Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended April 30, 2022
or
☐ TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 001-40699
PHARMACYTE BIOTECH, INC.
(Exact name of registrant as specified in its charter)
Securities registered pursuant to Section 12(b)
of the Act:
Title of each class Trading symbol(s) Name of each exchange on which registered
Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405)
during the precedent 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.
See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
Emerging growth company ☐
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange 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 asked price of such common equity, as of October 31, 2021: $58,283,010.
As of July 28, 2022, the registrant had 20,749,066
outstanding shares of common stock.
DOCUMENTS INCORPORATED BY REFERENCE
None.
TABLE OF CONTENTS
ITEM 1. BUSINESS. 1
ITEM 1A. RISK FACTORS 44
ITEM 1B. UNRESOLVED STAFF COMMENTS 83
ITEM 2. PROPERTIES 83
ITEM 3. LEGAL PROCEEDINGS 83
ITEM 4. MINE SAFETY DISCLOSURES 83
ITEM 6. SELECTED FINANCIAL DATA 85
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 91
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 91
ITEM 9A. CONTROLS AND PROCEDURES 91
ITEM 9B. OTHER INFORMATION 93
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS 93
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 94
ITEM 11. EXECUTIVE COMPENSATION 99
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 105
ii
Cautionary Note Regarding Forward-Looking Statements
This Report on Form 10-K (“Report”)
includes “forward-looking statements” within the meaning of the federal securities laws. All statements other than statements
of historical fact are “forward-looking statements” for purposes of this Report, including any projections of earnings, revenue
or other financial items, any statements regarding the plans and objectives of management for future operations, any statements concerning
proposed new products or services, any statements regarding future economic conditions or performance, any statements regarding expected
benefits from any transactions and any statements of assumptions underlying any of the foregoing. In some cases, forward-looking statements
can be identified by use of terminology such as “may,” “will,” “should,” “believes,” “intends,”
“expects,” “plans,” “anticipates,” “estimates,” “goal,” “aim,”
“potential” or “continue,” or the negative thereof or other comparable terminology. Although we believe that the
expectations reflected in the forward-looking statements contained in this Report are reasonable, there can be no assurance that such
expectations or any of the forward-looking statements will prove to be correct, and actual results could differ materially from those
projected or assumed in the forward-looking statements. Thus, investors should refer to and carefully review information in future documents
we file with the U.S. Securities and Exchange Commission (“Commission”). Our future financial condition and results of operations,
as well as any forward-looking statements, are subject to inherent risk and uncertainties, including, but not limited to, the risk factors
set forth in “Part I, Item 1A – Risk Factors” set forth in this Report and for the reasons described elsewhere in this
Report. Among others, these include our estimates regarding expenses, future revenues, capital requirements and needs for additional financing;
whether the United States Food and Drug Administration (“FDA”) approves our Investigational New Drug Application (“IND”)
after we complete the FDA’s requested studies and submit a response to the FDA’s clinical hold, so that we can commence our
planned clinical trial involving locally advanced, inoperable, non-metastatic pancreatic cancer (“LAPC”); the success and
timing of our preclinical studies and clinical trials; the potential that results of preclinical studies and clinical trials may indicate
that any of our technologies and product candidates are unsafe or ineffective; our dependence on third parties in the conduct of our preclinical
studies and clinical trials; the difficulties and expenses associated with obtaining and maintaining regulatory approval of our product
candidates; the material adverse impact that the coronavirus pandemic may have on our business, including our planned clinical trial involving
LAPC, which could materially affect our operations as well as the business or operations of third parties with whom we conduct business;
and whether the FDA will approve our product candidates after our clinical trials are completed, assuming the FDA allows our clinical
trials to proceed after submission and review of our response to the FDA’s clinical hold. All forward- looking statements and reasons
why results may differ included in this Report are made as of the date hereof, and we do not intend to update any forward-looking statements
except as required by law or applicable regulations. Except where the context otherwise requires, in this Report, the “Company,”
“we,” “us” and “our” refer to PharmaCyte Biotech, Inc., a Nevada corporation, and, where appropriate,
its subsidiaries.
iii
PART I
ITEM 1. BUSINESS.
Product Candidates
We are a biotechnology company focused on developing
cellular therapies for cancer, diabetes, and malignant ascites based upon a proprietary cellulose-based live cell encapsulation technology
known as “Cell-in-a-Box®..” The Cell-in-a-Box® technology is intended to be used as a platform
upon which therapies for several types of cancer, including LAPC, will be developed. The current generation of our product candidate is
referred to as “CypCapsTM.”
The Cell-in-a-Box® encapsulation
technology potentially enables genetically engineered live human cells to be used to produce various biologically -active molecules. The
technology is intended to result in the formation of pinhead -sized cellulose-based porous capsules in which genetically modified live
human cells can be encapsulated and maintained. In a laboratory setting, this proprietary live cell encapsulation technology has been
shown to create a micro-environment in which encapsulated cells survive and flourish. They are protected from environmental challenges,
such as the sheer forces associated with bioreactors and passage through catheters and needles, etc., which we believe enables greater
growth and production. The capsules are largely composed of cellulose (cotton) and are bio inert.
We are developing therapies for pancreatic and
other solid cancerous tumors by using genetically engineered live human cells that we believe are capable of converting a cancer prodrug
into its cancer-killing form. We encapsulate those cells using the Cell-in-a-Box® technology and place those capsules in
the body as close as possible to the tumor. In this way, we believe that when a cancer prodrug is administered to a patient with a particular
type of cancer that may be affected by the prodrug, the killing of the patient’s cancerous tumor may be optimized.
We are also developing a way to delay the production and accumulation
of malignant ascites that results from many types of abdominal cancerous tumors. Our potential therapy for malignant ascites involves
using the same encapsulated cells we employ for pancreatic cancer but placing the encapsulated cells in the peritoneal cavity of a patient
and administering ifosfamide intravenously.
We have also been developing a potential therapy
for Type 1 diabetes and insulin-dependent Type 2 diabetes. Our product candidate for the treatment of diabetes consists of encapsulated
genetically modified insulin-producing cells. The encapsulation will be done using the Cell-in-a-Box® technology. Implanting
these encapsulated cells in the body is designed to have them function as a bio-artificial pancreas for purposes of insulin production.
In addition to the two cancer programs discussed
above, we have been working on ways to exploit the benefits of the Cell-in-a-Box® technology to develop therapies for cancer
that involve prodrugs based upon certain constituents of the Cannabis plant. However, until the FDA allows us to commence our clinical
trial in LAPC and we are able to validate our Cell-in-a-Box® encapsulation technology in a clinical trial, we are not spending
any further resources developing our Cannabis Program.
Cancer Therapy
Targeted Chemotherapy
Our therapy for cancer involves encapsulating genetically engineered
human cells that convert an inactive chemotherapy drug into its active or “cancer-killing” form. For pancreatic cancer, these
encapsulated cells are implanted in the blood supply to the patient’s tumor as close as possible to the site of the tumor. Once
implanted, a chemotherapy drug that is normally activated in the liver (ifosfamide) is given intravenously at one-third the normal dose.
The ifosfamide is carried by the circulatory system to where the encapsulated cells have been implanted. When the ifosfamide flows through
pores in the capsules, the live cells inside act as a “bio-artificial liver” and activate the chemotherapy drug at the site
of the cancer.
Pancreatic Cancer
We believe an unmet medical need exists for patients
with LAPC whose pancreas tumor no longer responds after 4-6 months of treatment with either Abraxane® plus gemcitabine
or the 4-drug combination known as FOLFIRINOX. Both combinations are the current standards of care for pancreatic cancer. We believe that
these refractory patients have no effective treatment alternative once their tumors no longer respond to these therapies. Treatments are
being tried at various cancer centers in the U.S. in an attempt to address this lack of an effective treatment for LAPC patients, but
their success is far from certain.
Two of the most commonly used treatments for these
patients are 5-fluorouracil (“5-FU”) or capecitabine (a prodrug of 5-FU) plus radiation (chemoradiation therapy). More recently,
radiation treatment alone is being used at some cancer centers in the U.S.
We believe that these treatments are only marginally
effective in treating the LAPC tumor and result in serious side effects.
We believe that our therapy for LAPC, if approved,
can serve as a “consolidation therapy” that can be used with the current standards of care and thus address this critical
unmet medical need. On September 1, 2020, we submitted an Investigational New Drug Application (“IND”) to the FDA for a planned
Phase 2b clinical trial in LAPC. Highlights of our planned clinical trial are shown below:
Clinical Hold
On October 1, 2020, we received notice from the
FDA that it had placed our IND on clinical hold. On October 30, 2020, the FDA sent us a letter setting forth the reasons for the clinical
hold and providing specific guidance on what we must do to have the clinical hold lifted.
In order to address the clinical hold, the FDA
has requested that we:
· Provide additional sequencing data and genetic stability studies;
· Provide additional product release specifications for our encapsulated cells;
· Conduct a biocompatibility assessment using the capsules material;
The FDA also requested that we address the following
issues as an amendment to our IND:
We assembled a scientific and regulatory team
of experts to address the FDA requests. That team has been working diligently to complete the items requested by the FDA. To date we believe
we have made significant progress in fulfilling the FDA requests needed to lift the clinical hold.
The following provides a detailed summary of our
activities to have the clinical hold lifted:
Malignant Ascites
We have been exploring ways to delay the production and
accumulation of malignant ascites that results from several types of abdominal tumors. Malignant ascites is a fluid that is secreted
by an abdominal tumor into the abdomen after the tumor reaches a certain stage of growth. This fluid contains cancer cells that can
seed and form new tumors throughout the abdomen. As this malignant ascites fluid accumulates in the abdominal cavity, it can cause
gross swelling of the abdomen, severe breathing difficulties and extreme pain. Accumulated malignant ascites must be removed by
paracentesis on a periodic basis. This procedure is painful and costly. We know of no available therapy that prevents or delays the
production and accumulation of malignant ascites. Seven preclinical studies were conducted by Translational Drug Development
(“TD2”), an early-stage clinical research organization (“CRO”) specializing in oncology, to determine
whether the combination of Cell-in-a-Box® encapsulated cells plus low doses of ifosfamide could delay the production
and accumulation of malignant ascites. The data from these studies suggested that our cancer therapy might play a role in malignant
ascites fluid production and accumulation. However, the data were difficult to interpret with certainty.
On May 23, 2022, we initiated the first in a new series of studies
to test the ability of our pancreatic cancer therapy to treat malignant ascites. This is the eighth and final preclinical study that may
lead to a Phase 1 clinical trial. Such a clinical trial may allow us to validate the Cell-in-a-Box® technology much faster
than our planned Phase 2b clinical trial in LAPC.
If this new series of studies is successful, we
plan to submit an IND to seek approval from the FDA to conduct a Phase 1 clinical trial to determine if our product candidate for pancreatic
cancer can delay the production and accumulation of malignant ascites.
Diabetes Therapy
A Bio-Artificial Pancreas to Treat Diabetes
We are developing a therapy for Type 1 diabetes
and insulin-dependent Type 2 diabetes based upon the encapsulation of a human cell line genetically engineered to produce, store and release
insulin at levels in proportion to the levels of blood sugar in the human body.
The cell line we select will be encapsulated using
the Cell-in-a-Box® encapsulation technology.
If appropriate animal testing is completed successfully,
we intend to submit an IND to the FDA to seek its approval to transplant encapsulated insulin-producing cells into diabetic patients.
The goal for this approach is to develop a bio-artificial pancreas for purposes of insulin production for diabetic patients who are insulin-dependent.
Our diabetes program began with two of the most
critical components of a biological diabetes therapy - a line of human cells which release insulin in response to the blood glucose level
in their environment and a technology to protect the cells from an attack by the immune system once they are transplanted into a patient
to replace his or her own destroyed insulin-producing cells. This technology is the Cell-in-a-Box® encapsulation technology.
The cells we initially used are Melligen cells. They are patent-protected and have been licensed to us by University of Technology Sydney
(“UTS”).
Putting Melligen cells and the Cell-in-a-Box®
technology together, we conducted the first functional study in diabetic mice. The results did not meet our expectations. We discovered
that, contrary to what we had expected and what we had read in published scientific papers on the Melligen cells published by UTS, the
cells are not stable. With extensive testing and experiments, we discovered that the Melligen cells lose some of their specific beneficial
properties over time.
We entered into a research agreement with UTS
to create an advanced version of the Melligen cells for the treatment of diabetes. Under this agreement, improvements are to be made to
the Melligen cells that we believe will increase their stability, increase their insulin production and increase the bioactivity of the
produced insulin.
Until recently, UTS has been conducting this research.
The work is being funded by us and UTS. Our portion of the funding was previously paid to UTS. The research to date has not produced the
results we had anticipated and is taking longer than we anticipated. It remains to be seen whether the Melligen cells are capable of producing
the required insulin to be a viable cell line for the treatment of diabetes. Further research is requied.
Meanwhile, we have been working with two internationally
renowned academic institutions to develop a cell line that will form the backbone of our Diabetes Program. These institutions are developing
a stem-cell derived beta islet cell that we plan to encapsulate to treat Type 1 and insulin-dependent Type 2 diabetes. We are currently
negotiating agreements with these institutions, although no assurance can be give that the negotiations will be successful.
Cannabinoids to Treat Cancer
Numerous studies have demonstrated the therapeutic
potential of certain cannabinoids in patients with cancer. Studies have shown that cannabinoids are potentially: (i) anti-proliferative
(slow tumor growth); (ii) anti-metastatic (slow tumor spread); (iii) anti-angiogenic (slowing blood vessel development); and (iv) pro-apoptotic
initiate programed cell death). In in vitro and in vivo models, the therapeutic potential of cannabinoids is broad. Results
support the therapeutic potential in lung, brain, thyroid, lymphoma, liver, skin, pancreas, uterus breast and prostate cancers.
We intend to use the Cell-in-a-Box®
technology in combination with genetically modified cell lines designed to activate cannabinoid molecules for the treatment of diseases
and their related symptoms. Our initial target will be glioblastoma – a very difficult-to treat form of brain cancer. However, until
the FDA allows us to commence our clinical trial in LAPC and we are able to validate our Cell-in-a-Box® encapsulation technology
in a clinical trial, we are not spending any further resources developing our Cannabis Program.
The goal of the original research was to develop
methods for the identification, separation and quantification of constituents of Cannabis, some of which are prodrugs, which could
potentially be used in combination with the Cell-in-a-Box® technology to treat cancer. After achieving this milestone,
we then went on to assess the synthesis of the patG gene and its incorporation into a vector, transfection of human embryonic kidney cells
using this vector and assessment of cannabinoic acid decarboxylase activity. We later identified an organism whose genome contains the
genetic code for production of an enzyme capable of activating a cannabinoid prodrug into its active cancer-killing form.
Our Cannabis Program now has two primary areas
of focus. The first is evaluating the therapeutic potential of cannabinoids in our main “target” tumor – glioblastoma.
In laboratory research, we have confirmed that a purified cannabinoid showed a potent dose-dependent decrease in cell viability for various
cancers, suggesting that this cannabinoid exhibits significant anti-proliferative effects (stops the growth and multiplication of cancer
cells). This activity has been demonstrated in brain, pancreas, breast, lung, colon and melanoma cancer cells. The second area of focus
is in finding an enzyme capable of converting an inactive, side-effect-free, cannabinoid prodrug into its active cancer-killing form.
Clinically, targeted cannabinoid-based chemotherapy
would be accomplished by implanting the encapsulated bio-engineered cells near the site of a tumor, along with administration of a cannabinoid
prodrug which would become activated at the site of the tumor by an enzyme produced by the encapsulated cells. We believe this could lead
to better efficacy than existing therapies with minimal treatment related adverse events.
Impact of the COVID-19 Pandemic on Operations
The coronavirus SARS-Cov2 pandemic (“COVID-19”)
continues to cause uncertainty and significant, industry-wide delays in clinical trials. The availability of vaccines holds promise for
the future; however, new variants of the virus and potential waning immunity from vaccines may result in continued impact from COVID-19
in the future, which could adversely impact our operations. Although we are not yet in a clinical trial, we have filed an IND with the
FDA to commence a clinical trial in LAPC. While the IND has been placed on clinical hold by the FDA, we have assessed the impact of COVID-19
on our operations.
As of the date of this Report, COVID-19 has had
an impact upon our operations and that impact is increasing. The impact relates to, among other things, delays in (i) completing studies
required by the FDA; (ii) manufacturing a new batch of CypCapTM for our planned clinical trial in LAPC; (iii) manufacturing syringes
of CypCapsTM for use in our Malignant Ascites Program; (iv) securing third party contractors to conduct various research and development
projects; and (v) disruptions in our supply chain.
As a result of COVID-19, commencement of our planned
clinical trial to treat LAPC may be delayed beyond lifting of the clinical hold by the FDA should that occur. Also, enrollment may be
difficult for the reasons discussed above. In addition, after enrollment in the trial, if a patient contracts COVID-19 during his or her
participation in the trial or is subject to isolation or shelter in place restrictions, this may cause him or her to drop out of our clinical
trial, miss scheduled therapy appointments or follow-up visits or otherwise fail to follow the clinical trial protocol. If a patient is
unable to follow the clinical trial protocol or if the trial results are otherwise affected by the consequences of COVID-19 on patient
participation or actions taken to mitigate COVID-19 spread, the integrity of data from the clinical trial may be compromised or not be
accepted by the FDA. This could further adversely impact or delay our clinical development program if the FDA allows it to proceed.
Clinical trials in the biopharma industry may
be delayed due to COVID-19. There are numerous reasons for these potential delays. For example, patients have shown a reluctance to enroll
or continue in a clinical trial due to fear of exposure to COVID-19 when they are in a hospital or doctor’s office. There are local,
regional, and state-wide orders and regulations restricting usual normal activity by people. These discourage and interfere with patient
visits to a doctor’s office if the visit is not COVID-19 related. Healthcare providers and health systems are shifting their resources
away from clinical trials toward the care of COVID-19 patients. The FDA and other healthcare providers are making product candidates for
the treatment of COVID-19 a priority over product candidates unrelated to COVID-19.
It is highly speculative in projecting the effects
of COVID-19 on our proposed clinical development program and our company generally. The effects of COVID-19 may quickly and dramatically
change over time. Its evolution is difficult to predict, and no one can say with certainty when the pandemic will fully subside.
History of the Business
In 2013, we restructured our operations to focus
on biotechnology. On January 6, 2015, we changed our name from “Nuvilex, Inc.” to “PharmaCyte Biotech, Inc.” to
reflect the nature of our business.
We are a biotechnology company focused on developing
and preparing to commercialize cellular therapies for cancer, diabetes, and malignant ascites using our live cell encapsulation technology.
This resulted from entering into the following agreements.
Commencing in May 2011, we entered into a series
of agreements and amendments with SG Austria Pte. Ltd. (“SG Austria”) to acquire certain assets from SG Austria as well as
an exclusive, worldwide license to use, with a right to sublicense, the Cell-in-a-Box® technology and trademark for the
development of therapies for cancer (“SG Austria APA”).
In June 2013, we and SG Austria entered a Third
Addendum to the SG Austria APA (“Third Addendum”). The Third Addendum materially changed the transaction contemplated by the
SG Austria APA. Under the Third Addendum, we acquired 100% of the equity interests in Bio Blue Bird and received a 14.5% equity interest
in SG Austria. We paid: (i) $500,000 to retire all outstanding debt of Bio Blue Bird; and (ii) $1.0 million to SG Austria. We also paid
SG Austria $1,572,193 in exchange for a 14.5% equity interest of SG Austria. The transaction required SG Austria to return to us the 66,667
shares of our common stock held by SG Austria and for us to return to SG Austria the 67 shares of common stock of Austrianova we held.
Effective as of the same date we entered the Third
Addendum, we and SG Austria also entered a Clarification Agreement to the Third Addendum (“Clarification Agreement”) to clarify
and include certain language that was inadvertently left out of the Third Addendum. Among other things, the Clarification Agreement confirmed
that the Third Addendum granted us an exclusive, worldwide license to use, with a right to sublicense, the Cell-in-a-Box®
technology and trademark for the development of therapies for cancer.
With respect to Bio Blue Bird, Bavarian Nordic
A/S (“Bavarian Nordic”) and GSF-Forschungszentrum für Umwelt u. Gesundheit GmbH (collectively, “Bavarian Nordic/GSF”)
and Bio Blue Bird entered into a non-exclusive License Agreement (“Bavarian Nordic/GSF License Agreement”) in July 2005, whereby
Bio Blue Bird was granted a non-exclusive license to further develop, make, have made (including services under contract for Bio Blue
Bird or a sub-licensee, by Contract Manufacturing Organizations, Contract Research Organizations, Consultants, Logistics Companies or
others), obtain marketing approval, sell and offer for sale the clinical data generated from the pancreatic cancer clinical trials that
used the cells and capsules developed by Bavarian Nordic/GSF (then known as “CapCellsTM”) or otherwise use the licensed
patent rights related thereto in the countries in which patents had been granted. Bio Blue Bird was required to pay Bavarian Nordic a
royalty of 3% of the net sales value of each licensed product sold by Bio Blue Bird and/or its Affiliates and/or its sub-licensees to
a buyer. The term of the Bavarian Nordic/GSF License Agreement continued on a country-by-country basis until the expiration of the last
valid claim of the licensed patent rights.
Bavarian Nordic/GSF and Bio Blue Bird amended
the Bavarian Nordic License Agreement in December 2006 (“First Amendment to Bavarian Nordic/GSF License Agreement”) to reflect
that: (i) the license granted was exclusive; (ii) a royalty rate increased from 3% to 4.5%; (iii) Bio Blue Bird assumed the patent prosecution
expenses for the existing patents; and (iv) to make clear that the license will survive as a license granted by one of the licensors if
the other licensor rejects performance under the Bavarian Nordic License Agreement due to any actions or declarations of insolvency.
In June 2013, we acquired from Austrianova an
exclusive, worldwide license to use the Cell-in-a-Box® technology and trademark for the development of a therapy for Type
1 and insulin-dependent Type 2 diabetes (“Diabetes Licensing Agreement”). This allows us to develop a therapy to treat diabetes
through encapsulation of a human cell line that has been genetically modified to produce, store and release insulin in response to the
levels of blood sugar in the human body.
In October 2014, we entered into an exclusive,
worldwide license agreement with the UTS (“Melligen Cell License Agreement”) in Australia to use insulin-producing genetically
engineered human liver cells developed by UTS to treat Type 1 diabetes and insulin-dependent Type 2 diabetes. These cells, named “Melligen,”
were tested by UTS in mice and shown to produce insulin in direct proportion to the amount of glucose in their surroundings. In those
studies, when Melligen cells were transplanted into immunosuppressed diabetic mice, the blood glucose levels of the mice became normal.
In other words, the Melligen cells reportedly reversed the diabetic condition.
In December 2014, we acquired from Austrianova
an exclusive, worldwide license to use the Cell-in-a-Box® technology and trademark in combination with genetically modified
non-stem cell lines which are designed to activate cannabinoid prodrug molecules for development of therapies for diseases and their related
symptoms using of the Cell-in-a-Box® technology and trademark (“Cannabis Licensing Agreement”). This allows
us to develop a therapy to treat cancer and other diseases and symptoms through encapsulation of genetically modified cells designed to
convert cannabinoids to their active form using the Cell-in-a-Box® technology and trademark.
In July 2016, we entered into a Binding Memorandum
of Understanding with Austrianova (“Austrianova MOU”). Pursuant to the Austrianova MOU, Austrianova will actively work with
us to seek an investment partner or partners who will finance clinical trials and further develop products for our therapy for cancer,
in exchange for which we, Austrianova and any future investment partner will each receive a portion of the net revenue from the sale of
cancer products.
In October 2016, Bavarian Nordic/GSF and Bio Blue
Bird further amended the Bavarian Nordic License Agreement (“Second Amendment to Bavarian Nordic/GSF License Agreement”) in
order to: (i) include the right to import in the scope of the license; (ii) reflect ownership and notification of improvements; (iii)
clarify which provisions survive expiration or termination of the Bavarian Nordic License Agreement; (iv) provide rights to Bio Blue Bird
to the clinical data after the expiration of the licensed patent rights; and (v) change the notice address and recipients of Bio Blue
Bird.
In May 2018, the Company entered into a series
of binding term sheet amendments (“Binding Term Sheet Amendments”). The Binding Term Sheet Amendments provide that our obligation
to make milestone payments to Austrianova is eliminated in their entirety under the: (i) Cannabis License Agreement; and (ii) the Diabetes
License Agreement, as amended. The Binding Term Sheet Amendments also provide that our obligation to make milestone payments to SG Austria
for therapies for cancer be eliminated in their entirety. In addition, the Binding Term Sheet Amendments also provides that the scope
of the Diabetes License Agreement is expanded to include all cell types and cell lines of any kind or description now or later identified,
including, but not limited to, primary cells, mortal cells, immortal cells and stem cells at all stages of differentiation and from any
source specifically designed to produce insulin for the treatment of diabetes.
In addition, one of the Binding Term Sheet Amendments
provides that we will have a 5-year right of first refusal from August 30, 2017 in the event that Austrianova chooses to sell, transfer
or assign at any time during this period the Cell-in-a-Box® technology, tradename and Associated Technologies (defined
below), intellectual property, trade secrets and know-how, which includes the right to purchase any manufacturing facility used for the
Cell-in-a-Box® encapsulation process and a non-exclusive license to use the special cellulose sulfate utilized with the
Cell-in-a-Box® encapsulation process (collectively, “Associated Technologies”); provided, however, that the
Associated Technologies subject to the right of first refusal do not include Bac-in-a-Box® (which is used to encapsulate
bacteria). Additionally, for a period of one year from August 30, 2017 one of the Binding Term Sheet Amendments provides that Austrianova
will not solicit, negotiate or entertain any inquiry regarding the potential acquisition of the Cell-in-a-Box® and its
Associated Technologies.
The Binding Term Sheet Amendments further provide
that: (i) the royalty payments on gross sales as specified in the SG Austria APA, the Cannabis License Agreement and the Diabetes License
Agreement are changed to 4%; and (ii) the royalty payments on amounts received by us from sublicensees on sublicensees’ gross sales
under the same agreements are changed to 20% of the amount received us from our sublicensees, provided, however, that in the event
the amounts received by us from sublicensees is 4% or less of sublicensees’ gross sales, Austrianova will receive 50% of what we
receive (up to 2%) and then additionally 20% of any amount we receive over that 4%.
One of the Binding Term Sheet Amendments requires
that we pay $900,000 to Austrianova ratably over a nine-month period in the amount of two $50,000 payments each month during the nine-month
period on the days of the month to be agreed upon between the parties, with a cure period of 20 calendar days after receipt by us of written
notice from Austrianova that we have failed to pay timely a monthly payment. As of April 30, 2020, the $900,000 amount has been paid in
full. The Binding Term Sheet Amendments also provide that Austrianova receives 50% of any other financial and non-financial consideration
received from our sublicensees of the Cell-in-a-Box® technology.
Goal and Strategies to Implement
Our goal is to become an industry-leading biotechnology
company using the Cell-in-a-Box® technology as a platform upon which therapies for cancer, malignant ascites and diabetes
are developed and obtain marketing approval for these therapies from regulatory agencies in the U.S., the European Union, Australia and
Canada.
Our strategies to implement our goal consist of
the following:
Market Opportunity and Competitive Landscape
The three areas we are developing for live cell
encapsulation-based therapies are cancer, diabetes and malignant ascites.
The Cell-in-a-Box® capsules are
comprised of cotton’s natural component - cellulose. Other materials used by competitors include alginate, collagen, chitosan, gelatin
and agarose. Alginate appears to be the most widely used of these. We believe the inherent strength and durability of our cellulose-based
capsules provides us with advantages over the competition. They do so with no evidence of rupture, damage, degradation, fibrous overgrowth
or immune system response. The cells within the capsules also remained alive and functioning during these studies. Other encapsulating
materials degrade in the human body over time, leaving the encapsulated cells open to immune system attack. Damage to surrounding tissues
has also been reported to occur over time when other types of encapsulation materials begin to degrade.
The cells encapsulated using the Cell-in-a-Box®
technology can be frozen for extended periods of time. When thawed, the cells are recovered with approximately 85% viability. We are unaware
of any other cell encapsulation material that is capable of protecting their encapsulated cells to this degree. The implications of this
property of the Cell-in-a-Box® technology are obvious - long-term storage of encapsulated cells and shipment of encapsulated
cells over long distances.
We believe our live cell encapsulation technology
may have significant new advantages and opportunities for us in numerous and developing ways. For example:
Pancreatic cancer is increasing in most industrialized
countries. The American Cancer Society estimates that in 2022 there will be 62,210 people in the U.S. diagnosed with pancreatic cancer.
It also estimates 48,830 patients with pancreatic cancer will die in 2022. Pancreatic cancer accounts for about 3% of all cancers in the
U.S. and about 7% of all cancer deaths.
Our goal is to satisfy a clear unmet medical need
for patients with LAPC whose tumors no longer respond after 4-6 months of treatment with the chemotherapy combination of Abraxane®
plus gemcitabine or the four-drug combination known as FOLFIRINOX. For these patients, there is currently no effective therapy.
We believe there will be no therapy comparable to our Cell-in-a-Box® plus low dose of ifosfamide combination therapy when
it is used in these patients.
We face intense competition in the field of treating
pancreatic cancer. There are dozens of startups, smaller biotech companies, big pharma, and several academic institutions and cancer centers
all trying to improve the outcome for pancreatic cancer patients. For example, in a single patient case report published June 2022 in
the New England Journal of Medicine, a study funded by the Providence Portland Medical Foundation in conjunction with the Earle A. Chiles
Research Institute reported objective regression of metastatic pancreatic cancer using genetically-engineered autologous T cells. There
are several drugs already available and in the pipelines of pharmaceutical companies worldwide, not the least of which is the combination
of the drugs of Abraxane® and gemcitabine. This is the primary FDA-approved combination of drugs for treating advanced
pancreatic cancer. In Europe and in the U.S., the 4-drug combination FOLFIRINOX has also found use as a first-line treatment for advanced
pancreatic cancer. Some of our competitive strengths include the Orphan Drug Designation we have been granted by the FDA and the European
Medicines Agency for our pancreatic cancer therapy, our trade secrets, the patents we are seeking and the licensing agreements we have
that are described in this Report. Yet many of our competitors have substantially greater financial and marketing resources than we do.
They also have stronger name recognition, better brand loyalty and long-standing relationships with customers and suppliers. Our future
success will be dependent upon our ability to compete.
We believe our product candidate for pancreatic
cancer has already shown promise through the completion of a Phase 1/2 and a Phase 2 clinical trial in advanced, inoperable pancreatic
cancer carried out in Europe by Bavarian Nordic in 1998 – 1999 and 2000, respectively.
We have a number of competitors developing Cannabis-based
treatments for cancer. In February 2021, Jazz Pharmaceuticals Public Limited Company (“Jazz”), a neuroscience and oncology
focused company, acquired GW Pharmaceuticals, PLC for $7.2 billion. Jazz now has two approved cannabinoid extract-based products: Epidiolex®
(CBD) oral solution for the treatment of seizures associated with Lennox-Gastaut syndrome, Dravet syndrome or tuberous sclerosis complex,
and Sativex® (THC/CBD) oromucosal spray for the treatment of severe multiple sclerosis spasticity. Sativex®
is currently being studied in conjunction with the Brain Tumour Charity and the UK National Health Service to examine effectiveness in
the treatment of recurrent glioblastoma brain tumor when used alongside the chemotherapeutic agent temozolomide. Jazz’s pipeline
indications include: neonatal hypoxic-ischemic encephalopathy, neuropsychiatry targets, autism spectrum disorders, epilepsy, spasticity
and undisclosed targets. Cannabis Science, Inc. (“CBIS”) has a number of indications in its product development pipeline,
all pre-clinical, the most advanced being for the treatment of oxidative stress, psychosis/anxiety, PTSD, and sleep deprivation. CBIS
also has plans to develop treatments for Stage 4 lung cancer and pancreatic cancer. CNBX Pharmaceuticals Inc. (previously Cannabics Pharmaceuticals,
Inc.) (“CNBX”) has a primary research focus on the development of cannabinoid therapies for the treatment of cancer, mainly
cancers of the gastrointestinal tract, skin, breast and prostate. CNBX’s other Cannabis-based areas of research include Alzheimer’s
disease, mental health conditions, and auto-immune diseases. Cannabotech Ltd. (“Cannabotech”), an Israeli company, in collaboration
with Haifa University, is studying an improved method for killing pancreatic and colon cancer cells using a botanical drug based on an
extract of the Cyathus striatus fungus and a cannabinoid extract. Cannabotech is also developing therapies for breast, lung and
prostate cancers.
In contrast to the work being done by these companies, we plan to focus
on developing specific therapies based on chosen molecules rather than using Cannabis extracts. We intend to use the Cell-in-a-Box®
technology in combination with genetically -modified cell lines designed to activate cannabinoid molecules for the targeted treatment
of diseases and their related symptoms.
The Centers for Disease Control and Prevention
estimates that in 2022 a total of 37.3 million people in the U.S. have been diagnosed with diabetes (11.3% of the U.S. population) and
another 8.5 million people (23.0% of adults) are undiagnosed. The diabetes market is estimated in the tens of billions of dollars, and
it continues to grow.
The field of diabetes cell therapy development
is very competitive. There are numerous companies developing cell-based therapies for diabetes. These competitors include companies such
as ViaCyte, Inc. which has two stem cell-based product candidates in Phase 1/2 clinical trials for type 1 diabetes: PEC-Direct, which
is a pouch that is “open” to the surrounding vasculature and requires the use of immunosuppressive drugs, and PEC-Encap, which
is a pouch that contains the implanted cells and prevents contact with the vasculature and immune cells but still allows passage of nutrients
and proteins to travel between the cells inside the device and blood vessels which grow along the outside of the device. PEC-Encap is
reported to generally prevent immune rejection and immune sensitization. Conceptually, PEC-Encap has similarities with Cell-in-a-Box®.
Other companies developing some form of encapsulation-based diabetes therapy include Vertex Pharmaceuticals Inc., Defymed, Diatranz Otsuka
Limited, Seraxis, Inc., Unicyte AG, Sernova Corp., Betalin Therapeutics Ltd., Novo Nordisk, Beta-O2 Technologies Ltd., Eli Lilly &
Co. in collaboration with Sigilon Therapeutics, Inc. and the Diabetes Research Institute Foundation.
Although such competition exists in the diabetes
space, we believe these other companies are developing encapsulation-based therapies using materials and methodologies that produce capsules
or devices that are far less robust than ours or that are associated with other problems, such as extremely short shelf-life of the product
and/or fibrotic overgrowth of their encapsulation products when implanted in the body. We believe these properties are not characteristic
of the Cell-in-a-Box® capsules. Our product candidate for diabetes has shown promise. Completed research studies have resulted
in positive responses in animal models using the Melligen cells. We believe we are in a strong competitive position considering our unique
encapsulation technology and the genetically modified cells that we have the exclusive worldwide license to use in most industrialized
countries.
Malignant ascites occurs when cancer cells irritate the peritoneum
causing an overproduction of ascitic fluid which causes the abdomen to swell as fluid accumulates. It is more likely to develop in patients
who have ovarian, uterine, cervical, colorectal, stomach, pancreatic, breast and liver cancers. In most patients, development of malignant
ascites is a sign of advanced disease and poor prognosis. Malignant ascites can result in impairment to the quality of life of a cancer
patient. In addition to abdominal distention, pain and difficulty breathing, it may also cause nausea, vomiting, early satiety, lower
extremity edema, weight gain and reduced mobility. These symptoms can interfere with a patient’s ability to eat, to walk and to
perform daily activities. They also reduce a patient’s ability to withstand anti-cancer therapies, potentially reducing survival.
We are developing a therapy to delay the production
and accumulation of malignant ascites using our cancer therapy (i.e., ifosfamide converting encapsulated live cells). Preclinical studies
are underway in Germany, and, if successful, we plan to seek FDA approval to conduct a Phase 1 study. Typical treatments for malignant
ascites include paracentesis, percutaneously implanted catheters, peritoneal ports and peritoneovenous shunts. These treatments can be
painful, ineffective and expensive. There is currently no available treatment that delays the production and accumulation of malignant
ascites fluid, and we know of no competitors in this area.
Previous Clinical Trials Using Encapsulation
Technology
Two previous clinical trials using what is now
our encapsulation technology were carried out in Europe by Bavarian Nordic in 1998-1999 and 2000, respectively. Both employed the combination
of the cellulose-based live cell encapsulation technology with low doses of the anticancer drug ifosfamide. However, the FDA may not accept
the results of these trials for various reasons, none of which are in our control. In such event, we may have to conduct a Phase 1 trial,
not a Phase 2b trial, or even further pre-clinical animal trials.
The results of the two clinical trials have been
published in the peer-reviewed scientific literature and are summarized as follows:
Phase 1/2 Clinical Trial
Dates of Trial and Location: This clinical
trial was opened on July 28, 1998 and closed on September 20, 1999. It was carried out at the Division of Gastroenterology, University
of Rostock, Germany.
Identity of Trial Sponsors: The clinical
trial was sponsored by Bavarian Nordic.
Trial Design: The clinical trial was an
open-label, prospective, single-arm and single center trial.
Patient Information: A total of 17 patients
were enrolled in the clinical trial (51 were screened). A total of 14 patients were treated because two of the original 17 patients developed
severe infections before the start of the clinical trial and had to be treated by other means. For the other patient, angiography was
not successful, causing the patient to be disqualified from participating in the clinical trial.
Trial Criteria: Criteria for enrolling
in the clinical trial included inoperable pancreatic adenocarcinoma Stage 3-4 (according to IUCC criteria) as determined by histology
and measured by computerized tomography (“CT”) scan and the patients must not have had any prior chemotherapy for their disease.
Duration of Treatment and Dosage Information:
On day 0, celiac angiography was performed and 300 (in 13 patients, 250 in one) of the capsules containing the ifosfamide-activating cells
were placed by supraselective catheterization of an artery leading to the tumor. Each capsule (~0.7 mm in diameter) contained about 20,000
cells. The cells overexpressed CYP2B1 (a cytochrome P450 isoform), which catalyzed the conversion of the anticancer prodrug ifosfamide
into its “cancer-killing” form.
On day 1, patients were monitored for evidence
of any clinically relevant adverse reactions, e.g., allergy and/or pancreatitis. On days 2-4, each patient received low-dose (1 g/m2
body surface area) ifosfamide in 250 ml of normal saline administered systemically as a 1-hour infusion. This was accompanied by a 60%
dose equivalent of the uroprotective drug Mesna, which is used to reduce the side effects of ifosfamide chemotherapy, given as three intravenous
injections. This regimen was repeated on days 23-25 for all but two patients who received only one round of ifosfamide. A total of only
two cycles of ifosfamide were given to the remainder of the patients.
Specific Clinical Endpoints: Median survival
time from the time of diagnosis, the percentage of patients who survived one year or more and the quality of life of each patient were
examined in the clinical trial.
Observational Metrics Utilized and Actual Results
Observed: Standard National Cancer Institute (“NCI”) criteria for evaluating tumor growth were used to assess results:
· stable disease (tumors 50-125% of initial size) (“SD”);
· partial remission (more than 50% reduction in tumor volume) (“PR”); and
· minor response (tumor reduction of between 25% and 50%) (“MR”).
Effects of the treatment on tumor size were measured
by CT scans. Control CT scans were scheduled for weeks 10 and 20, respectively. During the final visit, a control angiography was performed.
On the initial CT scan, the scan demonstrating the largest diameter of the primary tumor was identified and the area measured. Using appropriate
landmarks, an identical scan was used for comparison. CT scans were evaluated by two unrelated radiologists, one of whom was not involved
in the clinical trial. After formally finishing the clinical trial, patients were followed on an ambulatory basis with visits once every
three months.
Toxicity was measured based on World Health Organization
(“WHO”)/NCI guidelines on common toxicity criteria. The WHO and the NCI use standardized classifications of the adverse events
associated with the use of cancer drugs. In cancer clinical trials, these are used to determine if a drug or treatment causes unwanted
side effects (“Adverse Events”) when used under specific conditions. For example, the most commonly used classification is
known as the “Common Terminology Criteria for Adverse Events” developed by the NCI in the U.S. Most clinical trials carried
out in the U.S. and the United Kingdom code their Adverse Event. This system consists of five grades. These are: 1 = mild; 2 = moderate;
3 = severe; 4 = life-threatening; 5 = death. In the studies reported for Cell-in-a-Box® plus low-dose ifosfamide combination
in pancreatic cancer patients, the study investigators noted 11 Serious Adverse Events (“SAEs”) in 7 patients, none of which
were believed to be treatment-related.
Each patient’s need for pain medication
and the quality of life (“QOL”) was monitored using a questionnaire established for diseases of the pancreas. A QOL questionnaire
for cancer patients, QLQ-C30, had been validated in several languages, but the module for pancreatic cancer per se was still under
development at the time of the study with respect to reliability, sensibility against changes and multicultural validation. Accordingly,
a version of the core questionnaire and a German QOL scale (published in 1995) for pancreatic cancer patients was used. QOL data were
documented independently from safety and efficacy data by having patients complete an independent questionnaire. Assessment of QOL data
did not interfere with routine documentation of Adverse Events reported by the patients. QOL questionnaires were analyzed according to
the criteria developed by the European Organization for Research and Treatment of Cancer (“EORTC”). As used in the description
of the QOL results discussed in the published report of the Phase 1/2 trial of the Cell-in-a-Box® plus low-dose ifosfamide
combination in pancreatic cancer patients, the questionnaire was used to assess the QOL of patients undergoing treatment. The QOL was
analyzed in a similar manner to the way that a QOL questionnaire developed by the EORTC is usually analyzed. This latter questionnaire
is known as EORTC QLQ-C30. QOL data were available from the baseline evaluation for 14 patients and for analysis of change for 8 patients.
A clinical benefit score based on variables, including
the “Karnofsky Score” and body weight, was determined. Pain and analgesic consumption were calculated from the QOL questionnaires.
The Karnofsky Score is a scale that is used to attempt to quantify a cancer patient’s general well-being and activities of daily
life. It is often used to judge the suitability of patients for inclusion into clinical trials. As a clinical trial progresses, a patient’s
Karnofsky Score can change. It is also used to assess a patient’s QOL as a clinical trial progresses. The scale starts at 100 (normal,
no complaints, no evidence of disease) and decreases in decrements of 10 down through 50 (requires considerable assistance and frequent
medical care) all the way to 10 (moribund, fatal processes progressing rapidly) and finally to 0 (deceased). Pain intensity was measured
on a visual analog scale ranging from 0 (no pain) to 100 (the most intensive pain imaginable) in increments of 10. Analgesic consumption
was assessed using a separate scale in which 0 indicated no regular consumption of analgesics and 25, 50 and 100 indicated administration
of non-steroidal anti-inflammatory drugs or opiates several times per year, per month or per week, respectively.
The primary tumor did not grow in any of the 14
patients. Two patients had a PR; 12 patients exhibited SD; and two patients showed an MR.
Median survival time of patients in this clinical
trial was 39 weeks. The one-year survival rate was 36%.
Within the 20-week study period, three patients
died from disease progression (on days 9, 85 and 132). Upon postmortem examination, the patient who died on day 9 from recurrent pulmonary
embolism was found to have extensive tumor necrosis.
The chemotherapy regimen was well tolerated. No
toxicity beyond Grade 2 (moderate adverse effect) was detected in any of the 14 patients.
Eleven SAEs were seen in 7 patients during the
study period. None of them were treatment-related (due to capsule implantation or ifosfamide administration). These SAEs were attributed
to underlying disease and/or the effects associated with the disease.
Implanting the capsules did not result in any
obvious allergic or inflammatory response, and no patients developed pancreatitis during the trial. Some patients exhibited elevated amylase
levels, presumably due to tumor infiltration of the pancreas and limited obstructive chronic pancreatitis. However, no further increase
in amylase levels was seen after angiography and capsule implantation.
In accordance with the report of the study, only
one Adverse Event (increased lipase activity on day 15 after installation of the capsules), which was a Grade 1 Adverse Event, “may”
have been linked to implanting the capsules.
Ten of 14 patients experienced a “clinical
benefit” which means either no increase or a decrease in pain intensity. For 7 of the patients, this was confirmed by their analgesic
consumption. None of these “benefited” patients registered an increased analgesic usage either in terms of dosage or WHO levels.
None of the patients showed an increased Karnofsky
Score after treatment. However, 7 of the 14 patients had stable Karnofsky Scores at the week 10 assessment. For 4 of these patients, their
indices were still stable at the week 20 assessment.
One patient’s body weight increased at both
weeks 10 and 20 and another patient showed increased weight at week 10 (this patient withdrew from the clinical trial and no week 20 weight
was obtained). Two patients showed stable body weights at week 10, one of whom dropped out of the clinical trial and the other showed
weight loss at week 20.
Two scenarios were used to establish the overall
integrative clinical benefit response, where each patient was given a +2 score for an improved value, a +1 score for a stable value and
a -1 score for a worsened value for each of four criteria (pain, analgesic consumption, Karnofsky Score and body weight) as compared to
the relevant week 0 values.
The “worst case scenario” required
a pain relief score of 20 points or more to be judged an improvement and a decrease in the Karnofsky Score of 10 points or more to indicate
worsening. Using this scenario, 50% or 7 of the treated patients experienced clinical benefit; 21.4% or 3 patients were neutral (benefits
were offset by impairments); and 28.6% or 4 patients had no clinical benefit. The latter included those passing away before the median
survival time.