10-K

d923315d10k.htm

10-K

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

For the fiscal year ended May 31, 2020

For the transition period from

Commission file number 000-49908

CYTODYN INC.

(Exact name of registrant as specified in its charter)

(Address of principal executive offices) (Zip Code)

Registrant’s Telephone Number, including area code:

(360) 980-8524

Securities registered pursuant to Section 12(b) of the Act:

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

None. None. None.

Securities registered pursuant to Section 12(g) of the Act:

Title of class

Common

Stock, par value $0.001 per share

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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 checkmark 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 checkmark 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 new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness

of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit

report. Yes ☐ No ☒

Indicate by check mark whether the

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

State 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 ask price of such common equity, as of the last business day of the registrant’s most recently

completed second fiscal quarter: $106,487,002 as of November 30, 2019.

As of July 31, 2020, the registrant had 568,242,391

shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Document Parts Into Which Incorporated

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CYTODYN INC.

FORM 10-K FOR THE YEAR ENDED MAY 31, 2020

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Page

PART I 4

ITEM 1. BUSINESS 4

ITEM 1A. RISK FACTORS 21

ITEM 1B. UNRESOLVED STAFF COMMENTS 55

ITEM 2. PROPERTIES 55

ITEM 3. LEGAL PROCEEDINGS 55

ITEM 4. MINE SAFETY DISCLOSURES 56

ITEM 6. SELECTED FINANCIAL DATA 58

ITEM 7A. QUANTITITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 73

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 73

ITEM 9A. CONTROLS AND PROCEDURES 117

ITEM 9B. OTHER INFORMATION 117

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 118

ITEM 11. EXECUTIVE COMPENSATION 118

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 118

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 119

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FORWARD-LOOKING STATEMENTS

This annual report contains certain forward-looking statements that involve risks, uncertainties and assumptions that are difficult to

predict, including our clinical priorities and our current and proposed trials. Words and expressions reflecting optimism, satisfaction or disappointment with current prospects, as well as words such as “believes,” “hopes,”

“intends,” “estimates,” “expects,” “projects,” “plans,” “anticipates” and variations thereof, or the use of future tense, identify forward-looking statements, but their absence does not

mean that a statement is not forward-looking. Our forward-looking statements are not guarantees of performance and actual results could differ materially from those contained in or expressed by such statements. In evaluating all such statements, we

urge you to specifically consider various risk factors identified in this annual report, including the matters set forth under the heading “Risk Factors,” any of which could cause actual results to differ materially from those indicated by

our forward-looking statements.

Our forward-looking statements reflect our current views with respect to future events and are based on

currently available financial, economic, scientific, and competitive data and information on current business plans. Forward-looking statements specifically include statements about leronlimab, its ability to have positive health outcomes, the

possible results of clinical trials, studies or other programs or ability to continue those programs, the ability to obtain regulatory approval for commercial sales, the market for actual commercial sales, and the impact of health epidemics,

including the ongoing COVID-19 pandemic, on our business and operations. You should not place undue reliance on our forward-looking statements, which are subject to risks and uncertainties relating to, among

other things: (i) the sufficiency of the Company’s cash position, (ii) the Company’s ability to raise additional capital to fund its operations, (iii) the Company’s ability to meet its debt obligations, if any,

(iv) the Company’s ability to enter into partnership or licensing arrangements with third-parties, (v) the Company’s ability to identify patients to enroll in its clinical trials in a timely fashion, (vi) the Company’s

ability to achieve approval of a marketable product, (vii) the design, implementation and conduct of the Company’s clinical trials, (viii) the results of the Company’s clinical trials, including the possibility of unfavorable

clinical trial results, (ix) the market for, and marketability of, any product that is approved, (x) the existence or development of vaccines, drugs, or other treatments that are viewed by medical professionals or patients as superior to

the Company’s products, (xi) regulatory initiatives, compliance with governmental regulations and the regulatory approval process, (xii) litigation affecting the Company or its products; (xiii) general economic and business

conditions, (ix) changes in foreign, political, and social conditions, and (xv) various other matters, many of which are beyond the Company’s control. Should one or more of these risks or uncertainties develop, or should underlying

assumptions prove to be incorrect, actual results may vary materially and adversely from those anticipated, believed, estimated, or otherwise indicated by our forward-looking statements.

We intend that all forward-looking statements made in this annual report on Form 10-K will be subject

to the safe harbor protection of the federal securities laws pursuant to Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), to the extent applicable. Except as required by law, we do not undertake any

responsibility to update these forward-looking statements to take into account events or circumstances that occur after the date of this annual report. Additionally, we do not undertake any responsibility to update you on the occurrence of any

unanticipated events that may cause actual results to differ from those expressed or implied by these forward-looking statements.

PART I

Item 1. Business.

Corporate History/Business Overview

CytoDyn Inc. was originally incorporated under the laws of Colorado on May 2, 2002 under the name RexRay Corporation (our previous name).

Effective August 27, 2015, we completed a reincorporation from

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Colorado to Delaware. Our principal business office is 1111 Main Street, Suite 660, Vancouver, Washington 98660. Our website can be found at www.cytodyn.com. We will make available on

our website, free of charge, the proxy statements and reports on Forms 8-K,10-K, and 10-Q that we file with the United States

Securities and Exchange Commission (“SEC”) as soon as reasonably practicable, after such material is electronically filed with or furnished to, the SEC. We do not intend to incorporate any contents from our website into this annual report.

Unless the context otherwise requires, references in this annual report to “CytoDyn,” the “Company,” “we,” “our,” or “us” are to CytoDyn Inc. and its subsidiaries.

We are a late-stage biotechnology company focused on the clinical development and potential commercialization of leronlimab (PRO 140), a CCR5

antagonist to treat HIV infection, with the potential for multiple therapeutic indications. In November 2018, the United States Adopted Names Council adopted “leronlimab” as the official nonproprietary name for PRO 140. The names

leronlimab and PRO 140 will be used interchangeably throughout this annual report. The Company has also received conditional acceptance by the U.S. Food and Drug Administration (the “FDA”) of the proprietary name Vyrologix (pronounced—vie-ro-loj-iks) for leronlimab as a combination therapy for highly treatment experienced HIV patients in the United

States. In addition, the Company has also received a notice of allowance from the U.S. Trademark Office for the trademark “Vyrologix”.

The preclinical and clinical development of PRO 140 was led by Progenics Pharmaceuticals, Inc. (“Progenics”) through 2011. The

Company acquired the asset from Progenics in October 2012, as described in “PRO 140 Acquisition and Licensing Arrangements” below. In February 2018, we announced we had met the primary endpoint in its Phase 3 trial for leronlimab as a

combination therapy with HAART for highly treatment experienced HIV patients, and filed the non-clinical portion of our Biologics License Application (“BLA) on March 18, 2019. We filed with the FDA

the clinical, along with the Chemistry, Manufacturing, and Controls (“CMC”) portions of the BLA April and May of 2020. In July 2020, we received a Refusal to File letter from the FDA regarding the BLA filing, and requested a Type A

meeting to discuss the FDA’s request for additional information.

Our current business strategy is to resubmit our BLA filing for

leronlimab as a combination therapy for highly treatment experienced HIV patients as soon as possible, to seek approval for leronlimab as a potential therapeutic benefit for COVID-19 patients with mild-to-moderate, as well as, severe to critical indications, to advance our clinical trials with leronlimab for various forms of cancer, including, among others, our Phase

1b/2 clinical trial for metastatic triple-negative breast cancer and Phase 2 trial for 22 solid tumor cancers, to continue our Phase 2 trial for graft-versus-host disease (“GvHD”), to finalize with the FDA our submitted protocol for a

pivotal Phase 3 clinical trial with leronlimab as a monotherapy for HIV patients and to concurrently explore other cancer and immunologic indications for leronlimab.

Overview

Leronlimab as a CCR5

Antagonist

We are focused on developing leronlimab, a monoclonal antibody C—C chemokine receptor type 5 (“CCR5”)

receptor antagonist, to be used as a platform drug for a variety of indications. The target of leronlimab is the immunologic receptor CCR5. The CCR5 receptor is a protein located on the surface of a variety of cells including white blood cells

and cancer cells. On white blood cells, it serves as a receptor for chemical attractants called chemokines. The CCR5 receptor is also the co-receptor needed for certain strains of HIV to infect healthy T-cells. Recent research has identified the CCR5 receptor as an important target for many disease processes including cancer metastasis and certain immunological conditions. Leronlimab is a unique humanized

monoclonal antibody. Leronlimab prevents certain strains of HIV from using the CCR5 receptor as an entry gateway for healthy cells. Pre-clinical research has also shown that leronlimab blocks calcium channel

signaling of the CCR5 receptor when present on the cancer cell surface. Calcium channel signaling of the CCR5 receptor is a crucial component to the spread of metastatic cancer.

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Leronlimab binds to the second extracellular loop and

N-terminus of the CCR5 receptor, and due to its selectivity and target-specific mechanism of action, leronlimab does not appear to activate the immune function of the CCR5 receptor through agonist activity.

This apparent target specificity differentiates leronlimab from other CCR5 antagonists. Leronlimab is a competitive rather than allosteric inhibitor of the CCR5 receptor. Other potential advantages of leronlimab include longer half-life and

less frequent dosing requirements.

The CCR5 receptor has been identified as a target in HIV, GvHD, NASH, cancer metastasis,

transplantation medicine, multiple sclerosis, traumatic brain injury, stroke recovery, and a variety of inflammatory conditions, including potentially COVID-19. As we progress in evaluating leronlimab via a

multi-pathways approach, we see an opportunity to build a broad pipeline of indications through label expansion following initial approval for multi-drug resistant HIV.

Leronlimab and Human Immunodeficiency Virus (“HIV”)

We believe the leronlimab antibody shows promise as a powerful antiviral agent with the advantage of fewer side effects, lower toxicity and

less frequent dosing requirements, as compared to daily drug therapies currently in use for the treatment of HIV. The leronlimab antibody belongs to a class of HIV therapies known as entry inhibitors that block HIV from entering into and infecting

certain cells. Leronlimab blocks HIV from entering a cell by binding to a molecule called CCR5, a normal cell surface receptor protein to which certain strains of HIV, referred to as “R5” strains, attach as part of HIV’s entry into a

cell.

Leronlimab does not appear to affect the normal function of the CCR5 co-receptor for HIV.

Instead, leronlimab binds to a precise site on CCR5 that R5 strains of HIV use to enter the cell and, in doing so, inhibits the ability of these strains of HIV to infect the cell without appearing to affect the cell’s normal function. The R5

strains of HIV currently represent approximately 67% of all HIV infections in the United States. As a result, we believe leronlimab represents a distinct class of CCR5 inhibitors with advantageous virological and immunological properties and may

provide a unique tool to treat HIV infected patients.

We believe leronlimab is uniquely positioned to address a growing HIV market, as an

alternative, or in addition to current therapies, which are failing primarily due to patient non-compliance, which causes drug resistance. Several factors give rise to patient

non-compliance issues, such as toxicity and side effects, coupled with the need for a strict regimen of daily dosing. In eight clinical trials previously conducted, leronlimab was generally well tolerated, and

limited drug-related serious adverse events (“SAEs”), or dose-proportional adverse events (“AEs”), were reported. In addition, there were no dose-limiting toxicities or patterns of drug-related toxicities observed during these

trials. The results of these studies established that leronlimab’s antiviral activity was potent, rapid, prolonged, dose-dependent, and statistically significant following a single dose. Because leronlimab’s mechanism of action (for a

monoclonal antibody use in HIV) is a relatively new therapeutic approach, it provides a very useful method of suppressing the virus in treatment-experienced patients who have failed a prior HIV regimen and need new treatment options. Leronlimab, as

a single agent therapy, has also demonstrated that it could potentially replace highly active antiretroviral therapy (“HAART”) altogether for a subpopulation of R5 patients who have suppressed viral load with HAART, but who are seeking an

alternative treatment that affords the patient an improved quality of life, with the advantages of fewer side effects, lower toxicity and less frequent dosing requirements.

To date, leronlimab has been tested and administered to patients predominantly as a subcutaneous injection. We believe that if leronlimab is

approved by the FDA for use as an injectable for HIV, it may be an attractive and marketable therapeutic option for patients, particularly in the following scenarios:

• Patients with difficulty adhering to daily drug regimens;

• Patients who poorly tolerate existing therapies;

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• Patients with complex concomitant medical requirements; and

Clinical trials for leronlimab have demonstrated potent antiretroviral activity (as compared to existing treatments)

and no drug-related SAEs or dose-proportional AEs. Consequently, we believe that leronlimab has the potential to be the first long-acting (weekly or every other week), self-administered HIV therapy. Leronlimab appears to inhibit CCR5-tropic HIV

while preserving CCR5’s natural function. As a result, we believe leronlimab represents a distinct class of CCR5 inhibitors with unique virological and immunological properties and may provide another distinct tool to treat HIV-infected patients.

Our ongoing HIV-related clinical trials,

as summarized below, have been designed to demonstrate the proof of concept that leronlimab monotherapy can continue to suppress the viral load in certain HIV-infected, treatment-experienced patients who had

suppressed viral load on HAART, but would like an alternative treatment that provides a higher quality of life with one dose a week through a self-injection. Once the viral load is undetectable, weekly administration of leronlimab can help maintain

the suppressed viral load in a subpopulation of R5 patients over an extended period of time (currently shown to be in excess of six years). Based on the preliminary results of such studies, we believe that a leronlimab treatment option could also

address the unmet medical need for therapy options for certain HIV-infected patients with uncontrolled viral load, despite conventional HAART treatments. Accordingly, we recently submitted to the FDA a pivotal

Phase 3 trial protocol for leronlimab as monotherapy.

Importantly and in parallel with the submission of our pivotal trial protocol for

monotherapy, we recently announced the completion of the development of a receptor occupancy test to measure the expression of CCR5 in HIV and tumor cells that are occupied by leronlimab. Development of this test could more precisely guide us in

identification of HIV patients at screening for monotherapy, thereby potentially improving therapeutic success, along with further identifying cancer-patient candidates who have a form of cancer that CCR5 is over expressed.

Leronlimab and Coronavirus Disease 2019

SARS-CoV-2 was identified as the cause of an outbreak of respiratory illness first detected in Wuhan, China. The origin of SARS-CoV-2 causing the COVID-19 disease is uncertain, and the virus is highly contagious. COVID-19 typically transmits person to

person through respiratory droplets, commonly resulting from close personal contact. Coronaviruses are a large family of viruses, some causing illness in people and others that circulate among animals. For confirmed

COVID-19 infections, symptoms have included fever, cough, and shortness of breath. The symptoms of COVID-19 may appear in as few as two days or as long as 14 days after

exposure. Clinical manifestations in patients have ranged from non-existent to severe and fatal. At this time, there are minimal treatment options for COVID-19.

Based upon analyses of leronlimab’s potential effect on the immune system and the results from over 60 Emergency Investigation New Drug (EIND)

authorizations provided by the FDA, the Company initiated two clinical trials for COVID-19, a Phase 2 randomized clinical trial for

mild-to-moderateCOVID-19 population in the U.S. and a Phase 3 randomized clinical trial for severe to critically ill COVID-19 population in several hospitals throughout the country. Following the completion of the Phase 2 trial, the Company reported positive results for safety in July 2020. The Top-line Report from the trial,

including efficacy and safety data, is expected to be submitted to the FDA in August 2020. Recently, the Data Safety Monitoring Committee for the ongoing Phase 3 trial completed its first safety review of patients with severe to critical COVID-19 and reported it saw no cause to modify the study. The DSMC reviewed compiled safety data from 149 of the 169 patients enrolled in the Phase 3 trial. The DSMC did not raise any concerns regarding safety and

recommended that the trial continue. As such, the Company will conduct a full interim analysis once 195 patients are enrolled, as provided in the trial’s protocol.

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Leronlimab and Cancer

Research indicates that the CCR5 receptor is the “GPS” system of a cancer cell that promotes metastatic disease. Pre-clinical studies have shown that leronlimab blocks the calcium channel signaling of the CCR5 receptor and has the potential to disable the GPS system. CCR5 inhibition may disrupt signaling and ultimately the

spread of CCR5+ Circulating Tumor Cells (“CTCs”). Current therapies are directed to the primary tumor, rather than the movement or spread of cancer in the bloodstream. Metastatic disease, not the primary tumor, is the cause of death in the

vast majority of cancer patients.

Research has shown that a majority of sampled patients in certain studies had increased CCR5 expression

in their breast cancer. Increased CCR5 expression is an indicator of disease status in several cancers. Research has shown three key properties of the CCR5’s mechanism of action (“MOA”) in cancer. The first is that the CCR5

receptor on cancer cells was responsible for the migration and invasion of cells into the bloodstream, which leads to metastasis of breast, prostate, and colon cancer. The second is that blocking the CCR5 receptor also turns on anti-tumor fighting

properties restoring immune function. The third key finding was that blockage of the CCR5/CCL5 interaction had a synergistic effect with chemotherapeutic therapy and controlled cancer progression. Chemotherapy traditionally increased expression of

CCR5 so blocking it is expected to reduce the levels of invasion and metastasis.

In late November 2018, we received FDA approval of our

Investigational New Drug application (“IND”) submission and subsequently initiated a Phase 1b/2 clinical trial for metastatic triple-negative breast cancer (“mTNBC”) patients. We have reported that our pre-clinical research with leronlimab was able to reduce by more than 98% the incidence of human breast cancer metastasis in a mouse xenograft model for cancer through six weeks with leronlimab. The temporal

equivalency of the murine 6 weeks study may be up to 6 years in humans. In May 2019, the FDA granted Fast Track Designation for leronlimab (PRO 140) for use in combination with carboplatin for the treatment of patients with CCR5-positive mTNBC.

In addition, the Company has intiated a Phase 2 basket trial with leronlimab for the treatment of 22 solid tumor cancers.

Leronlimab and Immunological

Applications

We are continuing to explore opportunities for clinical applications for leronlimab involving the CCR5 receptor, other

than HIV-related treatments, such as inflammatory conditions, autoimmune diseases and cancer.

The

target of leronlimab is the immunologic receptor CCR5. We believe that the CCR5 receptor is more than the door for HIV to enter T-cells: it is also a crucial component in inflammatory responses. This could

open the potential for multiple pipeline opportunities for leronlimab.

The CCR5 receptor is a protein located on the surface of white

blood cells that serves as a receptor for chemical attractants called chemokines. Chemokines are the key orchestrators of leukocyte trafficking by attracting immune cells to the sites of inflammation. At the site of an inflammatory reaction,

chemokines are released. These chemokines are specific for CCR5 and cause the migration of T-cells to these sites promoting further inflammation. The mechanism of action of PRO 140 has the potential to block

the movement of T-cells to inflammatory sites, which could be instrumental in diminishing or eliminating inflammatory responses. Some disease processes that could benefit from CCR5 blockade include

transplantation rejection, autoimmunity and chronic inflammation such as rheumatoid arthritis and psoriasis.

Due to leronlimab’s

MOA, we believe leronlimab may have significant advantages in terms of reduced side effects over other CCR5 antagonists. Prior studies have demonstrated that leronlimab does not cause direct activation of

T-cells. We have reported encouraging human safety data for our clinical trials with leronlimab in HIV-infected patients.

We have initiated our first clinical trial with leronlimab in an immunological indication – a Phase 2 clinical trial with leronlimab for

GvHD in reduced intensity conditioning (“RIC”) patients with acute myeloid leukemia

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(“AML”) or myelodysplastic syndrome (“MDS”) who are undergoing bone marrow stem cell transplantation. GvHD represents an unmet medical need, with patients who contract GvHD

during stem cell transplant having a significantly decreased 1-year survival rate with relapsed GvHD as the leading cause of death. Our pre-clinical study in GvHD has

been published in the peer-reviewed journal Biology of Blood and Marrow Transplantation. The FDA has granted orphan drug designation to leronlimab for the prevention of acute GvHD.

GvHD is a risk when patients receive bone marrow stem cells donated from another person. GvHD is a serious complication that limits the use of

Bone Marrow Stem Cell (“BMSC”) transplantation in patients with blood cancers. GvHD occurs when the donor’s immune cells attack the patient’s normal tissues (skin, liver, gut). GvHD can be acute or chronic. Its severity depends

on the differences in tissue type between patient and donor. Acute GvHD can occur soon after the transplanted cells begin to appear in the recipient and can range from mild to severe and can be life-threatening.

The CCR5 receptor, the target for leronlimab, appears to be an important mediator of GvHD, especially in the organ damage that is the usual

cause of death. We believe that the CCR5 receptor on engrafted cells is critical for the development of acute GvHD and by blocking this receptor from recognizing certain immune signaling molecules could be a viable approach to mitigating acute

GvHD. The potential of leronlimab to prevent this life-threatening condition could help extend the use of BMSC transplantation to effectively treat more patients.

We are also exploring the ability of leronlimab to prevent the progression of Non-Alcoholic Fatty

Liver Disease (“NAFLD”) into Non-Alcoholic Steatohepatitis (“NASH”). NAFLD is an inflammatory disease caused by the build-up of fat in hepatocytes

(steatosis). In severe cases, NAFLD progresses into NASH. It is estimated that 30% to 40% of adults in the United States have NAFLD, while 3% to 12% of adults in the United States have NASH. If left untreated, NASH may progress to

hepatocellular carcinoma and is expected to become the leading cause of liver transplantation by 2020.

We continue to expand the clinical

focus with leronlimab to include the evaluation in certain cancer and immunological indications where CCR5 antagonism has shown initial promise.

Prostate Diagnostic Test—PCa Test

An asset undergoing continued evaluation and development that we acquired from ProstaGene, LLC (“ProstaGene”) is the Prostate

Diagnostic Test (the “PCa Test”). This test, developed by a leading oncologist, is intended to determine outcomes of patients diagnosed with prostate cancer compared to the Gleason score, the current standard test for prostate cancer

diagnosis. It leverages technology using an artificial intelligence approach based on gene signatures. The PCa Test employs 16 gene biomarker signatures for prognostication and therapeutic substratification of prostate cancer using sophisticated

proprietary artificial intelligence algorithms.

Prostate cancer is the most commonly diagnosed cancer in men, except for non-melanoma skin cancer. About one in nine men in the United States will be diagnosed with prostate cancer during their lifetimes. It is believed to be the second leading cause of cancer death among men in the

United States. Worldwide, it is estimated that there are well over 1 million new cases of prostate cancer and 366,000 prostate cancer deaths annually.

The current standard of care for treating prostate cancer is based upon the Gleason score. Patients with prostate cancer with a low Gleason

score are observed, while those with higher Gleason scores typically undergo radical prostatectomy. The PCa Test potentially provides a “second opinion” and therefore could provide valuable guidance to assist physicians and patients to

make more educated and informed decision regarding appropriate treatments. Our plan for the PCa Test is to successfully advance its development to obtain a Section 510(k) clearance from the FDA for commercial use or to out-license the proprietary technology to a third party.

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Current Clinical Trials

We will require a significant amount of additional capital to complete our clinical trial programs for leronlimab, which are designed to

accelerate and maximize the leverage of our multi-pathway approach to identifying and evaluating multiple opportunities for clinical indications. See “Liquidity and Capital Resources” under the heading “Management’s Discussion

and Analysis of Financial Condition and Results of Operations” below.

To facilitate our clinical research plans and trials, we have

previously engaged Amarex Clinical Research, LLC (“Amarex”), as our principal contract research organization (“CRO”), to provide comprehensive regulatory and clinical trial management services.

Leronlimab is currently being studied in the following clinical trials:

Phase 2 Trial to Evaluate the Efficacy and Safety of Leronlimab for Mild-to-Moderate Coronavirus Disease 2019 (COVID-19). This is a two-arm, randomized, double blind, placebo controlled multicenter study to evaluate the safety and efficacy of leronlimab in patients with mild-to-moderate symptoms of respiratory illness caused by the coronavirus 2019 infection completed in July 2020. Patients were randomized to receive weekly doses of 700 mg

leronlimab, or placebo. Leronlimab and placebo were administered via subcutaneous injection. The study has three phases: Screening Period, Treatment Period and Follow-Up Period. A total of 84 subjects were

randomized 2:1 (active drug to placebo) in this study. The primary outcome measures are clinical improvement as assessed by change in total symptom score (for fever, myalgia, dyspnea and cough). Secondary outcome measures include: (1) time to

clinical resolution, (2) change from baseline in National Early Warning Score 2 (NEWS2), (3) change from baseline in pulse oxygen saturation, (4) change from baseline in the patient’s health status on a

7-category ordinal scale, (5) incidence of hospitalization, (6) duration (days) of hospitalization, (7) incidence of mechanical ventilation supply, (8) duration (days) of mechanical

ventilation supply, (9) incidence of oxygen use, (10) duration (days) of oxygen use, (11) mortality rate, (12) time to return to normal activity. Enrollment was completed in July 2020 and the Company has recently reported

positive safety results. The Top-line Report from the trial, including efficacy and safety data, is expected to be submitted to the FDA in August 2020.

Phase 3 Trial to Evaluate the Efficacy and Safety of Leronlimab for Patients With Severe or Critical Coronavirus Disease 2019 (COVID-19). This is a two-arm, randomized, double blind, placebo controlled, adaptive design multicenter study to evaluate the safety and efficacy of leronlimab in

patients with severe or critical symptoms of respiratory illness caused by coronavirus 2019 infection. Patients will be randomized to receive weekly doses of 700 mg leronlimab, or placebo. Leronlimab and placebo will be administered via subcutaneous

injection. The study will have three phases: Screening Period, Treatment Period, and Follow-Up Period. The primary outcome measured in this study is: all-cause mortality

at Day 28. Secondary outcomes measured are: (1) all-cause mortality at Day 14, (2) change in clinical status of subject at Day 14, (3) change in clinical status of subject at Day 28, and (4) change

from baseline in Sequential Organ Failure Assessment (SOFA) score at Day 14. Recently, the Data Safety Monitoring Committee for the ongoing Phase 3 trial completed its first safety review of patients with severe and critical COVID-19 and reported it saw no cause to modify the study. The DSMC reviewed compiled safety data from 149 of the 169 patients enrolled in the Phase 3 trial. The DSMC did not raise any concerns regarding safety and

recommended that the trial continue. As such, the Company will conduct a full interim analysis once 195 patients are enrolled, as provided in the trial’s protocol.

Phase 2b Extension Study for HIV, as Monotherapy. Currently, there are four patients in this ongoing extension study and each has

surpassed six years of suppressed viral load with PRO 140 as a single agent therapy. This extension study will be discontinued upon any FDA approval of leronlimab.

Rollover Study for HIV as Combination Therapy. This study is designed for patients who successfully completed the pivotal Phase 2b/3

Combination Therapy trial (which met its primary endpoint and serves as the

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basis for our current BLA filing) and for whom the treating physicians request a continuation of leronlimab therapy in order to maintain suppressed viral load. This extension study will be

discontinued upon any FDA approval of leronlimab.

Phase 2b/3 Investigative Trial for HIV, as Long-term Monotherapy.

Enrollment for this trial is now closed after reaching 500 patients. This trial assesses using leronlimab subcutaneously as a long-acting single-agent maintenance therapy for 48 weeks in patients with suppressed viral load with CCR5-tropic HIV-1 infection. The primary endpoint is the proportion of participants with a suppressed viral load to those who experienced virologic failure. The secondary endpoint is the length of time to virologic failure. We

completed the evaluation two higher-dose arms, one with 525 mg dose (a 50% increase from the original dosage of 350 mg), as well as a 700 mg dose. We recently reported that interim data suggested that both the 525 mg and the 700 mg dosages are

achieving a responder rate of approximately 90% after the initial 10 weeks. This trial has also been used to provide safety data for the BLA filing for leronlimab as a combination therapy. In view of the high responder rate at the increased dosage

levels, coupled with the newly developed CCR5 occupancy test, we filed a pivotal trial protocol with the FDA for leronlimab as a monotherapy. Upon finalization with the FDA of the pivotal trial protocol for monotherapy, this Phase2b/3 investigative

trial will likely be discontinued. In the interim, several patients are continuing in an extension study who have requested continued access to leronlimab.

Phase 1b/2 Trial for Triple-Negative Breast Cancer. This trial is to evaluate the feasibility of leronlimab combined with carboplatin

in patients with CCR5+ metastatic triple negative breast cancer. The Phase 1b portion is a dose escalation phase with three dose levels (cohorts) of leronlimab in combination with a fixed dose of carboplatin. The Phase 2 portion is a single arm

study with 30 patients to test the hypothesis that the combination of carboplatin intravenously and maximum tolerated dose of leronlimab subcutaneously will increase progression free survival. In May 2019, the FDA granted leronlimab Fast Track

designation for use in combination with carboplatin. The change in circulating tumor cells (“CTCs”) number will be evaluated every 21 days during treatment and will be used as an initial prognostic marker for efficacy. The first patient

was treated in September 2019.

Compassionate Use Study of Leronlimab in Breast Cancer. This is a single arm, compassionate use

study with 30 patients for leronlimab (PRO 140) combined with a treatment of physician’s choice (TPC) in patients with CCR5+ mTNBC. Leronlimab (PRO 140) will be administered subcutaneously as weekly dose of 350 mg until disease

progression or intolerable toxicity. Treatment of Physician’s Choice (TPC) is defined as one of the following single-agent chemotherapy drugs administrated according to local practice: eribulin, gemcitabine, capecitabine, paclitaxel, nab-paclitaxel, vinorelbine, ixabepilone, or carboplatin. In this study, patients will be evaluated for tumor response approximately every 3 months or according to institution’s standard practice by CT,

PET/CT or MRI with contrast (per treating investigator’s discretion) using the same method as at baseline.

Basket Trial for 22

Solid Tumor Cancers. This is a Phase 2 study to test the safety and efficacy of leronlimab on 22 different solid tumor cancers, including brain-glioblastoma, melanoma, lung, breast, ovarian, pancreas, bladder, throat, stomach, colon, testicular,

uterine, among other indications. The first patient was treated in April 2020.

Phase 2 Trial for Graft-versus-Host Disease. This

Phase 2 multi-center100-day study with 60 patients is designed to evaluate the feasibility of the use of leronlimab as an add-on therapy to standard GvHD prophylaxis

treatment for prevention of acute GvHD in adult patients with AML or MDS undergoing allogeneic hematopoietic stem cell transplantation (“HST”). Enrollment of the first patient was announced in May of 2017. On October 5, 2017, we

announced that the FDA had granted orphan drug designation to leronlimab (PRO 140) for the prevention of GvHD. In March 2018, we announced that the Independent Data Monitoring Committee (“IDMC”) for leronlimab (PRO 140) Phase 2 trial in

GvHD had completed a planned interim analysis of trial data on the first 10 patients enrolled. Following this review of data from the first 10 patients in the Phase 2 trial, we filed amendments to the protocol with the FDA. The amendments included

switching the pretreatment conditioning regimen from aggressive myeloablative (“MA”) conditioning to a reduced intensity conditioning

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(“RIC”), and switching from a blinded one-for-one randomized placebo-controlled design to an open-label

design under which all enrollees receive leronlimab. The amendments also provide for a 100% increase in the dose of leronlimab, to 700 mg, to more closely mimic pre-clinical dosing. The next review of data by

the IDMC will occur following enrollment of 10 patients under the amended protocol after each patient has been dosed for 30 days. Due to the necessary prioritization of limited capital, enrollment under the amended protocol has been temporarily

delayed.

PRO 140 Acquisition and Licensing Arrangements

We originally acquired PRO 140, as well as certain other related assets, including the existing inventory of PRO 140 bulk drug

substance, intellectual property, and FDA regulatory filings, pursuant to an Asset Purchase Agreement, dated as of July 25, 2012 and effective October 16, 2012 (the “Progenics Purchase Agreement”), between CytoDyn and Progenics.

Pursuant to the Progenics Purchase Agreement, we are required to pay Progenics a remaining milestone payment and royalties as follows: (i) $5,000,000 at the time of the first U.S. new drug application approval by the FDA or other non-U.S. approval for the sale of PRO 140; and (ii) royalty payments of up to 5% on net sales during the period beginning on the date of the first commercial sale of PRO 140 until the later of (a) the

expiration of the last to expire patent included in the acquired assets, and (b) 10 years, in each case determined on a country-by country basis. To the extent that such remaining milestone payment and

royalties are not timely made, under the terms of the Progenics Purchase Agreement, Progenics has certain repurchase rights relating to the assets sold to us thereunder.

Payments to Progenics are in addition to payments due under a Development and License Agreement, dated April 30, 1999 (the “PDL

License”), between Protein Design Labs (now AbbVie Inc.) and Progenics, which was assigned to us in the Progenics Purchase Agreement, pursuant to which we have an exclusive worldwide license to develop, make, have made, import, use, sell, offer

to sell or have sold products that incorporate the humanized form of the PRO 140 antibody developed under the agreement. Pursuant to the PDL License, we are required to pay AbbVie Inc. remaining milestone payments and royalties as follows:

(i) $500,000 upon filing a Biologic License Application with the FDA or non-U.S. equivalent regulatory body; (ii) $500,000 upon FDA approval or approval by another

non-U.S. equivalent regulatory body; and (iii) royalties of up to 3.5% of net sales for the longer of 10 years and the date of expiration of the last to expire licensed patent. Additionally, the PDL

License provides for an annual maintenance fee of $150,000 until royalties paid exceed that amount. To the extent that such remaining milestone payments and royalties are not timely made, under the terms of the PDL License, AbbVie Inc. has certain

termination rights relating to our license of PRO 140 thereunder.

Effective July 29, 2015, we entered into a License Agreement (the

“Lonza Agreement”) with Lonza Sales AG (“Lonza”) covering Lonza’s “system know-how” technology with respect to our use of proprietary cell lines to manufacture new PRO 140

material. The Lonza Agreement provides for an annual license fee and future royalty payments, both of which varies based on whether Lonza, or we or our strategic partner manufactures PRO 140. We currently use two independent parties as contract

manufacturers for PRO 140. Therefore, if this arrangement continues, an annual license fee of £600,000 (approximately USD785,000 given current exchange rate) would continue to apply, as well as a royalty, up to 2% of the net selling price upon

commercialization of leronlimab (PRO 140), excluding value added taxes and similar amounts.

Patents, Proprietary Technology and Data Exclusivity

Protection of the Company’s intellectual property rights is important to our business. We may file patent applications in the

U.S., Canada, China, and Japan, European countries that are party to the European Patent Convention and other countries on a selective basis in order to protect inventions we consider to be important to the development of our business.

Generally, patents issued in the U.S. are effective for either (i) 20 years from the earliest asserted filing date, if the application

was filed on or after June 8, 1995, or (ii) the longer of 17 years from the date of issue or 20

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years from the earliest asserted filing date, if the application was filed prior to that date. A U.S. patent, to be selected by us upon receipt of FDA regulatory approval, may be subject to up to

a five-year patent term extension in certain instances. While the duration of foreign patents varies in accordance with the provisions of applicable local law, most countries provide for a patent term of 20 years measured from the application filing

date and some may also allow for patent term extension to compensate for regulatory approval delay. We pursue opportunities for seeking new meaningful patent protection on an ongoing basis. We currently anticipate, absent patent term extension,

patent protection relating to the leronlimab (PRO 140) antibody itself will start to expire in 2023, certain methods of using leronlimab (PRO 140) for treatment of HIV-1 will start to expire in 2026, certain

formulations comprising leronlimab (PRO 140) will start to expire in 2031, and certain methods of using small-molecule CCR5 antagonists for treatment of cancer metastasis will start to expire in 2032.

Patents do not enable us to preclude competitors from commercializing drugs in direct competition with our products that are not covered by

granted and enforceable patent claims. Consequently, patents may not provide us with any meaningful competitive advantage. See related risk factors under the heading “Risk Factors” below. We may also rely on data exclusivity, trade secrets

and proprietary know-how to develop and attempt to achieve a competitive position with our product candidates. We require our employees, consultants and partners who have access to our proprietary information

to sign confidentiality agreements in an effort to protect our intellectual property.

Separate from and in addition to the patent rights

noted above, we expect that leronlimab (PRO 140) will be subject to at least a 12-year data exclusivity period measured from the first date of FDA licensure, during which period no other applications

referencing leronlimab (PRO 140) will be approved by FDA. Further, no other applications referencing leronlimab (PRO 140) will be accepted by FDA for a 4-year period measured from the first date of FDA

licensure. Accordingly, this period of data exclusivity is expected to provide at least a 12-year term of protection against competing products shown to be biosimilar or interchangeable with leronlimab (PRO

140). Similar data exclusivity or data protection periods of up to about five years or more are provided in at least Australia, Canada, Europe, Japan, and New Zealand.

We note that data exclusivity is not an extension of patent rights, and it does not prevent the introduction of generic versions of the

innovative drug during the data exclusivity period, as long as the marketing approval of the generic version does not use or rely upon the innovator’s test data. Patents and data exclusivity are different concepts, protect different subject

matter, arise from different efforts, and have different legal effects over different time periods.

Information with respect to our

current patent portfolio as of June 30, 2020, is set forth below.

Number of Patents Number of PatentApplications

U.S. International Expiration Dates(1) U.S. International

Mouse model 1 1

Research, development and commercialization of a biopharmaceutical product often require choosing between alternative development and

optimization routes at various stages in the development process. Preferred routes depend upon current—and may be affected by subsequent—discoveries and test results, availability of financial resources, and other factors, and cannot be

identified with certainty. There are numerous third-party

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patents in fields in which we work, and we may need to obtain licenses under patents of others in order to pursue a preferred development route of one or more of our product candidates. The need

to obtain a license would decrease the ultimate value and profitability of an affected product. If we cannot negotiate such a license, we might have to pursue a less desirable development route or terminate the program altogether. See “Risk

Factors” below.

Government Regulation

Regulation of Health Care Industry

The

health care industry is highly regulated, and state and federal health care laws and regulations are applicable to certain aspects of our business. For example, there are federal and state health care laws and regulations that apply to the business

relationships between health care providers and suppliers, the privacy and security of health information and the conduct of clinical research.

Regulation of Products

The design,

testing, manufacture, safety, effectiveness, labeling, storage, record keeping, approval, advertising and promotion of our products is regulated by numerous third parties, including the FDA, foreign governments, independent standards auditors and

our customers.

In the United States, biological products and medical devices, including diagnostic products, have long been subject to

regulation by various federal and state agencies, primarily as to product safety, efficacy, manufacturing, advertising, labeling, import, export and safety reporting. The exercise of broad regulatory powers by the FDA through its and its Center for

Biological Evaluation and Research and its Center for Devices and Radiological Health continues to result in increases in the amounts of testing and documentation for FDA clearance of current and new biologic products and medical devices. The FDA

can ban certain products; detain or seize adulterated or misbranded products; order repair, replacement or refund of these products; and require notification of health professionals and others with regard to products that present unreasonable risks

of substantial harm to the public health. The FDA may also enjoin and restrain certain violations of the Federal Food, Drug, and Cosmetic Act, as amended, or the Public Health Service Act pertaining to certain products or initiate action for

criminal prosecution of such violations.

The lengthy process of seeking approvals, and the subsequent compliance with applicable statutes

and regulations, require the expenditure of substantial resources. Failure to comply with applicable regulations can result in refusal by the FDA to approve product license applications. The FDA also has the authority to revoke previously granted

product approvals.

Pharmaceutical products such as leronlimab may not be commercially marketed without prior approval from the FDA and

comparable agencies in foreign countries. In the United States, the process for obtaining FDA approval for products like leronlimab typically includes pre-clinical studies, the filing of an IND, human clinical

trials and filing and approval of either a New Drug Application (“NDA”), for chemical pharmaceutical products, or a BLA for biological pharmaceutical products, such as leronlimab. The results of

pre-clinical testing, which include laboratory evaluation of product chemistry and formulation, animal studies to assess the potential safety and efficacy of the product and its formulations, details

concerning the drug manufacturing process and its controls, and a proposed clinical trial protocol and other information must be submitted to the FDA as part of an IND that must be reviewed and become effective before clinical testing can begin. The

study protocol and informed consent information for patients in clinical trials must also be submitted to an independent institutional review board (“IRB”), for approval. Once a sponsor submits an IND, the sponsor must wait 30 calendar

days before initiating any clinical trials, during which time the FDA has an opportunity to review the IND and raise concerns or questions relating to the proposed clinical trials outlined in the IND. If the FDA has comments or questions, they must

be resolved to the satisfaction of the FDA before clinical trials can begin. In addition, the

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FDA, an IRB or we may, at any time, impose a clinical hold on ongoing clinical trials. If the FDA imposes a clinical hold, clinical trials cannot commence or recommence without FDA authorization

and then only under terms authorized by the FDA. Our non-clinical and clinical studies must conform to the FDA’s Good Laboratory Practice (“GLP”), and Good Clinical Practice (“GCP”),

requirements, which are designed to ensure the quality and integrity of submitted data and protect the rights and well-being of study patients. Information for certain clinical trials also must be publicly disclosed within certain time limits on the

clinical trial registry and results databank maintained by the National Institutes of Health (“NIH”).

The results of the pre-clinical and clinical testing, chemistry, manufacturing and control information and proposed labeling are then submitted to the FDA in the form of either an NDA or BLA for review and potential approval to

commence commercial sales. In responding to an NDA or BLA, the FDA may grant marketing approval, request additional information in a complete response letter, or deny the approval if it determines that the NDA or BLA does not provide an adequate

basis for approval. A complete response letter generally contains a statement of specific conditions that must be met in order to secure final approval of an NDA or BLA and may require additional testing. If and when those conditions have been met

to the FDA’s satisfaction, the FDA will typically issue an approval letter, which authorizes commercial marketing of the product with specific prescribing information for specific indications, and sometimes with specified post-marketing

commitments. Any approval required from the FDA might not be obtained on a timely basis, if at all.

Among the conditions for an NDA or

BLA approval is the requirement that the manufacturing operations conform on an ongoing basis with current Good Manufacturing Practices (“cGMPs”). In complying with cGMPs, we must expend time, money and effort in the areas of training,

production and quality control within our own organization and at our contract manufacturing laboratories. A successful inspection of the manufacturing facility by the FDA is a prerequisite for final approval of a biological product like leronlimab

(PRO140). Following approval of the NDA or BLA, we and our third-party manufacturers remain subject to periodic inspections by the FDA. We also face similar inspections coordinated by the European Medicines Agency by inspectors from particular

European Union (“EU”) member countries that conduct inspections on behalf of the EU and from other foreign regulatory authorities. Any determination by the FDA or other regulatory authorities of manufacturing or other deficiencies could

materially adversely affect our business.

Regulatory requirements and approval processes in EU countries are similar in principle to

those in the United States and can be at least as costly and uncertain. The EU has established a unified centralized filing and approval system administered by the Committee for Medicinal Products for Human Use designed to reduce the administrative

burden of processing applications for pharmaceutical products derived from new technologies. In addition to obtaining regulatory approval of products, it is generally necessary to obtain regulatory approval of the facility in which the product will

be manufactured.

We use and plan to continue to use third-party manufacturers to produce our products in clinical and commercial

quantities. Future FDA inspections may identify compliance issues at the facilities of our contract manufacturers that may disrupt production or distribution, or require substantial resources to correct. In addition, discovery of problems with a

product, including new safety risks, or the failure to comply with requirements may result in restrictions on a product, manufacturer or holder of an approved NDA or BLA, including withdrawal or recall of the product from the market or other

voluntary or FDA-initiated action that could delay further marketing. Newly discovered or developed safety or efficacy data may require changes to an approved product’s approved labeling, including the

addition of new warnings and contraindications, the imposition of additional mandatory post-market studies or clinical trials, or the imposition of or revisions to a risk evaluation mitigation strategies (“REMS “) program, including

distribution and/or use restrictions.

Once a BLA is approved, a product will be subject to certain post-approval requirements, including

requirements for adverse event reporting and submission of periodic reports to the FDA, recordkeeping, product sampling and distribution, and, as discussed above, may be subject to mandatory post-market study and REMS requirements. In addition, the

FDA strictly regulates the promotional claims that may be made about prescription

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drug products and biologics. In particular, a drug or biologic may not be promoted for uses that are not approved by the FDA as reflected in the product’s approved labeling. The FDA and

other agencies actively enforce the laws and regulations prohibiting the promotion of off label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant

liability. The FDA also requires substantiation of any claims of superiority of one product over another, including the requirement that such claims be proven by adequate and well-controlled head-to-head clinical trials. The FDA also requires all promotional materials that discuss the use or effectiveness of a prescription drug or biologic to disclose in a balanced manner the risks and safety

profile of the product.

Regulation of Laboratory Operations

Clinical laboratories that perform laboratory testing (except for research purposes only) on human patients are subject to regulation under

Clinical Laboratory Improvement Amendments (“CLIA”). CLIA regulates clinical laboratories by requiring that the laboratory be certified by the federal government, licensed by the state and comply with various operational, personnel and

quality requirements intended to ensure that clinical laboratory test results are accurate, reliable and timely. State law and regulations also apply to the operation of clinical laboratories.

State Governments

Most states in which

we operate have regulations that parallel federal regulations. Most states conduct periodic unannounced inspections and require licensing under such state’s procedures. Our research and development activities and the manufacture and marketing

of our products are and will be subject to rigorous regulations relating to product safety and efficacy by numerous governmental authorities in the United States and other countries.

Other Laws and Regulations

We are

subject to various laws and regulations relating to safe working conditions, clinical, laboratory and manufacturing practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances, including

radioactive compounds and infectious disease agents, used in connection with our research. The extent of government regulation applying to our business that might result from any legislative or administrative action cannot be accurately predicted.

Environmental

We are subject to a

variety of federal, state and local environmental protection measures. We believe that our operations comply in all material respects with applicable environmental laws and regulations. Our compliance with these regulations did not have during the

past year and is not expected to have a material effect upon our capital expenditures, cash flows, earnings or competitive position.

Registrational

Clinical Trials Process

Described below is the traditional registrational drug development track. Our current business strategy is

to focus on completing our BLA filing for leronlimab as a combination therapy for highly treatment experienced HIV patients, advance the regulatory process of the clinical outcomes from our two COVID-19

clinical trials, advance our Phase 1b/2 clinical trial metastatic triple-negative breast cancer, continue our Phase 2 basket trial for 22 solid tumor cancers and Phase 2 trial for GvHD, finalize with the FDA our submitted protocol for a pivotal

Phase 3 clinical trial with leronlimab as a monotherapy for HIV patients and to concurrently explore other cancer and immunologic indications for leronlimab.

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Phase 1

Phase 1 includes the initial introduction of an investigational new drug or biologic into humans. These studies are closely monitored and may

be conducted in patients, but are usually conducted in a small number of healthy volunteer patients. These studies are designed to determine the metabolic and pharmacologic actions of the investigational product in humans, the side effects

associated with increasing doses, and, if possible, to gain early evidence on effectiveness. During Phase 1, sufficient information about the investigational product’s pharmacokinetics and pharmacological effects are obtained to permit the

design of well-controlled, scientifically valid, Phase 2 studies. Phase 1 studies of PRO 140 have been conducted and completed by or on behalf of Progenics by certain principal investigators prior to our acquisition of PRO 140.

Phase 2

Phase 2 includes the early

controlled clinical studies conducted to obtain some preliminary data on the effectiveness of the drug for a particular indication or indications in patients with the disease or condition. This phase of testing also helps determine the common

short-term side effects and risks associated with the drug. Phase 2 studies are typically well-controlled, closely monitored, and conducted in a relatively small number of patients, often involving several hundred people. In some cases, depending

upon the need for a new drug, a particular drug candidate may be licensed for sale in interstate commerce after a “pivotal” Phase 2 trial.

Phase 2 is often broken into Phase 2a, which can be used to refer to “pilot trials,” or more limited trials evaluating exposure

response in patients, and Phase 2b trials that are designed to evaluate dosing efficacy and ranges.

Phase 3

Phase 3 studies are expanded controlled clinical studies. They are performed after preliminary evidence suggesting effectiveness of the drug

has been obtained in Phase 2, and are intended to gather the additional information about effectiveness and safety that is needed to evaluate the overall benefit/risk relationship of the drug. Phase 3 studies also provide an adequate basis for

extrapolating the results to the general population and transmitting that information in the physician labeling. Phase 3 studies usually involve significantly larger groups of patients, and considerable additional expense. We were required to pay

significant fees to third parties upon the first patient dosing in a Phase 3 trial of leronlimab, and we may be required to make additional fee payments to third parties upon the completion of additional milestones. See the discussion under the

subheading “PRO 140 Acquisition and Licensing Arrangements” above.

Competition

The pharmaceutical, biotechnology and diagnostic industries are characterized by rapidly evolving technology and intense competition. Our

development efforts may compete with more established biotechnology companies that have significantly greater financial and managerial resources than we do.

Advancing leronlimab to commercialization is our highest priority. Leronlimab blocks a cell receptor called CCR5, which is the entry point for

most strains of HIV virus. Pfizer’s Maraviroc (Selzentry®) is the only currently approved CCR5 blocking agent. Maraviroc, like all other HIV approved drugs, must be taken daily and is

believed to have side effects and toxicity. For these reasons, we believe that our lead product, leronlimab, a monoclonal antibody, may prove to be useful in patients that cannot tolerate existing HIV therapies or desire a respite from those

therapies. Nonetheless, manufacturers of current therapies, such as Pfizer, Gilead Sciences, Merck, Bristol-Myers Squibb and ViiV Healthcare, are very large, multi-national corporations with significant resources. We expect that these companies will

compete fiercely to defend and expand their market share.

To construct a HAART regimen, three drugs from two classes of drugs are

typically needed. Currently there are only five different classes of drugs from which four are primarily used to construct a HAART regimen. Each

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of these four classes of drugs has many drugs available in its respective class, except the entry inhibitor (“EI”) class, which has only two drugs available. The only two drugs in the

EI class approved by the FDA are Maraviroc, a small molecule drug (which is taken orally once or twice a day) and Ibalizumab (which is an IV infusion administered once every two weeks). If approved, we believe that leronlimab will be only the second

approved drug outside of the main four classes of drugs approved for HIV since 2007.

The only other monoclonal antibody that recently

received FDA approval is TMB-335, also referred to as Ibalizumab, which was developed by TaiMed Biologics. Ibalizumab targets the CD4 receptor on T-cells which is one of

the two co-receptors required for HIV entry into T-cells.

Our potential competitors include entities that develop and produce therapeutic agents. These include numerous public and private academic and

research organizations and pharmaceutical and biotechnology companies pursuing production of, among other things, biologics from cell cultures, genetically engineered drugs and natural and chemically synthesized drugs. Our competitors may succeed in

developing potential drugs or processes that are more effective or less costly than any that may be developed by us or that gain regulatory approval prior to our potential drug candidates. Worldwide, there are many antiviral drugs for treating HIV.

In seeking to manufacture, distribute and market the potential drugs we hope to have approved, we face competition from established pharmaceutical companies. Many of these potential competitors have substantially greater capital resources,

management expertise, research and development capabilities, manufacturing and marketing resources and experience than we do.

We also

expect that the number of our competitors and potential competitors will increase as more potential drugs receive commercial marketing approvals from the FDA or analogous foreign regulatory agencies. Any of these competitors may be more successful

than us in manufacturing, marketing and distributing HIV treatments, as well as for new therapies for cancer and immunological disorders.

While we are encouraged from the clinical outcomes from over 60 Emergency Investigation New Drug (EIND) authorizations granted by the FDA and

the preliminary results from our two COVID-19 trials, there are hundreds of companies concurrently exploring therapies for COVID-19, including clinical trials. Many of

these potential competitors have substantially greater capital resources, management expertise, research and development capabilities, manufacturing and marketing resources and experience than we do.

As we evaluate leronlimab for potential indications in cancer and immunology, we will face competition from formidable global research-based

pharmaceutical companies. Potential competitors such as Roche, Celgene, Bristol-Myers Squibb, Merck, AbbVie and many others have vast financial, managerial, technical, commercialization and marketing resources than we do than we do.

Manufacturing

We do not own or

operate manufacturing facilities for the production of leronlimab. As such, we must depend on third-party manufacturing organizations and suppliers for all of our clinical trial quantities of leronlimab, in addition to previously manufactured

supplies of commercial grade leronlimab. We continue to explore alternative manufacturing sources, in order to ensure that we have access to sufficient manufacturing capacity in order to meet potential demand for leronlimab in a cost-efficient

manner.

We have engaged Samsung Biologics and AEC Biologics, two global contract manufacturing organizations (“CMOs”), to

initiate the scale-up to commercial batch quantities of product, and develop the necessary controls and specifications to manufacture product on a consistent and reproducible manner. We have also contracted

with suitable CMOs to fill, label, and package product into the final commercial package for commercial use. In order to commercialize product, this scaled-up material will need to be validated under best

practices, and demonstrated to meet approved specifications on an ongoing basis. GMP material will be produced as needed to support clinical trials for all therapeutic indications and until commercial product is approved by the FDA. We will rely on

CMO’s for all of our developmental and commercial needs.

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Regulation of Medical Devices, Including Diagnostics such as the PCa Test

Medical Device Classification

The FDA classifies medical devices into one of the following three classes on the basis of the amount of risk associated with the medical

device and the controls deemed necessary to reasonably ensure their safety and effectiveness:

As a result of the intended use of the PCa Test and the

technology upon which it is based, we anticipate that the PCa test could be regulated by FDA as either a Class III or a Class II medical device.

US Regulatory Approval Process

Products that are regulated as medical devices and that require review by the FDA are subject to either a premarket notification, also known as

a 510(k), which must be submitted to the FDA for clearance, or a PMA application, which the FDA must approve prior to marketing in the U.S. We believe that the PCa Test will be subject to the 510(k) premarket notification procedure, but the FDA will

ultimately determine the appropriate regulatory path.

To obtain 510(k) marketing clearance for a medical device, an applicant must submit

a premarket notification application to the FDA demonstrating that the device is “substantially equivalent” to a predicate device, which is typically a legally marketed Class II device in the United States. A device is substantially

equivalent to a predicate device if it has the same intended use and (i) the same technological characteristics, or (ii) has different technological characteristics and the information submitted demonstrates that the device is as safe and

effective as a legally marketed device and does not raise different questions of safety or effectiveness. In some cases, the submission must include data from human clinical studies. Marketing may commence when the FDA issues a clearance letter

finding substantial equivalence. While less onerous than the PMA process, the 510(k) process can be lengthy and expensive. The current average time between submission of a 510(k) application and FDA clearance is approximately six months. In

addition, significant modifications to a cleared 510(k) device may require the submission of a new 510(k).

A PMA must be submitted to the

FDA if a device cannot be cleared through another approval process or is not otherwise exempt from the FDA’s premarket clearance and approval requirements. A PMA is required for most Class III medical devices. A PMA must generally be

supported by extensive data, including without limitation technical, preclinical, clinical trial, manufacturing and labeling data, to demonstrate to the FDA’s satisfaction the safety and efficacy of the device for its intended use. During the

review period, the FDA will typically request additional information or clarification of the information previously provided. Also, an advisory panel of experts from outside the FDA may be convened to review and evaluate the PMA and provide

recommendations to the FDA as to the approvability of the device, although the FDA may or may not accept any such panel’s recommendation. In addition, the FDA will generally conduct a pre-approval

inspection of the manufacturing facility or facilities involved with producing the device to ensure compliance with the cGMP regulations. Upon approval of a PMA, the FDA may require that certain conditions of approval, such as conducting a

post-market approval clinical trial, be met.

The PMA approval process can be lengthy and expensive and requires an applicant to

demonstrate the safety and efficacy of the device based, in part, on data obtained from clinical trials. The PMA process is

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estimated to take from one to three years or longer, from the time the PMA application is submitted to the FDA until an approval is obtained.

Further, if post-approval modifications are made that affect the safety or efficacy of the device, including, for example, certain types of

modifications to the device’s indication for use, manufacturing process, labeling or design, then new PMAs or PMA supplements would be required. PMA supplements often require submission of the same type of information as a PMA, except that the

supplement is typically limited to information needed to support the changes from the device covered by the original PMA and accordingly may not require as extensive clinical and other data. Further, if post-approval modifications are made that

affect the safety or efficacy of the device, including, for example, certain types of modifications to the device’s indication for use, manufacturing process, labeling or design, then new PMAs or PMA supplements would be required. PMA

supplements often require submission of the same type of information as a PMA, except that the supplement is typically limited to information needed to support the changes from the device covered by the original PMA and accordingly may not require

as extensive clinical and other data.

Our plan for the PCa Test is to successfully advance its development to obtain a

Section 510(k) clearance from the FDA for commercial use or to out-license the proprietary technology to a third-party. However, we have not submitted either a 510(k) application or a PMA, or commenced

clinical trials. Even if we conduct successful preclinical and clinical studies and submit a 510(k) application or PMA, the FDA may not permit commercialization of the PCa Test for the desired indications, on a timely basis, or at all. Our inability

to achieve regulatory approval for the PCa Test in the U.S. for the desired indication could materially adversely affect our ability to grow this aspect of our business.

Post-Approval Regulation

After a medical

device obtains approval from the applicable regulatory agency and is launched in the market, numerous post-approval regulatory requirements apply, including:

• product listing and establishment registration;

Failure by us or

by our third-party manufacturers and other suppliers to comply with applicable regulatory requirements could result in enforcement action by various regulatory authorities, which may result in monetary fines, the imposition of operating

restrictions, product recalls, criminal prosecution or other sanctions.

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Research and Development Costs

The Company’s research and development expenses totaled approximately $52.6 million, $42.5 million and $38.2 million for

the fiscal years ended May 31, 2020, May 31, 2019 and May 31, 2018, respectively. We expect our research and development expenses to continue to increase in future periods as the activity within the Company’s clinical trials

expands and the Company’s biologics manufacturing processes and related regulatory compliance activities increase.

Employees and Consultants

We currently have 19 full-time employees, as well as several independent consultants assisting us with the Company’s BLA

preparation, manufacturing activities, regulatory matters and management of our clinical trials. There can be no assurances, however, that we will be able to identify or hire and retain additional employees or consultants on acceptable terms in the

future.

Item 1A. Risk Factors.

The risks enumerated below are not the only risks we face, and the listed risk factors are not intended to be an

all-inclusive discussion of all of the potential risks relating to our business. Any of the risk factors described below could significantly and adversely affect our business, prospects, financial condition

and results of operations. Additional risks and uncertainties not currently known or that are currently considered to be immaterial may also materially and adversely affect our business.

Risks Related to Our Business

are a clinical stage biotechnology company and have a history of significant operating losses; we expect to continue to incur operating losses, and we may never achieve or maintain profitability.

We have not generated any revenue from product sales, licensing, or other potential sales to date. Since our inception, we have incurred

operating losses in each year due to costs incurred in connection with research and development activities and general and administrative expenses associated with our operations. Our current drug candidate, leronlimab, is in the later stages of

clinical trials for multiple indications. The Company submitted a BLA for leronlimab as a combination therapy with highly active antiretroviral therapy (HAART) for HIV patients to the FDA for review in April 2020 and completed our submission on

May 11, 2020. In July 2020, the Company received a Refusal to File letter from the FDA regarding the BLA filing, and we have requested a Type A meeting to discuss the FDA’s request for additional information. During the fiscal years

ended May 31, 2020 and 2019, we incurred net losses of approximately $124.4 million and $56.2 million, respectively, and at May 31, 2020, we had an accumulated deficit of approximately $354.7 million and a stockholders’

deficit of $2.5 million. We expect to incur losses for the foreseeable future without any meaningful corresponding revenues as we continue development of, and seek regulatory approvals for, leronlimab. If leronlimab fails to gain regulatory

approval, or if it or other candidates we acquire or license in the future do not achieve approval and market acceptance, we will not be able to generate any revenue, or explore other opportunities to enhance stockholder value, such as through a

sale. If we fail to generate revenue and eventually become and remain profitable, or if we are unable to fund our continuing losses, our shareholders could lose all or part of their investments.

Our auditors have issued a going concern opinion, and we will not be able to achieve our objectives and will have to cease operations if we cannot

adequately fund our operations.

Our auditors issued an opinion, which includes a going concern exception, in connection with the

audit of our annual financial statements for the fiscal year ended May 31, 2020. A going concern exception to an audit opinion means that there is substantial doubt that we can continue as an ongoing business for the next 12 months. If we are

unable to continue as a going concern, we might have to liquidate our assets and the values we receive

Table of Contents

for our assets in liquidation or dissolution could be significantly lower than the values reflected in our financial statements. In addition, the inclusion of an explanatory paragraph regarding

substantial doubt about our ability to continue as a going concern and our lack of cash resources may materially adversely affect our share price and our ability to raise new capital or to enter into critical contractual relations with

third-parties. There is no assurance that we will be able to adequately fund our operations in the future.

Our business and operations could be

adversely affected by the effects of health epidemics, including the ongoing COVID-19 pandemic.

We could be negatively affected by the widespread outbreak of an illness or any other communicable disease, or any other public health crisis

that results in economic and trade disruptions, including the disruption of global supply chains. In December 2019, an outbreak of COVID-19 began in Wuhan, Hubei Province, China. In March 2020, the World

Health Organization declared COVID-19 a pandemic. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains, and created

significant volatility and disruption of financial markets.

Our operational and financial performance has already been affected by the

impact of the COVID-19 pandemic. Our clinical trials have experienced delays in patient enrollment, potentially due to prioritization of hospital resources toward the

COVID-19 pandemic, or concerns among patients about participating in clinical trials during a public health emergency. The COVID-19 pandemic is also affecting the

operations of government entities, such as the FDA, as well as contract research organizations, third-party manufacturers, and other third-parties upon whom we rely. As a result of

CYDY US Equity

CYDY · 10-K · period ended 2020-05-31

Item 1. Business.

Item 1A. Risk Factors.

CYDY US Equity☆

CYDY · 10-K · period ended 2020-05-31

Item 1. Business.

Item 1A. Risk Factors.

CYDY US Equity