10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
For the fiscal year ended December 31, 2021
OR
For the transition period from ________________ to ________________
Commission File Number: 001-40672
RANI THERAPEUTICS HOLDINGS, INC.
(Exact Name of Registrant as Specified in its Charter)
2051 Ringwood AvenueSan Jose, California 95131
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (408) 457-3700
Securities registered pursuant to Section 12(b) of the Act:
Title of each class TradingSymbol(s) Name of each exchange on which registered
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The registrant was not a public company as of June 30, 2021, the last business day of its most recently completed second fiscal quarter and therefore cannot calculate the aggregate market value of its voting and non-voting common equity held by non-affiliates as of such date. The registrant’s Class A common stock began trading on The Nasdaq Stock Market LLC on July 30, 2021.
As of March 28, 2022, the registrant had 24,387,030 shares of Class A common stock, $0.0001 par value per share, outstanding, 24,773,286 shares of Class B common stock, $0.0001 par value per share, outstanding and no shares of Class C common stock, $0.0001 par value per share, outstanding. Certain holders of units of the registrant’s consolidated subsidiary, Rani Therapeutics, LLC, who do not hold shares of the registrant’s Class B common stock can exchange their units of Rani Therapeutics, LLC for 1,387,471 shares of the registrant’s Class A common stock.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III of this Annual Report on Form 10-K, to the extent not set forth herein, is incorporated herein by reference from the registrant’s definitive proxy statement relating to the Annual Meeting of Stockholders to be held in 2022, which definitive proxy statement shall be filed with the Securities and Exchange Commission within 120 days after the end of the registrant's fiscal year ended December 31, 2021.
Table of Contents
Page
Forward-Looking Statements 3
PART I.
Item 1. Business 7
Item 1A. Risk Factors 33
Item 1B. Unresolved Staff Comments 90
Item 2. Properties 90
Item 3. Legal Proceedings 91
Item 4. Mine Safety Disclosures 91
PART II.
Item 6. [Reserved] 92
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 107
Item 8. Financial Statements and Supplementary Data 108
Item 9A. Controls and Procedures 137
Item 9B. Other Information 137
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 137
PART III.
Item 10. Directors, Executive Officers and Corporate Governance 138
Item 11. Executive Compensation 138
Item 14. Principal Accountant Fees and Services 138
Item 15. Exhibit and Financial Statement Schedules 139
Unless otherwise stated or the context otherwise requires, throughout this Annual Report on Form 10-K, the terms “we,” “us,” and “our,” and similar references refer to Rani Therapeutics Holdings, Inc. (“Rani Holdings”) and its consolidated subsidiaries, Rani Therapeutics, LLC (“Rani LLC”) and Rani Management Systems, Inc. (“RMS”).
We use Rani, Rani Therapeutics, RaniPill, the Rani Therapeutics logo, the R logo and other marks as trademarks in the United States and other countries. This Annual Report on Form 10-K contains references to our trademarks and service marks and to those belonging to other entities. Solely for convenience, trademarks and trade names referred to in this Annual Report on Form 10-K, including logos, artwork, and other visual displays, may appear without the ® or TM symbols, but such references are not intended to indicate in any way that we will not assert, to the fullest extent under applicable law, our rights, or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other entities’ trade names, trademarks, or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other entity.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K, including the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations," contains forward-looking statements. All statements other than statements of historical facts contained in this Annual Report on Form 10-K, including statements regarding our future results of operations and consolidated financial position, business strategy, product candidates, planned preclinical studies and clinical trials, results of clinical trials, research and development costs, manufacturing costs, regulatory approvals, development and advancement of our oral delivery technology, timing and likelihood of success, as well as plans and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties, and other important factors that are in some cases beyond our control and may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements.
In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “would,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “believe,” “estimate,” “predict,” “potential,” “seek,” “aim,” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this Annual Report on Form 10-K include, but are not limited to, statements about:
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the progress and focus of our current and future clinical trials in the United States and abroad, and the reporting of data from those trials;
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our ability to advance product candidates into and successfully complete clinical trials;
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the beneficial characteristics, safety, efficacy, and therapeutic effects of our product candidates;
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our potential and ability to successfully manufacture and supply our product candidates for clinical trials and for commercial use, if approved;
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our ability to develop RaniPill HC or any redesign and conduct additional preclinical and clinical studies of any future design of the RaniPill capsule to accommodate target payloads that are larger than the payload capacity of the RaniPill capsule currently used for our product candidates;
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our ability to further develop and expand our platform technology;
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our ability to utilize our technology platform to generate and advance additional product candidates;
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the accuracy of our estimates regarding expenses, future revenue, capital requirements, and needs for additional financing;
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our financial performance;
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our plans relating to commercializing our product candidates, if approved;
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our ability to selectively enter into strategic partnership and the expected potential benefits thereof;
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the implementation of our strategic plans for our business and product candidates;
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our ability to continue to scale and optimize our manufacturing processes by expanding our use of automation;
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our estimates of the number of patients in the United States who suffer from the indications we target and the number of patients that will enroll in our clinical trials;
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the size of the market opportunity for our product candidates in each of the indications we target;
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our ability to continue to innovate and expand our intellectual property by developing novel formulations and new applications of the RaniPill capsule;
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our plans and ability to obtain or protect intellectual property rights, including extensions of existing patent terms where available;
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the scope of protection we are able to establish and maintain for intellectual property rights, including our technology platform and product candidates;
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the sufficiency of our existing cash and cash equivalents to fund our future operating expenses and capital expenditure requirements;
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our expectations regarding the impact of the COVID-19 pandemic and the conflict between Ukraine and Russia on our business;
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developments relating to our competitors and our industry, including competing product candidates and therapies; and
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our expectations regarding the period during which we will qualify as an emerging growth company under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).
These forward-looking statements are subject to a number of risks, uncertainties, and assumptions described in the section titled “Risk Factors” and elsewhere in this Annual Report on Form 10-K. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, or otherwise.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Annual Report on Form 10-K, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and you are cautioned not to unduly rely upon these statements.
Summary of Risk Factors
Below is a summary of the principal factors that make an investment in our common stock speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Risk Factors” and should be carefully considered, together with other information in this Annual Report on Form 10-K and our other filings with the Securities and Exchange Commission (“SEC”), before making investment decisions regarding our Class A common stock. See “Special Note Regarding Forward-Looking Statements.”
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We have a very limited operating history, have incurred operating losses since our inception and expect to incur significant losses for the foreseeable future. We may never generate any revenue from commercial products or become profitable or, if we achieve profitability, we may not be able to sustain it.
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We are an early clinical stage biopharmaceutical company with no approved products and no historical commercial product revenue, which makes it difficult to assess our future prospects and financial results.
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If we are unable to raise additional capital when needed on acceptable terms, we may be forced to delay, limit, reduce or terminate our product development programs, commercialization efforts or other operations.
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We are early in our development efforts and have only two product candidates in early clinical development. All of our other product candidates are still in preclinical development. If we are unable to advance our product candidates through clinical development, obtain regulatory approval and ultimately commercialize our product candidates, or experience significant delays in doing so, our business will be materially harmed.
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Clinical development is a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results. Clinical failure can occur at any stage of clinical development.
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As an organization, we have completed only one phase 1 clinical trial, have not submitted an investigational new drug application, (“IND”), to the Food and Drug Administration (“FDA”), and we have never conducted later-stage clinical trials or submitted a Biologics License Application (“BLA”), and may be unable to do so for any of our product candidates.
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Because we have multiple product candidates in our clinical pipeline and are considering a variety of target indications, we may expend our limited resources to pursue a particular product candidate and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.
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Product candidates comprising a biologic within the RaniPill capsule employ novel technologies that have not yet been approved by the FDA or comparable foreign regulatory authorities, and we anticipate that our applications will have to be submitted as original, standalone BLAs. These regulatory authorities have limited experience in evaluating our technologies and product candidates. Our novel technologies also make it difficult to predict the time and cost of product candidate development.
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We have limited clinical data on our product candidates to indicate whether they are safe or effective for long-term use in humans.
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We depend on third-party suppliers for key materials used in our manufacturing processes as well as for the manufacturing of active pharmaceutical ingredients (“APIs”) and drug substances. We do not have long-term supply arrangements in place for APIs and drug substances. The loss of third-party suppliers or their inability to supply us with adequate materials and APIs or drug substances could prevent or delay the conduct of our clinical trials and the commercialization of our products, if approved, and could harm our business.
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Our new high-capacity oral delivery device, RaniPill HC, is in early stages of development, and it is subject to the inherent risks and uncertainties of developing a novel, innovative technology. Our efforts to develop RaniPill HC may not be successful.
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We have conducted and may in the future conduct clinical trials for current or future product candidates outside the United States, and the FDA and comparable foreign regulatory authorities may not accept data from such trials.
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The COVID-19 pandemic could adversely impact our business including our ongoing and planned preclinical studies and clinical trials.
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We face significant competition from other biotherapeutics and pharmaceutical companies, and our operating results will suffer if we fail to compete effectively.
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Our future success depends on our ability to retain our executive officers and to attract, retain and motivate highly qualified personnel. If we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.
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Failure or perceived failure to comply with existing or future laws, regulations, contracts, self-regulatory schemes, standards, and other obligations related to data privacy and security (including security incidents) could harm our business. Compliance or the actual or perceived failure to comply with such obligations could affect our ability to develop and commercialize RaniPill capsule, and otherwise negatively affect our operating results and business.
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Our commercial success may depend in part on our ability to build and maintain our intellectual property portfolio.
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We are a holding company and our principal asset is our interest in Rani LLC. Accordingly, we will depend on distributions from Rani LLC to pay our taxes, expenses (including payments under the Tax Receivable Agreement) and dividends. Rani LLC’s ability to make such distributions may be subject to various limitations and restrictions.
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Rani LLC may make distributions of cash to us substantially in excess of the amounts we use to make distributions to our stockholders and pay our expenses (including our taxes and payments under the Tax Receivable Agreement). To the extent we do not distribute such excess cash as dividends on our Class A common stock, the holders of units of Rani LLC would benefit from any value attributable to such cash as a result of their ownership of Class A common stock upon an exchange or redemption of their units of Rani LLC.
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The multi-class structure of our common stock has the effect of concentrating voting control, which will limit your ability to influence the outcome of important transactions, including a change in control.
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Our principal stockholders and management own a significant percentage of our stock and are able to exert significant control over matters subject to stockholder approval and may prevent other stockholders from influencing significant corporate decisions.
PART I
Item 1. Business
Overview
We are a clinical stage biotherapeutics company focusing on advancing technologies to enable the administration of biologics orally, to provide patients, physicians, and healthcare systems with a convenient alternative to painful injections. We are advancing a portfolio of oral biologic therapeutics using our proprietary delivery technology.
We have developed and clinically tested a drug-agnostic oral delivery platform, the RaniPill capsule, which can deliver any drug, including large molecules such as peptides, proteins, and antibodies. The current RaniPill capsule can deliver up to a 3 mg dose of drug with high bioavailability. We are also developing a high-capacity version known as the RaniPill HC, which is in preclinical stage and which is intended to enable delivery of drug payloads up to 20 mg with high bioavailability. Our current RaniPill capsule is optimized to orally deliver a variety of biologic therapeutics, and we are advancing development of the RaniPill HC to address biologics with higher dosing requirements. Together, we believe that the current RaniPill capsule and RaniPill HC could enable us to deliver most biologics currently on the market via a convenient, oral daily dose.
We believe that our drug-agnostic and high bioavailability oral delivery technology positions us to be the leader in oral biologics.
In March 2022, we initiated a phase 1 clinical trial with RT-102, a RaniPill capsule containing our proprietary formulation of parathyroid hormone (“PTH”), in Australia. The study will compare pharmacokinetics of PTH administered via RaniPill capsule to PTH administered via subcutaneous injection. We previously completed a phase 1 clinical study with RT-101, a RaniPill capsule containing our proprietary formulation of octreotide, in Australia. The phase 1 study successfully achieved both its primary and secondary endpoints, demonstrating the safety and tolerability of RT-101 and achieving oral bioavailability of octreotide greater than 70%. No serious adverse events were reported.
Market segment and technology
More than half of the adult population of the U.S. has one or more chronic diseases. The affected population is expected to continue to grow as the population ages. Chronic conditions, including cancers, cardiovascular diseases, autoimmune diseases, and metabolic disorders, are increasingly being treated with biologics. In 2021, six of the ten highest revenue-producing drugs in the world were biologics. Current treatments using biologics are primarily via injection.
Biologics, the fastest growing segment of the drug industry, refers to a broad class of drugs that are derived from living sources. Biologics are distinguished from small molecules, like aspirin, which derive from chemistry. Biologics include, for example, recombinant therapeutic proteins, peptides, and monoclonal antibodies, as well as cell and gene therapies. In 2019, worldwide sales of biologics were estimated to have reached approximately $269.0 billion and are projected to reach $465.0 billion by 2023.
Biologics must generally be administered through intravenous, intramuscular, or subcutaneous injection. Patient aversion to injections has promoted a significant interest in the development of solutions to enable the oral delivery of biologics. However, a significant hurdle is the ability to achieve sufficient bioavailability with oral biologics to produce an intended therapeutic effect. Bioavailability refers to the proportion of a delivered dose that reaches the bloodstream in active form. Attempts at oral delivery of biotherapeutics have remained largely unsuccessful due to the rapid degradation and digestion of biologics in the gastrointestinal (“GI”) environment before they can be absorbed into the bloodstream.
Our solution is our novel, proprietary and patented platform technology referred to as the RaniPill capsule, an orally ingestible pill designed to automatically deploy in the small intestine to administer a precise therapeutic dose of a biologic into the intestinal wall. Our several preclinical studies and clinical trials have demonstrated bioavailability of dosing via the RaniPill capsule that is generally comparable to dosing subcutaneously, with high dosing accuracy: this level of bioavailability is significantly higher than any that has been demonstrated with respect to others’ attempts at oral delivery of biologics.
We are pursuing a number of clinical and preclinical pipeline programs utilizing our current RaniPill capsule. In addition, our newly designed high-capacity oral biologic delivery device, the RaniPill HC, has the potential to deliver 500%-plus higher payloads than our current RaniPill capsule. We believe this is a significant breakthrough in drug delivery with the potential to provide expansive opportunities for the company, such that we could potentially pursue a daily dosing option for over 50 additional biologics, for internal development or through partnership, including such biologics as pembrolizumab, etanercept, trastuzumab and
secukinumab. We believe that oral biologics utilizing our RaniPill technology have the potential to disrupt the large and growing biologics market.
Organizational Transactions
Rani Holdings was formed as a Delaware corporation in April 2021 for the purpose of facilitating an initial public offering (“IPO”) of its Class A common stock, to facilitate certain organizational transactions, and to operate the business of Rani LLC and its consolidated subsidiary RMS. In connection with the IPO, we established a holding company structure with Rani Holdings as a holding company and its principal asset is the Class A common units (“Class A Units”) of Rani LLC that it owns. As the sole managing member of Rani LLC, Rani Holdings operates and controls all of Rani LLC’s operations, and through Rani LLC and its subsidiary, conducts all of Rani LLC’s business.
In connection with the IPO, we were party to the following organizational transactions (the “Organizational Transactions”):
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Amended and restated Rani LLC’s operating agreement (the “Rani LLC Agreement”) to appoint Rani Holdings as the sole managing member of Rani LLC and effectuated an exchange of all outstanding interests in Rani LLC into Class A Units and an equal number of voting noneconomic Class B units.
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Amended and restated our certificate of incorporation to provide for the issuance of (i) Class A common stock, each share of which entitles its holders to one vote per share, (ii) Class B common stock, each share of which entitles its holders to 10 votes per share on all matters presented to the Company's stockholders, (iii) Class C common stock, which has no voting rights, except as otherwise required by law and (iv) preferred stock.
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Certain holders of Class A Units tendered their Class A Units for shares of our Class A common stock. Certain holders of Class A Units continued to hold such Class A Units (“Continuing LLC Owners”) and received shares of our Class B common stock.
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Continuing LLC Owners are entitled to exchange, subject to the terms of the Rani LLC Agreement, the Class A Units they hold in Rani LLC, together with the shares they hold of our Class B common stock (together referred to as a "Paired Interest"), in return for shares of the Company’s Class A common stock on a one-for-one basis provided that, at our election, we may effect a direct exchange of such Class A common stock or make a cash payment equal to a volume weighted average market price of one share of Class A common stock for each Paired Interest redeemed. Any shares of Class B common stock will be cancelled on a one-for-one basis if we, at the election of the Continuing LLC Owners, redeem or exchange such Paired Interest pursuant to the terms of the Rani LLC Agreement.
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Entered into a registration rights agreement and tax receivable agreement (“Tax Receivable Agreement” or “TRA”) with certain of the Continuing LLC Owners.
Our Strategy
Our strategic vision is to disrupt and expand the approximately $269.0 billion market currently served by injectable only therapeutic biologics. We plan to do this by developing and advancing oral biologics therapies. We are committed to delivering oral biologic solutions for patients living with burdensome chronic diseases. We believe that the RaniPill capsule will improve the lives of millions of patients with chronic diseases who currently depend on biologics available only as injections.
Our strategy includes the following aspects.
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Pursue validated and commercially established market opportunities. We intend to pursue high-value markets with biologics that are already approved where we can develop our own differentiated products. We believe that these products will take market share from available therapies, while also expanding existing markets by reaching new patient populations that otherwise are not being treated by injectable biologics.
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Establish the RaniPill capsule as a platform technology with regulatory authorities. We plan to demonstrate the safety and tolerability of the RaniPill capsule through clinical trials independent of any biologic. Data from these studies will be used to support subsequent regulatory applications for our product candidates.
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Expand in-house manufacturing of the RaniPill capsule. We have vertically integrated our manufacturing, and plan to continue to scale and optimize our manufacturing processes by expanding our use of automation.
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Invest in RaniPill capsule capabilities. We intend to become a leader in oral biologics by continuing to invest in our technology, such as by expanding payload capacity and developing novel biologic formulations to maximize the number of therapeutic targets and addressable markets.
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Expand our reach by selectively entering into strategic partnerships.We are opportunistically exploring strategic partnerships to enable us to expand our commercial reach and enable oral administration of a broader array of biologics.
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Continue to strengthen our intellectual property portfolio. Our patent portfolio has helped establish us as a leading oral biologics company. We plan to continue to innovate and expand our intellectual property by developing novel formulations and new applications of the RaniPill capsule.
Rani LLC was founded by Mir Imran, our Chairman of the Board, who continues to contribute to our strategic planning and product development. Mir Imran has a background in medicine and engineering, is a prolific inventor, and a serial entrepreneur, having founded more than 20 life sciences companies.
Our Platform Technology
Each of our product candidates is a RaniPill capsule containing a biologic. We may use the term RaniPill platform herein to refer to the physical structure and/or mechanisms of the RaniPill capsule absent a biologic.
Our clinically tested RaniPill delivery platform described below is intended to be capable of delivering up to a 3 mg dose of any drug. We are also developing a high-capacity version known as the RaniPill HC, which is in preclinical stage and which is intended to enable delivery of drug payloads up to 20 mg.
The RaniPill capsule
The RaniPill capsule is a versatile, drug-agnostic, orally ingestible pill approximately the size of a fish oil or calcium pill or a ‘000’-sized capsule.
The capsule includes a proprietary coating designed to withstand stomach acid but dissolve in the jejunum portion of the small intestine. Dissolution of the coating leads to a series of steps that result in a biologic being delivered into the highly vascularized wall of the small intestine so that the biologic can be absorbed into the vasculature and enter the bloodstream.
The following illustrations depict the clinically tested RaniPill capsule traversing through and deploying within a lumen of the intestine illustrated in cross section.
Panel A Panel B Panel C Panel D
Panel A: As the RaniPill capsule exits the stomach and enters the small intestine, the higher pH environment of around 6.5 in the jejunum begins to dissolve the coating.
Panel B: Dissolution of the coating exposes a balloon in the RaniPill capsule to intestinal fluid which results in the balloon self-inflating.
Panel C: Inflation of the balloon orients a microneedle contained within the balloon approximately perpendicular to the intestinal wall. The pressure in the balloon delivers the microneedle, which is smaller than a grain of rice, into the intestinal wall. The microneedle dissolves in the moist tissue environment, and the drug is absorbed into the vasculature and thereby into the bloodstream.
Panel D: The balloon immediately deflates upon microneedle delivery and is excreted through normal digestive processes.
Features and advantages of the RaniPill capsule
The RaniPill capsule is a result of years of internal research activities to develop and optimize specialized components and systems that make up the RaniPill capsule. Several advanced features are included in the RaniPill capsule, providing what we believe to be significant and sustainable competitive advantages in the field of oral delivery of biologics. Some of the features and advantages of the RaniPill capsule are listed below.
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High bioavailability and high dosing accuracy – Our studies conducted to date have demonstrated that the RaniPill capsule delivers biologics with bioavailability that is generally comparable to dosing subcutaneously, with high dosing accuracy. This level of bioavailability is similar to subcutaneous injection and is significantly higher than that of currently marketed chemistry-based oral biologics, the best attempts of which to our awareness have resulted in peptides being delivered with only low single-digit bioavailability.
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Protective coating avoids deployment in the stomach– The proprietary protective coating formulation is pH-sensitive, enabling the RaniPill capsule to maintain its integrity through the acidic environment in the stomach for deployment in the small intestine.
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Protection of the drug prior to delivery – The microneedle is protected from intestinal fluid until delivery, and then the rapid injection of the microneedle into the intestinal wall during delivery provides for little or no exposure of the microneedle to intestinal fluid. This technique serves to overcome the body’s natural mechanisms that break biologics down in the harsh GI environment and thus block biologics from reaching the blood stream from within the intestine.
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Proprietary microneedle design preserves drug integrity and sterility – The proprietary dissolvable microneedle is made from injectable-grade, sterile materials. The microneedle is designed to accommodate in its hollow interior a biologic formed into a microtablet of up to 3 mg. Once exposed to body fluids, the microneedle begins to dissolve and expose the biologic for absorption into the vasculature. The sealed microneedle preserves the integrity and sterility of the biologic until the microneedle dissolves.
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Delivery of the microneedle in both fed and fasted states – The RaniPill capsule is designed to deliver the microneedle even if the patient ingests the RaniPill capsule with or after a meal, which we expect will allow for more flexible dosing regimens and improved patient adherence to a given regimen.
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Self-inflating balloon ensures reliable delivery – The proprietary self-inflating balloon is designed to provide optimal pressure to deliver the microneedle. In addition, the novel design of the balloon positions the microneedle
approximately perpendicular to the intestinal wall for reliable drug delivery, with up to 80% drug delivery success observed in our clinical trial of RT-101. The self-inflating balloon has been designed to minimize GI discomfort.
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Drug-agnostic design provides a standardized platform – The RaniPill capsule is designed to deliver any molecule irrespective of molecular mass. This allows a single platform design to be used with multiple drugs.
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Optimized dosing regimen – Based on the confirmed patient preference for oral delivery alternatives, we expect better treatment adherence with oral dosing versus injections, thus enabling a more physician-selectable dosing regimen. For example, the RaniPill capsule may enable a regimen of small daily doses, versus larger less-frequent doses for injections prescribed to improve treatment adherence; small daily dosing may allow for therapeutic exposures to be maintained within a narrow range, whereas larger less frequent injection dosing can lead to large variations in therapeutic exposure, which can directly contribute to adverse events, loss of efficacy, and increased propensity for immunogenic response.
Studies underscoring the advantages of the RaniPill capsule
Platform study in humans confirming reliable deployment in fed and fasted states
An initial clinical assessment of the RaniPill capsule (without a drug) was conducted to evaluate the safety and tolerability of the platform and to compare device performance in fed and fasted states in twenty healthy volunteers, divided into two groups of ten. In one group, the RaniPill capsule was administered under fasting conditions, while the other group was given the RaniPill capsule 45 minutes after consumption of a standardized meal. X-ray imaging was used to monitor transit of the device as well as its deployment. The evaluation involved the use of capsules that were not equipped with a drug or needle. The goals of this study were tolerability and effects of food on the RaniPill capsule’s functionality, as measured by the time required for the RaniPill capsule to reach and deploy in the small intestine.
The total transit time for the RaniPill capsule was longer in the fed group than in the fasted group because the capsule remained in the stomach longer in the fed group. However, food did not impact the deployment time of the RaniPill capsule. This was confirmed via radiographic tracking which showed successful balloon inflation, indicating both that the protective coating dissolved as designed and the balloon inflated as designed, regardless of the presence of matter in the lumen of the intestinal tract.
No volunteers reported difficulty in swallowing the capsule, nor did any study participant report experiencing pain or sensing an awareness upon balloon deployment.
Patient and physician survey indicating strong preference for pills over injections even for infrequent dosing
We commissioned an independent third-party survey to investigate United States patient and physician preference for oral medications versus injections. The results clearly indicated that both patients and prescribing physicians would prefer pills to injections over a broad base of patient populations and treatment regimens. The results also indicate that a majority of physicians would be likely to prescribe an oral regimen as a first line therapy.
Across all patient groups, genders, ages, conditions treated, and severity of condition, there was a consistently strong preference for switching from injections to pills, even for infrequent injection regimens of up to six months.
The 611 responding patients were aged 18 years or older and presently using an injectable biologic to treat a condition. Six patient groups each included 100-103 patients with current primary treatment being injections of Simponi, Entyvio, Stelara, Prolia, Evenity, or Cosentyx. The 201 responding physicians, mostly endocrinologists and rheumatologists, were presently prescribing injectable biologics to their patients. The physicians answered questions regarding the biologics listed with respect to the patient groups as well as five additional biologics (Natpara, Forteo, Tymlos, Norditropin, and Genotropin).
The results of this extensive patient preference survey across a large and varied patient population are consistent with the results obtained from our prior patient preference survey showing, for example, that 88% of rheumatoid arthritis patients taking Humira injections once every two weeks would prefer a daily pill and 76% of patients taking Prolia once every six months would prefer a daily pill. In each patient group surveyed, at least 64% of respondents would prefer a daily pill to their current injectable treatment regimen.
Repeat-dose studies
We have conducted two seven-day repeat-dose studies in canines under GLP guidelines, with no safety issues or adverse events observed. These studies indicate the potential for safe, daily dosing with the RaniPill capsule.
Our Pipeline
The broad utility of the RaniPill capsule to enable the oral delivery of biologics reliably provides us with a range of attractive development opportunities. We have prioritized development based on specific scientific, developmental, regulatory, and commercial considerations to optimize our portfolio of targeted product candidates. Our internal development targets are focused on well-characterized molecules with attractive commercial characteristics. We believe selection of these targets will allow us to potentially accelerate product approval and market launch, while also broadening patient, provider, and payor acceptance of the RaniPill capsule.
We have tested the RaniPill capsule with several biologics, in numerous preclinical studies. In March 2022, we initiated testing of RT-102 in a Phase 1 clinical trial in Australia. Previously, we completed a Phase 1 clinical trial of RT-101 in Australia.
Below is a summary of our product candidate pipeline. We believe these drugs are compatible with our technology based on their dosage and dosing schedule. Most importantly, if clinical testing proves successful and our product candidates are approved by regulatory authorities, these products would give millions of patients a convenient, oral option to effectively manage their diseases. We may complement these programs with robust partnering activities to maximize the value inherent in the RaniPill capsule.
RT-XXX refers to the RaniPill capsule containing a biologic in a proprietary Rani formulation.
* Each of these indications will require separate regulatory approvals.
**Changchun High & New Technology Industries will have a limited opportunity to negotiate for rights within China.
*** Timelines are subject to regulatory agency review delays.
RT-101: Octreotide for the treatment of NETs and acromegaly
Market overviewand currently approved products
Octreotide, developed by Novartis AG and sold under the brand name Sandostatin, is a truncated and modified form of the human somatostatin. Somatostatin is a peptide hormone involved in the regulation of the endocrine system. It acts as an inhibitory hormone and influences hGH release, insulin and glucagon secretion, regional blood flow, gastric acid secretion, intestinal mobility, and neuronal activity. Octreotide is a more potent mimetic with a significantly longer half-life than naturally occurring somatostatin.
Octreotide is currently approved by the FDA and EMA for the symptomatic treatment of acromegaly, a disorder involving the secretion of excessive growth hormone, as well as carcinoid syndrome, a condition involving NETs of the GI tract. Current treatment using octreotide involves painful subcutaneous injections administered three to four times daily or an extended-release formulation via painful, deep intramuscular injections every four weeks. Despite the inconvenience of the current route of administration, the worldwide market for octreotide in 2020 was approximately $2.7 billion. A chemistry-based attempt to develop an oral version of octreotide for treatment of acromegaly (MYCAPSSA from Amryt Pharma) resulted in a product with less than 1% bioavailability, which, due to this low bioavailability, was approved only for maintenance therapy of acromegaly patients on a low (100 μg) dose.
The total patient population of NETs and acromegaly in the United States is estimated to be around 200,000. Approximately 12,000 new cases of NETs and 3,000 new cases of acromegaly are diagnosed annually in the United States. The worldwide market for injectable somatostatin analogs is approximately $6.0 billion annually across both indications.
Our solution: RT-101
We are developing RT-101, the RaniPill capsule containing our novel formulation of octreotide, for oral treatment of NETs and acromegaly. We have worldwide commercial rights to RT-101. We believe that the oral delivery route provided by RT-101 has the potential to take market share from injectables and expand oral delivery of octreotide beyond the limited reach of MYCAPSSA.
Preclinical studies
RT-101 Pharmacokinetic study
Pharmacokinetic (“PK”) profiles of octreotide delivered as RT-101 were obtained in conscious beagles, and compared to that of an equivalent IV dose of the commercially available product, Sandostatin®. All animals receiving RT-101 tolerated the oral administration of the capsule. For the RT-101 group, the average maximum concentration (“Cmax”) was 9.9 ± 1.2 ng/ml and average Tmax for the group was 22 ± 3 minutes after payload delivery. The average absolute bioavailability of octreotide delivered via RT-101 was 78%.
RT-101 seven-day repeat dose GLP study
Tolerability and reliability of RT-101 was assessed in a seven-day administration study in canines, under GLP guidelines. RT-101 was orally administered daily to test group animals, and control group animals received an enteric coated capsule containing nonpareil sugar. Blood samples were collected after each RT-101 dose was administered to confirm successful payload delivery by measuring plasma concentrations of the drug. Plasma samples analyzed from test group animals showed that 77% of the administered devices successfully delivered the drug, with seven of eight animals having at least five successful payload deliveries over the seven-day dosing period. RT-101 was well-tolerated by all animals in the study. There were no clinical adverse effects observed in either group throughout the study duration. The GI tract was critically evaluated in all animals and no significant macroscopic or microscopic abnormalities were observed in any animal. These results demonstrated that the RaniPill capsule can be consumed on a daily basis for seven days, deploy within the targeted region of the small intestine without causing any adverse clinical effects, and remnants can be excreted without complications.
Clinical trials
Endoscopic delivery of octreotide into the jejunum of healthy volunteers
To obtain early proof-of-concept data, we evaluated PK of Sandostatin® (a commercial formulation of octreotide) delivered via a direct injection into the jejunal wall to mimic the intended route of delivery by the RaniPill capsule. Results from this study, which involved five healthy volunteers, showed a highly similar PK profile of octreotide delivered by a direct injection into the intestinal wall to that obtained with RT-101 in its Phase 1 clinical trial. (See below RT-101 Phase 1 study). These data indicate that a change in formulation of octreotide from liquid to solid form did not significantly affect the PK of the drug.
RT-101 Phase 1 study
We conducted a Phase 1 clinical trial with RT-101 in 62 healthy subjects to evaluate safety and tolerability as primary endpoints and bioavailability as a secondary endpoint. Bioavailability of octreotide delivered via RT-101 was 65% relative to an intravenous control group. We believe this is the first demonstration of such high bioavailability of an oral biologic in humans. To date, the best published bioavailability for oral octreotide is approximately 1%. The results of the RT-101 Phase 1 clinical trial support
the utility of the RaniPill capsule to deliver octreotide orally, and at levels of octreotide comparable to subcutaneous injection. In addition, the results indicate that the RaniPill capsule may be used for other biologics.
A similar study conducted in awake canines shows that the data from the canine model were consistent with the PK data obtained in humans, indicating that the canine is an appropriate model for octreotide.
Future clinical trials
We are currently optimizing the formulation for RT-101, to potentially enable once daily dosing. Once optimized, we will test and verify the formulation in appropriate animal models. Once the formulation is validated in preclinical studies, we plan to initiate clinical trials for the development of RT-101.
RT-102: Parathyroid hormone (PTH) for the treatment of osteoporosis
Market overviewand currently approved products
Osteoporosis is a bone disease where bone mineral density and bone mass decreases, leading to a decrease in bone strength that can increase the risk of fractures. Osteoporosis affects women and men of all races and ethnic groups. Osteoporosis can occur at any age, although the risk for developing the disease increases with age.
PTH is an effective bone-building treatment for osteoporosis. PTH is a hormone secreted by the parathyroid glands that regulates serum calcium concentration and promotes bone growth. PTH therapies are delivered by daily subcutaneous injections for up to 2 years. Approximately 10 million Americans suffer from osteoporosis; however, we estimate that only a small fraction of this population is being treated with a form of PTH. While there may be other reasons for this, we believe that patient aversion to daily injections may be a major factor. As a result, non-bone-building and less effective antiresorptive drugs are used as first line therapies because they are available in oral form.
Teriparatide, a synthetic form of the natural human parathyroid hormone hPTH(1-34), is a PTH analog administered as a once-daily injection to treat osteoporosis, first developed by Eli Lilly and Company and sold under the brand name Forteo. Another PTH analog injectable is Tymlos by Radius Health, Inc., approved in 2017. A teriparatide biosimilar injectable by Pfenex, Inc. was approved in 2019. Annual sales revenue of PTH analogs and biosimilars globally in 2019 was approximately $2.0 billion.
Our solution: RT-102
We are developing RT-102, the RaniPill capsule containing our novel formulation of PTH, for oral treatment of osteoporosis. We have worldwide commercial rights to RT-102. In addition to the existing market, we believe there is an opportunity to expand the market by advancing RT-102 as a first line therapy for osteoporosis.
Preclinical studies
Dose escalation study
We conducted a preclinical study with RT-102 where PK of PTH was determined in awake beagles at varying dosage levels of teriparatide formulation. Reference PK curves were also generated using Forteo administered at the approved dose and route of delivery of 20 μg subcutaneous liquid injection. Results of this study in terms of concentration-time profiles of hPTH(1-34) are provided in the following graph.
RT-102 yielded steep increases in concentration of PTH followed by a rapid decline to baseline levels, similar to the subcutaneous controls. Such a profile is desirable to produce an osteoanabolic effect. The overall duration of drug exposures remained short with drug concentrations returning to baseline levels within three hours. RT-102 was well tolerated by all animals with no significant adverse events noted at any of the doses tested.
Seven-day repeat dose GLP study with RT-102
Tolerability and reliability of RT-102 was assessed in a multi-day administration study in canines, under GLP guidelines. RT-102 was administered daily to eight test animals, and another four control animals received an enteric coated capsule containing nonpareil sugar followed by a seven-day washout period. Blood samples were collected after each RT-102 dose was administered to determine payload delivery by measuring plasma concentrations of the drug. The RaniPill capsule was well-tolerated by all animals in the study. Plasma samples analyzed from test group animals showed that 61% of the administered devices successfully delivered the
drug. There were no clinical adverse effects observed in either group throughout the study duration. The GI tract was critically evaluated in all animals and no significant macroscopic abnormalities were observed in any animal.
Clinical trials
In March 2022, we initiated a Phase 1 clinical trial of RT-102 in Australia. The single-center, open label, Phase 1 study will evaluate the pharmacokinetics, safety, and tolerability of parathyroid hormone administered via the RaniPill capsule in healthy adult women volunteers. RT-102 will be ingested orally, administering a single dose of parathyroid hormone. Doses given will range from 20 to 80 μg.
RT-105: Anti-TNF-alpha antibody for the treatment of psoriatic arthritis
Market overviewand currently approved products
Anti-TNF-alpha antibodies such as adalimumab are used to treat a range of inflammatory disorders and are among the largest selling class of pharmaceutical drugs globally as measured by revenue. Adalimumab, sold by AbbVie Inc. under the brand name Humira, generated sales of approximately $20.7 billion in 2021. Adalimumab is approved by the FDA and EMA to treat a range of autoimmune conditions, including psoriasis, rheumatoid arthritis, and Crohn’s disease. In the U.S. alone, there are an estimated 1.5 million patients with rheumatoid arthritis, 7 million with psoriasis, and 3 million with Crohn’s disease or ulcerative colitis. Currently, six Humira biosimilars have been approved by the FDA, but will not enter the U.S. market until 2023, per licensing agreements with the originator.
Patients who use adalimumab administer the drug through a painful subcutaneous injection once every two weeks. Despite the painful injections required to administer it, adalimumab was the best-selling drug globally in 2020.
Our solution: RT-105
We are developing RT-105, the RaniPill capsule containing our novel formulation of adalimumab, for oral treatment of a host of inflammatory conditions, beginning with treatment of psoriatic arthritis and later expanding to other indications for which TNF-alpha inhibitors are approved. We have worldwide commercial rights to RT-105. We believe that the development of an orally administered anti-TNF-alpha antibody represents a significant market opportunity.
Our preclinical studies and clinical trials with adalimumab have demonstrated the successful delivery of a large antibody via the RaniPill platform. Moreover, our studies indicate that serum concentrations comparable to the approved subcutaneous dosing method can achieved for antibody therapies using the RaniPill platform, providing compelling evidence that the RaniPill capsule could be a viable alternative to painful subcutaneous antibody injection therapies.
Preclinical studies
We evaluated the performance of RT-105 containing an adalimumab biosimilar in awake canines and compared it to the performance of the adalimumab biosimilar given by way of subcutaneous and intravenous injection. The PK profile for RT-105 was comparable to the profile for subcutaneous administration, and mean bioavailability for RT-105 was 49%, compared to 46% with subcutaneous injection.
Clinical trials
Endoscopic administration of adalimumab into the jejunum of healthy human volunteers
To assess whether the observations from preclinical studies regarding absorption of adalimumab through the intestinal wall translate to clinical trials, we conducted an endoscopic study in humans. The study involved 10 healthy volunteers and compared the PK of an approved formulation of adalimumab injected endoscopically into the jejunal intestinal wall, which mimics the RaniPill capsule route of administration, to that of an identical dose injected subcutaneously. Blood samples were obtained at prescribed intervals during a 14-day study period.
PK profiles were similar with no notable differences observed in either area under curve (“AUC”) or Cmax. The mean AUC was 62.7 ± 11.4 μg/ml*day*kg/mg for the subcutaneous group and 45.0 ± 29.0 μg/ml*day*kg/mg for the intrajejunal group. No serious adverse events were noted in this study, and adverse events of headache and flu-like symptoms after intrajejunal administration resolved within 48 hours. The results are consistent with data obtained in preclinical studies, confirming intrajejunal delivery as a viable route of delivery for adalimumab.
Phase 1
We plan to initiate a Phase 1 clinical trial of RT-105 in healthy volunteers in 2023.
RT-109: Human growth hormone (hGH) for the treatment of growth hormone deficiency
Market overviewand currently approved products
Juvenile growth disorders and adult growth hormone deficiency affect between 30,000 and 80,000 people in the U.S. Growth hormone is a peptide that is secreted by the pituitary gland and promotes cell growth, proliferation, and regeneration. This anabolic hormone also stimulates insulin-like growth factor 1 which has growth enhancing effects on a broad set of tissues.
HGH is approved by the FDA for the treatment of growth hormone deficiency. A recombinant form of hGH is used to treat juvenile growth disorders and adult growth hormone deficiency. Treatment involves painful daily subcutaneous hGH injections often over multiple years. Genentech, Inc., now part of Roche Holding AG, pioneered the use of recombinant hGH, receiving FDA approval for its commercial sale in 1985. HGH is currently available from a number of sources and is sold by Eli Lilly and Company under the brand name Humatrope and by Genentech, Inc. under the brand name Nutropin. Worldwide sales of hGH were approximately $3.9 billion in 2020 and are projected to reach $9.2 billion by 2030.
Our solution: RT-109
We are developing RT-109, the RaniPill capsule containing our novel formulation of hGH, for oral treatment of growth hormone deficiency. We have worldwide commercial rights to RT-109. We have entered into an Evaluation and First Right of Refusal Agreement with Changchun High & New Technology Industries (“CCHN”), which includes limited rights to negotiate commercialization rights for RT-109 in China. Because patients typically need daily injections of hGH over several years, we believe that a once-daily oral version would transform treatment regimens for both pediatric and adult patients.
Preclinical studies
We are conducting preclinical PK studies with RT-109.
Clinical trials
We plan to initiate a Phase 1 clinical trial in healthy volunteers in the second half of 2022.
RT-110: PTH for the treatment of hypoparathyroidism
Market overviewand currently approved products
Hypoparathyroidism is a rare condition of low levels of serum PTH resulting in low calcium levels in the blood. The prevalence of hypoparathyroidism in the United States is approximately 115,000 people. PTH is currently approved for the treatment of hypoparathyroidism by the FDA and EMA. PTH treatment requires lifelong daily injections but has suboptimal efficacy. Treatment of hypoparathyroidism is most effective with consistent and sustained plasma levels of PTH.
Our solution: RT-110
We are developing RT-110, the RaniPill capsule containing our second novel formulation of PTH, for oral treatment of hypoparathyroidism. We have worldwide commercial rights to RT-110. We believe that there is an unmet need for a delivery method more convenient than injection, and we further believe that the RaniPill capsule will provide for a treatment regimen that can better maintain consistent and sustained plasma levels of PTH than the current treatment regimen of daily PTH injections.
Preclinical studies
We are creating a sustained release formulation of RT-110 which will provide for continuous exposures of the hormone required to normalize the calcium imbalance in hypoparathyroidism patients. We plan to conduct preclinical PK studies of RT-110 prior to initiating human clinical studies.
Clinical trials
We plan to initiate a Phase 1 clinical trial in healthy volunteers in 2023.
Collaboration Opportunities
We envision complementing our core programs with robust partnering activities to maximize the value inherent in the RaniPill capsule.
One market segment for which we believe that the RaniPill capsule can add significant value is the treatment of diabetes. The CDC estimates that approximately 10% of the U.S. population have diabetes. Of these, 90% to 95% suffer from Type 2 diabetes, which is characterized by progressive hyperinsulinemia (pre-diabetes or insulin resistance) followed by hyperglycemia as a result of the body’s inability to properly respond to insulin and, eventually, produce sufficient insulin. Diabetes has no known cure and can give rise to a host of serious and often life-threatening complications, including cardiovascular disease, neuropathy, retinopathy, cognitive impairment, and stroke. This results in estimated economic costs totaling over $300.0 billion in the United States annually. Further, according to the CDC, about a third of Americans are pre-diabetic, a health condition in which blood glucose levels are higher than normal for long periods as a result of progressing insulin resistance.
In addition to the potential of the RaniPill capsule to replace treatment by injections, we believe that an oral treatment option could be adopted earlier in the treatment of diabetes or adopted to treat pre-diabetic patients, which could result in improved outcomes in the pre-diabetic and diabetic patient populations.
Due to the size, cost, and complexity of clinical trials required to address the diabetes market, our strategy is to partner with large pharmaceutical companies to create oral versions of injected diabetes drugs, such as GLP-1 mimetics and basal insulin.
RT-104: GLP-1 mimetic for the treatment of Type 2 diabetes
Market overviewand currently approved products
GLP-1 mimetics are used to treat Type 2 diabetes by increasing insulin secretion and suppressing glucagon secretion. Several large pharmaceutical companies market GLP-1 mimetics, and the global combined sales of these were estimated to be $12.7 billion in 2020.
Our solution: RT-104
We are developing RT-104, the RaniPill capsule containing our novel formulation of a GLP-1 mimetic, for oral treatment of Type 2 diabetes. Based on a survey we commissioned, we found that 89% of endocrinologists prescribing GLP-1 mimetics were likely to switch their prescription to a once-daily pill if available, and we believe that RT-104 would be more appealing to patients than the presently available injectable form. We have worldwide commercial rights to RT-104.
Clinical trials
Clinical study with Byetta
We conducted a proof-of-concept study in humans with Byetta, a branded form of the GLP-1 mimetic exenatide. Five healthy subjects were dosed with Byetta via an intrajejunal injection to mimic the RT-104 route of administration and then, after a washout period, the subjects were dosed with a subcutaneous injection of Byetta. PK profiles of exenatide were similar between subcutaneous injection and intrajejunal injection. The AUC for intrajejunal injection was 27 ± 3 ng/ml*min and for subcutaneous injection was 23 ± 2 ng/ml*min. These data provide evidence that delivery of exenatide via the intrajejunal route of the RaniPill capsule will yield bioavailability similar to subcutaneous injections.
While we continue to optimize our formulation to increase drug half-life, we plan to pursue partnership opportunities with large pharmaceutical companies to further develop and commercialize RT-104.
RT-106: Basal insulin for the treatment of Type 2 diabetes
Market overviewand currently approved products
In addition to oral anti-diabetic drugs and lifestyle changes, patients with advanced Type 2 diabetes manage their blood sugar by administering painful daily injections including one or both types of: (1) a single injection of a longer-acting insulin called basal insulin, which provides a steady baseline of insulin to offset insulin resistance and reduce hyperinsulinemia; and (2) a rapid-acting insulin called mealtime insulin, which is added in the later stages of the disease and injected several times daily approximately 20 to 30 minutes before the ingestion of a meal. Worldwide sales of basal insulin totaled an estimated $11.0 billion in 2019. Several long-acting insulin biosimilars are available in the market today.
We expect that the market for basal insulin would further expand in the currently unserved ‘pre-diabetic’ market segment if an oral version of basal insulin were available. Clinical research has indicated that early intervention with daily injections of basal insulin could prevent or slow down disease progression in pre-diabetic patients, as steady-state, low levels of insulin would reduce the hyperinsulinemia caused by insulin resistance. Despite this knowledge, pre-diabetic patients currently are not prescribed basal insulin or indeed any injectable as a first-line therapy, and instead are advised lifestyle changes and are prescribed only oral anti-diabetic drugs to manage the disease. However, in market research studies we commissioned, we found that approximately 81% of surveyed endocrinologists would initiate basal insulin therapy for diabetic patients earlier if an oral option were available and 87% of patients using insulin were likely to switch to a once-daily pill if available.
Our solution: RT-106
We are developing RT-106, the RaniPill capsule containing our novel formulation of basal insulin, for oral treatment of Type 2 diabetes. We have worldwide commercial rights to RT-106. We intend to pursue partnership opportunities with large pharmaceutical companies to co-develop and commercialize RT-106.
We believe that RT-106 would have significant benefit to the millions of people living with Type 2 diabetes who presently inject longer-acting basal insulin daily. Additionally, our RT-106 program aims to address the unserved pre-diabetic patients who would benefit from using basal insulin. Further, because of the solid form of the drug in the RaniPill capsule, generic or rapid acting insulin can be converted to a long-acting formulation using pharmaceutical approaches, enabling additional therapeutic regimen options.
Preclinical studies
As a proof-of-concept to demonstrate the viability of the RaniPill capsule to deliver insulin orally, we evaluated the efficacy of rapid-acting human insulin delivered via the RaniPill capsule in a preclinical study using anesthetized juvenile swine under a euglycemic glucose clamp. In this study, 20 IU of rapid-acting human insulin was delivered via the RaniPill capsule in one group and via subcutaneous injection in another group, and the associated PK and pharmacodynamic (“PD”) profiles compared. Serum samples were taken at frequent intervals over a seven-hour period to quantify serum insulin levels with glucose infusion rates adjusted to maintain plasma glucose levels between 60 and 80 mg/dl (euglycemic glucose clamp). The changes in glucose infusion rates reflect the glucose disposing action of insulin.
Results of this study demonstrate that rapid-acting insulin was successfully delivered via the RaniPill capsule, comparable to subcutaneous injection. The AUC for delivery via RaniPill capsule was 83± 18 and AUC for subcutaneous injection was 81 ± 10 pmol/L.min.
Our Regulatory Pathways
Test, approval, manufacture, and sale of our products are subject to federal, state, local, and foreign statutes and regulations. We, along with our third-party contractors, will be required to navigate the various preclinical, clinical, and commercial approval requirements of the governing regulatory authorities of the countries in which we wish to conduct studies or seek approval or licensure of our product candidates. We detail the U.S. regulatory pathway in this section. In the United States, the FDA regulates biologic products such as ours under the FDCA and the PHSA and their implementing regulations. Other jurisdictions will have somewhat different requirements.
FDA centers: CDRH, CBER, CDER, OCP
Each of our product candidates includes the RaniPill platform and a biologic. The RaniPill platform if marketed without a biologic would be classified by the FDA as a device regulated by the Center for Devices and Radiological Health (“CDRH”). A biologic if marketed without the RaniPill platform would be classified by the FDA as either a “biological product” regulated by the
Center for Biologics Evaluation and Research (“CBER”) or a “drug” regulated by the Center for Drug Evaluation and Research (“CDER”). The classification as biological product or drug would depend on the FDA’s definition of “biological product” with respect to the active ingredient of a product candidate at the time a request for regulatory license or approval is submitted to the FDA to market that product candidate. The FDA currently defines a biological product as “a virus, therapeutic serum, toxin, antitoxin, vaccine, blood, blood component or derivative, allergenic product, protein, or analogous product, or arsphenamine or derivative of arsphenamine (or any other trivalent organic arsenic compound), applicable to the prevention, treatment, or cure of a disease or condition of human beings,” and defines a protein as an “alpha amino acid polymer with a specific, defined sequence that is greater than 40 amino acids in size.”
Because our product candidates each include a device and a biologic, it is expected that each of our product candidates will be classified by the FDA as a combination product. The FDA is charged with assigning a center with primary jurisdiction, or a lead center, for review of a combination product. The designation of a lead center generally eliminates the need to receive approvals from more than one center. The determination of which center will be the lead center is based on the “primary mode of action” of the combination product, although the other centers may participate in review. The FDA has also established an Office of Combination Products, (“OCP”), which serves as a focal point for combination product issues for agency reviewers and industry. OCP is also responsible for developing guidance and regulations to clarify the regulation of combination products, and for assignment of the FDA center that has primary jurisdiction for review of combination products where the jurisdiction is unclear or in dispute.
It is expected that most of our product candidates will include a biologic within the FDA’s definition of “biological product” and some of our product candidates may include a biologic that will be considered a “drug.” CDER is the lead center for review of therapeutic proteins at this time, thus most of our product candidates will have CDER as the lead center.
For each product candidate, we will perform numerous preclinical laboratory tests and animal studies, as well as perform human clinical trials. Preclinical laboratory tests, preclinical animal studies, and/or clinical trials may be ongoing concurrently for a product candidate in focused studies to assess various properties of a formulation and/or the platform of the product candidate. Animal studies require pre-approval by an independent IRB or ethics committee. Human studies in the United States require pre-approval by the FDA. For FDA approval of a human trial, if the trial will involve a biologic alone then an IND application will be needed, and if the trial will involve the RaniPill platform alone then an IDE application will be needed. For a clinical trial in which the RaniPill platform will be used in combination with a biologic, we must submit an IDE application if the lead center is CDRH or an IND application if the lead center is CBER or CDER. IND and IDE applications are discussed in more detail below.
Based on discussions with the FDA, we plan to test the RaniPill platform absent a biologic and create a Master File for the platform alone which can be referred to in subsequent FDA submissions.
Master file for the RaniPill platform
Our RaniPill platform will be used across multiple products and as such, the same device information may be applicable to and used to support multiple submissions to the FDA for our combination products. Based on discussions with the FDA and guidance we have received from CDRH and OCP, we intend to separately evaluate the safety and tolerability of the RaniPill capsule in an IDE study, absent a drug.
The IDE study is expected to confirm the safety results already obtained from the various studies we have performed, including repeat-dose GLP studies in canines. The IDE study will evaluate the safety and tolerability of the RaniPill capsule in an eight-week healthy volunteer study (n=40) with daily administration of a RaniPill capsule absent a biologic. The study will also evaluate the effect of food on the delivery performance of the RaniPill capsule.
After completion of the IDE study, we plan to create a Master File for the RaniPill platform with CDRH. The Master File would include at least facilities and manufacturing procedures and controls, verification and validation reports, biocompatibility test data, GLP canine study data, and IDE clinical trial data.
A master file is not itself approved by the FDA, but rather is a mechanism to provide information regarding the device constituent part when the same information is applicable to multiple approval submissions. The information in the RaniPill master file would be applicable to any of our product candidates and could be referenced in our IND, IDE, BLA, or NDA submissions.
Approval or license to market the RaniPill capsule
The FDA has specified a BLA path for seeking a license to market a biological product and an NDA path for seeking approval to market a drug. It is expected that most of our product candidates will follow the BLA path while some may follow the NDA path.
Our current pipeline includes well-characterized biologics that have been in clinical use for several years. We believe that we may be able to leverage the FDA’s prior conclusions of safety, purity, and potency for already-approved products in our own BLA or NDA. The degree to which we may be able to reduce the burden on our own development may depend on whether the API is the same as the original approved product. Additionally, because certain products originally approved under an NDA have been reclassified by the FDA and would now follow a BLA pathway, it is unclear whether conclusions regarding such reclassified products can be leveraged in our BLA submissions. We intend to have the scope of the leverage that will be available from already-approved biologics clarified on a product-by-product basis for each product candidate in pre-IND meetings with the FDA.
CBER and CDER may ask for additional testing for specific biologics, disease indications, or patient populations.
Additional information regarding regulatory pathways is provided in the “Government Regulation” section below.
Evaluation Agreements
Novartis evaluation agreement
In May 2015, we entered into an Evaluation and First Rights Agreement (the “Novartis Agreement”), with Novartis Pharmaceuticals Corporation, or Novartis, in which we agreed to perform certain specified research for Novartis to evaluate two specified Novartis compounds with our oral drug delivery technology. In August 2019 and July 2020, we amended the agreement to focus on one compound. Under the agreement, we granted Novartis an exclusive, fully paid-up license to the intellectual property it generates for the sole purpose of delivering that compound via any delivery route other than through use of any microtablet. Novartis will own intellectual property generated related to that compound and we will own all other intellectual property regardless of inventorship. We are currently in the process of completing our own internal testing of higher capacity payloads in the RaniPill capsule. Certain data from such testing was shared with Novartis pursuant to the July 2020 amendment. Following delivery of a report by us, Novartis will have a right of first negotiation to obtain rights to research, develop, manufacture, and commercialize a specified class of biologics formulated with our delivery technology (“Novartis Field”) for a period of four months. If we and Novartis do not reach an agreement in this period, for a period of another six months, Novartis will have the opportunity to make a topping bid on any third-party transaction proposal in the Novartis Field. Unless earlier terminated, the Novartis Agreement will expire upon the expiration of the last-to-expire time periods for which Novartis has a right of first negotiation or a right to make a topping bid. Prior to these periods, Novartis may terminate the Novartis Agreement at any time for convenience, and we and Novartis may terminate the Novartis Agreement for the other party’s uncured material breach.
Novartis has paid us an aggregate of $7.0 million under the Novartis Agreement as of December 31, 2021 and made an equity investment of approximately $5 million in our Series C preferred unit financing. As part of the Organizational Transactions, the Series C preferred units were exchanged for 404,638 Paired Interests. We do not expect any future payments under the Novartis Agreement unless we and Novartis negotiate a new agreement constructed around a higher-capacity payload system.
Takeda evaluation agreement
In November 2017, we entered into an Evaluation and First Rights Agreement (the “Takeda Agreement”) with Shire International GmbH, which was subsequently acquired by Takeda Pharmaceutical Company Limited (“Takeda”). This agreement is now terminated.
Changchun High & New Technology Industries evaluation agreement
In August 2017, we entered into an Evaluation and Right of First Refusal Agreement, or the CCHN Agreement, with CCHN in which we agreed to perform and share data from preclinical testing of RT-109. We will provide CCHN with reports and data resulting from our performance of our preclinical testing and CCHN will have a non-exclusive right to use this information in connection with specified activities. CCHN will own intellectual property generated under the CCHN Agreement that comprises of or relates to certain materials and assays provided by CCHN and we will own all other intellectual property generated under the CCHN Agreement. Following the completion of the evaluation program, we and CCHN will negotiate, for a period of 90 days, an agreement to provide CCHN with commercial rights for RT-109 in China. Additionally, we granted CCHN a right of first refusal with respect to commercial rights for RT-109 in China for a period of two years following the completion of our preclinical testing, pursuant to which CCHN will have a period of 90 days following our receipt of a third-party proposal for commercial rights for RT-109 in China to make a competing offer for such rights. The CCHN Agreement will expire upon the expiration of CCHN’s right of first refusal, or up to 90 days longer if CCHN makes a bid under its right of first refusal. Prior to these periods, CCHN may terminate for convenience upon 30 days’ notice, and we and CCHN may terminate for the other party’s material uncured breach.
There are no payment obligations under the CCHN Agreement.
Manufacturing and Quality Assurance
We currently manufacture and assemble RaniPill capsules at our facilities in San Jose and Milpitas, California. We also inspect, package and ship finished products to support our clinical trials from this facility. We are intentionally pursuing a vertically integrated manufacturing strategy, which we believe offers significant advantages, including rapid product iteration, control over our product quality, and the ability to rapidly scale our manufacturing capacity. This capability also allows us to develop future generations of products while maintaining the confidentiality of our intellectual property.
Each RaniPill capsule is assembled through a process which involves a series of integrated, well-developed, and highly reproducible steps that have been optimized to consistently produce capsules of high reliability.
The RaniPill capsule manufacturing process
A drug API or drug substance combined with excipients specific to the drug API or drug substance is lyophilized and compressed into a solid microtablet form. The microtablet is sealed inside the microneedle and is then packaged in a tiny vial under aseptic conditions. The vial containing the microneedle is incorporated in the RaniPill capsule, which is given a protective coating. Each of these steps in the manufacturing process has been subjected to rigorous testing and process qualification procedures to ensure manufacturing consistency. We rely on non-exclusive, third-party relationships with several manufacturers for the drug API or drug substance. We maintain in-house capabilities related to the aseptic manufacturing, following FDA Current Good Manufacturing Practice regulations for drugs that contain minimum requirements for the methods, facilities, and controls used in manufacturing, processing, and packing of a drug product (“cGMP”) guidelines. Our personnel have significant technical, manufacturing, analytical, quality, regulatory, and project management experience to oversee our third-party manufacturers and to manage in-house manufacturing and quality operations in compliance with regulatory requirements.
The current semi-automated manufacturing process will be sufficient to support our currently planned clinical trials. In parallel, we are in the process of automating the entire manufacturing process, which we anticipate being complete by the time the RaniPill capsule is commercialized.
Commercialization
Markets
The key markets for our products, once approved, will be in the United States, Europe, and Asia.
Sales and supply infrastructure
Development of our product candidates includes identifying sources that can provide consistent quality and increasing quantities of APIs, or drug substance to meet our needs through in vitro studies, preclinical studies, and clinical trials, and later into commercialization. We currently do not have agreements in place for long-term supplies of any API or drug substance. Availability of API or drug substance supply may inform our decisions regarding which product candidates present the best development opportunities.
Currently we do not have any approved products. We intend to either develop the commercialization sales and supply infrastructure as our product candidates are approved, or partner with pharma companies for commercialization.
Coverage and reimbursement of approved products by third-party payors
Sales of any product, if approved, depend in part on the extent to which such product will be covered by third-party payors, such as federal, state, and foreign government healthcare programs, commercial insurance, and managed healthcare organizations, and the level of reimbursement, if any, for such product by the payors. Decisions regarding whether to cover a product, the extent of coverage, and the amount of reimbursement to be provided are made separately, and these decisions are made on a plan-by-plan basis because there is no uniform policy for coverage and reimbursement. As a result, one payor’s decision to cover a
particular product does not ensure that other payors will also provide coverage for the product, or that any of the reimbursement rates will be adequate.
Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own coverage policy, formulary, and reimbursement rates, but also have their own methods and approval process apart from Medicare determinations. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific, clinical, and/or cost-effectiveness support for the use of our products to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance.
For products administered under the supervision of a physician, obtaining coverage and adequate reimbursement may be particularly difficult because of the higher prices often associated with such drugs. Additionally, separate reimbursement for the treatment or procedure in which the product is used may not be available, which may impact physician utilization.
In addition, the U.S. government, state legislatures, and foreign governments have continued implementing cost-containment programs, including price controls, restrictions on coverage and reimbursement, and requirements for substitution of generic products when available. Third-party payors are increasingly challenging prices charged, examining medical necessity, and reviewing cost effectiveness in addition to questioning safety and efficacy. A decrease in, or decision to stop, payor reimbursement for a product could reduce physician prescribing of, and patient demand for, the product.
Competition
Our industry is highly competitive and subject to rapid and significant technological changes as researchers learn more about diseases and develop new technologies and treatments. Key competitive factors affecting the commercial success of product candidates we may develop are likely to be efficacy, safety and tolerability profile, reliability, convenience of administration, price, and reimbursement.
Broadly speaking, we will face competition from current and future (generic or biosimilar) manufacturers of the branded injectable versions of our pipeline drugs, manufacturers such as AbbVie Inc., Eli Lilly and Company, Novartis AG, Roche Holdings AG, etc. However, we believe that oral biologics have the potential to take significant market share from current injectable therapies. We also believe that oral biologics have the potential to expand existing markets by an early reach into new patient populations that are averse to taking injections.
We are aware of a few companies that are pursuing oral biologics through either device-based or chemistry-based technologies. Early stage device-based technologies such as the SOMA and LUMI from the Novo Nordisk-MIT collaboration were reported to be in preclinical stages several years ago. Chemistry-based oral delivery companies include Oramed Pharmaceuticals, Inc., Entera Bio Ltd., Applied Molecular Transport Inc., Protagonist Therapeutics, Inc., i2O, Therapeutics, Progenity, Inc., Intract Pharma, and two with recently approved oral peptide products – Amryt Pharma (Mycappssa) and Novo Nordisk A/S (Rybelsus). Chemistry-based approaches have limited applications because they work only for small peptides and, even then, with low (often less than 1%) bioavailability, far lower than injections. In contrast, our versatile technology is designed to deliver biologics, from small peptides to large proteins, irrespective of molecular mass and with bioavailability similar to that of injections.
Environmental impact
We have instituted policies and procedures related to appropriate chemical and biological material handling, use, and disposal in our facilities, and we train our employees on these policies and procedures.
Regulations in certain jurisdictions may require us to submit with our marketing approval request an environmental impact assessment related to our biologics, our RaniPill platform, or both. Such assessments could cause significant expenditures. We may be able to reduce expenditures related to these assessments by our strategy of using biologics already approved for marketing.
Intellectual Property
Our commercial success depends in part on our ability to obtain and maintain protection for our current and future product candidates and the technologies used to develop and manufacture them. Our development efforts have enabled us to construct an extensive intellectual property portfolio that we believe provides us a competitive advantage. Our policy is to seek to protect our proprietary position through patents, trademarks, trade secrets, domain names, intellectual property assignment agreements, confidentiality agreements, and facility and network security measures. Some of our intellectual property is in-licensed. We believe that our intellectual property portfolio provides good coverage for our current and pipeline product candidates.
For information regarding the risks related to our intellectual property, see the section titled “Risk Factors— Risks Related to Our Intellectual Property.”
Patents
We have built a patent portfolio globally around several aspects of the current and future generations of our technology. We file new patent applications as we conduct research and development, initiate new programs and monitor the activities of others. Generally, issued patents are granted a term of 20 years from the earliest claimed non-provisional filing date if all fees continue to be paid. In some cases, the term of a United States patent may be shortened by terminal disclaimer, such that its term is reduced to end with that of an earlier-expiring patent. In some cases, U.S. patent term can be adjusted to recapture a portion of delay by the U.S. Patent & Trademark Office (“USPTO”) in examining the patent application (patent term adjustment) or extended to account for term effectively lost as a result of the FDA regulatory review period (patent term extension), or both.
Our initial patent family has a priority date in 2009, with patent term expected to extend into at least 2030 if all fees are paid. This patent family claims many device aspects of the RaniPill capsule, and the delivery of a wide variety of biologics using the RaniPill capsule. Patents and patent applications in this core family number more than 230. As of January 14, 2022, this patent family included 65 patents issued in the United States and 126 patents issued in other jurisdictions (in Australia, Austria, Belgium, Canada, China, Denmark, Finland, France, Germany, India, Ireland, Italy, Japan, Netherlands, Norway, Poland, Portugal, Spain, Sweden, Switzerland, Turkey, and the United Kingdom), with applications pending in the United States, Australia, Canada, China, Europe, Hong Kong, India, and Japan.
Our microtablet patent family includes claims covering the microtablets delivered by the RaniPill capsule. This patent family has a priority date in 2014, includes several dozen patents and patent applications, and is expected to have patent terms extending into at least 2035 if all fees are paid. As of January 14, 2022, this patent family included 8 patents issued in the United States, 2 patents issued in Australia, and 1 patent issued in China, with applications pending in the United States, Australia, Canada, China, Europe, India, and Japan.
We own numerous additional patents and patent applications, with claims to additional biologics, pharmacologic properties of various biologics and various next generation devices, with applications pending in the United States, Australia, Brazil, Canada, China, Europe, Hong Kong, India, Japan, Mexico, and South Korea. Patents in these families are expected to expire between the late 2030s and early 2040s if all fees are paid.
Trade secrets and other proprietary information
We rely in part on keeping our trade secrets and other proprietary information confidential. We protect proprietary information by executing confidentiality agreements and intellectual property assignment agreements with employees, and consulting or other contractual agreements with consultants, scientific advisors, sponsored researchers, contractors, and other collaborators, prior to commencement of our relationship with them. Confidentiality agreements limit use and disclosure of our confidential information during and after the relationship. Intellectual property assignment agreements require that all inventions resulting from work performed for us or relating to our business and conceived during the period of the relationship are our exclusive property. We take other appropriate precautions, such as physical and technological security measures, to guard against misappropriation of our proprietary information by third parties.
Government Regulation
Regulatory authorities at federal, state, and local levels, as well as in foreign countries, extensively regulate, among other things, the research, development, testing, manufacture, quality control, import, export, safety, effectiveness, labeling, packaging, storage, distribution, record keeping, approval, advertising, promotion, marketing, post-approval monitoring, and post-approval reporting of products such as those we are developing. We, along with our third-party contractors, will be required to navigate the various preclinical, clinical, and commercial approval requirements of the governing regulatory authorities of the countries in which we wish to conduct studies or seek approval or licensure of our product candidates. Failure to comply with applicable regulations at any time during the product development process or approval process or after approval may result in delays to the conduct of a study, regulatory review, or commercialization authorization, or may subject an applicant to administrative or judicial actions. In the United States, such actions could include, among other actions, refusal to allow proceeding with clinical trials, imposition of a clinical hold, refusal to approve pending applications, withdrawal of an approval, license suspension or revocation, issuance of untitled or warning letters, product recalls or withdrawals from the market, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement of profits, or civil or criminal investigations or penalties.
Current Good Manufacturing Practices (cGMP)
To obtain marketing approval for a candidate product, we must finalize processes for manufacturing the product in commercial quantities in accordance with cGMP requirements. These processes must address design, monitoring, control, and maintenance of manufacturing processes and facilities, and the implemented processes must be capable of consistently producing quality batches of the product candidate. Our processes must, among other things, enable us to monitor several aspects of the interim and finished product, such as identity, purity, strength, quality, potency, and sterility as applicable. Additionally, stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life, and appropriate packaging must be selected and tested.
Preclinical and clinical development
For each product candidate, we perform numerous laboratory tests and preclinical animal studies, as well as human clinical trials. Preclinical laboratory tests, preclinical animal studies, and/or clinical trials may be ongoing concurrently for a product candidate in focused studies to assess various properties of a formulation and/or platform of the product candidate. Animal studies require pre-approval by an independent Institutional Animal Care and Use Committee (“IACUC”). Human studies in the United States require pre-approval by the FDA and an independent IRB, requested by way of an IDE or IND for investigational products such as our product candidates.
Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators in accordance with cGCP, which includes the requirement that all research subjects provide their informed consent for their participation in any clinical trial. Clinical trials are conducted under protocols detailing, among other things, the objectives of the study, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated. Furthermore, an independent IRB or ethics committee for each site proposing to conduct the clinical trial must review and approve the plan for any clinical trial and its informed consent form before the clinical trial begins at that site, and an IRB or ethics committee must monitor the study until completed. An IRB is charged with protecting the welfare and rights of trial participants and considers such items as whether the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. Regulatory authorities, the IRB, or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable health risk, the trial is not being performed in accordance with the investigational plan or associated protocols, or that the trial is unlikely to meet its stated objectives. Some studies also include oversight by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board, which provides authorization for whether or not a study may move forward at designated check points based on access to certain data from the study and may halt the clinical trial if the data safety monitoring board determines that there is an unacceptable safety risk for subjects, no demonstration of efficacy, or other grounds. There are also requirements governing the reporting of ongoing preclinical studies, clinical trials, and clinical trial results to public registries. Sponsors of certain clinical trials of FDA-regulated products, including biologics, are required to register and disclose certain clinical trial information, which is publicly available at www.clinicaltrials.gov.
Human clinical trials are typically conducted in three phases that may be performed sequentially, in overlapping time frames, or in combination.
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Phase 1 includes the initial introduction of an investigational new drug into humans. Phase 1 studies may be conducted in patients or normal volunteer subjects. These studies are designed to determine the metabolism and pharmacologic actions of the drug in humans, the side effects associated with increasing doses, and, if possible, to gain early evidence on effectiveness. The total number of subjects and patients included in Phase 1 studies varies with the drug, but is generally in the range of 20 to 80.
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Phase 2 includes the controlled clinical studies conducted to evaluate the effectiveness of the drug for a particular indication or indications in patients with the disease or condition under study and to determine the common short-term side effects and risks associated with the drug. Phase 2 studies are typically conducted in a relatively small number of patients, usually involving no more than several hundred subjects.
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Phase 3 studies are expanded controlled and uncontrolled trials. They are performed after preliminary evidence suggesting effectiveness of the drug has been obtained, 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 and to provide an adequate basis for physician labeling. Phase 3 studies usually include from several hundred to several thousand subjects.
For each of our product candidates, we may conduct Phase 1, Phase 2, and Phase 3 clinical trials of our formulation, the RaniPill platform, or the formulation in combination with the RaniPill platform.
In some cases, the FDA may require, or we may voluntarily pursue, additional clinical trials after a product is approved to gain more information about the product. These so-called Phase 4 studies may alternatively be made a condition to approval of the BLA or NDA. These trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication and further document clinical benefit in the case of drugs approved under certain regulatory programs, such as accelerated approval regulations. Failure to exhibit due diligence with regard to conducting Phase 4 clinical trials could result in withdrawal of approval for the associated product.
During all phases of clinical development, regulatory agencies require extensive monitoring and auditing of all clinical activities, clinical data, and clinical trial investigators. Progress reports detailing the results of the clinical trials, among other information, must be submitted at least annually to the FDA, and written IND or IDE safety reports must be submitted to the FDA and the investigators for serious and unexpected suspected adverse events, findings from other studies suggesting a significant risk to humans exposed to a particular or similar biologic, findings from animal or in vitro testing that suggest a significant risk for human subjects, and any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure.
Investigational products
Prior to initiating a clinical trial of an investigational product such as for one of our product candidates, the FDA must grant authorization to proceed. A request for authorization is made by way of an IND or IDE application as applicable for the clinical trial.
An IND is a request for authorization from the FDA to administer an investigational new drug product to humans. The central focus of an IND submission is on the general investigational plan and the protocols to be used in associated preclinical studies and clinical trials. The IND also includes results of animal and in vitro studies already performed to assess toxicology, pharmacokinetics, pharmacology and pharmacodynamic characteristics of the product. The IND further includes chemistry, manufacturing, and controls information, and human data or literature to support the use of the investigational product.
An IDE is a request for authorization from the FDA to allow an investigational device to be used in a clinical trial to collect safety and effectiveness data. The IDE application must be supported by appropriate data, such as animal and laboratory testing results, showing that it is safe to test the device in humans and that the testing protocol is scientifically sound.
An IND or IDE must become effective before human clinical trials may begin. The IND or IDE automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day period, raises safety concerns or questions about the proposed clinical trial. In such a case, the IND or IDE may be placed on clinical hold to resolve any outstanding concerns or questions before the clinical trial can begin.
The FDA’s approval of an IND or IDE does not bind the FDA to accept the results of the trial as sufficient to prove the stated conclusions, even if the trial meets its intended success criteria.
All clinical trials must be conducted in accordance with FDA regulations that govern investigational product labeling, prohibit promotion, and specify an array of recordkeeping, reporting, and monitoring responsibilities of study sponsors and study investigators. Required records and reports are subject to inspection by the FDA. Clinical trials must further comply with FDA regulations that govern institutional review board approval, informed consent, and other human subject protections.
An amendment to the existing IND or IDE must be made for subsequent protocol changes and also for each successive clinical trial conducted during product development.
Although the FDA Quality System Regulation does not fully apply to investigational products, the requirement for controls on design and development does apply. The sponsor also must manufacture the investigational product in conformity with the quality controls described in the IND or IDE application and any conditions of IND or IDE approval that FDA may impose with respect to manufacturing.
BLA/NDA review process
Following completion of clinical trials, data are analyzed to assess whether the investigational product is safe and effective for the proposed indicated use or uses. The results of preclinical studies and clinical trials are then submitted to the FDA as part of an NDA or BLA, along with proposed labeling, chemistry, and manufacturing information to ensure product quality and other relevant data. In short, the NDA or BLA is a request for approval to market the product candidate for one or more specified indications and must contain proof of safety and efficacy for a drug or safety, purity, and potency for a biological product. The application may include both negative and ambiguous results of preclinical studies and clinical trials, as well as positive findings. Data
may come from company-sponsored clinical trials intended to test the safety and efficacy of a product’s use and/or from a number of alternative sources, including studies initiated by investigators or cooperative clinical groups. To support marketing approval, the data submitted must be sufficient in quality and quantity to establish the safety and efficacy of the investigational product to the satisfaction of FDA. FDA approval of an NDA or BLA must be obtained before a drug or biologic may be marketed in the United States.
Under the Prescription Drug User Fee Act (“PDUFA”) and the Biologics Price Competition and Innovation Act of 2009 (“BPCI”), as amended, each NDA or BLA must be accompanied by a user fee. User fees may be adjusted on an annual basis. PDUFA also imposes an annual program fee for each marketed human drug or biologic. BsUFA imposes a user fee for a biosimilar development program at the time of the first meeting with the FDA or the initial IND submission, whichever occurs first. This fee must be paid annually.
The FDA reviews all submitted NDAs and BLAs before it accepts them for filing and may request additional information rather than accepting the NDA or BLA for filing. The FDA must make a decision on accepting an NDA or BLA for filing within 60 days of receipt. Once the submission is accepted for filing, the FDA begins an in-depth review of the NDA or BLA. Under the goals and policies agreed to by the FDA under PDUFA, the FDA has ten months from the filing date in which to complete its initial review and respond to the applicant, or six months if the submission is designated for priority review. The FDA does not always meet its PDUFA goal dates for standard and priority NDAs or BLAs, and the review process may be extended by FDA requests for additional information or clarification.
Before approving an NDA or BLA, the FDA will conduct a pre-approval inspection of the manufacturing facilities for the new product to determine whether they comply with cGMP requirements. The FDA will not approve the product unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. The FDA also may audit data from clinical trials to ensure compliance with GCP requirements. Additionally, the FDA may refer applications for novel drug products or drug products which present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation, and a recommendation as to whether the application should be approved and under what conditions, if any. The FDA is not bound by recommendations of an advisory committee, but it considers such recommendations when making decisions on approval. The FDA likely will reanalyze the clinical trial data, which could result in extensive discussions between the FDA and the applicant during the review process. After the FDA evaluates an NDA or BLA, it will issue an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. A Complete Response Letter indicates that the review cycle of the application is complete and the application will not be approved in its present form. A Complete Response Letter usually describes specific deficiencies in the NDA or BLA identified by the FDA. A Complete Response Letter may require additional clinical data, additional pivotal Phase 3 clinical trial(s), and/or other significant and time-consuming requirements related to clinical trials, preclinical studies, or manufacturing. If a Complete Response Letter is issued, the applicant may either resubmit the NDA or BLA addressing all of the deficiencies identified in the letter, or withdraw the application. Even if such data and information are submitted, the FDA may decide that the NDA or BLA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differently than we interpret the same data.
Pediatric Research Equity Act (PREA)
Under the Pediatric Research Equity Act (“PREA”), a BLA or NDA submission or supplement must contain data to assess the safety and efficacy of the product for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDCA requires that a sponsor who is planning to submit a marketing application for a product that includes a new active ingredient, new indication, new dosage form, new dosing regimen, or new route of administration submit an initial Pediatric Study Plan, (“PSP”), within sixty days of an end-of-Phase 2 meeting or as may be agreed between the sponsor and FDA. The initial PSP must include an outline of the pediatric study or studies that the sponsor plans to conduct, including study objectives and design, age groups, relevant endpoints, and statistical approach, or a justification for not including such detailed information, and any request for a deferral of pediatric assessments or a full or partial waiver of the requirement to provide data from pediatric studies along with supporting information. The FDA and the sponsor must reach agreement on the PSP. A sponsor can submit amendments to an agreed-upon initial PSP at any time if changes to the pediatric plan need to be considered based on data collected from nonclinical studies, early phase clinical trials, and/or other clinical development programs. The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of data or full or partial waivers.
Expedited development and review programs
The FDA has a number of programs intended to expedite the development or review of products that meet certain criteria. For example, presently the FDA has a fast-track designation, a priority review path, an accelerated approval path, and a breakthrough therapy designation. Any product submitted to the FDA for approval may be eligible for one or more of such FDA programs intended
to expedite development and review. These expedited approvals do not change the standards for approval but may expedite the development or approval process. We may explore some of these opportunities for our product candidates as appropriate.
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New drugs may be eligible for fast-track designation if they are intended to treat a serious or life-threatening disease or condition and demonstrate the potential to address unmet medical needs for the disease or condition. Fast-track designation applies to the combination of the product and the specific indication for which it is being studied. The sponsor of a fast-track product has opportunities for more frequent interactions with the review team during product development, and the FDA may consider sections of the BLA or NDA for review on a rolling basis before the complete application is submitted.
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A product is eligible for priority review if it has the potential to provide safe and effective therapy where no satisfactory alternative therapy exists or to provide a significant improvement in the treatment, diagnosis or prevention of a disease compared to marketed products. The FDA will attempt to direct additional resources to the evaluation of a BLA or NDA designated for priority review in an effort to facilitate the review. The FDA endeavors to review applications with priority review designations within six months of the filing date as compared to ten months for review of standard review designation under its current PDUFA review goals.
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Products intended to treat serious or life threatening diseases or conditions may be eligible for accelerated approval upon a determination that the product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, has an effect on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, or that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. As a condition of approval, the FDA may require that a sponsor of a product receiving accelerated approval perform adequate and well-controlled post-marketing clinical trials. In addition, the FDA currently requires pre-approval of promotional materials as a condition for accelerated approval, which could adversely impact the timing of the commercial launch of the product.
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The Food and Drug Administration Safety and Innovation Act established a category referred to as “breakthrough therapies.” A sponsor may seek FDA designation of a product candidate as a “breakthrough therapy” if the product is intended, alone or in combination with one or more other products, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints.
Even if a product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or may decide that the time period for FDA review or approval will not be shortened.
Post-approval requirements
Any products manufactured or distributed by us pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to cGMP, quality controls, record-keeping, reporting of adverse experiences, periodic reporting, product sampling and distribution, and advertising and promotion of the product. After approval, most changes to the approved product, including adding new indications or other labeling claims, are subject to prior FDA review and approval. There also are continuing user fee requirements, under which the FDA assesses an annual program fee for each approved product. The FDA regulations require that products be manufactured in specific approved facilities and in accordance with cGMP. Biologics manufacturers and their subcontractors are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP, which impose certain organizational, procedural and documentation requirements with respect to manufacturing and quality assurance activities. Changes to the manufacturing process are strictly regulated, and, depending on the significance of the change, may require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting requirements upon us and any third-party manufacturers that we may decide to use. We are responsible for the selection and monitoring of qualified contract manufacturers, laboratories, and packagers, and, in certain circumstances, qualified suppliers to them. These facilities and, where applicable, their suppliers are subject to inspections by the FDA at any time, and the discovery of violative conditions, including failure to conform to cGMP, could result in enforcement actions that interrupt the operation of any such facilities or the ability to distribute products manufactured, processed, or tested by them. Accordingly, we must continue to expend time, money, and effort on quality control for our own facilities and the facilities of others which contribute to the commercialization of our final product, to maintain compliance with cGMP and other aspects of regulatory compliance.
The FDA may withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information, imposition of post-market studies or
clinical trials to assess new safety risks, or imposition of distribution restrictions or other restrictions under a REMS program. Other potential consequences include, among other things:
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Restrictions on the marketing or manufacturing of a product, complete withdrawal of the product from the market, or product recalls
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Fines, warning letters, or holds on post-approval clinical trials
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Refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of existing product approvals
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Product seizure or detention, or refusal of the FDA to permit the import or export of products
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Consent decrees, corporate integrity agreements, debarment, or exclusion from federal healthcare programs
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Mandated modification of promotional materials and labeling and the issuance of corrective information
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The issuance of safety alerts, Dear Healthcare Provider letters, press releases, and other communications containing warnings or other safety information about the product
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Injunctions or the imposition of civil or criminal penalties
The FDA closely regulates the marketing, labeling, advertising, and promotion of biologics. A company can make only those claims relating to safety, efficacy, purity, and potency that are approved by the FDA and in accordance with the provisions of the approved label. However, companies may share truthful and not misleading information that is otherwise consistent with a product’s FDA approved labeling. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses. Failure to comply with these requirements can result in, among other things, one or more of adverse publicity, warning letters, corrective advertising, civil penalties, criminal penalties, government investigation, debarment, or exclusion from participation in federal health care programs. Physicians may prescribe legally available products for uses that are not described in the product’s labeling and that differ from those tested by us and approved by the FDA. Such off-label uses are common across medical specialties. Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the practice of medicine by physicians or their choice of treatments. The FDA does, however, regulate manufacturer’s communications on the subject of off-label use of their products.
Orange Book; Purple Book
The FDA publishes the Orange Book for products following the NDA pathway and the Purple Book for products following the BLA pathway. Our product candidates will be listed in the Orange Book after approval for marketing or listed in the Purple Book after license for marketing, as applicable.
The Orange Book contains information about all FDA-approved drug products regulated by CDER and their exclusivities. The Orange Book also includes patent information. The applicant provides patent information to the FDA as part of its NDA, or after patent grant. Orange Book patent listing provides a 30 month stay of FDA approval of any generic submitted via an ANDA. An applicant submitting an ANDA must, for each patent listed against the approved drug in the Orange Book, either (i) state that the ANDA applicant is not seeking approval for a patented method of use, (ii) ask the FDA to delay approval until that patent is expired (a “Paragraph III” certification), or (iii) attest that the patent is invalid, unenforceable, or will not be infringed by the generic product (a “Paragraph IV” certification), which can trigger ANDA litigation over the associated patent.
The purple book contains information about all FDA-licensed biological products regulated by CBER, including licensed biosimilar and interchangeable products and their reference products, and FDA-licensed allergenic, cellular and gene therapy, hematologic, and vaccine products regulated by CBER. The Purple Book includes granted exclusivity information. The Purple Book also includes for each biological product a list of patents identified to a biosimilar applicant during biosimilar litigation under the BPCIA.
Exclusivities
Some of our product candidates may be eligible for exclusivities provided under various FDA programs. Exclusivity refers to certain delays and prohibitions on approval of competitor drugs available under an applicable statute that take effect upon
FDA’s approval of a biologics or drug, or of certain supplements to the BLA or NDA. Exclusivities do not convey any advantage in or shorten the duration of the regulatory review and approval process.
The Pediatric exclusivity might apply to most or all of our product candidates. For an applicant to be able to take advantage of the Pediatric exclusivity, the FDA must make a written request for a pediatric study to be performed, although the applicant may request for the FDA to make the request for a pediatric study. After the study is performed, the applicant may request Pediatric exclusivity. If granted, 180 days of patent term are added to the patent term listed in the Orange Book.
With respect to other FDA exclusivity programs, in some cases the exclusivity programs will not apply to our product candidates due to our unique formulation or oral capsule technology, or it is unclear the extent to which they will apply, or they will not apply to most or all of the product candidates in our pipeline.
For exclusivity programs that apply to our product candidates, we will consider pursuing such exclusivities at the appropriate time. However, we do not expect any of the exclusivities to provide us significant competitive advantage. Exclusivities granted to our competitors could block approval and/or commercialization of one or more of our product candidates, possibly for several years.
Other healthcare laws and compliance requirements
Pharmaceutical companies are subject to additional healthcare regulation and enforcement by the federal government and by authorities in the states and foreign jurisdictions in which they conduct their business. Such laws include, without limitation: the federal Anti-Kickback Statute, the federal False Claims Act, the Sunshine Act, the federal Health Insurance Portability and Accountability Act of 1996, (“HIPAA”), and similar foreign, federal, and state fraud and abuse, transparency, and data privacy and security laws.
The federal Anti-Kickback Statute prohibits, among other things, persons and entities from knowingly and willfully soliciting, receiving, offering or paying remuneration, to induce, or in return for, either the referral of an individual, or the purchase or recommendation of an item or service for which payment may be made under any federal healthcare program. The term remuneration has been interpreted broadly to include anything of value, including stock options. The federal Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on one hand and prescribers, purchasers, and formulary managers, among others, on the other. There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution, but they are drawn narrowly and require strict compliance in order to offer protection. Our activities, including our engagement of consultants, may be alleged to be intended to induce prescribing, purchasing, or recommending and so may be subject to scrutiny if they do not qualify for an exception or safe harbor. Failure to meet all of the requirements of an applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the federal Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all relevant facts and circumstances. Our practices may not in all cases meet all of the criteria for protection under a statutory exception or regulatory safe harbor. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. In addition, a claim including items or service resulting from a violation of the federal Anti-Kickback Statute, can result in a false or fraudulent claim for purposes of the federal False Claims Act.
Civil and criminal false claims laws, including the federal False Claims Act, which can be enforced through civil whistleblower or qui tam actions, and civil monetary penalty laws prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment to the federal government, including federal healthcare programs, that are false or fraudulent. For example, the federal False Claims Act prohibits any person or entity from knowingly presenting, or causing to be presented, a false claim for payment to the federal government or knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government.
The U.S. federal Physician Payments Sunshine Act requires applicable manufacturers of prescription drugs, devices, biological products, or medical supplies subject to FDA approval or clearance for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program, with specific exceptions, to annually report to the Centers for Medicare & Medicaid Services (“CMS”) information related to certain payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), other healthcare professionals (such as physician assistants and nurse practitioners), and teaching hospitals, including ownership and investment interests held by physicians and their immediate family members.
HIPAA created additional federal criminal statutes that prohibit, among other things, executing a scheme to defraud any healthcare benefit program, including private third-party payors, and making false statements relating to healthcare matters. In addition, HIPAA, as amended the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and their implementing regulations, impose certain requirements on HIPAA covered entities, which include certain healthcare providers,
healthcare clearinghouses, and health plans, and individuals and entities, known as business associates, that provide services for or on behalf of the covered entities that involve individually identifiable health information as well as their covered subcontractors, relating to the privacy, security, and transmission of individually identifiable health information.
We are also subject to additional similar U.S. state and foreign law equivalents of each of the above federal laws, which, in some cases, differ from each other in significant ways, and may not have the same effect, complicating compliance efforts.
If our operations are found to be in violation of any of such laws or any other governmental regulations that apply, we may be subject to penalties including, without limitation, significant civil, criminal, and administrative penalties, damages, fines, exclusion from participating in government-funded healthcare programs such as Medicare and Medicaid or similar programs in other countries or jurisdictions, government investigations, consent decrees, corporate integrity agreements, integrity oversight and reporting obligations to resolve allegations of non-compliance, disgorgement, imprisonment, contractual damages, reputational harm, diminished profits and market share, and the curtailment or restructuring of our operations.
Healthcare reform
The United States and some foreign jurisdictions are considering or have enacted a number of reform proposals to change the healthcare system. There is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality, or expanding access.
In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by federal and state legislative initiatives, including those designed to limit the pricing, coverage, and reimbursement of pharmaceutical and biopharmaceutical products, especially under government-funded health care programs, and increased governmental control of drug pricing. For example, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (collectively, the “ACA”), which was enacted in March 2010, contains a number of provisions of particular import to the pharmaceutical and biotechnology industries, including, but not limited to, those governing enrollment in federal healthcare programs, a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated, and annual fees based on pharmaceutical companies’ share of sales to federal health care programs. There have been executive, judicial and Congressional challenges to certain aspects of the ACA. For example, on June 17, 2021, the United States Supreme Court dismissed a challenge on procedural grounds that argued the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress. Thus, the ACA will remain in effect in its current form. It is possible that the ACA will be subject to additional challenges in the future. It is unclear how such challenges and the healthcare reform measures of the Biden administration will impact the ACA, or the impact any changes to the ACA may have on our ability to commercialize products or the prices we are able to obtain.
Other legislative changes have been proposed and adopted since the ACA was enacted, including aggregate reductions of Medicare payments to providers of 2% per fiscal year and reduced payments to several types of Medicare providers. These reductions went into effect in April 2013 and, due to subsequent legislative amendments to the statute, including the Infrastructure Investment and Jobs Act, will remain in effect through 2031 unless additional action is taken by Congress. COVID-19 relief legislation suspended the 2% Medicare sequester from May 1, 2020 through March 31, 2022. Under current legislation the actual reduction in Medicare payments will vary from 1% in 2022 to up to 3% in the final fiscal year of this sequester. Further, Congress is considering additional health reform measures.
Moreover, there has recently been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Presidential executive orders, Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products. For example, in July 2021, the Biden administration released an executive order, “Promoting Competition in the American Economy,” with multiple provisions aimed at prescription drugs. In response to Biden’s executive order, on September 9, 2021, the U.S. Department of Health and Human Services (“HHS”) released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and sets out a variety of potential legislative policies that Congress could pursue as well as potential administrative actions HHS can take to advance these principles. No legislation or administrative actions have been finalized to implement these principles.
At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. Further, it is possible that additional governmental action is taken in response to the COVID-19 pandemic.
Data privacy and security obligations
In the ordinary course of our business, we may collect, receive, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit, share and store (commonly known as processing) proprietary, confidential and sensitive information, including personal data, intellectual property, trade secret, and proprietary information owned or controlled by ourselves or third parties (collectively, sensitive information). We, and the third parties upon whom we rely, use information technology, software and services to process other sensitive information. Accordingly, we are, or may become, subject to numerous data privacy and security obligations, including federal, state, local, and foreign laws, regulations, guidance, and industry standards related to data privacy and security. Such obligations may include, without limitation, the Federal Trade Commission Act, the California Consumer Privacy Act of 2018 (“CCPA”), the European Union’s General Data Protection Regulation 2016/679 (“EU GDPR”) and the EU GDPR as it forms part of United Kingdom law by virtue of section 3 of the European Union (Withdrawal) Act 2018 (“UK GDPR”). In addition, several states within the United States have enacted or proposed data privacy and security laws. For example, Virginia passed the Consumer Data Protection Act, and Colorado passed the Colorado Privacy Act.
Obligations related to the processing of personal data worldwide is rapidly evolving. The number and scope of data privacy and security laws, regulations and other obligations is changing, subject to differing applications and interpretations, and may be inconsistent among jurisdictions, or in conflict with other data processing obligations. Efforts to ensure that our current and future business arrangements, including our relationship with our CROs or other vendors who process data on our behalf, comply with applicable data privacy and security obligations will involve substantial costs.
Foreign data privacy and security laws (including but not limited to the EU GDPR and UK GDPR) impose significant and complex compliance obligations on entities that are subject to those laws. For example, the EU GDPR, imposes several requirements relating to the consent of the individuals to whom personal data relates, the information provided to the individuals, the security and confidentiality of the personal data, data breach notification, and the use of third-party processors in connection with the processing of personal data. Additional requirements may include limiting personal data processing to only what is necessary for specified, explicit, and legitimate purposes; requiring a legal basis for personal data processing; requiring the appointment of a data protection officer in certain circumstances; requiring data protection impact assessments in certain circumstances; limiting the collection and retention of personal data; formalizing a heightened and codified standard of data subject consents; requiring the implementation and maintenance of technical and organizational safeguards for personal data; and mandating the appointment of representatives in the UK and/or the EU in certain circumstance. European data protection laws, such as the EU GDPR, also impose strict rules on the transfer of personal data out of the European Economic Area.
Various data privacy and security laws in the U.S. also impose compliance obligations. For example, the CCPA imposes obligations on covered businesses to provide specific disclosures related to a business’s collection, use, and disclosure of personal data and to respond to certain requests from California residents related to their personal data (for example, requests to know of the business’s personal data processing activities, to delete the individual’s personal data, and to opt out of certain personal data disclosures). Also, the CCPA provides for civil penalties and a private right of action for data breaches which may include an award of statutory damages. Although the CCPA exempts certain data processed in the context of clinical trials, the CCPA, to the extent applicable to our business and operations, may increase our compliance costs and potential liability with respect to the personal data we maintain about California residents. In addition, the California Privacy Rights Act of 2020, or CPRA, effective January 1, 2023, will expand the CCPA. The CPRA will, among other things, give California residents the ability to limit the use of certain sensitive personal data, establish restrictions on personal data retention, expand the types of data breaches that are subject to the CCPA’s private right of action, and establish a new California Privacy Protection Agency to implement and enforce the new law. U.S. federal and state consumer protection laws require us to publish statements that accurately and fairly describe how we handle personal data and choices individuals may have about the way we handle their personal data
Employees and Human Capital Resources
As of December 31, 2021, we had 114 full-time employees and no part-time employees. The majority of our employees are based at our facilities in San Jose and Milpitas, California, with a contingent of employees based outside of California. None of our employees are represented by a labor union or are a party to a collective bargaining agreement and we believe that we have good relations with our employees.
Attracting and Retaining Talent
Our human capital objectives include, as applicable, identifying, recruiting, retaining, incentivizing, and integrating our existing and additional employees. The principal purposes of our equity incentive plans are to attract, retain, and motivate selected employees, consultants, and directors through the granting of stock-based compensation awards. In addition, we have added a People Ops team that has launched multiple initiatives focused on employee health and engagement, inter and intra team building and
collaboration, and individual career development planning. We have implemented a health engagement program that is completed by all new hires. We have also implemented a health engagement check-in for all existing employees. This is all in support and encouragement of a more collaborative environment at the company, which is vital to our efforts to recruit, retain and develop our employees.
Compensation and Benefits
The success of our business is fundamentally connected to the well-being of our employees. We provide market competitive compensation and benefits programs. In addition to salaries, these programs include potential annual discretionary bonuses, broad-based equity awards, a 401(k) plan, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave and flexible work schedules, among others. These benefits provide our employees choices where possible so they can customize their benefits to meet their needs and the needs of their families.
COVID-19 and Employee Safety
In response to the COVID-19 pandemic and the related guidelines and orders issued by federal, state and local governments, we continue to restrict access to our offices in California, limit work gatherings, and suspend non-essential business travel. Many of our employees are conducting their work remotely, wholly or in part, to reduce the risk of a COVID-19 outbreak in our facilities. We have modified workspaces for employees that are essential to continue to work in the office. The safety, health, and well-being of our employees is paramount. As such, we will consider ongoing government regulations and local health conditions in establishing and implementing workplace practices.
Initial Public Offering
We became publicly traded in July 2021 through the IPO in which the Company sold 7,666,667 shares of its Class A common stock, including shares issued pursuant to the exercise in full of the underwriters’ option, for cash consideration of $11.00 per share. We received approximately $73.6 million in net proceeds, after deducting underwriting discounts, offering costs and commissions. We used the proceeds from the IPO to purchase 7,666,667 newly issued economic nonvoting Class A units of Rani LLC. Details regarding the IPO can be found in “Notes to the Consolidated Financial Statements” below.
Capital Structure
We have three classes of common stock. Our Class A common stock has one vote per share, our Class B common stock has 10 votes per share, and our Class C common stock has no voting rights, except as otherwise required by law.
All shares of our Class B common stock are held by certain stockholders who held equity in Rani LLC before the IPO. The shares beneficially owned by the Continuing LLC Owners represent more than 80% of the total voting power of our outstanding capital stock as of March 15, 2022. The Continuing LLC Owners will be able to determine or significantly influence any action requiring the approval of our stockholders, including the election of our board of directors, the adoption of amendments to our certificate of incorporation and bylaws, and the approval of any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transaction.
Shares of our Class C common stock are not issued nor outstanding and we have no current plans to issue shares of Class C common stock. These shares will be available to be used in the future to further strategic initiatives, such as financings or acquisitions, or issue future equity awards to our service providers. Because the shares of Class C common stock have no voting rights (except as otherwise required by law), the issuance of such shares will not result in further dilution to the voting power held by the Continuing LLC Owners.
The multi-class structure of our common stock is intended to ensure that, for the foreseeable future, the Continuing LLC Owners continue to control or significantly influence our governance which we believe will permit us to continue to prioritize our long-term goals rather than short-term results, to enhance the likelihood of stability in the composition of our board of directors and its policies, and to discourage certain types of transactions that may involve an actual or threatened acquisition of us.
Corporate Information
Our principal offices are located at 2051 Ringwood Ave., San Jose, California 95131. Our telephone number is 408-457-3700. Our website address is www.ranitherapeutics.com. References to our website address do not constitute incorporation by reference of the information contained on the website, and the information contained on the website is not part of this document.
Copies of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements, and all amendments to these reports, filed with or furnished to the Securities and Exchange Commission (“SEC”) pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as amended may be obtained from the SEC’s on-line database, which is located at www.sec.gov. Our common stock is traded on the Nasdaq Stock Market (“Nasdaq”) under the symbol “RANI.”
We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012. As such, we are eligible for exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and reduced disclosure obligations regarding executive compensation.
Item 1A. Risk Factors.
Investing in our Class A common stock involves a high degree of risk. You should carefully consider the risks described below, including our consolidated financial statements and related notes, as well as the other information in this report, and in our other public filings, before investing in our Class A common stock. While we believe that the risks and uncertainties described below are the material risks currently facing us, additional risks that we do not yet know of or that we currently think are immaterial may also arise and materially affect our business. If any of the following risks materialize, our business, financial condition and results of operations could be adversely affected. In that case, the trading price of our Class A common stock could decline. You should consider all of the risk factors described when evaluating our business.
Risks Related to Our Limited Operating History, Financial Position and Capital Requirements
We have a very limited operating history, have incurred operating losses since our inception and expect to incur significant losses for the foreseeable future. We may never generate any commercial product revenue or become profitable or, if we achieve profitability, we may not be able to sustain it.
Biologics delivery is a highly speculative undertaking and involves a substantial degree of risk. We are an early clinical stage biopharmaceutical company with a very limited operating history upon which you can evaluate our business and prospects. We were formed in 2012, and to date, we have devoted the majority of our resources to research and development, manufacturing automation and scaleup, and establishing our intellectual property portfolio. RT-101 and RT-102 are in early clinical development, while our other product candidates remain in formulation and preclinical development. We have not yet demonstrated an ability to successfully complete pivotal clinical trials, obtain regulatory approvals, manufacture a commercial scale product, or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization. Consequently, any predictions made about our future success or viability may not be as accurate as they could be if we had a history of successfully developing and commercializing oral biologics products.
We have incurred significant operating losses since our formation in 2012. Our net loss for the year ended December 31, 2021 was approximately $53.1 million. As of December 31, 2021, we had an accumulated deficit of $8.3 million. Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders, deficit and working capital. The majority of our losses have resulted from expenses incurred in connection with research and development, manufacturing automation and scaleup, and establishing our intellectual property portfolio. All of our product candidates will require substantial additional development time and resources before we would be able to apply for or receive regulatory approvals and begin generating revenue from product sales. We expect to continue incurring significant research, development, manufacturing and other expenses related to our ongoing business operations and product development, and as a result, we expect to continue incurring losses for the foreseeable future. We also expect these losses to increase as we continue our development of, and seek regulatory approvals for, our product candidates.
We do not anticipate generating revenue from sales of products for the foreseeable future, if ever, and our product candidates are in preclinical and early-stage clinical trials. If any of our product candidates fail in preclinical studies or clinical trials or do not gain regulatory approval, or even if approved, fail to achieve market acceptance, we may never become profitable. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Failure to become and remain profitable may adversely affect the market price of our Class A common stock and our ability to raise capital and continue operations.
If one or more of our product candidates is approved for commercial sale and we retain commercial rights, we anticipate incurring significant costs associated with manufacturing and commercializing such approved product. Therefore, even if we are able to generate revenue from the sale of any approved product, we may never become profitable.
We are an early clinical stage biopharmaceutical company with no approved products and no historical commercial product revenue, which makes it difficult to assess our future prospects and financial results.
We are an early clinical stage biopharmaceutical company with a limited operating history upon which you can evaluate our business and prospects. Biologics development, especially as it relates to biologic-device combination products, is a highly speculative undertaking and involves a substantial degree of uncertainty. Our operations to date have been limited to developing our technology and undertaking preclinical studies and early clinical trials of our product candidates, which consist of investigational biologics delivered via the RaniPill capsule. We completed a Phase 1 clinical trial of RT-101 in Australia, and have completed preclinical studies of other product candidates. We plan to initiate Phase 1 clinical trials of certain of these product candidates in 2022 and in 2023. We initiated a Phase 1 clinical trial of RT-102 in Australia in March 2022. As an early clinical stage company, we have not yet demonstrated an ability to generate revenue or successfully overcome many of the risks and uncertainties frequently encountered by companies in new and rapidly evolving fields such as biologics development and delivery. Consequently, the ability to accurately assess our future operating results or business prospects is significantly more limited than if we had a longer operating history or approved products on the market.
We expect that our financial condition and operating results will fluctuate significantly from period to period due to a variety of factors, many of which are beyond our control, including, but not limited to:
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the clinical outcomes from the continued development of our product candidates;
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occurrence of adverse events or serious adverse events in preclinical studies or clinical trials of our product candidates;
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