item 1A - “Risk Factors,” and Item 7 - “Management’s Discussion

and Analysis of Financial Condition and Results of Operations” in this report and in other documents which we file with the Securities

and Exchange Commission (“SEC”). In addition, such statements could be affected by risks and uncertainties related to:

● the cost, timing and results of our pre-clinical and clinical trials;

Any

forward-looking statements speak only as of the date on which they are made, and, except as may be required under applicable securities

laws, we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the filing

date of this report.

SUMMARY

OF RISK FACTORS

investment in our securities involves a high degree of risk. You should carefully consider the risks summarized in Item 1A, “Risk

Factors” included in this report. These risks include, but are not limited to, the following:

iii

PART

Item

1. Business

Overview

Citius

Pharmaceuticals, Inc. (the “Company,” “Citius” or “we”), headquartered in Cranford, New Jersey, is

a specialty pharmaceutical company dedicated to the development and commercialization of first in class critical care products with a

focus on anti-infective products in adjunct cancer care, unique prescription products and mesenchymal stem cell therapy. Our goal generally

is to achieve leading market positions by providing therapeutic products that address unmet medical needs yet have a lower development

risk than usually is associated with new chemical entities. New formulations of previously approved drugs with substantial existing safety

and efficacy data are a core focus. We seek to reduce development and clinical risks associated with drug development, yet still focus

on innovative applications. Our strategy centers on products that have intellectual property and regulatory exclusivity protection, while

providing competitive advantages over other existing therapeutic approaches.

The

Company was founded as Citius Pharmaceuticals, LLC, a Massachusetts limited liability company, on January 23, 2007. On September 12,

2014, Citius Pharmaceuticals, LLC entered into a Share Exchange and Reorganization Agreement, with Citius (formerly Trail One, Inc.),

a publicly traded company incorporated under the laws of the State of Nevada. Citius Pharmaceuticals, LLC became a wholly-owned subsidiary

of Citius. On March 30, 2016, Citius acquired Leonard-Meron Biosciences, Inc. (“LMB”) as a wholly-owned subsidiary. LMB was

a pharmaceutical company focused on the development and commercialization of critical care products with a concentration on anti-infectives.

On September 11, 2020, we formed NoveCite, Inc. (“NoveCite”), a Delaware corporation, of which we own 75% of the issued and

outstanding capital stock. NoveCite is focused on the development and commercialization of its proprietary mesenchymal stem cells for

the treatment of acute respiratory disease syndrome (“ARDS”). On August 23, 2021, we formed Citius Acquisition Corp. as a

wholly-owned subsidiary in conjunction with the acquisition of I/ONTAK, but no activity has occurred to date.

Since

its inception, the Company has devoted substantially all of its efforts to business planning, acquiring our proprietary technology, research

and development, recruiting management and technical staff, and raising capital. We are developing five proprietary products: Mino-Lok,

an antibiotic lock solution used to treat patients with catheter-related bloodstream infections by salvaging the infected catheter; Mino-Wrap,

a liquifying gel-based wrap for reduction of tissue expander infections following breast reconstructive surgeries; Halo-Lido, a corticosteroid-lidocaine

topical formulation that is intended to provide anti-inflammatory and anesthetic relief to persons suffering from hemorrhoids; NoveCite,

a mesenchymal stem cell therapy for the treatment of ARDS; and I/ONTAK, in-licensed in September 2021, a engineered IL-2 diphtheria toxin

fusion protein, for the treatment of patients with persistent or recurrent cutaneous T-cell lymphoma (“CTCL”). We believe

these unique markets for our products are large, growing, and underserved by the current prescription products or procedures.

Citius

is subject to a number of risks common to companies in the pharmaceutical industry including, but not limited to, risks related to the

development by Citius or its competitors of research and development stage products, market acceptance of its products that receive regulatory

approval, competition from larger companies, dependence on key personnel, dependence on key suppliers and strategic partners, the Company’s

ability to obtain additional financing and the Company’s compliance with governmental and other regulations.

I/ONTAK

Overview

September 2021, the Company announced that it had entered into a definitive agreement with Dr. Reddy's Laboratories SA, a subsidiary

of Dr. Reddy's Laboratories, Ltd. (collectively, "Dr. Reddy's"), to acquire its exclusive license of E7777 (denileukin diftitox),

a late-stage oncology immunotherapy for the treatment of CTCL, a rare form of non-Hodgkin lymphoma. E7777, an engineered IL-2-diphtheria

toxin fusion protein, is an improved formulation of oncology agent, ONTAK®, which was previously approved by the U.S. Food and Drug

Administration (“FDA”) for the treatment of patients with persistent or recurrent CTCL. We have renamed E7777 as I/ONTAK

although we refer to it as E7777 at times in this report.

Phase

3 Trial

global, multicenter, open label single arm pivotal clinical trial for the treatment of patients with persistent or recurrent CTCL was

initiated in 2013. Inclusion criteria for the study were to evaluate patients in advanced stage CTCL (Mycosis Fungoides or Sézary

Syndrome), who received at least one prior CTCL therapy.

The

pivotal trial was divided into two phases, a lead-in phase with 21 subjects that evaluated dose finding, pharmacokinetics and immunogenicity,

as well as assessing the Objective Response Rate (the “ORR”). An ORR is defined as a greater than 50% reduction in tumor

burden.

The

results of the lead-in study were:

· No new safety signals were identified compared to Ontak.

The

second phase to the pivotal trial was a 70-patient study administered at the 9 mcg/kg/dose rate for 5 consecutive days in 21-day cycles,

The inclusion criteria was identical to the lead-in study and the primary objective was to evaluate the ORR.

Investigator

Initiated Trials

Phase 1 trial has been initiated at the University of Minnesota, Masonic Cancer Center. This study is a single-arm non-randomized trial

which has an estimated enrollment of 30 participants who will be administered E7777 prior to tisagenlecleucel Chimeric Antigen Receptor,

(“CAR-T”) therapy. The Phase 1 study consists of two components: dose finding to establish a maximum tolerated dose (“MTD”)

of E7777 in combination with CART-T Therapy, and a small extension component to provide an estimate of efficacy at that MTD.

second Phase 1 Study is planned to be initiated by March 2022 at the University of Pittsburg Medical Center, Hillman Cancer Center. This

study will be investigating the safety and efficacy of a combined regimen of pembrolizumab with T-regulatory cell depletion and E7777

in patients diagnosed with recurrent or metastatic solid tumors in the second line setting.

Regulatory

Development

the 1990’s, denileukin diftitox was developed at Boston University and the National Cancer Institute (“NCI”) in collaboration

with Seragen, Inc. In 1999, Ontak® (denileukin diftitox) was granted accelerated approval by the FDA for the treatment of persistent

or recurrent CTCL with Ligand Pharmaceuticals, Inc. (“Ligand”) acquiring the marketing rights in that same year. In 2006,

Eisai Co., Ltd. (“Eisai”) acquired the commercial rights to Ontak from Ligand.

2008, the FDA granted full approval to Ontak for CTCL.

2011, there was a commercial supply disruption due to manufacturing issues and a new formulation of denileukin diftitox was developed

under the code name E7777. The FDA considered this a new product with a new IND being filed. In ensuing discussions, the FDA agreed to

a development plan that included a single arm, open label study to conclude safety and efficacy of E7777 and a CMC development plan that

demonstrates the new process results in a comparable drug product.

2011, the FDA Office of Orphan Products Development granted E7777 orphan drug designation status for the treatment of Peripheral T-Cell

Lymphoma (“PTCL”). In 2013, the FDA Office of Orphan Products Development granted E7777 orphan drug designation status for

the treatment of CTCL.

2013, the first patient was enrolled into the lead-in phase of the pivotal study for the E7777 U.S. CTCL clinical trial.

2014, commercial sales of Ontak were discontinued when the product was voluntarily withdrawn from the market due to manufacturing issues

at the contract manufacturer.

2015, the last patient enrolled exited the lead-in phase of the E7777 U.S. CTCL clinical trial.

March 2016, Dr. Reddy’s Laboratories (“DRL”) acquired the global rights to E7777 from Eisai, other than far east countries,

with Eisai retaining the rights in those countries.

June 2016, the first patient was enrolled in the Phase 3 pivotal study for E7777 CTCL in the U.S.

March 2020, Eisai filed an NDA for E7777 in Japan for both CTCL and PTCL and in March 2021 received approvals in both CTCL and PTCL.

The

last patient in the Phase 3 Pivotal study of E7777 has been enrolled and a biologics license application (“BLA”) for E7777's

first indication in CTCL is expected to be filed with the FDA by the end of 2022.

Market

Opportunity

CTCL’s

are a heterogeneous subset of extranodal non-Hodgkin lymphomas (“NHL”) of mature, skin-homing T-cells that are mainly localized

to the skin. The most common types of CTCL are mycosis fungoides (“MF”) and primary cutaneous CD30+ anaplastic large cell

lymphoma (pcALCL), jointly representing an estimated 80–85% of all CTCL. Sézary Syndrome (“SS”), a very rare

subtype (~2–5% of CTCL) characterized by diffuse inflammatory, often exfoliative, erythroderma and by leukemic and nodal involvement,

displays a significant degree of clinical and biological overlap with MF and has long been considered a clinical variant of MF, although

recent evidence suggests that it may be a separate entity. The rest is represented by extremely rare, generally more aggressive subtypes.

In light of the overlap between MF and SS, and considering that many of the systemic therapy options for the two neoplasms are the same,

some consider the treatment approach to MF and SS as if they were a single disease entity (MF/SS). However, some of the drugs currently

in use, or in development, for MF/SS appear to be more effective in clearing different anatomical compartments (skin versus blood, for

example) and therefore have differential efficacy in MF and SS.

Based

on Surveillance Epidemiology and End Results (SEER) data from 2001–2007, the estimated incidence rate of MF/SS in the U.S. is 0.5/100,000

or about 2,500–3,000 new cases per year representing about 25% of all T-cell lymphomas.

The

Company estimates that there are 30,000 – 40,000 patients living with CTCL in the U.S. with approximately 16,000 – 20,000

having mycosis fungoides. Of those, the Company further estimates that there are 10,000 patients with relapsed or refractory CTCL that

require systemic therapy.

The

Company also estimates that the addressable U.S. market is approximately $300,000,000 for patients with advanced stage relapsed or refractory

CTCL.

Mino-Lok®

Overview

Mino-Lok

is a patented solution containing minocycline, disodium ethylenediaminetetraacetic acid (edetate), and ethyl alcohol, all of which act

synergistically to treat and salvage infected central venous catheters (“CVCs”) in patients with catheter related bloodstream

infections (“CRBSIs”). Mino-Lok breaks down biofilm barriers formed by bacterial colonies, eradicates the bacteria, and provides

anti-clotting properties to maintain patency in CVCs.

The

administration of Mino-Lok consists of filling the lumen of the catheter with 0.8 ml to 2.0 ml of Mino-Lok solution. The catheter is

then “locked”, meaning that the solution remains in the catheter without flowing into the vein. The lock is maintained for

a dwell-time of two hours while the catheter is not in use. If the catheter has multiple lumens, all lumens may be locked with the Mino-Lok

solution either simultaneously or sequentially. If patients are receiving continuous infusion therapy, the catheters alternate between

being locked with the Mino-Lok solution and delivering therapy. The Mino-Lok therapy is two hours per day for at least five days, usually

with two additional locks in the subsequent two weeks. After locking the catheter for two hours, the Mino-Lok solution is aspirated,

and the catheter is flushed with normal saline. At that time, either the infusion will be continued, or will be locked with the standard-of-care

lock solution until further use of the catheter is required. In a clinical study conducted by MD Anderson Cancer Center (“MDACC”),

there were no serum levels of either minocycline or edetate detected in the sera of several patients who underwent daily catheter lock

solution with minocycline and edetate (“M-EDTA”) at the concentration level proposed in Mino-Lok treatment. Thus, it has

been demonstrated that the amount of either minocycline or edetate that leaks into the serum is very low or none at all.

Phase

2b Results

From

April 2013 to July 2014, 30 patients with CVC-related bloodstream infection were enrolled at MDACC in a prospective Phase 2b study. Patients

received Mino-Lok therapy for two hours once daily for a minimum of five days within the first week, followed by two additional locks

within the next two weeks. Patients were followed for one month post-lock therapy. Demographic information, clinical characteristics,

laboratory data, therapy, as well as adverse events and outcome were collected for each patient. Median age at diagnosis was 56 years

(range: 21-73 years). In all patients, prior to the use of lock therapy, systemic treatment with a culture-directed, first-line intravenous

antibiotic was started. Microbiological eradication was achieved at the end of therapy in all cases. None of the patients experienced

any serious adverse event related to the lock therapy.

The

active arm, which is the Mino-Lok treated group of patients, was then compared to 60 patients in a matched cohort that experienced removal

and replacement of their CVCs within the same contemporaneous timeframe. The patients were matched for cancer type, infecting organism,

and level of neutropenia. All patients were cancer patients and treated at MDACC. The efficacy of Mino-Lok therapy was 100% in salvaging

CVCs, demonstrating equal effectiveness to removing the infected CVC and replacing it with a new catheter.

The

main purpose of the study was to show that Mino-Lok therapy was at least as effective as the removal and replacement of CVCs when CRBSIs

are present, and that the safety was better, that is, the complications of removing an infected catheter and replacing with a new one

could be avoided. In addition to having a 100% efficacy rate with all CVCs being salvaged, Mino-Lok therapy had no significant adverse

events (“SAEs”), compared to an 18% SAE rate in the matched cohort where patients had the infected CVCs removed and replaced

with a fresh catheter. There were no overall complication rates in the Mino-Lok arm group compared to 11 patients with events (18%) in

the control group. These events included bacterial relapse (5%) at four weeks post-intervention, and a number of complications associated

with mechanical manipulation in the removal or replacement procedure for the catheter (10%) or development of deep-seated infections

such as septic thrombophlebitis and osteomyelitis (8%). As footnoted, six patients had more than one complication in the control arm

group.

Mino-Lok® Arm Control Arm

Parameter N (%) N (%)%

Cancer type

ICU Admission 4 (13 ) 4 (7 )

Mech.Ventilator 3 (10 ) 0 (0 )

Bacteremia

- Relapse 0 (0 ) 3 (5 )

Complications 0 (0 ) 8 (13 )

SAEs related R&R 0 (0 ) 6 (10 )

Overall Complication Rate 0 (0 )% 11 ** (18 )%

* 1 Polymicrobial patient had a Gram+ and a Gram- organism cultured

** 6 Patients had > 1 complication

Source:

Dr. Issam Raad, Antimicrobial Agents and Chemotherapy, June 2016, Vol. 60 No. 6, Page 3429

Phase

3 Trial

November 2016, the Company initiated site recruitment for Phase 3 clinical trials. From initiation through the first quarter of 2017,

the Company received input from several sites related to the control arm as being less than standard-of-care for some of the respective

institutions. The Company worked closely with the FDA with respect to the design of the Phase 3 trial and received feedback on August

17, 2017. The FDA stated that they recognized that there is an unmet medical need in salvaging infected catheters and agreed that an

open label, superiority design would address the Company’s concerns and would be acceptable to meet the requirements of a new drug

application. The Company amended the Phase 3 study design to remove the saline and heparin placebo control arm and to use an active control

arm that conforms with today’s current standard-of-care. Patient enrollment commenced in February 2018.

The

Mino-Lok Phase 3 Trial was originally planned to enroll 700 patients in 50 participating institutions, all located in the U.S. There

were interim analyses at both the 50% and 75% points of the trial as measured by the number of patients treated. As of November 30, 2021,

there are 21 active sites currently enrolling patients including such academic centers as MDACC, Henry Ford Health Center, Georgetown

University Medical Center, and others. There are two additional medical centers in startup mode. There are no other remaining sites in

feasibility.

September 2019, the Company announced that the FDA agreed to a new primary efficacy endpoint of “time to catheter failure”

in comparing Mino-Lok to the antibiotic lock control arm. This change in the trial design reduced the required patient sample size of

the trial from 700 subjects to approximately 144 available subjects to achieve the pre-specified 92 catheter failure events needed to

conclude the trial. Additionally, the Company submitted a response to the FDA that it would implement this change in the primary endpoint

and expected it to result in less than 150 subjects needed in its Phase 3 trial. The new primary endpoints require that the time to catheter

failure be at least 38 days for Mino-Lok versus 21 days for the standard of care antibiotic locks.

October 2019, the FDA agreed that the patient sample size of approximately 144 patients was acceptable.

October 2019, the Company announced that the Phase 3 trial had reached the 40% completion triggering an interim futility analysis by

the data monitoring committee (the “DMC”). The DMC is an independent panel of experts that review progress regarding the

safety and efficacy of drugs in clinical trials, and to determine if the trial may be futile in achieving its endpoints or if the trial

should be modified in any way.

December 2019, the DMC convened and recommended that the trial continue with no changes because the analysis showed a positive outcome,

as it met the prespecified interim futility analysis criteria.

May 2020, we announced that we are providing free access to Mino-Lok for healthcare providers under an Expanded Access protocol to ease

the burden associated with the COVID-19 pandemic. Through the Expanded Access protocol, an infected central venous catheter can now be

treated with Mino-Lok, potentially avoiding the need for the removal and replacement procedure.

June 2020, we announced that we had received positive feedback from the FDA on our proposed catheter compatibility studies for Mino-Lok.

The studies, if and when successfully completed, should allow Mino-Lok to be labeled for use with all commercially available CVCs and

peripherally inserted central catheters (PICCs) on the U.S. market. We further assume that these studies will meet European and world

standards. The ability to be labeled without restrictions with respect to catheter type would allow Mino-Lok unrestricted access to the

full U.S. and world markets for an effective antibiotic lock therapy for central line associated blood stream infections (“CLABSIs”).

September 2020, we announced that another DMC meeting was held to review the data being generated and analyzed in the Mino-Lok Phase

3 trial based on progress to date, and to make recommendations to us as to any action that may be necessary regarding the study. After

reviewing these data, the DMC members stated that they did not find any safety signals; and they also recommended continuing the trial

without any modifications. The DMC further conducted an ad hoc meeting and agreed with the Company that a 75% interim analysis

be conducted as planned in which superior efficacy is evaluated.

September 2020, the Company announced that the three registration batches for all components of Mino Lok were manufactured and that clinical

sites were resupplied with registration product.

November 2020, the Company announced that the three components of Mino-Lok, minocycline, disodium edetate (“EDTA”), and ethanol,

were superior to EDTA and ethanol in their ability to eradicate resistant staphylococcal biofilms.

The

75% interim analysis was completed in June 2021. In July 2021, the Company announced that following an unblinded data review of safety

and efficacy, the independent DMC for the trial recommended proceeding with the trial as planned. The DMC did not identify any safety

concerns and no modifications were recommended to the protocol-defined sample size or power to achieve the primary endpoint.

Fast

Track Designation

October 2017, the Company received official notice from FDA that the investigational program for Mino-Lok was granted “Fast Track”

status. Fast Track is a designation that expedites FDA review to facilitate development of drugs which treat a serious or life-threatening

condition and fill an unmet medical need. A drug that receives Fast Track designation is eligible for the following:

Mino-Lok

International Study

October 2017, data from an international study on Mino-Lok was presented at the Infectious Disease Conference, (“ID Week”),

in San Diego, California. The 44-patient study was conducted in Brazil, Lebanon, and Japan and showed Mino-Lok therapy was an effective

intervention to salvage long-term, infected CVCs in CRBSIs in patients who had cancer with limited vascular access. This study showed

95% effectiveness for Mino-Lok therapy in achieving microbiological eradication of the CVCs as compared to 83% for the control. The single

failure in the Mino-Lok arm was due to a patient with Burkholderia cepacia that was resistant to all antibiotics tested.

Stability

Patent Application for Mino-Lok

October 2018, the U.S. Patent and Trademark Office (“USPTO”) issued U.S. Patent No. 10,086,114, entitled “Antimicrobial

Solutions with Enhanced Stability.” On October 9, 2019, the European Patent Office (“EPO”) granted European Patent

No. 3370794, entitled “Antimicrobial Solutions with Enhanced Stability.” The grant of this European patent strengthens the

intellectual property protection for Mino-Lok through November of 2036. This invention overcomes limitations in mixing antimicrobial

solutions in which components have precipitated because of physical and/or chemical factors, thus limiting the stability of the post-mix

solutions. The scientists and technologists at MDACC have been able to improve the stability of the post-mixed solutions through adjustments

of the post-mixed pH of the solution. This may allow for longer storage time of the ready-to-use solution. Citius holds the exclusive

worldwide license which provides access to this patented technology for development and commercialization of Mino-Lok.

Market

Opportunity

spite of best clinical practice, catheters contribute to approximately 70% of blood stream infections that occur in the intensive care

unit or are associated with hemodialysis or cancer patients (approximately 470,000 per year). Bacteria enter the catheter either from

the skin or intraluminally through the catheter hub. Once in the catheter, bacteria tend to form a protective biofilm on the interior

surface of the catheter that is resistant to most antimicrobial solutions. The most frequently used maintenance flush, heparin, actually

stimulates biofilm formation. Heparin is widely used as a prophylactic lock solution, in spite of the evidence that it contributes to

the promotion of biofilm formation. The formation of bacterial biofilm usually precedes CRBSIs.

The

standard of care in the management of CRBSI patients consists of removing the infected CVC and replacing it with a new catheter at a

different vascular access site. However, in cancer and hemodialysis patients with long-term surgically implantable silicone catheters,

removal of the CVC and reinsertion of a new one at a different site might be difficult, or even impossible, because of the unavailability

of other accessible vascular sites and the need to maintain infusion therapy. Furthermore, critically ill patients with short-term catheters

often have underlying coagulopathy, which makes reinsertion of a new CVC at a different site, in the setting of CRBSIs, risky in terms

of mechanical complications, such as pneumothorax, misplacement, or arterial puncture. Studies have also revealed that CRBSI patients

may be associated with serious complications, including septic thrombosis, endocarditis and disseminated infection, particularly if caused

by Staphylococcus aureus or Candida species. Furthermore, catheter retention in patients with CRBSIs is associated with

a higher risk of relapse and poor response to antimicrobial therapy.

According

to Maki et al., published in the Mayo Clinic Proceedings in 2006, there are approximately 250,000 CRBSIs annually in the U.S.

Subsequent to this study, our estimates have ranged upwards to over 450,000 CLABSIs annually (see analysis in the table below). CRBSIs

are associated with a 12% to 35% mortality rate and an attributable cost of $35,000 to $56,000 per episode.

estimate that the potential market for Mino-Lok in the U.S. to be approximately $500 million to $1 billion as shown in the table below

based on a target price of up to $300 per dose of each salvage flush treatment.

Short-Term CVC Long-Term CVC Total

No. of Catheters 3 million 4 million 7 million

Avg. Duration (Days) 12 100 N/A

Catheter Days 36 million 400 million 436 million

Flushes/Catheter 5 7 6.7

Sources:

Ann Intern Med 2000; 132:391-402, Clev Clin J Med 2011; 78(1):10-17, JAVA 2007; 12(1):17-27, J Inf Nurs 2004;27(4):245-250, Joint Commission

website Monograph, CLABSI and Internal Estimates.

Under

various plausible pricing scenarios, we believe that Mino-Lok would be cost-saving to the healthcare system given that the removal of

an infected CVC and replacement of a new catheter in a different venous access site is estimated by us to cost between $8,000 and $10,000.

Furthermore, there are potential additional medical benefits, a reduction in patient discomfort and avoidance of serious adverse events

with the Mino-Lok approach since the catheter remains in place and is not subject to manipulation. We believe there will be an economic

argument to enhance the adoption of Mino-Lok by infection control committees at acute care institutions.

January of 2017, we commissioned a primary market research study with MEDACore, a subsidiary of Leerink, a healthcare focused network

with more than 35,000 healthcare professionals, including key opinion leaders, experienced practitioners and other healthcare professionals

throughout North America, Europe, Asia and other locations around the world. This network includes approximately 55 clinical specialties,

21 basic sciences and 20 business specialties. As part of this market research project, we commissioned a third-party survey of 31 physicians

to qualify the need for catheter salvage in patients with infected, indwelling central venous lines, especially when the catheter is

a tunneled or an implanted port. There were 19 infectious disease experts and 12 intensivists surveyed who all agreed that salvage would

be preferable to catheter exchange to avoid catheter misplacements, blood clots, or vessel punctures that can potentially occur during

reinsertion. Most were also concerned that viable venous access may not be available in patients who were vitally dependent on a central

line.

Mino-Wrap

Overview

January 2, 2019, we entered into a patent and technology license agreement with the Board of Regents of the University of Texas System

on behalf of MDACC, whereby we in-licensed exclusive worldwide rights to the patented technology for any and all uses relating to breast

implants, specifically the Mino-Wrap technology. This includes rights to U.S. Patent No. 9,849,217, which was issued on December 16,

2017. We intend to develop Mino-Wrap as a liquefying, gel-based wrap containing minocycline and rifampin for the reduction of infections

associated with breast implants following breast reconstructive surgeries. We are required to use commercially reasonable efforts to

commercialize Mino-Wrap under several regulatory scenarios and achieve milestones associated with these regulatory options leading to

an approval from the FDA. Mino-Wrap will require pre-clinical development prior to any regulatory pathway. In July 2019, we announced

that we intend to pursue the FDA’s Investigational New Drug (“IND”) regulatory pathway for the development of Mino-Wrap.

On August 4, 2020, we announced that we had submitted a briefing package to the FDA for a pre-IND consultation on Mino-Wrap.

December 2020, the Company announced the receipt of a written response and guidance from the FDA Division of Anti-Infective Products

to the Company's Pre-IND consultation request for its Mino-Wrap briefing package. The briefing package contained information regarding

pre-clinical data and a clinical development plan, along with questions for the FDA regarding safety and efficacy data that would be

required to advance Mino-Wrap into clinical trials. The FDA granted a Written Response Only meeting regarding guidance and direction

on our Mino-Wrap development plan. The FDA indicated that bio absorption simulation studies may provide information to support the development

of Mino-Wrap and made suggestions on what should be provided relative to non-clinical support. The FDA provided guidance on the

design of the drug elution studies and agreed that a large animal pharmacology study would be appropriate. They also agreed that

a 28-day toxicology study appears appropriate and that microbiology support through existing data is acceptable. We are pursuing these

studies and anticipate filing an IND for Mino-Wrap in 2022.

Market

Opportunity

Breast

cancer is the most frequent cancer in women worldwide representing 25% of all cancer diagnoses with the exception of non-melanoma skin

cancer. In the United States, the overall rate of mastectomies, combining single and double mastectomies, has increased 36% from 2005

to 2013. Additionally, the incidence of post-mastectomy breast reconstruction, following breast cancer treatment, has been increasing

on an annual basis.

2017, the American Society of Plastic Surgeons reported that over 105,000 women in the United States underwent a post-mastectomy breast

reconstructive procedure. Approximately 30% of these breast reconstructions occur simultaneously with mastectomy, with most reconstructions

occurring weeks later.

The

current standard of care in post-mastectomy breast reconstruction is the use of a Tissue Expander (“TE”), which is a temporary

implant that is placed below the pectoralis muscle within the mastectomy space. Once a sufficiently large soft tissue envelope has been

created, the TE is then replaced by a permanent breast implant. Approximately 80% of the time, a TE is used in breast reconstructions.

The

rate of infection following a mastectomy with a TE is 2.4 to 24% with an estimated mean of 12-14%. Once the implant becomes infected,

the patient is usually hospitalized requiring approximate two weeks of IV and/or oral antimicrobials. In addition, the TE is removed,

leading to a delay of lifesaving chemo-radiation therapy, and a more complex reconstruction in the future.

Currently,

preventive measures are used to decrease the rate of TE infections with include a systemic perioperative antimicrobial agent with the

perioperative immersion of the implant or irrigation of the surgical pocket with an antimicrobial solution prior to insertion of the

device. This is also administered with immediate postoperative oral antimicrobials.

Based

on the in vitro preclinical laboratory work, Mino-Wrap appears to have the characteristics necessary for advancement in the protection

of human implants from subsequent infection.

Halo-Lido

Overview

Halo-Lido

is a topical formulation of halobetasol propionate, a corticosteroid, and lidocaine that is intended for the treatment of hemorrhoids.

To our knowledge, there are currently no FDA-approved prescription drug products for the treatment of hemorrhoids. Some physicians are

known to prescribe topical steroids for the treatment of hemorrhoids. In addition, there are various topical combination prescription

products containing halobetasol propionate along with lidocaine or pramoxine, each a topical anesthetic, that are prescribed by physicians

for the treatment of hemorrhoids. These products contain drugs that were in use prior to the start of the Drug Efficacy Study Implementation

(“DESI”) program and are commonly referred to as DESI drugs. However, none of these single-agent or combination prescription

products have been clinically evaluated for safety and efficacy and approved by the FDA for the treatment of hemorrhoids. Further, many

hemorrhoid patients use over the counter (“OTC”) products as their first line therapy. OTC products contain any one of several

active ingredients including glycerin, phenylephrine, pramoxine, white petrolatum, shark liver oil and/or witch hazel, for symptomatic

relief.

Development

of Hemorrhoids Drugs

Hemorrhoids

are a common gastrointestinal disorder, characterized by anal itching, pain, swelling, tenderness, bleeding and difficulty defecating.

In the U.S., hemorrhoids affect nearly 5% of the population, with approximately 10 million persons annually admitting to having symptoms

of hemorrhoidal disease. Of these persons, approximately one third visit a physician for evaluation and treatment of their hemorrhoids.

The data also indicate that for both sexes a peak of prevalence occurs from age 45 to 65 years with a subsequent decrease after age 65

years. Caucasian populations are affected significantly more frequently than African Americans, and increased prevalence rates are associated

with higher socioeconomic status in men but not women. Development of hemorrhoids before age 20 is unusual. In addition, between 50%

and 90% of the general U.S., Canadian and European population will experience hemorrhoidal disease at least once in life. Although hemorrhoids

and other anorectal diseases are not life-threatening, individual patients can suffer from agonizing symptoms which can limit social

activities and have a negative impact on the quality of life.

Hemorrhoids

are defined as internal or external according to their position relative to the dentate line. Classification is important for selecting

the optimal treatment for an individual patient. Accordingly, physicians use the following grading system referred to as the Goligher’s

classification of internal hemorrhoids:

Grade I Hemorrhoids not prolapsed but bleeding.

Grade II Hemorrhoids prolapse and reduce spontaneously with or without bleeding.

Grade III Prolapsed hemorrhoids that require reduction manually.

Development

Activities to Date

the fall of 2015, we completed dosing patients in a double-blind dose ranging placebo-controlled Phase 2a study where six different formulations

containing hydrocortisone and lidocaine in various strengths were tested against the vehicle control. The objectives of this study were

to: (1) demonstrate the safety and efficacy of the formulations when applied twice daily for two weeks in subjects with Grade I or II

hemorrhoids, and (2) assess the potential contribution of lidocaine hydrochloride and hydrocortisone acetate, alone or in combination

for the treatment of symptoms of Goligher’s Classification Grade I or II hemorrhoids.

Symptom

improvement was observed based on a global score of disease severity (“GSDS”) and based on some of the individual signs and

symptoms of hemorrhoids, specifically itching and overall pain and discomfort. Within the first few days of treatment, the combination

products (containing both hydrocortisone and lidocaine) were directionally favorable versus the placebo and their respective individual

active treatment groups (e.g., hydrocortisone or lidocaine alone) in achieving ‘almost symptom free’ or ‘symptom free’

status according to the GSDS scale. These differences suggest the possibility of a benefit for the combination product formulation.

Overall,

results from adverse event reporting support the safety profile of all test articles evaluated in this study and demonstrate similar

safety profiles as compared to the vehicle. The safety findings were unremarkable. There was a low occurrence of adverse events and a

similar rate of treatment related adverse events across all treatment groups. The majority of adverse events were mild and only one was

severe. None of the adverse events were an SAE and the majority of adverse events were recovered/resolved at the end of the study. There

were only two subjects who were discontinued from the study due to adverse events.

addition to the safety and dose-ranging information, information was obtained relating to the use of the GSDS as an assessment tool for

measuring the effectiveness of the test articles. Individual signs and symptoms were also assessed but can vary from patient to patient.

Therefore, the goal of the GSDS was to provide an assessment tool that could be used for all patients regardless of which signs and symptoms

they are experiencing. The GSDS proved to be a more effective tool for assessing the severity of the disease and the effectiveness of

the drug when compared to the assessment of the individual signs and symptoms. Citius believes that we can continue to develop this assessment

tool as well as other patient reported outcome endpoints for use in the next trials and in the pivotal trial.

Information

was also obtained about the formulation of the drug and the vehicle. As a result of this study, we believe that the performance of the

active arms of the study relative to the vehicle could be improved by re-formulating our topical preparation. Therefore, we initiated

work on vehicle formulation and evaluation of higher potency steroids.

June and July 2016, we engaged the Dominion Group, a leading provider of healthcare and pharmaceutical marketing research services. The

primary market research was conducted to understand the symptoms that are most bothersome to patients better in order to develop meaningful

endpoints for the clinical trials. We also learned about the factors that drive patients to seek medical attention for hemorrhoids in

an effort to understand the disease impact on quality of life. The results of this survey are able to help us develop patient reported

outcome evaluation tools. These tools can be used in clinical trials to evaluate the patients’ conditions and to assess the performance

of the test articles.

March 2018, we announced that we had selected a higher potency corticosteroid in our steroid/anesthetic topical formulation program for

the treatment of hemorrhoids. The original topical preparation, which we referred to as Hydro-Lido or CITI-001, which was used in the

Phase 2a study, was a combination of hydrocortisone acetate and lidocaine hydrochloride. The new formulation, CITI-002, which we refer

to as Halo-Lido, combine lidocaine with the higher potency corticosteroid halobetasol propionate for symptomatic relief of the pain and

discomfort of hemorrhoids.

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