Item 1. Business
Our Business
The
business plan of the company will no longer be focused on a chewing gum delivery system but it will re-focus its activities
to the development of cannabinoid, cannabinoid-like, and non-cannabinoid pharmaceutical active pharmaceutical
ingredients (APIs), pharmaceutical medicines made from cannabinoid, cannabinoid-like, and non- cannabinoid
APIs and the development of ingredients and products with the aim of achieving European novel food approval of cannabinoid-based,
cannabinoid-like and non-cannabinoid ingredients and products .In addition, the company
plans to develop such bulk ingredients for supply into the cosmetic sector.
Because
the IP relating to the development of a chewing gum with nutraceutical/functional ingredients is not relevant to
the pharmaceutical development that the
company plans to undertake, the IP surrounding the chewing gum may no longer
benefit the company’s operations going forward. While company has not yet decided on the proper disposition of the
IP at present, the company will likely divest ownership in the near future.
The new business
plan of the company is for the company’s operations to be repositioned as a fully regulatory- compliant pharmaceutical
company specializing in the development of the following:
•
cannabinoid, cannabinoid-like and non-cannabinoid pharmaceutical
active pharmaceutical ingredients (APIs) globally;
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•
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pharmaceutical medicines made
from cannabinoid, cannabinoid-like and non-cannabinoid APIs globally;
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•
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cannabinoid, cannabinoid-like
and non-cannabinoid food-grade ingredients
with the aim of achieving European novel
food approval of such ingredients;
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•
non-pharmaceutical (nutraceutical / dietary supplement) products
containing cannabinoids, cannabinoid-like and non-cannabinoid food-grade
ingredients with the aim of achieving European novel
food approval of such products; and
•
Supply of cosmetic ingredients to
potential customers who may develop products containing cannabinoids, cannabinoid-like and
non-cannabinoid ingredients
The controlled
drugs / cannabinoid pharmaceutical market worldwide has experienced exponential growth over the past few
years in the development of cannabinoid medicines. It is Alterola’s intention to develop ingredients and products
on a global basis, fully compliant with the appropriate international laws and regulations
and also compliant with the relevant national laws and regulations on a territory-by-territory basis.
In December 2020, the company retained new management
and board members that have experience in the pharmaceutical, botanical and nutraceutical
industries. Further to this objective, the company is also interested in recruiting
key executives and personnel that have experience in the controlled drugs / cannabinoid medicines industry. The focus will be on
recruiting outstanding talents that have contributed or can contribute more in the future with the company’s expansion
plans.
The company also has interest in licensing / acquiring
other IP from companies that have IP pertinent to the aforementioned products the company plans to develop. Under consideration
are companies that have existing pharmaceutical research and/or development or manufacturing
capability or associated IP. Some of these companies have IP which is available to
integrate into our company strategy. These acquisition
or in-licensing opportunities are expected to facilitate the company to develop API
and medicines globally and food-grade ingredients and products for the food and beverage industry in Europe.
Acquisition of ABTI Pharma
On January 19, 2021, we entered into an Stock Transfer
Agreement (the “Agreement”) with ABTI Pharma Limited, a company registered in England and Wales (“ABTI
Pharma”), pursuant to which the Company will acquire all of the outstanding shares of capital stock of ABTI Pharma from
its shareholders in exchange for 600,000,000 shares of the Company pro rata to the ABTI Pharma shareholders. The shares have
been issued in anticipation of the closing and the transaction will close upon the ABTI Pharma Limited Shares being
transferred to the company which will occur upon the filing by the company of its outstanding
annual report and Form 10-K for 2020.and its quarterly report for the period 01 Oct 2020
to 31 December 2020.
Pursuant to the Agreement, from the date of execution, the
Company will provide funding to ABTI Pharma to pay for operating expenses including salaries, office expenses and additional expenses
or projects in the amount of US$500,000 within fifteen (15) days from closing the Agreement and shall fund an additional US $200,000 every
30 days thereafter until a total funding of US $1,100,000 has been delivered.
Further under the Agreement, Alterola will endeavor
to raise a total of at least $50,000,000 with $45,000,000 in net proceeds and Alterola will arrange an underwriting commitment
of the first ($25,000,000 USD) to be funded at a price of not less than $1.00 per share within 45 days of execution of the Agreement.
As part of the Agreement, Amsterdam Café
Holdings Limited has agreed to cancel and return to the Company 200,000,000 shares it holds and Bulls Run Investments Limited will
be issued 19,100,000 shares of common stock.
Operations of ABTI Pharma
ABTI Pharma Ltd is a UK-based pharmaceutical company
developing cannabinoid, cannabinoid-like, and non- cannabinoid pharmaceutical active pharmaceutical ingredients (APIs), pharmaceutical
medicines made from cannabinoid, cannabinoid-like, and non-cannabinoid APIs and targeting European novel food approval of cannabinoid-based,
cannabinoid-like and non-cannabinoid ingredients and products .In addition, the company is seeking to develop such bulk ingredients
for supply into the cosmetic sector.
ABTI Pharma Ltd is a UK-based pharma company working
with cannabinoid and cannabinoid like molecules. It has three areas of focus:
1)
Development of regulated pharmaceuticals (human and animal health) and regulated food products.
This has been achieved via the strategic acquisition of Phytotherapeutix Ltd.
2)
Production of low cost of goods Active Pharmaceutical Ingredient (API) and food-grade ingredients
(supported by the strategic acquisition of Ferven Ltd), and
3)
Formulation, and drug delivery, providing improved bioavailability, solubility and stability
(supported by the exclusive licensing of IP and technology from Nano4M Ltd).
Phytotherapeutix Ltd, is a company which has
been acquired, which has generated a number of molecules with patents pending, some of which have demonstrable pharmacological
activity, similar to that of CBD. This means that some of these molecules are anticipated to have a similar market potential to
CBD across a range of therapeutic areas.
Ferven
Ltd, is a company, which is looking to produce cannabinoids by fermentation. The exclusively licensed organism has the potential
to be genetically modified to produce multiple cannabinoids at a very low cost of goods. It is anticipated that the selected genetically
modified organisms will grow very quickly, which in turn, reduces the cost of
production.
Nano4M Ltd is a company which has exclusively licensed
its nano-formulation patents and know-how to ABTI Pharma Ltd.
Additionally,
in principle agreements have been reached to bring a number of other IP-protected technologies into Alterola via the deal with
ABTI Pharma.
ABTI Pharma management has extensive proven experience,
know-how and connections in the cannabinoid medicines sector, and is looking to utilize this knowledge and experience for the development
of such medicines from existing cannabinoids and cannabinoid-like molecules.
Competition
Pharmaceutical Sector
The cannabinoid-based
and cannabinoid-like pharmaceutical medicine research and development sector and is
and will likely remain competitive. In general, the biotechnology and pharmaceutical industries are characterized by rapidly
advancing technologies, intense competition, and a strong emphasis on proprietary drugs / medicines.
We expect that Alterola will be required to compete
with a variety of multinational pharmaceutical companies and specialized biotechnology companies,
as well as drugs and processes being developed at universities and other research institutions. Our competitors may develop or
may already have developed drugs comparable or competitive with our pipeline drug
candidates. Competitive therapeutic treatments for diseases, disorders and medical conditions that are included
in our pipeline development projects have already been approved by the pharmaceutical regulatory bodies around the world
(e.g. FDA, EMA etc.) and used / prescribed by the medical community and any new treatments that may enter the market would face
fierce competition.
We are aware
of a number of companies that are engaged in cannabinoid-based drug development. In addition, several other
U.S.-based companies are in early stage discovery and preclinical development utilizing synthetic and/or plant- derived
cannabinoids such as CBD and/or THC.
Non-Pharmaceutical
Sector
Due to Federal regulation, it is not currently
possible to develop THC or CBD-containing products for non- pharmaceutical use (e.g. as food
ingredients or dietary supplements) in the USA. However, it is possible to develop cannabinoid- containing ingredients and
products in the food sector in Europe through the Novel Food Approvals route.
Again this sector
is and will likely remain competitive in territories where it is legal to develop and sell such products. Further it is
also possible to develop cannabinoid-containing ingredients in the cosmetics sector.
For both pharmaceutical
and non-pharmaceutical markets, established companies may have a competitive advantage due to their size and experiences, positive
cash flows and institutional networks. Many of our pharma and non-pharma competitors
may have significantly greater financial, technical and human resources than we do. Due to these factors, our competitors
may have a range of competitive advantages and may obtain regulatory approval of their active pharmaceutical
ingredient (API), or medicines; or food ingredients or food products or cosmetic ingredients before we are
able to develop or commercialize our pharma or non pharma active ingredients or products. Our competitors may also develop
ingredients or products that are safer, more effective, more widely used and less expensive than ours.
Furthermore, some of these competitors may make acquisitions
or establish collaborative relationships among themselves or with third parties to increase
their ability to rapidly gain market share and/or increase their ingredient or product lines.
Mergers and
acquisitions in the pharmaceutical and biotechnology and non-pharmaceutical industries may result in even more resources
being concentrated among a smaller number of competitors. Smaller and other early-stage companies,
such as ours, may also prove to be significant competitors, particularly through collaborative
arrangements with large and established companies. We aim to compete with large and small companies in recruiting and retaining
qualified scientific, management and commercial
personnel, and using our management knowhow and expertise in the sector to develop ingredients and products in a compliant manner,
as well as in acquiring technologies complementary to our development programs.
Intellectual Property:
Through the acquisition
of ABTI Pharma, Alterola has acquired ABTI Pharma’s IP portfolio, which includes:
1)
IP including patent applications pertaining
to novel compounds for development of pharmaceutical drug candidates and their therapeutic
use;
2)
IP (including organisms, protocols and knowhow) pertaining to low
cost of goods production of Active Pharmaceutical Ingredient (API) and food-grade ingredients;
and
3)
IP including granted patents pertaining
to particle engineering technology, formulation, and drug delivery technologies, which will
provide improved drug performance.
In addition,
ABTI Pharma have in principle agreements to
bring in additional complimentary technologies with incumbent IP.
Regulatory Matters Pharmaceuticals
USA
As a development stage company that intends to
have its pipeline drug candidates approved in the U.S., we are subject to extensive regulation by regulatory agencies. The U.S.
Food, Drug, and Cosmetic Act and its implementing regulations set forth, among other things, requirements for the research, testing,
development, manufacture, quality control, safety, effectiveness, approval, labeling, storage, record keeping, reporting, distribution,
import, export, advertising and promotion of our drugs (medicines). Generally, our activities in other countries will be subject
to regulations that are similar in nature and scope as those in the United States, although there can be important differences.
Additionally, some significant aspects of regulation in the European Union are addressed in a centralized way through the European
Medicines Agency (“EMA”) and the European Commission, but country- specific regulation remains essential in many respects.
The process of obtaining regulatory marketing approvals and the subsequent compliance with appropriate federal, state, local and
foreign statutes and regulations require the expenditure of substantial time and financial resources and we may not be successful.
Given that the active ingredients present in our
APIs, food ingredients and cosmetic ingredients are in some cases considered to be controlled substances in certain jurisdictions
/ territories, there are additional regulations which are applicable to the research, development, import, receipt, possession,
storage, preparation, extraction, synthesis, biosynthesis, manufacture, processing, analysis, release, formulation, dispensing,
packaging and labelling, import/export, transport, commercialization, advertising and supply / distribution of Controlled Substances.
This means that Alterola needs to be compliant with competent authorities such as the DEA (USA), The Home Office (UK) and the corresponding
authorities in each country.
We intend to conduct some of our research and
development relating to our drug candidates in the United States, at which time, our research and development, future manufacturing,
distribution and sale of our drugs will become subject to the United States Federal Controlled Substances Act of 1970 and regulations
promulgated thereunder.
While cannabis is a Schedule I controlled substance,
drugs approved for medical use in the United States that contain cannabis or cannabis extracts must be placed in Schedules II-V,
since approval by the FDA satisfies the “accepted medical use” requirement. If any of our pipeline drug candidates
will receive approval by the FDA, it must be listed by the DEA as an appropriately scheduled controlled substance to be allowed
for commercialization.
Consequently, the manufacture, importation,
exportation, domestic distribution, storage, sale and legitimate use of our future drugs will be subject to a significant degree
of regulation by the DEA. In addition, individual states in the United States have also established controlled substance laws and
regulations. Though state-controlled substances laws often mirror federal law, because the states are separate jurisdictions, they
may separately schedule our drugs.
Europe
It is the company’s intention have its pipeline
drug candidates approved in countries in addition to the USA and hence we are subject to extensive regulation by other international
regulatory agencies, and the applicable local laws and regulations.
Similarly to the U.S. Food,
Drug, and Cosmetic Act in the USA and its implementing regulations, there are similar laws and regulations in Europe for the research,
testing, development, manufacture, quality control, safety, effectiveness, approval, labeling, storage, record keeping, reporting,
distribution, import, export, advertising and promotion of our drugs (medicines). Again, our activities in Europe will be subject
to regulations that are similar in nature and scope as those in the United States, although there can be important differences.
Our pipeline candidates may be developed or
approved through the Centralized Procedure or Decentralized Procedure through the or through the Mutual Recognition Procedure (MRP)
through the European Medicines Agency (“EMA”) and the European Commission; however it should be noted that country-specific
regulation remains essential in many respects. The process of obtaining regulatory marketing approvals and the subsequent compliance
with the appropriate national, federal, state, local and foreign statutes and regulations require the expenditure of substantial
time and financial resources and we may not be successful.
Again, given that the active ingredients present
in our APIs, food ingredients and cosmetic ingredients are in some countries are considered to be controlled substances in certain
European jurisdictions / territories, there are additional regulations which are applicable to the research, development, import,
receipt, possession, storage, preparation, extraction, synthesis, biosynthesis, manufacture, processing, analysis, release, formulation,
dispensing, packaging and labelling, import/export, transport, commercialisation, advertising and supply / distribution of Controlled
Substances. This means that Alterola needs to be compliant with each competent authority in each European country as applicable.
Japan
It is the company’s intention have its pipeline drug
candidates in due course approved in Japan and hence we are subject to extensive regulation by the pharmaceutical regulatory authority
of Japan: the Pharmaceutical and Food Safety Bureau (PFSB) of the Japanese Ministry of Health, Labor and Welfare (MHLW), and the
Japanese applicable local laws and regulations.
Japan has its own laws and regulations for the
research, testing, development, manufacture, quality control, safety, effectiveness, approval, labeling, storage, record keeping,
reporting, distribution, import, export, advertising and promotion of our drugs (medicines).
Again, given that the active ingredients present
in our APIs, food ingredients and cosmetic ingredients are in some countries are considered to be controlled substances in Japan,
there are additional regulations which are applicable to the research, development, import, receipt, possession, storage, preparation,
extraction, synthesis, biosynthesis, manufacture, processing, analysis, release, formulation, dispensing, packaging and labelling,
import/export, transport, commercialization, advertising and supply / distribution of Controlled Substances. This means that Alterola
needs to be compliant with the Japanese competent authority requirements.
The process of obtaining regulatory marketing
approvals and the subsequent compliance with the appropriate national and local statutes and regulations of Japan require the expenditure
of substantial time and financial resources and we may not be successful.
Rest of the World
It is the company’s intention have its pipeline
drug candidates in due course approved in other countries around the world (Rest of World) and hence we are subject to extensive
regulation by the various national pharmaceutical regulatory authorities which govern the various countries, and the applicable
local laws and regulations.
Different countries have different laws and
regulations for the research, testing, development, manufacture, quality control, safety, effectiveness, approval, labeling, storage,
record keeping, reporting, distribution, import, export, advertising and promotion of our drugs (medicines).
Again, given that the active
ingredients present in our APIs, food ingredients and cosmetic ingredients are in some countries are considered to be controlled
substances in some countries, there are additional regulations which are applicable to the research, development, import, receipt,
possession, storage, preparation, extraction, synthesis, biosynthesis, manufacture, processing, analysis, release, formulation,
dispensing, packaging and labelling, import/export, transport, commercialization, advertising and supply / distribution of Controlled
Substances. This means that Alterola needs to be compliant with each competent authority in each country as applicable.
The process of obtaining regulatory
marketing approvals and the subsequent compliance with the appropriate national, federal, state, local and foreign statutes and
regulations of other countries (ex-US, Europe and Japan) require the expenditure of substantial time and financial resources and
we may not be successful.
The Regulatory Process for the approval of
New Medicines
The company operate in a highly controlled new drugs
/ medicines regulatory environment. Strict regulations establish requirements relating to demonstration of quality, safety and
efficacy of a medicine. Regulations also cover preclinical and clinical research and development, manufacturing and reporting procedures,
both pre- and post- approval. Failure to comply with regulations can result in stringent sanctions, including product recalls,
withdrawal of approvals, seizure of products and criminal prosecution. Further, many countries have stringent regulations relating
to the possession and use of cannabis or cannabinoid or cannabis-based medicines.
Before obtaining regulatory approvals for the commercial
sale of our future drug candidates, we must demonstrate that the proposed medicine demonstrates quality, safety and efficacy. From
a quality perspective this is done through demonstrating appropriate chemistry and manufacturing controls (CMC), and from a safety
and efficacy perspective, this is done through demonstrating that our drug candidates are safe and effective in preclinical studies
and clinical trials.. Historically, the results from preclinical studies and early clinical trials often have not accurately predicted
results of later clinical trials. In addition, many pharmaceuticals have shown promising results in clinical trials but subsequently
failed to establish sufficient safety and efficacy results to obtain necessary regulatory approvals.
We expect to incur substantial expense for, and
devote a significant amount of time to, the development of quality ingredients and products as well as preclinical studies and
clinical trials. Many factors can delay the commencement and rate of completion of clinical trials, including the inability to
recruit patients at the expected rate, the inability to follow patients adequately after treatment, the failure to manufacture
sufficient quantities of materials used for clinical trials, and the emergence of unforeseen safety issues and governmental and
regulatory delays. If a drug candidate fails to demonstrate safety and efficacy in clinical trials, this failure may delay development
of other drug candidates and hinder our ability to develop and / or conduct related preclinical studies and clinical trials.
Additionally, if we have pipeline candidate
failures, we may also be expected to experience challenges, delays or even the inability to obtain additional financing at acceptable
terms and conditions to develop these or other drug candidates.
Governmental authorities in all major markets
require that a new drug be approved or exempted from approval before it is marketed, and have established high standards for technical
appraisal, which can result in an expensive and lengthy approval process. The time to obtain approval of a new medicine or indication
varies by country and some drugs are never approved. The lengthy process of conducting new product or formulation development,
preclinical studies and clinical trials, seeking approval and the subsequent compliance with applicable statutes and regulations,
if approval is obtained, are very costly and require the expenditure of substantial resources.
United States
In the United States, the Public Health Service
Act and the Federal Food, Drug, and Cosmetic Act, as amended, and the regulations promulgated thereunder, and other federal and
state statutes and regulations govern, among other things, the safety and effectiveness standards for our drugs and the raw materials
and components used in the production of, testing, manufacture, labeling, storage, record keeping, approval, distribution, advertising
and promotion of drug candidates on a product-by-product basis.
Preclinical tests include in vitro and in vivo
evaluation of the drug candidate, including animal studies to assess potential safety and efficacy. Certain preclinical tests must
be conducted in compliance with good laboratory practice regulations. Violations of these regulations can, in some cases, lead
to invalidation of the studies, requiring them to be replicated. In addition, non-clinical studies (Chemistry and Manufacturing
Controls, CMC) are undertaken to evaluate a new drug’s chemistry, and to determine, amongst other things, the active ingredients’
and finished product formulation’s stability and batch-to-batch reproducibility.
After laboratory analysis and preclinical testing,
a Sponsor files an Investigational New Drug Application, or IND, to begin clinical development (clinical trials in humans). Typically,
a manufacturer conducts a three-phase human clinical development program which itself is subject to numerous laws and regulatory
requirements, including adequate monitoring, reporting, record keeping and informed consent. In Phase I, small clinical trials
are conducted to determine the safety and tolerability of drug candidates. In Phase II, clinical trials are conducted to assess
safety and gain preliminary evidence of the efficacy of drug candidates, and to determine appropriate dose ranges in
patients with the target indication. In Phase
III, clinical trials are conducted in appropriate patient populations to provide sufficient data for the statistically valid evidence
of safety and efficacy. The time and expense that will be required for us to perform this clinical development can vary and is
substantial. We cannot be certain that we will successfully complete Phase I, Phase II or Phase III clinical trials within any
specific period, if at all. Furthermore, the FDA, the IRB are responsible for approving and monitoring the clinical trials at a
given site, the Data Safety Monitoring Board, where one is used, or we may suspend the clinical trials at any time on various grounds,
including a finding that subjects or patients are exposed to unacceptable health risk. Given that a number of our clinical trials
are likely to be performed using drug candidates containing controlled substances, there is the added requirement for compliance
with DEA regulations (or equivalent competent authority in ex-US countries where the preclinical studies and clinical trials may
be conducted). DEA requirements for State and Federal DEA Registration for receipt, storage and dispensing of controlled substances
vary from state to state and the DEA Registration process can be lengthy and requirement multiple site visits by DEA personnel.
This is further complicated if the controlled substance needs temperature regulation as well as controlled access / storage. Failure
to gain or delay to gaining the necessary DEA registrations at one or more non-clinical (CMC), laboratory or manufacturing or packaging
or labelling sites. preclinical study sites, analytical laboratories or clinical trial sites may delay the delivery of materials
to key stakeholders. For example, delay of delivery of investigational product to a clinical trial site, may ultimately delay the
initiation, conduct or completion of clinical trials critical for the approval of the product. These failures or delays may delay
also the development of other drug candidates and hinder our ability to develop and / or conduct related preclinical studies and
clinical trials. Additionally, if we have failures or delays in DEA registrations in pivotal or critical programs, we may also
be expected to experience challenges, delays or even the inability to obtain additional financing at acceptable terms and conditions
to develop these or other drug candidates.
If the clinical data from these clinical trials (Phases
I, II and III) are deemed to support the safety and effectiveness of the drug candidate for its intended use, and the preclinical
and quality data are also acceptable, then we may proceed to seek to file with the FDA, a New Drug Application, or NDA, with the
US FDA seeking approval to market a new drug for one or more specified intended uses. We have not completed our non-clinical (CMC)
studies or preclinical studies or clinical trials for any candidate drug for any intended use and therefore, we cannot ascertain
whether the clinical data will support and justify filing an NDA. Nevertheless, if and when we are able to ascertain that the clinical
data supports and justifies filing an NDA, we intend to make such appropriate filing.
The purpose of the NDA is to provide the FDA with
sufficient information so that it can assess whether the candidate drug has a positive benefit / risk profile and whether it should
approve the drug candidate for marketing for specific intended uses.
The fact that the FDA has previously granted a
candidate drug an IND, or designated a drug as an orphan drug for a specific intended use, or granted it Breakthrough status, or
fast track status or an expedited review does not mean that the drug has been approved for marketing. Only after an NDA has been
approved by the FDA is marketing allowed. A request for orphan drug status (orphan drug designation) must be filed before the NDA
is filed. The orphan drug designation, though, provides certain benefits, including a seven-year period of market exclusivity subject
to certain exceptions.
The NDA normally includes, but is not limited to,
sections describing the quality safety and efficacy of the medicine. The quality section describes the chemistry, manufacturing,
and controls, the preclinical (non-clinical) section describes the non-clinical pharmacology, safety pharmacology, drug metabolism
and pharmacokinetics (DMPK) and toxicology, human pharmacokinetics and bioavailability, , and the clinical section describes the
efficacy and safety results of the clinical trials, and the proposed labeling which contains, among other things, the intended
uses of the candidate drug. Importantly for drug candidates containing controlled substances, studies investigating the medicine’s
potential for abuse are also undertaken and reported.
We cannot take any action to market any new drug
or biologic drug in the United States until our appropriate marketing application has been approved by the FDA. The FDA has substantial
discretion over the approval process and may disagree with our interpretation of the data submitted. The process may be significantly
extended by requests for additional information or clarification regarding information already provided. As part of this review,
the FDA may refer the application to an appropriate advisory committee, typically a panel of clinicians. Satisfaction of these
and other regulatory requirements typically takes several years, and the actual time required may vary substantially based upon
the type, complexity and novelty of the drug. Government regulation may delay or prevent
marketing of potential drugs for a considerable
period and impose costly procedures on our activities. We cannot be certain that the FDA or other regulatory agencies will approve
any of our drugs on a timely basis, if at all. Success in preclinical or early stage clinical trials does not assure success in
later-stage clinical trials. Even if a drug receives regulatory approval, the approval may be significantly limited to specific
indications or uses and these limitations may adversely affect the commercial viability of the drug / medicine. Delays in obtaining,
or failures to obtain regulatory approvals, would have a material adverse effect on our business.
Even after we obtain FDA approval, we may be required
to conduct further studies which may be additional preclinical studies or clinical trials (e.g. Phase IV trials) and provide additional
data on safety and effectiveness. We are also required to gain separate approval for the use of an approved drug as a treatment
for indications other than those initially approved. In addition, side effects or adverse events that are reported during clinical
trials can delay, impede or prevent marketing approval. Similarly, adverse events that are reported after marketing approval can
result in additional limitations being placed on the drug’s use and, potentially, withdrawal of the drug from the market.
Any adverse event, either before or after marketing approval, can result in product liability claims against the company.
As an alternate path for
FDA approval of new indications or new formulations of previously-approved drugs, a company may file a Section 505(b)(2) NDA, instead
of a “stand-alone” or “full” NDA. Section 505(b)(2) of the Food, Drug, and Cosmetic Act was enacted as
part of the Drug Price Competition and Patent Term Restoration Act of 1984, otherwise known as the Hatch-Waxman Amendments. Section
505(b)(2) permits the submission of an NDA where at least some of the information required for approval comes from studies not
conducted by or for the applicant and for which the applicant has not obtained a right of reference. Some examples of drugs that
may be allowed to follow a 505(b)(2) path to approval are drugs that have a new dosage form, strength, route of administration,
formulation or indication. The Hatch-Waxman Amendments permit the applicant to rely upon certain published nonclinical or clinical
studies conducted for an approved drug or the FDA’s conclusions from prior review of such studies. The FDA may require companies
to perform additional studies or measurements to support any changes from the approved drug. The FDA may then approve the new drug
for all or some of the labeled indications for which the referenced listed drug has been approved, as well as for any new indication
supported by the NDA. While references to nonclinical and clinical data not generated by the applicant or for which the applicant
does not have a right of reference are allowed, all development, process, stability, qualification and validation data related
to the manufacturing and quality of the new drug must be included in an NDA submitted under Section 505(b)(2).
To the extent that the Section 505(b)(2) applicant
is relying on the FDA’s conclusions regarding studies conducted for an already approved drug, the applicant is required to
certify to the FDA concerning any patents listed for the approved drug in the FDA’s “Orange Book” publication.
Specifically, the applicant must certify that: (i) the required patent information has not been filed; (ii) the listed patent has
expired; (iii) the listed patent has not expired, but will expire on a particular date and approval is sought after patent expiration;
or (iv) the listed patent is invalid or will not be infringed by the new drug. The Section 505(b)(2) application also will not
be approved until any non-patent exclusivity, such as exclusivity for obtaining approval of a new chemical entity, listed in the
Orange Book for the reference drug has expired. Thus, the Section 505(b)(2) applicant may invest a significant amount of time and
expense in the development of its drugs only to be subject to significant delay and patent litigation before its drugs may be commercialized.
In addition to regulating and auditing human clinical
trials, the FDA regulates and inspects equipment, facilities, laboratories and processes used in the manufacturing and testing
of such drugs prior to providing approval to market a drug.
Orphan Drug Designation in the U.S.
Under the Orphan Drug Act, the FDA may grant orphan
drug designation to a drug intended to treat a rare disease or condition, which is a disease or condition that affects fewer than
200,000 individuals in the United States. If the disease or condition affects more than 200,000 individuals in the United States,
orphan drug designation may nevertheless be available if there is no reasonable expectation that the cost of developing and making
the drug would be recovered from sales in the United States. In the United States, a drug that has received orphan drug designation
is eligible for financial incentives, such as opportunities for grant funding towards clinical trial costs, tax credits for
certain research and user fee waivers
under certain circumstances. The Orphan Drug Act provides that, if a designated drug is approved for the rare disease or
condition for which it was designated, the approved drug will be granted seven years of orphan drug exclusivity, which means
the FDA generally will not approve any other application for a drug containing the same active moiety for the same indication
for a period of seven years, except in limited circumstances, such as a showing of clinical superiority over the drug with
orphan drug exclusivity. Orphan drug exclusivity does not prevent the FDA from approving a different drug for the same
disease or condition, or the same drug for a different disease or condition.
Orphan drug designation must be requested before
submission of an application for marketing approval. Products that qualify for orphan designation may also qualify for other FDA
programs that are intended to expedite the development and approval process and, as a practical matter, clinical trials for orphan
products may be smaller, simply because of the smaller patient population. Nonetheless, the same approval standards apply to orphan-
designated products as for other drugs. Orphan drug designation does not convey any advantage in, or shorten the duration of, the
regulatory review and approval process.
Europe
The drug development process in Europe is essentially
the same as that required to develop drugs in an acceptable manner, in that a drug must meet the requirements for quality safety
and efficacy. The international regulators (including the FDA) have a system which allows them to mutually recognize the standards
of drug development. This is called the ICH standard (international Conference on Harmonization). This avoids the need for pharmaceutical
companies to repeat their costly drug development programs for different jurisidctions / international territories. There are nuances
between the requirements of the USA, Europe and Japan – but the standards to which development programs must be conducted
are essentially the same.
There are essentially three mechanisms for obtaining a
marketing authorization (MA) in Europe
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1)
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the Centralized Procedure
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2)
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the De-Centralized Procedure
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3)
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the Mutual Recognition Procedure
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Centralized Procedure (CP)
The advantage of the centralized procedure is that
it requires a single application which, if successful, results in a single marketing authorization with the same product information
available in all EU languages and valid in all EU member states / countries, as well
as Iceland, Liechtenstein, and Norway. The scientific assessment of the marketing authorization application is carried out by the
Committee on Human Medicinal Products (CHMP). The scientific review process consists of alternating periods of active evaluation
and periods during which the clock is stopped in order to give the applicant time to resolve any issues identified during the evaluation.
In total, the duration of the process is up to 210 ‘active’ days before an opinion is issued by the CHMP. Once an opinion
has been given, it is forwarded to the European Commission which then has 67 days to issue a legally binding decision on the marketing
authorization.
Once a marketing authorization has been granted,
the applicant can start to market the medicine in any EU Member State of its choice. However, in practice before a medicine is
marketed, it will be subject to pricing negotiations and a review of its cost-effectiveness. This is carried out at national level
by Member States to determine reimbursement criteria. Initially, the centralized procedure was mandatory only for biotechnology
medicines, as was the case with the previous concertation procedure. Over time, however, the mandatory scope of the centralized
procedure has been gradually expanded and by 2005, it included orphan medicines (medicines for rare diseases) as well as human
medicines that contain a new active substance (not previously authorized in the Union before 20 November 2005) and that are intended
for the treatment of AIDS, cancer, neurodegenerative disorders, diabetes, auto-immune and other immune dysfunctions, and viral
diseases. In 2009, the centralized procedure also became mandatory for advanced therapy medicines. The centralized procedure is
also optional for other medicines that contain a new active substance not authorized in the Union before 20 November 2005, and
for products which are considered to be a significant therapeutic, scientific, or technical innovation, or for which an EU-wide
authorization is considered to be in the interests of public health.
The Decentralized Procedure (DCP)
In the decentralized procedure, the applicant
chooses one country as the reference Member State when making its application for marketing authorization. The chosen reference
Member State then prepares a draft assessment report that is submitted to the other Member States where approval is sought for
their simultaneous consideration and approval. In allowing the other Member States access to this assessment at an early stage,
any issues and concerns can be dealt with quickly without delay, which sometimes is known to occur with the mutual recognition
procedure (MRP, see below). Compared with the MRP, the decentralized procedure has the advantage that the marketing authorization
in all chosen Member States is received simultaneously, enabling simultaneous marketing of the medicine and reducing the administrative
and regulatory burden.
The Mutual Recognition Procedure (MRP)
The mutual recognition procedure has been in place
since 1995 and evolved from the multi-state licensing procedure. The applicant must initially receive national approval in one
EU Member State, referred to as the “Reference Member State” (RMS) and then seek approval for the medicine in other,
so-called ‘Concerned Member States’ in a second step based on the assessment done in the RMS. This process has significant
differences from the former multi-state licensing procedure, notably the requirement that disagreements between Member States must
now be resolved at EU level. Disagreements are handled by the Co-ordination Group for Mutual Recognition and Decentralized Procedures
– Human (CMDh), a body representing Member States, which is responsible for any questions in two or more Member States relating
to the Marketing Authorization (MA) of a medicinal product approved through the mutual recognition or the decentralized procedure.
If there is a disagreement between Member States on grounds of a potential serious risk to public health, the CMDh considers the
matter in order to reach an agreement within 60 days. If resolution is not possible by the CMDh, the procedure is referred to the
CHMP in a procedure called a referral. The CHMP will then carry out a scientific assessment of the relevant medicine on behalf
of the EU. In contrast to the previous (multi-state) procedure, the outcome of the CHMP is binding on the Member States involved
once it has been adopted by the European Commission. The timelines for assessment by CHMP is 60 days. Since the introduction of
the decentralized procedure, the mutual recognition procedure is used for extending existing marketing authorizations to other
countries.
There are other nuances to Marketing Authorization
approval of medicines in Europe compared with the FDA. For example a Pediatric Investigation Plan (PIP) is a development plan aimed
at ensuring that the necessary data are obtained through studies in children, to support the authorization of a medicine for children.
All applications for marketing authorization for new medicines have to include the results of studies as described in an agreed
PIP, unless the medicine is exempt because of a deferral or waiver.
Orphan Drug Designation in Europe
In the European Union, it is also possible to obtain
an orphan drug designation for a pipeline drug candidate. This also entitles a company to financial incentives such as a reduction
of fees or fee waivers and ten years of market exclusivity following drug approval. This period may be reduced to six years if
the orphan drug designation criteria are no longer met, including where it is shown that the drug is sufficiently profitable not
to justify maintenance of market exclusivity. The definition of what qualifies as a rare disease in Europe is slightly different
to the USA definition.
To qualify for orphan designation in Europe, a medicine
must meet a number of criteria:
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it must be intended for the treatment, prevention or diagnosis
of a disease that is life-threatening or chronically debilitating;
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the prevalence of the condition in the EU must not be more than
5 in 10,000 or it must be unlikely that marketing of the medicine would generate sufficient returns to justify the investment needed
for its development;
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no satisfactory method of diagnosis, prevention or treatment of
the condition concerned can be authorized, or, if such a method exists, the medicine must be of significant benefit to those affected
by the condition
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As with the USA, European Orphan drug designation
does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.
In the same way that there is no guarantee than any
medicines developed by Alterola will be approved in the USA, there is similarly no guarantee that any of Alterola’s medicines
will be approved in Europe.
Non-Pharmaceuticals
Food, Drinks & Dietary Supplements
USA
According to the FDA, it is currently illegal
to market THC or CBD by adding it to a food or labeling it as a dietary supplement. Based on available evidence, FDA has concluded
that THC and CBD products are excluded from the dietary supplement definition under section 201(ff)(3)(B) of the FD&C Act [21
U.S.C. § 321(ff)(3)(B)]. Under that provision, if a substance (such as THC or CBD) is an active ingredient in a drug product
that has been approved under section 505 of the FD&C Act [21 U.S.C. § 355], or has been authorized for investigation as
a new drug for which substantial clinical investigations have been instituted and for which the existence of such investigations
has been made public, then products containing that substance are excluded from the definition of a dietary supplement. FDA considers
a substance to be "authorized for investigation as a new drug" if it is the subject of an Investigational New Drug application
(IND) that has gone into effect. Under FDA’s regulations (21 CFR 312.2), unless a clinical investigation meets the limited
criteria in that regulation, an IND is required for all clinical investigations of products that are subject to section 505 of
the FD&C Act.
There is an exception to section 201(ff)(3)(B)
if the substance was "marketed as" a dietary supplement or as a conventional food before the drug was approved or before
the new drug investigations were authorized, as applicable. However, based on available evidence, FDA has concluded that this is
not the case for THC or CBD. FDA is not aware of any evidence that would call into question its current conclusions that THC and
CBD products are excluded from the dietary supplement definition under section 201(ff)(3)(B) of the FD&C Act. FDA continues
to review information that is submitted to FDA on this issue, but to date this has not caused FDA to change their conclusions.
Given the legal / regulatory situation at present
in the USA, at this time, Alterola will not be looking to commercialize cannabinoid-containing ingredients or products in the food,
drinks or dietary supplements sector in the USA.
Europe - Novel Food Application (Europe)
Under EU regulations, any food that was not consumed
“significantly” prior to May 1997 is considered to be a “Novel Food”. The category covers new foods, food
from new sources, new substances used in food as well as new ways and technologies for producing food. There is a specific procedure
for gaining a Novel Food Approval in Europe.
The novel food status of CBD extracts was confirmed
in January 2019. This means that applicants need to apply for authorisation of CBD extracts and isolates using the procedure for
full applications (rather than a traditional food) outlined in the European Food Standards Agency (EFSA) guidance.
In general, the process is as follows: (1) The
applicant submits a Novel Food application; (2) the application is reviewed and if compliant validated by the European Commission
to see if it falls within the scope of Novel Food Regulation (EU) 2015 / 2283 (EC validity check); (3) the European Food Standards
Agency (EFSA) undertakes a suitability check to see if the application fulfils the requirements of article 10(2) of (EU) 2015 /
2283; (4) EFSA reviews and performs a risk assessment and gives an opinion within 9 months of receipt of a valid application (5)
the EC drafts an implementing act authorizing the placement on the market of a Novel Food and updating the EU list, within 7 months
of the EFSA opinion. This process can take approximately 18 months from receipt of a valid application, although it can take longer
in some cases.
Given the legal and regulated process
in Europe, Alterola intends to submit Novel Food applications for cannabinoid-containing ingredients and / or products in the
food, drinks or dietary supplements sector in Europe, where it is legal to do so. It may be several years before we can obtain
approval and commence commercialization of such ingredients, if ever.
Rest of The World (RoW)
Given the varying legal and regulated processes
for regulatory approval of for cannabinoid-containing ingredients and / or products in the food, drinks or dietary supplements
sector in countries outside of the USA and Europe, Alterola will consider gaining such approval in countries / territories where
it is legal to do so. These will be considered on a case-by-case basis as appropriate. It may be several years before we can obtain
approval and commence commercialization of such ingredients, if ever.
Cosmetics
USA
A cosmetic is defined in the Food, Drug and Cosmetics
Act 201(i) as "(1) articles intended to be rubbed, poured, sprinkled, or sprayed on, introduced into, or otherwise applied
to the human body or any part thereof for cleansing, beautifying, promoting attractiveness, or altering the appearance, and (2)
articles intended for use as a component of any such articles; except that such term shall not include soap."
Under the FD&C Act, cosmetic products and ingredients
are not subject to premarket approval by FDA, except for most color additives. Certain cosmetic ingredients are prohibited or restricted
by regulation, but currently that is not the case for any cannabis or cannabis-derived ingredients. Ingredients not specifically
addressed by regulation must nonetheless comply with all applicable requirements, and no ingredient – including a cannabis
or cannabis-derived ingredient – cannot be used in a cosmetic if it causes the product to be adulterated or misbranded in
any way. A cosmetic generally is adulterated if it bears or contains any poisonous or deleterious substance which may render it
injurious to users under the conditions of use prescribed in the labeling, or under such conditions of use as are customary or
usual (section 601(a) of the FD&C Act [21 U.S.C. § 361(a)]).
Alterola may choose to supply active ingredient(s)
to cosmetic companies within the USA where it is legal to do so. However, although the company is focussed upon producing low cost
of goods ingredients, there is no guarantee that the company will be able to produce cosmetic ingredients at the purity required
of at a cost of goods which will enable the company to compete within other suppliers of cosmetic ingredients to cosmetic companies.
Alterola has no intention in producing its own cosmetic products. It may be several years before we can obtain approval and commence
commercialization of such ingredients, if ever.
Europe
The use of CBD in cosmetics is
harmonised within the European Cosmetic Regulation 1223/2009 , under entry 306 ‘Narcotics, natural and synthetic’
of Annex II , and has been for some time. The regulation prohibits use of cannabis and cannabis extracts in cosmetics, as
they are controlled substances in Schedule I of the 1961 Single Convention on Narcotic Drugs. However, CBD specifically is
not referenced in this convention. At the beginning of 2019, the European Commission (EC) added two entries to its database
of cosmetics ingredients for CBD to differentiate between: CBD “derived from extract or tincture or resin of
cannabis” and CBD “synthetically produced”. Both entries contain the same text: “Cannabidiol (CBD) as
such, irrespective of its source, is not listed in the Schedules of the 1961 Single Convention on Narcotic Drugs. However, it
shall be prohibited from use in cosmetic products (II/306) if it is prepared as an extract or tincture or resin of Cannabis
in accordance with the Single Convention. Please note that national legislations on controlled substances may also
apply.” Essentially, use of naturally-derived CBD from cannabis plants is prohibited in the EU but use of hemp-derived
or synthetically-produced CBD is allowed. However, the Single Convention’s banned ingredients list does not include
cannabis seeds or leaves without tops, meaning use of CBD derived from these parts of the cannabis plant is not currently
prohibited.
It is Alterola’s intention to supply active
ingredient(s) to cosmetic companies within the EU where it is legal to do so. However, although the company is focussed upon producing
low cost of goods ingredients, there is no guarantee that the company will be able to produce cosmetic ingredients at the purity
required of at a cost of goods which will enable the company to compete within other suppliers of cosmetic ingredients to cosmetic
companies. Alterola has no intention in producing its own cosmetic products. It may be several years before we can obtain approval
and commence commercialization of such ingredients, if ever.
Rest of the World
Given the varying legal and regulated processes
for regulatory approval of for cannabinoid-containing ingredients and / or products in the cosmetic sector in countries outside
of the USA and Europe, Alterola will consider gaining such approval in countries / territories where it is legal to do so. These
will be considered on a case-by-case basis as appropriate.
Employees
At present, we have no other employees other than
our officers and directors. They oversee all responsibilities in corporate administration, business development and research. If
finances permit, however, we intend to expand our current management to retain skilled directors, officers and employees with experience
relevant to our business focus.
Item 1A. Risk Factors
Risks Relating to Drug Development
Our
future success will largely depend on the success of our drug candidates, which development will require significant capital
resources and years of clinical development effort.
We currently have no drug
products on the market, and none of our drug development projects / pipeline drug candidates
has reached preclinical study or clinical trial status. Our business depends almost entirely on the successful clinical
development, regulatory approval and commercialization of our pipeline drug candidates. Investors need to be aware
that substantial additional investments including preclinical and clinical development and regulatory approval efforts will
be required before we are permitted to market and commercialize our pipeline drug
candidates, if ever. It may be several years before we can commence clinical trials, if ever.
Any clinical trial will be subject to extensive and rigorous review and regulation
by numerous government authorities in the United States, the European Union, and other jurisdictions where
we intend, if approved, to market our pipeline drug candidates. Before obtaining regulatory approvals for any of our
pipeline drug candidates, we must demonstrate through preclinical testing and clinical trials that the pipeline drug candidate
is safe and effective for its specific application. This process can take many years and may include post- marketing
studies and surveillance, which would require the expenditure of substantial resources. Of the large number of drugs in
development for approval in the United States, European Union (and the rest of the world), only a small percentage
will successfully complete the FDA regulatory approval process or be granted authorization to be marketed in
the European Commission or the other competent authorities in the European Union (“EU”) Member States, or the
rest of the world. Accordingly, even if we obtain the sufficient financing to fund
our planned research, development and clinical programs, we cannot assure you that any of
our pipeline drug candidates will be successfully developed or commercialized.
We may be
unable to formulate or scale-up any or all of our pipeline drug candidates. There is no guarantee that any of the pipeline
drug candidates will be or are able to be manufactured or produced in a manner to meet the FDA’s criteria for
product stability, content uniformity and all other criteria necessary for product approval in the United States and other
markets. Any of our pipeline drug candidates may fail to achieve their specified endpoints in clinical trials.
Furthermore,
pipeline drug candidates may not be approved even if they achieve their specified endpoints in clinical trials.
The FDA may disagree with our trial design and our interpretation of data from clinical trials, or may change the requirements
for approval even after it has reviewed and commented on the design for our clinical trials. The FDA may also approve a
drug for fewer or more limited indications than we request, or may grant approval contingent on the performance
of costly post-approval clinical trials (i.e., Phase IV trials). In addition, the FDA may not approve the labeling
claims that we believe are necessary or desirable for the successful commercialization of our pipeline drug candidates.
If we are unable to expand our pipeline and obtain
regulatory approval for our pipeline drug candidates within the timelines we anticipate,
we will not be able to execute our business strategy effectively and our ability to substantially grow
our revenues will be limited, which would have a material adverse impact on our long-term business, results of operations,
financial condition, and prospects.
Our
drug development projects, if approved, may be unable to achieve the expected market acceptance and, consequently,
limit our ability to generate revenue
Even when drug development is successful and
regulatory approval has been obtained, our ability to generate significant revenue depends
on the acceptance of our (then) approved medicines by physicians, prescribers and patients. We cannot assure you that any
of our pipeline drug candidates will achieve the expected market acceptance and revenue, if and when we obtain the regulatory approvals.
The market acceptance of any drug depends on a number of factors, including the indication statement and warnings approved by regulatory
authorities for the drug label, continued demonstration of efficacy and safety in commercial
use, physicians’ / prescribers willingness to prescribe the drug, reimbursement from third-party payers such as government
health care systems and insurance companies, the price of the drug, the nature of any post-approval
risk management plans mandated by regulatory authorities, competition, and marketing and
distribution support. Any factors preventing or limiting the market acceptance of our drugs could have a material adverse effect
on our business, results of operations and financial condition.
Results
of preclinical studies and earlier clinical trials are not necessarily predictive indicators of future results.
Any positive
results from future preclinical testing of our pipeline drug candidates and potential future clinical trials may not necessarily
be predictive of the results from Phase 1, Phase 2 or Phase 3 clinical trials. In addition, our interpretation of results derived
from clinical data or our conclusions based on our preclinical data may prove inaccurate.
Frequently, pharmaceutical and biotechnology companies have suffered significant setbacks
in clinical trials after achieving positive results in preclinical testing and early phase clinical trials, and we cannot
be certain that we will not face similar setbacks. These setbacks may be caused by the
fact that preclinical and clinical data can be susceptible to varying interpretations and
analyses. Furthermore, certain pipeline drug candidates may perform satisfactorily in preclinical
studies and clinical trials, but nonetheless fail to obtain FDA approval, a marketing authorization granted by the European
Commission, or appropriate approvals by the appropriate medicines regulatory authorities in other countries.
If we fail to produce positive results in our clinical trials for our pipeline drug candidates, the development timeline
and regulatory approval and commercialization prospects for them and as a result our business and financial prospects, would
be materially adversely affected.
The
regulatory approval processes with the FDA, the EMA and other comparable foreign regulatory authorities is lengthy and inherently
unpredictable.
We are not permitted
to market our drug candidates as medicines in the United States or the European
Union or other countries until we receive approval of a New Drug Application (“NDA”)
from the FDA or a Marketing Authorization Application (“MAA”) from the European
Commission, respectively, or in any foreign countries until we receive the approval from the regulatory authorities of such
countries. Prior to submitting an NDA to the FDA or an MAA to the EMA for approval of our
drug candidates we will need to have completed our preclinical studies and clinical trials. Successfully completing
any clinical program and obtaining approval of an NDA or MAA is a complex, lengthy, expensive and uncertain process, and
the FDA or EMA (or other country medicines regulatory body) may delay, limit or deny approval of pipeline drug candidates for many
reasons, including, among others, because:
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an inability to demonstrate that our pipeline
drug candidates are safe and effective in treating patients to the satisfaction of the FDA
or EMA (or any other country’s medicine regulatory body);
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results of clinical trials that may not
meet the level of statistical or clinical significance required by the FDA or EMA (or any
other country’s medicine regulatory body);
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disagreements with the FDA or EMA (or
any other country’s medicine regulatory body) with respect to the number, design, size,
conduct or implementation of clinical trials;
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requirements by the FDA and EMA (or any
other country’s medicine regulatory body) to conduct additional clinical trials;
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disapproval by the FDA or EMA or other
applicable foreign regulatory authorities of certain formulations, labeling or specifications
of pipeline drug candidates;
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findings by the FDA or EMA (or any other
country’s medicine regulatory body) that the data from preclinical studies and clinical
trials are insufficient;
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the FDA or EMA (or any other country’s
medicine regulatory body) may disagree with the interpretation of data from preclinical studies
and clinical trials; and
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the FDA, European
Commission or other applicable foreign regulatory agencies may change their approval policies
or adopt new regulations.
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Any of these
factors, many of which are beyond our control, could increase development time and
/ or costs or jeopardize our ability to obtain regulatory approval for our
drug candidates.
We may
apply for orphan drug status granted by the FDA and / or EMA for some of our
drug candidates for the treatment of rare diseases.
Regulatory
authorities in some jurisdictions, including the United States and the European Union, may designate drugs for
relatively small patient populations as orphan drugs. The FDA may grant orphan drug designation to drugs intended to treat
a rare disease or condition that affects fewer than 200,000 individuals annually in the United States. In the European
Union, the EMA’s Committee for Orphan Medicinal Products grants orphan drug designation to promote the development
of drugs that are intended for the diagnosis, prevention or treatment of life-threatening or chronically debilitating conditions
affecting not more than 5 in 10,000 persons in the European Union. Additionally, such designation is granted for drugs intended
for the diagnosis, prevention or treatment of a life-threatening, seriously debilitating
or serious and chronic condition and when, without incentives, it is unlikely that sales of the drug in the European Union
would be sufficient to justify the necessary investment in developing the drug.
In the USA, orphan drug designation entitles a party
to financial incentives, such as opportunities for grant funding towards clinical trial costs,
tax credits for certain research and user fee waivers under certain circumstances. In addition, if a drug receives the first
FDA approval for the drug and indication for which it has orphan drug designation, the drug is entitled to seven years of market
exclusivity, which means the FDA may not approve any other application for the same drug for the same indication for a period of
seven years, except in limited circumstances, such as a showing of clinical superiority over
the drug with orphan drug exclusivity. Orphan drug exclusivity does not prevent the FDA from approving a different drug
for the same disease or condition, or the same drug for a different disease or condition.
In
the European Union, orphan drug designation also entitles a party to financial incentives such as reduction of fees or fee
waivers and ten years of market exclusivity following drug approval. This period may be reduced to six years if the orphan
drug designation criteria are no longer met, including where it is shown that the drug is sufficiently profitable so that
market exclusivity is no longer justified.
Whilst the company may wish
to apply for ODDs for some or all of its pipeline drug candidates, there is no guarantee that FDA or EMA (or any other international
regulatory body) will grant an ODD for any of the company’s pipeline drug candidates.
Our
drug candidates may become subject to controlled substance laws and regulations in the U.S.
While cannabis and some cannabinoids are controlled
substances under the CSA in the United States, we plan to initially focus our drug development projects using cannabinoids and
other molecules that are produced from a variety of sources: (1) produced via chemical synthesis
and / or (2) produced biosynthetically and / or (3) produced via botanical means.
A number of cannabinoid-containing
medicines, such as Marinol® or Syndros®
(containing dronabinol), or Epidiolex (containing botanically-derived cannabidiol) or Cesamet®
(containing nabilone) have been approved by the FDA for variousindications.
In the USA, while plant-derived
cannabinoids – during development - are categorized as Schedule I substances under the CSA, the scheduling changes
once a medicine has been approved by the FDA.
Marinol®,
a capsule formulation which contains synthetic tetrahydrocannabinol, or THC when
formulated is a Schedule III medicine.
Syndros® (which
also contains synthetic THC, dronabinol) is a liquid formulation as is classified as Schedule II.
Epidiolex®
was initially a Schedule V medicine when it was introduced in 2018, but was descheduled by
the DEA in 2020.
It is our
intention to produce pipeline drug candidates via synthetic, and / or biosynthetic
and / or botanical means, which may produce
complex extracts or purified drug substance as API.
Depending upon the content of our selected API(s),
and their subsequent controlled drug status in the USA, and if the company conducts
preclinical studies or clinical trials in the
United States, we will become subject to the CSA laws and regulation in addition to FDA regulations..
If the Company decides to proceed with APIs which are controlled drugs, it will evaluate where it is best to conduct its
research and preclinical and clinical trials. This may or may not be the USA.
Nevertheless, our finished drug products may contain
controlled substances as defined in the CSA. Pipeline drug candidates which contain controlled substances are subject to a high
degree of regulation under the CSA, which establishes, among other things, certain registration,
manufacturing quotas, security, recordkeeping, reporting, import, export and other
requirements administered by the DEA. The DEA classifies controlled substances into five schedules: Schedule I, II, III,
IV or V substances. Schedule I substances, by definition, have a high potential for abuse, have no currently
“accepted medical use” in the United States, lack accepted safety for use under medical supervision, and may
not be prescribed, marketed or sold in the United States. Pharmaceutical products
approved for use in the United States may be listed as Schedule II, III, IV or V,
with Schedule II substances considered to present the highest potential for abuse or dependence
and Schedule V substances the lowest relative risk of abuse among such substances. Schedule I and
II drugs are subject to the strictest controls under the CSA, including manufacturing and procurement quotas, security
requirements and criteria for importation. In addition, dispensing of Schedule II drugs is further restricted. For example,
they may not be refilled without a new prescription.
While cannabis
and certain of its derivatives and certain cannabinoids are Schedule I controlled substances, drugs approved
for medical use in the United States that contain cannabis, cannabis extracts or certain cannabinoids must be placed
in Schedules II - V, since approval by the FDA satisfies the “accepted medical use” requirement. If, and when
any of our pipeline drug candidates receive FDA approval, for
those that are considered controlled substances under the CSA, the DEA will
make a scheduling determination and place it in a schedule other than Schedule I for it to be prescribed for patients in the United
States. If approved by the FDA, depending upon the products potential for abuse amongst
other factors, we expect the finished dosage forms of any of our pipeline drug candidates to be listed by the DEA as a Schedule
II-V controlled substance. Consequently, their manufacture, importation, exportation, domestic
distribution, storage, sale and legitimate use will be subject to a significant degree of regulation by the DEA (in the USA) and
the corresponding competent authorities around the world. The scheduling process may take one or more years beyond FDA approval
in the USA, thereby significantly delaying the launch of our drugs / medicines. However, the DEA must issue a temporary
order scheduling the drug within 90 days after the FDA approves the drug and the DEA receives a scientific and medical evaluation
and scheduling recommendation from the Department of Health and Human Services. Furthermore, if the FDA,
DEA or any foreign regulatory authority determines that any of our drugs may have potential for abuse, it may require
us to generate more clinical data than that which is currently anticipated, which could increase the cost and/or delay the
launch of our drugs / medicines or APIs (or food or cosmetic ingredients outside of the USA).
Clinical
trials of cannabinoid-based drug candidates are novel with very limited or non-existing history; we face a significant risk
that the trials will not result in commercially viable drugs and treatments.
At present, there is only a
very limited documented clinical trial history from which we can derive any scientific conclusions
for our drug pipeline candidates, or prove that our present assumptions for the current and planned research are scientifically
compelling. The API content of the Investigational Medicinal Products (IMPs) can vary from one IMP to another – hence
it is not necessarily possible to extrapolate results from studies with one product and predict efficacy of safety with another
product containing a similar API a different source. Whilst the principal cannabinoid component may be similar, the APIs may differ
in terms of minor cannabinoid content, impurity profiles or degradant profiles. While we
are encouraged by the results of clinical trials by others (where they exist), there can be no assurance that any preclinical
study or clinical trial will result in producing results which will lead to commercially viable drugs or treatments.
Clinical trials
are expensive, time consuming and difficult to design and implement. We, as well as the regulatory authorities
may suspend, delay or terminate our clinical trials at any time, may require us, for various reasons, to conduct
additional clinical trials, or may require a particular clinical trial to continue for a longer duration than originally
planned, including, among others:
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lack of effectiveness of any API, formulation or delivery
system during clinical trials;
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discovery of serious or unexpected toxicities
or side effects experienced by trial participants or other safety issues;
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slower than expected rates of subject recruitment and
enrollment rates in clinical trials;
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delays
or inability in manufacturing or obtaining sufficient quantities of GMP-grade materials for
use in clinical trials due to regulatory and manufacturing constraints;
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delays
in obtaining regulatory authorization to commence a trial, including Institutional Review
Board (“IRB”) approvals or DEA approvals,
licenses required for obtaining and using cannabis , cannabis-derived cannabinoid or
cannabinoid-like substances for research, either before or after a trial is commenced;
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unfavorable results from ongoing pre-clinical studies and
clinical trials;
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patients or investigators failing to comply with
clinical trial protocols;
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patients failing to return for post-treatment follow-up
at the expected rate;
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sites participating in an ongoing clinical trial
withdraw, requiring us to engage new sites;
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third-party clinical investigators decline
to participate in our clinical trials, do not perform the clinical trials on the
anticipated schedule, or act in ways inconsistent with the established investigator agreement, clinical trial protocol,
good clinical practices, and other IRB requirements;
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third-party entities do not perform data collection and analysis in a timely or accurate manner
or at all; or
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regulatory inspections of our clinical
trials require us to undertake corrective action or suspend or terminate our clinical trials.
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Any of the foregoing
could have a material adverse effect on our business, results of operations and financial condition.
The
FDA has not approved any complex botanically-derived cannabinoid drug as a safe and effective drug for any indication.
To date, the FDA has not approved any complex botanical
cannabinoid medicine as safe and effective for any indication. It has however approved a
cannabinoid medicine containing a highly purified cannabinoid (CBD) medicine (Epidiolex®)
for a limited number of indications. However, the FDA is aware that there is considerable interest in the use
of complex botanical medicines (e.g. Sativex®
- which is not approved in the USA, but is approved in some other countries)
or purified cannabinoids (e.g. Epidiolex®) or synthesized cannabinoid medicines (e.g.
Marinol) to attempt to treat a number of medical conditions.
Before conducting testing in humans of a drug that
has not been approved by the FDA, we will need to submit an investigational new drug (“IND”)
application to the FDA (or a Clinical Trial Authorisation (CTA) to the EMA). Failure to comply with applicable U.S. requirements
may subject a company to a variety of administrative or judicial sanctions, such as
the FDA’s refusal to approve pending NDAs, warning letters, product recalls, product
seizures, total or partial suspension of production or distribution, injunctions,
fines, civil penalties and criminal prosecution. Failure to comply with similarly applicable regulatory requirements
in other countries may also subject a company to a variety of administrative or judicial sanctions within their country.
We
face a potentially highly competitive market.
Demand for
cannabinoid-containing or cannabis-based medicines will likely be dependent on a number of social, political
and economic factors that are beyond our control. While we believe that there will be a demand for such drugs, and that
the demand will grow, there is no assurance that such demand will happen, that we will benefit from any demand or that our business,
in fact, will ever generate revenues from our drug development programs or become profitable.
The emerging markets for cannabinoid-containing or
cannabis-derived medicines and medical research and development is and will likely remain
competitive. The development and commercialization of drugs / medicines is highly competitive. We compete with a variety
of multinational pharmaceutical companies and specialized biotechnology companies, as well as products and processes being developed
by universities and other research institutions. Many of our competitors have developed,
are developing, or will develop drugs and processes which may be competitive with
our drug candidates. Competitive therapeutic treatments include those that have already been approved
by medicines regulators and accepted by the medical community and any new treatments that may enter the market. For some
of our drug development programs / areas of therapeutic interest, other treatment options are currently
available, under development, and may become commercially available in the future. If any of our pipeline drug
candidates is approved for the diseases and conditions we are currently pursuing, they may compete with a range of medicines
/ therapeutic treatments that are either in development, will be developed in the future or currently marketed.
We
are aware of many companies that are engaged in cannabinoid-derived drug development activities. In addition, other
U.S.-based and foreign-based companies are in early stage discovery and preclinical
development utilizing the cannabinoids CBD and/or THC.
Established
companies may have a competitive advantage over us due to their size and experiences, financial resources, and
institutional networks. Many of our competitors may have significantly greater financial, technical and human resources
than we do. Due to these factors, our competitors may have an advantage in marketing their approved drugs and may obtain
regulatory approval of their drug candidates before we are able to, which may limit our ability to develop or commercialize our
drug candidates. Our competitors may also develop drugs / medicines that are safer, more
effective, more widely used and less expensive than ours. These advantages could materially impact our ability to develop
and, if approved, commercialize our pipeline drug candidates successfully. Furthermore, some of these competitors
may make acquisitions or establish collaborative relationships among themselves or with third parties to increase their
ability to rapidly gain market share.
Our pipeline
drug candidates may compete with other cannabinoid or cannabis-based drugs, in addition to competing with state-licensed
medical and recreational marijuana, in markets where the recreational and/or medical use of marijuana
is legal. There is continuing support in the USA for further state legalization of marijuana. In markets where recreational
and/or medical marijuana is not legal, our pipeline drug candidates, once approved by regulators, may compete
with marijuana or marijuana-based products purchased in the illegal drug market. This may or may not affect the
commercial price that we may be able to achieve for our cannabinoid-containing or other
non-cannabinoid-containing regulatory-approved medicines, should they be approved by the FDA.
Moreover,
as generic versions of drug products enter the market, the price for such medicines may be expected to decline rapidly and
substantially. Even if we are the first to obtain FDA approval of one of our pipeline drug candidates,
the future potential approval of generics could adversely affect the price we are able to charge and the profitability of
our product(s) will likely decline.
Mergers and
acquisitions in the pharmaceutical and biotechnology industries may result in more resources being concentrated
among a smaller number of our competitors. Smaller and other early-stage companies may also prove to be
significant competitors, particularly through collaborative arrangements with large and established companies.
These companies
may compete with us in recruiting and retaining qualified scientific, management and commercial personnel,
utilizing contract manufacturing facilities or contract research organizations (CROs),
or establishing clinical trial sites and subject registration for clinical trials, as well as in acquiring technologies complementary
to our research projects.
Our
failure to comply with existing and potential future laws and regulations relating to drug development could harm our plan
of operations.
Our business is, and will be, subject to wide-ranging
existing federal and state laws and regulations and other governmental bodies in each of
the countries we may develop and/or market our pipeline drug candidates. We must comply with all regulatory requirements
if we expect to be successful.
If
any of our cannabinoid-containing or cannabis-based pipeline drug candidates are controlled substances and are approved
in the United States, they will be subject to ongoing regulatory requirements including federal and state requirements.
As a result, we and our collaborators and/or joint venture partners must continue to expend time, money and
effort in all areas of regulatory compliance, including, if applicable, manufacturing, production, quality control and assurance,
preclinical research and development and, of upmost importance, clinical trials. We will also be required to report certain
adverse reactions and production problems, if any and applicable, to the FDA, and to
comply with advertising and promotion requirements for our cannabinoid-containing drug candidates.
Any failure
to comply with ongoing regulatory or controlled drug requirements may significantly and adversely affect our
ability to conduct clinical trials which are prerequisites to our ability to commercialize our cannabinoid-based drugs and
related treatments. If regulatory sanctions are applied or if regulatory approval, once obtained, is for any reason suspended
or withdrawn, the value of our business and our operating results could be materially adversely affected.
Our
failure to be able to out-licence some or all of our pipeline drug candidates could
harm our plan of operations.
The cost of drug development is high and the attrition
rate of new drug pipeline candidates is also high during the drug development process. In order to help fund the development of
some of our pipeline drug candidates, the company may wish / need to out-licence some of its assets to other (big) pharmaceutical
or biotechnology companies. The aim of such out-licensing would be generate funds for the company which may take the form of up-front
payments and / or milestone payments and / or royalties. Such decisions will be taken on a case-by-case basis, as the opportunity
arises or is required.
There is no guarantee that the company will generate
pipeline drug candidates which are suitable for out-licensing. In addition, even if the company does produce pipeline drug candidates
that are suitable for out-licensing there is no guarantee that the company will be successful in being able to identify potential
licencees and successfully negotiate such out-licensing agreements, on agreeable terms if and when required. Any failure to secure
such out-licensing agreements may materially affect our ability to finance or develop and / or commercialize one or more of our
pipeline drug candidates. Any such failure may materially adversely affect our business.
Our
failure to be able to enter Research and Development (R & D) Collaboration Agreements
or Joint Venture (JV) Agreements for some or all of our pipeline drug candidates could harm our plan of operations
As mentioned above, the cost of drug development
is high. In order to help fund the development of some of our pipeline drug candidates, the company may wish to enter into Research
and Development Collaboration Agreements or Joint Venture Agreements with other (big) pharmaceutical or biotechnology companies
to help research and develop some of its assets and for those companies pay for some or all of the associated R & D costs.
The aim of such Collaboration or JV agreements would be to offset some of the company’s R & D costs. Depending upon the
outcome of such R & D or JV Agreements, it may lead to the opportunity to outlicence one or more of the assets investigated
under the Collaboration Agreement to the same other (big) pharmaceutical or biotechnology company who may be our R &D Collaboration
/ JV partner. If successful, this may generate funds for the company which may take the form of up-front payments and / or milestone
payments and / or royalties. Such decisions will be taken on a case-by-case basis, as the opportunity arises or is required.
There is no guarantee that the company will generate
pipeline drug candidates which are suitable for R & D Collaborations or JV Agreements. In addition, even if the company does
produce pipeline drug candidates that are suitable for such collaborations or JVs, there is no guarantee that the company will
be successful in being able to identify potential R & D collaboration partners or JV partners and successfully negotiate such
collaboration or JV agreements, on agreeable terms if and when required. Depending upon the financial status of the company, any
failure to secure such collaboration or JV agreements agreements may materially affect our ability to finance or develop and /
or commercialize one or more of our pipeline drug candidates. Any such failure may materially adversely affect our business.
COVID-19
pandemic
The
recent novel coronavirus (COVID-19) pandemic has impacted business across the world and the current situation or worsening of the
current situation or any future similar situation could further impact our future operations and the operations of our third-party
suppliers, manufacturers, and CROs as a result of quarantines, facility closures, travel and logistics restrictions, and other
limitations in connection with the outbreak. While we expect this to be temporary, there is uncertainty around its duration and
its broader impact.
It
is also possible that other future possible non-COVID-19 pandemics may similarly impact the business in the future.