form10k.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-K
x ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
FOR THE
FISCAL YEAR ENDED JUNE 30, 2009
OR
o TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
FOR THE
TRANSITION PERIOD FROM _____ TO __________
COMMISSION
FILE NO. 333-148471
NANOVIRICIDES,
INC.
(Name of
Business Issuer in Its Charter)
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NEVADA
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76-0674577
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(State
or other jurisdiction of incorporation or organization)
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(I.R.S.
Employer Identification No.)
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135 WOOD
STREET, SUITE 205
WEST
HAVEN, CONNECTICUT 06516
(Address
of principal executive offices)
203-937-6137
(Issuer's
telephone number, including area code)
SECURITIES
REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES
REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON
STOCK, PAR VALUE $.001 PER SHARE
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NONE
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(Title
of Class)
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(Name
of exchange on which registered)
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Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
Yes
o
No x
Indicate
by a check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.
Yes ¨ No x
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 x No ¨
Indicate
by checkmark whether the registrant has submitted electronically and posted on
its corporate Website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this
chapter) during the preceding 12 months ( or for such shorter period that the
registrant was required to submit and post such files.
Yes o No
x (Not required by
smaller reporting companies)
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. x
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of “large accelerated filer”, “accelerated filer”, or “smaller
reporting company in Rule 12b-2 of the Exchange Act (check one):
Large
accelerated filer ¨
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Accelerated
filer ¨
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Non-accelerated
filer ¨
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Smaller
reporting Company x
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Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act.).
Yes ¨ No x
As of
October 1, 2009, there were 125,299,457 shares of common stock of the registrant
issued and outstanding.
The
aggregate market value of the voting stock held on June 30, 2009 by
non-affiliates of the registrant was $41,250,063 based on the closing
price of $0.57 per share as reported on the OTC Bulletin Board on
June 30, 2009, the last business day of the registrant's most recently completed
fiscal year (calculated by excluding all shares held by executive officers,
directors and holders known to the registrant of five percent or more of the
voting power of the registrant's common stock, without conceding that such
persons are "affiliates" of the registrant for purposes of the federal
securities laws).
PART
I
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Item
1.
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Item
1A
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Item
1B
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Item
2.
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Item
3.
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Item
4.
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PART
II
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Item
5.
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Item
6.
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Item
7.
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Item
7A
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Item
8.
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Item
9.
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Item
9A(T)
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Item
9B.
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PART
III
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Item
10.
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Item
11.
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Item
12.
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Item
13.
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Item
14.
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PART
IV
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Item
15.
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PART
I
SPECIAL
NOTE ON FORWARD-LOOKING STATEMENTS
The
information in this report contains forward-looking statements. All statements
other than statements of historical fact made in this report are forward
looking. In particular, the statements herein regarding industry prospects and
future results of operations or financial position are forward-looking
statements. These forward-looking statements can be identified by the use of
words such as “believes,” “estimates,” “could,” “possibly,” “probably,”
anticipates,” “projects,” “expects,” “may,” “will,” or “should,” or other
variations or similar words. No assurances can be given that the future results
anticipated by the forward-looking statements will be achieved. Forward-looking
statements reflect management’s current expectations and are inherently
uncertain. Our actual results may differ significantly from management’s
expectations.
The
following discussion and analysis should be read in conjunction with our
financial statements, included herewith. This discussion should not be construed
to imply that the results discussed herein will necessarily continue into the
future, or that any conclusion reached herein will necessarily be indicative of
actual operating results in the future. Such discussion represents only the best
present assessment of our management.
ITEM I:
DESCRIPTION OF BUSINESS
Corporate
History
NanoViricides,
Inc. was incorporated under the laws of the State of Colorado on July 25, 2000
as Edot-com.com, Inc.
and was organized for the purpose of conducting Internet retail sales. On
April 1, 2005, Edot-com.com, Inc. was incorporated under
the laws of the State of Nevada for the purpose of re-domiciling the Company as
a Nevada corporation, Edot-com.com (Nevada). On April 15, 2005, Edot-com.com
(Colorado) and Edot-com.com (Nevada) were merged and Edot-com.com, Inc.,
(ECMM) a Nevada
corporation, became the surviving entity. On April 15, 2005, the authorized
shares of common stock was increased to 300,000,000 shares at $.001 par value
and the Company effected a 3.2 - 1 forward stock split effective May 12,
2005.
On June
1, 2005, Edot-com.com, Inc. acquired NanoViricides, Inc., a privately owned
Florida corporation (“NVI”), pursuant to an Agreement and Plan of Share Exchange
(the “Exchange”). NVI was incorporated under the laws of the State of Florida on
May 12, 2005 and its sole asset was comprised of a licensing agreement with
TheraCour Pharma, Inc., (“TheraCour,” an approximately 27% shareholder of NVI)
for rights to develop and commercialize novel and specifically targeted drugs
based on TheraCour's targeting technologies, against a number of human viral
diseases. (For financial accounting purposes, the acquisition was a reverse
acquisition of the Company by NVI, under the purchase method of accounting, and
was treated as a recapitalization with NVI as the acquirer). Upon consummation
of the Exchange, ECMM adopted the business plan of NVI.
Pursuant
to the terms of the Exchange, ECMM acquired NVI in exchange for an aggregate of
80,000,000 newly issued shares of ECMM common stock, resulting in an aggregate
of 100,000,000 shares of ECMM common stock issued and outstanding. As a result
of the Exchange, NVI became a wholly-owned subsidiary of ECMM. The ECMM shares
were issued to the NVI Shareholders on a pro rata basis, on the basis of 4,000
shares of the Company’s Common Stock for each share of NVI common stock held by
such NVI Shareholder at the time of the Exchange.
On June
28, 2005, NVI was merged into its parent ECMM and the separate corporate
existence of NVI ceased. Effective on the same date, Edot-com.com, Inc., changed
its name to NanoViricides, Inc. and its stock symbol on the Pink Sheets to
“NNVC”, respectively. The Company submitted a Form-10SB to the SEC to
become a reporting company on November 14, 2006. The Company’s filing status
became effective in March, 2007. On June 28, 2007, the company became
quoted on the OTC Bulletin Board under the symbol NNVC.OB. The Company is
considered a development stage company at this time.
NanoViricides,
Inc. (the “Company”), is a developmental stage nano-biopharmaceutical
(nanomedicine) company engaged in the discovery, development and
commercialization of anti-viral therapeutics. The Company has no customers,
products or revenues to date, and may never achieve revenues or profitable
operations. Our drugs are based on several patents, patent applications,
provisional patent applications, and other proprietary intellectual property
held by TheraCour Pharma, Inc., one of the Company’s principal shareholders, to
which we have the licenses in perpetuity for the treatment of the following
human viral diseases: Human Immunodeficiency Virus (HIV/AIDS), Hepatitis B Virus
(HBV), Hepatitis C Virus (HCV), Herpes Simplex Virus (HSV), Rabies, Influenza
and Asian Bird Flu Virus. Additionally, TheraCour has permitted the Company to
use its nanomaterials to develop a treatment against Dengue Fever viruses,
Ebola/Marburg viruses, and viruses causing certain eye diseases. The Company
anticipates negotiating with TheraCour an amendment to the Licensing Agreement
to include those additional viruses that the Company determines it wants to
follow for further development. We focus our laboratory research and
pre-clinical programs on specific anti-viral solutions. We are seeking to add to
our existing portfolio of products through our internal discovery pre-clinical
development programs and through an in-licensing strategy.
The
Company has incurred significant operating losses since its inception resulting
in an accumulated deficit of $11,995,535 at June 30, 2009. For the year ended
June 30, 2009 the Company had a net loss of $2,787,798. Such losses are expected
to continue for the foreseeable future and until such time, if ever, as the
Company is able to attain sales levels sufficient to support its
operations.
To date,
we have engaged in organizational activities; sourcing compounds and materials;
developing novel compounds and nanomaterials, and experimentation with studies
on cell cultures and animals. We have generated funding through the issuances of
debt and private placement of common stock. We have not generated any revenues
and we do not expect to generate revenues in the near future. We may not be
successful in developing our drugs and start selling our products when planned,
or that we will become profitable in the future. We have incurred net losses in
each fiscal period since inception of our operations. The Company currently has
no long term debt.
The
accompanying financial statements on pages F-1 through F-27 -of this Form 10-K
have been prepared assuming that the Company will continue as a going concern
that contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business. Accordingly, they do not reflect
any adjustments relating to the realization of the carrying value of assets or
the amounts and classification of liabilities that might be necessary should the
company be unable to continue as a going concern.
Glossary
of Terms:
Nano- When used as a prefix
for something other than a unit of measure, as in "nanoscience," nano means
relating to nanotechnology, or on a scale of nanometers (one billionth of a
meter or greater)
Viricide- is an agent which
reliably deactivates or destroys a virus.
Nanoviricide ™ – is an agent
which is made by attaching ligands against a certain virus or family of viruses
to a nanomicelle based on the Company's patent-pending and proprietary
technologies.
Ligand- is a short peptide or
chemical molecule fragment that has been designed to specifically recognize one
particular type of virus.
Micelle- One of the structural
units said to make up organized bodies.
Nanomicelle- micelles on the
scale of nanometers.
Pendant polymeric micelles- A
polymeric micelle forms from a polymer whose chemical constitution is such that
even a single chain of the polymer forms a micelle. A pendant polymer is a
polymer that has certain units in its backbone that extend short chains branched
away from the backbone. Pendant Polymeric Micelles therefore are polymeric
micelle materials that are a class of pendant polymers, and naturally form
exceptionally well-defined, self-assembling, globular micelles with a core-shell
architecture.
Mutations - The ability (of a
virus) to change its genetic structure to avoid the body’s natural defenses.
Mutants are viruses created from a parent virus strain through a process of
natural selection under pressure as it replicates in a host.
P-Value: In statistical
hypothesis testing, the p-value is the probability of
obtaining a result at least as extreme as that obtained, assuming that the null
hypothesis is true; wherein the truth of the null hypothesis states that the
finding was the result of chance alone. The fact that p-values are based on this
assumption is crucial to their correct interpretation. The smaller the p-value,
the greater is the probability that the observed study results and the
comparison control are distinct, and therefore that the study results are not a
result of chance alone.
More
technically, the p-value of an observed value observed of some random
variable T used as a test statistic is the probability that, given that the null
hypothesis is true, T will assume a value as or more unfavorable to the null
hypothesis as the observed value observed. “More unfavorable
to the null hypothesis” can in some cases mean greater than, in some cases less
than and in some cases further away from a specified center value.
Investigational New Drug Application
(IND): The process of licensure of a new drug in the US goes through
several steps. A simplified explanation of these steps is as follows. Initially
a Company may file a pre-IND application to seek meetings with the FDA for
guidance on work needed for filing an IND application. The Company obtains data
on the safety and effectiveness of the drug substance in various laboratory
studies including cell cultures and animal models. The Company also obtains data
on chemical manufacturing of the drug substance. These and certain additional
data are used to create an IND which the Company files with the FDA. After the
FDA approves an IND application, the Company may conduct human clinical studies.
A Phase I human clinical trial is designed typically to evaluate safety of the
drug and maximum permissible dosage level. A Phase II human clinical trial that
follows is designed to evaluate effectiveness of the drug against the disease in
a small cohort of patients. A Phase III human clinical trial thereafter is
designed to evaluate effectiveness and safety in larger groups of patients,
often at multiple sites. The Company may then submit an NDA (New Drug
Application) with the data collected in the clinical trials. The FDA
may approve the NDA. Once the NDA is approved, the Company can sell the drug in
the USA. European countries have similar processes under the European Medicines
Agency (EMEA). Other countries have similar processes.
NanoViricides
Technologies, Products in Development, and Collaborations
Pharmaceutical
drug development is an expensive and long duration proposition. Management’s
plan is to develop each of our nanoviricides to the necessary stage(s) and then
engage into co-development relationships with other pharmaceutical companies.
Such co-development relationships usually may entail upfront payments,
milestones payments, cost-sharing, and eventual revenue-sharing, including
royalty on sales. There is no guarantee that we will be able to negotiate
agreements that are financially beneficial to the Company at the present stage.
Management plans to continue to raise additional funds as needed for our
continuing drug development efforts on public markets.
The
Company currently has several drug development programs. Our drug development
programs with large commercial interest include (1) Influenzas, (2) HIV, (3)
Topical Eye Drops for viral diseases of the external eye, and (4) Herpes “cold
sores” and genital Herpes. In addition, the Company believes that, as the holder
of potentially paradigm-shifting antiviral drug development technologies, it has
a social responsibility to develop drugs against diseases affecting large
segments of worldwide populations. In our Social Responsibility programs, we are
developing drugs against Neglected Tropical Diseases (NTDs) caused by viruses
such as Dengue viruses and Rabies. The Company also has BioSecurity programs
that include drug development against hemorrhagic fever viruses such as
Ebola/Marburg, and a unique technology that we call “ADIF™” to combat natural or
bioterrorism attacks by novel viruses as happened with SARS and may happen with
engineered viruses. The Company plans to perform its NTD and BioSecurity R&D
and drug development in collaboration with Institutes of renown and with public
funding, in order to minimize the strain on our resources. The Company believes
that this work provides direct benefits to our commercially important programs.
A grant application for developing a broad-spectrum nanoviricide against
hemorrhagic fever viruses such as Ebola/Marburg and Dengue is currently pending
with the Department of Defense.
Our
development model is to employ collaborations with academic labs, government
labs, as well as external service providers in order to minimize our capital
requirements. We currently have collaborations with the Center for Disease
Control and Prevention (CDC) and the National (Central) Institute of Hygiene and
Epidemiology (NIHE) (Vietnam) for Rabies, with NIHE for H5N1 Avian Flu, the
Walter Reed Army Institute of Research (WRAIR) for Dengue family viruses, United
States Army Medical Institute of Infectious Diseases (USAMRIID) for
Ebola/Marburg family of hemorrhagic viruses, and the Long Island Jewish Medical
System, Feinstein Institute of Medical Research (LIJMS) for viral eye diseases
such as epidemic kerato-conjunctivitis (EKC) and herpes keratitis. In
addition, our HIV and common influenza studies were subcontracted to KARD
Scientific, Inc., USA. Some of the biological testing work for Herpes Virus
infection of the eye was subcontracted to TheVac, LLC, laboratories
at the Louisiana Emerging Technology Center located within the
Louisiana State University (LSU) campus in collaboration with the LSU School of
Veterinary Medicine. We have recently signed a Master Service Agreement to
subcontract evaluation of nanoviricide drug candidates against various diseases
including Influenzas and HIV with the Southern Research Institute, Infectious
Diseases Division, Frederick, MD (SRI-F), a well known contract research
organization that performs preclinical testing. Initially, we plan to
perform additional testing of influenza dug candidates including High-Path or
Highly Pathogenic Avian Influenzas (i.e. HPAI) at SRI-F. In addition to H5N1,
several H9N and H7N influenza virus subtypes are highly pathogenic and have
caused or have the potential to cause severe influenza epidemics. We
also plan to perform additional testing of our HIV drug candidates at
SRI-F.
We have
additional collaborations in the process of formalization for work on Dengue
viruses, HIV, Viral Conjunctivitis, HSV “cold sores” and genital herpes, and
other viruses. We typically employ more than one external laboratory to perform
testing for a particular disease agent in order to limit possible laboratory
level bias.
We have
developed lead drug candidates against a number of viral diseases.
Proof-of-principle efficacy studies in animals have been conducted successfully
in many of these.
Nanoviricides
are designed to work by binding to and eliminating virus particles from the
blood-stream, just as antibodies do, only potentially much better. This is
expected to result in reduction in viremia. A nanoviricide is constructed by
chemically attaching a ligand designed to bind to virus particle, to a polymeric
material that forms a flexible nanomicelle by self-assembly. If antibodies are
known to affect a viral disease, it is possible to construct a nanoviricide
against it, and there can be a general expectation of some success, depending
upon the ligand chosen. We can choose a ligand from any of a number of chemical
classes, including small chemicals, peptides, or antibody fragments or even
whole antibodies.
The
NanoViricides’ Concept and Antiviral Strategy
The
Company owns an exclusive worldwide license in perpetuity to technology that
enables the creation of nanoviricides™. A “nanoviricide” is a flexible
nano-scale material approximately a few billionths of a meter in size,
comparable to the size of a virus particle, which is chemically programmed by a
“ligand” to specifically target and attack a particular type of virus. A
nanoviricide also is capable of simultaneously delivering a devastating payload
of active pharmaceutical ingredients (API) into the virus particle, to destroy
its genome (RNA/DNA).
A
nanoviricide is designed to “look like” the portion of a cell membrane to which
a virus particle binds, in a sense. This biomimetic approach is expected to fool
the virus into binding to the nanoviricide, and in an attempt to “enter” it, it
is thought that the virus particle may get destroyed. This is because viruses
have developed ways of uncoating themselves once they enter a cell, in order to
expose the viral genomic material so that it can hijack the cellular machinery
to make its own copies. We call this the “passive view” of how a nanoviricide
may work.
A
nanoviricide is designed as a flexible material, that self-assembles, at about
the same size scale as a typical virus particle. The flexible material we use is
one type of a special polymeric material called TheraCour®, invented by the
Company’s founders. It assembles in solution into a flexible ball, somewhat like
a ball of hair. We call this a nanoviricide micelle, or “nanomicelle” for short.
On first contact with a virus particle, a nanoviricide micelle may bind to a
virus particle because of specific interaction between a ligand attached to the
nanoviricide and the glycoproteins on the virus surface. This may cause the
flexible nanoviricide to reach very close to the virus surface, leading to
additional ligands binding to additional viral coat proteins, in a mode called
“cooperative binding”. Cooperative binding is a well known natural
process that forms the basis of biological recognition such as antibody-antigen
binding, DNA hybridization, and protein assembly, among others. Eventually it is
thought that the interior of the nanomicelle, which is lipidic (oil-like) in
nature, would fuse with the exterior lipidic coat of the virus particle. This
lipidic fusion is also a well known natural process. Such fusion may lead to the
flexible nanomicelle spreading onto the virus surface much like an oil-slick
covering a golf ball. In the process, the coat proteins that the virus uses for
binding to cells may be expected to become unavailable, and are also likely to
even get stripped off completely. The virus particle would then be rendered
incapable of binding to a cell, and thus no longer infectious or capable of
causing disease or of making copies of itself. We call this the “active view” of
how a nanoviricide may work.
Nanoviricides
thus are designed to employ the “Bind-Encapsulate-Destroy” strategy, which is
akin to the “Find-Encircle-Destroy” war strategy that has been successfully
employed historically in many wars.
Antibodies
are a major defense of humans and animals against viruses. After a person is
infected by one particular virus, he/she develops antibodies against the virus.
The infection is fully controlled after a strong antibody response develops.
Subsequent exposure to the same virus does not cause disease. However,
antibodies by themselves do not destroy a virus particle. After a few antibodies
bind to a virus particle, several processes must take place that eventually lead
to destruction of the virus particle. Many viruses have developed ways of
dysregulating this complex immune response cascade.
Nanoviricides,
on the other hand, are designed as “programmed nanomachines” capable of
executing the entire strategy of “Bind-Encapsulate-Destroy” without any
dependence on or assistance from the human immune system.
Antibodies
also may be too specific to a particular virus strain, and thus viruses evade
antibodies by changing their external surface. Vaccines create antibodies in the
recipient, in order to protect the person. Vaccines are thus limited by the
nature of antibodies, and tend to be very specific to particular strains or
groups of strains of a virus. This is why a new seasonal vaccine must be
formulated for influenza every year. This is also why a novel influenza strain
such as bird flu (H5N1) or the 2009/”Swine flu” virus cannot be defended against
by existing vaccines.
Despite
all evolutionary/spontaneous changes such as mutations, re-assortments,
recombinations, etc., a particular virus retains its ability to bind to the same
features on the cell surface at the same sites. In designing a nanoviricide, we
pay particular attention to the design and selection of a ligand. We generally
choose a ligand that mimics the cell surface features to which all virus strains
of a particular virus are known to bind. We therefore believe that a resistant
viral strain against a nanoviricide would be far less likely to occur than
resistance development against any other antiviral agent strategy. If, however,
such resistance does occur, a new nanoviricide can be developed by changing the
ligand appropriately.
The
NanoViricides’ Technology and Approach
Nanoviricide
drugs, which are presently in a preclinical stage of development, are designed
to lead to reduction in viremia by a set of novel, multiple, concerted,
mechanisms:
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Each
nanoviricide drug is designed as a specifically targeted antiviral agent
for a particular type of virus or group of viruses. Often side effects of
a drug may be correlated with non-specific interactions with the host
cells, tissues, and organs. Most existing anti-viral agents are known to
have non-specific effects against both host cells and viral machinery at
the same time. Most existing anti-viral agents act inside human cells. It
is believed that this intracellular mechanism leads to significant
opportunities for non-specific effects against host cells. Nanoviricides,
on the other hand, are designed to work directly against virus particles
in bodily fluids. The Company believes that this approach may make
nanoviricides inherently safer than existing
approaches.
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A
nanoviricide is designed to seek and attach to a specific virus particle,
engulfing the virus particle in the process, thereby rendering it
incapable of infecting new cells, and disabling it completely. This
suggested mechanism of action comprises much more than what the current
entry and fusion inhibitors are expected to do. The fusion and entry
inhibitors do not completely cover the virus particle and likely block
only a few sites on the virus particle, which means the virus particle may
still be capable of infecting cells using its unblocked attachment sites.
In contrast, a nanoviricide is expected to engulf the virus particle
completely, because of its larger size and flexible nature, thus disabling
it completely. The action of a nanoviricide, if it works as designed, in
this regard may be expected to be superior to antibody agents that attack
viruses as well. Antibodies, being large, are expected to block relatively
greater portions of the virus particle surface compared to small molecule
entry inhibitors. However, antibodies depend upon the human immune system
responses for clearing up the virus particle. In contrast, nanoviricides
are thought to be capable of acting as completely programmed chemical
robots that finish their task of destroying the virus particle on their
own.
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A
nanoviricide is designed to be capable of encapsulating an active
pharmaceutical ingredient (API) in its core, or “belly”. This is expected
to reduce toxic effects of the API. Such encapsulating methods are
currently being used in anti-cancer therapy and have shown reduced
toxicity as well as increased efficacy (see http://nihroadmap.nih.gov/nanomedicine/).
Our goal, which we can give no assurance that we will achieve, is for
NanoViricides, Inc. to become the premier company developing nanomedicines
for anti-viral therapy.
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A
nanoviricide is designed to deliver any encapsulated API directly into the
core of the virus particle. This is proposed to result in maximal effect
against the anti-viral targets, such as the viral genomic materials. Our
goal for this specifically targeted delivery of the API is to minimize
toxic effects and also improve efficacy of the API. (see http://www.nci.nih.gov).
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With
this concerted targeted set of mechanisms, our objective is for the
nanoviricide to be programmed to (a) prevent the virus particle from being
able to infect new cells, (b) dismantle the virus particle, and (c)
destroy the genetic material of the virus particle, thereby completely
destroying the target. Our complete systems engineered approach to
anti-viral therapy is in stark contrast with the current piece-meal
approaches. Current drug therapies often have extensive toxicities,
limited efficacies, and generation of mutants (mutated viruses) through
selective incomplete pressure applied by the therapeutic regime onto the
virus.
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We
designed the nanoviricides to act by completely novel and distinctly different
mechanisms compared to most existing anti-viral agents. The self-assembling
nanoviricide “Trojan horses” would be expected to course through the blood
stream, seek their target, i.e. a specific virus particle, attach themselves to
the virus particle target and fuse with the virus particle. This chain of
events, if it in fact occurs, is designed to destroy the virus particle's
ability to infect host cells. In addition, if the nanoviricide may contain an
encapsulated API, such API may be deployed into the virus particle and might
lead to destruction of the virus genetic material (such as viral DNA, viral RNA,
etc.), and/or key viral components that the virus carries inside its “belly”
(such as the reverse transcriptase, the protease, and the integrase carried by
HIV particles), based on the capabilities of the API. This concept needs to be
extensively tested in future experiments. The concept of targeted delivery of an
API is well known in the cancer therapeutics arena as this quote from the
National Cancer Institute website above makes clear: “Nanoscale devices have the
potential to radically change cancer therapy for the better and to dramatically
increase the number of highly effective therapeutic agents. Nanoscale constructs
can serve as customizable, targeted drug delivery vehicles capable of ferrying
large doses of chemotherapeutic agents or therapeutic genes into malignant cells
while sparing healthy cells, greatly reducing or eliminating the often
unpalatable side effects that accompany many current cancer therapies.” http://nano.cancer.gov/resource_center/nano_critical.asp
- cancer.
We
designed the nanoviricides to act by a novel set of multiple, concerted, mechanisms. However, being
so novel, our drugs are not directly comparable to existing anti-viral
therapies. Thus, the safety and efficacy of the nanoviricides needs to be
established by experimentation, and cannot be anticipated on the basis of any
similar information regarding existing drugs. See Part
I, Preclinical
Safety And Efficacy Studies.
It is
important to realize that the flexible nanoviricides nanomedicines show
substantial advantages over hard sphere nanoparticles in this antiviral drug
application. Hard sphere nanomaterials such as dendritic materials (dendrimers),
nanogold shells, silica, gold or titanium nanospheres, polymeric particles,
etc., were never designed to be capable of completely enveloping and
neutralizing the virus particle.
The
Company does not claim to be creating a cure for viral diseases. The Company's
objectives are to create the best possible anti-viral nanoviricides and then
subject these compounds to rigorous laboratory and animal testing towards US FDA
and international regulatory approvals. Our long-term research efforts are aimed
at augmenting the nanoviricides that we currently have in development with
additional therapeutic agents to produce further improved anti-viral agents in
the future.
The
Company plans to develop several drugs through the preclinical studies and
clinical trial phases with the goal of eventually obtaining approval from the
United States Food and Drug Administration (“FDA”) and International regulatory
agencies for these drugs. The Company plans, when appropriate, to seek
regulatory approvals in several international markets, including developed
markets such as Europe, Japan, Canada, Australia, and Emerging Regions such as
Southeast Asia, India, China, Central and South America, as well as the African
subcontinent. The seeking of these regulatory approvals would only come when and
if one or more of our drugs, now in early stage of pre-clinical development, has
significantly advanced through the US FDA regulatory process. If and as these
advances occur, the Company may attempt to partner with more established
pharmaceutical companies to advance the various drugs through the approval
process.
There can
be no assurance that the Company will be able to develop effective
nanoviricides, or if developed, that we will have sufficient resources to be
able to successfully manufacture and market these products to commence
revenue-generating operations.
There can
be no assurance that other developments in the field would not impact our
business plan adversely. For example, successful creation and availability of an
effective vaccine may reduce the potential market size for a particular viral
disease.
The
Company's headquarters are currently in West Haven, Connecticut.
Our
Product Focus and Technologies
The
Company plans to develop several different nanoviricide drugs against a number
of human viral diseases. The Company has a license in perpetuity to develop
drugs based on technologies originally created by TheraCour Pharma, Inc.,
(TheraCour) against the following human viral diseases: H5N1 (Avian Flu), Human
Influenza, Human Immunodeficiency Virus (HIV/AIDS), Hepatitis B Virus (HBV),
Hepatitis C Virus (HCV), Herpes Simplex Virus (HSV), and Rabies, including all
known strains of these viruses. In addition, TheraCour has permitted
the Company to use its nanomaterials to develop a treatment against Dengue
viruses (including Dengue Hemorrhagic Fever), Ebola/Marburg viruses, and viruses
causing certain eye diseases.
We
currently have, in early, active development, products against HIV, Epidemic
Influenzas including the current novel H1N1/2009 “Swine flu” virus, H5N1 and
other Highly Pathogenic Avian Influenzas (H5N, H7N, H9N HPAI, Bird Flu), common
seasonal human Influenzas, Rabies, Dengue, and Eye drops against viral diseases
of the eye such as conjunctivitis and keratitis. Adnoviral Epidemic
Kerato-Conjunctivitis (EKC) is a severe pink eye disease that may lead to blurry
vision in certain patients after recovery. Herpes simplex viral infections cause
keratitis of the eye, and severe cases of infection may sometimes necessitate
corneal transplants. We plan on undertaking the development of drugs against
other viruses when adequate financing becomes available. The Company's ability
to achieve progress in the drugs in development is dependent upon available
financing and upon the Company's ability to raise capital. The
Company will negotiate with TheraCour to obtain licenses for additional viral
diseases as necessary. However, there can be no assurance that TheraCour will
agree to license these materials to the Company, or to do so on terms that are
favorable to the Company.
The total
market size of drugs for the programs in which we already have lead drug
candidates are estimated to be over $40B in 2013.
Our
product development programs can be roughly divided into three sectors: (1)
Commercially Important Diseases, (2) Neglected Tropical Diseases (NTD’s) and
Biosecurity/Biodefense, and (3) Advanced Technologies.
The
commercially vital diseases tend to have large market sizes, and we therefore
expect to be able to develop collaborations with major pharmaceutical companies
to pursue these programs. We have signed a Material Transfer Agreement with a
major pharmaceutical company to evaluate the nanoviricide eye drops. The
evaluation is currently in progress. There is no guarantee that the evaluation
of the nanoviricide eye drops will lead to a licensing agreement. However,
should a licensing agreement take place, we anticipate an initial payment,
followed by milestone payments during drug development, and royalties upon
commercialization of the drug.
We are
pursuing similar opportunities for our other commercial drug programs as well.
Traditionally, major pharmaceutical companies have licensed highly innovative
drugs only after human clinical studies have established the value of the drug.
In recent years, the trend is for major pharmaceutical companies to enter into
very early stage agreements, as early as screening and discovery level, with
other pharmaceutical companies. We cannot predict to what extent major
pharmaceutical companies will be interested in engaging in early stage
collaborations with us to develop our nanoviricide drugs.
We have
initiated a Biosecurity/Biodefense program based on the US Government’s
commitment to Biosecurity. We are performing these developments strictly in
various government and institutional collaborations to minimize development
costs to us. In addition, we are pursuing grant and contract opportunities in
this area to finance the drug development activities. The US Government is
virtually the only source of revenue for our Biosecurity/Biodefense programs.
Although we believe that we have demonstrated significant successes in this
area, we do not intend to develop drugs in this area without continued
government funding and assistance.
Our NTD
programs were initiated because of the Company’s commitment to social
responsibility. As a Company led by medical professionals and
committed scientists, we believe that these programs could make a substantial
impact on the quality of worldwide healthcare. The Company believes its
nanoviricide technology enables development of highly effective drug candidates
against various diseases, at less effort and expense than traditional drug
development. We have taken advantage of various government and institutional
collaborations to perform drug development activities in the NTD area at a
minimal cost. In addition, our R&D on NTD’s also indirectly benefits our
drug development for the commercially important diseases.
The NTD’s
have very high incidence rates worldwide. Most of the NTD infections occur in
underdeveloped countries. As such, NTD’s have traditionally been assigned low
market sizes by market analysts. With the economic prosperity of India, China,
Brazil, Russia, and other emerging world economies (the BRIC block), the
economic situation relative to healthcare is also changing dramatically.
Further, there are significant US government programs designed to promote the
development of drugs against various NTD’s, including the “priority voucher”
program of the US FDA, which may have commercial value. In addition, there are
several charitable foundations that are deeply involved in the NTD area in
various roles, although primarily in improving access to
healthcare.
Commercially
High Priority Drug Development Programs
To date, the Company has developed drug candidates against four virus
types/disease areas with strong commercial prospects. These include Influenza,
HIV, viral diseases of the external eye, and Herpes Cold Sores and Genital
Herpes. The market size for HIV is estimated to be $21billion in 2013. The
market for influenza drugs is estimated at about $7billion. The eye drops
topical viricide market size is estimated to be in the billions of dollars. In
addition, the herpes cold sores and genital herpes market size is in several
billion dollars.
“H1N1
Swine Flu”, Common Influenzas, High Path Avian Influenzas, Bird Flu, Epidemic
and Pandemic Influenzas
Our
FluCide™ program lead drug candidate has shown efficacies animals that far
exceed that of known drugs such as oseltamivir (Tamiflu®, Roche) against common
influenza in an animal model. Until last year, we had three different drug
development programs for influenzas: FluCide for common influenzas, FluCide-HP™
for highly pathogenic influenzas, and AviFluCide™ specific to H5N1 bird flu. We
have consolidated all three of our influenza drug programs into a single,
broadly active, yet highly effective, pan-influenza FluCide program. The new
FluCide is expected to be highly active against all influenzas, including highly
pathogenic strains such as H5N1, the novel H1N1/2009 Mexico/California “Swine
Flu” epidemic strain, H3N2, H7N, and H9N among others. We are currently
developing a single drug for all influenzas, whether pandemic, epidemic,
seasonal, novel, emerging, human, swine, or avian. We anticipate significant
cost savings as well as simplification in regulatory and eventual marketing
efforts by consolidating these drug programs.
Recently,
with additional SAR (structure-activity-relationship) studies, we have been able
to develop influenza virus binding ligands that are expected to be superior to
the previously used ligands in FluCide-HP. The new ligands are designed to be
closer mimics of the sialic acid receptors (than the previously employed ones),
yet capable of binding to influenza virus hemagglutinin proteins that use either
the “avian” or the “human” types of sialic acid receptors. Pigs are known to be
a “mixing vessel” species, exhibiting both avian and human types of sialic acid
receptors, and thereby re-assortment (mixing) of genetic material from influenza
strains, subtypes, or types, with different host specificities can occur readily
in pigs. We are actively seeking partnerships, collaborations and government
funding for our anti-influenza drug program.
Viral
Diseases of the Eye: Viral Conjunctivitis, Viral Keratitis – Eye
Drops
We are
developing a nanoviricide against adenoviral Epidemic Kerato-Conjunctivits
(EKC). EKC is a severe disease of the eye which in some people causes long term
or permanent blurred vision. In an animal study, our EKCCide™ lead candidate was
shown to rapidly resolve the clinical signs of the disease, when treatment was
started after infection had set in. The clinical success included demonstration
that no SEI’s (immunoprecipitates) were formed in treated animals, as opposed to
control group. SEI’s are known to be the cause of blurred vision. There are
currently no approved drugs available against EKC, and it is an active field of
drug development research. There are about 2.5 million cases of EKC annually in
the USA alone.
The
Company is not aware of any animal studies of anti-EKC drug candidates that have
demonstrated resolution of clinical disease. Based on these successful results,
we expanded our program to develop a single broad-spectrum nanoviricide
treatment effective against most of the viruses causing external eye diseases,
including viral conjunctivitis and viral keratitis. A large majority of external
eye viral infections are caused by adenoviruses or herpes simplex viruses
(mainly HSV-1).
We have
now successfully developed drug candidates that are effective against both
adenoviruses and against HSV-1, viruses that cause most of the viral diseases of
the external eye. Additional animal testing against HSV-1 infection of the eye
is being commissioned at two independent external research centers.
HSV and
some adenoviruses cause most of the cases of keratitis, a serious infection of
the cornea (approximately 250,000 US cases/year). Importantly, HSV infection can
lead to corneal scarring that may necessitate corneal
transplantation. In addition, some adenoviruses cause a majority of
conjunctivitis cases (“Pink eye”). The remaining cases of
conjunctivitis are caused by bacteria and are treatable with topical
antibiotics. Currently there are no effective treatments for viral
diseases of the exterior portion of the eye.
The
nanoviricide eye drug candidate is formulated as simple eye drops.
The total
market for viral conjunctivitis and keratitis is estimated to be in the billions
of dollars. The incidence of severe herpes keratitis is estimated to
be 250,000 cases per year in the USA. In Japan, where EKC is a
reportable disease, it is estimated that there are at least one million cases
per year. The number of cases of non-specific conjunctivitis (pink
eye) is considered to be far greater, possibly into the tens of millions in the
US and hundreds of millions worldwide.
The
Company reported on February 27, 2009 that it entered into a Material Transfer
Agreement with a major pharmaceutical company. Pursuant to the terms
of the agreement, the Company is not authorized to disclose the identity or the
terms of the Agreement, except for securities reporting purposes. The
pharmaceutical company will evaluate one of the Company’s compounds as a drug
candidate for certain viral infections of the external eye. The
Agreement also provides that following evaluation, should the pharmaceutical
company so elect, the parties may enter into good faith negotiations for an
exclusive, worldwide license for drug development and commercialization of the
eye drug candidate.
On May 6,
2009, the Company entered into a Clinical Study Agreement with TheVac, LLC, a
company affiliated with the Emerging Technology Center of the Louisiana State
University. At present, TheVac is performing biological testing of anti-herpes
nanoviricides. TheVac is conducting studies on the effect of anti-herpes
nanoviricide drug candidates developed for use against herpes cold sores and
genital herpes in cell culture models. In addition, TheVac is also conducting
studies on the effect of anti-herpes nanoviricides drug candidates in a mouse
model of herpes keratitis. Professor Gus Kousoulas and his team at Louisiana
State University have validated and published on this animal model extensively
in peer-reviewed scientific journals.
HIV
Our very
first animal studies in the standard SCID-hu mice against HIV-I have
demonstrated that our primary nanoviricide drug candidate, HIVCide, as well as
several other nanoviricide drug candidates were found to be superior
to the three-drug oral cocktail (HAART) that is the current standard of
care.
We
designed the anti-HIV nanoviricides using rational drug design principles. The
ligands we have designed in the case of HIV-1 are thought to be broadly
neutralizing. In-silico modeling indicates that our ligands dock to the
conserved CD4 binding site of gp120 of HIV-1. We have even observed successful
docking of some of our ligands with gp120 of the HIV-1 JRFL strain which is
thought to be resistant to HAART.
Resistance
to HAART eventually leads to AIDS. It is possible that HIVCide can be used in
addition to HAART to obtain even stronger beneficial effects, resulting in a
“functional cure” of HIV. We believe that the term “Functional Cure”
of HIV may be defined as: The HIV genome integrates into certain human cells
that go into hiding or dormancy for several years. While dormant, the HIV genome
does not produce HIV virus particles or HIV proteins to any significant extent
and are thought to remain unaffected by current anti-HIV drugs. The current
standard treatment results in very low levels of HIV viremia, but the immune
cells (CD4+ T cells and CD8+T cells) count eventually begins decreasing at a
slow rate. The HAART therapy must be continued for the life of the
patient. A more effective therapy could result in complete loss of
HIV from the blood stream. This may eliminate the slow loss of
healthy immune cell populations, and allow immune system function to return to
normal. Patients may then enjoy a normal life without further daily
treatment, until an episode occurs which mobilizes the “sleeping” cells
containing the HIV genome. Such a therapy would be called a “functional cure”
against HIV. A total cure of HIV would require elimination of the dormant cell
pool containing the HIV genome. Research in the field of reactivating the
dormant pool of HIV infected cells is encouraging. If these cells can be
reactivated, and simultaneously the HIV viremia controlled, researchers have
proposed that this could lead to reduction in the dormant infected cell pool. If
their hypotheses are correct, HIVCide could lead to an eventual cure, possibly
in combination with other drugs.
Nanoviricides
act by a different mechanism than standard anti-HIV therapy. The Company
believes, therefore, that by combining a nanoviricide with current therapy, a
functional cure of HIV may be already achievable. However, there is no way to
predict whether such a treatment would be successful at providing a functional
cure of HIV at present.
Additional
studies in cell cultures are planned to be conducted in the next six months. We
have executed a Master Service Agreement (MSA) with Southern Research Institute,
Infectious Diseases Division, Frederick, MD (SRI-F) to conduct these studies.
SRI-F is a well established Contract Research Organization (CRO) that has
developed, conducted, and published in scientific journals on standardized study
protocols for various mechanisms of anti-HIV action, including microbicides,
antibodies, and small chemical therapeutics. We are also planning additional
animal studies of these drug candidates. We are also planning
additional animal model studies of the HIVCide™ lead drug
candidate.
HIVCide
is expected to be a significant anti-HIV candidate, acting by a novel mechanism
of action and a first-in-class therapeutic, based on current preliminary
data. We intend to develop it further.
Herpes
“Cold Sores” and Genital Herpes
We have
developed nanoviricide drug candidates that are capable of attacking the herpes
virus that causes cold sores and genital herpes. These drug candidates are
designed so that they can be easily formulated as a skin cream or gel
formulation in order to be able to apply readily to cold sores or genital
lesions caused by herpes.
We have
successfully tested these drug candidates in a cell culture model for
effectiveness against Herpes Simplex Virus (HSV-1) infection. This
testing was conducted by TheVac, LLC laboratories at the Louisiana Emerging
Technology Center located within the Louisiana State University (LSU) campus in
collaboration with the LSU School of Veterinary Medicine.
Four
different nanoviricides showed greater than 10,000-fold (>99.99% or 4-logs)
reduction in virus quantity compared to untreated controls in a cell culture
assay employing the LSU proprietary green-fluorescent-protein-tagged (GFP)
modified HSV-1 McKrae strain.
These
nanoviricide drug candidates are designed to act against all herpes simplex
virus strains, including HSV-1 and HSV-2. The Company has commissioned
additional in vitro studies to confirm the results. Animal studies have also
been scheduled.
Herpes
simplex virus (HSV) causes “cold sores” or “fever blisters”, the incidence of
which is second only to the common cold (100 million recurrences annually in the
US alone). In addition, genital herpes prevalence is 67 million infected
individuals in the US alone. This represents 20% of the US population infected
with symptomatic, recurrent disease. It is also believed that a large fraction
of infected individuals remain asymptomatic. Seroprevalence (people with
antibodies) in general French population is about 67% for HSV-1 and 17% for
HSV-2. It is estimated that worldwide incidence and infection rates are very
similar to these high proportions of infection prevalence.
Existing
therapies for herpes virus infections include acyclovir and drugs chemically
related to it (e.g. gancyclovir, valcyclovir, others). These drugs, nucleoside
analogs, act by inhibiting viral DNA synthesis. However, there is known drug
toxicity due to interference with human metabolism. Currently, there is no cure
for herpes infection.
Nanoviricides
are designed to act by a novel and distinctly different mechanism compared to
existing drugs. Nanoviricides are designed to mimic the human cell surface to
which the virus binds. Our results suggest that a nanoviricide could become a
highly sought after drug against HSV.
Neglected
Tropical Diseases and Biosecurity/Biodefense Programs
Ebola,
Marburg, Dengue
We have
obtained significant positive results against Ebola, although the Ebola virus
produces a soluble glycoprotein decoy that may be capable of avoiding certain of
our virus-binding ligands.
We are
currently working on developing anti-Dengue therapeutics. Dengue is an important
NTD. According to the Centers for Disease Control and Prevention in
Atlanta (CDC), dengue fever risk is about 1 illness per 1,000 US travelers, and
it is the most common cause of fever in returned travelers from the Caribbean,
Central America, and South Central Asia. The CDC has also noted "dengue is the
most important mosquito-borne viral disease affecting humans... Each year, tens
of millions of cases of DF occur and, depending on the year, up to hundreds of
thousands of cases of Dengue hemorrhagic fever (DHF)." Dengue fever is also
called “break-bone fever”. The first or primary dengue infection has very low
fatality rates associated with it. However, when a person is infected with a
different type of dengue virus afterwards, the person is at risk of developing
Dengue Hemorrhagic Fever (DHF), or Severe Dengue fever. The fatality rate
associated with DHF/Severe Dengue may be as high as 10%. There is currently no
vaccine or cure for dengue, which causes high fever, muscular pain, headaches,
vomiting, and in some cases skin rash. WHO estimates that 2.5 billion people are
at risk of dengue fever or of DHF out of a total world population of 6.6
billion. Dengue viruses are carried by Aedes aegypti mosquito, which
is gaining ground northwards as the global climate warms up. There have been
several cases of Dengue in the southern regions of the USA.
We have
recently submitted a grant application to the Department of Defense for the
development of broad-spectrum nanoviricides that may be useful in treating
Ebola, Marburg, and Dengue viruses. This application received excellent reviews
and we were notified that it is now in the “reserve list” status, as of June,
2009. A reserve list status indicates that should the agency receive sufficient
funding in the government budgeting process, it is likely to consider the
application for funding. There is no guarantee that this grant application will
be funded. In the absence of public funding, the Company’s ability to develop
these drugs is very limited.
Rabies
Our
RabiCide™ program has resulted in candidates that have enabled survival of 20%
to 30% of infected animals after disease has set in, using a particular animal
model. Further testing is in progress in a different experimental model. We
believe that if this testing succeeds, it may be the first ever therapeutic
against rabies. Currently, rabies is a uniformly lethal disease with only
prophylactic medications available, which are comprised of human antibodies,
monoclonal antibody mixtures, and rabies vaccine virus strains. The potential
market size for a rabies drug worldwide has been estimated at $300M to $500M. In
absence of public funding, the Company’s ability to develop these drugs is very
limited.
Advanced
Technologies : ADIF™ Technologies
We
believe that our technologies and capabilities at attacking different viruses
are fairly well demonstrated. In addition, we have developed
“Accurate-Drug-In-Field™” or ADIF™ technologies that may show efficacy in
treating epidemics like H5N1, SARS or Ebola by developing a targeted therapeutic
in the field to prevent the spread of the disease.
ADIF
technology does not require any knowledge of the molecular biology of the virus,
or even its specific identification. An accurate drug, specifically targeted at
the virus, can be developed in the field, from nanomicelles stockpiled
beforehand. This enables a rapid response timeframe of as short as 3 weeks for
initial drug doses, and potentially less than 3 months for sufficient doses to
curb the spread of the virus outside the affected area. Thus ADIF technologies
are applicable to novel, or engineered viruses, or emerging infections whether
natural or man-made. This technology may have significant applications in the
Biodefense area. We believe that this is the only technology that can enable
humans to combat novel viruses before they spread disease.
We have
already demonstrated the ADIF technology capabilities successfully.
The
Strength of Our Drug Pipeline
Between
the two ends of the spectrum of specific antivirals developed during peace-time
effort, and the specific antivirals developed as a “war-like” effort (ADIF), we
have also demonstrated the capability of developing broad-spectrum
nanoviricides. Broad-spectrum nanoviricides are based on the validated
scientific fact that a large number of virus families employ the same cell
surface receptor. Our nanoviricides are designed as “cell biomimetics,” meaning
that the nanoviricides “look like” a cell to the virus. The
nanoviricide carries a portion of the broad-spectrum receptor on the nanomicelle
surface that the virus attaches to and is then entrapped or dismantled by the
nanoviricide. Such broad-spectrum nanoviricides could be stockpiled to enable
treatment of many infectious agents with very few drugs, and thus would be
valuable to worldwide disease programs, and Strategic National Stockpiling
efforts.
We
believe that the Company has a strong, wide and deep pipeline of drugs. However,
with relatively meager financial resources, the Company continues to juggle
prioritization of the various programs, and program achievements. We are also
working on bolstering our infrastructure with the objective of enabling us to
file pre-IND applications for some of our drug candidates with the FDA. The
Company has received significant interest from major pharmaceutical companies in
its Viral Eye Diseases drug candidate, and HIVCide and FluCide programs to date,
and we expect interest to increase in other programs as well. There is no
guarantee that this interest would result in any financially lucrative
co-development agreements.
All of
our programs are currently at the pre-clinical stage. We have established
preliminary proof of efficacy in cell culture and animal models, and we have
conducted preliminary safety studies that have indicated that all of our
nanoviricides are safe in the animal models as tested. We continue to
work on further experiments necessary for development of our various drug
candidates as FDA approvable drugs.
Last
year, we added two commercially important drug candidates to our pipeline,
namely HIVCide and EKCCide.
This
year, we have greatly expanded the scope of our eye anti-viral treatment to
develop drug candidate eye drops against potentially all viruses infecting the
exterior portion of the eye. Our EKCCide program has now evolved into the
broad-spectrum eye drops antiviral program, which is expected to lead to a
significant expansion in marketability as well as market size if
successful.
A
nanoviricide against Herpes cold sores and genital herpes is a new addition to
our pipeline of drug candidates this year. The market size for herpes simplex
virus treatments is in excess of $2 billion annually.
In
addition, we simplified our anti-influenza drug programs because of the high
efficacies of our new drug candidates into a single pan-Influenza broadly acting
new FluCide. This single drug is being developed for all influenza indications
including seasonal influenzas, highly pathogenic influenzas, bird flu, and novel
epidemic influenzas such as the current novel H1N1/2009. We believe that this
will reduce development costs significantly. This is also expected to help us
gain expanded market share and easier market acceptance, including stockpiling,
when a drug is approved. Emergency Use Authorization can occur under
circumstances such as the current epidemic under certain conditions after an IND
has been filed, prior to a full FDA approval. We are not at the stage of
submitting the necessary applications to the FDA as yet.
We are
developing nanoviricides for different routes of administration, choosing the
best option based on a viral disease pathology. Thus, we are developing eye drop
formulation for the viral diseases of the external eye. We are developing skin
cream and gel formulations for topical application of nanoviricides against oral
and genital herpes. All other drugs candidates including FluCide and HIVCide are
currently being developed as injectables. We believe that it will be possible in
the future to develop aerosols for influenza and nasal sprays for common colds
and similar diseases. This is possible because
nanoviricides have been designed so that they can be formulated in many
different ways.
Background:
Preclinical Safety And Efficacy Studies
The
discussions in this section and throughout this Form 10-K describe the tests
that have been conducted and the results obtained. These results do not provide
sufficient evidence regarding efficacy or safety to support an Investigational
New Drug (IND) application with the FDA. Additional studies will need to be
conducted. It must be noted that subsequent results may or may not corroborate
earlier results.
Preliminary
Safety Studies In Vitro
We have
conducted limited initial animal safety studies on one of the core TheraCour® ™
nanomaterials (patent pending). TheraCour technology covers a large range of
nanomaterials in a class known as pendant polymeric micelles. These materials
are self-assembling, flexible, non-particulate, and stable at room
temperature.
We rely
upon TheraCour nanomaterial to form the backbone of our nanoviricide antiviral
drugs. One of the TheraCour polymers was tested at a 100mg/kgBW (body-weight)
dose level in mice in a preliminary experiment. In studies involving gross
tissue examination, microscopic histology studies, and blood pathology, no
ill-effects or toxic effects were found. These studies showed that the tested
core nanomaterial did not cause any organic damage in mice at the amounts
tested. All results were within safe limits.
Several
additional animal studies have been conducted in which the effect of a
nanoviricide in the context of a disease was evaluated using histopathological
techniques. Mice infected with influenza virus (H1N1) in a lethality type of
study were treated with nanoviricides. The histological effects observed to date
have been mild and explained by the disease state and there do not appear to be
any deleterious effects of any significance that related to the nanoviricides
drugs. Systematic studies for evaluating the safety or toxicity
threshold will be performed in the future.
Higher
dosage levels and studies on additional materials are planned in order to
determine the safety thresholds in laboratory animals. The only purpose of these
studies was to give our scientists direction in designing the next set of
studies. These have no impact on the regulatory (FDA) process.
Proof-of
Principle
We have
conducted studies which demonstrated that when a small chemical molecule
(ligand) is attached to our nanomicelles covalently, the resulting nanoviricide
has such a high activity that as little as 1/50th of
the attached molecule is needed for comparable activity [i.e. a 20mg/kgBW
injection of free molecule and a 0.04 mg/kgBW injection of the molecule attached
to the polymer showed equivalent efficacy]. These results suggest to us that the
observed antiviral activity of the nanoviricide is due to the proposed mechanism
of action of the nanoviricide and not to either component of the drug, the
ligand or the nanomicelle. This is considered "proof of principle" in that our
original theoretical assumptions about the functionality of the nanoviricide
have scientifically been validated.
We have
also performed studies in vitro in which a murine cytomegalovirus (CMV)
preparation was subjected to dilute solutions of two different nanoviricides and
the resulting solutions were studied by electron micrography to evaluate
morphological changes in the virus. The nanoviricide treatments led to complete
loss of the virus's lipid coat, resulting in the virion capsids spilling out.
The virion capsids of CMV lack the coat proteins required for attachment to
cells and are non-infectious. Electron micrographs depicting this can
be found on our web site at http://www.nanoviricides.com/action_small.html.
Preliminary
Efficacy Study against Common Influenza
The
preclinical animal testing, performed to study the efficacy (effectiveness) of
the test nanoviricide (anti-human influenza, H1N1) substances, revealed
potential for development as drugs for the reasons delineated below.
Several separate and distinct sets of experiments were performed to address
different questions regarding efficacy.
Certain
sets of experiments were conducted to determine the destruction/protection of
the animal organs. There were ten animals per group and positive and negative
controls were employed. Lethal infectious challenges of H1N1 influenza virus
were administered, followed by treatment with nanoviricides after a significant
delay. The active substances appeared to have protected the organs so
that there were no histological (microscopic tissue) changes to the internal
organs of the treated animals. Highly significant tissue damage was found in the
internal organs of the unprotected (no nanoviricide treatment)
groups.
Another
set of experiments was performed, again on five separate groups each containing
ten animals where the viral load was determined in the animals. The findings
revealed that the viral load (number of viral particles per cubic millimeter) in
the treated animals was significantly lower than that found in the control
animals.
These
initial animal findings suggested that the test nanoviricide compound was an
effective treatment for human influenza in mice and that the concept of using a
nanoviricide as a treatment for certain viral illnesses was a valid one and was
deserving of further study. In more scientific terms, the statistical test was
met for validity of the findings and these findings could be considered
statistically significant. Thus, in statistical terms, one could say that the
null hypothesis, that is the statistical likelihood that the observed result was
due to chance and not the effect of the drug, was rejected.
Preliminary
Cell Culture Studies against H5N1 Avian Influenza, Clade 1 and Clade
2
In vitro
(laboratory) evaluation of 14 substances, including controls, was performed to
evaluate protection of mammalian cells against infection by the H5N1 subtype.
These assays were conducted in Vietnam under the auspices of the National
Institute of Hygiene and Epidemiology, Hanoi (NIHE) under the Vietnam Ministry
of Health. We identified four different nanoviricides as being highly effective
against H5N1 using two different assays, both involving cell culture, one using
the plaque reduction method and the other involving microscopic examination, to
determine the extent of cytopathic events (CPE) reduction. All of these
nanoviricides were effective at extremely low concentrations and many of them
are considered by us to be drug candidates.
Four
different nanoviricides were selected on the basis of the statistical test
called the p-value, (explained below). The p-values for these four compounds
were p<.003 which meant that there was a high statistical probability that
these results were due to the effect of the test nanoviricides and not due to
chance. Thus the "null hypothesis" is rejected and the results can be considered
statistically significant.
The most
successful of these was a nanoviricide based on an antibody fragment as the
targeting ligand, which led to substantial suppression of CPE at an
extraordinarily low concentration level. This is being developed as
AviFluCide-I™, a drug highly specific to H5N1 that is being developed against
the Vietnam strain. We currently believe that it is very likely to work against
the Indonesian strain although further studies will be required to determine its
efficacy against various highly pathogenic stains of influenza. If it fails to
work against the Indonesian 2006 strain, further development may become
necessary.
Another
nanoviricide which is based on a ligand that we designed in-house, using
rational drug design strategy, to be specific to the group of all or a majority
of highly pathogenic avian influenza (HPAI) viruses, also showed a very high
efficacy. This is being developed as “FluCide-HP™”, a drug designed to be
group-specific against emergent and existing highly pathogenic influenza viruses
(including H5N1, H7N, H9N and others). Non-H5N1 HPAI (non-pathogenic avian
influenza) strains could become a pandemic threat when their occurrences
increase, as can all influenza A viruses since they all have the ability to
mutate. It is well known that influenza strains drift constantly due to
mutation, re-assortment or recombination events leading to failure of vaccines
and existing drugs.
A third
nanoviricide is based on a ligand that we designed for attacking all influenza A
viruses (type-level specificity). This has shown strong efficacy against H5N1 as
well, as expected. This is being developed as “FluCide-I™”, a drug designed
primarily for use against serious cases of human influenza.
Preliminary
analysis of the H5N1 preclinical in vitro studies performed in Vietnam showed
that many nanoviricide candidates were effective at as low as 5-nanomolar
concentration levels in cell culture experiments. Typically, an early
developmental drug that proves effective at concentrations less than 500
nanomolars is considered a strong candidate for FDA approval as an
“Investigational New Drug (IND)” applicant.
All of
the above studies have been repeated with the same, as well as, additional test
methodologies (for example, evaluation of CPE quantitatively by a cell viability
soluble dye assay) producing confirmatory results against this rgH5N1 Vietnam
strain (based on the Vietnam 2004/2005 H5N1 strain).
Additional
cell culture studies against the wild-type clade 2 H5N1 strain isolated in
Vietnam in late 2006 showed that FluCide-HP caused a 90% reduction in CPE as
measured by the dye assay, whereas FluCide-I gave a 70% reduction in CPE,
indicating that both of these broad-spectrum drugs are highly effective even
against different strains and different clades of H5N1.
The
Indonesia 2006 H5N1 strain also belongs to the clade 2 subgroup within H5N1
subtype.
Both of
these drug candidates were also highly effective in vivo against the influenza A
H1N1 strain (see below). These studies provide a preliminary indication that the
various influenza viruses may have limited ability to escape these nanoviricides
drugs via mutations and other changes. The choice of ligands we have
performed in such a fashion that the potential for a virus strain to mutate and
escape the nanoviricide drug and still remain a serious cause of disease, is
minimized. Further studies are planned.
Preliminary
Efficacy Studies In Vivo - Common Influenza
100% of
Mice Survived Long After All Mice Treated With Oseltamivir Had
Died.
All but
the antibody-based anti-influenza nanoviricides have been tested in mice in an
aggressive study involving extremely high levels of infection with a common
influenza strain called H1N1. This study was conducted by Dr. Krishna Menon, the
Company’s Chief Regulatory Officer. While a final comprehensive report on this
study has not yet been issued, the results indicate that most of the
nanoviricide nanotechnology-based drug candidates were substantially more
efficacious than oseltamivir (Tamiflu(R)). Initial unpublished data suggest that
FluCide-I may be as much as 8 to 10 times (800% to 1,000%) superior to Tamiflu
in common influenza.
Additional
studies have been performed in the same highly lethal mouse model with H1N1
infection wherein all the mice treated with oseltamivir died within 151.4±1.0
hours, at which point 100% of the mice treated with a nanoviricide using an
improved sialic-acid-based ligand (improved FluCide(tm)-I) as well as 100% of
the mice treated with a nanoviricide made using a ligand designed against the
high path site of highly pathogenic influenzas including H5N1 (FluCide-HP(tm))
were still surviving. The mice treated with FluCide-HP survived until 186.0±1.4
hours, whereas those treated with FluCide-I survived until 190.0±3.7 hours in this test. (The
control, untreated mice died within 119.0±0.6 hrs. Oseltamivir is the active
ingredient of Tamiflu(R)). It is estimated that the Tamiflu dose would need to
be increased by much more than ten times (i.e. much more than 1,000%) to match
the efficacy of the improved FluCide-I. These estimates are very preliminary in
nature.
Considering
that the preclinical data for oseltamivir and for peramivir are similar in terms
of effect on survival or time course, it is clear that our nanoviricides may be
expected to be far superior to peramivir as well.
From this
unpublished data, we have concluded that the results are statistically
significant with a p<0.003.
Virus
Load in lungs of lethally infected animals was reduced
significantly.
In the
above study, the virus load in lungs of infected animals was reduced to 92±21 pfu/ml by FluCide-HP and
119±18 pfu/ml by
the improved FluCide-I in this study. These are very low levels of virus load.
The control untreated mice had a viral load of 946± 115 pfu/ml at this sampling
point. Thus, the reduction in viral load was approximately 1 log
units for both of these candidates. Virus load reduction estimates
depends upon various factors. Improvement in dosing regimen may be
expected to provide a further reduction in viral load.
Preliminary
Efficacy Studies In Vivo – Rabies
As part
of our agreement with Vietnam that enabled us to perform studies on various H5N1
strains and gave us access to anti-H5N1 antibodies from multiple host species,
we have undertaken the development of anti-rabies drug candidates.
We
performed two separate animal studies using a lethal mouse model in which mice
were infected intracerebrally with 1,000LD50 of rabies challenge standard virus
strain. Each group had 10 animals and there were 36 groups all
together. In both studies, three different nanoviricides led to
significant indefinite survival of mice. In the intracerebral
virus-neutralization mechanism study, two of the tested nanoviricides led to 30%
of the mice surviving indefinitely, and one led to 20% of the mice surviving
indefinitely. In the intraperitoneal nanoviricide administration route study,
two of these nanoviricides led to 20% of the mice surviving indefinitely. A 20%
or greater population survival is considered statistically significant in this
study. BayRab(R), a commercial antibody used for post-exposure prophylaxis of
rabies, gave 0% population survival rate in both studies. A nanoviricide made
using antibody-based ligand followed the same course as the antibody itself, and
gave a 0% population survival rate.
These
studies appear to be the first ever in which a non-vaccine agent led to a
significant population survival extent in rabies-infected mice in any high
lethality infection protocol. Two of the three nanoviricides that led
to high population survival rates in these studies are being further developed
under the RabiCide-I(tm) project. Further studies are
planned.
On July
3, 2008, the Company signed an agreement with the Centers for Disease Control
and Prevention (CDC, Atlanta, GA) for further animal studies. If these studies
meet the goals and expectations of the CDC Rabies scientists, it is anticipated
that the Company will be able to develop an anti-rabies nanoviricide drug. The
Company anticipates that such a drug could be used for post-exposure
prophylaxis, replacing costly antibody therapies. The Company also anticipates
that additionally, a post-infection rabies treatment drug may also be possible,
if the testing results so indicate.
An
estimated 10 million people receive post-exposure treatments each year after
being exposed to rabies-suspect animals. About 30,000 people in the United
States receive both pre-and post exposure prophylaxis every year, at a cost of
over $1000 per treatment course. The annual number of deaths worldwide caused by
rabies is estimated to be 55,000, mostly in rural areas of Africa and Asia,
according to a recent World Health Organization report. The market size for
post-exposure prophylaxis for rabies has been estimated at $300 million to $500
million annually.
Rabies, a
uniformly fatal disease found primarily in Africa and Southeast Asia, had never
before been successfully treated with drugs. There are currently no FDA-approved
treatment options for rabies once symptoms develop. In addition, the Company
believes that significantly increased survival rate of these lethally infected
animals is possible in the dose-ranging studies to follow.
Preliminary
Efficacy Studies In Vivo – Viral EKC
Viral
EKC, or Viral Epidemic Kerato-Conjunctivitis is a severe pink eye disease that
lasts for several days with painful discharge causing sticky eyes. In addition,
a few percentage of the recovered patients experience permanent blurred vision
or partial loss of vision due to the presence of “immuno-precipitates” that
occur as a result of the body’s immune response to the virus. Approximately 50%
of all EKC cases are viral; the remaining being caused by bacteria. Bacterial
EKC is treatable with antibiotics. There are no current treatments against Viral
EKC (“EKC” for short, in this document).
In a
preliminary rabbit eye animal study, we tested two different nanoviricides
against EKC caused by infection with Adenovirus 5, a well known causative agent.
The virus was supplied by the CDC. Controls of uninfected, untreated eyes, of
infected, untreated eyes, and of infected eyes treated with the standard eye
wash formulating solution, were also part of the experiment. Treatment with eye
drops of nanoviricides was started 15 hours post-infection, well after the
disease had set in, and was continued twice a day for ten days. On the third
day, eyes treated with nanoviricide B were completely cleared up with no
redness, stickiness, exudate, or furry eyebrows. The other nanoviricide was
slightly less effective. The eyes in control groups in contrast showed all
classic signs of infection throughout the due course of disease. Further
examination has indicated that treatment with nanoviricide B resulted in all
eyes being completely free of sub-epithelial filtrate and immuno-precipitate
formation, whereas eyes in the control groups exhibited SEI and
immuno-precipitates as expected. Further results regarding viral load and other
effects are being evaluated.
The study
concluded that both nanoviricide B and nanoviricide C were highly effective
against adenoviral EKC and of these, nanoviricide B was substantially superior.
Further studies are scheduled.
In
addition to adenoviruses, herpesviruses form another important cause of viral
EKC as well as additional related diseases of the eye. We plan to extend our
studies to herpesviral eye infections in the near future.
The
Company is in contact with several major pharmaceutical companies for
development collaboration for viral EKC drugs.
Preliminary
Efficacy Studies In Vivo – HIV
In a
preliminary animal study against HIV in a well established animal model,
SCID-hu-Thy/Liv mice, we tested a number of nanoviricides against a positive
control (that is known effective drug) that comprised the clinically employed
well established HAART therapy of oral three drug combo (AZT+3TC (lamivudine) +
Efavirenz (a non-nucleoside reverse transcriptase inhibitor (NNRTI)). Several
additional parameters were tested and indicate significant benefit of
nanoviricide therapy.
Treatment
with HAART and anti-HIV nanoviricides resulted in a significant reduction in
viral load in the Thy/Liv implant as determined by qPCR and viral particle
counts in aspirated implant lymphocytes by EM. qPCR analysis showed
that HAART and nanoviricide treatment reduced the implant viral load equally
well, with nanoviricide results showing slight superiority. The aspirated
lymphocytes showed substantially lower viral particle burden in nanoviricide
treated groups, as compared to HAART-treated groups. The EM data are considered
preliminary and we do not draw any conclusions rather than they support the
viral load reduction studied by qPCR.
Similar
to the reduction in viral load, both HAART and nanoviricide treatment had
positive long term effects on reducing thymocyte depletion as shown by the
proportion of CD4+CD8+ thymocytes (double-positive, or “DP”) in the 5th week
post-infection. Implants in the HAART and nanoviricide treatment
groups exhibited 80-85% CD4+,CD8+ DP cells while the vehicle control groups had
only approximately 30% CD4+CD8+ thymocytes.
The equal
treatment effect was produced by administering only 150 mg/kg
nanoviricide, as opposed to a total of 4,200 mg/kg of HAART drug load. Thus,
nanoviricides were more than 25X (2,500%) superior to the HAART cocktail on a
dosage level basis. In addition, the nanoviricide therapy was given only during
the first week whereas HAART therapy was continued for 42 days. Thus, there is a
significant possibility that extending nanoviricide treatment further could have
far more significant benefits than observed in this study.
No
adverse events were observed with nanoviricide therapy. The physical appearance
of the animals was much better in the nanoviricide treated animals than in the
HAART treated animals. These preliminary findings suggest that nanoviricide
therapy was safe, well tolerated, and did not result in any adverse events.
HAART therapy in humans is known to be associated with significant adverse
events including nausea, weight loss, and lipid redistribution, among other
factors. The very large dosages of drugs in HAART therapy are thought to lead to
various adverse events.
The HAART
cocktail we used consisted of AZT+3TC+Efavirenz, at 40 + 20 + 40
mg/kg, respectively, administered p.o. 1x daily for the duration of
the study, beginning 24 hrs after virus inoculation, for a total drug load of
4,200mg/kg. In contrast, the nanoviricide treatments were given only during the
first week, at days 1, 3, and 5 post-infection, at 50 mg/kg (tail vein
injection), for a total drug load of 150 mg/kg. We intend to increase the extent
of nanoviricide drug treatment in the future studies.
In
summary, treatment of SCID-hu mice with nanoviricides following HIV-1 Ba-L
infection of hu-Thy/Liv implants resulted in significantly reduced viral load
and significantly improved double positive, CD4+,CD8+ thymocyte proportion.
These effects appear to have resulted in improved survival and reduced body
weight loss. Importantly, comparison with mice treated with the HAART cocktail
for the duration of the study revealed that the nanoviricide anti-viral agents
were comparable or slightly superior to HAART treatment for all parameters
evaluated. It is important to note that nanoviricides were single
administrations only at 24, 48 and 72 hours post-infection while the HAART
cocktail was administered daily for the duration of the study. The nanoviricide
total drug load was only 150 mg/kg as opposed to a total HAART drug load of 4200
mg/kg, thus equivalent effects were observed with nanoviricide drug candidates
at ~1/25th of the HAART drug load. It would be important to determine if
extended nanoviricide administration shows significantly greater
efficacy. Additionally, we are not aware of any anti-HIV drug
candidate that is equivalent or superior by itself alone to the HAART
cocktail.
Based on
this study, the Company believes that it has a strong lead drug candidate
against HIV. If the preliminary results are substantiated in further studies,
and later in human clinical trials, it would be the first time ever that a new
drug in development would have been found to be superior to the entire cocktail
of three drugs called HAART.
At
present, there are several drugs against HIV. These have led to HIV becoming a
chronic, treatable, disease that can be controlled through the lifespan of an
infected individual until an episode occurs. An episode is usually characterized
by development of resistance against the therapy given. Drugs in the cocktail
are then substituted or additional drugs added to provide additional
benefit.
To the
initially developed three drug classes, NRTI, NNRTI, and PI, recently three new
classes have been added. These are EFI (Entry/Fusion Inhibitors) such as
Fuzeon(™, Roche), II (Integrase Inhibitors) such as Isentress (tm, Merck),
elvitegravir (Gilead), and most recently, CCR5-blockers, maraviroc (Pfizer). Of
these, NRTI, NNRTI, PI, and II act intracellularly, blocking different steps in
the virus replication. EFI block the early step of virus entry and fusion with a
human cell. CCR-5 blockers inhibit viral entry by blocking one of the receptors
on the human cells used by the virus. However, HIV can also use CXCR4 in
addition to or instead of CCR5, and viruses that do so cannot be affected by
CCR5-blockers. Current standard of care is a three-drug combination called
HAART. This leads to significant viral load control until resistance emerges. A
recent clinical trial has established the validity of an approach that combines
an II as a fourth drug into the original three drug combination cocktail. Fuzeon
showed significant toxicity, potentially due to its action against human cells,
and has not gained much acceptance, with a substantial number of patients
falling off therapy due to side effects.
None of
these drug classes alone cause benefits equivalent to the combination of the
three drugs of the HAART cocktail. Nanoviricides are expected to act by a
completely novel mechanism that is expected to result in complete dismantling of
the extracellular virus load, rather than simply inhibition of entry of a small
fraction of the extracellular virus load. Thus, nanoviricides
mechanism is distinct from and superior to that of EFI and CCR5-blockers, as
well as antibody cocktails. In addition, nanoviricides can be combined for
significant geometric increase in benefit with agents that act intracellularly
such as the NRTI, NNRTI, PI and II class of drugs. Thus we believe that
nanoviricides will become a significant tool in the arsenal against
HIV.
If the
viral load reduction seen in the preliminary animal study by a nanoviricide in
comparison with HAART therapy proves to be predictive of benefit, then we can
estimate that the anti-HIV nanoviricide alone or perhaps in combination with one
or more components of the existing arsenal of drugs may provide what has been
called a “functional cure” against HIV. A total cure is a state in which all
virus, including copies of its genome integrated into human cells, is eliminated
from the body, so that the virus infection does not exist and cannot recur. A
functional cure can be paraphrased as a drug treatment which practically
eliminates substantially all circulating virus, so that therapy can be stopped
until a new recurrence happens after a significantly prolonged time interval.
Thus, patients can live worry-free lives for years before requiring treatment
again.
Preliminary
Efficacy Studies In Cell Cultures – HSV-1
We have
successfully tested certain nanoviricide drug candidates in a cell culture model
of HSV-1 infection. The study was designed as a virus neutralization study. This
testing was conducted by TheVac, LLC laboratories at the Louisiana Emerging
Technology Center located within the Louisiana State University (LSU) campus in
collaboration with the LSU School of Veterinary Medicine.
Four
different nanoviricides showed greater than 10,000-fold (>99.99% or 4-logs)
reduction in virus quantity compared to untreated controls in a cell culture
assay employing the LSU proprietary green-fluorescent-protein-tagged (GFP)
modified HSV-1 McKrae strain. Virus quantity was determined in terms of pfu or
plaque forming units, as is customary.
These
nanoviricide drug candidates are designed to act against all herpes simplex
virus strains, including HSV-1 and HSV-2. The Company has commissioned
additional in vitro studies to confirm the results. Animal studies have also
been scheduled.
A Note on
Our Studies to Date
Current
pharmaceutical industry work in antiviral therapy generally results in small
efficacy improvements. Thus, in the case of influenza, peramivir™, (BioCryst)
was reported as having approximately equal efficacy to oseltamivir (Tamiflu,
Roche), in the most recent studies reported. In these clinical studies,
peramivir was administered as an IV infusion at about 300mg or 600mg. IV
infusion is a cumbersome process requiring hospital based administration.
Previously, it was suggested that peramivir™ may have a superior safety profile
and thus may enable use of large doses (compared to Tamiflu). Peramivir
previously failed its Phase II clinical trials, and BioCryst stated that this
may have been due to the use of needles of insufficient length in the Phase II
study.
These
levels of efficacy differences between other product candidates against
influenzas and bird flu can be easily seen to be insignificantly small compared
to the ones established in our studies for the nanoviricides
tested.
However,
it should be noted that all of our studies to date were preliminary. Thus, the
evidence we have developed is indicative, but not considered confirmative, of
the capabilities of the nanoviricides technology's potential. These results
merely lead us to the next step in the development process. They have no
relevance when it comes to the FDA regulatory process. Despite such excellent
early results, there is a risk that the nanoviricides may not result in drugs
suitable for commercial production.
It must
be stressed that the results discussed above were very preliminary and similar
results may not be found on retesting. However, further repeat
studies will be necessary to substantiate and validate these
results.
In
statistics, a result is called significant if it is unlikely to have occurred by
chance. "A statistically significant difference" simply means there is
statistical evidence that there is a difference; it does not mean the difference
is necessarily large, important or significant in the usual sense of the word.
For a detailed discussion of the significance of the p-value, please see http://en.wikipedia.org/wiki/P-value.
In
traditional frequentist statistical hypothesis testing, the significance level
of a test is the maximum probability, assuming the null hypothesis, that the
statistic would be observed. Hence, the significance level is the probability
that the null hypothesis will be rejected in error when it is true (a decision
known as a Type I error). The significance of a result is also
called its p-value; the smaller the p-value, the more significant the result is
said to be.
Significance is
represented by the Greek symbol, α (alpha). Popular levels of significance are
5%, 1% and 0.1%. If a test of significance gives a p-value lower than the
α-level, the null hypothesis is rejected. Such results are informally referred
to as 'statistically significant'. For example, if someone argues that
"there's only one chance in a thousand this could have happened by coincidence,"
they are implying a 0.1% level of statistical significance. The lower the
significance level, the stronger the evidence.
A very
small α-level (say 1%) is less likely to be more extreme than the critical value
and so is more significant than high α-level values (say 5%). However, smaller
α-levels run greater risks of failing to reject a false null hypothesis (a Type
II error), and so have less statistical power. The selection of an α-level
inevitably involves a compromise between significance and power, and
consequently between the Type I error and the Type II error.
Our
experiments have constantly resulted in the p-value less than 0.003, which makes
the tests very accurate, that there are no errors statistically for such an
experiment, and all the values obtained from these experiments are of
significance.
Mechanism
of Nanoviricides Action
It should
be noted that while the nanomaterials and nanomedicines we are developing are
designed with the set of ground rules stated earlier as our design goals, it is
generally not possible to establish whether each of these mechanisms is actually
active or whether it is truly responsible for the efficacy
observed.
We
believe that mechanisms are guidelines rather than endpoints. Our study
endpoints and development programs are defined for establishing efficacy,
safety, and chemical manufacturing controls, rather than establishing mechanisms
of action.
Escape
Mutants
Escape
mutants are a known risk and challenge to any given anti-viral drug. Our plan is
to develop new drugs with modified ligands that attack the new attachment sites
of the escape mutants. The rationale for this is based on the concept that a
nanoviricide drug is constructed from several building blocks. One of these
building blocks is the ligand that attaches specifically to the virus.
Identifying or creating a new ligand that binds to an escape mutant enables
creating a new drug, simply by replacing the ligand part of a drug already known
to be reasonably safe and efficacious. The Company's scientists have developed
strategies for identifying and designing such ligands.
Ligand
Tuning ™
A very
broad-spectrum nanoviricide can be made by using a ligand that binds to a very
large number of types and strains of a given virus. Usually, but not always, it
is possible to identify a ligand that will provide such a broad specificity
against a particular virus, or a group of viruses.
Usually,
the broader the spectrum of a ligand, the lower is its efficacy level by itself.
Thus, it is always beneficial to develop highly efficacious narrow spectrum
drugs against potentially deadly diseases. Both high efficacy and low efficacy
ligands can be combined on the same nanomicelle for “tuning” the spectrum of
activity of the nanoviricide drug.
A Note on
US FDA Priority Review Vouchers
The Food
and Drug Administration Amendments Act of September 2007 authorizes the FDA to
award a priority review voucher to any company that the FDA has determined is
eligible for priority approval process for a treatment for a neglected tropical
disease. The priority review voucher can be traded to another company
in a manner similar to carbon (emissions) credit vouchers. The recipient company
can save as much as six months on their drug review process, and it is
anticipated that they would be willing to trade in vouchers with cash benefits
to the company developing drugs against neglected tropical diseases. The
regulation became effective as of September 30, 2008.
Economists
at Duke University, who proposed the voucher concept in 2006, have calculated
that reduction of the FDA approval time from 18 to six months could be worth
more than $300 million to a company with a top-selling drug with a net present
value close to $3 billion. At this level, the voucher would be expected to
offset the substantial investment and risk required for discovery and
development of a new treatment for a neglected tropical disease. (David B.
Ridley, Henry G. Grabowski and Jeffrey L. Moe, "Developing Drugs For Developing
Countries", Health Affairs, 25, no. 2 (2006):
313-324; doi: 10.1377/hlthaff.25.2.313; © 2006 by Project
Hope. and http://blogs.cgdev.org/globalhealth/2007/10/fda_priority_review.php)
While it
is too early to say whether NanoViricides, Inc. can obtain priority review for
its drugs against neglected tropical diseases, the high efficacies of our drug
candidates lead us to believe that this may be possible. FDA awards priority
review status on the basis of several criteria. NanoViricides, Inc. is currently
working on several neglected tropical diseases, including Dengue fever viruses,
rabies, Ebola/Marburg viruses, among others. Of these, Dengue viruses are
explicitly included in the list under this Public Law, and the remaining viruses
are eligible for similar treatment according to the language in the Public Law,
at the discretion of the Secretary of Health (Food and Drug
Administration Amendments Act of 2007, P.L. 110–85, Sept. 27, 2007,
http://www.fda.gov/oc/initiatives/fdaaa/PL110-85.pdf).
Background:
Collaborations and Subcontract Arrangements
Arrangement
with KARD Scientific, Inc.
Owned and
operated by Dr. Krishna Menon, KARD Scientific Inc. of Wilmington,
Massachusetts, is currently our primary vendor for animal model study design and
performance. KARD operates its own facilities in Wilmington, Massachusetts. KARD
uses the Beth Israel Deaconess Hospital of the Harvard University Medical School
to conduct these studies on our behalf. NanoViricides, Inc. does not have any
direct collaborative relationships with Beth Israel Deaconess or Harvard
University.
NanoViricides
has a fee for service arrangement with KARD. We do not have an exclusive
arrangement with KARD; we do not have a contract with KARD; all work performed
by KARD must have prior approval by the executive officers of NanoViricides; and
we retain all intellectual property resulting from the services by
KARD.
Dr.
Krishna Menon is the Company’s Chief Regulatory Officer, a non-executive officer
position.
Collaboration
with the Health Ministry of the Government of Vietnam
On
December 23, 2005, the Company signed a Memorandum of Understanding with the
National Institute of Hygiene and Epidemiology in Hanoi (NIHE), a unit of the
Vietnamese Government’s Ministry of Health. This Memorandum of Understanding
calls for cooperation in the development and testing of certain nanoviricides.
The parties agreed that the initial target would be the development of drugs
against H5N1 (avian influenza). NIHE thereafter requested that we develop a drug
for rabies, a request to which we agreed. The initial phase of this agreement
called first for laboratory testing, followed by animal testing of several drug
candidates developed by the Company. Preliminary laboratory testing of
FluCide™-I, AviFluCide-I™ and FluCide-HP™ against various H5N1 strains in cell
culture were successfully performed at the laboratories of the National
Institute of Hygiene and Epidemiology in Hanoi (NIHE). In addition, animal
studies of RabiCide drug candidates were also performed at the NIHE BSL2
facilities. The next stage of the project, animal testing of the Influenza and
H5N1 candidates, has been delayed until the BSL3+ animal facility in Hanoi is
ready. The H5N1 testing will utilize the NIHE’s BSL3 (biological safety
laboratory level 3) laboratory. Rabies testing can safely be done at their BSL2
facility.
Other
Collaborations
The
Nanoviricides approach depends upon significant scientific input as well as
scientific experimentation during various stages of developments. The Company
currently does not have the facilities to conduct most of the anti-viral
studies. The Company has made and will need to continue to develop
additional collaborations in order to minimize capital
outlays.
In the
past year, we have made significant efforts to obtain collaborations with
various agencies, institutions, and commercial enterprises. To date, we have
entered into the following collaborations.
On April
4, 2007, the Company signed a Cooperative Research and Development Agreement
(CRADA) with the Walter Reed Army Institute for Research (WRAIR) for a
cooperative research project to test the effectiveness of the Company’s products
against the Dengue Fever Viruses.
On
October 4, 2007, the Company signed a Material Transfer Agreement (MTA) with the
United States Army Medical Research Institute of Infectious Diseases (USAMRIID)
for a cooperative research project to test the effectiveness of the Company’s
products against the Ebola and Marburg Viruses.
On
February 4, 2008, the Company signed a Cooperative Research Agreement with the
United Stated Armed Forces Institute of Pathology (USAFIP) to test the efficacy
of the Company’s nanomedicine technology in preliminary animal studies against
H5N1 and HIV viruses. USAFIP has informed us that they will not be able to
perform the H5N1 studies due to policy restrictions. The company will fund such
studies in the amount of $122,844.
On July
3, 2008, the Company signed a Materials Cooperative Research and Development
Agreement (M-CRADA) with the Centers for Disease Control and Prevention (CDC)
for testing anti-rabies nanoviricides. The M-CRADA was extended in July 2009 for
an additional year.
On
February 25,2009, the Company signed a Material Transfer Agreement with a
pharmaceutical company, which pursuant to the agreement, has not authorized the
the disclosure of itsidentity or the terms of the agfreement, except for
securities reporting purposes, for evaluation of the Company’s compounds as a
drug candidate for certain viral infections of the external eye. There can be no
assurance of any co-development or licensing agreement.
On May 6,
2009, the Company entered into a Clinical Study Agreement with THEVAC, LLC, a
company affiliated with the Emerging Technology Center of the Louisiana State
University. At present, TheVac is performing biological testing of anti-herpes
nanoviricides. TheVac is conducting studies on the effect of anti-herpes
nanoviricide drug candidates against herpes cold sores and genital herpes in
cell culture models. In addition, TheVac is also conducting studies on the
effect of anti-herpes nanoviricides drug candidates in a mouse model of herpes
keratitis. Professor Gus Kousoulas and his team at Louisiana State University
have validated and published on this animal model extensively in peer-reviewed
scientific journals.
In
addition, the Company has received several cooperative research and development
agreements (CRADA's) from different government agencies, civilian as well as
military. These CRADA's are currently in review by the Company counsel. We have
also received requests for material for testing under Material Testing
Agreements (MTAs) from certain agencies. However, there can be no assurance that
a final agreement may be forthcoming.
Further,
the Company has had preliminary negotiations and discussions with other pharma
and non-pharma commercial enterprises regarding commercial projects based on the
Company’s technologies. The Company has signed or has in legal
review Non-Disclosure Agreements with certain major pharmaceutical
companies. However, there is no assurance that the Company may enter
into such agreements with these or other pharmaceutical companies, nor is there
any assurance that any of these agreements and subsequent research, testing, and
evaluation, may result in any collaborations or partnerships with these or other
pharmaceutical companies.
Background:
Bio-Defense - Emergency Preparedness
NanoViricides
Technology May be Well Suited for Bio-Terrorism and Emerging Disease Threat
Response
In our
early stages of development, we have designed a building-block based approach of
nanoviricides drug development which may have potential use against
bio-terrorism, accidental release of infectious agents, or natural outbreaks.
This building block approach is expected to have the potential to allow us to
expeditiously develop a new drug to fight new and emerging threats. The Company
has shown this in multiple presentations to various agencies within the U. S.
Department of Defense.
Background:
Bio-Defense “Rapid Threat Response”
One of
the long-term goals of the Company is to develop the ability to assist in the
response of governments to viral bio-threats, whether due to bio-terrorism or
natural events. Such a response scenario may in fact be possible because of the
building-block nature of the nanoviricides platform technology. In this
scenario, a base nanoviricide would be stockpiled under strategic national and
international stockpiling programs, and a new drug could be developed against a
threat even prior to identifying the actual pathogen that is the cause of the
public health crisis event. This capability is seen as extremely valuable
because it is anticipated that bioterrorism agents of the future as well as
natural outbreaks may be of novel pathogens and therefore identification and
diagnosis of the same may take large amounts of time, a time period in which an
epidemic may threaten to become a pandemic. Such was the case with SARS, and
other smaller outbreaks. Last year, a coxsackie virus outbreak in Northern India
resulted in several child fatalities during the pathogen identification time
frame itself, despite being caused by a previously known pathogen. This year,
there have been cases of an unidentified infection in children in Northern India
that resulted in several deaths.
Background:
Anti-HIV Drugs
Importance
of Reduction in Viremia
In the
field of HIV treatment, it is well established that keeping the viremia to a
minimum level has significant clinical benefits. Thus, in one clinical study,
only 8% of HIV infected patients with a viral load of less than 4350 copies of
viral mRNA/uL progressed to full-blown AIDS in 5 years. By contrast, 62% of
patients with a viral load of greater than 36,270 copies of mRNA/uL had
developed AIDS in the same period (ref 145 from PATH p254). Viremia is
significantly controlled with the current state of the art highly active
antiretroviral therapies (HAART) against HIV, to the extent of almost
undetectable viral load (i.e. less than 50-75 copies of HIV RNA per ml) in many
patients. However, this is a dynamic condition, in which the rate of creation of
new virus particles is balanced by the rate of their destruction, primarily by
the body's innate defenses. In addition, once an escape mutation occurs, the
HAART therapy loses its effectiveness and viral load rises sharply. Similarly,
other precipitative events such as a secondary infection can cause progress to
the AIDS stage. The AIDS stage is characterized by rapidly rising HIV viral
loads (viremia) and, concomitantly, rapidly declining CD4+ T cells (an important
component of human immune system). Eventually, the patient dies of complications
related to the debilitation of immune response, often by a variety of secondary
infections or even neoplasms (cancers) that grow unchecked.
In the
very first stage of HIV infection, i.e. immediately after infection, there is a
rapid rise in HIV viremia in the first few weeks, called the Acute HIV Syndrome
(or Disease). If the body's immune system then brings the viremia under control,
into a dynamic state, it is called “Asymptomatic HIV Disease”. This stage lasts
for a median 10 years, and a precipitative event, such as usually a secondary
infection, leads to the clinical manifestations of AIDS. During the asymptomatic
stage, it is known that the level of the steady state viremia correlates with
the future progression of the disease and the life span of the
patient.
While
HAART therapy, when successful, leads to “undetectable” levels of viremia, the
virus levels may still be at about 50 copies per ml, or about 1.5 million
circulating virions in the blood
and probably many magnitudes more virions inside cells and other tissues. This
is still a very large load of virus. Thus, control of viremia is important even
in the asymptomatic stage of “latent” HIV infection, even with HAART
therapy.
Based on
our early stage in-vitro and in-vivo results on our anti-viral influenza
nanoviricides, we now have a scientific basis to expect that once we identify
and attach a suitable ligand to develop an anti-HIV nanoviricide, it may well be
possible to control viremia in all three stages of the HIV disease; viz. the
early acute HIV infection syndrome, the later clinically latent HIV infection,
and the late stage of full-blown AIDS. This “system” still needs to be
extensively tested in the laboratory and in animals before any definitive
statements can be made about its effectiveness.
The
Company's Plan of Attacking HIV/AIDS
As
previously anticipated, we began pre-clinical studies of our first generation
anti-HIV nanoviricide drug, HIVCide(tm)-I in the later part of our 2007 fiscal
year. The early studies have been extremely successful, and in these preliminary
studies we have found at least one lead drug candidate that provided results
superior to the three-drug oral cocktail that is currently in human clinical use
as HAART therapy. We plan on continuing these studies towards the preparation of
a Tox Package for filing an IND in the near future. These planned studies are
elaborate, intensive, time-consuming, resource-intensive, and expensive. Our
ability to conduct these studies depends upon adequate financing for the staff
as well as for the materials required for the various experiments. We plan on
continuing to rely upon external providers and collaborators for various
services as before, wherever possible, in order to minimize capital expenses.
The Company will strategically evaluate any outsourcing of the production of
certain key intellectual property sensitive materials very
carefully.
As the
studies progress, we may find it necessary to accelerate the development of a
second anti-HIV drug, HIVCide-II, in order to cover the various types, strains,
quasi-species and mutants of the HIV viruses as completely as possible. Our
objective is to develop anti-HIV drugs that together respond to the needs of
combating the rapidly changing HIV viruses in the most complete fashion
possible. The Company expects that these two anti-HIV drugs together should
encompass the currently known array of HIV types and subtypes in the world.
These first nanoviricides drugs have been designed to engulf the virus
particles, and dismantle them.
Together,
these two drugs in combination with one or more of the existing therapies may
result in a "functional cure" for HIV infection. To obtain a complete cure, it
will be necessary to eliminate the HIV virus and its genome completely from the
body. Eliminating the HIV virus completely would require eliminating it from the
"memory cells" - dormant cells inside which the HIV genome remains hidden, and
springs to life in a later episode. The current two nanoviricides are not
designed to accomplish this task. The Company is currently researching various
approaches for impacting the HIV-hiding memory cell population in our march
towards a true cure for HIV. However, we are fully aware that curing HIV will be
a very long process.
Background:
Influenza
Seasonal
Influenza
Seasonal
influenza, commonly known as the flu, is a viral infection characterized by
symptoms including fever, cough, sore throat, fatigue, headache, and/or chills.
According to the U.S. Centers for Disease Control and Prevention (“CDC”), (www.cdc.gov), an
estimated 5% to 20% of the American population suffers from influenza annually,
more than 200,000 people are hospitalized from flu complications, and
approximately 36,000 people die from the flu in the US. The worldwide death toll
is estimated at upwards of 200,000 per year. Influenza is particularly dangerous
to the elderly, young children and people with certain chronic health
conditions. Outbreaks of seasonal flu tend to follow predictable patterns
usually occurring in the winter. New vaccines are developed annually based on
known flu strains and are usually available for the annual flu season. There are
also antiviral treatments available for the treatment of people infected with
the influenza virus.
Avian
Influenza
According
to information taken from the CDC website, avian influenza, or bird flu, is an
infection caused by viruses which occur naturally among birds. This form of flu
is very contagious among birds and can lead to serious illness and sometimes
death. There are two main forms of disease that infect domestic poultry, one a
low pathogenic form and the other a highly pathogenic form. The latter form can
cause disease that affects multiple internal organs and with a mortality rate
between 90-100% in these birds within 2 days.
While
there are many different subtypes of the influenza A viruses, only three
subtypes are known to be currently circulating among humans. Avian influenza A
viruses are found chiefly in birds, but there have been confirmed cases of
infection in humans, generally as a result of contact with infected birds. These
infections have led to symptoms of normal flu to more severe and life
threatening conditions. Influenza A (“H5N1”) is a subtype of an influenza virus
that is highly contagious among birds and can be very deadly to them. Of the
avian influenza viruses that have crossed the species barrier to infect humans,
the H5N1 has caused the largest number of detected cases of severe disease and
death in humans. In 2006, it is suspected that the Indonesia strain of H5N1 may
have mutated to result in limited spreading from one person to another, only in
close contact circumstances. It is possible that the substantially high case
fatality rate may be keeping the human to human spread in check. But as
influenza A viruses constantly change, they could mutate over time to have the
ability to spread among humans.
Pandemic
Influenza
Pandemic
flu is a global disease outbreak that occurs when a new influenza virus emerges
so that people have had no previous exposure. This situation occurs very rarely
and only occurred three times in the 20th century.
Flu
Prevention and Treatment
The
development of effective therapeutics has challenged medical researchers due to
the seasonal variation in viral strains and the highly infectious nature of
influenza. Patients, therefore, have limited treatment options. Amantadine™ and
rimantadine™ are used for treatment of influenza A but are ineffective against
influenza B. In addition, these drugs cause some adverse side effects, and the
virus tends to develop resistance to these drugs. For the 2005-2006 flu season,
the CDC has recommended against the use of amantadine and rimantadine for the
treatment or prophylaxis of influenza in the United States due to signs of
resistance to those drugs.
Vaccines are available
against the disease but have limitations: people require advance vaccination;
vaccines are limited by their specificity to particular strains of the virus;
and vaccines offer little protection if the vaccine is inaccurate. In addition,
many people decline the required injections because of fear and/or discomfort,
as well as side effects such as allergies. The ability of the virus to change
its structure to avoid the body’s natural defenses is a serious obstacle to
developing an effective vaccine against influenza. Different strains can arise
when surface antigens on the virus (the portion of the virus that causes an
immune reaction in humans) undergo minor genetic mutations each year as the
virus replicates. Because of this mutability, the immunity acquired in response
to infection by a particular strain of the virus does not provide adequate
protection against viruses that subsequently arise. The production of a new
vaccine each year is not only complex and expensive, but also an inefficient
method of global disease control. The time lag between threat potential
assignment and vaccine production implies that a novel influenza mutant can
develop in the field and may result in very poor vaccine response.
Inhibiting
Influenza Neuraminidase
Research
during the past two decades has seen dramatic advances in understanding the
molecular structure and function of the influenza virus. Considerable attention
has been focused on the enzyme neuraminidase, which is located on the surface of
the virus particle. Neuraminidase assists in the release and spread of the flu
virus by breaking the chemical strands that hold the new viruses to the cell
surface, allowing the replicated virus to spread and infect other cells. This
process progresses until the host’s immune response can produce enough
antibodies to bring the infection under control. Inhibiting the neuraminidase
enzyme keeps new viruses attached to the cell surface, thereby preventing the
spread of the virus and the further infection of other cells. The subsequent
quantities of virus in the bloodstream are not enough to cause disease but are
sufficient to induce the body to mount an immune response.
Roche, in
collaboration with Gilead Sciences, and GlaxoSmithKline (“GSK”) have currently
approved neuraminidase inhibitors on the market. Roche’s neuraminidase
inhibitor, oseltamivir (Tamiflu™) is a twice-a-day, orally active neuraminidase
inhibitor, while GSK’s neuraminidase inhibitor, Relenza™ is administered by dry
powder inhaler twice a day. Both drugs are approved for marketing in the United
States and other countries for treatment of influenza. Roche’s neuraminidase
inhibitor is also approved for prophylaxis use for prevention of influenza. In
addition to these companies with neuraminidase inhibitors, there are other
companies working to develop vaccines and other antiviral drugs to be used
against various strains of influenza.
BioCryst
is currently developing a neuraminidase inhibitor, peramivir, as an IV infusion,
for the treatment of common influenza as well as H5N1. Peramivir previously
failed its Phase II human trials, and BioCryst has stated that this may be due
to the use of short needles in the Phase II study.
Several
molecular biology oriented studies have described that there are significant
differences between the neuraminidase of the H5N1 strain and those of the other
common influenza strains that may be responsible for the poor efficacy of
neuraminidase inhibitors as a class against H5N1. The New England Journal of
Medicine reported one study which assessed the results of 17 prior studies
related to the effectiveness of neuraminidase inhibitors. de Jong, Memo d.,
Thanh, Trran T., Khanh, Truong H., et. al. “Oseltamivir
Resistance during treatment of Influenza A (H5N1) Infection, New England Journal of
Medicine, Volume 353:2667-2672, December 22, 2005, November
25.
Antibodies
Against Influenza
Crucell,
NV has recently reported that they are developing monoclonal antibodies as drugs
against H5N1 bird flu.
We
ourselves are developing AviFluCide-I which uses a ligand based on certain
anti-H5N1 antibodies. However, escape of virus against antibody drugs has been a
major challenge, particularly for the influenzas and for HIV, and many other
viral diseases. All of these viruses exhibit a significant antigenic drift,
caused usually by small changes in the structure of their coat
protein.
Our
broad-spectrum nanoviricides, FluCide-I and FluCide-HP, are expected to be able
to attack the virus even when it mutates, and thereby suppress escape
significantly. However, this needs to be proven in extensive
studies.
|
1
|
The
Writing Committee of the World Health Organization (WHO) Consultation on
Human Influenza A/H5. Avian influenza A (H5N1) infection in humans. N Engl
J Med 2005;353:1374-1385.
|
|
2
|
Hien
TT, Liem NT, Dung NT, et al. Avian influenza A (H5N1) in 10 patients in
Vietnam. N Engl J Med
2004;350:1179-1188.
|
|
3
|
Chotpitayasunondh
T, Ungchusak K, Hanshaoworakul W, et al. Human disease from influenza A
(H5N1), Thailand, 2004. Emerg Infect Dis
2005;11:201-209.
|
|
4
|
Moscona
A. Neuraminidase inhibitors for influenza. N Engl J Med
2005;353:1363-1373.
|
|
5
|
Identification
of influenza isolates by hemagglutination inhibition. In: Department of
Communicable Disease Surveillance and Response. WHO manual on animal
influenza diagnosis and surveillance. Geneva: World Health Organization,
2002:28-36.
(WHO/CDS/CSR/NCS/2002.5.)
|
|
6
|
de
Jong MD, Cam BV, Qui PT, et al. Fatal avian influenza A (H5N1) in a child
presenting with diarrhea followed by coma. N Engl J Med
2005;352:686-691.
|
|
7
|
Boom
R, Sol C, Beld M, Weel J, Goudsmit J, Wertheim-van Dillen P. Improved
silica-guanidiniumthiocyanate DNA isolation procedure based on selective
binding of bovine alpha-casein to silica particles. J Clin Microbiol
1999;37:615-619.
|
|
8
|
Boom
R, Sol CJ, Salimans MM, Jansen CL, Wertheim-van Dillen PM, van der Noordaa
J. Rapid and simple method for purification of nucleic acids. J Clin
Microbiol 1990;28:495-503.
|
|
9
|
Chen
H, Smith GJ, Zhang SY, et al. Avian flu: H5N1 virus outbreak in migratory
waterfowl. Nature 2005;436:191-192.
|
|
10
|
Gubareva
LV, Kaiser L, Matrosovich MN, Soo-Hoo Y, Hayden FG. Selection of influenza
virus mutants in experimentally infected volunteers treated with
oseltamivir. J Infect Dis
2001;183:523-531.
|
|
11
|
Le
QM, Kiso M, Someya K, et al. Avian flu: isolation of drug-resistant H5N1
virus. Nature 2005;437:1108-1108.
|
|
12
|
Whitley
RJ, Hayden FG, Reisinger KS, et al. Oral oseltamivir treatment of
influenza in children. Pediatr Infect Dis J 2001;20:127-133. [Erratum,
Pediatr Infect Dis J 2001;20:421.]
|
|
13
|
Kiso
M, Mitamura K, Sakai-Tagawa Y, et al. Resistant influenza A viruses in
children treated with oseltamivir: descriptive study. Lancet
2004;364:759-765.
|
|
14
|
Ward
P, Small I, Smith J, Suter P, Dutkowski R. Oseltamivir (Tamiflu) and its
potential for use in the event of an influenza pandemic. J Antimicrob
Chemother 2005;55:Suppl 1:i5-i21.
|
|
15
|
Yen
HL, Monto AS, Webster RG, Govorkova EA. Virulence may determine the
necessary duration and dosage of oseltamivir treatment for highly
pathogenic A/Vietnam/1203/04 influenza virus in mice. J Infect Dis
2005;192:665-672.
|
|
16
|
Maines
TR, Lu XH, Erb SM, et al. Avian influenza (H5N1) viruses isolated from
humans in Asia in 2004 exhibit increased virulence in mammals. J Virol
2005;79:11788-11800.
|
Background:
Rabies
The
current protocol for treatment after exposure to Rabies (known as post-exposure
prophylaxis or "P.E.P.") is highly successful in preventing the disease if
administered promptly, within fourteen days after infection. The first step is
immediately washing the wound with soap and water, which is very effective at
reducing the number of viral particles. In the United States, patients receive
one dose of immunoglobulin and five doses of rabies vaccine over a twenty-eight
day period. One-half the dose of immunoglobulin is injected in the region of the
bite, if possible, with the remainder injected intramuscularly away from the
bite. The first dose of rabies vaccine is given as soon as possible after
exposure, with additional doses on days three, seven, fourteen, and twenty-eight
after the first. Patients that have previously received pre-exposure vaccination
do not receive the immunoglobulin, only the post-exposure
vaccinations.
Because
of the significant expense of the rabies treatment, there is limited
availability in the rural areas of these underdeveloped countries (The cost in
the U.S. is approximately $1,000 for a course of treatment).
At the
request of the Vietnamese Ministry of Health, we initiated development of an
anti-rabies drug. Rabies is a serious public health problem in Vietnam,
Thailand, India, and many other tropical and subtropical countries.
Our first
RabiCide drug candidates were tested at NIHE, Vietnam, in the first quarter of
2007. The Rabies drug, identified as RabiCide™, salvaged 30% of the animals
given 1000X the lethal dose of rabies virus directly into the brain. There can
be no assurance that our drug candidate (RabiCide), if developed, can
successfully be manufactured. There are no guarantees that the drug, even if
successfully manufactured, can produce revenue for the Company.
The
United States Center for Disease Control has recently declared that the United
States is now free of canine rabies, although dogs and humans may still get
rabies from other animals such as bats, raccoons, and skunks
(http://cdc.gov/news/2007/09/canine_rabies.html). In addition, the World Health
Organization has recently declared that the world will be free of canine rabies
by the middle of the next decade. Thus the commercial potential, for the
Company, of a rabies drug is uncertain.
Background:
NanoViricides Company Philosophy
NanoViricides,
Inc. is a for-profit company. We have identified several diseases as large
commercially important drug development targets. These include HIV, Hepatitis C,
Herpes Simplex Virus, and Influenzas, among others.
It is
theoretically possible to develop nanoviricide drugs against a large number of
infectious disease agents, primarily viruses. In this regard, there is a
potential to develop good nanoviricides against these infectious agents,
including those that are primarily seen in developed countries and well as those
primarily seen in developing and sub-tropical areas.
Significant
effort and scientific developments will be necessary in order to develop
nanoviricides against drugs that affect the brain, and the central nervous
system (CNS). This issue, a result of the blood-brain barrier, which does not
allow drugs injected in the bloodstream to go into the CNS fluid, is well known.
This is a major barrier for all drug development against CNS diseases. It may
not be necessary to overcome this challenge in order to develop good
nanoviricides against Dengue fever, West Nile virus, and other diseases that
progress only slowly to attack the CNS. There may well be a time window for the
nanoviricides to attack the virus in the circulation before it has an
opportunity to move into the central nervous system in such
diseases. Blood-brain barrier is also compromised in severe disease
states. This may help the nanoviricides to be effective against neurotropic
viruses even after they have localized in the CNS. Extensive studies will be
necessary to resolve blood-brain-barrier issues. Alternatively, it is possible
to inject drugs directly into the CNS, although this is a cumbersome and
skill-requiring procedure.
It is not
possible for any early-stage pharmaceutical company to expeditiously tackle a
large number of disease targets without significant assistance and
collaborations, both financial and technical. We have recently initiated
discussions with various civilian and military agencies as well as with various
universities and commercial entities regarding various
collaborations.
Products
NanoViricides,
Inc. currently has no products for sale.
Products
In Development
The
following table summarizes NanoViricides active development projects as of June
30, 2009.
Table
1. Products in Development
|
|
Project
|
Virus
|
Development
Stage
|
1
|
FluCide™
|
Influenza
(Common), H5N1 Bird Flu, Highly Pathogenic Influenzas, novel
H1N1/2009
|
Preclinical
|
2
|
HIVCide™
|
HIV/AIDS
|
Preclinical
|
3
|
Nanoviricide
Eye Drops
|
Eye
Drops for Viral Diseases of the External Eye
|
Preclinical
|
4
|
HerpeCide™
|
Herpes
“Cold Sores” and Genital Herpes, Topical Cream and Gel
Formulations
|
Very
Early Preclinical
|
5
|
RabiCide™
|
Rabies
|
Preclinical
|
6
|
Nanoviricide
against Ebola/Marburg
|
Ebola,
Marburg Filoviruses
|
Preclinical
|
7
|
Nanoviricide
against Dengue Viruses
|
Dengue
|
Early
R&D
|
8
|
HepCCide™
|
HCV
|
R&D,
project delayed, expect to restart in
2010
|
FluCide, is currently in
preclinical studies against all common influenzas as well as avian influenza
H5N1. It is a broad-spectrum anti-influenza nanoviricide. It is based on ligands
that we have developed through rational drug design. These ligands are based on
a well known mechanism by which influenza viruses bind to cells. One mechanism
involves the hemagglutinin coat protein of influenza virus binding to sialic
acids on cell surfaces. Our broad-spectrum ligand used in FluCide is
based on the sialic acid expressed by cells. Therefore, it is expected to work
well against all of the influenza viruses. Since all influenza viruses, no
matter what type (A, B, C), which subtype (e.g. HxNy of Influenza A), or clades,
or strains, must bind to one of two varieties of sialic acid, we have designed
the ligand such that all of the influenza viruses must bind to our
ligand. If an influenza virus escapes FluCide-I, this mutant virus
would be unable to bind to both types of sialic acids, and would be thus unable
to infect most animal species, including birds and mammals.
HIVCide, This is our first
announced drug project against HIV-I. Our first HIV drug to be developed is a
targeted nanoviricide against HIV and is engineered with specific recognition
ligands that allow multiple point binding to inactivate HIV virus in the
bloodstream.
Nanoviricide Eye Drops - We
undertook a new project last year and have already designed a ligand, made a
nanoviricide drug, and completed successful animal studies that indicate
significant preliminary efficacy and safety of a drug candidate against the
severe pink eye disease caused by adenoviruses called epidemic
kerato-conjunctivitis. This year, we expanded the indication to include HSV,
another cause of viral eye diseases. We designed new broad-spectrum ligands
expected to be active against all HSV types and strains, as well as retaining
the previously observed activity features against adenoviruses and created new
nanoviricide drug candidates. We have already tested these against HSV in cell
cultures. Animal model studies against Herpes Keratitis are expected to be
conducted in the next six months.
HerpeCide - We undertook a new
project this year and have already designed a ligand, made a nanoviricide drug,
and tested in cell cultures successfully. HerpeCide is being developed as skin
cream or gel formulation for the treatment of oral and genital herpes lesions.
We expect animal studies to begin in 2010.
RabiCide, a nanoviricide
against Rabies finished its first set of animal studies in the first quarter of
2007 in Vietnam. The candidate ligands for this nanoviricide were designed by
the Company using publicly available information regarding the interaction of
the rabies virus with cells. Additional animal studies at CDC are expected to be
performed during 2010. The Company has slowed down its development programs in
NTDs and BioDefense areas during the economic crisis of the last year in order
to conserve resources.
HCV- A Hepatitis
C nanoviricide is planned for research and development to begin in 2009-2010.
The Company has not yet sourced the materials to target this disease. The
Company has only begun the early stages of a plan to develop nanoviricides
against Hepatitis C.
We have
successfully formulated nanoviricides as eye drops, as IV injections and are now
formulating them as skin creams and gels. We choose the formulation and route of
administration that is expected to provide the best outcome for a particular
viral disease, based on disease pathology. It is possible to administer
nanoviricides drugs using other approaches as well. Our goals for the second
generation of our anti-influenza drugs will be to develop an oral/bronchial
administration that carries the drug into the bronchial/pulmonary space that is
the primary site infection by influenza viruses. There can be no assurance that
we will be able to develop a drug that may be administered orally or bronchially
or that such a drug would be effective against influenza.
Development
Stage of Products
All of
the above products are in various stages of pre-clinical development. The
Company believes that the anti-influenza drugs will advance into second stage of
preclinical studies, known as “Tox Package” studies, as soon as appropriate
facilities and finances are available. The Company believes that our
anti-influenza drug candidates, anti-HIV drug candidates, as well as anti-viral
eye drops drug candidates have all produced substantial positive results and
should be developed further towards the goal of filing appropriate IND
applications. All of our developments are subject to availability of
appropriate levels of financing.
Plan of
Operations
The
Company intends to perform the regulatory filings and own all the regulatory
licenses for the drugs it is currently developing. The Company will develop
these drugs in part via subcontracts to TheraCour Pharma, Inc. (“TheraCour”),
the exclusive source for these nanomaterials. With sourcing of materials from
TheraCour, the Company prefers to manufacture these drugs in our own facility.
However, the Company may manufacture these drugs under subcontract arrangements
with external manufacturers that carry the appropriate regulatory licenses and
have appropriate capabilities. The Company intends to distribute these drugs via
subcontracts with distributor companies or in partnership arrangements. The
Company plans to market these drugs either on its own or in conjunction with
marketing partners. The Company also plans to actively pursue co-development, as
well as other licensing agreements with other pharmaceutical companies. Such
agreements may entail up-front payments, milestone payments, royalties, and/or
cost sharing, profit sharing and many other instruments that may bring early
revenues to the Company. Such licensing and/or co-development agreements may
shape the manufacturing and development options that the company may pursue. The
Company has received significant interest from certain major pharmaceutical
companies for potential licensing or co-development of some of our drug
candidates. However, none of these distributor or co-development agreements is
in place at the current time.
Manufacturing
Manufacturing
of Research Materials
Nanomaterials
that form the basis of our nanoviricide drugs are produced for research by
TheraCour Pharma, Inc. at their research scale production facility in West
Haven, Connecticut.
Manufacturing
of Drugs
The
Company is presently looking to acquire, build, or lease manufacturing
facilities that would enable GMP manufacturing of our drugs. Until such time,
the Company believes that its current relationship with TheraCour is sufficient
to meet its current developmental requirements.
The
Company intends to manufacture FluCide, HIVCide, Nanoviricide Eye Drops,
HerpeCide, RabiCide as well as other drugs for pre-clinical animal studies and
human clinical studies, in facilities owned or leased by the Company. In the
event that we cannot secure funding that allows us to establish the necessary
facilities to manufacture such drugs, we plan to subcontract with third party
facilities that have the appropriate capabilities and regulatory licenses to
manufacture our drugs and materials on a commercial scale.
Certain
changes in FDA regulations have enabled the use of research products produced in
a non-GMP-certified facility for certain human studies, provided the materials
and production facility meet certain standards. The Company may be able to take
advantage of these regulatory amendments in order to advance our drugs into IND
stage and first-in-human studies more rapidly.
We have
no commercial-scale manufacturing facilities at present. For our future
products, we will need to develop additional manufacturing capabilities and
establish additional third party suppliers to manufacture sufficient quantities
of our product candidates to undertake clinical trials and to manufacture
sufficient quantities of any products that are approved for commercial sale. If
we are unable to develop manufacturing capabilities internally or contract for
large scale manufacturing with third parties on acceptable terms for our future
antiviral products, our ability to conduct large-scale clinical trials and meet
customer demand for commercial products would be adversely
affected.
We
believe that the technology we use to manufacture our products and compounds is
proprietary. For our products, we may have to disclose all necessary aspects of
this technology to contract manufacturers to enable them to manufacture the
products and compounds for us. We plan to have discussions with manufacturers
under non-disclosure and non-compete agreements that are intended to restrict
them from using or revealing this technology, but we cannot be certain that
these manufacturers will comply with these restrictions. In addition, these
manufacturers could develop their own technology related to the work they
perform for us that we may need to manufacture our products or compounds. We
could be required to enter into an agreement with that manufacturer if we wanted
to use that technology ourselves or allow another manufacturer to use that
technology. The manufacturer could refuse to allow us to use their technology or
could demand terms to use their technology that are not acceptable.
We
believe that we are in compliance with all material environmental regulations
related to the manufacture of our products.
Patents
and Proprietary Rights
The
Company has an exclusive license in perpetuity for technologies developed (with
materials referenced in Table 1 below) by TheraCour for the following virus
types: HIV, Hepatitis C Virus, Herpes, Asian (bird) flu, Influenza, and rabies.
Nanoviricides, Inc has notified TheraCour Pharma of its interest in acquiring
licenses for additional viruses.
In
consideration for obtaining this exclusive license, we agreed: (1) that
TheraCour can charge its costs (direct and indirect) plus a maximum of 30% of
direct costs as a Development Fee payable in periodic installments as billed;
(2) we will pay $25,000 per month for usage of lab supplies and chemicals from
existing stock held by TheraCour; (3) we will pay $2,000 or actual costs,
whichever is higher for other general and administrative expenses incurred by
TheraCour on our behalf (4) to make royalty payments of fifteen percent (15%) of
net sales of the licensed drugs to TheraCour Pharma, Inc.; (5) that TheraCour
retain the exclusive right to develop and synthesize nanomicelle(s), a small
(approximately twenty nanometers in size) long chain polymer based chemical
structure, as component elements of the Licensed Products. TheraCour agreed that
it will develop and synthesize such licensed nanomicelles exclusively for
NanoViricides, and unless such license is terminated, will not develop or
synthesize such licensed nanomicelles for others; and (6) TheraCour may request
and NanoViricides, Inc. will pay an advance payment equal to twice the amount of
the previous months invoice to be applied as a prepayment towards
expenses.
TheraCour
Pharma, Inc. may terminate the license upon a material breach by us as specified
in the agreement. However, we may avoid such termination if within 90 days of
receipt of such termination notice we cure the breach.
Development
costs charged by and paid to TheraCour Pharma, Inc. were $ 2,915,931 since
inception through June 30, 2009 and $828,952 and $746,309 for the years ended
June 30, 2009 and 2008, respectively. No royalties are due or have been paid
from inception through June 30, 2009.
TheraCour Pharma, Inc. owns 34,160,000 shares of the Company’s
125,299,457 outstanding shares of common stock as of June 30, 2009. Anil Diwan,
the Company’s President and Chairman of the Board and Director, owns
approximately seventy percent (70%) of the outstanding capital of TheraCour
Pharma., Inc.
Patents
and other proprietary rights are essential for our operations. If we have a
properly designed and enforceable patent, it can be more difficult for our
competitors to use our technology to create competitive products and more
difficult for our competitors to obtain a patent that prevents us from using
technology we create. As part of our business strategy, we actively seek patent
protection both in the United States and internationally and intend to file
additional patent applications, when appropriate, to cover improvements in our
compounds, products and technology. We also rely on trade secrets, internal
know-how, technological innovations and agreements with third parties to
develop, maintain and protect our competitive position. Our ability to be
competitive will depend on the success of this strategy.
The
Company believes that the drugs by themselves, FluCide, HivCide, Nanoviricide
Eye Drops, HerpeCide, RabiCide, and others, may be eligible for patent
protection. The Company plans on filing patent applications for protecting these
drugs when we have definitive results from either in-vitro or in-vivo studies
that can be replicated by others.
The
Company has licensed key patents, patent applications and rights to proprietary
and patent-pending technologies related to our compounds, products and
technologies (see Table 2), but we cannot be certain that issued patents will be
enforceable or provide adequate protection or that pending patent applications
will result in issued patents.
Table
2: Intellectual Property, Patents and Pending Patents Licensed by The
Company
|
|
Patent
or Application
|
Date
of Issue/ Application
|
US
Expiry Date
|
International
|
Owners
|
1
|
US6,521,736
(Certain
specific amphiphilic polymers).
|
Issued:
Feb 18, 2003
|
Feb
18, 2020
|
N/A
|
TheraCour
Pharma and Univ. of Massachusetts, Lowell. [Nonexclusive license from
TheraCour Pharma].
|
2
|
PCT/US06/01820
(SOLUBILIZATION
AND TARGETED DELIVERY OF DRUGS WITH SELF-ASSEMBLING AMPHIPHILIC
POLYMERS).
|
Applied:
Jan 19, 2006 PCT Application.
|
Jan
18, 2023 (estimated)
|
Applications being
filed.
|
TheraCour
Pharma, Inc. [Exclusive License].
|
3
|
PCT/US2007/001607
SELF-ASSEMBLING
AMPHIPHILIC POLYMERS AS ANTIVIRAL AGENTS
|
Applied:
Jan 22, 2007
|
Jan
21, 2024 (estimated)
|
Applications
to be filed.
|
TheraCour
Pharma, Inc. [Exclusive License].
|
4
|
Provisional
US 61/230,457
ANTIVIRAL
AMPHIPHILIC POLYMERS
|
Applied:
Jul 31, 2009
|
Jul
31, 2026 (estimated)
|
To
be Converted to PCT Application
|
TheraCour
Pharma, Inc. [Exclusive License].
|
Of the
patents and technologies licensed, the Company believes that the Company will
not be using the intellectual property, compositions of matter, or other aspects
described and secured under the US Patent No. US 6,521,736. The Company believes
that this patent describes an inferior technology compared to the technology in
the later patent filings of Dr. Diwan. This patent, the Company believes,
discloses prototype materials that served to establish the proof of principles
of Dr. Anil Diwan, the Company’s President and co-founder, whether such
materials were possible to create and whether such materials would indeed be
capable of encapsulation of pharmaceutically relevant compounds. The Company
believes that the new and novel compositions disclosed in the new patent
applications, No. PCT/US06/01820, and No. PCT/US2007/001607, and US Provisional
No. US 61/230,457 provide the necessary features that enable the development of
nanoviricides. The Company believes that no other published literature materials
or existing patents are capable of providing all of the necessary features for
this development, to the best of our knowledge. However, the Company has no
knowledge of the extensive active internal developments at a number of companies
in the targeted therapeutics area.
We may
obtain patents for our compounds many years before we obtain marketing approval
for them. Because patents have a limited life, which may begin to run prior to
the commercial sale of the related product, the commercial value of the patent
may be limited. However, we may be able to apply for patent term extensions,
based on delays experienced in marketing products due to regulatory
requirements. There is no assurance we would be able to obtain such
extensions.
The
Company controls the research and work TheraCour performs on its behalf and no
costs may be incurred without the prior authorization or approval of the
Company.
Patents
relating to pharmaceutical, biopharmaceutical and biotechnology products,
compounds and processes such as those that cover our existing compounds,
products and processes and those that we will likely file in the future, do not
always provide complete or adequate protection. Future litigation or
reexamination proceedings regarding the enforcement or validity of our licensor,
TheraCour Pharma Inc.’s existing patents or any future patents, could invalidate
TheraCour’s patents or substantially reduce their protection. In addition, the
pending patent applications and patent applications filed by TheraCour, may not
result in the issuance of any patents or may result in patents that do not
provide adequate protection. As a result, we may not be able to prevent third
parties from developing the same compounds and products that we have developed
or are developing. In addition, certain countries do not permit enforcement of
our patents, and manufacturers are able to sell generic versions of our products
in those countries.
We also
rely on unpatented trade secrets and improvements, unpatented internal know-how
and technological innovation. In particular, a great deal of our material
manufacturing expertise, which is a key component of our core material
technology, is not covered by patents but is instead protected as a trade
secret. We protect these rights mainly through confidentiality agreements with
our corporate partners, employees, consultants and vendors. These agreements
provide that all confidential information developed or made known to an
individual during the course of their relationship with us will be kept
confidential and will not be used or disclosed to third parties except in
specified circumstances. In the case of employees, the agreements provide that
all inventions made by the individual while employed by us will be our exclusive
property. We cannot be certain that these parties will comply with these
confidentiality agreements, that we have adequate remedies for any breach, or
that our trade secrets will not otherwise become known or be independently
discovered by our competitors.
Competition
Our
products in development target a number of diseases and conditions that include
several different kinds of viral infections. There are many commercially
available products for these diseases and a large number of companies and
institutions are spending considerable amounts of money and other resources to
develop additional products to treat these diseases. Most of these companies
have substantially greater financial and other resources, larger research and
development staffs, and extensive marketing and manufacturing organizations. If
we are able to successfully develop products, they would compete with existing
products based primarily on:
|
•
|
tolerability;
|
|
•
|
acceptance
by doctors;
|
|
•
|
patent
compliance;
|
|
•
|
patent
protection;
|
|
•
|
insurance
and other reimbursement coverage;
|
|
•
|
distribution;
|
|
•
|
marketing;
and
|
|
•
|
adaptability
to various modes of dosing.
|
The
current approved drugs for influenza include the neuraminidase inhibitors
Tamiflu and Relenza, anti-influenza drugs that are sold by Roche and Glaxo
SmithKline (GSK), respectively. In addition, M2 channel inhibitors, generic
drugs include amantadine and rimantadine, both oral tablets that only inhibit
the replication of the influenza A virus. There is significant viral resistance
to the approved M2 channel inhibitors especially in the US. Peramivir, a
neuraminidase inhibitor is in Phase II studies. BioCryst Pharmaceuticals, Inc.
has recently developed IV infusion formulations of peramivir, an influenza
neuraminidase inhibitor, for the treatment of influenza. Several companies are
developing anti-influenza drugs at present. Small chemical classes include
neuraminidase inhibitors, M2-channel inhibitors, RDRP inhibitors, among others.
There are also monoclonal, polyclonal, and mixed antibodies, as well as enzymes
as drugs in development.
There are
a growing number of anti-HIV drugs being sold or in advanced stages of clinical
development. Companies with HCV and HIV products include Gilead, Bristol-Myers
Squibb Company (BMS), Roche, Boehringer Ingelheim, Merck & Co., Inc.
(Merck), in addition to several other pharmaceutical and biotechnology
firms.
There are
currently no approved drugs for the treatment of viral diseases of the external
eye. A drug in development, called CTC-96, was shown to have little clinical
benefit in published animal studies. Another drug in development, an
Aganocide(tm) compound from NovaBay Pharma in collaboration with Alcon is in
Phase II clinical studies. Aganocides, by virtue of their chemical structure,
are generally not expected to be useful for any applications other than
topical.
There are
several drugs in the market that effectively control HSV cold sores and genital
herpes lesions in most patients. These include the nucleoside analogues
idoxuridine, vidarabine, acyclovir, and its derivatives. However, their efficacy
is limited or toxicities are high.
Our HCV
drugs are at the earliest stage of development. There are a growing number of
anti-HCV drugs being sold or are in advanced stages of clinical development.
Companies with HCV products or drugs in development include Valeant, Schering,
Pharmassett, Vertex, Intermune, and Achillion, among others.
Currently
there are two accepted methods of rabies prophylaxis: rabies vaccines and rabies
immune globulin, manufactured by many foreign and multinational manufacturers
including Aventis Pasteur and Chiron. These accepted methods will be the
standard against which our new anti-rabies drug in development will be
judged.
In order
to compete successfully, we must develop proprietary positions in patented drugs
for therapeutic markets. Our products, even if successfully tested and
developed, may not be adopted by physicians over other products and may not
offer economically feasible alternatives to other therapies.
Government
Regulation
Our
operations and activities are subject to extensive regulation by numerous
government authorities in the United States and other countries. In the United
States, drugs are subject to rigorous regulation by the United States Food and
Drug Administration (“FDA”). The Federal Food, Drug and Cosmetic Act and other
federal and state statutes and regulations govern the testing, manufacture,
safety, effectiveness, labeling, storage, record keeping, approval, advertising
and promotion of our products. As a result of these regulations, product
development and the product approval process is very expensive and time
consuming.
The FDA
must approve a drug before it can be sold in the United States. As of the date
of this filing, the FDA has approved other nano-particulate drugs including
Emend® by Merck and Rapamune® by Wyeth, as well as others. The general process
for FDA approval is as follows:
Preclinical
Testing
Before we
can test a drug candidate in humans, we must study the drug in laboratory
experiments and in animals to generate data to support the drug’s potential
safety and benefits. We submit this data to the FDA in an investigational new
drug application (IND) seeking their approval to test the compound in
humans.
Clinical
Trials
If the
FDA accepts the investigational new drug application, we study the drug in human
clinical trials to determine if the drug is safe and effective. These clinical
trials involve three separate phases that often overlap, can take many years to
compile and are very expensive. These three phases, which are themselves subject
to considerable regulation, are as follows:
s Phase 1. The drug
is given to a small number of healthy human subjects or patients to test for
safety, dose tolerance, pharmacokinetics, metabolism, distribution and
excretion.
s Phase 2. The drug
is given to a limited patient population to determine the effect of the drug in
treating the disease, the best dose of the drug, and the possible side effects
and safety risks of the drug.
s Phase 3. If a
compound appears to be effective and safe in Phase 2 clinical trials, Phase 3
clinical trials are commenced to confirm those results. Phase 3 clinical trials
are long-term, involve a significantly larger population, are conducted at
numerous sites in different geographic regions and are carefully designed to
provide reliable and conclusive data regarding the safety and benefits of a
drug. It is not uncommon for a drug that appears promising in Phase 2 clinical
trials to fail in the more rigorous and reliable Phase 3 clinical
trials.
FDA
Approval Process
If we
believe that the data from the Phase 3 clinical trials show an adequate level of
safety and effectiveness, we will file a new drug application (NDA) with the FDA
seeking approval to sell the drug for a particular use. The FDA will review the
NDA and often will hold a public hearing where an independent advisory committee
of expert advisors asks additional questions regarding the drug. This committee
makes a recommendation to the FDA that is not binding on the FDA but is
generally followed. If the FDA agrees that the compound has met the required
level of safety and effectiveness for a particular use, it will allow us to sell
the drug in the United States for that use. It is not unusual, however, for the
FDA to reject an application because it believes that the drug is not safe
enough or effective enough or because it does not believe that the data
submitted is reliable or conclusive.
At any
point in this process, the development of a drug could be stopped for a number
of reasons including safety concerns and lack of treatment benefit. We cannot be
certain that any clinical trials that we are currently conducting or any that we
conduct in the future, will be completed successfully or within any specified
time period. We may choose, or the FDA may require us, to delay or suspend our
clinical trials at any time if it appears that the patients are being exposed to
an unacceptable health risk or if the drug candidate does not appear to have
sufficient treatment benefit.
The FDA
may also require us to complete additional testing, provide additional data or
information, improve our manufacturing processes, procedures or facilities or
may require extensive post-marketing testing and surveillance to monitor the
safety or benefits of our product candidates if it determines that our new drug
application does not contain adequate evidence of the safety and benefits of the
drug. In addition, even if the FDA approves a drug, it could limit the uses of
the drug. The FDA can withdraw approvals if it does not believe that we are
complying with regulatory standards or if problems are uncovered or occur after
approval.
In
addition to obtaining FDA approval for each drug, we obtain FDA approval of the
manufacturing facilities for any drug we sell, including those of companies who
manufacture our drugs for us as well as our own and these facilities are subject
to periodic inspections by the FDA. The FDA must also approve foreign
establishments that manufacture products to be sold in the United States and
these facilities are subject to periodic regulatory inspection.
We are
also subject to other federal, state and local regulations regarding workplace
safety and protection of the environment. We use hazardous materials, chemicals,
viruses and various radioactive compounds in our research and development
activities and cannot eliminate the risk of accidental contamination or injury
from these materials. Any misuse or accidents involving these materials could
lead to significant litigation, fines and penalties.
Drugs are
also subject to extensive regulation outside of the United States. In the
European Union, there is a centralized approval procedure that authorizes
marketing of a product in all countries in the European Union (which includes
most major countries in Europe). If this procedure is not used, under a
decentralized system, an approval in one country of the European Union can be
used to obtain approval in another country of the European Union under a
simplified application process at present. After approval under the centralized
procedure, pricing and reimbursement approvals are also required in most
countries. These procedures are undergoing revision and modification at present.
We have never received approval for a product in the European Union to
date.
Employees
and Service Providers
As of
June 30, 2009, the Company had four full time employees. In addition, most of
the business activities of the Company including accounting and legal work and
business development are provided by subcontractors and consultants. Further,
the Company has subcontracted nanomaterials research and development (“R&D”)
to TheraCour. The Company has subcontracted some of its animal
studies to KARD Scientific, Inc. and to government, academic, and private
institutions. Some of the Company's R&D work was performed by agencies in
Vietnam. In the future, the Company anticipates having additional service
providers. We believe that we have good relations with our employees and
subcontractors.
Reports
to Security Holders
As a
result of its filing of Form 10-SB/A and listing on the NASD OTC Bulletin Board,
the Company has become subject to the reporting obligations of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). These obligations include
filing an annual report under cover of Form 10-K, with audited financial
statements, unaudited quarterly reports on Form 10-Q and the requisite proxy
statements with regard to annual shareholder meetings. The public may read and
copy any materials the Company files with the Securities and Exchange Commission
(the “Commission”) at the Commission’s Public Reference Room at 100 F Street,
NE, Washington, DC 20549. The public may obtain information on the operation of
the Public Reference Room by calling the Commission at 1-800-SEC-0030. The
Commission maintains an Internet site (http://www.sec.gov) that contains
reports, proxy and information statements and other information regarding
issuers that file electronically with the Commission. Information about the
Company is also available on its Web site at www.nanoviricides.com. Information
included on the Web site is not part of this Form 10-K.
Website
Our
website address is www.nanoviricides.com.
We intend
to make available through our website, all of our filings with the Commission
and all amendments to these reports as soon as reasonably practicable after
filing, by providing a hyperlink to the EDGAR website containing our
reports.
Our
Information
Our
principal executive offices are currently located at 135 Wood St. West Haven,
Connecticut 06516 and our telephone number is (203) 937-6137. We can be
contacted by email at info@nanoviricides.com.
Our
business, financial condition, operating results and prospects are subject to
the following risks. Additional risks and uncertainties not presently
foreseeable to us may also impair our business operations. If any of the
following risks actually occurs, our business, financial condition or operating
results could be materially adversely affected. In such case, the trading price
of our common stock could decline, and our stockholders may lose all or part of
their investment in the shares of our common stock.
This
Form-10K contains forward-looking statements that involve risks and
uncertainties. These statements can be identified by the use of forward-looking
terminology such as “believes,” “expects,” “intends,” “plans,” “may,” “will,”
“should,” or “anticipation” or the negative thereof or other variations thereon
or comparable terminology. Actual results could differ materially from those
discussed in the forward-looking statements as a result of certain factors,
including those set forth below and elsewhere in this Registration
Statement.
Risks
Specific to Us
Our
company is a development stage company that has no products approved for
commercial sale, never generated any revenues and may never achieve revenues or
profitability.
We are a
development stage biopharmaceutical company. Currently, we have no products
approved for commercial sale and, to date, we have not generated any revenues.
Our ability to generate revenue depends heavily on:
|
•
|
demonstration
and proof of principle in pre-clinical trials that a nanoviricide is safe
and effective;
|
|
|
•
|
successful
development of our first product candidates FluCide, Nanoviricide Eye
Drops, HIVCide, HerpeCide or another one of the drug candidates in our
pipeline;
|
|
|
•
|
our
ability to seek and obtain regulatory approvals, including with respect to
the indications we are seeking;
|
|
|
•
|
the
successful commercialization of our product candidates;
and
|
|
|
•
|
market
acceptance of our products.
|
|
All of
our existing product candidates are in early stages of development. It will be
several years, if ever, until we have a commercial drug product available for
resale. If we do not successfully develop and commercialize these products, we
will not achieve revenues or profitability in the foreseeable future, if at all.
If we are unable to generate revenues or achieve profitability, we may be unable
to continue our operations.
We are a
development stage company with a limited operating history, making it difficult
for you to evaluate our business and your investment.
We are in
the development stage and our operations and the development of our proposed
products are subject to all of the risks inherent in the establishment of a new
business enterprise, including but not limited to:
o
|
the
absence of an operating history;
|
o
|
the
lack of commercialized
products;
|
o
|
insufficient
capital;
|
o
|
Expected
substantial and continual losses for the foreseeable
future;
|
o
|
limited
experience in dealing with regulatory issues;
|
o
|
the
lack of manufacturing experience and limited marketing
experience;
|
o
|
an
expected reliance on third parties for the development and
commercialization of our proposed products;
|
o
|
a
competitive environment characterized by numerous, well-established and
well capitalized competitors; and
|
o
|
reliance
on key personnel.
|
Because
we are subject to these risks, you may have a difficult time evaluating our
business and your investment in our company.
Our
ability to become profitable depends primarily on the following
factors:
o
|
our
ability to develop drugs, obtain approval for such drugs, and if approved,
to successfully commercialize our nanoviricide
drug;
|
o
|
our
R&D efforts, including the timing and cost of clinical trials;
and
|
o
|
our
ability to enter into favorable alliances with third-parties who can
provide substantial capabilities in clinical development, regulatory
affairs, sales, marketing and
distribution.
|
Even if
we successfully develop and market our drug candidates, we may not generate
sufficient or sustainable revenue to achieve or sustain
profitability.
The
report of our independent registered public accounting firm includes a going
concern opinion, and we have incurred significant operating losses and may not
be profitable in the future, if ever.
As of
June 30, 2009 we have a cash and cash equivalent balance of $1,689,422. Also,
the Company has incurred significant operating losses since its inception,
resulting in an accumulated deficit of $11,995,535 at June 30, 2009. Such losses
are expected to continue for the foreseeable future. On September 17, 2009, the
Company had received subscriptions in the aggregate amount of $1,337,500 through
the offering of shares of the Company's common stock and warrants to purchase
common stock and an additional $1,879,900 through the exercise of existing
warrants to purchase stock. The Company estimates that it has
sufficient cash to support current operations through the next six quarters,
i.e. through December 31, 2010.
Our
history of losses, operating expenses , cash consumption, and doubt as to
whether we will ever become profitable, are factors which raise substantial
doubt as to our ability to continue as a going concern. Consequently, our
independent registered public accounting firm has included a going concern
opinion in its report which is included elsewhere in this Form 10-K. In many
cases a going concern opinion makes raising capital more difficult and often
results in terms less favorable than if the Company did not have a going concern
opinion. Therefore it is likely the going concern opinion by our
independent registered public accounting firm will affect our ability to raise
capital. If we are unable to achieve revenues or obtain financing, then we may
not be able to commence revenue-generating operations or continue as a going
concern.
We will
need to raise substantial additional capital in the future to fund our
operations and we may be unable to raise such funds when needed and on
acceptable terms.
We currently do not have sufficient resources to complete the
development and commercialization of any of our proposed products. As of June
30, 2009 we have a cash and cash equivalent balance of $1,689,422 which
combined with the $3,217,400 obtained through the
sale of the Company’s common stock, after the close of the Company’s year end,
will be sufficient to fund our operations for the next eighteen
months. We expect to incur additional costs of approximately $10~15 million
dollars in the upcoming twenty-four months to construct or obtain facilities to
support a initial new drug application filing with the FDA in accordance with
our business plans.
As a
result of the above sale of the Company’s stock and warrant conversions, the
Company has reserves in excess of $3,000,000. This will permit us to continue
our operations and research and development for the next fifteen months, but not
to fully execute the first phase of the Company’s business plan. In the event
that we cannot obtain acceptable financing, or that we are unable to secure
additional financing on acceptable terms, we would be unable to complete
development of our various drug candidates. This would necessitate implementing
staff reductions and operational adjustments that would include reductions in
the following business areas:
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research
and development programs;
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preclinical
studies and clinical trials; material characterization studies, regulatory
processes;
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establishment
of our own laboratory or a search for third party marketing partners to
market our products for us.
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The
amount of capital we may need will depend on many factors, including
the:
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progress,
timing and scope of our research and development
programs;
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progress,
timing and scope of our preclinical studies and clinical
trials;
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time
and cost necessary to obtain regulatory approvals;
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time
and cost necessary to establish our own marketing capabilities or to seek
marketing partners;
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time
and cost necessary to respond to technological and market
developments;
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changes
made or new developments in our existing collaborative, licensing
and
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other
commercial relationships; and
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new
collaborative, licensing and other commercial relationships that we may
establish.
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Our fixed
expenses, such as rent, license payments and other contractual commitments, may
increase in the future, as we may:
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enter
into leases for new facilities and capital equipment;
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enter
into additional licenses and collaborative agreements;
and
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incur
additional expenses associated with being a public
company.
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We have
limited experience in drug development and may not be able to successfully
develop any drugs.
Until the
formation of NanoViricide, Inc. (the Company's predecessor prior to the
exchange) our management and key personnel had no experience in pharmaceutical
drug development and, consequently, may not be able to successfully develop any
drugs. Our ability to achieve revenues and profitability in our business will
depend, among other things, on our ability to:
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develop
products internally or obtain rights to them from others on favorable
terms;
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complete
laboratory testing and human
studies;
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obtain
and maintain necessary intellectual property rights to our
products;
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successfully
complete regulatory review to obtain requisite governmental agency
approvals
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enter
into arrangements with third parties to manufacture our products on our
behalf; and
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enter
into arrangements with third parties to provide sales and marketing
functions.
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Development
of pharmaceutical products is a time-consuming process, subject to a number of
factors, many of which are outside of our control. Consequently, we can provide
no assurance of the successful and timely development of new drugs.
Our drug
candidates are in their developmental stage. Further development and extensive
testing will be required to determine their technical feasibility and commercial
viability. Our success will depend on our ability to achieve scientific and
technological advances and to translate such advances into reliable,
commercially competitive drugs on a timely basis. Drugs that we may develop are
not likely to be commercially available for a few years. The proposed
development schedules for our drug candidates may be affected by a variety of
factors, including technological difficulties, proprietary technology of others,
and changes in government regulation, many of which will not be within our
control. Any delay in the development, introduction or marketing of our drug
candidates could result either in such drugs being marketed at a time when their
cost and performance characteristics would not be competitive in the marketplace
or in the shortening of their commercial lives. In light of the long-term nature
of our projects, the unproven technology involved and the other factors
described elsewhere in “Risk Factors”, we may not be able to complete
successfully the development or marketing of any drugs.
We may
fail to successfully develop and commercialize our drug candidates because
they:
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are
found to be unsafe or ineffective in clinical trials;
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do
not receive necessary approval from the FDA or foreign regulatory
agencies;
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fail
to conform to a changing standard of care for the diseases they seek to
treat; or
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are
less effective or more expensive than current or alternative treatment
methods.
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Drug
development failure can occur at any stage of clinical trials and as a result of
many factors and there can be no assurance that we or our collaborators will
reach our anticipated clinical targets. Even if we or our collaborators complete
our clinical trials, we do not know what the long-term effects of exposure to
our drug candidates will be. Furthermore, our drug candidates may be used in
combination with other treatments and there can be no assurance that such use
will not lead to unique safety issues. Failure to complete clinical trials or to
prove that our drug candidates are safe and effective would have a material
adverse effect on our ability to generate revenue and could require us to reduce
the scope of or discontinue our operations.
We must
comply with significant and complex government regulations, compliance with
which may delay or prevent the commercialization of our drug
candidates.
The
R&D, manufacture and marketing of drug candidates are subject to regulation,
primarily by the FDA in the United States and by comparable authorities in other
countries. These national agencies and other federal, state, local and foreign
entities regulate, among other things, R&D activities (including testing in
primates and in humans) and the testing, manufacturing, handling, labeling,
storage, record keeping, approval, advertising and promotion of the products
that we are developing. Noncompliance with applicable requirements can result in
various adverse consequences, including approval delays or refusals to approve
drug licenses or other applications, suspension or termination of clinical
investigations, revocation of approvals previously granted, fines, criminal
prosecution, recalls or seizures of products, injunctions against shipping drugs
and total or partial suspension of production and/or refusal to allow a company
to enter into governmental supply contracts.
The
process of obtaining FDA approval has historically been costly and time
consuming. Current FDA requirements for a new human drug or biological product
to be marketed in the United States include: (1) the successful conclusion of
pre-clinical laboratory and animal tests, if appropriate, to gain preliminary
information on the product’s safety; (2) filing with the FDA of an IND
application to conduct human clinical trials for drugs or biologics; (3) the
successful completion of adequate and well-controlled human clinical
investigations to establish the safety and efficacy of the product for its
recommended use; and (4) filing by a company and acceptance and approval by the
FDA of a New Drug Application, or NDA, for a drug product or a biological
license application, or BLA, for a biological product to allow commercial
distribution of the drug or biologic. A delay in one or more of the procedural
steps outlined above could be harmful to us in terms of getting our drug
candidates through clinical testing and to market.
The FDA
reviews the results of the clinical trials and may order the temporary or
permanent discontinuation of clinical trials at any time if it believes the drug
candidate exposes clinical subjects to an unacceptable health risk.
Investigational drugs used in clinical studies must be produced in compliance
with current good manufacturing practice, or GMP, rules pursuant to FDA
regulations.
Sales
outside the United States of products that we develop will also be subject to
regulatory requirements governing human clinical trials and marketing for drugs
and biological products and devices. The requirements vary widely from country
to country, but typically the registration and approval process takes several
years and requires significant resources. In most cases, even if the FDA has not
approved a product for sale in the United States, the product may be exported to
any country if it complies with the laws of that country and has valid marketing
authorization by the appropriate authority. There are specific FDA regulations
that govern this process.
We also
are subject to the following risks and obligations, related to the approval of
our products:
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The
FDA or foreign regulators may interpret data from pre-clinical testing and
clinical trials in different ways than we interpret
them.
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If
regulatory approval of a product is granted, the approval may be limited
to specific indications or limited with respect to its distribution. In
addition, many foreign countries control pricing and coverage under their
respective national social security
systems.
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The
FDA or foreign regulators may not approve our manufacturing processes or
manufacturing facilities.
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The
FDA or foreign regulators may change their approval policies or adopt new
regulations.
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Even
if regulatory approval for any product is obtained, the marketing license
will be subject to continual review, and newly discovered or developed
safety or effectiveness data may result in suspension or revocation of the
marketing license.
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If
regulatory approval of the product candidate is granted, the marketing of
that product would be subject to adverse event reporting requirements and
a general prohibition against promoting products for unapproved or
“off-label” uses.
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In
some foreign countries, we may be subject to official release requirements
that require each batch of the product we produce to be officially
released by regulatory authorities prior to its distribution by
us.
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We
will be subject to continual regulatory review and periodic inspection and
approval of manufacturing modifications, including compliance with current
GMP regulations.
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We can
provide no assurance that our drug candidates will obtain regulatory approval or
that the results of clinical studies will be favorable.
The
work-plan we have developed for the next twelve months is planned to enable us
to file a pre-IND application for our influenza and HIV drugs in the 2010 fiscal
year. We believe that this work-plan will lead us to obtain certain information
about the safety and efficacy of our influenza and HIV drugs. We need to be able
to undertake further studies in animal models to obtain necessary data regarding
the pharmaco-kinetic and pharmaco-dynamic profiles of our drug candidates. The
data will then be used to file an IND application, towards the goal of obtaining
FDA approval for testing the drugs in human patients.
The
testing, marketing and manufacturing of any product for use in the United States
will require approval from the FDA. We cannot predict with any certainty the
amount of time necessary to obtain such FDA approval and whether any such
approval will ultimately be granted. Preclinical and clinical trials may reveal
that one or more products are ineffective or unsafe, in which event further
development of such products could be seriously delayed or terminated. Moreover,
obtaining approval for certain products may require testing on human subjects of
substances whose effects on humans are not fully understood or documented.
Delays in obtaining FDA or any other necessary regulatory approvals of any
proposed drug and failure to receive such approvals would have an adverse effect
on the drug’s potential commercial success and on our business, prospects,
financial condition and results of operations. In addition, it is possible that
a proposed drug may be found to be ineffective or unsafe due to conditions or
facts that arise after development has been completed and regulatory approvals
have been obtained. In this event, we may be required to withdraw such proposed
drug from the market. To the extent that our success will depend on any
regulatory approvals from government authorities outside of the United States
that perform roles similar to that of the FDA, uncertainties similar to those
stated above will also exist.
Even if
we obtain regulatory approvals, our marketed drug candidates will be subject to
ongoing regulatory review. If we fail to comply with continuing U.S. and foreign
regulations, we could lose our approvals to market these drugs and our business
would be seriously harmed.
Following
any initial regulatory approval of any drugs we may develop, we will also be
subject to continuing regulatory review, including the review of adverse
experiences and clinical results that are reported after our drug candidates are
made commercially available. This would include results from any post-marketing
tests or vigilance required as a condition of approval. The manufacturer and
manufacturing facilities we use to make any of our drug candidates will also be
subject to periodic review and inspection by the FDA. The discovery of any
previously unknown problems with the drug, manufacturer or facility may result
in restrictions on the drug or manufacturer or facility, including withdrawal of
the drug from the market. If we are required to withdraw all or more of our
drugs from the market, we may be unable to continue revenue generating
operations. We do not have, and currently do not intend to develop, the ability
to manufacture material for our clinical trials or on a commercial scale.
Reliance on third-party manufacturers entails risks to which we would not be
subject if we manufactured drugs ourselves, including reliance on the
third-party manufacturer for regulatory compliance. Our drug promotion and
advertising is also subject to regulatory requirements and continuing FDA
review.
Development
of our drug candidates requires a significant investment in R&D. Our R&D
expenses in turn, are subject to variation based on a number of factors, many of
which are outside of our control. A sudden or significant increase in our
R&D expenses could materially and adversely impact our results of
operations.
We have
expended $ 6,721,963 on research and development from inception through June 30,
2009.
We have
an R&D and other costs budget of $2,500,000 for the next 12
months. In the last three years we have established lead compounds against a
number of viral diseases and completed proof of principle studies against a
number of viral diseases. We now have lead drug compounds against all
Influenzas,,HIV, Viral diseases of the Eye, and Oral and Genital Herpes. We are
currently working on identifying and establishing collaborations with major
pharmaceutical companies as well as government institutions for the purpose of
co-development of these products. Notwithstanding these efforts, we will
continue the development of these drugs, as well as our other drug development
endeavors that include Rabies, Dengue viruses, and Ebola/Marburg
viruses.
The
Company has the cash on hand to complete the budgeted R&D work through
December 31, 2010. Should the pre-clinical studies of our Influenza, HIV, Viral
diseases of the Eye, and Oral and Genital Herpes drugs meet managements
expectations the Company will require substantial additional funding to take any
one or more of these drugs into IND filing(s) with the FDA. The Company projects
it will need an additional $15 million for the costs of hiring additional
scientific staff and consulting firms to assist with FDA compliance, material
characterization, pharmaco-kinetic, pharmaco-dynamic and toxicology studies
required for filing an IND, and for constructing or obtaining facilities to
support such application.
The
Company will be unable to proceed with its business plan beyond December 31,
2010, without obtaining additional financing of approximately $3 - $5 million to
support its budgeted Research and Development and other costs.
Because
we expect to expend substantial resources on R&D, our success depends in
large part on the results as well as the costs of our R&D. A failure in our
R&D efforts or substantial increase in our R&D expenses would adversely
affect our results of operations. R&D expenditures are uncertain and subject
to much fluctuation. Factors affecting our R&D expenses include, but are not
limited to:
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the
number and outcome of clinical studies we are planning to conduct; for
example, our R&D expenses may increase based on the number of
late-stage clinical studies that we may be required to
conduct;
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the
number of drugs entering into pre-clinical development from research; for
example, there is no guarantee that internal research efforts will succeed
in generating sufficient data for us to make a positive development
decision;
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licensing
activities, including the timing and amount of related development funding
or milestone payments; for example, we may enter into agreements requiring
us to pay a significant up-front fee for the purchase of in-process
R&D that we may record as R&D
expense.
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We have
no experience in conducting or supervising clinical trials and must outsource
all clinical trials.
We have
no experience in conducting or supervising clinical trials that must be
performed to obtain data to submit in concert with applications for approval by
the Food and Drug Administration ("FDA"). The regulatory process to obtain
approval for drugs for commercial sale involves numerous steps. Drugs are
subjected to clinical trials that allow development of case studies to examine
safety, efficacy, and other issues to ensure that sale of drugs meets the
requirements set forth by various governmental agencies, including the FDA. In
the event that our protocols do not meet standards set forth by the FDA, or that
our data is not sufficient to allow such trials to validate our drugs in the
face of such examination, we might not be able to meet the requirements that
allow our drugs to be approved for sale.
Because
we have no experience in conducting or supervising clinical trials, we must
outsource our clinical trials to third parties. We have no control over their
compliance with procedures and protocols used to complete clinical trails in
accordance with standards required by the agencies that approve drugs for sale.
If these subcontractors fail to meet these standards, the validation of our
drugs would be adversely affected, causing a delay in our ability to meet
revenue-generating operations
We are
subject to risks inherent in conducting clinical trials. The risk of non
compliance with FDA-approved good clinical practices by clinical investigators,
clinical sites, or data management services could delay or prevent us from
developing or ever commercializing our drug candidates.
Agreements
with clinical investigators and medical institutions for clinical testing and
with other third parties for data management services place substantial
responsibilities on these parties, which could result in delays in, or
termination of, our clinical trials if these parties fail to perform as
expected. For example, if any of our clinical trial sites fail to comply with
FDA-approved good clinical practices, we may be unable to use the data gathered
at those sites. If these clinical investigators, medical institutions or other
third parties do not carry out their contractual duties or obligations or fail
to meet expected deadlines, or if the quality or accuracy of the clinical data
they obtain is compromised due to their failure to adhere to our clinical
protocols or for other reasons, our clinical trials may be extended, delayed or
terminated, and we may be unable to obtain regulatory approval for or
successfully commercialize our drug candidates.
We or
regulators may suspend or terminate our clinical trials for a number of reasons.
We may voluntarily suspend or terminate our clinical trials if at any time we
believe that they present an unacceptable risk to the patients enrolled in our
clinical trials. In addition, regulatory agencies may order the temporary or
permanent discontinuation of our clinical trials at any time if they believe
that the clinical trials are not being conducted in accordance with applicable
regulatory requirements or that they present an unacceptable safety risk to the
patients enrolled in our clinical trials.
Our
clinical trial operations will be subject to regulatory inspections at any time.
If regulatory inspectors conclude that we or our clinical trial sites are not in
compliance with applicable regulatory requirements for conducting clinical
trials, we may receive reports of observations or warning letters detailing
deficiencies, and we will be required to implement corrective actions. If
regulatory agencies deem our responses to be inadequate, or are dissatisfied
with the corrective actions that we or our clinical trial sites have
implemented, our clinical trials may be temporarily or permanently discontinued,
we may be fined, we or our investigators may be precluded from conducting any
ongoing or any future clinical trials, the government may refuse to approve our
marketing applications or allow us to manufacture or market our drug candidates
or we may be criminally prosecuted. If we are unable to complete clinical trials
and have our products approved due to our failure to comply with regulatory
requirements, we will be unable to commence revenue generating
operations.
Efforts
of government and third-party payors to contain or reduce the costs of health
care may adversely affect our revenues even if we were to develop an FDA
approved drug.
Our
ability to earn sufficient returns on our drug candidates may depend in part on
the extent to which government health administration authorities, private health
coverage insurers and other organizations will provide reimbursement for the
costs of such drugs and related treatments. Significant uncertainty exists as to
the reimbursement status of newly approved health care drugs, and we do not know
whether adequate third-party coverage will be available for our drug candidates.
If our current and proposed drugs are not considered cost-effective,
reimbursement to the consumers may not be available or sufficient to allow us to
sell drugs on a competitive basis. The failure of the government and third-party
payors to provide adequate coverage and reimbursement rates for our drug
candidates could adversely affect the market acceptance of our drug candidates,
our competitive position and our financial performance.
If we
fail to comply with applicable continuing regulatory requirements, we may be
subject to fines, suspension or withdrawal of regulatory approval, product
recalls and seizures, operating restrictions and criminal
prosecutions.
Confidentiality
agreements with employees and others may not adequately prevent disclosure of
trade secrets and other proprietary information. Disclosure of our trade secrets
or proprietary information could compromise any competitive advantage that we
have.
We depend
upon confidentiality agreements with our officers, employees, consultants, and
subcontractors to maintain the proprietary nature of the technology. These
measures may not afford us sufficient or complete protection, and may not afford
an adequate remedy in the event of an unauthorized disclosure of confidential
information. In addition, others may independently develop technology similar to
ours, otherwise avoiding the confidentiality agreements, or produce patents that
would materially and adversely affect our business, prospects, financial
condition, and results of operations.
We will
rely upon licensed patents to protect our technology. We may be unable to obtain
or protect such intellectual property rights, and we may be liable for
infringing upon the intellectual property rights of others.
Our
ability to compete effectively will depend on our ability to maintain the
proprietary nature of our technologies and the proprietary technology of others
with which we have entered into licensing agreements. We have exclusively
licensed patent applications from TheraCour Pharma, Inc and expect to file
patents of our own in the coming years. There can be no assurance that any of
these patent applications will ultimately result in the issuance of a patent
with respect to the technology owned by us or licensed to us. The patent
position of pharmaceutical or biotechnology companies, including ours, is
generally uncertain and involves complex legal and factual considerations. The
standards that the United States Patent and Trademark Office use to grant
patents are not always applied predictably or uniformly and can change. There is
also no uniform, worldwide policy regarding the subject matter and scope of
claims granted or allowable in pharmaceutical or biotechnology patents.
Accordingly, we do not know the degree of future protection for our proprietary
rights or the breadth of claims that will be allowed in any patents issued to us
or to others. Further, we rely on a combination of trade secrets, know-how,
technology and nondisclosure, and other contractual agreements and technical
measures to protect our rights in the technology. If any trade secret, know-how
or other technology not protected by a patent were to be disclosed to or
independently developed by a competitor, our business and financial condition
could be materially adversely affected.
We do not
believe that any of the drug candidates we are currently developing infringe
upon the rights of any third parties nor are they infringed upon by third
parties; however, there can be no assurance that our technology will not be
found in the future to infringe upon the rights of others or be infringed upon
by others. In such a case, others may assert infringement claims against us, and
should we be found to infringe upon their patents, or otherwise impermissibly
utilize their intellectual property, we might be forced to pay damages,
potentially including treble damages, if we are found to have willfully
infringed on such parties’ patent rights. In addition to any damages we might
have to pay, we may be required to obtain licenses from the holders of this
intellectual property, enter into royalty agreements, or redesign our drug
candidates so as not to utilize this intellectual property, each of which may
prove to be uneconomical or otherwise impossible. Conversely, we may not always
be able to successfully pursue our claims against others that infringe upon our
technology and the technology exclusively licensed from the TheraCour Pharma
Inc. Thus, the proprietary nature of our technology or technology licensed by us
may not provide adequate protection against competitors.
Moreover,
the cost to us of any litigation or other proceeding relating to our patents and
other intellectual property rights, even if resolved in our favor, could be
substantial, and the litigation would divert our management’s efforts.
Uncertainties resulting from the initiation and continuation of any litigation
could limit our ability to continue our operations.
Other
companies or organizations may assert patent rights that prevent us from
developing and commercializing our drug candidates.
We are in
a relatively new scientific field that has generated many different patent
applications from organizations and individuals seeking to obtain important
patents in the field. Because the field is so new, very few of these patent
applications have been fully processed by government patent offices around the
world, and there is a great deal of uncertainty about which patents will issue,
when, to whom, and with what claims. It is likely that there will be significant
litigation and other proceedings, such as interference proceedings in various
patent offices, relating to patent rights in the field. Others may attempt to
invalidate our patents or other intellectual property rights. Even if our rights
are not directly challenged, disputes among third parties could lead to the
weakening or invalidation of those intellectual property rights.
Thus, it
is possible that one or more organizations will hold patent rights to which we
will need a license. Any license required under any patent may not be made
available on commercially acceptable terms, if at all. In addition, such
licenses are likely to be non-exclusive and, therefore, our competitors may have
access to the same technology licensed to us. If we fail to obtain a required
license and are unable to design around a patent, we may be unable to
effectively market some of our technology and drug candidates, which could limit
our ability to generate revenues or achieve profitability and possibly prevent
us from generating revenue sufficient to sustain our
operations.
We are
dependent upon TheraCour Pharma Inc. for the rights to develop the products we
intend to sell.
Our
ability to develop, manufacture and sell the products the Company plans to
develop is derived from our “Material Licensing Agreement” with TheraCour Pharma
Inc (“TheraCour”). While we hold the license in perpetuity, the Agreement may be
terminated by TheraCour as a result of: the insolvency or bankruptcy proceedings
by or against the Company, a general assignment by the Company to is creditors,
the dissolution of the Company, cessation by the Company of business operations
for ninety (90) days or more or the commencement by the Company or an affiliate
to challenge or invalidate the issued patents.
The
Company does not hold the rights to any other patents nor does the Company
conduct its own research and development to develop other products to
manufacture and sell. If the Company’s Agreement with TheraCour is terminated,
it is unlikely we will be able to commence revenue-generating operations or that
the Company could continue operating at all
We lack
suitable facilities for clinical testing; reliance on third parties
The
Company does not have facilities that could be used to conduct clinical testing.
We expect to contract with third parties to conduct all clinical testing
required to obtain approvals for any drugs that we might develop. We currently
outsource all clinical testing to KARD Scientific, Walter Reed Army Institute of
Research (WRAIR) and the Vietnamese National Institute of Hygiene and
Epidemiology (NIHE), and are reliant on the services of these third parties to
conduct studies on our behalf. KARD is not under contract to perform studies for
us and NIHE may discontinue their collaboration at any time. If we are unable to
continue with KARD Scientific WRAIR or NIHE, or retain third parties for these
purposes on acceptable terms, we may be unable to successfully develop our
proposed products. In addition, any failures by third parties to adequately
perform their responsibilities may delay the submission of our proposed products
for regulatory approval, impair our ability to deliver our products on a timely
basis or otherwise impair our competitive position. (The agreement with NIHE and
WRAIR is filed as an Exhibit to this 10K).
We have
limited manufacturing experience
The
Company has never manufactured products in the highly regulated environment of
pharmaceutical manufacturing. There are numerous regulations and requirements
that must be maintained to obtain licensure and the permits required to commence
manufacturing, as well as additional requirements to continue manufacturing
pharmaceutical products. We do not own or lease facilities currently that could
be used to manufacture any products that might be developed by the Company, nor
do we have the resources at this time to acquire or lease suitable
facilities.
We have
no sales and marketing personnel.
We are an
early stage development Company with limited resources. We do not currently have
any products available for sale, so have not secured sales and marketing staff
at this early stage of operations. We cannot generate sales without sales or
marketing staff and must rely on officers to provide any sales or marketing
services until such staff are secured, if ever.
Even if
we were to successfully develop approvable drugs, we will not be able to sell
these drugs if we or our third party manufacturers fail to comply with
manufacturing regulations.
If we
were to successfully develop approvable drugs, before we can begin selling these
drugs, we must obtain regulatory approval of our manufacturing facility and
process or the manufacturing facility and process of the third party or parties
with whom we may outsource our manufacturing activities. In addition, the
manufacture of our products must comply with the FDA's current Good
Manufacturing Practices regulations, commonly known as GMP regulations. The GMP
regulations govern quality control and documentation policies and procedures.
Our manufacturing facilities, if any in the future and the manufacturing
facilities of our third party manufacturers will be continually subject to
inspection by the FDA and other state, local and foreign regulatory authorities,
before and after product approval. We cannot guarantee that we, or any potential
third party manufacturer of our products, will be able to comply with the GMP
regulations or other applicable manufacturing regulations.
With our
limited resources, we may be unable to effectively manage growth.
As of the
date of this filing, we have three employees and several consultants and
independent contractors. The only consultant/contractor that we consider
critical to the Company is TheraCour, discussed in the next risk factor. KARD
Scientific, another consultant/contractor (See ITEM 1. Background:
Collaborations and Subcontract Arrangements) is considered by the Company
important but not critical as they are replaceable with moderate difficulty. All
other consultant/contractors would be more readily replaceable. While the
Company’s current operations cause it to be unlikely that we will need to grow
and hire additional consultants, contractors or employees, if future preclinical
studies of our nanoviricide drugs and technology show significant improvements
in efficacy over existing drugs, we intend to expand our operations and staff
materially. At that time our new employees may include a number of key
managerial, technical, financial, R&D and operations personnel who will not
have been fully integrated into our operations. We would expect the expansion of
our business to place a significant strain on our limited managerial,
operational and financial resources. We have no experience in integrating
multiple employees. Therefore, there is a substantial risk that we will not be
able to integrate new employees into our operations which would have a material
adverse effect on our business, prospects, financial condition and results of
operations.
We
license our core technology from TheraCour Pharma Inc. and we are dependent upon
them as they have exclusive development rights. If we lose the right to utilize
any of the proprietary information that is the subject of this license
agreement, we may incur substantial delays and costs in development of our drug
candidates.
The
Company has entered into a Material License Agreement with TheraCour Pharma,
Inc. (“TheraCour”) (an approximately 30% shareholder of the Company’s common
stock) whereby TheraCour has exclusive rights to develop exclusively for us, the
materials that comprise the core drugs of our planned business. TheraCour is a
development stage company with limited financial resources and needs the
Company’s progress payments to further the development of the nanoviricides. The Company controls the
research and work TheraCour performs on its behalf and no costs may be incurred
without the prior authorization or approval of the Company.
Development
costs charged by and paid to TheraCour Pharma, Inc. were $2,915,931 since
inception through June 30, 2009; No royalties are due to TheraCour from the
Company’s inception through June 30, 2009.
We depend
on TheraCour and other third parties to perform manufacturing activities
effectively and on a timely basis. If these third parties fail to perform as
required, this could impair our ability to deliver our products on a timely
basis or cause delays in our clinical trials and applications for regulatory
approval, and these events could harm our competitive position and adversely
affect our ability to commence revenue generating operations. The manufacturing
process for pharmaceutical products is highly regulated, and regulators may shut
down manufacturing facilities that they believe do not comply with regulations.
We and our manufacturers are subject to the FDA’s current Good Manufacturing
Practices, which are extensive regulations governing manufacturing processes,
stability testing, record-keeping and quality standards and similar regulations
are in effect in other countries. In addition, our manufacturing operations are
subject to routine inspections by regulatory agencies.
Our
collaborative relationships with third parties could cause us to expend
significant resources and incur substantial business risk with no assurance of
financial return.
We
anticipate substantial reliance upon strategic collaborations for marketing and
the commercialization of our drug candidates and we may rely even more on
strategic collaborations for R&D of our other drug candidates. Our business
depends on our ability to sell drugs to both government agencies and to the
general pharmaceutical market. Offering our drug candidates for non-medical
applications to government agencies does not require us to develop new sales,
marketing or distribution capabilities beyond those already existing in the
company. Selling antiviral drugs, however, does require such development. We
plan to sell antiviral drugs through strategic partnerships with pharmaceutical
companies. If we are unable to establish or manage such strategic collaborations
on terms favorable to us in the future, our revenue and drug development may be
limited. To date, we have not entered into any strategic collaborations with
third parties capable of providing these services. In addition, we have not yet
marketed or sold any of our drug candidates or entered into successful
collaborations for these services in order to ultimately commercialize our drug
candidates.
If we
determine to enter into R&D collaborations during the early phases of drug
development, our success will in part depend on the performance of our research
collaborators. We will not directly control the amount or timing of resources
devoted by our research collaborators to activities related to our drug
candidates. Our research collaborators may not commit sufficient resources to
our programs. If any research collaborator fails to commit sufficient resources,
our preclinical or clinical development programs related to this collaboration
could be delayed or terminated. Also, our collaborators may pursue existing or
other development-stage products or alternative technologies in preference to
those being developed in collaboration with us. Finally, if we fail to make
required milestone or royalty payments to our collaborators or to observe other
obligations in our agreements with them, our collaborators may have the right to
terminate those agreements.
Manufacturers
producing our drug candidates must follow current GMP regulations enforced by
the FDA and foreign equivalents. If a manufacturer of our drug candidates does
not conform to the current GMP regulations and cannot be brought up to such a
standard, we will be required to find alternative manufacturers that do conform.
This may be a long and difficult process, and may delay our ability to receive
FDA or foreign regulatory approval of our drug candidates and cause us to fall
behind on our business objectives.
Establishing
strategic collaborations is difficult and time-consuming. Our discussion with
potential collaborators may not lead to the establishment of collaborations on
favorable terms, if at all. Potential collaborators may reject collaborations
based upon their assessment of our financial, regulatory or intellectual
property position. Even if we successfully establish new collaborations, these
relationships may never result in the successful development or
commercialization of our drug candidates or the generation of sales revenue. To
the extent that we enter into collaborative arrangements, our drug revenues are
likely to be lower than if we directly marketed and sold any drugs that we may
develop.
Management
of our relationships with our collaborators will require:
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significant
time and effort from our management team;
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coordination
of our marketing and R&D programs with the marketing and R&D
priorities of our collaborators;
and
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effective
allocation of our resources to multiple
projects.
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We employ
the use of certain chemical and biological agents and compounds that may be
deemed hazardous and we are therefore subject to various environmental laws and
regulations. Compliance with these laws and regulations may result in
significant costs, which could materially reduce our ability to become
profitable.
We use
hazardous materials, including chemicals and biological agents and compounds
that could be dangerous to human health and safety or the environment. As
appropriate, we safely store these materials and wastes resulting from their use
at our laboratory facility pending their ultimate use or disposal. We contract
with a third party to properly dispose of these materials and wastes. We are
subject to a variety of federal, state and local laws and regulations governing
the use, generation, manufacture, storage, handling and disposal of these
materials and wastes. We may incur significant costs complying with
environmental laws and regulations adopted in the future.
If we use
biological and hazardous materials in a manner that causes injury, we may be
liable for damages.
Our
R&D and manufacturing activities will involve the use of biological and
hazardous materials. Although we believe our safety procedures for handling and
disposing of these materials comply with federal, state and local laws and
regulations, we cannot entirely eliminate the risk of accidental injury or
contamination from the use, storage, handling or disposal of these materials. We
carry $1,000,000 casualty and general liability insurance policies. Accordingly,
in the event of contamination or injury, we could be held liable for damages or
penalized with fines in an amount exceeding our resources and insurance
coverage, and our clinical trials or regulatory approvals could be
suspended.
We may
not be able to attract and retain highly skilled personnel.
Our
ability to attract and retain highly skilled personnel is critical to our
operations and expansion. We face competition for these types of personnel from
other pharmaceutical companies and more established organizations, many of which
have significantly larger operations and greater financial, technical, human and
other resources than us. We may not be successful in attracting and retaining
qualified personnel on a timely basis, on competitive terms, or at all. If we
are not successful in attracting and retaining these personnel, our business,
prospects, financial condition and results of operations will be materially and
adversely affected.
We depend
upon our senior management and their loss or unavailability could put us at a
competitive disadvantage.
We
currently depend upon the efforts and abilities of our management team. The loss
or unavailability of the services of any of these individuals for any
significant period of time could have a material adverse effect on our business,
prospects, financial condition and results of operations. We have not obtained,
do not own, nor are we the beneficiary of key-person life
insurance.
The
Company believes the following persons are critical to the success of the
Company as well as the terms of the employment agreements between them and the
Company:
On
September 23, 2005, the Company entered into employment agreements with its
three executive officers, Eugene Seymour, Chief Executive Officer, Anil Diwan,
President and Chairman of the Board of Directors, and Leo Ehrlich, Chief
Financial Officer. Leo Ehrlich resigned as CFO in May 2007 and his employment
agreement is completed. Mr. Ehrlich entered into a leak-out agreement with the
Company which limits the amount of stock Mr. Ehrlich and affiliates could sell
in each quarter. The provisions of the Leakout Agreement have expired as of June
30, 2009. The remaining employment agreements provide a minimum annual base
salary of $200,000 for a term of three years. This base salary has increased to
$250,000 per year upon the financing that closed on October 15, 2007. The
Company is also obligated to pay health and life insurance benefits and
reimburse expenses incurred by the officers on behalf of the company. Each
executive, if terminated by the Company without cause, would be entitled to six
months severance pay in the amount of $125,000. The current Executive
Employment Agreement terminated on September 30, 2008. The Company and two of
the Executives have verbally agreed that the Executives will continue to work
under the same terms until a new agreement is put into effect.
There are
conflicts of interest among our officers, directors and
stockholders.
Certain
of our executive officers and directors and their affiliates are engaged in
other activities and have interests in other entities on their own behalf or on
behalf of other persons. Neither we nor our stockholders will have any rights in
these ventures or their income or profits. Specifically, Anil Diwan owns
approximately 70% of the capital stock of TheraCour Pharma, Inc. which owns
approximately twenty-seven percent (27%) of our Common Stock, provides the
Company the nanomaterials with which it intends to develop its products and is
the holder of the intellectual property rights the Company uses to conduct its
operations. While the Company is not aware of any conflict that has arisen or
any transaction which has not been conducted on an arm’s length basis to date,
Dr. Diwan may have conflicting fiduciary duties between the Company and
TheraCour.
Currently,
the Company does not have any policy in place to deal with such should such a
conflict arise. In particular:
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Our
executive officers or directors or their affiliates may have an economic
interest in, or other business relationship with, partner companies that
invest in us.
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Our
executive officers or directors or their affiliates have interests in
entities that provide products or services to
us.
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In any of
these cases:
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Our
executive officers or directors may have a conflict between our current
interests and their personal financial and other interests in another
business venture.
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Our
executive officers or directors may have conflicting fiduciary duties to
us and the other entity.
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The
terms of transactions with the other entity may not be subject to arm’s
length negotiations and therefore may be on terms less favorable to us
than those that could be procured through arm’s length
negotiations.
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We may
enter into contracts with various U.S. government agencies which have special
contracting requirements that give the government agency various rights or
impose on the other party various obligations that can make the contracts less
favorable to the non-government party. Consequently, if a large portion of our
revenue is attributable to these contracts, our business may be adversely
affected should the governmental parties exercise any of these additional rights
or impose any of these additional obligations.
We anticipate
entering into contracts with various U.S. government agencies. In
contracting with government agencies, we will be subject to various federal
contract requirements. Future sales to U.S. government agencies will depend, in
part, on our ability to meet these requirements, certain of which we may not be
able to satisfy.
U.S.
government contracts typically contain unfavorable termination provisions and
are subject to audit and modification by the government at its sole discretion,
which subjects us to additional risks. These risks include the ability of the
U.S. government to unilaterally:
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suspend
or prevent us for a set period of time from receiving new contracts or
extending existing contracts based on violations or suspected violations
of laws or regulations;
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terminate
our existing contracts;
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reduce
the scope and value of our existing contracts;
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audit
and object to our contract-related costs and fees, including allocated
indirect costs;
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control
and potentially prohibit the export of our drug candidates;
and
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change
certain terms and conditions in our
contracts.
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The U.S.
government may terminate any of its contracts with us either for its convenience
or if we default by failing to perform in accordance with the contract schedule
and terms. Termination for convenience provisions generally enable us to recover
only our costs incurred or committed, and settlement expenses and profit on the
work completed prior to termination. Termination for default provisions do not
permit these recoveries and make us liable for excess costs incurred by the U.S.
government in procuring undelivered items from another source.
As a U.S.
government contractor, we may become subject to periodic audits and reviews.
Based on the results of these audits, the U.S. government may adjust our
contract-related costs and fees, including allocated indirect costs. As part of
any such audit or review, the U.S. government may review the adequacy of, and
our compliance with, our internal control systems and policies, including those
relating to our purchasing, property, compensation and/or management information
systems. In addition, if an audit or review uncovers any improper or illegal
activity, we may be subject to civil and criminal penalties and administrative
sanctions, including termination of our contracts, forfeiture of profits,
suspension of payments, fines and suspension or prohibition from doing business
with the U.S. government. We could also suffer serious harm to our reputation if
allegations of impropriety were made against us. In addition, under U.S.
government purchasing regulations, some of our costs, including most financing
costs, amortization of intangible assets, portions of our R&D costs and some
marketing expenses, may not be reimbursable or allowed under our contracts.
Further, as a U.S. government contractor, we may become subject to an increased
risk of investigations, criminal prosecution, civil fraud, whistleblower
lawsuits and other legal actions and liabilities to which purely private sector
companies are not.
We may
fail to obtain contracts to supply the U.S. government, and we may be unable to
commercialize our drug candidates.
The U.S.
government has undertaken commitments to help secure improved countermeasures
against bio-terrorism. The process of obtaining government contracts is lengthy
and uncertain, and we must compete for each contract. Moreover, the award of one
government contract does not necessarily secure the award of future contracts
covering the same drug. If the U.S. government makes significant future contract
awards for the supply of its emergency stockpile to our competitors, our
business will be harmed and it is unlikely that we will be able to ultimately
commercialize our competitive drug candidate.
In
addition, the determination of when and whether a drug is ready for large scale
purchase and potential use will be made by the government through consultation
with a number of government agencies, including the FDA, the NIH, the CDC and
the Department of Homeland Security. Congress has approved measures to
accelerate the development of bio-defense drugs through NIH funding, the review
process by the FDA and the final government procurement contracting authority.
While this may help speed the approval of our drug candidates, it may also
encourage competitors to develop their own drug candidates.
The
market for government stockpiling of H5N1 medicines and other antiviral drugs in
the Strategic National Stockpile is fairly new and uncertain.
At the
present many governments have already stockpiled influenza medicines for H5N1.
We cannot predict with certainty the size of the market, if any for all of the
antiviral drugs that the governments may want to stockpile. Consequently, we
cannot predict whether sales, if any, to governments will be sufficient to fund
our business plan and commence revenue generating operations.
If the
U.S. government fails to continue funding bio-defense drug candidate development
efforts or fails to purchase sufficient quantities of any future bio-defense
drug candidate, we may be unable to generate sufficient revenues to continue
operations.
We hope
to receive funding from the U.S. government for the development of our
bio-defense drug candidates. Changes in government budgets and agendas, however,
may result in future funding being decreased and de-prioritized, and government
contracts typically contain provisions that permit cancellation in the event
that funds are unavailable to the government agency. Furthermore, we cannot be
certain of the timing of any future funding, and substantial delays or
cancellations of funding could result from protests or challenges from third
parties. If the U.S. government fails to continue to adequately fund R&D
programs, we may be unable to generate sufficient revenues to continue
operations. Similarly, if we develop a drug candidate that is approved by the
FDA, but the U.S. government does not place sufficient orders for this drug, our
future business may be harmed.
Risks
Related to the Biotechnology/Biopharmaceutical Industry
The
biotechnology and biopharmaceutical industries are characterized by rapid
technological developments and a high degree of competition. We may be unable to
compete with enterprises equipped with more substantial resources than
us.
The
biotechnology and biopharmaceutical industries are characterized by rapid
technological developments and a high degree of competition based primarily on
scientific and technological factors. These factors include the availability of
patent and other protection for technology and products, the ability to
commercialize technological developments and the ability to obtain government
approval for testing, manufacturing and marketing.
Our
anti-influenza drug in development, Flucide,
would compete with neuraminidase inhibitors Tamiflu and Relenza, anti-influenza
drugs that are sold by Roche and Glaxo SmithKline (GSK), respectively. Generic
competitors include amantadine and rimantadine, both oral tablets that only
inhibit the replication of the influenza A virus. BioCryst Pharmaceuticals, Inc.
is developing IV Infusions formulations of peramivir, an influenza neuraminidase
inhibitor, for the treatment of influenza, which recently failed in Phase II
human trials as an injectable. Several H5N1 bird flu, and influenza
novelH1N1/2009 vaccines are also in development worldwide. Several companies are
developing anti-influenza drugs and vaccines.
We have
recently completed preliminary animal studies against HIV that have resulted in
the finding that certain of our drug candidates were superior to the oral HAART
cocktail in SCID-hu mice lethally infected with HIV-I. We thus believe that we
have a very strong lead drug identified against HIV. There are
several companies with anti-HIV drugs in the market. A new drug, maraviroc from
Pfizer has recently been approved, which falls in a new class called
CCR5-blockers. Prior to this, two new drugs in a new class called Integrase
Inhibitors have been approved. A drug in the class called Entry & Fusion
Inhibitors, enfuvirtide, (Fuzeon™, Roche) has also been available. Additionally,
the classical drugs, NRTI’s, NNRTI’s and PI’s (protease inhibitors) are used in
various combinations. The HIVCide-I nanoviricide is expected to act by a very
different kind of mechanism, defining a new class of drugs, that is
complementary to the existing classes of anti-HIV drugs.
Our
nanoviricide eye drops for viral diseases of the eye are currently under
development. We have shown significant clinical efficacy in an animal model of
EKC (adenoviral epidemic kerato-conjunctivitis). We have also shown very strong
in vitro efficacy in HSV-1 reduction in cell cultures. We believe that this drug
has a very good efficacy and safety profile, based on current data. There are no
approved drugs against all viral diseases of the eye, or adenoviral EKC in
particular. Several drugs are available for the treatment of herpes keratitis.
Idoxuridine, vidarabine, acyclovir and its derivatives, are among the leading
ones. Aganocide is under development. We believe that the nanoviricide eye drops
should have a significant advantage in terms of reduced frequency of application
needed and simple application procedure.
Our HCV
drugs are at the earliest stage of development. There are a growing number of
anti-HCV drugs being sold or in advanced stages of clinical development.
Companies with anti-HIV and HCV products include Bristol-Myers Squibb Company
(BMS), Roche, Boehringer Ingelheim, Merck & Co., Inc. (Merck), Abbott
Laboratories, and Schering Plough, in addition to several other pharmaceutical
and biotechnology firms.
We
compete with specialized biopharmaceutical firms in the United States, Europe
and elsewhere, as well as a growing number of large pharmaceutical companies
that are applying biotechnology to their operations. Many biopharmaceutical
companies have focused their development efforts in the human therapeutics area,
including cancer. Many major pharmaceutical companies have developed or acquired
internal biotechnology capabilities or made commercial arrangements with other
biopharmaceutical companies. These companies, as well as academic institutions,
government agencies and private research organizations, also compete with us in
recruiting and retaining highly qualified scientific personnel and consultants.
Our ability to compete successfully with other companies in the pharmaceutical
field will also depend to a considerable degree on the continuing availability
of capital to us.
We are
aware of numerous products under development or manufactured by competitors that
are used for the prevention or treatment of certain diseases we have targeted
for drug development. Various companies are developing biopharmaceutical
products that potentially directly compete with our drug candidates even though
their approach to such treatment is different.
We expect
that our drug candidates under development and in clinical trials will address
major markets within the anti-viral sector. Our competition will be determined
in part by the potential indications for which drugs are developed and
ultimately approved by regulatory authorities. Additionally, the timing of the
market introduction of some of our potential drugs or of competitors’ products
may be an important competitive factor. Accordingly, the relative speed with
which we can develop drugs, complete pre-clinical testing, clinical trials,
approval processes and supply commercial quantities to market are important
competitive factors. We expect that competition among drugs approved for sale
will be based on various factors, including product efficacy, safety,
reliability, availability, price and patent protection.
The
successful development of biopharmaceuticals is highly uncertain. A variety of
factors including, pre-clinical study results or regulatory approvals, could
cause us to abandon development of our drug candidates.
Successful
development of biopharmaceuticals is highly uncertain and is dependent on
numerous factors, many of which are beyond our control. Products that appear
promising in the early phases of development may fail to reach the market for
several reasons including:
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pre-clinical
study results that may show the product to be less effective than desired
(e.g., the study failed to meet its primary objectives) or to have harmful
or problematic side effects;
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failure
to receive the necessary regulatory approvals or a delay in receiving such
approvals. Among other things, such delays may be caused by slow
enrollment in clinical studies, length of time to achieve study endpoints,
additional time requirements for data analysis or a IND and later NDA,
preparation, discussions with the FDA, an FDA request for additional
pre-clinical or clinical data or unexpected safety or manufacturing
issues;
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manufacturing
costs, pricing or reimbursement issues, or other factors that make the
product not economical; and
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the
proprietary rights of others and their competing products and technologies
that may prevent the product from being
commercialized.
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Success
in pre-clinical and early clinical studies does not ensure that large-scale
clinical studies will be successful. Clinical results are frequently susceptible
to varying interpretations that may delay, limit or prevent regulatory
approvals. The length of time necessary to complete clinical studies and to
submit an application for marketing approval for a final decision by a
regulatory authority varies significantly from one product to the next, and may
be difficult to predict.
Risks
Related to the Securities Markets and Investments in Our Common
Stock
Because
our common stock is quoted on the "OTC Bulletin Board," your ability to sell
your shares in the secondary trading market may be limited.
Our
common stock is currently quoted on the OTC Bulletin Board. Consequently, the
liquidity of our common stock is impaired, not only in the number of shares that
are bought and sold, but also through delays in the timing of transactions, and
coverage by security analysts and the news media, if any, of our company. As a
result, prices for shares of our common stock may be lower than might otherwise
prevail if our common stock was quoted and traded on Nasdaq or a national
securities exchange.
Because
our shares are "penny stocks," you may have difficulty selling them in the
secondary trading market.
Federal
regulations under the Securities Exchange Act of 1934 regulate the trading of
so-called "penny stocks," which are generally defined as any security not listed
on a national securities exchange or Nasdaq, priced at less than $5.00 per share
and offered by an issuer with limited net tangible assets and revenues. Since
our common stock currently is quoted on the OTC Bulletin Board at less than
$5.00 per share, our shares are "penny stocks" and may not be quoted unless a
disclosure schedule explaining the penny stock market and the risks associated
therewith is delivered to a potential purchaser prior to any trade.
In
addition, because our common stock is not listed on Nasdaq or any national
securities exchange and currently is quoted at and trades at less than $5.00 per
share, trading in our common stock is subject to Rule 15g-9 under the Securities
Exchange Act. Under this rule, broker-dealers must take certain steps prior to
selling a "penny stock," which steps include:
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obtaining
financial and investment information from the
investor;
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obtaining
a written suitability questionnaire and purchase agreement signed by the
investor; and
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providing
the investor a written identification of the shares being offered and the
quantity of the shares.
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If these
penny stock rules are not followed by the broker-dealer, the investor has no
obligation to purchase the shares. The application of these comprehensive rules
will make it more difficult for broker-dealers to sell our common stock and our
shareholders, therefore, may have difficulty in selling their shares in the
secondary trading market.
Our stock
price may be volatile and your investment in our common stock could suffer a
decline in value.
As of
June 30, 2009, the last trade price of our common stock, as quoted on the NASD
OTC Bulletin Board, was $0.55. The price may fluctuate significantly in response
to a number of factors, many of which are beyond our control. These factors
include:
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progress
of our products through the regulatory process;
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results
of preclinical studies and clinical
trials;
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announcements
of technological innovations or new products by us or our
competitors;
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government
regulatory action affecting our products or our competitors' products in
both the United States and foreign
countries;
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developments
or disputes concerning patent or proprietary rights;
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general
market conditions for emerging growth and pharmaceutical
companies;
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economic
conditions in the United States or abroad;
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actual
or anticipated fluctuations in our operating
results;
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broad
market fluctuations; and
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changes
in financial estimates by securities
analysts.
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A
registration of a significant amount of our outstanding restricted stock may
have a negative effect on the trading price of our stock.
At June 30, 2009, shareholders of the Company had 80,516,759 shares of
restricted stock, or 64.26% of the outstanding common stock. If we were to file
a registration statement including all of these shares, and the registration is
allowed by the SEC, these shares would be freely tradable upon the effectiveness
of the planned registration statement. If investors holding a significant number
of freely tradable shares decide to sell them in a short period of time
following the effectiveness of a registration statement, such sales could
contribute to significant downward pressure on the price of our stock.
We do not
intend to pay any cash dividends in the foreseeable future and, therefore, any
return on your investment in our capital stock must come from increases in the
fair market value and trading price of the capital stock.
We have
not paid any cash dividends on our common stock and do not intend to pay cash
dividends on our common stock in the foreseeable future. We intend to retain
future earnings, if any, for reinvestment in the development and expansion of
our business. Any credit agreements, which we may enter into with institutional
lenders, may restrict our ability to pay dividends. Whether we pay cash
dividends in the future will be at the discretion of our board of directors and
will be dependent upon our financial condition, results of operations, capital
requirements and any other factors that the board of directors decides is
relevant. Therefore, any return on your investment in our capital stock must
come from increases in the fair market value and trading price of the capital
stock.
We may
issue additional equity shares to fund the Company’s operational requirements
which would dilute your share ownership.
The
Company's continued viability depends on its ability to raise capital. Changes
in economic, regulatory or competitive conditions may lead to cost increases.
Management may also determine that it is in the best interest of the Company to
develop new services or products. In any such case additional financing is
required for the Company to meet its operational requirements. There can be no
assurances that the Company will be able to obtain such financing on terms
acceptable to the Company and at times required by the Company, if at all. In
such event, the Company may be required to materially alter its business plan or
curtail all or a part of its operational plans as detailed further in
Management’s Discussion and Analysis in this Form 10-K. While the Company
currently has no offers to sell its securities to obtain financing, sale or the
proposed sale of substantial amounts of our common stock in the public markets
may adversely affect the market price of our common stock and our stock price
may decline substantially. In the event that the Company is unable to raise or
borrow additional funds, the Company may be required to curtail significantly
its operational plans as further detailed in Requirements for Additional Capital
in the Management Discussion and Analysis of this Form 10-K.
The
Company is authorized to issue up to 300,000,000 total shares of Common Stock
without additional approval by shareholders. As of June 30, 2009, we had
125,299,457 of common stock outstanding, and warrants and options convertible
to 9,303,150 shares of common stock outstanding.
Because
our common stock is quoted only on the OTC Bulletin Board, your ability to sell
your shares in the secondary trading market may be limited.
Our
common stock is quoted only on the OTC Bulletin Board. Consequently, the
liquidity of our common stock is impaired, not only in the number of shares that
are bought and sold, but also through delays in the timing of transactions, and
coverage by security analysts and the news media, if any, of our company. As a
result, prices for shares of our common stock may be different than might
otherwise prevail if our common stock was quoted or traded on a national
securities exchange such as the New York Stock Exchange.
Large
amounts of our common stock will be eligible for resale under Rule
144.
As of June 30, 2009, 80,516,759 of 125,299,457 issued and outstanding
shares of the Company’s common stock were restricted securities as defined under
Rule 144 of the Securities Act of 1933, as amended (the “Act”) and under certain
circumstances may be resold without registration pursuant to Rule 144.
Approximately
28,356,759 shares of our restricted shares of common stock are held by
non-affiliates who may avail themselves of the public information requirements
and sell their shares in accordance with Rule 144. As a result, some or all of
these shares may be sold in accordance with Rule 144 potentially causing the
price of the Company’s shares to decline.
In
general, under Rule 144, a person (or persons whose shares are aggregated) who
has satisfied a six month holding period may, under certain circumstances, sell
within any three-month period a number of securities which does not exceed the
greater of 1% of the then outstanding shares of common stock or the average
weekly trading volume of the class during the four calendar weeks prior to such
sale. Rule 144 also permits, under certain circumstances, the sale of
securities, without any limitation, by a person who is not an Affiliate, as such
term is defined in Rule 144(a)(1), of the Company and who has satisfied a
two-year holding period. Any substantial sale of the Company's common stock
pursuant to Rule 144 may have an adverse effect on the market price of the
Company’s shares. This filing will satisfy certain public information
requirements necessary for such shares to be sold under Rule
144.
The
requirements of complying with the Sarbanes-Oxley act may strain our resources
and distract management
We are
subject to the reporting requirements of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), and the Sarbanes-Oxley Act of 2002. The costs
associated with these requirements may place a strain on our systems and
resources. The Exchange Act requires that we file annual, quarterly and current
reports with respect to our business and financial condition. The Sarbanes-Oxley
Act requires that we maintain effective disclosure controls and procedures and
internal controls over financial reporting. Historically, as a private company
we have maintained a small accounting staff, but in order to maintain and
improve the effectiveness of our disclosure controls and procedures and internal
control over financial reporting, significant additional resources and
management oversight will be required. This includes, among other things,
retaining independent public accountants. This effort may divert management’s
attention from other business concerns, which could have a material adverse
effect on our business, financial condition, results of operations and cash
flows. In addition, we may need to hire additional accounting and financial
persons with appropriate public company experience and technical accounting
knowledge, and we cannot assure you that we will be able to do so in a timely
fashion.
Sales of
additional equity securities may adversely affect the market price of our common
stock and your rights in the Company may be reduced.
We expect
to continue to incur drug development and selling, general and administrative
costs, and in order to satisfy our funding requirements, we may need to sell
additional equity securities. Our stockholders may experience substantial
dilution and a reduction in the price that they are able to obtain upon sale of
their shares. Also, any new securities issued may have greater rights,
preferences or privileges than our existing common stock that may adversely
affect the market price of our common stock and our stock price may decline
substantially.
ITEM
1B: UNRESOLVED STAFF COMMENTS.
None.
Description
of Property
The
Company’s principal executive offices are located at 135 Wood Street, West
Haven, Connecticut, and include approximately 7,000 square feet of office and
laboratory space at a base monthly rent of $7,311. Commencing September 1, 2008
the Company rented additional storage space and the base monthly rent increased
to $7,311. The term of lease expires in February 28, 2011, and may be extended,
at the option of the Company, for an additional two years. The lease can be
cancelled by the Company upon providing six months written notice.
We
subcontract the laboratory research and development work to TheraCour Pharma,
Inc. which has a 5,000 square foot laboratory in the same building. Management
believes that the space is sufficient for the Company to monitor the
developmental progress at its subcontractors.
In
February 27, 2007, NanoViricides, Inc. entered into a sublease to occupy 5,000
square feet of space at 4 Research Drive, in Woodbridge, Connecticut
at a monthly rent of $11,667, plus an additional $500 per month for
utilities.
The term
of the occupancy expired January 30, 2009. This sublease has since expired and
the Company has decided not to extend the same. Instead, the Company has decided
to consolidate and grow its operations at its principal location of 135 Wood
Street, West Haven, CT.
The
company is currently engaged in a national search for an R&D as well as
manufacturing facility. The manufacturing portion of the facility will
eventually have to be certified by the FDA in order for the Company to produce
experimental materials that can be sent to outside scientists for
pharmaco-kinetic, pharmaco-dynamic and toxicology studies. These three sets of
studies must be completed prior to the Company filing an IND with the FDA to
begin the human safety and efficacy trials (Phase I and Phase
II).
ITEM 3:
Legal Proceedings.
There are
no other legal proceedings against the Company to the best of the Company’s
knowledge as of the date hereof and to the Company’s knowledge, no action, suit
or proceeding has been threatened against the Company
ITEM 4:
Submission of Matters to Vote of Security Holders.
None
PART
II
ITEM 5:
Market For Registrant's Common Equity
Related Shareholder Matters and Issuer Purchases of Equity
Securities
Market
for Common Equity and Related Stockholder Matters
The
Company’s Common Stock was initially traded on the Pink Sheets under the symbol
NNVC. From June 29, 2007 the Company’s Common Stock has been quoted on the Over
The Counter Bulletin Board. The table below sets forth the high and low prices
for the Company’s Common Stock for the quarters included within 2007, 2008, and
2009. Quotations reflect inter-dealer prices, without retail mark-up, mark-down
commission, and may not represent actual transactions. Since the Company's
common stock trades sporadically, there is not an established active public
market for its common stock. No assurance can be given that an active market
will exist for the Company's common stock and the Company does not expect to
declare dividends in the foreseeable future since the Company intends to utilize
its earnings, if any, to finance its future growth, including possible
acquisitions.
CHANGE
SCHEDULE
Quarter
ended
|
|
Low
price
|
|
|
High
price
|
|
June
30, 2009
|
|
$ |
0.54 |
|
|
$ |
0.58 |
|
March
31, 2009
|
|
$ |
0.65 |
|
|
$ |
0.71 |
|
December
31,2008
|
|
$ |
0.70 |
|
|
$ |
0.81 |
|
September
30, 2008
|
|
$ |
0.80 |
|
|
$ |
0.85 |
|
June
30, 2008
|
|
$ |
1.30 |
|
|
$ |
1.49 |
|
March
31, 2008
|
|
$ |
0.50 |
|
|
$ |
0.54 |
|
December
31, 2007
|
|
$ |
0.36 |
|
|
$ |
0.42 |
|
September
30, 2007
|
|
$ |
0.65 |
|
|
$ |
0.74 |
|
June
30, 2007
|
|
$ |
0.80 |
|
|
$ |
0.99 |
|
March
31, 2007
|
|
$ |
1.10 |
|
|
$ |
1.79 |
|
December
31, 2006
|
|
$ |
0.60 |
|
|
$ |
1.22 |
|
September
30, 2006
|
|
$ |
0.99 |
|
|
$ |
1.68 |
|
(1)
Effective date of reverse merger, June 1, 2005
Number of
Shareholders.
As of June 30, 2009, a total of 125,299,457 of the Company’s common stock
(shares) are outstanding and held by approximately 210 shareholders of record.
Of this amount, 44,781,880 shares are unrestricted. Approximately 28,356,759
shares are restricted securities held by non-affiliates, and the remaining
52,160,000 shares are restricted securities held by affiliates. These shares may
only be sold in accordance with Rule 144. As of June 30, 2009, there were
7,428,150 warrants and 1,875,000 stock options to purchase the
Company’s Common Stock outstanding.
Dividends.
The
Company has not paid any cash dividends since its inception. The Company
currently intends to retain any earnings for use in its business, and therefore
does not anticipate paying dividends in the foreseeable future.
LONG-TERM
INCENTIVE PLANS AWARDS IN LAST FISCAL YEAR
None
Recent
sales of Unregistered Securities.
During
the fiscal years ended June 30, 2009 and 2008, the Company issued the following
securities exempt from the registration requirements of the Securities Act
pursuant to Section 4(2) of the Securities Act. No underwriting or other
compensation was paid in connection with these transactions:
In August
2007, the Scientific Advisory Board (SAB) was granted warrants to purchase
40,000 shares of common stock at $.80 per share. These warrants, if not
exercised will expire in August 2011 The fair value of these warrants, by using
the Black-Scholes option pricing model, were valued at $14,800 and was recorded
as consulting expense.
On
September 21, 2007, the Company entered into a Subscription Agreement with DKR
Saturn Event Driven Holding Fund Ltd. (the "Investor") pursuant to which the
Company agreed to sell 1,500,000 shares (the "Shares") of its common stock, par
value $0.001 per share (the "Common Stock") and warrants (the "Warrants") to
purchase 450,000 shares of Common Stock (the "Warrant Shares") at an exercise
price of $1.00 per share for a purchase price of
$750,000. The Warrants may be exercised at any time and
expire in three years. In connection with the sale, the Company
entered into a Registration Rights Agreement with the Investor pursuant to which
the Company agreed to file a registration statement (the “Registration
Statement”) with the Securities and Exchange Commission ("SEC") on or before
December 20, 2007 covering the resale of the Shares, the Warrant Shares, and all
shares of Common Stock issuable upon any stock split, dividend or other
distribution, recapitalization or similar event involving the Common
Stock. On January 3, 2008 the Company filed a Form SB-2 with the
Securities and Exchange Commission. This filing became effective as of April 11,
2008.
In
September, 2007, the Company had received fully paid subscriptions in the
aggregate amount of $1,625,000 through the offering of shares of the Company’s
Common Stock (the “Offering”). The subscriptions are for shares of common stock
at a purchase price of $.50 per share and warrants to purchase 0.30 shares of
common stock at an exercise price of $1.00 per share; which warrants may be
exercised at any time and expire in three years. In accordance with the
Offering, on October 16, 2007, the Company sold 3,250,000 shares of common stock
and warrants to purchase 975,000 shares of common stock at an exercise price of
$1.00 per share. The warrants may be exercised at any time and expire in three
years.
In
October, 2007, the Company had received fully paid subscriptions in the
aggregate amount of $125,000 through the offering of shares of the Company’s
Common Stock (the “Offering”). The subscriptions are for shares of common stock
at a purchase price of $.50 per share and warrants to purchase 0.30 shares of
common stock at an exercise price of $1.00 per share; which warrants may be
exercised at any time and expire in three years. In accordance with the
Offering, on October 16, 2007, the Company sold 250,000 shares of common stock
and warrants to purchase 75,000 shares of common stock at an exercise price of
$1.00 per share. The warrants may be exercised at any time and expire in three
years.
In
September 2007, the Company's Board of Directors authorized the issuance of
13,899 shares of its common stock with a restrictive legend to Dr. Randall
Barton for scientific consulting. Based upon the fair market value of the common
stock on the commitment date, the Company recorded a consulting expense of
$8,400.
In
September 2007, the Company's Board of Directors authorized the issuance of
11,345 shares of its common stock with a restrictive legend to Harry Schochat,
Esq. for legal consulting. Based upon the fair market value of the common stock
on the commitment date, the Company recorded a consulting expense of
$15,000.
In
November 2007, the Scientific Advisory Board (SAB) was granted warrants to
purchase 40,000 shares of common stock common stock at $.54 per
share. These warrants, if not exercised will expire in November
2011 The fair value of these warrants, by using the Black-Scholes
option pricing model, were valued at $7,200, and was recorded as consulting
expense.
In
December 2007, the Company's Board of Directors authorized the issuance of
25,820 shares of its common stock with a restrictive legend to Dr. Randall
Barton for scientific consulting. Based upon the fair market value of the common
stock on the commitment date, the Company recorded a consulting expense of
$11,900.
In
December 2007, the Company's Board of Directors authorized the issuance of
31,332 shares of its common stock with a restrictive legend to Mr. Harry
Schochat, Esq. for legal consulting. Based upon the fair market value of the
common stock on the commitment date, the Company recorded a consulting expense
of $15,000
In
February 2008, the Scientific Advisory Board (SAB) was granted warrants to
purchase 50,000 shares of common stock at $.53 per share. These warrants, if not
exercised will expire in February 2012.The fair value of these warrants were
valued at $8,500 was recorded as consulting expense.
In March
2008 the Company's Board of Directors authorized the issuance of 18,530 shares
of its common stock with a restrictive legend to Dr. Randall Barton for
scientific consulting. Based upon the fair market value of the common stock on
the commitment date, the Company recorded a consulting expense of
$8,400.
In March
2008, the Company's Board of Directors authorized the issuance of 33,089 shares
of its common stock with a restrictive legend to Mr. Harry Schochat, Esq. for
legal consulting. Based upon the fair market value of the common stock on the
commitment date, the Company recorded a consulting expense of
$15,000.
In March
2008 the Company's Board of Directors authorized the issuance of 9,927 shares of
its common stock with a restrictive legend to Udayan Gupta for consulting
services. Based upon the fair market value of the common stock on the commitment
date, the Company recorded a consulting expense of $4,500.
In April
2008 the Company's Board of Directors authorized the issuance of 27,750 shares
of its common stock with a restrictive legend to Friedland Investment Events,
LLC for consulting. Based upon the fair market value of the common stock on the
commitment date, the Company recorded a consulting expense of
$10,823
In May
2008, the Scientific Advisory Board (SAB) was granted warrants to purchase
50,000 shares of common stock at $1.48 per share. These warrants, if not
exercised will expire in May 2012.The fair value of these warrants in the amount
of $32,253 was recorded as consulting expense.
In June
2008 the Company's Board of Directors authorized the issuance of 8,983 shares of
its common stock with a restrictive legend to Dr. Randall Barton for scientific
consulting. Based upon the fair market value of the common stock on the
commitment date, the Company recorded a consulting expense of
$8,400.
In June
2008, the Company's Board of Directors authorized the issuance of 16,046 shares
of its common stock with a restrictive legend to Mr. Harry Schochat, Esq. for
legal consulting. Based upon the fair market value of the common stock on the
commitment date, the Company recorded a consulting expense of
$15,000.
In June
2008 the Company's Board of Directors authorized the issuance of 4,812 shares of
its common stock with a restrictive legend to Udayan Gupta for consulting
services. Based upon the fair market value of the common stock on the commitment
date, the Company recorded a consulting expense of $4,500.
In August
2008, the Scientific Advisory Board (SAB) was granted warrants to purchase
50,000 shares of common stock at $1.56 per share. These warrants, if not
exercised, will expire in August 2012. The fair value of these warrants in the
amount of $47,500 was recorded as consulting expense.
On August
22, 2008, the Company consummated subscriptions with certain investors whereby
the Company sold 3,286,000 shares (the “Shares”) of its common stock, par value
$0.001 per share (the “Common Stock”) and (“Warrants”) to purchase 1,643,000
shares of Common Stock at an exercise price of $2.00 per share for an
aggregate purchase price of $3,286,000. The 3,286,000 share private placement of
stock included 150,000 shares of Common Stock and 75,000 warrants subscribed in
consideration of $150,000 of scientific testing and other laboratory work
performed for the Company. The Warrants may be exercised at any time
and expire on September 17, 2011. The Company allocated a relative
fair value of $827,485 to these warrants, by using the Black-Scholes option
pricing model.
Also on
August 22, 2008, the Company consummated subscriptions with certain of its
Warrant holders whereby the Company offered all the holders of its $2.50
Warrants the option of exercising the Warrants at $1.00 per share of Common
Stock, of which warrants to purchase 50,000 shares of Common Stock for an
aggregate price of $50,000 were exercised. Concurrently, the Company consummated
subscriptions with certain other of its Warrant holders whereby the Company
offered all the holders of its $1.00 Warrants the option of exercising the
Warrants at $0.75 per share of Common Stock, of which warrants to purchase
75,000 shares of Common Stock for an aggregate price of $56,250 were
exercised.
In
November, 2008, the Scientific Advisory Board (SAB) was granted warrants to
purchase 50,000 shares of common stock at $0.70 per share. These warrants, if
not exercised, will expire in November 2012. The fair value of these warrants in
the amount of $30,500 was recorded as consulting expense.
In
February 2009, the Company's Board of Directors authorized the issuance of
50,000 shares of its common stock with a restrictive legend to a Scientific
Advisory Board Member advising the Company for consulting services. Based upon
the fair market value of the common stock on the commitment date, the Company
recorded a consulting expense of $34,950.
In
February, 2009, the Scientific Advisory Board (SAB) was granted warrants to
purchase 50,000 shares of common stock at $0.89 per share. These warrants, if
not exercised, will expire in February 2013. The fair value of these warrants in
the amount of $29,000 was recorded as consulting expense.
In April,
2009 the Company’s Board of Directors authorized the issuance of 172,500 shares
of its common stock with a restrictive legend, in payment of a current account
payable for laboratory equipment in the amount of
$137,500.
In May,
2009, the Scientific Advisory Board (SAB) was granted warrants to purchase
50,000 shares of common stock at $0.78 per share. These warrants, if not
exercised, will expire in May, 2013. The fair value of these warrants in the
amount of $30,600 was recorded as consulting expense.
For the
year ended June 30, 2009, the Company's Board of Directors authorized the
issuance of 244,530 shares of its common stock with a restrictive legend, for
services. The Company recorded an expense of $176,599.
In June 2009, 805,250 warrants were converted into common
stock in a Warrant Conversion Offering, resulting in the issuance of 2,050,700
common shares. The Company received $1,025,350 upon this conversion. All holders
of the Company’s warrants were provided an option to exercise their warrants
during the period ending June 30, 2009 at a price of $0.50 and to receive an
additional Warrant convertible into one (1) restricted share of the Company’s $
..001 par common stock . The Warrants may be exercised at any time
and expire on August 17, 2012. The Company allocated a relative fair value of
$471,661 to these warrants, by using the Black-Scholes option pricing
model.
In June 2009, the Registrant accepted subscriptions from its warrantholders
for an aggregate of $1,025,350 for 2,050,700 shares of common stock and warrants
to purchase 2,050,700 shares of common stock. In a separate offering
which also closed on July 7, 2009, the Registrant accepted subscriptions of
$75,000 for 150,000 shares of common stock and warrants to purchase an
additional 75,000 shares. The warrants in these offerings are
exercisable at the price of $1.00 per
share of common stock and expire in 3 years.
All of
the securities set forth above were issued by the Company pursuant to Section
4(2) of the Securities Act of 1933, as amended, or the provisions of Rule 504 of
Regulation D promulgated under the Securities Act. All such shares issued
contained a restrictive legend and the holders confirmed that they were
acquiring the shares for investment and without intent to distribute the shares.
All of the purchasers were friends or business associates of the Company’s
management and all were experienced in making speculative investments,
understood the risks associated with investments, and could afford a loss of the
entire investment. The Company has never utilized an underwriter for an offering
of its securities. Some of the investors were introduced to the Company by
certain Agents that we call Finders. The Company had individual agreements with
the Finders regarding fees payable to them. Fees paid to these agents
were $-0- and $29,400 in the years ended June 30, 2009 and June 30, 2008
respectively.
ITEM 6:
SELECTED FINANCIAL DATA
Not
applicable.
ITEM 7:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The
following discussion should be read in conjunction with the information
contained in the consolidated financial statements of the Company and the notes
thereto appearing elsewhere herein and in conjunction with the Management's
Discussion and Analysis of Financial Condition and Results of Operations set
forth in (1) the Company's Annual Report on Form 10-K for the year ended June
30, 2009. Readers should carefully review the risk factors disclosed in this
Form 10-K and other documents filed by the Company with the SEC.
As used
in this report, the terms "Company", "we", "our", "us" and "NNVC" refer to
Nanoviricides, Inc., a Nevada corporation.
PRELIMINARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
Annual Report contains forward-looking statements within the meaning of the
federal securities laws. These include statements about our expectations,
beliefs, intentions or strategies for the future, which we indicate by words or
phrases such as "anticipate," "expect," "intend," "plan," "will," "we believe,"
"NNVC believes," "management believes" and similar language. The forward-looking
statements are based on the current expectations of NNVC and are subject to
certain risks, uncertainties and assumptions, including those set forth in the
discussion under "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in this report. Actual results may differ materially
from results anticipated in these forward-looking statements. We base the
forward-looking statements on information currently available to us, and we
assume no obligation to update them.
Investors
are also advised to refer to the information in our previous filings with the
Securities and Exchange Commission (SEC), especially on Forms 10-K,10-Q and 8-K,
in which we discuss in more detail various important factors that could cause
actual results to differ from expected or historic results. It is not possible
to foresee or identify all such factors. As such, investors should not consider
any list of such factors to be an exhaustive statement of all risks and
uncertainties or potentially inaccurate assumptions.
Management’s
Plan of Operation
The
Company’s drug development business model was formed in May 2005 with a license
to the patents and intellectual property held by TheraCour Pharma, Inc., that
enabled creation of drugs engineered specifically to combat viral diseases in
humans. This exclusive license from TheraCour Pharma serves as a foundation for
our intellectual property. The Company was granted a worldwide exclusive
perpetual license to this technology for several drugs with specific targeting
mechanisms in perpetuity for the treatment of the following human viral
diseases: Human Immunodeficiency Virus (HIV/AIDS), Hepatitis B Virus (HBV),
Hepatitis C Virus (HCV), Rabies, Herpes Simplex Virus (HSV), Influenza and Asian
Bird Flu Virus. Additionally, TheraCour has permitted the Company to use its
nanomaterials to develop a treatment against Dengue Fever viruses, Ebola/Marburg
viruses, and viruses causing certain eye diseases. The Company anticipates
negotiating with TheraCour an amendment to the Licensing Agreement to include
those of these additional viruses that the Company determines it wants to follow
for further development. We are seeking to add to our existing portfolio of
products through our internal discovery pre-clinical development programs and
through an in-licensing strategy.
The
Company intends to perform the regulatory filings and own all the regulatory
licenses for the drugs it is currently developing. The Company will develop
these drugs in part via subcontracts to TheraCour Pharma, Inc., the exclusive
source for these nanomaterials. The Company may manufacture these drugs itself,
or under subcontract arrangements with external manufacturers that carry the
appropriate regulatory licenses and have appropriate capabilities. The Company
intends to distribute these drugs via subcontracts with distributor companies or
in partnership arrangements. The Company plans to market these drugs either on
its own or in conjunction with marketing partners. The Company also plans to
actively pursue co-development, as well as other licensing agreements with other
Pharmaceutical companies. Such agreements may entail up-front payments,
milestone payments, royalties, and/or cost sharing, profit sharing and many
other instruments that may bring early revenues to the Company. Such licensing
and/or co-development agreements may shape the manufacturing and development
options that the company may pursue. The Company has received significant
interest from certain major Pharmaceutical companies for potential licensing or
co-development of some of our drug candidates. However, none of these
distributor or co-development agreements is in place at the current
time.
To date,
we have engaged in organizational activities; developing and sourcing compounds
and preparing nano-materials; and experimentation involving preclinical studies
using cell cultures and animals. We have generated funding through the issuances
of debt and private placement of common stock (see Item 5 Recent Sales of
Unregistered Securities). The Company does not currently have any long term
debt. We have not generated any revenues and we do not expect to generate
revenues in the near future. We may not be successful in developing our drugs
and start selling our products when planned, or we may not become profitable in
the future. We have incurred net losses in each fiscal period since inception of
our operations.
Collaborative
Agreements and Contracts
On
December 23, 2005, the Company signed a Memorandum of Understanding (MOU) with
the National Institute of Hygiene and Epidemiology in Hanoi (NIHE), a unit of
the Vietnamese Government’s Ministry of Health. This Memorandum of Understanding
calls for cooperation in the development and testing of certain nanoviricides.
The parties agreed that NanoViricides will retain all intellectual property
rights with respect to any resulting product and that the initial target would
be the development of drugs against H5N1 (avian influenza). NIHE thereafter
requested that we develop a drug for rabies, a request to which we agreed. The
initial phase of this agreement called first for laboratory testing, followed by
animal testing of several drug candidates developed by the Company. Preliminary
laboratory testing of FluCide™-I, AviFluCide-I™ and AviFluCide-HP™ were
successfully performed at the laboratories of the National Institute of Hygiene
and Epidemiology in Hanoi (NIHE), against both clade 1 and clade 2 of H5N1 virus
isolated in Vietnam. Successful animal testing
of RabiCide-I™, the company’s rabies drug, was performed
in Vietnam during the first half of 2007, and reproducibly repeated in 2008.
Rabies testing can safely be done at their BSL2 facility. The H5N1 animal
testing requires a BSL3 (biological safety laboratory level 3) laboratory. NIHE
has acquired a BSL3 animal testing capacity during 2008. The work
with NIHE will likely continue through calendar year 2010. While the MOU
provides for a final agreement between the Company and NIHE, we have not yet
discussed a “final agreement” with NIHE and continue to work under the existing
MOU. There are no financial obligations or responsibilities for either the
Company or NIHE pursuant to the provisions of the MOU.
We have
finalized execution of a Materials Cooperative Research and Development
Agreement (M-CRADA) with the Centers for Disease Control and Prevention (CDC),
Atlanta, GA in July, 2008. This agreement was initiated based on our success
against Rabies in the animal studies conducted at NIHE Vietnam. Preliminary
animal studies against Rabies were expected to start in the last quarter of
calendar year 2009 or first quarter of calendar year 2010. The Company has
lowered the priority of this program during the recent economic crisis in order
to use our resources most effectively. Subsequent to the agreement execution,
the Company has supplied certain materials to CDC for testing. This testing, if
successful, is expected to expand to involve potential use of nanoviricides as
(1) a post-infection
therapeutic drug against rabies, possibly in conjunction with a rabies
vaccine, and (2) a post-exposure prophylactic
drug against rabies, to replace costly human or monoclonal antibodies, possibly
in conjunction with a rabies vaccine. To date, there is no effective
post-infection therapeutic against rabies. Post-exposure prophylaxis market has
been estimated to be as much $300M to $500M worldwide.
We have
finalized a CRADA with Walter Reed Army Institutes of Research (WRAIR) to
develop collaboratively antiviral agents against all four types of dengue
viruses in April, 2007. Preliminary work has commenced under this
CRADA. This CRADA is expected to be renegotiated due to changes in funding
requirements at WRAIR.
We have
finalized a Materials Transfer Agreement (MTA) with the United States Army
Institute of Infectious Diseases (USAMRIID) to develop antiviral agents against
Ebola, Marburg and other hemorrhagic viruses in October 2007. Preliminary
studies began in February, 2008. Certain nanoviricides candidates were found to
be highly successful against Ebola virus in pre-clinical cell culture studies.
Ebola virus is known to produce, in vivo, a soluble decoy protein that is a
portion of its surface glycoprotein. If the nanoviricides that were successful
in the in vitro studies bind to the decoy protein portion of the Ebola virus
envelope, then we would expect that the nanoviricides would be neutralized in
vivo by the decoy protein. We are therefore developing novel ligands that would
potentially bind to the Ebola virus glycoprotein portion that is known to be not
a part of the decoy protein. The MTA was extended for another year in October,
2009 to continue these studies. The Company has lowered the priority of this
program during the recent economic crisis in order to use our resources most
effectively.
We have
finalized a CRADA with Armed Forces Institute of Pathology (AFIP) to perform
animal studies against H5N1 and HIV in March, 2008. The animal protocols are in
review for final approval by their animal care
committee. Subsequently AFIP has informed us that they will not be
able to conduct H5N1 studies due to policy limitations.
We have
finalized an agreement with a major Medical Institute to perform animal studies
of our eye drop formulation of nanoviricides against viral EKC (viral Epidemic
Kerato-conjunctivitis) in March, 2008. The first EKC-Cide™-I animal study was
completed in June, 2008. Biochemical testing of the samples is continuing. The
study indicated that the best nanoviricide drug candidate showed excellent
clearance of clinical signs of the disease, viz. redness of the eye as well as
sticky exudates, in a short time after treatment. We have received significant
interest from certain Pharmaceutical companies in this drug
candidate.
We have
signed a Material Transfer Agreement (MTA) for our broad-spectrum nanoviricide
against viral infections of the external eye with a major pharmaceutical company
in February, 2009. This agreement calls for testing of nanoviricide drug
candidates by the pharmaceutical company (“Party”). The terms of the Agreement
do not allow the disclosure of the identity of the Party or the exact terms of
the Agreement. The proposed testing is currently in progress. There is no
guarantee that a licensing or co -development agreement will occur in
the future or that it will occur at all.
On May 6,
2009, the Company entered into a Clinical Study Agreement with THEVAC, LLC, a
company affiliated with the Emerging Technology Center of the Louisiana State
University. At present, TheVac is performing biological testing of anti-herpes
nanoviricides. TheVac is conducting studies on the effect of anti-herpes
nanoviricide drug candidates against herpes cold sores and genital herpes in
cell culture models. In addition, TheVac is also conducting studies on the
effect of anti-herpes nanoviricides drug candidates in a mouse model of herpes
keratitis. Professor Gus Kousoulas and his team at Louisiana State University
have validated and published on this animal model extensively in peer-reviewed
scientific journals.
Subsequent Event. In
September, 2009, the Company has signed a Master Service Agreement (MSA) with
the Southern Research Institute, Infectious Diseases Division, Frederick, MD
(SRI-F). The Company plans to conduct anti-influenza drug cell culture testing
at SRI-F. The Company also plans to conduct anti-HIV nanoviricide drug candidate
testing in cell culture at SRI-F. SRI-F is a well established Contract Research
Organization (CRO) that has developed, conducted, and published in scientific
journals on standardized study protocols for various mechanisms of anti-HIV
action, including microbicides, antibodies, and small chemical therapeutics. We
are also planning additional animal studies of these drug
candidates.
The
Company’s Drug Pipeline
Management
believes that it has achieved significant milestones in the development of a
number of antiviral nanoviricide drug candidates. We now have high efficacy lead
drug candidates against four commercially important diseases, namely, (1) All
Influenza viruses (FluCide-I), (2) HIV (HIVCide-I), (3) Nanoviricide Eye Drops
for Viral Infections of the External Eye, and (4) a nanoviricide against Herpes
“Cold Sores” and genital herpes. Further, the Company has identified highly
active nanoviricide drug candidates against Ebola/Marburg, against Rabies, and
against Dengue viruses. In addition, the Company has also established the
technology feasibility for (a) broad-spectrum nanoviricides, and (b)
Just-in-Time ADIF technology; both of which are well suited for stockpiling to
defend against known as well as novel infectious diseases.
The
Company has not yet performed detailed safety profile studies to be included in
a “Tox Package” for submission to the FDA for any of our drug candidates. Our
studies regarding safety of the various nanoviricide drug candidates to date
have been preliminary and of a limited nature.
Management’s
beliefs are based on results of pre-clinical cell culture studies and in vivo
animal studies using mice.
The
Company thus has a strong and growing drug pipeline to take us several years
into the future. The Company already has technologies in development that
promise to yield even better drugs against various diseases as the drugs we are
developing now approach their product end of lifecycle.
It should
be noted that all of our studies to date were preliminary. Thus, the evidence we
have developed is indicative, but not considered confirmative, of the
capabilities of the nanoviricides technology's potential. With the success of
these preliminary studies, the Company has decided to perform further
pre-clinical studies that validate safety and efficacy of its materials and its
various anti-viral drugs. Management intends to use capital and debt
financing to enable the completion of these goals.
In the
last year’s deep recession economic climate, the Company took several steps to
conserve capital. These included (1) changing our public auditor, (2)
eliminating our consulting agreement with the Gencarelli group, (3) reducing
payroll, (4) minimizing our laboratory leasing expenditures, and (5) adjusting
our drug development work schedules, project priorities, and project timelines,
effectively slowing down our business plan The Company has always been very
thrifty and has maintained the policy of keeping its use of cash as small as
feasible. Thus the steps taken to reduce expenditures did require adjustment of
our priorities and slowing down of our business plan. In particular, the work on
NTD’s and Biodefense/Biosecurity objectives was significantly slowed down. In
addition, the Company delayed further testing and development of its anti-HIV
drug candidates.
The
Company, nevertheless, continued its organizational efforts robustly and has
signed or is in the process of obtaining several new agreements and contracts
that are expected to have a significant positive impact for us in the near
future. In addition, the Company improved its anti-influenza drug candidates
further. This has led to the development of a single, pan-influenza drug
candidate in the FluCide program that is highly effective against H1N1
influenza, as well as H5N1 Clade 1 and H5N1 Clade 2, distinctly different bird
flu viruses feared to be capable of causing a pandemic. This drug candidate is
expected to be highly effective against the current pandemic novel Influenza
A/H1N1/2009 “swine flu” virus as well. We plan on conducting testing of this
nanoviricide against a number of different influenza virus strains in the very
near future. Consolidation of the three different programs, viz FluCide,
FluCide-HP and AviFluCide into one without compromising effectiveness
or safety, is expected to yield significant benefits in that the drug
development complexities may be expected to be reduced and drug development
costs may be expected to be reduced substantially. In addition, the Company
added two new commercially important drugs to its pipeline of drug candidates
this year. Thus, despite the re-prioritization due to financial constraints and
worldwide economic conditions, the Company has made a significant level of
progress and has achieved significant accomplishments this
year.
Requirement
for Additional Capital
We
currently have sufficient cash reserves to achieve all of our budgeted plans for
the next twelve months. We will need to raise substantial additional capital in
the future to fund our operations and we may be unable to raise such funds when
needed and on acceptable terms.
The
Company has taken several steps to reduce its operating expenses. We
have not renewed certain consulting contracts, which are expected to result in
annual savings of $150,000 to $300,000. We have not renewed our lease
for laboratory facilities at 4 Research Drive and have constructed and
consolidated our laboratory facilities at 135 Wood Street, West Haven,
Connecticut, for an anticipated annual savings of approximately
$50,000. We have also made several changes which should result in a
reduction in our professional fees of approximately $100,000
annually.
2009
Subsequent
Events:
In
September, 2009, the Company has signed a Master Service Agreement (MSA) with
the Southern Research Institute, Infectious Diseases Division, Frederick, MD
(SRI-F). The Company plans to conduct anti-influenza drug cell culture testing
at SRI-F. The Company also plans to conduct anti-HIV nanoviricide drug candidate
testing in cell culture at SRI-F. SRI-F is a well established Contract Research
Organization (CRO) that has developed, conducted, and published in scientific
journals on standardized study protocols for various mechanisms of anti-HIV
action, including microbicides, antibodies, and small chemical therapeutics. We
are also planning additional animal studies of these drug
candidates.
On September 30, 2009, the Company consummated subscriptions with
certain investors in the aggregate amount of $3,217,400 from the offerings of
shares of the Registrant’s common stock and warrants to purchase common stock
and the exercise by the Registrant’s warrant holders of their outstanding
warrants. The offerings were commenced in June, 2009, at the
Registrant’s then, current stock price levels of approximately
$0.50. The offerings were closed to investors on August 30, 2009,
after an extension by the Registrant’s Board of Directors from the original
termination date of August 14, 2009. In the Registrant’s offering of
Units comprised of shares of common stock and warrants to purchase common stock,
the Registrant accepted subscriptions for $1,337,500 for Units consisting of
2,675,000 shares and Warrants to purchase an additional 1,337,500
shares. In the offering to its warrant holders, the Registrant raised
an aggregate of $1,879,900 for 3,759,800 shares and warrants to purchase
3,759,800 shares. All of the warrants sold in the offerings are
exercisable at the price of $1.00 per share and expire in three years.
As of
June 30, 2009 we have a cash and cash equivalent balance of $1,689,422. On
September 21, 2009, the Company had received and accepted subscriptions in the
aggregate amount of $1,337,500 through the offering of shares of the Company's
common stock and an additional $1,879,900 through the exercise of existing
warrants to purchase stock. The Company estimates that it can support
current operations through the next six quarters, i.e. through December 31,
2010.
We
estimate that we will need approximately an additional $10M to $15M over the
next 18 months for further development of our pipeline. These additional funds
will enable us to perform Tox Package Studies and additional efficacy studies
necessary to prepare the full dataset required for filing our first IND to the
US FDA on one of our drug candidates. The additional funds will also be needed
to hire additional personnel, increased subcontract costs relative to the
expansion and further development of our drug pipeline, and for additional
capital and operational expenditures to be incurred infilling our
first IND.
We are
currently evaluating several vehicles for raising these additional
funds.
Assuming
that we are successful in raising this additional financing, we anticipate that
we will incur the following expenses additional expenses over the next 18
months.
1 Research
and Development of $5,000,000: Planned costs for in-vivo and in-vitro studies
for pan-influenza FluCide,, Eye nanoviricide, HIVCide, HerpeCide, and Rabies,
Dengue and Ebola/Marburg programs, planned for the next twelve months ending
June 30, 2010.
2 Corporate
overhead of $1,250,000: This amount includes budgeted office salaries, legal,
accounting, investor relations, public relations, and other costs expected to be
incurred by being a public reporting company.
3 Capital
costs of $3,000,000: This is the estimated cost for equipment and laboratory
improvements expected during the next twelve months ending June 30,
2010.
4 Staffing
costs of $3,750,000: This is the estimated cost of hiring additional scientific
staff and consulting firms to assist with FDA compliance, material
characterization, pharmaco-kinetic, pharmaco-dynamic and toxicology studies, and
other items related to FDA compliance, as required for development of necessary
data for filing an Investigational New Drug Application (IND) with the United
States Food and Drug Administration.
5. Capital
costs of $2,000,000: This is the estimated cost of infrastructure and laboratory
facilities for a scaled up research pilot production facility.
Not
withstanding these additional outlays for progressing towards an FDA
application, the Company will be unable to proceed with its planned drug
development progress, meet its administrative expense requirements, capital
costs, and staffing costs after about December 31, 2010 without obtaining
additional financing of approximately $3,000,000 to $5,000,000 for minimum
annual expenses. If we are unable to obtain additional financing, our
business plan will be significantly delayed or curtailed. The Company
continues to re-prioritize its objectives and delay certain drug development
programs until we can raise sufficient funding that enables further development
of the drugs with the goal of filing an Investigational New Drug application
(IND) to the FDA.
The
Company does not have any arrangements, at this time, for equity or other
financing for these further needs of $10~15 million beyond minimum
operations. If we are unable to obtain additional financing, our
business plan will be significantly delayed.
The
Company has limited experience with pharmaceutical drug development. Thus, our
budget estimates are not based on experience, but rather based on advice given
by our associates and consultants. As such these budget estimates may not be
accurate. In addition, the actual work to be performed is not known at this
time, other than a broad outline, as is normal with any scientific work. As
further work is performed, additional work may become necessary or change in
plans or workload may occur. Such changes may have an adverse impact on our
estimated budget. Such changes may also have an adverse impact on our projected
timeline of drug development.
We
believe that this coming year's work-plan will lead us to obtain certain
information about the safety and efficacy of some of the drugs under development
in animal models. If our studies are not successful, we will have to
develop additional drug candidates and perform further studies. If
our studies are successful, then we expect to be able to undertake further
studies in animal models to obtain necessary data regarding the pharmaco-kinetic
and pharmaco-dynamic profiles of our drug candidates. We believe these data will
then enable us to file an Investigational New Drug (IND) application, towards
the goal of obtaining FDA approval for testing the drugs in human
patients.
Most
pharmaceutical companies expect 4 to 10 years of study to be required before a
drug candidate reaches the IND stage. We believe that because we are working in
the infectious agents area, our studies will have objective response end points,
and most of our studies will be of relatively short durations. Our
business plan is based on these assumptions. If we find that we have
underestimated the time duration of our studies, or we have to undertake
additional studies, due to various reasons within or outside of our control,
this will grossly and adversely impact both our timelines and our financing
requirements.
Management
intends to use capital and debt financing, as required, to fund the Company’s
operations. There can be no assurance that the Company will be able to obtain
the additional capital resources necessary to fund its anticipated obligations
for the next twelve months.
The
Company is considered to be a development stage company and will continue in the
development stage until it generates revenues from the sales of its products or
services.
Research
and Development Costs
The
Company does not maintain separate accounting line items for each project in
development. The Company maintains aggregate expense records for all research
and development conducted. Because at this time all of the Company’s projects
share a common core material, the Company allocates expenses across all projects
at each period-end for purposes of providing accounting basis for each project.
Project costs are allocated based upon labor hours performed for each
project.
The
Company has signed several cooperative research and development agreements with
different agencies and institutions.
The
Company expects to enter into additional cooperative agreements with other
governmental and non-governmental, academic, or commercial, agencies,
institutions, and companies. There can be no assurance that a final agreement
may be achieved and that the Company will execute any of these agreements.
However, should any of these agreements materialize, the Company will implement
a system to track these costs by project and account for these projects as
customer-sponsored activities and show these project costs
separately.
The
following table summarizes the primary components of our research and
development expenses as allocated, during the periods presented in this Form
10K.
Table
3: R&D Cost Allocations
|
|
|
|
Year
Ended June 30, 2009
|
|
|
Year
Ended June 30, 2008
|
|
|
For
the CumulativePeriod From May 12, 2005 (Inception) through
June 30, 2009
|
|
All
Influenzas: FluCide™, (Note: FluCide-HP, and AviFluCide are now
consolidated into a single drug candidate, viz FluCide)
|
|
|
334,733 |
|
|
|
194,127 |
|
|
|
2,862,387 |
|
EKC-Cide™,
other Eye Viral Infections
|
|
|
465,903 |
|
|
|
545,989 |
|
|
|
736,103 |
|
HIV-Cide™
|
|
|
758,705 |
|
|
|
888,936 |
|
|
|
1,198,805 |
|
Other
(includes Dengue, Ebola, and other projects)
|
|
|
232,593 |
|
|
|
135,000 |
|
|
|
1,924,668 |
|
Total
Research and development
|
|
|
1,791,934 |
|
|
|
1,764,052 |
|
|
|
6,721,963 |
|
Time
Schedules, Milestones and Development Costs
In the
event that funding can be achieved, we shall endeavor to achieve completion of
the following events within the next twelve months:
The
status of each of our major research and development projects is as
follows:
Table
4: Drug Development Status
|
Project
|
Drug
Development of FluCide™ for All Influenzas
|
Current
status
|
This
year, we developed new ligands for FluCide using additional rational drug
design and our experience with the old FluCide, FluCide-HP, and
AviFluCide. This development has allowed us to consolidate all three
programs into one. The new FluCide is designed as a highly effective,
pan-Influenza drug. It is expected to be highly effective
against all Influenza A viruses including bird flu H5N1 all
clades, Highly Pathogenic Avian Influenzas of all types, subtypes and
strains, seasonal Influenzas, as well as the novel 2009/H1N1 epidemic
virus. Cell culture testing of this drug candidate is scheduled in CY
2009. Animal studies will follow.
|
Nature,
timing and estimated costs
|
The Company has budgeted approximately $1,500,000 for the material
development, production and testing of this drug. These costs will be paid
from our available cash balances. Should management determine the results
to be satisfactory, we will need to obtain additional financing to perform
material characterization, pharmaco-kinetic, pharmaco-dynamic and
toxicology studies, which we have presently budgeted at
$2,000,000.
|
Anticipated
completion date
|
Preclinical
stage is expected to be completed in 12-18 months, depending upon
financing. An IND could be filed within a few months after the completion
of preclinical stage.
|
Risks
and uncertainties associated with completing development on schedule, and
the consequences to operations, financial position and liquidity if not
completed timely
|
The
Company has not yet raised the financing necessary to complete the
preclinical stage and file an IND with the FDA.
|
Timing
of commencement of expected material net cash inflows |
If
we file an IND in the next 18~24 months , we can expect human clinical
trials to be completed at the earliest by 2013. Revenues are expected to
occur after FDA approval and marketing of the drug. Revenues may occur
earlier if the BARDA authority determines that FluCide should be
stockpiled in the USG CDC stockpile of drugs for defense against pandemic
influenza. If we are successful in partnering the drug with another
pharmaceutical Company, we may see revenues much earlier than FDA
approval. |
Project
|
Drug
Development of AviFluCide™ for Avian Influenza
|
Current
status
|
AviFluCide
is a specific anti-H5N1 anti-influenza nanoviricide. It is based on an
antibody provided to us by the NIHE, Vietnam by which influenza viruses
bind to cells. AviFluCide has been tested in cell cultures and has
demonstrated better results than oseltamivir. Given the high efficacy
demonstrated by FluCide-HP against H5N1, the Company has decided to
abandon the development of the more expensive and troublesome
antibody-based drug, viz. AviFluCide.
|
Nature,
timing and estimated costs
|
This
year, the Company has consolidated the AviFluCide (H5N1-only)
and FluCide-HP drug development programs with the new
pan-Influenza FluCide drug development. The new FluCide is expected to be
highly effective against all High Path Avian Influenzas (HPAI), including
H5N1 (all Clades), as well as all other Influenza A viruses, including the
novel H1N1/2009 “Swine Flu” virus.
|
Anticipated
completion date
|
Project
completed successfully.
|
Risks
and uncertainties associated with completing development on schedule, and
the consequences to operations, financial position and liquidity if not
completed timely
|
The
development was terminated due to the high success of the new FluCide.
This project demonstrated the technical feasibility of our ADIF™
“Accurate-Drug-In-Field” technology which is well suited for tackling
novel and emerging viruses in bio-defense applications.
|
Timing
of commencement of expected material net cash inflows
|
Project
terminated by consolidation into the new FluCide
program.
|
Project
|
Drug
Development of FluCideHP™ for all High Pathogenic Avian
Influenzas
|
Current
status
|
FluCide-HP,
was being developed as a highly effective drug against all highly
pathogenic avian influenzas with pandemic potential, including H5N1, H7N
and H9N. It is a relatively broad-spectrum anti-influenza nanoviricide. It
is based on a well-known ligand mechanism by which influenza viruses
become highly pathogenic to humans. This mechanism involves the
hemagglutinin coat protein region of influenza virus protein called the
polybasic site. FluCide-HP has been tested in cell cultures and in mice
and has demonstrated superior results compared to
oseltamivir.
|
Nature,
timing and estimated costs
|
This
year, the Company has consolidated the AviFluCide (H5N1-only)
and FluCide-HP drug development with the new pan-Influenza
FluCide drug development. The new FluCide is expected to be highly
effective against all High Path Avian Influenzas (HPAI), including H5N1
(all Clades), as well as all other Influenza A viruses, including the
novel H1N1/2009 “Swine Flu” virus.
|
Anticipated
completion date
|
Project
completed successfully.
|
Risks
and uncertainties associated with completing development on schedule, and
the consequences to operations, financial position and liquidity if not
completed timely
|
The
development was terminated due to the high success of the new
FluCide.
|
Timing
of commencement of expected material net cash inflows
|
Project
terminated by consolidation into the new FluCide
program.
|
Project
|
Drug
Development of Nanoviricide Eye Drops for all Viral Infections of the
External Eye
|
Current
status
|
This
year, we developed new, broad-spectrum. ligands tha t should be capable of
enabling nanoviricide binding to herpes simplex viruses, while retaining
the features that were previously successful against adenoviral EKC in
clinical studies. The resulting nanoviricides have been tested against
HSV-1 in cell cultures and a lead drug candidate has been identified. We
are developing nanoviricide eye drop solution that should be capable of
resolving the broad range of viruses that can cause infections of the
external eye resulting in conjunctivitis or keratitis. Majority of these
viruses are adenoviruses or HSV.
|
Nature,
timing and estimated costs
|
The
Company has budgeted approximately $750,000 for the material development,
production and testing of this drug. These costs will be paid from our
available cash balances. Should management determine the results to be
satisfactory, we will need to obtain additional financing to perform
material characterization, pharmaco-kinetic, pharmaco-dynamic and
toxicology studies, which we have presently budgeted at
$1,500,000.
The
Company has entered a Material Testing Agreement (MTA) with a Big Pharma
company for this drug. Should this MTA result in a co-development,
licensing agreement, the Company may be able to accelerate this program.
The Company may be able to receive revenues in the form of milestone
payments. However, the net effect of such an agreement is expected to be a
net cost to our development program. There is no guarantee that such a
licensing agreement may take place.
|
Anticipated
completion date
|
Not
known
|
Risks
and uncertainties associated with completing development on schedule, and
the consequences to operations, financial position and liquidity if not
completed timely
|
The
outcome of clinical testing cannot be known at this time, and this poses
substantial risk and uncertainty as to whether or when if ever, this drug
will become marketable.
|
Timing
of commencement of expected material net cash inflows
|
It
is not known or estimable when net cash inflows from this project will
commence if ever, due to the uncertainties associated with the completion
of the product, regulatory submissions, approvals and market purchases of
this product.
|
Project
|
Drug
Development of EKCCide™ for Viral EKC
|
Current
status
|
The
Company has broadened this project and expanded it to the program of
developing a single broad-spectrum nanoviricide as eye drops that is
effective against substantially all viruses that cause diseases of the
external eye such as conjunctivitis and keratitis. EKC-Cide is currently
in preclinical studies against viral EKC. It is a broad-spectrum
anti-viral nanoviricide eye drops solution. It is based on a well-known
ligand mechanism by which adenoviruses and herpes-viruses bind to cells.
EKC-Cide has been successfully tested in rabbits against adenoviral EKC.
The Company is planning additional in-vivo and in-vitro studies with
EKCCide against adenoviral EKC as well as Herpes viral keratitis at
various institutions and subcontractors during
2009-2010.
|
Nature,
timing and estimated costs
|
This
program is superceded by the Broad-Spectrum Nanoviricide Eye Drops for all
viral diseases of the external eye.
|
Anticipated
completion date
|
Completed
successfully this year.
|
Risks
and uncertainties associated with completing development on schedule, and
the consequences to operations, financial position and liquidity if not
completed timely
|
The
development was consolidated into the broader program for development of a
single nanoviricide against substantially all viral diseases of the
eye.
|
Timing
of commencement of expected material net cash inflows
|
The development was consolidated into the broader program for
development of a single nanoviricide against substantially all viral
diseases of the eye. The Company has entered a Material
Testing Agreement (MTA) with a Major Pharmaceutical company for this
drug. The net effect of such an agreement is expected to be a
net cost to our development program. There is no guarantee that a
licensing agreement will result from this
agreement.
|
Project
|
Drug
Development of HIVCide™
|
Current
status
|
HIV-Cide is currently in
preclinical studies. It is designed to mimic the site at which all HIV
gp120 bind to the CD4 receptor. It is therefore expected to work against
all HIV-1 subtypes and strains. HIV-Cide has been successfully tested in
SCID-huThy/Liv mouse model and was found to have very high efficacy, equal
to that of >25X (2,500%) dosage level of the triple drug HAART
combination therapy. The Company is planning additional in-vivo
and in-vitro studies at various institutions and subcontractors during
2009-2010.
|
Nature,
timing and estimated costs
|
The Company has budgeted approximately $2,000,000 for the material
development, production and testing of this drug. These costs will be paid
from our available cash balances. Should management determine the results
to be satisfactory, we will need to obtain additional financing to perform
material characterization, pharmaco-kinetic, pharmaco-dynamic and
toxicology studies, which we have presently budgeted at
$3,000,000.
|
Anticipated
completion date
|
Not
known
|
Risks
and uncertainties associated with completing development on schedule, and
the consequences to operations, financial position and liquidity if not
completed timely
|
The
outcome of clinical testing cannot be known at this time, and this poses
substantial risk and uncertainty as to whether or when if ever, this drug
will become marketable.
|
Timing
of commencement of expected material net cash inflows
|
It
is not known or estimable when net cash inflows from this project will
commence if ever, due to the uncertainties associated with the completion
of the product, regulatory submissions, approvals and market purchases of
this product.
|
Project
|
Drug
Development of HerpeCide™ for Oral and Genital Herpes ”Cold Sores, “Fever
Blisters” and Herpetic Ulcers
|
Current
status
|
HerpeCide is currently in
preclinical studies against oral and genital herpes virus infections. It
is being developed as a skin cream and gel formulations, which may result
in two separate drugs. The Company is planning additional
in-vivo and in-vitro studies at various institutions and subcontractors
during 2009-2010.
|
Nature,
timing and estimated costs
|
The Company has budgeted approximately $1,000,000 for the material
development, production and testing of this drug. These costs will be paid
from our available cash balances. Should management determine the results
to be satisfactory, we will need to obtain additional financing to perform
material characterization, pharmaco-kinetic, pharmaco-dynamic and
toxicology studies, which we have presently budgeted at
$1,500,000.
|
Anticipated
completion date
|
Not
known
|
Risks
and uncertainties associated with completing development on schedule, and
the consequences to operations, financial position and liquidity if not
completed timely
|
The
outcome of clinical testing cannot be known at this time, and this poses
substantial risk and uncertainty as to whether or when if ever, this drug
will become marketable.
|
Timing
of commencement of expected material net cash inflows
|
It
is not known or estimable when net cash inflows from this project will
commence if ever, due to the uncertainties associated with the completion
of the product, regulatory submissions, approvals and market purchases of
this product.
|
Project
|
Drug
Development of RabiCide™ for Rabies
|
Current
status
|
RabiCide,
is currently in preclinical studies against rabies. It is a broad-spectrum
anti-Rabies nanoviricide. It is based on a well-known ligand mechanism by
which rabies viruses bind to cells. Rabicide has been successfully tested
in mice. The Company is planning additional in-vivo and in-vitro studies
with RabiCide at the Vietnam National Institute of Hygiene and
Epidemiology (NIHE) and at the CDC during 2009-2010.
|
Nature,
timing and estimated costs
|
The Company has budgeted approximately $300,000 for the material
development, production and testing of this drug. These costs will be paid
from our available cash balances. Should management determine the results
to be satisfactory, we will need to obtain additional financing to perform
material characterization, pharmaco-kinetic, pharmaco-dynamic and
toxicology studies which we have presently budgeted at
$500,000.
|
Anticipated
completion date
|
Not
known
|
Risks
and uncertainties associated with completing development on schedule, and
the consequences to operations, financial position and liquidity if not
completed timely
|
The
outcome of clinical testing cannot be known at this time, and this poses
substantial risk and uncertainty as to whether or when if ever, this drug
will become marketable.
|
Timing
of commencement of expected material net cash inflows
|
It
is not known or estimable when net cash inflows from this project will
commence if ever, due to the uncertainties associated with the completion
of the product, regulatory submissions, approvals and market purchases of
this product.
|
Other drug
candidates: Nanoviricides against Ebola/Marburg, Dengue,
Hepatitis C Virus (HCV), and several other viral diseases are at various early
stages of research and development and involve a substantial amount of
uncertainty as to the development of these drug candidates. At this time, very
little resources have been allocated to these drugs. However should the early
studies of any of these drug candidates provide an indication of high efficacy,
the corresponding drug candidate will become a full-fledged drug development
project and the Company will endeavor to seek additional funding for the
necessary drug development work.
The
Company has limited experience with pharmaceutical drug development. Thus, our
budget estimates are not based on experience, but rather based on advice given
by our associates and consultants. As such these budget estimates may not be
accurate. In addition, the actual work to be performed is not known at this
time, other than a broad outline, as is normal with any scientific work. As
further work is performed, additional work may become necessary or change in
plans or workload may occur. Such changes may have an adverse impact on our
estimated budget. Such changes may also have an adverse impact on our projected
timeline of drug development.
The
Company is currently engaged in a national search for a manufacturing facility.
The manufacturing portion of the facility will eventually need to be certified
by the FDA in order for the Company to produce experimental materials that can
be used in human clinical trials. It is preferable to use the same quality of
materials for pharmaco-kinetic, pharmaco-dynamic and toxicology studies. These
three sets of studies must be completed prior to the Company filing an IND with
the FDA to begin the human safety and efficacy trials (Phase I, II and III
).
The
work-plan we have developed for the next twelve months is expected to enable us
to file an investigational new drug application in our 2011-2012 fiscal year,
subject to availability of necessary levels of research and development funds.
This work-plan is expected to reduce certain risks of drug development. We
believe that this coming year's work-plan will lead us to obtain certain
information about the safety and efficacy of some of the drugs under development
in animal models. If our studies are not successful, we will have to develop
additional drug candidates and perform further studies. If our studies are
successful, then we expect to be able to undertake further studies in animal
models to obtain necessary data regarding the pharmaco-kinetic and
pharmaco-dynamic profiles of our drug candidates. We believe these data will
then enable us to file an Investigational New Drug (IND) application, towards
the goal of obtaining FDA approval for testing the drugs in human
patients.
Most
pharmaceutical companies expect 4 to 10 years of study to be needed before a
drug candidate reaches the IND stage. We believe that because we are working in
the infectious agents area, our studies will have objective response end points,
and further, studies on acute viral infectious diseases are expected to be of
relatively short durations. Our business plan is based on these assumptions. If
we find that we have underestimated the time duration of our studies, or we have
to undertake additional studies, due to various reasons within or outside of our
control, this will grossly and adversely impact both our timelines and our
financing needs.
Management
intends to use capital and debt financing, as required, to fund the Company’s
operations. Management intends to pursue non-diluting funding sources such as
government grants and contracts as well as licensing agreements with other
pharmaceutical companies. There can be no assurance that the Company will be
able to obtain the additional capital resources necessary to fund its
anticipated obligations for the next twelve months.
The
Company is considered to be a development stage company and will continue in the
development stage until generating revenues from the sales of its products or
services. As a result, the report of the independent registered public
accounting firm on our financial statements as of June 30, 2009, contains an
explanatory paragraph regarding a substantial doubt about our ability to
continue as a going concern.
Results
of Operations
The
Company is a development-stage biopharmaceutical company and does not have
revenue for the year ending June 30, 2009.
Revenues
- The Company is
a non-revenue producing entity.
Operating
Expenses -
General and administrative expenses decreased $142,259 to $1,085,920 for the
year ended June 30, 2009 from $1,228,179 for the year ended June 30,
2008. The decrease resulted from the Company’s reduction of
consulting and professional fees
Research
and development expenses for the year ended June 30, 2009 increased $27,882 to
$1,791,934 from $1,764,052 for the year ended June 30, 2008. This
increase in the cost of Research and development is largely attributable to the
development of additional drug candidates.
Research
and Development expenses were offset in the amount of $58,128 and $200,190 in
the years ended June 30, 2009, and June 30, 2008, respectively, by a Connecticut
Refundable Research and Development Credit.
Other Income
(Expenses) – Net
Interest income was $31,928 and $53,704 for the years ending June 30, 2009 and
2008, respectively. Net Interest income in 2009 included interest on cash
equivalent deposits in an interest-bearing account.
Income Taxes
– There is no
provision for income taxes due to ongoing operating losses. As of June 30, 2009,
we had federal net operating loss carryforwards of approximately $10,237,487
resulting in a deferred tax benefit of approximately $4,711,000 for Federal
reporting purposes. This amount has been offset by a full valuation
allowance.
Net Operating
Loss - For the
year ended June 30, 2009, the Company had a net loss of $2,787,798, or $0.02 per
share compared to a net loss of $2,738,337, or $0.02 per share for the year
ending June 30, 2008.
Liquidity
and Capital Reserves
The
Company had cash and cash equivalents of $1,689,442 as of June 30,
2009. On the same date, accounts payable and accrued
liabilities outstanding totaled $515,719.
Since
inception, the Company has expended substantial resources on research and
development. Consequently, we have sustained substantial losses. The
Company has an accumulated deficit of $11,995,535 at June 30,
2009.
The
Company’s current financial condition raises doubt as to its ability to continue
as a going concern. The report of the Company’s
independent public accountants, which accompanied the financial statements for
the year ended June 30, 2009, contained going concern
language. As of June 30, 2009 we have a cash and cash
equivalent balance of $1,689,442. On September 21, 2009, the Company had
received and accepted subscriptions in the aggregate amount of $1,337,500
through the offering of shares of the Company's common stock and warrants and an
additional $1,879,900 through the exercise of existing warrants to purchase
stock. The Company estimates that it can support current operations
through the next six quarters, i.e. through December 31, 2010.
While
this sum is sufficient for us to continue our operations through December 31,
2010, it is insufficient to fully execute the Company’s business
plan. If the Company is unable to obtain debt or equity financing to
meet its cash needs it may have to severely limit, its business plan by reducing
the funds it hopes to expend on pre-clinical studies and trials, the
establishment of our own laboratory and/or research and development
project.
Off
Balance Sheet Arrangements
We have
not entered into any off-balance sheet arrangements during the year ended June
30, 2009.
CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
Accounting Basis – The Company
has not earned any revenue from limited principal operations. Accordingly, the
Company's activities have been accounted for as those of a "Development Stage
Company" as set forth in Financial Accounting Standards Board Statement No. 7
(“SFAS 7"). Among the disclosures required by SFAS 7 are that the Company's
financial statements be identified as those of a development stage company, and
that the statements of operations and stockholders' equity and cash flows
disclose activity since the date of the Company's inception.
Research and Development –
Research and development expenses consist primarily of costs associated with the
preclinical and or clinical trials of drug candidates, compensation and other
expenses for research and development, personnel, supplies and development
materials, costs for consultants and related contract research and facility
costs. Expenditures relating to research and development are expensed as
incurred.
Accounting for Stock Based
Compensation – The Company adopted the fair value recognition provisions
of “FASB Statement No. 123(R) Share-Based Payment”, using the modified
prospective-transition method. Under that transition method, compensation cost
recognized in the years ended June 30, 2008 includes compensation cost for all
share-based payment granted based on the grant-date fair value estimated in
accordance with provisions of FASB 123(R).
Accounting for Non-Employee Stock
Based Compensation – The Company accounts for shares and options issued
for non-employees in accordance with the provision of Emerging Issue Task Force
Issue No. 96-18, “Accounting for Equity Instruments that are issued to other
than Employees for Acquiring or in Conjunction with selling Goods or Services”.
According to the provisions of ETIF 96-18, the Company determines the fair value
of stock and options granted to non-employees on the measurement date which is
either the date of a commitment for performance has been reached or when
performance has been completed, depending upon the facts and circumstances. The
fair value of the shares and options valued at commitment date is expensed
immediately if they were for past services.
POLICY
AFFECTING RECOGNITION OF REVENUE
The
Company is a development stage company and does not have revenue arising from
operations
RECENT
ACCOUNTING PRONOUNCEMENTS
In
June 2009, the FASB issued SFAS No. 168, “The ‘FASB
Accounting Standards Codification’ and the Hierarchy of Generally Accepted
Accounting Principles, a replacement of FASB Statement No. 162”
(“SFAS 168”). SFAS 168 establishes the “FASB Accounting Standards Codification”
(“Codification”), which officially launched July 1, 2009, to become
the source of authoritative U.S. generally accepted accounting principles
(“GAAP”) recognized by the FASB to be applied by nongovernmental entities,
superseding existing FASB, American Institute of Certified Public Accountants
(“AICPA”), Emerging Issues Task Force (“EITF”), and related accounting
literature. Rules and interpretive releases of the Securities and Exchange
Commission (“SEC”) under authority of federal securities laws are also sources
of authoritative U.S. GAAP for SEC registrants. SFAS 168 reorganizes
the previously issued GAAP pronouncements into accounting topics and displays
them using a consistent structure. The subsequent issuances of new standards
will be in the form of Accounting Standards Updates that will be included in the
Codification. SFAS 168 will be effective for the Company as of the interim
period ended September 30, 2009. As the Codification was not intended
to change or alter existing GAAP, it will not have an impact on the Company’s
consolidated financial statements. The only impact will be that any future
references to authoritative accounting literature will be in accordance with
SFAS 168 and the new numbering system prescribed by the
Codification.
In
May 2009, the FASB issued SFAS No. 165, “Subsequent
Events” (“SFAS 165”). This standard is intended to establish general standards
of accounting and disclosure of events that occur after the balance sheet date
but before financial statements are issued or are available to be issued. SFAS
165 requires issuers to reflect in their financial statements and disclosures
the effects of subsequent events that provide additional evidence about
conditions at the balance sheet date. Disclosures should include the nature of
the event and either an estimate of its financial effect or a statement that an
estimate cannot be made. This standard also requires issuers to disclose the
date through which they have evaluated subsequent events and whether the date
corresponds with the release of their financial statements. The Company adopted
SFAS 165 as of the interim period ended June 30, 2009. As the
requirements under SFAS 165 are consistent with its current practice, the
implementation of this standard did not have an impact on the Company’s
consolidated financial statements. The Company has evaluated subsequent events
through October 10, 2009 the date it filed this annual report on Form
10-K.
In March
2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments
and Hedging Activities," and Amendment of FASB Statement No. 133. SFAS 161
amends SFAS 133, "Accounting for Derivative Instruments and Hedging Activities,"
to amend and expand the disclosure requirements of SFAS 133 to provide greater
transparency about (i) how and why an entity uses derivative instruments, (ii)
how derivative instruments and related hedge items are accounted for under SFAS
133 and its related interpretations, and (iii) how derivative instruments and
related hedged items affect an entity's financial position, results of
operations and cash flows. To meet those objectives, SFAS 161 requires
qualitative disclosures about objectives and strategies for using derivatives,
quantitative disclosures about fair value amounts of gains and losses on
derivative instruments and disclosures about credit-risk-related contingent
features in derivative agreements. SFAS 161 is effective for fiscal years and
interim periods beginning after November 15, 2008. Earlier adoption is
encouraged. The Company is currently evaluating the impact of SFAS 161 on its
financial position, results of operations or cash flows.
In May
2008, the FASB issued FSP APB 14-1, "Accounting for Convertible Debt Instruments
That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlements)." This FSP requires a portion of this type of convertible debt to
be recorded as equity and to record interest expense on the debt portion at a
rate that would have been charged on nonconvertible debt with the same terms.
This FSP takes effect in the first quarter of fiscal years beginning after
December 15, 2008 and will be applied retrospectively for all periods presented.
It will effective for the Company on July 1, 2009. This FSP would apply to the
Company's convertible debentures. The Company is currently evaluating how it may
affect the financial statements. The Company does not currently have
any convertible debt instruments.
In June
2008, the FASB issued Staff Position ("FSP") EITF 03-6-1, "Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating
Securities." Securities participating in dividends with common stock according
to a formula are participating securities. This FSP determined unvested shares
of restricted stock and stock units with nonforfeitable rights to dividends are
participating securities. Participating securities require the "two-class"
method to be used to calculate basic earnings per share. This method lowers
basic earnings per common share. This FSP takes effect in the first quarter of
fiscal years beginning after December 15, 2008 and will be applied
retrospectively for all periods presented. It will be effective for the Company
on July 1, 2009. The Company does not expect FSP EITF 03-6-1 to have a material
effect on its financial statements.
Management
does not believe that any other recently issued, but not yet effective
accounting pronouncements, if adopted, would have a material effect on the
accompanying financial statements.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
The
Company is not exposed to market risk related to interest rates on foreign
currencies.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The
information required by Item 8 appears after the signature page to this
report.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURES
On
January12, 2009, Holtz Rubenstein Reminick LLP ("HRR") was dismissed as the
independent accountant of NanoViricides, Inc. (the "Company"). The Board of
Directors acting in the capacity of an audit committee approved the dismissal of
HRR.
HRR's
reports on the Company's financial statements for the years ended June 30, 2008
and 2007 did not contain any adverse opinion or disclaimer of opinion, nor were
they qualified or modified as to uncertainty, audit scope or accounting
principles except that the reports for both years indicated that the Company is
in the development stage, has suffered significant operating losses, and is
dependent upon its stockholders to provide sufficient working capital to meet
its obligations and sustain its operations. Accordingly, such reports indicated
that there was substantial doubt as to the Company's ability to continue as a
going concern and that the financial statements did not include any adjustments
that might result from the outcome of this uncertainty.
During
the years ended June 30, 2008 and 2007 and through January 12, 2009, there were
no disagreements with HRR on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of HRR, would have caused it
to make reference thereto in connection with its reports on the financial
statements for such years. During the years ended June 30, 2008 and 2007 and
through January 12, 2009, there were no matters that were either the subject of
a disagreement as defined in Item 304(a)(l)(iv) of Regulation S-K or a
reportable event as described in Item 304(a)(l)(v) of Regulation
S-K.
The
Company provided HRR with a copy of the foregoing disclosures and requested HRR
to furnish the Company with a letter addressed to the Securities and Exchange
Commission stating whether or not HRR agrees with the disclosures.
On
January 13, 2009, the Company's Board of Directors acting in the capacity of an
audit committee engaged Li & Company, PC ("Li") as the Company's new
independent accountant to act as the principal accountant to audit the Company's
financial statements. During the Company's fiscal years ended June 30, 2008 and
2007 and through January 7, 2009, neither the Company, nor anyone acting on its
behalf, consulted with Li regarding the application of accounting principles to
a specific completed or proposed transaction or the type of audit opinion that
might be rendered on the Company's financial statements, and no written report
or oral advice was provided that Li concluded was an important factor considered
by the Company in reaching a decision as to any such accounting, auditing or
financial reporting issue.
ITEM
9A(T). CONTROLS AND PROCEDURES
Evaluation
of Disclosure Controls and Procedures
We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our Exchange Act reports is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission’s rules and forms and that such information
is accumulated and communicated to our management, including our chief executive
and chief financial officer, as appropriate, to allow for timely decisions
regarding required disclosure. Disclosure controls and procedures, no matter how
well designed and operated, can provide only reasonable assurance of achieving
the desired control objectives, and management is required to apply its judgment
in evaluating the cost-benefit relationship of possible controls and procedures.
Management has designed our disclosure controls and procedures to provide
reasonable assurance of achieving the desired control objectives.
As
required by Exchange Act Rule 13a-15(b), we have carried out an evaluation,
under the supervision and with the participation of our management, including
our principal executive and principal financial officer, of the effectiveness of
the design and operation of our disclosure controls and procedures as of June
30, 2009.
a) Based
upon an evaluation of the effectiveness of disclosure controls and procedures,
our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO") have
concluded that as of the end of the period covered by this Annual Report on Form
10K our disclosure controls and procedures (as defined in Rules 13a-15(e) or
15d-15(e) under the Exchange Act) were effective to provide reasonable assurance
that information required to be disclosed in our Exchange Act reports is
recorded, processed, summarized and reported within the time periods specified
by the rules and forms of the SEC and is accumulated and communicated to
management, including the CEO and CFO, as appropriate to allow timely decisions
regarding required disclosure.
b)
Changes in internal control over financial reporting.
In our
Annual Report on Form 10-K for the year ended June 30, 2008, Management reported
that it was aware that there were the following material weaknesses in our
internal control over financial reporting
Timeliness
of Financial Reporting: Our Chief Executive Officer and Interim Chief Financial
Officer concluded that the Company's controls were not effective as of June 30,
2008 due to inherent weaknesses present in the preparation of financial
statements as a result of the departure of its Chief Financial Officer on May
16, 2007. The Company has taken corrective measures. In January, 2009, we
engaged the services of a Financial Consultant to assist us with
preparation and review of SEC related financial and reporting matters. The
Company plans to hire a full time Comptroller in the near future.
Segregation
of Duties: We did not maintain adequate segregation of duties related to job
responsibilities for initiating, authorizing, and recording of certain
transactions as of June 30, 2008. Due to this material weakness, there is a
reasonable possibility that a material misstatement in the financial statements
would not be prevented or detected on a timely basis. The Company has taken
corrective steps. The Company has strengthened its roles and responsibilities
and management procedures for initiating, authorizing, and recording of various
transactions. In addition, the Company plans to hire a full time Comptroller in
the near future.
The
Company believes that it has taken significant steps to remediate these
weaknesses including implementing additional segregation of responsibilities and
authorizations for initiating, authorizing and recording
transactions. In addition the Company has outsourced certain
financial functions, including reviewing significant transactions and quarterly
financial statements to independent contractors.
Other
than as described above, there were no material changes in our internal control
over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act)
that occurred as of June 30, 2009, that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
Notwithstanding
the material weaknesses discussed below, our management has concluded that the
financial statements included in this Annual Report on Form 10-K fairly present
in all material respects our financial condition, results of operations and cash
flows for the periods presented in conformity with generally accepted accounting
principles.
Management’s
Report on Internal Control Over Financial Reporting
Management
is responsible for establishing and maintaining adequate internal control over
financial reporting as defined in Rules 13a-15(f) under the Securities Exchange
Act of 1934, as amended. Internal control over financial reporting is designed
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles in the United States of America
(“GAAP”). We recognize that because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies and procedures may
deteriorate.
To
evaluate the effectiveness of our internal control over financial reporting,
management used the criteria described in Internal Control — Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”).
In
connection with management’s assessment of our internal control over financial
reporting, we identified the following material weaknesses in our internal
control over financial reporting as of June 30, 2008:
Timeliness of Financial Reporting:
Our Chief Executive Officer and Interim Chief Financial Officer concluded
that the Company's controls were not effective as of June 30, 2008 due to
inherent weaknesses present in the preparation of financial statements as a
result of the departure of its Chief Financial Officer on May 16,
2007.
Segregation of
Duties: We did not maintain adequate segregation of duties
related to job responsibilities for initiating, authorizing, and recording of
certain transactions. Due to this material weakness, there is a reasonable
possibility that a material misstatement in the financial statements would not
be prevented or detected on a timely basis.
The
Company believes that it has taken significant steps to remediate these
weaknesses including implementing additional segregation of responsibilities and
authorizations for initiating, authorizing and recording
transactions. In addition the Company has engaged the services of a
financial consultant to assist in reviewing significant transactions
and the Company’s quarterly and annual financial statements.
Remediation
Efforts to Address Deficiencies in Internal Controls Over Financial
Reporting
At
present, the Company believes that it has substantially remediated the aforesaid
weakness.
Changes
in Internal Control Over Financial Reporting
Other
than as described above, there were no material changes in our internal control
over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act)
that occurred as of June 30, 2009 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
Attestation
Report of the Independent Registered Public Accounting Firm
This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by our registered public
accounting firm pursuant to temporary rules of the Securities and Exchange
Commission that permit us to provide only management’s report in this annual
report.
ITEM
9B Other Information
Not applicable
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The
following table sets forth the names and ages of our current directors and
executive officers, their principal offices and positions and the date each such
person became a director or executive officer. Executive officers are elected
annually by our Board of Directors. Each executive officer holds his office
until he resigns, is removed by the Board or his successor is elected and
qualified. Directors are elected annually by our stockholders at the annual
meeting. Each director holds his office until his successor is elected and
qualified or his earlier resignation or removal.
The
following persons are the directors and executive officers of our
company:
Name
|
Age
|
Title
|
|
|
|
Anil
Diwan, PhD.
|
51
|
President;
Chairman of the Board
|
Eugene
Seymour, MD, MPH
|
68
|
Chief
Executive Officer; Acting CFO;
Director
|
The
Company’s executive officers and directors are elected annually and serve until
the next annual meeting of stockholders.
Eugene Seymour, MD, MPH, age
68, has been Chief Executive Officer (CEO) and a director of the Company since
consummation of the merger on June 1, 2005. From 1996 until May 2005 he has been
a private investor and has held no corporate positions. During this period he
formed a non-profit foundation which funded both testing and training programs
for health workers in Asia and Africa. He was a consultant to the UN Global
Program on AIDS and was sent to several countries, (Lithuania, Latvia, Estonia
and Russia) to interact with local physicians and assist them in setting up
testing programs. Dr. Seymour obtained a Master's degree in the Epidemiology of
Infectious Diseases at UCLA in addition to his medical degree. He began clinical
practice in Internal Medicine and joined the UCLA Medical School faculty. He
left UCLA after two years and joined the USC faculty as Associate Professor. Dr.
Seymour served in the Medical Corps of US Army Reserve during the Vietnam era
and attained the rank of Major. In 1986, he was requested by the US government
to establish a testing laboratory and run a large-scale surveillance program for
HIV prevalence in the Hispanic population in Los Angeles. His laboratory ended
up testing over 50,000 people. In 1989, he founded StatSure Diagnostic Systems,
Inc. (SDS) (formerly Saliva Diagnostic Systems, Inc.), raised capital and
developed the rapid HIV antibody blood test (Hema-Strip). He took the company
public in 1993 as CEO and President. He left SDS in 1996. Dr. Seymour holds 8
issued patents, and is married with three children, two of whom are
physicians.
Anil Diwan, PhD, age 51, has
been President and the Chairman of the Board of Directors of the Company since
consummation of the merger on June 1, 2005. Dr. Diwan simultaneously therewith
and since its formation, has also served as the Chief Executive Officer and
Director of AllExcel, Inc. (from 1995 to the present) and TheraCour Pharma, Inc.
(from 2004 to the present) and is the original inventor of the technologies
licensed to NanoViricides Inc, as well as the TheraCour polymeric micelle
technologies and products based on them. Since 1992, he has researched and
developed TheraCour nanomaterials. Dr. Diwan was the first to propose the
development of novel pendant polymers for drug delivery that led to an explosion
of research in pharmacological applications of polymeric micelles. Anil has won
over 12 NIH SBIR grants. Dr. Diwan holds four patents, one issued and three
applied for, and has made intellectual property depositions of several
additional patentable discoveries with the patent attorney. Dr. Diwan has held
several scholastic distinctions, including an All-India 9th rank on the Joint
Entrance Examination of all IIT’s. He holds a Ph.D. in Biochemical Engineering
from Rice University (1986) and B.S. in Chemical Engineering from Indian
Institute of Technology (IIT) Bombay (1980).
AUDIT
COMMITTEE
Although
its By-laws provide for the appointment of one, the Company is not yet required
to have an Audit Committee as a result of the fact that our common stock is not
considered a “listed security” as defined in Rule 10A-3 of the Exchange Act.
There are currently no audit committee members that meet the criteria of
“Financial Expert”, however the company is actively working to appoint a
“Financial Expert” in the current year.
CODE OF
ETHICS
We have
adopted a code of ethics meeting the requirements of Section 406 of the
Sarbanes-Oxley Act of 2002. We believe our code of ethics is reasonably designed
to deter wrongdoing and promote honest and ethical conduct; provide full, fair,
accurate, timely and understandable disclosure in public reports; comply with
applicable laws; ensure prompt internal reporting of violations; and provide
accountability for adherence to the provisions of the code of ethic. Our code of
ethics is filed as an exhibit to this Form 10-K.
ITEM 11.
EXECUTIVE COMPENSATION
The
Company's executive compensation program for the named executive officers (NEOs)
is administered by the Board of Directors.
COMPENSATION
OBJECTIVES
We
believe that the compensation programs for the Company's NEOs should reflect the
Company's performance and the value created for the Company's stockholders. In
addition, the compensation programs should support the short-term and long-term
strategic goals and values of the Company, and should reward individual
contributions to the Company's success. Our compensation plans are consequently
designed to link individual rewards with Company's performance by applying
objective, quantitative factors including the Company's own business performance
and general economic factors. We also rely upon subjective, qualitative factors
such as technical expertise, leadership and management skills, when structuring
executive compensation in a manner consistent with our compensation
philosophy.
ELEMENTS
OF COMPENSATION
BASE
SALARY. All full time executives are paid a base salary. Base salaries for our
executives are established based on the scope of their responsibilities,
professional qualifications, academic background, and the other elements of the
executive's compensation, including stock-based compensation. However, at this
time current total annual compensation is not in line with comparable companies,
because our philosophy was to pay modest salaries with no bonus to conserve
capital resources for future company growth. Our intent is to set executives'
base salaries near the median of the range of salaries for executives in similar
positions with similar responsibilities at comparable companies, in line with
our compensation philosophy. Base salaries are reviewed annually, and may be
increased to align salaries with market levels after taking into account the
subjective evaluation described previously.
EQUITY
INCENTIVE COMPENSATION. We believe that long-term performance is achieved
through an ownership culture participated in by our executive officers through
the use of stock-based awards. Currently, we do not maintain any incentive
compensation plans based on pre-defined performance criteria. The Board of
Directors has the general authority, however, to award equity incentive
compensation, i.e. stock options, to our executive officers in such amounts and
on such terms as the committee determines in its sole discretion. The Board of
Directors does not have a determined formula for determining the number of
options available to be granted. The Board of Directors will review each
executive's individual performance and his or her contribution to our strategic
goals periodically. With the exception of stock options automatically granted in
accordance with the terms of the employment agreement with our executive
officers, our Board of Directors grants equity incentive compensation at times
when we do not have material non-public information to avoid timing issues and
the appearance that such awards are made
based on
any such information.
DETERMINATION
OF COMPENSATION
The Board
of Directors makes independent decisions about all aspects of NEO compensation,
and takes into account compensation data and benchmarks for comparable positions
and companies in
different
applicable geographical areas.
The
Company's current executives’ compensation program as of the date of this report
has been at the same level since 2005. The program is simplistic and is less
structured than a more mature corporation. Two of our officers are founders or
co-founders of the Company and their ownership in the Company has driven their
philosophy to provide modest salaries and no annual bonus. The compensation
structure was set to retain capital resources in the Company to further
growth.
The
following table reflects all forms of compensation for the year ended June 30,
2009 and for the period from May 12, 2005 (date of inception) through June 30,
2009. No other person received salary or bonus in excess of $100,000 for any of
these fiscal years.
Summary
Compensation Table
|
|
|
|
Annual
Compensation
|
|
Long-Term
Compensation
|
|
|
Name and Principal
Position
|
|
Year
|
|
Salary
|
|
Bonus
|
|
Other
Annual Compensation
|
|
Restricted
Stock Award(s) ($)
|
|
Securities
Underlying Options/SARs (#)
|
|
All Other Compensation ($)
|
|
|
|
|
Eugene Seymour,
|
|
2009
|
|
$ |
250,000 |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
- |
|
$ |
- |
|
$ |
250,000 |
|
CEO, Director
|
|
2008
|
|
$ |
237,500 |
|
$ |
- |
|
$ |
- |
|
$ |
2,035 |
|
125,000 |
|
$ |
- |
|
$ |
239,535 |
|
|
|
2007
|
|
$ |
200,000 |
|
$ |
- |
|
$ |
- |
|
$ |
6,208 |
|
125,000 |
|
$ |
- |
|
$ |
206,208 |
|
|
Anil Diwan,
|
|
2009
|
|
$ |
252,000 |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
- |
|
$ |
- |
|
$ |
252,000 |
|
President, Director
|
|
2008
|
|
$ |
243,107 |
|
$ |
- |
|
$ |
1,500 |
|
$ |
5,009 |
|
333,334 |
|
$ |
- |
|
$ |
248,116
|
|
|
|
2007
|
|
$ |
200,000 |
|
$ |
- |
|
$ |
- |
|
$ |
17,197 |
|
333,333 |
|
$ |
|
|
$ |
217,197
|
|
|
Leo Ehrlich,
|
|
2009
|
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
- |
|
$ |
- |
|
$ |
- |
|
Former CFO*
|
|
2008 |
|
$ |
91,666 |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
- |
|
$ |
- |
|
$ |
91,666 |
|
|
|
2007 |
|
$ |
150,000 |
|
$ |
- |
|
$ |
- |
|
$ |
3,657 |
|
125,000 |
|
$ |
- |
|
$ |
153,657 |
|
Deferred compensation paid in 2008, accrued in 2007
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, MANAGEMENT,
AND RELATED
STOCKHOLDERS MATTERS.
The
following table sets forth information relating to the beneficial ownership of
the Company's common stock by those persons beneficially holding more than 5% of
the Company's common stock, by the Company's directors and executive officers,
and by all of the Company's directors and executive officers as a group as of
June 30, 2009.
Name
and Address of Beneficial Owner
|
Amount
and Nature of Beneficial Owner (1)
|
Percent
of Class (2)
|
TheraCour
Pharma, Inc.(3) (4)
|
|
|
135
Wood Street
|
|
|
West
Haven, CT 06516
|
34,160,000
|
27.26%
|
Anil
Diwan (3) (4)
|
|
|
135
Wood Street
|
|
|
West
Haven, CT 06516
|
11,000,000
|
8.78%
|
Eugene
Seymour (5)
|
|
|
135
Wood Street
|
|
|
West
Haven, Connecticut 06516
|
8,500,000
|
6.78%
|
|
|
|
|
|
|
All
Directors and Executive Officers as a Group (2 persons)
(6)
|
53,660,000
|
39.82%
|
(2)
|
For
each shareholder, the calculation of percentage of beneficial ownership is
based upon 125,299,457 shares of Common Stock outstanding as of June 30
2009, and shares of Common Stock subject to options, warrants and/or
conversion rights held by the shareholder that are currently exercisable
or exercisable within 60 days, which are deemed to be outstanding and to
be beneficially owned by the shareholder holding such options, warrants,
or conversion rights. The percentage ownership of any shareholder is
determined by assuming that the shareholder has exercised all options,
warrants and conversion rights to obtain additional securities and that no
other shareholder has exercised such
rights.
|
(3)
|
Anil
Diwan, President and Chairman of the Board of Directors. Includes
10,000,000 shares of NanoViricides common stock held by Mr. Diwan and
1,000,000 shares of NanoViricides common stock issuable upon exercise of
options held by Mr. Diwan that are currently exercisable or will become
exercisable within 60 days.
|
(4)
|
Anil
Diwan, the Company’s President and Chairman, also serves as the CEO and
Director of TheraCour Pharma Inc. and owns approximately 70% of the
outstanding capital stock of TheraCour. Anil Diwan has both
investment and dispositive power over the Nanoviricides shares held by
TheraCour Pharma, Inc.
|
(5)
|
Eugene
Seymour, Chief Executive Officer and Director. Includes
8,000,000 shares of NanoViricides common stock held by Dr. Seymour and
500,000 shares of NanoViricides common stock issuable upon exercise of
options held by Dr. Seymour that are currently exercisable or will become
exercisable within 60 days.
|
(6)
|
Includes
34,160,000 shares of Common Stock indirectly owned by certain of the
Executive Officers and Directors as a
group.
|
EMPLOYMENT
AGREEMENTS
On
September 26, 2005, the Company entered into employment agreements with its
three executive officers, Eugene Seymour, Chief Executive Officer, Anil Diwan,
President and Chairman of Board, and Leo Ehrlich, Chief Financial Officer. All
three agreements provide a minimum annual base salary of $200,000 for a term of
three years. This base salary increased to $250,000 per year upon closing of a
financing to the Company as of October 16, 2007. The
Company is also obligated to pay health and life insurance benefits and
reimburse expenses incurred by the officers on behalf of the company. Each
executive, if terminated by the Company without cause, would be entitled to six
months severance pay in the amount of $125,000. Additionally the agreements
provided the following stock options exercisable into the Company’s common stock
at $0.10 per share:
|
•
|
Dr.
Anil Diwan received 1,000,000 options, 333,333 options vested upon
execution of the employment agreement. Another 333,333 options vested on
January 1, 2007. The remaining 333,334 options vested on January 1, 2009 .
The options expire September 26,
2015.
|
|
•
|
Dr.
Eugene Seymour received 500,000 options, 250,000 options vested upon
execution of the employment agreement. Another 125,000 options vested on
January 1, 2007. The remaining 125,000 options vested on January 1, 2009
The options expire September 26,
2015.
|
Leo
Ehrlich resigned as Company CFO to pursue other opportunities on May,2007 and
Dr. Eugene Seymour was appointed Acting CFO. The employment agreements expired
on September 26, 2008 The Company and two of the executives have agreed to
continue the executive compensation under the same terms until a new agreement
is put into effect.
COMPENSATION
OF DIRECTORS
At this
time, directors receive no remuneration for their services as directors of the
Company, nor does the Company reimburse directors for expenses incurred in their
service to the Board of Directors. The Company does not expect to pay any fees
to its directors for the 2009 fiscal year.
COMPENSATION
OF SCIENTIFIC ADVISORY BOARD
The
Company anticipates holding four Scientific Advisory Board meetings per annum.
As compensation, each member of the Scientific Advisory Board (SAB) will be
granted each quarter 10,000 warrants to purchase the Company’s common stock at
120% of the Company’s closing stock quote on the day following the meeting.
Should the Company not call a quarterly meeting, quarterly options will be
granted on May 15, August 15, November 15, and February 15. The warrants will
have a four year expiration date. In addition the Company will reimburse each
SAB member for travel and other out-of-pocket expenses incurred in the course of
performing their services. For the year ended June 30, 2009, the SAB was granted
a total of 200,000 stock warrants exercisable into common shares at prices from
$.61 to $1.56 per share.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
Currently,
we have no independent directors on our Board of Directors, and therefore have
no formal procedures in effect for reviewing and pre-approving any transactions
between us, our directors, officers and other affiliates. We will use our best
efforts to insure that all transactions are on terms at least as favorable to
the Company as we would negotiate with unrelated third parties.
TheraCour
Pharma, Inc.
On May
12, 2005, the Company entered into a Material License Agreement, amended as of
January 8, 2007 (the “License”) with TheraCour Pharma, Inc., (“TheraCour”), our
largest shareholder. As of the present, TheraCour granted the Company an
exclusive license in perpetuity for technologies developed by TheraCour for six
virus types: HIV, HCV, Herpes, Rabies, Asian (bird) flu and Influenza. In
consideration for obtaining this exclusive license, we agreed: (1) that
TheraCour can charge its costs (direct and indirect) plus no more than 30% of
direct costs as a development fee and such development fees shall be due and
payable in periodic installments as billed; (2) to pay $25,000 per month for
usage of lab supplies and chemicals from existing stock held by TheraCour; (3)
to pay the greater of $2,000 or actual costs, for other general and
administrative expenses incurred by TheraCour on our behalf; (4) to
make royalty payments of 15% (calculated as a percentage of net sales of the
licensed drugs) to TheraCour; (5) that TheraCour Pharma, Inc. shall retain the
exclusive right to develop and synthesize nanomicelle(s), a small (approximately
twenty nanometers in size) long chain polymer based chemical structure, as
component elements of the Licensed Products. TheraCour agreed that it will
develop and synthesize such nanomicelles, to be used for the Licensed Products,
exclusively for NanoViricides, and unless such license is terminated, will not
develop or synthesize the nanomicelles to be used for the Licensed
product for its own sake or for others; and (6) to pay an advance payment equal
to twice the amount of the previous months invoice to be applied as a prepayment
towards expenses. TheraCour may terminate the License upon a material breach by
us as specified in the agreement. However, the Company has the opportunity to
cure the breach within 90 days of receipt of notice to terminate the
License.
Development
costs charged by and paid to TheraCour Pharma, Inc. was $2,915,931 since
inception through June 30, 2009; $828,9520 and $746,309 for the years ended June
30, 2009 and 2008, respectively. No royalties are due or have been paid from
inception through June 30, 2009.
As of
June 30, 2009, TheraCour owns 34,160,000 shares of the Company’s outstanding
common stock. Anil Diwan, the Company’s President and Chairman, also serves as
the CEO and Director of TheraCour and owns approximately 70% of the outstanding
capital stock of TheraCour.
KARD
Scientific, Inc.
In June
2005, the Company engaged KARD Scientific to conduct pre clinical human
influenza animal (mouse) studies and provide the Company with a full history of
the study and final report with the data collected. This project is on-going.
NanoViricides has a fee for service arrangement with KARD. We do not have an
exclusive arrangement with KARD; we do not have a contract with KARD; all work
performed by KARD must have prior approval of the executive officers of
NanoViricides; and we retain all intellectual property resulting from the
services by KARD. Dr. Krishna Menon, the Company’s Chief Regulatory Officer-
Consulting, a non-executive officer position, is also an officer and principal
owner of KARD Scientific. Lab fees charged by KARD Scientific for services for
the years ended June 30, 2009, and 2008, were, $-0- and $233,015 respectively,
and $554,235 since inception.
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
Audit
Fees
The
aggregate fees for each of the last two years for professional services rendered
by the principal accountant for our audits of our annual financial statements
and interim reviews of our financial statements included in our
fillings with Securities and Exchange Commission on Form 10-K and 10-Qs or
services that are normally provided by the accountant in connection with
statutory and regulatory filings or engagements for those years were
approximately:
June
30, 2009:
|
|
$ 35,000
|
|
Li
& Company, P.C.
|
June
30, 2009:
|
|
$ 77,000
|
|
Holtz
Rubenstein Reminick LLP
|
June
30, 2008:
|
|
$177,000
|
|
Holtz
Rubenstein Reminick LLP
|
Audit
Related Fees
The
aggregate fees in each of the last two years for the assurance and related
services provided by the principal accountant that are not reasonably related to
the performance of the audit or review of the Company's financial statements
and are not reported in paragraph (1) were approximately:
June
30, 2009:
|
|
$
0
|
|
Li
& Company, P.C.
|
June
30, 2009:
|
|
$
0
|
|
Holtz
Rubenstein Reminick LLP
|
June
30, 2008:
|
|
$
11,000
|
|
Holtz
Rubenstein Reminick LLP
|
We
incurred these fees in connection with registration statements and financing
transactions.
Tax
Fees
The
aggregate fees in each of the last two years for the professional services
rendered by the principal accountant for tax compliance, tax advice and tax
planning were approximately:
June
30, 2009:
|
|
$
0
|
|
Li
& Company, P.C.
|
June
30, 2009:
|
|
$
0
|
|
Holtz
Rubenstein Reminick LLP
|
June
30, 2008:
|
|
$
0
|
|
Holtz
Rubenstein Reminick LLP
|
All Other
Fees
The
aggregate fees in each of the last two years for the products and services
provided by the principal accountant, other than the services reported in
paragraph (1) were approximately:
June
30, 2009:
|
|
$
0
|
|
Li
& Company, P.C.
|
June
30, 2009:
|
|
$
0
|
|
Holtz
Rubenstein Reminick LLP
|
June
30, 2008:
|
|
$
0
|
|
Holtz
Rubenstein Reminick LLP
|
Pre-Approval
Policies
The Board
of Directors, which performs the equivalent functions of an audit committee,
currently does not have any pre-approval policies or procedures concerning
services performed by Holtz Rubenstein Reminick LLP or Li & Company,
P.C.. All the services performed by Holtz Rubenstein Reminick LLP and
Li & Company, P.C. as described above were pre-approved by the Board of
Directors.
The Board
of Directors, which performs the equivalent functions of an audit committee,
currently does not have any pre-approval policies or procedures concerning
services performed Holtz Rubenstein Reminick LLP or Li & Company,
P.C.. All the services performed by Holtz Rubenstein Reminick LLP or
Li & Company, P.C. as described above were pre-approved by the
Board of Directors.
Exhibit
No.
|
|
Description
|
|
|
|
3.1*
|
|
Articles
of Incorporation, as amended, of the Registrant
|
3.2*
|
|
By-laws
of the Registrant
|
|
|
|
4.1*
|
|
Specimen
Stock Certificate of the Registrant
|
4.2*
|
|
Series
A Convertible Debenture
|
4.3*
|
|
Form
of Warrant
|
10.1*
|
|
Share
Exchange Agreement between NanoViricide, Inc. and the
Registrant
|
10.2*
|
|
Employment
Agreement Eugene Seymour
|
10.3*
|
|
Employment
agreement Anil Diwan
|
10.4*
|
|
Employment
agreement Leo Ehrlich
|
10.5*
|
|
Form
of Scientific Advisory Board Agreement
|
10.6*
|
|
Amended
License Agreement with TheraCour Pharma, Inc.
|
10.7*
|
|
Lease
with landlord
|
10.8*
|
|
Form
of First Subscription Agreement
|
10.9*
|
|
Form
of Second Subscription Agreement
|
10.10*
|
|
Code
of Ethics
|
10.11*
|
|
Amended
Agreement #2 with TheraCour Pharma, Inc.
|
10.12*
|
|
Memorandum
of Understanding with Vietnam’s National Institute of Hygiene and
Epidemiology (NIHE) dated December 23, 2005
|
31.1 |
|
Certification
of Chief Executive and Interim Chief Financial Officer required by Rule
13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as
amended
|
32.1 |
|
Certification
of Chief Executive Officer and Interim Chief Financial
Officer required by Rule 13a-14(b) or Rule 15d-14(b) under the
Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
*
Incorporated by reference to the Company’s registration statement on Form 10-SB,
filed with the Securities Commission on November 14, 2006, as
amended.
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Dated:
October 9, 2009
|
NANOVIRICIDES,
INC.
|
|
|
|
/s/ Eugene Seymour, MD
|
|
|
Eugene
Seymour, M.D.
|
|
Chief
Executive Officer and Interim Chief Financial Officer and
Director
|
|
(Principal
Executive and Accounting Officer)
|
|
|
|
|
|
/s/ Anil Diwan
|
|
|
Anil
Diwan,
|
|
President
and Chairman of the Board of
Directors
|
NANOVIRICIDES,
INC.
(A
DEVELOPMENT STAGE COMPANY)
Index to Financial
Statements
Reports
of Independent Registered Public Accounting Firm
|
F-2
|
|
|
Financial
Statements
|
|
|
|
Balance
Sheets – June 30, 2009 and 2008
|
F-3
|
|
|
Statements
of Operations – For the fiscal Years Ended June 30, 2009 and 2008 and For
the Period From May 12, 2005 (Inception) through June 30,
2009.
|
F-4
|
|
|
Statements
of Changes in Stockholders’ Equity (Deficit) – For the Period From May 12,
2005 (Inception) through June 30, 2009.
|
F-5
|
|
|
Statements
of Cash Flows – For the Fiscal Years Ended June 30, 2009 and 2008 and For
the Period From May 12, 2005 (Inception) through June 30,
2009.
|
F-15
|
|
|
Notes
to Financial Statements
|
F-17
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and
Stockholders
of NanoViricides, Inc.
We have
audited the accompanying balance sheet of NanoViricides, Inc. (a development
stage company) (the "Company") as of June 30, 2008, and the related statements
of operations, stockholders' equity, and cash flows for the year ended June 30,
2008 and the cumulative period from May 12, 2005 (date of inception) through
June 30, 2008. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of NanoViricides, Inc. as of June 30,
2008, and the results of its operations and its cash flows for the year ended
June 30, 2008 and the cumulative period from May 12, 2005 (date of inception)
through June 30, 2008, in conformity with accounting principles generally
accepted in the United States of America.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 2 to the financial
statements, the Company has no revenues, has suffered significant operating
losses, and is dependent upon its stockholders to provide sufficient working
capital to meet its obligations and sustain its operations. These circumstances
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans regarding those matters are also described in Note
2. The accompanying financial statements do not contain any adjustments that
might result from the outcome of this uncertainty.
/s/ Holtz
Rubenstein Reminik LLP
New York,
New York
October
28, 2008
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Stockholders of
Nanoviricides,
Inc.
West
Haven, Connecticut
We have
audited the accompanying balance sheet of Nanoviricides, Inc. (the “Company”) as
of June 30, 2009 and the related statements of operations, stockholders’ equity
and cash flows for the fiscal year then ended and for the period from May 12,
2005 (inception) through June 30, 2009. These financial statements are the
responsibility of the Company’s management. Our responsibility is to
express an opinion on these financial statements based on our
audits. The Company’s financial statements as of June 30, 2008 and
for the fiscal year then ended and for the period from May 12, 2005 (inception)
through June 30, 2008 were audited by other auditors whose report dated October
28, 2008, on those statements included an explanatory paragraph that described a
going concern uncertainty due to the fact that the Company had no revenues, had
suffered significant operating losses, and is dependent upon its stockholders to
provide sufficient working capital to meet its obligations and sustain its
operations, discussed in Note 2 to the financial statements. The other
auditors’ reports have been furnished to us,
and our opinion, insofar as it
relates to amounts included for such
prior periods, is based solely on the reports
of such other auditors.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provide a reasonable basis
for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of the Company as of June 30, 2009 and
the results of its operations and its cash flows for the fiscal year then ended
and for the period from May 12, 2005 (inception) through June 30, 2009 in
conformity with accounting principles generally accepted in the United States of
America.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has no revenues, has suffered significant
operating losses, and is dependent upon its stockholders to provide sufficient
working capital to meet its obligations and sustain its operations. These
factors raise substantial doubt about the Company’s ability to continue as a
going concern. Management's plans in regards to these matters are also described
in Note 2. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ Li & Company,
PC
Skillman,
New Jersey
October
13, 2009
NANOVIRICIDES,
INC.
(A
DEVELOPMENT STAGE COMPANY)
BALANCE
SHEETS
|
|
June
30, 2009
|
|
June
30, 2008
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
1,689,442 |
|
|
$ |
816,386 |
|
Prepaid
expenses
|
|
|
321,545 |
|
|
|
328,544 |
|
Other
current assets
|
|
|
109,312 |
|
|
|
102,873 |
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
2,120,299 |
|
|
|
1,247,803 |
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
688,618 |
|
|
|
133,738 |
|
|
|
|
|
|
|
|
|
|
OTHER
ASSETS:
|
|
|
|
|
|
|
|
|
Security
deposit
|
|
|
- |
|
|
|
80,000 |
|
Trademark,
net
|
|
|
192,344 |
|
|
|
6,709 |
|
|
|
|
|
|
|
|
|
|
Total
other assets
|
|
|
192,344 |
|
|
|
86,709 |
|
|
|
|
|
|
|
|
|