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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 10-K

 

 

(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM  TO .

 

 

Commission File Number: 001-40493

 

 

ATAI Life Sciences N.V.

(Exact name of registrant as specified in its charter)

 

The Netherlands

 

Not Applicable

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer
Identification No.)

 

 

ATAI Life Sciences N.V. c/o Mindspace

Krausenstraße 9-10

Berlin, Germany

 

Not Applicable

(Address of principal executive offices)

 

(Zip Code)

 

+49 89 2153 9035

(Registrant’s telephone number, including area code)

 

 

 

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange

on which registered

Common shares, par value €0.10 per share

 

ATAI

 

The Nasdaq Stock Market LLC
(Nasdaq Global Market)

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YesNo

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES NO ☒

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, as of June 30, 2021, the last business day of the Registrant's most recently completed second fiscal quarter, was approximately $2.05 billion. Solely for purposes of this disclosure, common shares held by executive officers, directors and certain shareholder of the Registrant as of such date have been excluded because such holders may be deemed to be affiliates.

As of March 15, 2022, the registrant had 160,709,397 common shares, par value €0.10 per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s definitive proxy statement relating to its 2022 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year ended December 31, 2021, are incorporated herein by reference in Part III where indicated.

 

 

 


 

ATAI Life Sciences N.V.

 

FORM 10-K

 

Table of Contents

 

 

 

Page

PART I

 

 

Item 1.

Business

3

Item 1A.

Risk Factors

40

Item 1B.

Unresolved Staff Comments

96

Item 2.

Properties

96

Item 3.

Legal Proceedings

96

Item 4.

Mine Safety Disclosures

96

 

 

 

PART II

 

 

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

96

Item 6.

[Reserved.]

97

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

98

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

125

Item 8.

Financial Statements and Supplementary Data

126

Item 9.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

183

Item 9A.

Controls and Procedures

183

Item 9B.

Other Information

184

Item 9C.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

185

 

 

 

PART III

 

 

Item 10.

Directors, Executive Officers and Corporate Governance

185

Item 11.

Executive Compensation

185

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

185

Item 13.

Certain Relationships and Related Transactions, and Director Independence

185

Item 14.

Principal Accountant Fees and Services

185

 

 

 

PART IV

 

 

Item 15.

Exhibits and Financial Statement Schedules

185

Item 16.

Form 10-K Summary

189

 

 

i


 

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

 

This Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (the “Form 10-K") contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements contained in this Form 10-K other than statements of historical fact, including statements regarding our future operating results and financial position, the success, cost and timing of development of our product candidates, including the progress of preclinical and clinical trials and related milestones, the commercialization of our current product candidates and any other product candidates we may identify and pursue, if approved, including our ability to successfully build a specialty sales force and commercial infrastructure to market our current product candidates and any other product candidates we may identify and pursue, the timing of and our ability to obtain and maintain regulatory approvals, our business strategy and plans, potential acquisitions, and the plans and objectives of management for future operations and capital expenditures, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “could,” “would,” “project,” “plan,” “potentially,” “preliminary,” “likely,” and similar expressions are intended to identify forward-looking statements.

 

We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of important factors that could cause actual results to differ materially from those in the forward-looking statements, including the risks, uncertainties, and assumptions described under "Risk Factor Summary" below, “Risk Factors” in Item 1A of Part I, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of Part II and elsewhere in this Form 10‑K.

 

Any forward-looking statements made herein speak only as of the date of this Form 10-K, and you should not rely on forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, performance, or achievements reflected in the forward-looking statements will be achieved or will occur. Except as required by applicable law, we undertake no obligation to update any of these forward-looking statements for any reason after the date of this Form 10-K or to conform these statements to actual results or revised expectations.

 

GENERAL

 

Unless the context otherwise requires, all references in this Form 10-K to “we,” “us,” “our,” “atai” or the “Company” refer to ATAI Life Sciences N.V. and its consolidated subsidiaries. References to “Form 10-K” and “Annual Report” herein refer to this Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

 

Corporate Reorganization

We were incorporated pursuant to the laws of the Netherlands as Adripa Holding B.V. on September 10, 2020 to become a holding company for ATAI Life Sciences AG. On January 11, 2021, our name was changed to ATAI Life Sciences B.V. In April 2021, all of the outstanding shares in ATAI Life Sciences AG were contributed and transferred to ATAI Life Sciences B.V. in a capital increase in exchange for newly issued common shares of ATAI Life Sciences B.V. and, as a result, ATAI Life Sciences AG became a wholly owned subsidiary of ATAI Life Sciences B.V. and the former shareholders of ATAI Life Sciences AG became the shareholders of ATAI Life Sciences B.V. In connection with such exchange, the common share in ATAI Life Sciences B.V. held by Apeiron Investment Group Ltd. was cancelled (ingetrokken). On June 7, 2021, the existing issued shares of ATAI Life Sciences B.V. were split applying a ratio of 1.6 to one, and the nominal value was reduced to €0.10. Prior to our initial public offering ("IPO") on June 22, 2021, we converted the legal form of ATAI Life Sciences B.V. into a public company with limited liability and our name into ATAI Life Sciences N.V.

 

 

SUMMARY RISK FACTORS

 

Our business is subject to numerous risks and uncertainties, including those summarized below. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the headings “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the related notes. If any of the following risks occur, our business, financial condition, results of operations and future growth prospects could be materially and adversely affected. In these circumstances, the market price of our common shares could decline. The principal risks and uncertainties affecting our business include the following:

We are a clinical-stage biopharmaceutical company and have incurred significant losses since our inception; we expect to incur losses for the foreseeable future and may never be profitable; to become and remain profitable, we must succeed in developing and eventually commercializing products that generate significant revenue;

 

1


 

If we are unable to obtain funding when needed and on acceptable terms, we could be forced to delay, limit or discontinue our product development efforts;
Our limited operating history may make it difficult to evaluate the success of our business and to assess our future viability;
The production and sale of our product candidates may be considered illegal or may otherwise be restricted due to the use of controlled substances, which may also have consequences for the legality of investments from foreign jurisdictions;
Our product candidates are in preclinical or clinical development, which is a lengthy and expensive process with uncertain outcomes. We cannot give any assurance that any of our product candidates will be successfully developed and/or receive regulatory approval, which is necessary before they can be commercialized;
We rely on third parties to assist in conducting our clinical trials and some aspects of our research and preclinical testing, and those clinical trials, including progress and related milestones, may be impacted by several factors including the failure by such third parties to meet deadlines for the completion of such trials, research, or testing, changes to trial sites and other circumstances;
We currently rely on qualified therapists working at third-party clinical trial sites to administer certain of our product candidates in our clinical trials and we expect this to continue upon approval, if any, of our current or future product candidates. If third-party sites fail to recruit and retain a sufficient number of therapists or effectively manage their therapists, our business, financial condition and results of operations would be materially harmed;
We cannot give any assurance that any of our product candidates will receive regulatory approval, which is necessary before they can be commercialized, or that our product candidates will ultimately succeed;
Research and development of drugs targeting the central nervous system, or CNS, is particularly difficult, and it can be difficult to predict and understand why a drug has a positive effect on some patients but not others;
We face significant competition in an environment of rapid technological and scientific change and our competitors may discover, develop or commercialize therapies before or more successfully than us, which may result in the reduction or elimination of our commercial opportunities;
If we are unable to obtain and maintain sufficient intellectual property protection for our existing product candidates or any other product candidates that we may identify, or if the scope of the intellectual property protection we currently have or obtain in the future is not sufficiently broad, our competitors could develop and commercialize product candidates similar or identical to ours, and our ability to successfully commercialize our existing product candidates and any other product candidates that we may pursue may be impaired;
Third parties may claim that we are infringing, misappropriating or otherwise violating their intellectual property rights, the outcome of which would be uncertain and may prevent or delay our development and commercialization efforts;
Our ability to retain key employees, directors, consultants and advisors, including key management of us or our product candidate portfolio companies and respective scientific personnel may limit our growth strategy;
A change in our effective place of management may increase our aggregate tax burden;
We have identified material weaknesses in our internal control over financial reporting. If we are unable to remediate the material weaknesses, or if other control deficiencies are identified, we may not be able to report our financial results accurately, prevent fraud or file our periodic reports as a public company in a timely manner;
Our business is subject to economic, political, regulatory and other risks associated with international operations; and
A pandemic, epidemic, or outbreak of an infectious disease, such as the COVID-19 pandemic, may materially and adversely affect our business, including our preclinical studies, clinical trials, trial sites, third parties on whom we rely, our supply chain, our ability to raise capital, our ability to conduct regular business and our financial results.

 

 

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Item 1. Business.

 

Overview

We are a clinical-stage biopharmaceutical company aiming to transform the treatment of mental health disorders. We were founded in 2018 as a response to the significant unmet need and lack of innovation in the mental health treatment landscape, as well as the emergence of therapies that previously may have been overlooked or underused, including psychedelic compounds and digital therapeutics and, on June 22, 2021, we closed the initial public offering (“IPO”) of our common shares on the Nasdaq Stock Market (“Nasdaq”).

 

Our Business and Strategy

We have a bold and ambitious vision: to heal mental health disorders so that everyone, everywhere can live a more fulfilled life.

 

Mental health disorders such as depression, substance use disorder, or SUD, and anxiety, which are among our initial focus indications, are highly prevalent and estimated to affect more than one billion people globally. Additionally, it is expected that more than 50% of the U.S. population will be diagnosed with a mental health disorder at some point in their lifetime. Most recently, the COVID-19 pandemic has had a negative impact on mental health and has resulted in an increasing incidence, with depression rates reported to have increased threefold compared to those reported pre-pandemic. Those suffering from mental health disorders have higher mortality rates than the general population and often experience decreased quality of life as a result of emotional, behavioral or physical manifestations. In addition, the total costs of mental health disorders are significant and expected to increase substantially. Between 2009 and 2019, spending on mental health care in the United States increased by more than 50%, reaching $225 billion, and a Lancet Commission report estimates the global economic cost will reach $16 trillion by 2030. While current treatments, such as selective serotonin reuptake inhibitors, or SSRIs, and serotonin-norepinephrine reuptake inhibitors, or SNRIs, are well established and effective for certain patients, a significant percentage of patients either respond inadequately or relapse, translating to a significant unmet patient need.

 

We have built a pipeline of 13 drug and discovery development programs and four enabling technologies, each led by focused teams with deep expertise in their respective fields and supported by our internal development and operational infrastructure. We believe that several of our therapeutic programs’ target indications have potential market opportunities of at least $1 billion in annual sales, if approved.

 

Our business is organized along three strategic pillars:

Rapid acting intervention: first, second, and third generation compounds that result in rapid-acting improvement of mental health disorders;
Ongoing digital support: additional care that is provided to patients before, during, and after initial treatment interventions; and
Biomarker-driven precision mental health: the identification of patient sub-types using biological and digital biomarkers.

 

https://cdn.kscope.io/d17c31f510edab39900a00ce4a63809d-img104120494_0.jpg 

We operate a decentralized model to enable scalable drug or technological development at our atai companies. Our atai companies drive development of our programs and enabling technologies that we have either acquired a controlling or significant interest in or created de novo. We believe that this model provides our development teams the support and incentives to rapidly advance their therapeutic candidates or technologies in a cost-efficient manner. To continue to grow our business and to aid in the development of our various

 

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programs, we intend to continue to incubate, acquire and invest in companies that share our goal of advancing transformative treatments for patients that suffer from mental health disorders.

 

Our Platform

To support the ongoing growth of our pipeline and the development of our existing programs, we have established a platform that underpins our operations. Our platform consists of our process, our people and our enabling technologies.

 

Our Process

Our process comprises three core elements: (i) disciplined new program selection, focusing on differentiated mental health opportunities encompassing psychedelic compounds and nonpsychedelic compounds, (ii) decentralized operations with access to shared resources, which we believe facilitates scalable drug or technological development in a capital efficient manner, and (iii) impactful capital allocation and strategic value capture.

 

Disciplined New Program Selection

We focus on differentiated mental health opportunities that we believe present significant commercial potential and a high probability of clinical success based on screening along certain criteria, including the following:

 

 

 

Therapeutic focus in mental health. We are focused on developing innovative therapeutics for mental health disorders based on new insights into the brain’s response to therapies that may previously have been overlooked or underused, including psychedelic compounds, nonpsychedelic compounds and digital therapeutics. Despite a previous stigma, psychedelics are emerging as novel breakthrough therapies for mental health disorders, such as depression and SUD, with growing scientific support, recent regulatory advancements and increasing patient and physician acceptance. There is a growing body of clinical evidence that supports the potential efficacy and safety profile of psychedelics, which may have potential therapeutic benefits, such as a rapid onset of effect and sustained efficacy after a short-course of administration. Our pipeline also includes nonpsychedelic compounds. We believe these programs, which include new molecular entities as well as variants of known compounds with unique pharmacology, have the potential to address unmet needs in mental health disorders.

 

 

 

Prior evidence in humans. We prioritize the development of compounds and compound classes that have shown potential for efficacy and safety in prior clinical trials or observational studies.

 

 

 

Differentiated pharmacological and treatment effect. We prioritize the development of compounds with novel pharmacological characteristics including the potential for rapid onset, enhanced efficacy and improved tolerability. Our programs include natural products and their derivatives that have not previously been formally developed as drugs, as well as de novo compounds.

 

 

 

Rapid clinical proof of concept. Our approach to research and development involves defining discrete de-risking steps that constitute go/no-go decision points. Our clinical development strategy is focused on obtaining clinical proof of concept from modestly sized, short duration trials where a clinical effect or a biomarker of efficacy can be observed before investing in larger trials.

 

 

 

Significant commercial opportunity. We prioritize opportunities that we believe, if approved, have a peak sales potential of $1 billion or more.

 

 

 

Potential synergies with our existing pipeline. We intend to pursue opportunities which align with our selection criteria and for which we believe we have a competitive advantage due to synergies with our existing knowledge, capabilities, infrastructure, pipeline programs and enabling technologies, among others.

 

Decentralized Operations with Access to Shared Resources

We operate a decentralized model to enable scalable drug or technological development. Our atai companies are led by teams dedicated to advancing their respective therapeutic candidates. We believe that this model provides our development teams the support and incentives to rapidly advance their therapeutic candidates or technologies in a cost-efficient manner. Key elements of our operating model include:

 

 

 

Shared operational backbone. Our central organization provides operating leverage to our teams by providing shared services and expertise, such as scientific insight, intellectual property, strategy, data analytics and clinical and regulatory support.

 

 

 

Efficient cost structure. We believe our shared operational model enables us to minimize overhead costs that may otherwise be incurred by individual companies that are required to build out full non-research and development support functions and fixed cost infrastructure, despite relatively small pipelines.

 

 

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Entrepreneurial incentives and decentralized decision making. Each program is supported by a team of experts and specialists who are incentivized to achieve success. For subsidiaries that we have acquired, the management teams hold equity interests in those particular entities, thus providing equity incentives at the program level. This creates an intense focus on advancing drug candidates for patients. Though ultimate oversight of our company is at the atai level, our structure includes certain operational determinations made by respective management and stakeholders closest to the programs, which we believe results in faster and more effective program management.

 

 

 

Network of academic and business leaders. Our broad focus on developing therapeutics for the treatment of mental health disorders benefits from our network of advisors that includes many of the leading experts in the mental health field. In addition, a number of scientific advisory board members at both atai and our subsidiaries guide the development of each of our programs.

 

Impactful Capital Allocation and Strategic Value Capture

We look to optimize deployment of our capital in order to maximize value for our stakeholders. Key components of our approach include:

 

 

 

Diversified pipeline. We have built a pipeline of 13 drug and discovery development programs that vary across stage of development, indication and mechanism of action and we intend to add further programs to our pipeline, which we believe will improve the commercial potential and risk profile of our pipeline in the aggregate. We believe our programs are clinically uncorrelated, which has the potential to mitigate the impact of any single program failure. In addition, we also have four enabling technologies to help support the development of our pipeline and be used as patient support tools.

 

 

 

Discrete de-risking decision points. Our approach to research and development involves defining discrete de-risking steps that constitute go/no-go decision points in the development of our programs. This approach allows each atai company to focus on achieving their next milestone and provides us with appropriate control over each program. If our programs do not meet our criteria for advancement at a particular stage, we will discontinue the program in order to focus our resources and capital more effectively.

 

 

 

Optimized value capture. We intend to provide the necessary funding and operational support to our programs to maximize their probability of success in clinical development and commercialization. However, we regularly review the status of our programs to assess whether there are alternative forms of ownership, partnership or other forms of collaboration that would optimize our economic interests and the success of our programs.

 

Our People

We were founded by Christian Angermayer, a prominent biotech investor and the founder of Apeiron Investment Group Ltd. (Apeiron”), our largest shareholder, Florian Brand, our Chief Executive Officer, Srinivas Rao, our Chief Scientific Officer, and Lars Christian Wilde, Co-founder of COMPASS Pathways plc (COMPASS), with the aim of transforming the treatment of mental health disorders. This focus came out of direct experience with the trauma of mental health challenges such as depression and awareness of the potential solutions offered by unconventional approaches including psychedelic compounds. In addition to our founders, we have an experienced senior leadership team including Greg Weaver, our Chief Financial Officer, and Rolando Gutiérrez-Esteinou, our Chief Medical Officer. For more information regarding our people, see below under the section titled “Human Capital Management”.

 

Our Enabling Technologies

We believe our enabling technologies have the potential to support the development of our pipeline and be used as patient support tools. We currently have four enabling technologies housed at our atai companies: Introspect Digital Therapeutics, InnarisBio and Psyber, as well as IntelGenx Technologies, a strategic investment of ours. Introspect Digital Therapeutics is a digital therapeutics platform dedicated to improving patient outcomes through personalized care. InnarisBio is a formulation technology company developing a sol-gel based, intranasal excipient technology. Psyber is developing an EEG-based brain-computer interface technology for psychiatric use. IntelGenx Technologies is an oral thin film ("OTF") drug delivery system manufacturer that is currently developing an OTF formulation of Viridia's VLS-01. None of our existing programs were developed using these enabling technologies, and many of these technologies remain in early stage testing and development. We intend to use these enabling technologies to support the future development of our programs. For more information regarding our enabling technologies, see below under the section titled “Enabling Technologies”.

 

Our Drug Discovery Companies

We also believe in the development of innovative and scalable solutions to better meet patient needs and are conducting robust drug discovery through four subsidiary companies. EntheogeniX Biosciences uses an AI-enabled computational platform to create structurally differentiated molecules. PsyProtix, Inc. ("PsyProtix") is a discovery stage company that is developing compounds to treat specific subsets of treatment resistant depression ("TRD") patients that are characterized by mitochondrial dysfunction, and represents an important first step towards our goal of delivering biomarker-driven precision mental health. In December 2021 and January 2022, respectively, we announced the launch of two new companies to support this commitment in driving next-generation approaches in the treatment of mental health disorders, TryptageniX, Inc. (“TryptageniX”) and Invyxis, Inc. (“Invyxis”). These two companies’ approaches to drug discovery are highly complementary to that of EntheogeniX. TryptageniX will develop new chemical entities ("NCEs") through a unique bioprospecting

 

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and synthetic biology approach and Invyxis brings proven medicinal chemistry and comprehensive biological evaluation capabilities to our discovery efforts. Expanding intellectual property has been essential to our strategy since inception, with key investments made to unlock NCEs. We have already made substantial progress in our drug discovery efforts to date, synthesizing and screening approximately 300 compounds and identifying novel scaffolds that display potential in targeting mental health disorders. For more information regarding our drug discovery companies, see below under the section titled “Drug Discovery Companies”.

 

Our Programs

 

Our Emerging Clinical and Preclinical Programs

 

Our pipeline currently consists of therapeutic candidates across multiple neuropsychiatric indications including depression, cognitive impairment associated with schizophrenia ("CIAS"), opioid use disorders ("OUD"), anxiety, mild traumatic brain injury ("mTBI") and post-traumatic stress disorder ("PTSD"). We believe there may be additional indications with potential for treatment using psychedelic therapeutics, including obsessive-compulsive disorder, attention deficit disorder, hyperactivity disorder and eating disorders, each of which we believe represent areas of unmet medical need. The table below summarizes the status of our product candidate portfolio as of the filing date of this Form 10-K.

https://cdn.kscope.io/d17c31f510edab39900a00ce4a63809d-img104120494_1.jpg 

Note: DMT = N,N-dimethyltryptamine; MDMA = 3,4-Methyl​enedioxy​methamphetamine; DTx = Digital Therapeutics

(1)
Perception, Recognify, DemeRx IB, Kures and Neuronasal are all variable interest entities; GABA is a non-consolidated VIE with operational involvement through MSA model; EmpathBio, Revixia and Viridia are wholly-owned subsidiaries; COMPASS Pathways and DemeRx NB are non-controlling equity interests.
(2)
RL-007 compound is (2R, 3S)-2-amino-3-hydroxy-3-pyridin-4-yl-1-pyrrolidin-1-yl-propan-1-one(L)-(+) tartrate salts
(3)
Including EntheogeniX, TryptageniX, Invyxis
 

The following is a summary of our clinical and preclinical programs, including related prior evidence in humans based on third-party clinical trials or studies, recent advancements, and upcoming milestones, as applicable.

 

Perception Neuroscience: PCN-101 for TRD

 

Product concept: PCN-101 is a parenteral formulation of R-ketamine, a glutamatergic modulator that is a component of racemic ketamine and is being developed as a rapid-acting antidepressant, with the potential to be an at-home non-dissociative alternative to S-ketamine (marketed as SPRAVATO).
Prior evidence in humans: In a third-party clinical trial, another formulation of R-ketamine was observed to produce a rapid and durable response with limited dissociative side effects in patients with TRD. In September 2020, Perception Neuroscience completed a Phase 1 trial of PCN-101 supporting the advancement of PCN-101 into a Phase 2a proof-of-concept trial. In September 2021, the Phase 2a proof-of-concept trial of PCN-101 for TRD was initiated.

 

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Upcoming milestones: In December 2021, the FDA gave Investigational New Drug ("IND") clearance for the development of PCN-101 for the treatment of TRD. In September 2021, the Phase 2a proof-of-concept trial of PCN-101 for TRD was initiated. This randomized, double-blind, placebo-controlled Phase 2a proof-of-concept trial is designed to assess the efficacy, safety, dose response, and duration of response in patients with TRD. A topline data readout of this trial is expected by the end of 2022. We also anticipate results from a PCN-101 Phase 1 trial that bridges between the current intravenous formulation to a subcutaneous formulation to support at-home use, by the end of 2022.

 

Recognify Life Sciences: RL-007 for CIAS

 

Product concept: RL-007, a cholinergic, glutamatergic and GABA-B receptor modulator, is an orally available compound that is thought to alter the excitatory/inhibitory balance in the brain to produce pro-cognitive effects. We are developing this compound for the treatment of CIAS.
Prior evidence in humans: In third-party studies, other formulations of this compound have been shown to effect a significant improvement in aspects of cognitive function in both experimental paradigms involving healthy subjects as well as in a Phase 2 trial in patients suffering from diabetic peripheral neuropathic pain. In April 2021, Recognify initiated a Phase 2 proof-of-mechanism study for RL-007 in 32 CIAS patients, after receiving IND clearance from the U.S. Food and Drug Administration to commence clinical trials for the treatment of CIAS. The study was designed to evaluate the effects of RL-007 on safety, tolerability, electroencephalogram-based biomarkers and cognition.
Recent advancements: In December 2021, we announced positive biomarker data from the Phase 2a proof-of-mechanism study of RL-007 in CIAS patients. RL-007 was well tolerated and demonstrated a clinically meaningful behavioral pro-cognitive profile consistent with previous Phase 1 and 2 trials of this compound. Changes in quantitative electroencephalogram ("qEEG") consistent with a previous Phase 1 trial involving a scopolamine challenge were noted. These results support the progression of RL-007 to a double-blind, placebo-controlled Phase 2a proof-of-concept trial with the goal of demonstrating the pro-cognitive benefit of RL-007 in CIAS.
Upcoming milestones: We anticipate the Phase 2a proof-of-concept trial to be initiated in the second half of 2022.

 

GABA: GRX-917 for GAD

 

Product concept: GRX-917 is an oral formulation of a deuterated version of etifoxine, a compound that has a long history of prescription use in France and other countries for treating anxiety disorders. GRX-917 is designed to provide rapid anxiolytic activity with improved tolerability compared to current treatments for anxiety available in the United States.
Prior evidence in humans: Etifoxine has been observed to have the rapid onset of anxiolytic activity of benzodiazepines without their sedating or addicting properties. Furthermore, etifoxine is not associated with abuse, dependence or respiratory depression and has been observed to have no significant impact on motor skills or cognition.
Recent advancements: In June 2021, GABA initiated a Phase 1 single and multiple ascending dose trial of GRX-917. The ongoing Phase 1 trial is a randomized, double-blind, placebo-controlled study of the safety, tolerability and pharmacokinetics of single-ascending and multiple-ascending doses of GRX-917 administered orally to healthy volunteers.
Upcoming milestones: Topline data for this trial is expected by mid-year 2022 and the initiation of a Phase 2a proof-of-concept trial is anticipated to follow in the second half of this year.

 

DemeRx IB: DMX-1002 for OUD

Product concept: DMX-1002 is an oral formulation of ibogaine, a cholinergic, glutamatergic and monoaminergic receptor modulator that is a naturally occurring psychedelic product isolated from a West African shrub, that we are developing for the treatment of OUD.
Prior evidence in humans: In third-party studies evaluating other formulations of ibogaine, significant reductions in opioid cravings were observed, both at discharge and at one month post treatment, and were associated with improved mood in patients with OUD.
Recent advancements: DMX-1002 is being tested in an ongoing Phase 1/2 trial to evaluate its safety, tolerability, pharmacokinetics, and efficacy in recreational drug users and healthy volunteers, to help inform future studies in patients with opioid use disorder.
Upcoming milestones: We expect safety data from the phase 1 element of the this trial in the second half of 2022.

 

 

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Kures: KUR-101 for OUD

 

Product concept: KUR-101 is an oral formulation of deuterated mitragynine being developed for the treatment of OUD. Mitragynine is a component of the leaves of kratom (Mitragnyna speciosaz).
Prior evidence in humans: Kratom has a long history of traditional medicine use as an analgesic in parts of Southeast Asia, and its use in the United States has increased in recent years, particularly amongst individuals seeking to reduce prescription opioid consumption or manage opioid withdrawal symptoms. Published third-party human data involving isolated mitragynine are limited, but recent mechanistic insights suggest that this compound may be well-suited for the medically assisted therapy of OUD.
Recent advancements: KUR-101 is a Phase 1 randomized, double-blind, two-part study of the safety, tolerability, pharmacokinetics, analgesic and respiratory effects of KUR-101 in healthy volunteers. Part 1 is a 5 cohort ascending dose design of a single dose of KUR-101. Part 2 is a three-period crossover design to compare the analgesic and respiratory effects of a single oral dose of KUR-101, a single oral dose of OxyNorm®, and a single oral dose of placebo in healthy male volunteers.
Upcoming milestones: A Phase 1 single ascending dose trial to evaluate the maximum tolerable dosage was initiated, with first patient dosed in March and topline results expected in the second half of 2022.

 

Revixia Life Sciences: RLS-01 for TRD

 

Product concept: RLS-01 is a formulation of SalA, a naturally occurring dissociative hallucinogenic compound, with pharmacology differentiated from that of psilocybin or DMT, being developed for the treatment of TRD and other indications.
Prior evidence in humans: In a third-party study of another formulation of SalA, the effects of the compound were observed to be similar to those of psilocybin based upon functional brain imaging. We believe these data combined with anecdotal usage reports suggest that SalA may possess rapid-acting antidepressant properties.
Upcoming milestones: RLS-01 is in preclinical development for TRD with a Phase 1 trial expected to be initiated in the second half of 2022.

 

Viridia Life Sciences: VLS-01 for TRD

 

Product concept: VLS-01 is a formulation of DMT, the active moiety of the traditional, hallucinogenic drink ayahuasca. DMT is characterized by an intrinsically short duration of psychedelic effect with a serum half-life estimated at less than 10 minutes. VLS-01 is formulated to provide a psychedelic experience lasting 30 to 45 minutes, thus potentially allowing for a shorter clinic visit compared to many other psychedelic compounds that may require a patient to be monitored for four or more hours.
Prior evidence in humans: Ayahuasca administration was shown to provide significant antidepressant effects compared with placebo at one, two and seven days after dosing in a double-blind, randomized, placebo-controlled third-party clinical trial in patients with TRD.
Upcoming milestones: VLS-01 is in preclinical development for TRD with a Phase 1 trial expected to be initiated in the middle of 2022. The study will utilize buccal and IV formulations in healthy adult volunteers to assess the relative bioavailability of the buccal versus IV formulations, the safety and tolerability of VLS-01 administered by both routes, as well as pharmacodynamics using qEEG and other measures.

 

EmpathBio: EMP-01 for PTSD

Product concept: EMP-01 is an oral formulation of an MDMA derivative being developed for the treatment of PTSD. We are developing EMP-01 for the potential to have an improved therapeutic index compared to racemic MDMA.
Prior evidence in humans: In a meta-analysis of 21 third-party trials of other formulations of MDMA-combined with psychotherapy for the treatment of PTSD, the benefits of such treatment were statistically significant versus placebo or active placebo-assisted therapy alone. In addition, a recent third-party randomized, double-blind, placebo-controlled phase 3 study with 90 patients with severe PTSD, showed statistically significant reduction in PTSD symptoms in the MDMA-assisted psychotherapy group versus placebo.
Upcoming milestones: EMP-01 is in preclinical development for PTSD with a Phase 1 trial expected to be initiated in the second half of 2022.

 

 

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Neuronasal: NN-101 for mTBI

Product concept: NN-101 is a novel intranasal formulation of NAC. NAC is believed to stimulate the synthesis of GSH, an endogenous antioxidant that plays a protective role in the pathogenesis of mTBI.
Prior evidence in humans: An orally administered formulation of NAC was shown to increase the probability of mTBI symptom resolution at seven days in a third-party study conducted by the U.S. Army. Neuronasal has also completed a pilot study of NN-101 in nine healthy volunteers. In this pilot study, NN-101 was observed to be approximately 20 times and 100 times more brain-penetrant compared to IV and oral NAC, respectively, and was well tolerated.

 

Programs and Lead Indications

Depression Background

Depression is characterized by persistent depressed mood and loss of interest or pleasure in most daily activities of at least two weeks’ duration. These symptoms are often accompanied by fatigue, difficulty concentrating, psychomotor impairments and suicidal ideation, among others. Depression is one of the most prevalent psychiatric disorders and a leading cause of disability worldwide, affecting an estimated 300 million people globally, with depression rates reported to have increased threefold in the U.S. since the onset of the COVID-19 pandemic, for example. There are a wide range of available therapies for depression, including pharmacological treatments and psychological interventions, but these approaches have significant limitations for many patients, including slow and/or inadequate response, resulting in a significant unmet medical need.

 

Pharmacological treatment of depression is mostly based on drugs targeting the monoaminergic neurotransmitter system. Available therapies include antidepressants, such as SSRIs or SNRIs, and atypical antipsychotics, among others. In addition to efficacy limitations—as manifested by high rates of treatment resistance—these therapies are often associated with significant side effects, including weight gain, fatigue, nausea, apathy, sleep disturbances and sexual dysfunction, all of which can impair patient quality of life and impact compliance. It is estimated that global antidepressant sales could reach at least $8 billion by 2025.

 

We are initially focused on a subtype of depression referred to as TRD. TRD is a severe form of major depressive disorder, or MDD, comprising patients who inadequately respond to two or more depression treatments. Approximately one third of patients with MDD are diagnosed with TRD.

 

TRD is estimated to afflict approximately 100 million people globally and has greater economic and societal costs as compared to MDD patients that are not treatment resistant. TRD patients are often unable to perform daily tasks, are less productive at work and have higher rates of unemployment. These patients are also more likely to receive disability or welfare benefits and are reported to have a higher frequency of co-occurring conditions, including hypertension, anemia and diabetes. In addition, direct medical costs for TRD patients are estimated to be two to three times higher than for MDD patients that are not treatment resistant, with an average of twice the number of inpatient visits and hospital stays that are over one-third longer. Furthermore, it has been found that the proportion of TRD patients that have attempted suicide may be as high as 30%, approximately a seven-fold increase compared with non-TRD MDD patients.

 

Given the limitations of existing therapeutic treatments, there continues to be high unmet need for antidepressants that provide greater efficacy, faster onset of effect, higher remission rates and improved tolerability. Most pharmacotherapies for depression use the same mechanism of action targeting the monoaminergic system and until recently, no novel mechanism of action had been approved for depression in several decades. S-ketamine (SPRAVATO) is a therapy for TRD approved in 2019 with a novel mechanism of action. S-ketamine (also referred to as esketamine) is one of the two enantiomers that constitute ketamine, an N-methyl-D-aspartic acid, or NMDA, receptor antagonist that has been used on-label for several decades for anesthesia induction, as well as off-label for depression and chronic pain. Ketamine consists of S-ketamine and R-ketamine in a 1:1 ratio.

 

S-ketamine addresses some of the limitations of current therapies with rapid onset of action and improved efficacy in treatment resistant patients. However, S-ketamine has several drawbacks, including the need for multiple administration sessions in a doctor’s office involving a minimum two hour stay. The requirement for a supervised setting for administration is driven by both the dissociative side effects and abuse potential of S-ketamine. Thus, high unmet need still exists despite S-ketamine’s approval.

 

Perception Neuroscience (PCN-101)

Perception Neuroscience is developing PCN-101, a subcutaneous formulation of R-ketamine, as a therapy for psychiatric indications, initially focused on TRD. PCN-101 is being evaluated as a rapid-acting antidepressant therapy with potential benefits over S-ketamine, including a nondissociative profile that has the potential to allow for at-home use and the possibility of combination treatment with SSRIs.

 

 

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We believe PCN-101 has a potentially superior therapeutic profile versus S-ketamine based on the following observations in head-to-head third-party nonclinical studies of S-ketamine and other R-ketamine formulations:

 

 

 

Favorable tolerability profile. R-ketamine was observed to have an approximately four-fold lower affinity for the NMDA receptor relative to S-ketamine in in vitro studies. Pharmacological activity at the NMDA receptor is thought to underlie some of the safety and tolerability issues associated with ketamine and S-ketamine, including the dissociative side effects.

 

 

 

Greater Potency. R-ketamine was observed to be more potent compared to S-ketamine in multiple mouse models of depression.

 

 

 

Longer duration of effect. R-ketamine led to longer duration of benefits compared to S-ketamine in multiple mouse models of depression.

 

 

 

Reduced abuse potential. R-ketamine was observed to have no change in the conditional place preference, or CPP, score, a standard preclinical measure of abuse potential based on the ability of a drug to be associated with reward behavior. Conversely, administration of ketamine and S-ketamine in mice led to an increase in CPP score at doses efficacious in models of depression.

 

Prior Evidence in Humans

Across previously published, academic, third-party clinical studies involving other formulations, a total of 78 subjects have been administered R-ketamine in its purified form. Overall, less pronounced psychotomimetic and dissociative-like effects were reported with R-ketamine than with S-ketamine at equimolar doses.

 

Preliminary clinical evidence for the efficacy and tolerability of R-ketamine in patients with TRD was reported in the European Archives of Psychiatry and Clinical Neuroscience in 2020. This publication describes the results of a third-party, open-label trial conducted in seven TRD patients. A single IV infusion of R-ketamine (0.5 mg/kg) was reported to lead to a reduction in Montgomery-Åsberg Depression Rating Scale, or MADRS, a widely accepted scale for depression that has been used as a primary endpoint in pivotal trials of other depression treatments, within 60 minutes that was largely sustained through at least seven days, as shown in the figure below. The mean Clinician-Administered Dissociative States Scale, or CADSS, measures dissociative symptoms with a score of four or less being considered normal. At 40 minutes, the average CADSS score of R-ketamine was 1.1 (SD 1.7), whereas ketamine and S-ketamine reported mean CADSS scores of 18.2 and 14.9, respectively, in prior third-party clinical trials. It was observed that R-ketamine may produce rapid onset and sustained antidepressant effects in humans with a favorable tolerability profile and with dissociation being nearly absent.

 

A rapid decrease in depressive symptoms with limited dissociative side effects was seen in TRD patients after a single IV dose of R-ketamine

 

https://cdn.kscope.io/d17c31f510edab39900a00ce4a63809d-img104120494_2.jpg 

 

Note: Error bars represent standard deviation; MADRS = Montgomery Asberg Depression Rating Scale; CADSS = Clinician Administered Dissociative Symptom Scale; (n=7)

 

Phase 1 Clinical Data for PCN-101

In 2020, Perception Neuroscience conducted a Phase 1 trial of PCN-101 delivered by IV infusion in New Zealand. The study consisted of two parts. The objective of part one was to identify an acceptable tolerated dose of PCN-101 delivered by IV infusion in 48 healthy adults using a single ascending dose design. Safety endpoints included adverse events, vital signs, ECG parameters, blood hematology and chemistry, and clinical measures of sedation, dissociation, and psychotomimetic effects. Dose-related pharmacokinetics of PCN-101 were

 

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also assessed. Part two was a double-blind, cross-over comparison of the relative safety and tolerability of the acceptable tolerated dose of PCN-101 identified in part one to S-ketamine, both delivered by IV infusion in ten healthy volunteers.

 

The Phase 1 data in healthy volunteers showed that PCN-101 was well tolerated at all doses up to 150 mg. Observed side effects were transient and consistent with expected effects seen with ketamine and S-ketamine. Importantly, the onset of dissociative and psychotomimetic effects was observed to occur at fourfold higher doses than the equimolar doses of S-ketamine. Qualitatively, the pattern of effects on dissociation and altered states of consciousness seemed similar to the effects seen with S-ketamine, albeit occurring at higher dose levels with PCN-101.

 

Phase 2 Clinical Trial of PCN-101

In September 2020, Perception Neuroscience completed the Phase 1 trial of PCN-101 supporting the advancement of PCN-101 into a Phase 2a proof-of-concept trial. In September 2021, Perception Neuroscience initiated the Phase 2a proof-of-concept trial of PCN-101 for TRD. This randomized, double-blind, placebo-controlled trial is designed to assess the efficacy, safety, dose response and duration of action in patients with TRD. A topline data readout of the Phase 2 proof-of-concept trial is expected by the end of 2022.

 

Patients will be randomized into three groups receiving a single infusion of either 30 mg of PCN-101, 60 mg of PCN-101 or placebo in clinic. The trial will aim to enroll approximately 93 patients in total (approximately 31 per cohort). PCN-101 at 30 mg and 60 mg dosages will be evaluated. In-clinic treatment will be preceded by a screening period and followed by two follow-up periods where clinical parameters will be assessed. The primary endpoint of the trial will be an assessment based on MADRS at 24 hours. Safety assessment measures will include CADSS, Modified Observer’s Assessment of Alertness/Sedation Scale and Brief Psychiatric Rating Scale Positive Symptoms Subscale.

 

Other Clinical Trials of PCN-101

As we announced in January 2022, the FDA gave IND clearance to conduct a clinical DDI trial of PCN-101 for TRD. We also anticipate results from a Phase 1 trial that bridges between the current intravenous formulation to a subcutaneous formulation of PCN-101 to support at-home use by the end of 2022.

 

Viridia Life Sciences (VLS-01)

Viridia Life Sciences, our wholly owned subsidiary, is developing VLS-01, a synthetic form of DMT being developed in buccal and IV formulations initially for the treatment of TRD. DMT is the active psychedelic moiety in ayahuasca, a hallucinogenic drink made from a combination of leaves from several South American plants that has been shown to have antidepressant effects. Formulations of isolated or synthetic DMT that have been tested clinically to date include those that are inhaled or injected intravenously. As a result of the rapid absorption associated with these routes of administration and DMT’s inherently fast metabolism, such approaches have been associated with poor tolerability and a very short duration of psychedelic effect.

 

Other psychedelic therapies, such a psilocybin, are promising treatments for depression, but their long duration of psychedelic effect requires a patient to be monitored for four to six hours, which may limit patient uptake and adherence. We are designing our buccal formulation of DMT to have the following characteristics:

 

 

 

Improved PK Profile. Our formulation is intended to have a longer absorption window while improving tolerability.

 

 

 

Short Duration of Psychedelic Effect. Relative to many other psychedelic therapies, our formulation of DMT is designed to have a shorter duration of psychedelic effect at 30 to 45 minutes, which would allow for a shorter clinic visit compared to many other psychedelic compounds.

 

Viridia Life Sciences is working to develop a digital therapeutic, in collaboration with both Psyber and IntroSpect Digital Therapeutics, to provide contextual “(mind)set-and-setting” prior to dosing, as well as behavioral activation therapy, group therapy, and patient monitoring post dosing.

 

Prior Evidence in Humans

In a double-blind randomized placebo-controlled third-party trial in 29 patients with TRD, statistically significant antidepressant effects of ayahuasca given orally were observed when compared with placebo, based on changes in depression severity measured with the MADRS at baseline and at one, two and seven days after dosing. The antidepressant effects of ayahuasca were observed at each time point compared to placebo.

 

 

 

 

 

 

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An oral dose of ayahuasca led to rapid and sustained decrease in mean MADRS relative to placebo

https://cdn.kscope.io/d17c31f510edab39900a00ce4a63809d-img104120494_3.jpg 

 

 

Note: Error bars represent standard error of the mean; MADRS = Montgomery Asberg Depression Rating Scale; (n=29)

*denotes p-value <0.05.

***denotes p-value <0.0001.

 

Planned Phase 1 Clinical Trial of VLS-01

VLS-01 is in preclinical development for TRD with a Phase 1 trial expected to be initiated in the middle of 2022. The study will utilize buccal and IV formulations in healthy adult volunteers to assess the relative bioavailability of the buccal versus IV formulations, the safety and tolerability of VLS-01 administered by both routes, as well as pharmacodynamics using qEEG and other measures.

 

Revixia Life Sciences (RLS-01)

Revixia Life Sciences, our wholly owned subsidiary, is developing RLS-01, a formulation of Salvinorin A, or SalA, for the treatment of TRD. SalA is a unique, non-orally bioavailable, non-nitrogenous agonist of the kappa-opioid receptor, or KOR, with potential use in treating TRD, SUD and pain. The compound is naturally occurring and is derived from the Salvia divinorum plant. SalA’s non-serotonergic mechanism of action (unlike psilocybin and DMT) may allow for combination treatment with SSRIs and other therapies that share a serotonergic mechanism of action.

 

Revixia Life Sciences is working to develop a digital therapeutic, in collaboration with both Psyber and IntroSpect Digital Therapeutics, to provide contextual “(mind)set-and-setting” prior to SalA dosing, behavioral activation therapy, group therapy, and patient monitoring.

 

Prior Evidence in Humans

A double-blind, placebo-controlled, randomized third-party study of 30 participants evaluated the acute differences in behavioral and psychological effects of enhanced, smoked S. divinorum leaf (containing approximately 40 µg/mg SalA per dried leaf) relative to a placebo compound (containing a presumed non-psychoactive dose of approximately 4 µg/mg SalA per dried leaf) and found that all six Hallucinogen Rating Scale, or HRS, clusters were significantly elevated (p<0.05) for participants given the active S. divinorum leaf, consistent with a hallucinogenic effect. No significant adverse events were observed or reported by the participants. Additionally, in a third-party study of another formulation of SalA, the effects of the compound were observed to be similar to those of psilocybin based upon functional brain imaging.

 

Planned Phase 1 Clinical Trial of RLS-01

RLS-01 is in preclinical development for TRD with a Phase 1 trial expected to be initiated in the second half of 2022.

 

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Cognitive Impairment Associated with Schizophrenia (CIAS) Background

Schizophrenia is a chronic, psychiatric disorder characterized by a heterogeneous combination of symptoms, including psychosis, social withdrawal, flattened affect and cognitive impairment. It is one of the most debilitating mental illnesses known and often requires patients to be under medical care for their entire lives.

 

It is estimated that schizophrenia affects over 21 million people globally and approximately 2.4 million people in the United States. Approximately 300,000 new cases are diagnosed each year in the United States. People with schizophrenia are two to three times more likely to die early than the general population, with suicide being the main contributor in the early course of disease and cardiovascular disease being the main contributor in later years.

 

Schizophrenia is considered more than a psychotic disorder. Patients are often limited in their ability to distinguish facial expressions, voice tone or pitch, and have difficulty with tasks related to learning, memory and mental processing. Nearly every schizophrenia patient is affected by CIAS, limiting both social and non-social cognitive functions.

 

The annual U.S. economic burden due to schizophrenia is estimated to exceed $155 billion. People living with schizophrenia often experience a reduced quality of life and are more likely to be homeless, unemployed or living in poverty compared with the general population. While antipsychotics are most commonly used to treat the psychotic symptoms of schizophrenia, these medications fail to address the cognitive and negative symptoms and are often associated with severe dose limiting effects. It is estimated that global sales of antipsychotics could reach $13 billion or more by 2025. To date, there are no pharmacological treatments approved for CIAS.

 

Recognify Life Sciences (RL-007)

Recognify is developing RL-007, an orally available compound that is thought to modulate the excitatory/inhibitory balance to improve learning and memory, supporting potential use in CIAS patients. RL-007 is thought to impact the cholinergic, NMDA and gamma aminobutyric acid type B, or GABAB, receptor systems. We have observed pro-cognitive effects of RL-007 in animal models and in clinical trials, and RL-007 is thought to act directly on brain regions involved with learning and memory processes. In contrast to other compounds that modulate GABAB receptors, we observed RL-007 to be non-sedating in preclinical studies at doses approximately 1000 times greater than its effective dose. The non-sedating effects of the compound were equally observed in subsequent clinical studies.

 

Prior Evidence in Humans

RL-007 was previously in development for the treatment of neuropathic pain and has been tested in nine Phase 1 and Phase 2 clinical trials. The compound has been assessed in over 500 subjects and no drug-related serious adverse events were observed. Pro-cognitive effects of RL-007 were observed in three prior third-party clinical trials, including two Phase 1 trials and one Phase 2 trial.

 

In a clinical pharmacology trial in healthy volunteers, RL-007 at doses of 30 mg, 150 mg and 750 mg, was observed to protect against the memory impairing effects of a single dose of scopolamine (0.5 mg). At the lowest dose tested, RL-007 was observed to protect against scopolamine-induced impairment of episodic memory as shown by an improvement in the composite score of ‘Quality of Episodic Secondary Memory’ during cognitive testing at 1.5 and 3 hours following the dose. This improvement was primarily due to the effects on the delayed word recall task. Further evidence of the protective effect of RL-007 at the 30 mg dose was observed against scopolamine-induced impairment of the ability to sustain attention, as indicated by an improvement in the composite score ‘Continuity of Attention’ at 1.5 hours following the dose. This improvement was primarily due to the effects of RL-007 on the subject performance on the Digit Vigilance False Alarms Test. At later time points (4.5 and 10 hours following the dose), a delayed recovery from the effects of scopolamine was seen on several measures, primarily in the cohorts receiving the higher doses of RL-007.

 

A randomized double-blind, placebo and active-controlled Phase 2a crossover trial of RL-007 was conducted in 181 patients with diabetic neuropathy by a third party. No improvements in pain scores were associated with RL-007. As part of this trial, cognitive function was assessed using a standard computerized cognitive test battery, Cogstate, which assessed cognitive abilities such as attention, concentration, verbal learning and memory, working memory and global cognitive functioning. In the cohort receiving RL-007 at the lower dose (40 mg TID for one week, then 80 mg TID for three weeks), significant improvement in immediate and delayed word recall was observed compared with placebo, suggesting that RL-007 may be associated with cognitive enhancement.

 

Verbal learning includes immediate and delayed word recall exercises by using the International Shopping List Task, or ISLT, method and delivered by Cogstate’s computerized assessment system. The below graph from a third party study illustrates the improved verbal learning ability of the low dose RL-007 (FSV7-007) group (40 or 80mg three times a day (TID)), compared to pregabalin and high dose RL-007 (FSV-007).

 

 

 

 

 

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RL-007 low doses enhanced verbal learning and memory

https://cdn.kscope.io/d17c31f510edab39900a00ce4a63809d-img104120494_4.jpg 

Note: RL-007 (FSV7-007) is (2R, 3S)-2-amino-3-hydroxy-3-pyridin-4-yl-1-pyrrolidin-1-yl-propan-1-one(L)-(+) tartrate salt; TID denotes 3x/day dosing; (n=181)

 

Phase 2a Clinical Trial of RL-007

In December 2021, we announced positive biomarker data from the Phase 2a proof-of-mechanism study of RL-007 in CIAS patients. RL-007 was well tolerated and demonstrated a clinically meaningful behavioral pro-cognitive profile consistent with previous Phase 1 and 2 trials of this compound. Changes in quantitative electroencephalogram ("qEEG") consistent with a previous Phase 1 trial involving a scopolamine challenge were noted. These results support the progression of RL-007 to a double-blind, placebo-controlled Phase 2a proof-of-concept trial in CIAS, which is anticipated to be initiated in the second half of 2022.

 

Substance Use Disorder Background

SUDs are highly prevalent disorders characterized by an inability to control the use of a legal or illegal drug, medication or other psychoactive compound. SUDs typically occur following prolonged, repeated use of a substance at high doses and/or high frequencies and can lead to significant health and social consequences. According to the National Survey on Drug Use and Health, 19.7 million adults in the United States suffered from an SUD in 2017.

 

We are initially focused on OUD, a form of SUD characterized by uncontrolled and persistent self-administration of opioids, resulting in significant impairment, distress, and mortality. In 2017, an estimated 2.1 million people in the United States had an OUD, and 47,600 people died from an opioid drug overdose. OUD’s societal effects are extremely far-reaching as the condition burdens multiple stakeholders. A retrospective secondary analysis using 2018 data from the National Survey on Drug Use and Health and the CDC WONDER Database attributed a $787 billion societal cost to OUD in the United States alone. The most common treatments for OUD are directed at achieving abstinence and include psychological and social interventions.

 

For many patients, pain relief and substance use disorders are fundamentally linked, given the use of opioids to manage acute pain can lead to drug dependence. While opioids are indeed effective for most forms of acute pain, they are associated with a variety of adverse effects, including risk of addiction and respiratory depression, the latter being the main cause of death among opioid users. Of individuals prescribed at least one day of opioids, 6% are still taking them one year later. Moreover, it is estimated that 8% to 12% of individuals prescribed opioids for chronic pain ultimately develop OUD.

 

There are limited pharmacological agents available to treat OUD, with the current options divided into two classes: (i) synthetic opioid receptor full or partial agonists, such as methadone and buprenorphine, respectively, and (ii) opioid antagonists, such as naltrexone and naloxone. These therapies suffer from a number of limitations, including high relapse rates, inconvenient treatment regimens, difficult access and an inability to maintain abstinence after medically assisted withdrawal.

 

 

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Buprenorphine, methadone and naltrexone are used as maintenance therapy with the primary goal of preventing relapse while naloxone is used as rescue therapy for opioid overdose. Access to treatments such as buprenorphine and methadone is limited by their treatment regimens and inherent risks of abuse, placing significant requirements and regulations on practitioners. In addition to these limitations, current treatment options are not highly effective; approximately 75% of patients undergoing OUD therapy experience relapse within one year of treatment. For abuse of other substances, such as cocaine or methamphetamine, no pharmacological agents have been approved.

Despite the limitations of current treatment options, the worldwide market for OUD therapies totaled $1.9 billion in 2018, the vast majority of which came from the United States. Furthermore, due to the significant increase in opioid use and the heightened response to the opioid crisis, the worldwide market for opioid abuse therapies is projected to grow by over 10% per year, signaling significant need for new treatment options.

 

DemeRx IB (DMX-1002)

DemeRx IB is developing DMX-1002, a formulation of ibogaine, initially for the treatment of OUD. Ibogaine is a naturally occurring psychedelic product isolated from a West African shrub. Ibogaine was marketed in France as an antidepressant (known as Lambarere) from 1939 to 1970, though it is currently no longer marketed as a therapeutic anywhere in the world. We believe DMX-1002 has the potential to become a disease-modifying treatment for OUD, meaning that a single therapeutic dose administered in a monitored setting could potentially provide reduced opioid use, sustained for a period of at least three months, in previously opioid dependent patients.

 

Prior Evidence in Humans

A single dose of another formulation of ibogaine has been shown in several case series to be an effective treatment for acute opioid withdrawal, from both the physiological and psychological perspectives. A 2018 publication authored by the founder of DemeRx IB describes the results of clinical use of ibogaine to treat SUD in over 180 patients. In this clinical study, treatment of 75 opioid-dependent and 81 cocaine-dependent patients with single doses of 8 mg/kg to 12 mg/kg ibogaine led to significant and durable reductions in ratings of craving at discharge on day 12 and at one month post-treatment. In addition, both opioid- and cocaine-dependent patients reported improved mood from as early as five days after dosing up to at least one-month follow-up.

 

Ibogaine was generally well tolerated when administered in a highly controlled clinical setting. All patients experienced a hallucinatory, dream-like state which typically resolved between six and 12 hours after dosing, though subjective effects were observed up to 24 hours after dosing in some subjects. There were no serious adverse events or deaths that occurred from administration of ibogaine to drug dependent patients in the dose range used in this trial.

 

As shown below, opioid-dependent patients reported significant decreases in drug craving as measured by all Heroin Craving Questionnaire-29 subscales at discharge and at one-month follow-up. Similarly, assessments of mood (The Beck Depression Inventory, or BDI, The Profile of Mood States, or POMS, depression subscale, Symptom Checklist-90 depression subscale) revealed significant reductions in depression, as well as improvement in mood scores from baseline to post-dose and at one-month follow-up (p £0.01 for all).

 

Administration of single doses of ibogaine led to significant reductions in standard instruments used to measure drug craving

 

https://cdn.kscope.io/d17c31f510edab39900a00ce4a63809d-img104120494_5.jpg 

Note: Results depict scores on HCQN subscale (Heroin Craving Questionnaire); Error bars represent standard error of the mean.

 

Phase 1/2 Clinical Trial of DMX-1002

The Phase 1/2 clinical trial of ibogaine HCl (DMX-1002) is being tested in an ongoing Phase 1/2 trial designed to evaluate its safety, tolerability, pharmacokinetics, and efficacy in recreational drug users and healthy volunteers, to help inform future studies in patients with opioid use disorder. The enrollment of approximately 80 patients with OUD are to be treated with DMX-1002 (N=~40) or placebo (N=~40). The primary endpoint of the Phase 2 portion of the trial will be abstinence or harm reductionurine-confirmed relapse out to 90 days post administration of ibogaine. We expect safety data from the phase 1 element of the this trial in the second half of 2022.

 

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Kures (KUR-101)

Kures is developing KUR-101 for the treatment of OUD. KUR-101 is a deuterated version of mitragynine, the major alkaloid in kratom that is a relatively low-potency mu-opioid receptor, or MOR, agonist. KUR-101 is a semisynthetically produced drug substance designed to improve the safety profile and potential effectiveness of mitragynine. In results from our preclinical studies carried out to date, KUR-101 has shown dose-dependent analgesic effect without inducing significant respiratory depression at therapeutic doses in animal models.

 

Prior Evidence in Humans

Consumption of the leaves of kratom tree (Mitragyna speciosa, Rubiaceae family) has a long history in Southeast Asia. Whole leaves and their extracts have been consumed for their psychoactive properties or to self-manage or self-treat a broad range of conditions or ailments including pain and opioid withdrawal symptoms. Typically, only the kratom leaves are consumed, including chewing the whole leaves, ingesting or smoking dried and pulverized leaves or drinking water extracts based on steeping or boiling of the leaf material. In Malaysia, kratom is primarily consumed as a decoction, where the leaves are boiled for several hours and the resulting liquid is consumed several times throughout the day.

 

A randomized, placebo-controlled, double-blind third-party study of kratom extracts in 26 male subjects evaluated pain tolerance in a cold pressor task as time (in seconds) between pain onset and hand withdrawal from the ice bath. Pain tolerance significantly increased 1 hour after kratom ingestion in the experimental group (p=0.007) but was unchanged in the placebo group.

 

Phase 1 Clinical Trial of KUR-101

KUR-101-101 is a Phase 1 randomized, double-blind, two-part study of the safety, tolerability, pharmacokinetics, analgesic and respiratory effects of KUR-101 in healthy volunteers. Part 1 is a 5 cohort ascending dose design of a single dose of KUR-101. Part 2 is a three-period crossover design to compare the analgesic and respiratory effects of a single oral dose of KUR-101, a single oral dose of OxyNorm®, and a single oral dose of placebo in healthy male volunteers. A Phase 1 single ascending dose trial to evaluate the maximum tolerable dosage was initiated, with first patient dosed in March 2022 and topline results expected in the second half of 2022.

 

Anxiety Disorder Background

Anxiety is considered a common aspect of life, but anxiety disorders develop when feelings of apprehension and unease persist over an extended period and potentially worsen over time. Anxiety disorders can present with a range of symptoms and may impact personal health as well as both social and professional interactions. Furthermore, it is common for those suffering with an anxiety disorder to also have co-occurring mental health disorders or physical illness, which can compound symptoms and complicate recovery. For example, it is estimated that half of patients diagnosed with depression also suffer from an anxiety disorder.

 

There are several types of anxiety disorders, including generalized anxiety disorder, or GAD, social anxiety disorder and panic disorder, which are distinct but share common symptoms. In aggregate, anxiety disorders are considered to be the most common mental illness in the United States, affecting approximately 40 million adults, or 18% of the population. Furthermore, the total annual cost of anxiety disorders in the United States is estimated to be over $42 billion, of which more than 75% can be attributed to morbidity, mortality, lost productivity and other indirect costs.

 

We are initially focused on GAD, which is characterized as excessive, prolonged and difficult to control anxiety and stress that can impact normal life activities. GAD symptoms can vary, but may include behavioral traits such as unwarranted or disproportional anxiety, difficulty handling uncertainty and indecisiveness, in addition to physical signs such as fatigue and trembling. GAD is diagnosed when an individual finds it challenging to control anxiety on more days than not for at least a six-month period and has three or more symptoms. GAD can emerge gradually and most frequently manifests between childhood and middle age. Within the United States, GAD affects almost seven million adults.

 

Anxiety disorders are generally treated with medication, psychotherapy or both. First line therapy often involves use of antidepressants including SSRIs, such as paroxetine, sertraline and citalopram. SSRIs work by increasing levels of serotonin in the brain, but they typically have a slow onset of action, with treatment required for four to six weeks before significant therapeutic benefits are observed, and maximal benefits often requiring up to twelve weeks of treatment. SSRIs also have a number of side effects, including sexual dysfunction, insomnia and gastrointestinal disturbances.

 

Benzodiazepines are also used to treat anxiety and can offer rapid reduction of symptoms, with relief as soon as thirty minutes after administration. However, many patients experience sedative side effects resulting in drowsiness or lethargy, decreased mental sharpness, slurring of speech and decreased coordination. The long-term use of benzodiazepines is also associated with the development of tolerance and dependence, making discontinuing such medications challenging for most patients. Finally, benzodiazepines have been noted to exacerbate the respiratory depression associated with opioids, thus contributing to the mortality associated with OUD.

 

 

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GABA Therapeutics (GRX-917)

GABA Therapeutics is developing GRX-917, a deuterated version of etifoxine, initially for the treatment of GAD. Etifoxine is a drug that has a long history of use in France and many other countries (though not the United States) for treating anxiety disorders and has a strong safety record. A review of over 14 million prescriptions between 2000 and 2012 by Agence Nationale de Sécurité du Médicament et des Produits de Santé, or ANSM, in France found no cases of abuse, misuse or pharmacodependence. Etifoxine has the rapid onset of anxiolytic activity of benzodiazepines without their sedating, addicting, or respiratory significant impact on motor skills or cognition.

 

Etifoxine was originally developed in the 1960s and approved in France in 1979. At the time, its rapid onset activity and non-sedating properties led it to be classified as a weakened atypical benzodiazepine-like drug. Only recently was it determined that etifoxine exerts its activity through two mechanisms unrelated to those of benzodiazepines. Etifoxine has been shown to be a low potency, positive allosteric activator of gamma aminobutyric acid type A, or GABAA, receptors, binding to a site that is independent of that recognized by benzodiazepines. A second activity of etifoxine has more recently been described that may play a more prominent role in the agent’s anxiolytic activity. Specifically, etifoxine has been shown to activate the translocator protein, or TSPO, a transmembrane protein located on the outer mitochondria membrane. TSPO activation leads to increased synthesis of neuroactive steroids, including allopregnanolone and pregnanolone, that in turn function as positive allosteric modulators of GABAA receptors. Studies have shown that subsets of individuals with disorders such as depression and anxiety have lower levels of endogenous neuroactive steroids in their cerebrospinal fluid compared to healthy individuals. An IV formulation of allopregnanolone (Zulresso) was recently approved by the FDA for the treatment of post-partum depression. At high doses, direct administration of allopregnanolone can result in loss of consciousness and other adverse effects. It is thought that the ability of etifoxine to work with the body to increase levels of endogenous neurosteroids and raise GABAA activity in specific brain regions leads to a more natural physiological response and improved safety and tolerability.

 

GRX-917 is designed, through the process of deuteration, to address certain limitations of etifoxine while maintaining its pharmacological benefits. Specifically, etifoxine has a half-life of approximately four hours in adults and is typically dosed three times per day. Deuterated etifoxine has the potential to extend the half-life and thus be dosed less frequently.

 

We believe the anticipated clinical profile of GRX-917 is beneficial compared to certain existing treatments, particularly SSRIs and benzodiazepines. GRX-917 is being designed to have rapid efficacy (expected in the first day of use) like a benzodiazepine but without the well documented safety concerns associated with such compounds, including sedation, cognitive impairments and abuse liability, which make chronic use undesirable. GRX-917 is also being designed to be well-suited for chronic use, like an SSRI, but without such compound’s slow onset of activity and side effects, which may include sexual dysfunction, impaired sleep and gastrointestinal discomfort.

 

Prior Evidence in Humans

Etifoxine has been shown to have comparable time to onset and efficacy to several benzodiazepines (like Ativan, Xanax, and Klonopin) in head-to-head clinical trials but with fewer adverse effects. For example, etifoxine was non-inferior to Ativan (lorazepam) in a double-blind randomized parallel study conducted by a third-party in subjects with adjustment disorders with anxiety, or ADWA. In the study, 191 ADWA patients were assigned to receive etifoxine (50 mg TID) or lorazepam (0.5-0.5-1 mg per day) for 28 days. Efficacy was evaluated on days 7 and 28 of the treatment with the Hamilton Rating Scale for Anxiety, or HAM-A, score on Day 28 adjusted to Day 0 the main efficacy assessment criterion. The anxiolytic effect of etifoxine was found to be non-inferior to that of lorazepam (HAM-A score decrease: 54.6% vs 52.3%, respectively, p=0.0006). However, more etifoxine recipients responded to the treatment (HAM-A score decreased by 50%, p=0.03) and more etifoxine patients improved markedly (p=0.03) and had a marked therapeutic effect without side effects as assessed by Clinical Global Impression scale, (p=0.04). Furthermore, one week after stopping treatment, fewer patients taking etifoxine experienced a rebound of anxiety, compared to lorazepam (one and eight, respectively, p=0.034).

 

 

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Double-blind controlled study comparing etifoxine to lorazepam monotherapy demonstrated non-inferiority in anxiolytic effects

https://cdn.kscope.io/d17c31f510edab39900a00ce4a63809d-img104120494_6.jpg 

Note: HAM-A = Hamilton Anxiety Rating Scale; (n=191)

 

Etifoxine has a strong safety record. A review of over 14 million prescriptions between 2000 and 2012 by Agence Nationale de Sécurité du Médicament et des Produits de Santé, or ANSM, in France found no cases of abuse, misuse or pharmacodependence. Moreover, no tolerance, withdrawal or rebound effects were reported. The overall rate of adverse drug reactions, or ADRs, was 21 per million in 2011 (ADR range was 13-50 per million prescriptions per year for 2002-2011) with very rare reports of serious adverse events. Over half of the serious adverse events were for dermatological and hypersensitivity reactions.

 

Phase 1 Clinical Trial of GRX-917

In June 2021, GABA initiated a Phase 1 single and multiple ascending dose trial of GRX-917. The ongoing Phase 1 trial is a randomized, double-blind, placebo-controlled study of the safety, tolerability and pharmacokinetics of single-ascending and multiple-ascending doses of GRX-917 administered orally to healthy volunteers. Topline data for this trial is expected by mid-year 2022 and the initiation of a Phase 2a proof-of-concept trial is anticipated to follow in the second half of this year.

 

Traumatic Brain Injury Overview

Traumatic brain injury, or TBI, typically occurs when a sudden force impacts the head, resulting in damage and functional impairment of the brain. Injuries range in severity, from mild, characterized by a brief change in mental status or consciousness, to severe, involving an extended period of unconsciousness or amnesia. In the United States, an estimated 1.7 million people sustain a TBI annually and there are approximately 57,000 annual TBI-related deaths. Nearly 5.3 million people in the United States live with TBI-related disabilities, and 70% to 90% of patients being treated for TBI continue to exhibit prolonged neurocognitive dysfunctions.

 

Mild TBI, or mTBI, accounts for 70% to 80% of all reported TBIs, but the prevalence may be even higher, as many cases often do not receive medical attention. Symptoms of mTBI may include headaches, fatigue, depression, irritability and impaired cognitive function and may persist for many years, negatively affecting quality of life. In addition, mTBI can lead to increased risk of affective mood disorders such as MDD, PTSD and other psychiatric and nonpsychiatric disorders.

 

To date, there are no pharmacological treatments approved for mTBI, and there are limited assets in development. Patients with mTBI are often told to avoid mentally strenuous activities to allow their brains to rest, but a lack of treatment may lead to increased risk of affective disorders and long-term cognitive impairment, underscoring the need for new effective treatments.

 

Post-Traumatic Stress Disorder Background

PTSD is a psychiatric disorder that affects approximately 4% of the global population and over 8% of the U.S. population. PTSD symptoms include recurring and intrusive negative thoughts, mood and memories, reduced cognitive abilities, hyperarousal, reactivity and avoidance that persist for longer periods than a month after experiencing a traumatic event. Overall reduction in quality of life is common in individuals with PTSD leading to disability and the further manifestation of other comorbidities such as obesity, hypertension, concomitant mental health conditions and suicidality.

 

The current first line treatment for PTSD is the use of trauma-focused psychotherapy, but access to these psychotherapies is typically difficult, and not all with PTSD respond to psychotherapy alone. Similarly, medication only treatment is ineffective in controlling PTSD symptoms in as many as 40% to 60% of patients, and many of these medications commonly produce problematic side effects. Given the

 

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issues with access to trauma-focused psychotherapy and ineffectiveness of current pharmacotherapy, PTSD is a mental health disorder of high unmet medical need. We believe novel interventions are needed to better treat PTSD.

 

EmpathBio (EMP-01)

EmpathBio Inc., our wholly owned subsidiary, is developing EMP-01, a derivative of MDMA, the latter also known as ecstasy, for the treatment of PTSD. MDMA is considered the prototype of a class of compounds called entactogens, the primary characteristic of which is a capacity to increase feelings of love, empathy and closeness towards others. Racemic MDMA has a complex pharmacological profile that is dominated by effects as both a monoamine releaser and reuptake inhibitor. Its prominent effects on serotonin (5-HT) differentiate it from amphetamine and methamphetamine, both of which primarily act on the dopamine (DA) and norepinephrine (NE) pathways. EmpathBio is working to develop a digital therapeutic, in collaboration with both Psyber and IntroSpect Digital Therapeutics, to provide contextual “(mind)set-and-setting” prior to SalA dosing, behavioral activation therapy, group therapy, and patient monitoring.

 

Prior Evidence in Humans

A pooled analysis of six Phase 2 randomized, controlled third-party trials of MDMA-assisted psychotherapy for the treatment of PTSD revealed a statistically significant reduction in Clinician-Administered PTSD Scale for DSM-IV, or CAPS-IV, scores. The between-group Cohen’s d effect size was 0.8, indicating a substantial treatment effect. After two experimental sessions with 75-125 mg of MDMA, 54.2% of active-dose participants (n=72) no longer met PTSD diagnostic criteria, compared with 22.6% of control participants (n=31) who received 0-40mg of MDMA.

 

In a third party randomized, double-blind, placebo-controlled phase 3 study (n=90), published in May 2021, MDMA-assisted psychotherapy was shown to statistically significantly reduce PTSD symptoms in severe PTSD patients, compared to therapy alone. Participants were given either MDMA or placebo at three sessions approximately 4-weeks apart in a controlled clinical environment and in the presence of a trained therapy team. MDMA was found to induce a statistically significant attenuation in PTSD symptomatology compared to placebo, as assessed by the CAPS-V total severity score (P < 0.0001, d = 0.91) and the Sheehan Disability Scale, or SDS, total score (P = 0.0116, d = 0.43).

 

MDMA-assisted therapy significantly reduced CAPS-V scores in PTSD patients (primary endpoint)

https://cdn.kscope.io/d17c31f510edab39900a00ce4a63809d-img104120494_7.jpg 

Note: Change in CAPS-V total severity score from T1 to T4 (P < 0.0001, d = 0.91, n = 89 (MDMA n = 46)), as a measure of the primary outcome. Primary analysis was completed using least square means from a mixed model repeated measure (MMRM) analysis model; (n=90)

 

 

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Planned Phase 1 Clinical Trial of EMP-01

EMP-01 is in preclinical development for PTSD with a Phase 1 trial expected to be initiated in the second half of 2022.

 

Enabling Technologies

We have four enabling technologies that we believe have the potential to support the development of our pipeline and be used as patient support tools. Our enabling technologies housed at our atai companies include: Introspect Digital Therapeutics, InnarisBio, Psyber and IntelGenx Technologies. Introspect Digital Therapeutics, a wholly owned subsidiary we launched in June 2020, is a digital therapeutics platform dedicated to improving patient outcomes through personalized care. InnarisBio, a majority owned subsidiary we launched in March 2021, is a formulation technology company developing a sol-gel based, intranasal excipient technology. In February 2021, we acquired a majority interest in Psyber, which is developing an EEG-based brain-computer interface technology for psychiatric use. In May 2021, we acquired a minority interest in IntelGenx Technologies, an OTF drug delivery system manufacturer that is currently developing an OTF formulation of Viridia’s VLS-01. None of our existing programs were developed using these enabling technologies, and many of these technologies remain in early stage testing and development. We intend to use these enabling technologies to support the future development of our programs, as further described below.

 

 

 

 

IntroSpect Digital Therapeutics is a wholly owned digital therapeutics platform dedicated to improving patient outcomes through personalized care. We believe capabilities such as symptom tracking, mobile application-based therapy (e.g., behavioral activation therapy) and remote monitoring, have the potential to improve patient outcomes as has been observed with other, similar therapies, such as Pear Therapeutics’ reSET-O. The FDA has also recently expressed support for digital health initiatives through its Digital Health Innovation Action Plan. We intend to incorporate digital therapeutics into the design of clinical trials for several of our programs, including DemeRx IB and Viridia. In September 2021, we announced the initiation of a usability study of Introspect’s digital therapeutic (“DTx”) app technology in support of standard of care ketamine therapy for patients with TRD in collaboration with Kadima Neuropsychiatry. Introspect’s DTx app approach to supported treatment in mental health are integrated across 3 cohorts. Cohort 1 and Cohort 2, each successfully completed, focused on user acceptability and examined the introduction of therapeutic content via the app, respectively; and Cohort 3, which is ongoing, is assessing (mind)set and setting of treatment.

 

 

 

InnarisBio is a joint venture with UniQuest, the commercialization and technology transfer company of the University of Queensland, Australia, with atai owning 82% as of December 31, 2021. InnarisBio is dedicated to developing a sol-gel based, intranasal excipient technology to facilitate nose-to-brain, or N2B, delivery of platform compounds, starting with Salvinorin A and with potential plans to expand to additional active pharmaceutical ingredients, or APIs. InnarisBio’s non-invasive, N2B delivery technology is designed to avoid systemic circulation and first-pass metabolism, both factors that may reduce safety risks, depending upon the API. Potential additional advantages include increased patient compliance, ease of administration and rapid onset of action.

 

 

 

Psyber is a majority owned subsidiary, with atai owning 75% as of December 31, 2021. Psyber is developing interventions that use brain computer interface-based technology to induce rapid behavioral change through biofeedback. Beneficial effects of BCI-based approaches have been observed on stress reduction, attention and emotional modulation in humans. Our initial application of this technology platform is to enhance both “(mind)set and setting” prior to and during psychedelic dosing. We intend to co-develop this technology with our psychedelic therapies and IntroSpect Digital Therapeutics’ mobile application and anticipate a prototype at the end of 2022.

 

 

 

IntelGenx Technologies is an OTF manufacturer based in Montreal, Canada with a Canadian Schedule 1 license, allowing it to develop re-formulations of scheduled compounds. Currently, IntelGenx is developing an additional OTF formulation of Viridia’s VLS-01. OTF formulations are designed to enable delivery of therapeutics through oromucosal absorption, thereby avoiding the stomach and first-pass metabolism and allowing for non-invasive delivery of non-orally bioavailable therapeutics. In May 2021, we acquired a 25% interest in IntelGenx as part of a strategic partnership in which we and IntelGenx cooperate to conduct research and development projects. As part of the agreement, atai acquired additional warrants and received the right to purchase additional shares and warrants, leading to a potential path to majority ownership. So long as we maintain certain levels of our initial equity ownership in IntelGenx, IntelGenx will work exclusively with us in the field of compounds for the prevention or treatment of mental health diseases or disorders and compounds that have psychedelic, entactogenic and/or oneirophrenic properties, but excluding certain specific compounds and veterinary applications.

 

Drug Discovery Companies

We have four drug discovery companies that we believe have the potential to support our commitment in driving next-generation approaches in the treatment of mental health disorders to better meet patient needs. Our drug discovery companies include EntheogeniX Biosciences, PsyProtix, TryptageniX and Invyxis. In November 2019, we acquired a majority interest in EntheogeniX Biosciences, a controlled variable interest entity, is an AI-enabled computational platform to create structurally differentiated molecules. PsyProtix, a majority owned subsidiary we launched in February 2021, is a discovery stage company that is developing compounds to treat specific

 

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subsets of TRD patients that are characterized by mitochondrial dysfunction. In December 2021, we announced the launch of TryptageniX, a new platform company that will specialize in both the discovery of NCEs for our pipeline through a unique bioprospecting and synthetic biology approach of our naturally derived development candidates. More recently, in January 2022, we announced the launch of Invyxis, a new, wholly owned platform company committed to developing new chemical entities NCEs and to further pioneering next-generation mental health treatments bringing proven medicinal chemistry and comprehensive biological evaluation capabilities to our discovery efforts. These approaches are expected to further strengthen our already robust intellectual property portfolio spanning psychedelic and non-psychedelic compounds. We intend to use these drug discovery companies to support the future development of our programs, as further described below.

EntheogeniX Biosciences is a discovery stage joint venture with Cyclica, with atai owning 80% as of December 31, 2021, dedicated to developing the next generation of innovative mental health drugs. EntheogeniX leverages Cyclica’s AI-enabled computational biophysics platforms—Ligand Design and Ligand Express—to accelerate drug discovery. We believe EntheogeniX has the potential to be a drug discovery engine for atai, supporting the next generation of novel compounds. We anticipate EntheogeniX identifying a lead product candidate in the second half of 2022.
PsyProtix is a joint venture with Chymia, a spinout of Duke University, with atai owning 75% as of December 31, 2021. PsyProtix is a discovery stage company that is targeting subsets of TRD patients that are characterized by mitochondrial dysfunction with the aim to improve patient outcomes through a precision psychiatry approach. Currently this program is in preclinical phase with an initial focus on mitochondrial energetics. Targeting this metabolic pathway may provide a new treatment approach for subsets of TRD cases.
TryptageniX is a majority-owned joint venture with CB Therapeutics that will specialize in both the discovery of new chemical entities NCEs for the atai pipeline through bioprospecting and on biosynthesis of atai’s naturally derived development candidates. Bioprospecting refers to the search for natural products from which medicines can be developed, while biosynthesis is the production of complex molecules within living organisms or cells. Both are central to TryptageniX’s approach to the development of NCEs. In addition, the development of innovative biosynthetic methods will further optimize the scalability of compound manufacturing, allowing us to address the escalating mental health crisis in an ecologically sustainable manner.
Invyxis is a wholly owned platform company committed to developing NCEs and to further pioneering next-generation mental health treatments, which will bring proven medicinal chemistry tools and comprehensive biological screening approaches to our growing enterprise of drug discovery and design. Invyxis has entered into a strategic collaboration with Dalriada Drug Discovery, specialists in the discovery of small molecule therapeutics. Invyxis will harness a broad array of methods including structure-based design, synthetic chemistry, high-throughput screening, and in vivo characterization with the goal of discovering new agents with potential in treating mental health disorders, generating NCEs to progress into our research & development pipeline of psychedelic and non-psychedelic compounds. The platform company will initially focus on agonists at the 5-HT2A receptor, recognizing the importance of this key serotonin receptor system in treating a range of mental health disorders.

 

Our Ownership Position in COMPASS

 

In addition to our emerging clinical and preclinical programs and enabling technologies, we led the Series A financing round in 2018 for COMPASS, co-led their Series B financing round in 2020 and continue to hold a significant equity ownership position in COMPASS. COMPASS is developing its investigational COMP360 psilocybin therapy, which comprises administration of COMP360 with psychological support from specially trained therapists, with an initial focus on TRD. The therapeutic potential of psilocybin administered in conjunction with psychological support has been shown in multiple academic-sponsored studies, which did not involve COMP360, specifically exhibiting rapid reductions in depression symptoms after a single high dose with no SAEs. COMPASS evaluated COMP360 in conjunction with psychological support in a Phase 2b trial that concluded in July 2021 and reported its positive Phase 2b data for its proprietary psilocybin COMP360 for TRD in November 2021. The 233-patient trial met its primary endpoint, showing a 6.6-point reduction on the Montgomery-Åsberg Depression Rating Scale (MADRS) total score from baseline to 3 weeks when comparing the 25mg dose to the 1mg dose. COMP360 also showed both rapid response and durability of efficacy and was generally well tolerated. COMPASS plans to meet with the FDA in April 2022 to discuss the Phase 3 trial design which is anticipated to start in the second half of this 2022.

 

As of December 31, 2021, we beneficially owned 9,565,774 shares representing 22.8% equity interest in COMPASS. Certain of our founding investors were also seed investors and founders of COMPASS. Our interest in the product candidates of COMPASS is limited to the potential appreciation of our equity interest.

 

Competition

The pharmaceutical industry is highly competitive, with new approaches and technologies regularly emerging. We face competition across our current programs and expect to face competition with any future programs we may seek to develop and/or commercialize from major pharmaceutical, biotechnology, specialty pharmaceutical and generic pharmaceutical companies, among others. Potential competitors also include academic institutions, government agencies and other public and private research organizations that conduct research, seek patent

 

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protection and establish collaborative arrangements for research, development, manufacturing and commercialization. In addition, programs that we currently believe to be complementary may eventually become competitors.

 

We face competition across our programs in depression, including from Sage Therapeutics, Axsome Therapeutics, GH Research,The Janssen Pharmaceutical Companies of Johnson & Johnson, and Praxis Precision Medicine; CIAS, including from Boehringer Ingelheim, Biogen, Karuna Therapeutics, Minerva Biosciences, Sunovion Pharmaceuticals, and Takeda Pharmaceuticals Vanda and Novartis; SUD, including from BioXcel, Opiant and Intra-Cellular Therapies; anxiety, including from VistaGen Therapeutics, Bionomics and Arvelle Therapeutics; mTBI, including from SanBio, Vasopharm, Levolta Pharmaceuticals, Oxeia, Otsuka and Athersys; as well as in other therapeutic areas and indications.

 

Many of the companies with which we compete or with which we may compete in the future have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved drugs than we do and may already have established markets for their products. Accordingly, our potential competitors may succeed in obtaining FDA or other regulatory approval for alternative or superior products. Our competitors also may compete with us in recruiting and retaining qualified scientific and management personnel, in establishing clinical trial sites and enrolling subjects for our clinical trials and in acquiring technologies complementary to, or necessary for, our programs. In addition, competitors may have higher name recognition and more extensive collaborative relationships. Mergers and acquisitions within the industry may result in greater resources being concentrated among a small set of competitors. Smaller or emerging earlier-stage companies may also prove to be significant competitors, particularly if they have collaborations with larger, established companies. We are aware that a number of companies are increasing their efforts in discovery of non-traditional alternative compounds including psychedelics.

 

The commercial opportunity for our potential products could reduce or be eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any products that we may develop. Furthermore, we may also face competition from 501(c)(3) non-profit medical research organizations, including the Usona Institute and the Multidisciplinary Association for Psychedelic Studies. Such non-profit organizations may be willing to provide products at cost or for free which could significantly disrupt the potential market for our products. Our competitors also may obtain FDA or other regulatory approval for their products faster than we may obtain approval for ours, which could result in our competitors establishing a market position before we are able to enter the market. The key competitive factors affecting the success of all our product candidates, if approved, are likely to be their efficacy, safety, convenience and price, as well as the level of biosimilar or generic competition and the availability of reimbursement from government and other third-party payors.

 

Depression

Multiple therapies for depression exist, including common pharmacological treatments such as anti-depressants and psychosocial interventions such as cognitive based therapy. There are also non-pharmacological, somatic treatments for depression such as electroconvulsive therapy and transcranial magnetic stimulation, among others. However, these current therapies are ineffective or inadequately effective for a significant portion of patients. This treatment-resistant subset of depression is our initial therapeutic focus for several of our compounds. For TRD there are currently only two pharmacological treatments approved in the United States: (i) SPRAVATO (S-ketamine) nasal spray, an NMDA receptor antagonist, approved by the FDA in March 2019 and marketed by Janssen Pharmaceutical Companies of Johnson & Johnson, and (ii) a fixed dose combination of olanzapine and fluoxetine hydrochloride, which are individually available generically. These treatments are typically used alongside antidepressants and other treatments used in earlier lines of therapy for depression. Psychosocial interventions and non-pharmacological, somatic treatments may also be used for patients.

We are aware of several biopharmaceutical companies with therapies in development for TRD and MDD including Sage Therapeutics, Praxis Precision Medicines, GH Research, Johnson & Johnson (Janssen Pharmaceuticals), Novartis, NeuroRX and Axsome Therapeutics, as well as COMPASS, in which we hold an equity stake.

 

Cognitive Impairment Associated with Schizophrenia

We are not aware of any pharmacological treatments approved for CIAS. While antipsychotics are most commonly used to treat psychotic symptoms of schizophrenia, these medications fail to address the cognitive and negative symptoms of schizophrenia and are often associated with severe dose limiting effects. Furthermore over 50 assets in development for CIAS have been discontinued or are inactive, indicating the complexity of successfully developing a therapy for this condition. We are aware of several biopharmaceutical companies with therapies in development for CIAS including Boehringer Ingelheim, Pfizer, Roche, Biogen, Vanda, Sunovion, Neurocrine Biosciences, Novartis and Takeda Pharmaceuticals.

 

Substance Use Disorder

There are a range of available therapies for different forms of SUD, but we believe that many have limitations. For OUD existing pharmacological treatments are divided into two classes: (i) synthetic opioid receptor agonists, such as buprenorphine and methadone, and (ii) opioid antagonists, such as naltrexone and naloxone. Limitations of these agents include inconvenient treatment regimens, limited access, and an inability to maintain abstinence after medically assisted withdrawal. Currently marketed products include the SUBOXONE,

 

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SUBUTEX and SUBLOCADE brands, marketed by Indivior, VIVITROL, marketed by Alkermes, and BUNAVAIL buccal film, marketed by BioDelivery Sciences, among others.

 

We are aware of several biopharmaceutical companies with therapies in development for OUD including BioXcel, Opiant and Intra-Cellular Therapies.

 

Anxiety

Anxiety disorders are generally treated with medication, psychotherapy or both. Treatment often involves use of antidepressants including SSRIs, such as paroxetine, sertraline and citalopram. However, SSRIs typically have a slow onset of action and have a number of side effects, such as sexual dysfunction, drowsiness and weight gain. Benzodiazepines are also used to treat anxiety and can offer rapid reduction of symptoms, but their long-term use is associated with the development of tolerance, respiratory depression, drug dependence and sedative side effects.

 

We are aware of several biopharmaceutical companies with therapies in development for anxiety disorders including VistaGen Therapeutics and Arvelle Therapeutics.

 

mTBI

We are not aware of any pharmacological treatments approved for mTBI and there are limited assets in development specifically for the treatment of mTBI. We are aware of several biopharmaceutical companies with therapies in development for forms of traumatic brain injury including SanBio, Vasopharm, Levolta Pharmaceuticals, Oxeia Biopharmaceuticals, Avanir (now Otsuka) and Athersys.

 

PTSD

There are currently two SSRIs, Zoloft and Paxil, approved for the treatment of PTSD, and these two drugs are generic. There are several other generic products on the market and many drugs currently under development for anxiety and trauma-related disorders are also being evaluated for PTSD, which we believe reflects the limitations of the available therapies and an urgent need for better treatment.

We are aware of several biopharmaceutical companies with therapies in development for PTSD, including MAPS Public Benefit Corporation, Otsuka, Bionomics, Corcept Therapeutics, Aptinyx, Azevan Pharmaceuticals, Bionorica, Seelos Therapeutics and Tonix Pharmaceuticals.

 

Intellectual Property

 

Overview of our Intellectual Property

Our success depends in large part on our ability to obtain and maintain protection of intellectual property, particularly patents, in the United States and other countries with respect to product candidates and technology that are important to our business. In addition to patent protection, we also rely on trade secrets to protect aspects of our business for which we do not consider patent protection appropriate. The intellectual property covering the technologies and product candidates related to our programs are handled directly by the applicable platform companies, and we are not actively involved in the management of such intellectual property. For information regarding risks related to our intellectual property, see the section titled “Risk Factors—Risks Related to Our Intellectual Property.”

 

As of December 31, 2021, our intellectual property portfolio includes 17 issued U.S. patents, 154 issued non-U.S. patents, 9 pending U.S. applications; 40 pending non-U.S. applications; and 24 pending provisional applications in the U.S. Our intellectual property portfolio for each of the programs in our pipeline are further described and summarized in the table below. In addition, we have, and may continue to,

 

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enter into collaboration and licensing arrangements for research and development, manufacturing, and commercialization activities with counterparties for the development and commercialization of its product candidates.

 

 

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Patents

 

Perception Neuroscience (PCN-101)

As of December 31, 2021, Perception Neuroscience in-licenses three issued U.S. patents, three foreign issued patents in Japan and 1 foreign issued patent in Europe, four U.S. pending patent applications and 13 foreign pending patent applications in Canada, China, Europe, Hong Kong, Japan and Taiwan covering the composition of and methods of using R-ketamine (PCN-101) for the treatment of depressive symptoms in mental disorders, neurological disorders and substance abuse. As of December 31, 2021, Perception Neuroscience also in-licenses one U.S. pending patent application and eight foreign pending patent applications in Australia, Brazil, Canada, China, Europe, Hong Kong, Israel and Japan covering the composition of matter of S-Norketamine for the treatment of depressive symptoms. As of December 31, 2021, Perception Neuroscience also owns one U.S. pending patent application and seven foreign pending patent applications in Australia, Canada, China, Europe, Hong Kong, Japan and Mexico covering the method of using R-ketamine (PCN-101) for the treatment of depressive symptoms in mental disorders and substance abuse, as well as one pending U.S. provisional application directed to R-Ketamine salts and pharmaceutical compositions. Perception Neuroscience’s owned and in-licensed issued patents and any patents issuing from the owned or in-licensed pending patent applications or patent applications claiming the benefit of the in-licensed PCT patent application, if granted, are expected to expire between 2034 and 2042, exclusive of possible patent term adjustments or extensions or other forms of exclusivity.

 

Recognify (RL-007)

As of December 31, 2021, Recognify in-licenses ten issued U.S. patents and 28 foreign issued patents in Europe, Australia, Brazil, Canada, China, Hong Kong, Israel, South Africa, India, Japan, Republic of Korea, Mexico, New Zealand and Russia., covering RL-007, including the pharmaceutical composition of and methods of using RL-007. The patents licensed to Recognify are expected to expire between 2026 and 2034, exclusive of possible patent term adjustments or extensions or other forms of exclusivity.

 

 

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DemeRx IB (DMX-1002)

As of December 31, 2021, DemeRx IB owns two issued U.S. patents and two foreign issued patents in Europe and Australia, two U.S. pending patent applications, and three foreign pending patent applications in Australia, Europe and Canada covering methods of treatment using ibogaine (DMX-1002). DemeRx IB’s issued patent and any patents issuing from the pending applications, if granted, are expected to expire in 2035, exclusive of possible patent term adjustments or extensions or other forms of exclusivity. As of December 31, 2021, Atai Life Sciences AG owns one U.S. provisional patent application, covering methods of improving the therapeutic effectiveness and safety profile of ibogaine. Any patents issuing from these pending patent applications, if granted, are expected to expire in 2042, exclusive of possible patent term adjustments or extensions or other forms of exclusivity.

 

GABA Therapeutics (GRX-917)

As of December 31, 2021, GABA Therapeutics owns two issued U.S. patents, one U.S. pending patent application, four issued foreign patents in Australia, Mexico, Israel and Japan and nine foreign pending patent applications in Australia, Brazil, Canada, China, Republic of Korea, Europe, India and Japan, covering the pharmaceutical composition and corresponding methods of use of the deuterated analogs of etifoxine (GRX-917). GABA Therapeutics’ issued patents and any patents issuing from the pending patent applications, if granted, are expected to expire in 2036, exclusive of possible patent term adjustments or extensions or other forms of exclusivity.

 

EmpathBio (EMP-01)

As of December 31, 2021, Atai Life Sciences AG owns two U.S. provisional patent applications, covering prodrugs of MDMA and related compounds and uses thereof. Any patents issuing from these pending patent applications, if granted, are expected to expire in 2042, exclusive of possible patent term adjustments or extensions or other forms of exclusivity. As of December 31, 2021, Atai Life Sciences AG owns three U.S. provisional patent applications, covering MDMA enantiomers and processes for the preparation of MDMA, its enantiomers and derivatives thereof. Any patents issuing from these pending patent applications, if granted, are expected to expire in 2042, exclusive of possible patent term adjustments or extensions or other forms of exclusivity.

 

Revixia (RLS-01)

As of December 31, 2021, Atai Life Sciences AG owns one U.S. provisional patent application, covering buccal and intranasal compositions of salvinorin A (RLS-01) exhibiting unique PK profiles following administration. Any patents issuing from this pending patent application, if granted, are expected to expire in 2042, exclusive of possible patent term adjustments or extensions or other forms of exclusivity.

 

Viridia Life Sciences (VLS-01)

As of December 31, 2021, Atai Life Sciences AG owns two U.S. provisional patent applications, covering (i) DMT compositions exhibiting unique PK profiles following administration and (ii) new DMT salts and polymorphic forms, including DMT succinate (VLS-01). Any patents issuing from these pending patent applications, if granted, are expected to expire in 2042, exclusive of possible patent term adjustments or extensions or other forms of exclusivity. As of December 31, 2021, Atai Life Sciences AG owns five U.S. provisional patent applications, covering novel analogues, products and conjugates of dimethyltryptamine, methods and pharmaceutical compositions thereof. Any patents issuing from these pending patent applications, if granted, are expected to expire in 2042, exclusive of possible patent term adjustments or extensions or other forms of exclusivity.

 

PsyProtix

As of December 31, 2021, Atai Life Sciences AG owns one U.S. provisional patent application, covering products of acylcarnitines. Any patents issuing from this pending patent application, if granted, are expected to expire in 2042, exclusive of possible patent term adjustments or extensions or other forms of exclusivity.

 

Entheogenix

As of December 31, 2021, Atai Life Sciences AG owns two U.S. provisional patent applications, covering serotonin receptor drugs and pharmaceutical compositions thereof. Any patents issuing from these pending patent applications, if granted, are expected to expire in 2042, exclusive of possible patent term adjustments or extensions or other forms of exclusivity.

 

Psyber

As of December 31, 2021, Atai Life Sciences AG owns three U.S. provisional patent applications, covering a method using data to determine therapy exercises and contents. Any patents issuing from these pending patent applications, if granted, are expected to expire in 2042, exclusive of possible patent term adjustments or extensions or other forms of exclusivity.

 

Introspect

As of December 31, 2021, Atai Life Sciences AG owns three U.S. provisional patent applications, covering digital therapeutics to assessing physical and mental health. Any patents issuing from these pending patent applications, if granted, are expected to expire in 2042, exclusive of possible patent term adjustments or extensions or other forms of exclusivity.

 

 

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Individual patents have terms for varying periods depending on the date of filing of the patent application or the date of patent issuance and the legal term of patents in the countries in which they are obtained. Generally, utility patents issued for applications filed in the United States are granted a term of 20 years from the earliest effective filing date of a non-provisional patent application. The duration of foreign patents varies in accordance with provisions of applicable local law, but typically is also 20 years from the earliest effective filing date. With regard to our U.S. provisional patent applications, if we do not file any corresponding non-provisional patent applications within 12 months of the provisional patent application filing date, we may lose our priority date with respect to our provisional patent applications and any patent protection on the inventions disclosed in our provisional patent applications. All taxes, annuities or maintenance fees for a patent, as required by the USPTO and certain foreign jurisdictions, must be timely paid in order for the patent to remain in force during this period of time.

 

The actual protection afforded by a patent may vary on a product by product basis, from country to country and can depend upon many factors, including the type of patent, the scope of its coverage, the availability of regulatory-related extensions and the availability of legal remedies in a particular country and the validity and enforceability of the patent. Our patents and patent applications may be subject to procedural or legal challenges by others. We may be unable to obtain, maintain and protect the intellectual property rights necessary to conduct our business, and we may be subject to claims that we infringe or otherwise violate the intellectual property rights of others, which could materially harm our business. For more information, see the section titled “Risk Factors—Risks Related to Our Intellectual Property.”

 

Trade Secrets and Proprietary Information

In addition to patents, we rely upon unpatented trade secrets and know-how and continuing technological innovation to develop and maintain our competitive position. However, trade secrets and know-how can be difficult to protect. We seek to protect our proprietary information, in part, by executing confidentiality agreements with our collaborators and scientific advisors, and non-competition, non-solicitation, confidentiality, and invention assignment agreements with our employees, consultants, and independent contractors. We have also executed agreements requiring assignment of inventions with selected scientific advisors and collaborators. The confidentiality agreements we enter into are designed to protect our proprietary information, and the agreements or clauses requiring assignment of inventions to us are designed to grant us ownership of technologies that are developed through our relationship with the respective counterparty. We cannot guarantee, however, that we have executed such agreements with all applicable counterparties, such agreements will not be breached, or that these agreements will afford us adequate protection of our intellectual property and proprietary rights. See “Risk Factors—Risks Related to our Intellectual Property.”

 

Government Regulation and Product Approval

The FDA, the U.S. Department of Health and Human Services Office of Inspector General, CMS, DEA, and comparable regulatory authorities in state and local jurisdictions and in other countries impose substantial and burdensome requirements upon companies involved in the clinical development, manufacture, marketing and distribution of drugs such as those we are developing. These agencies and other federal, state, local and foreign entities regulate, among other things, the research and development, testing, manufacture, quality control, safety, effectiveness, labeling, storage, record keeping, approval, advertising and promotion, distribution, post-approval monitoring and reporting, sampling and export and import of our product candidates. Any drug candidates that we develop must be approved by the FDA before they may be legally marketed in the United States and by the appropriate foreign regulatory agency before they may be legally marketed in those foreign countries. Generally, our activities in other countries will be subject to regulation that is similar in nature and scope as that imposed in the United States, although there can be important differences. Additionally, some significant aspects of regulation in the European Union, or EU, are addressed in a centralized way, but country-specific regulation remains essential in many respects.

 

Certain of our product candidates may be subject to regulation as combination drug-device products, which means that they are composed of both a drug product and device product. If marketed individually, each component would be subject to different regulatory pathways and reviewed by different Centers within the FDA. A combination product, however, is assigned to a Center that will have primary jurisdiction over its regulation based on a determination of the combination product’s primary mode of action, which is the single mode of action that provides the most important therapeutic action. In the case of our product candidates, we believe the primary mode of action is attributable to the drug component of the product, which means that the FDA’s Center for Drug Evaluation and Research would have primary jurisdiction over the premarket development, review and approval of our product candidates regulated as combination drug/devices. We do not anticipate that the FDA will require a separate medical device authorization for the device, but this could change during the course of its review of any marketing application that we may submit.

 

U.S. Drug Development Process

In the United States, the FDA regulates drugs under the FDCA and its implementing regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources.

The process required by the FDA before a drug may be marketed in the United States generally involves the following:

 

 

 

completion of preclinical laboratory tests, animal studies and formulation studies in accordance with FDA’s good laboratory practice (“GLP”) requirements and other applicable regulations;

 

 

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submission to the FDA of an IND which must become effective before human clinical trials may begin;

 

 

 

approval by an institutional review board (“IRB”) or ethics committee at each clinical site before each trial may be initiated;

 

 

 

performance of adequate and well-controlled human clinical trials in accordance with good clinical practice (“GCP”) requirements to evaluate the safety and efficacy of the proposed drug for its intended use;

 

 

 

submission to the FDA of a new drug application (“NDA”) after completion of all pivotal trials;

 

 

 

payment of user fees for the FDA review of the NDA;

 

 

 

a determination by the FDA within 60 days of its receipt of an NDA to file the NDA for review;

 

 

 

satisfactory completion of an FDA advisory committee review, if applicable;

 

 

 

satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is produced to assess compliance with current good manufacturing practice (“cGMP”) requirements to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity, and of selected clinical investigation sites to assess compliance with GCP requirements;

 

 

 

potential FDA audit of the preclinical and/or clinical trial sites that generated the data in support of the NDA, and

 

 

 

FDA review and approval of the NDA to permit commercial marketing of the product for particular indications for use in the United States.

 

Prior to beginning the first clinical trial with a product candidate in the United States, we must submit an IND to the FDA. The central focus of an IND submission is on the general investigational plan and the protocol(s) for clinical studies. Some preclinical testing may continue even after the IND is submitted. The IND also includes results of animal and in vitro studies assessing the toxicology, pharmacokinetics, pharmacology, and pharmacodynamic characteristics of the product; chemistry, manufacturing, and controls information; and any available human data or literature to support the use of the investigational product. An IND must become effective before human clinical trials may begin. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises safety concerns or questions about the proposed clinical trial. In such a case, the IND may be placed on clinical hold and the IND sponsor and the FDA must resolve any outstanding concerns or questions before the clinical trial can begin. Submission of an IND therefore may or may not result in FDA authorization to begin a clinical trial.

 

Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators in accordance with GCP requirements, which include the requirement that all research subjects provide their informed consent for their participation in any clinical study. Clinical trials are conducted under protocols detailing, among other things, the objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. A separate submission to the existing IND must be made for each successive clinical trial conducted during product development and for any subsequent protocol amendments.

 

Furthermore, an independent IRB for each site proposing to conduct the clinical trial must review and approve the plan for any clinical trial and its informed consent form before the clinical trial begins at that site and must monitor the study until completed. An IRB is charged with protecting the welfare and rights of trial participants and considers such items as whether the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the informed consent form that must be provided to each clinical trial subject or his or her legal representative and must monitor the clinical trial until completed. Regulatory authorities, the IRB or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable health risk or that the trial is unlikely to meet its stated objectives. Some studies also include oversight by an independent group of qualified experts organized by the clinical study sponsor, known as a data safety monitoring board, which provides authorization for whether or not a study may move forward at designated check points based on access to certain data from the study and may halt the clinical trial if it determines that there is an unacceptable safety risk for subjects or other grounds, such as no demonstration of efficacy. There are also requirements governing the reporting of ongoing clinical studies and clinical study results to public registries.

 

Human clinical trials are typically conducted in three sequential phases that may overlap or be combined:

 

 

 

Phase 1: The product candidate is initially introduced into healthy human subjects or patients with the target disease or condition. These studies are designed to test the safety, dosage tolerance, absorption, metabolism and distribution of the investigational product in humans, the side effects associated with increasing doses, and, if possible, to gain early evidence on effectiveness. In the case of some products for severe or life-threatening diseases, especially when the product may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing is often conducted in patients.

 

 

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Phase 2: The product candidate is administered to a limited patient population with a specified disease or condition to evaluate the preliminary efficacy, optimal dosages, dose tolerance and dosing schedule and to identify possible adverse side effects and safety risks. Multiple Phase 2 clinical trials may be conducted to obtain information prior to beginning larger and more expensive Phase 3 clinical trials, with objectives around demonstrating proof-of-mechanism, proof-of-concept, or dose finding.

 

 

 

Phase 3: The product candidate is administered to an expanded patient population to further evaluate dosage, to provide statistically significant evidence of clinical efficacy and to further test for safety, generally at multiple geographically dispersed clinical trial sites. These clinical trials are intended to evaluate the overall risk/benefit ratio of the investigational product and to provide an adequate basis for product approval. Generally, two adequate and well-controlled Phase 3 clinical trials are required by the FDA for approval of an NDA.

 

Post-approval trials, sometimes referred to as Phase 4 studies, may be conducted after initial marketing approval. These trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication. In certain instances, such as with accelerated approval drugs, FDA may mandate the performance of Phase 4 trials. In certain instances, the FDA may mandate the performance of Phase 4 clinical trials as a condition of approval of an NDA.

 

The FDA or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients.

 

During the development of a new drug, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior to submission of an IND, at the end of Phase 2, and before an NDA is submitted. Meetings at other times may be requested. These meetings can provide an opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice, and for the sponsor and the FDA to reach agreement on the next phase of development. Sponsors typically use the meetings at the end of the Phase 2 trial to discuss Phase 2 clinical results and present plans for the pivotal Phase 3 clinical trials that they believe will support approval of the new drug.

 

Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry and physical characteristics of the drug and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, the manufacturer must develop methods for testing the identity, strength, quality and purity of the final drug. In addition, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.

 

While the IND is active, progress reports summarizing the results of the clinical trials and nonclinical studies performed since the last progress report must be submitted at least annually to the FDA, and written IND safety reports must be submitted to the FDA and investigators for serious and unexpected suspected adverse events, findings from other studies suggesting a significant risk to humans exposed to the same or similar drugs, findings from animal or in vitro testing suggesting a significant risk to humans, and any clinically important increased incidence of a serious suspected adverse reaction compared to that listed in the protocol or investigator brochure.

 

U.S. Review and Approval Process

Assuming successful completion of all required testing in accordance with all applicable regulatory requirements, the results of product development, preclinical and other non-clinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conducted on the chemistry of the drug, proposed labeling and other relevant information are submitted to the FDA as part of an NDA requesting approval to market the product. Data may come from company-sponsored clinical trials intended to test the safety and effectiveness of a use of a product, or from a number of alternative sources, including studies initiated by investigators. To support marketing approval, the data submitted must be sufficient in quality and quantity to establish the safety and effectiveness of the investigational drug product to the satisfaction of the FDA. The submission of an NDA is subject to the payment of substantial user fees; a waiver of such fees may be obtained under certain limited circumstances. Additionally, no user fees are assessed on NDAs for products designated as orphan drugs, unless the product also includes a non-orphan indication.

 

The FDA conducts a preliminary review of all NDAs within the first 60 days after submission, before accepting them for filing, to determine whether they are sufficiently complete to permit substantive review. The FDA may request additional information rather than accept an NDA for filing. In this event, the NDA must be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once an NDA has been accepted for filing, the FDA reviews an NDA to determine, among other things, whether a product is safe and effective for its intended use and whether its manufacturing is cGMP-compliant to assure and preserve the product’s identity, strength, quality and purity. Under the Prescription Drug User Fee Act, or PDUFA, guidelines that are currently in effect, the FDA has a goal of ten months from the date of “filing” of a standard NDA for a new molecular entity to review and

 

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act on the submission. This review typically takes twelve months from the date the NDA is submitted to FDA because the FDA has approximately two months to make a “filing” decision after it the application is submitted. The FDA conducts a preliminary review of all NDAs within the first 60 days after submission, before accepting them for filing, to determine whether they are sufficiently complete to permit substantive review. The FDA may request additional information rather than accept an NDA for filing. In this event, the NDA must be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing.

The FDA may refer an application for a novel drug to an advisory committee. An advisory committee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.

 

Before approving an NDA, the FDA will typically inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP and adequate to assure consistent production of the product within required specifications. Additionally, before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP requirements. If the FDA determines that the application, manufacturing process or manufacturing facilities are not acceptable, it will outline the deficiencies in the submission and often will request additional testing or information. Notwithstanding the submission of any requested additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.

 

After the FDA evaluates an NDA, it will issue an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing of the drug with prescribing information for specific indications. A Complete Response Letter indicates that the review cycle of the application is complete, and the application will not be approved in its present form. A Complete Response Letter usually describes the specific deficiencies in the NDA identified by the FDA and may require additional clinical data, such as an additional pivotal Phase 3 trial or other significant and time-consuming requirements related to clinical trials, nonclinical studies or manufacturing. If a Complete Response Letter is issued, the sponsor must resubmit the NDA, addressing all of the deficiencies identified in the letter, or withdraw the application. Even if such data and information are submitted, the FDA may decide that the NDA does not satisfy the criteria for approval.

If regulatory approval of a product is granted, such approval will be granted for particular indications and may contain limitations on the indicated uses for which such product may be marketed. For example, the FDA may approve the NDA with a Risk Evaluation and Mitigation Strategy, or REMS, to ensure the benefits of the product outweigh its risks. A REMS is a safety strategy to manage a known or potential serious risk associated with a medicine and to enable patients to have continued access to such medicines by managing their safe use, and could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries, and other risk minimization tools. The FDA also may condition approval on, among other things, changes to proposed labeling or the development of adequate controls and specifications. Once approved, the FDA may withdraw the product approval if compliance with pre- and post-marketing requirements is not maintained or if problems occur after the product reaches the marketplace. The FDA may also require one or more Phase 4 post-market studies and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization, and may limit further marketing of the product based on the results of these post-marketing studies.

 

Expedited Development and Review Programs

The FDA has a number of programs intended to expedite the development or review of products that meet certain criteria. For example, new drugs are eligible for fast track designation if they are intended to treat a serious or life-threatening disease or condition and demonstrate the potential to address unmet medical needs for the disease or condition. Fast track designation applies to the combination of the product and the specific indication for which it is being studied. The sponsor of a fast track-designated product has opportunities for more frequent interactions with the review team during product development, and the FDA may consider for review sections of the NDA on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the NDA, the FDA agrees to accept sections of the NDA and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the NDA.

 

The FDA may also designate of a product candidate as a “breakthrough therapy” if the product is intended, alone or in combination with one or more other products, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The designation includes all of the fast track designation features, as well as more intensive FDA interaction and guidance.

 

Any product submitted to the FDA for approval, including a product with a fast track or breakthrough therapy designation, may also be eligible for other types of FDA programs intended to expedite development and review, such as priority review and accelerated approval. A product is eligible for priority review if it has the potential to provide safe and effective therapy where no satisfactory alternative therapy exists or a significant improvement in the treatment, diagnosis or prevention of a disease compared to marketed products. The FDA will attempt to direct additional resources to the evaluation of an application for a new drug designated for priority review in an effort to facilitate the review. The FDA endeavors to review applications with priority review designations within six months of the filing date as compared to ten months for standard review of new molecular entity NDAs under its current PDUFA review goals.

 

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In addition, a product may be eligible for accelerated approval. Drug products intended to treat serious or life-threatening diseases or conditions may be eligible for accelerated approval upon a determination that the product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. As a condition of approval, the FDA may require that a sponsor of a drug receiving accelerated approval perform adequate and well-controlled post-marketing clinical trials. In addition, the FDA currently requires pre-approval of promotional materials as a condition for accelerated approval, which could adversely impact the timing of the commercial launch of the product.

 

Fast track designation, breakthrough therapy designation, priority review, and accelerated approval do not change the standards for approval, but may expedite the development or approval process. Even if a product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or decide that the time period for FDA review or approval will not be shortened. We may explore some of these opportunities for our product candidates as appropriate.

 

Post-approval Requirements

Any products manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to record-keeping, reporting of adverse experiences, periodic reporting, product sampling and distribution, and advertising and promotion of the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims, are subject to prior FDA review and approval. There also are continuing, annual program fees for any marketed products. Drug manufacturers and their subcontractors are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP, which impose certain procedural and documentation requirements upon us and our third-party manufacturers. Changes to the manufacturing process are strictly regulated, and, depending on the significance of the change, may require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting requirements upon us and any third-party manufacturers that we may decide to use.

 

The FDA may withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical studies to assess new safety risks; or imposition of distribution restrictions or other restrictions under a REMS program. Other potential consequences include, among other things:

 

 

 

restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls;

 

 

 

fines, warning letters, or untitled letters;

 

 

 

clinical holds on clinical studies;

 

 

 

refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of product license approvals;

 

 

 

product seizure or detention, or refusal to permit the import or export of products;

 

 

 

consent decrees, corporate integrity agreements, debarment or exclusion from federal healthcare programs;

 

 

 

mandated modification of promotional materials and labeling and the issuance of corrective information;

 

 

 

the issuance of safety alerts, Dear Healthcare Provider letters, press releases and other communications containing warnings or other safety information about the product; or

 

 

 

injunctions or the imposition of civil or criminal penalties.

 

The FDA also may require post-marketing testing, known as Phase 4 testing, and surveillance to monitor the effects of an approved product. Discovery of previously unknown problems with a product or the failure to comply with applicable FDA requirements can have negative consequences, including adverse publicity, judicial or administrative enforcement, warning letters from the FDA, mandated corrective advertising or communications with doctors, and civil or criminal penalties, among others. Newly discovered or developed safety or effectiveness data may require changes to a product’s approved labeling, including the addition of new warnings and contraindications, and also may require the implementation of other risk management measures.

 

 

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The FDA closely regulates the marketing, labeling, advertising and promotion of drug products. A company can make only those claims relating to safety and efficacy that are approved by the FDA and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses. Failure to comply with these requirements can result in, among other things, adverse publicity, warning letters, corrective advertising and potential civil and criminal penalties. Physicians may prescribe, in their independent professional medical judgment, legally available products for uses that are not described in the product’s labeling and that differ from those tested by us and approved by the FDA. Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA does, however, restrict manufacturer’s communications on the subject of off-label use of their products. The federal government has levied large civil and criminal fines against companies for alleged improper promotion of off-label use and has enjoined companies from engaging in off-label promotion. The FDA and other regulatory agencies have also required that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed. However, companies may share truthful and not misleading information that is otherwise consistent with a product’s FDA-approved labeling.

 

In addition, the distribution of prescription pharmaceutical products is subject to the Prescription Drug Marketing Act, or PDMA, which regulates the distribution of drugs and drug samples at the federal level, and sets minimum standards for the registration and regulation of drug distributors by the states. Both the PDMA and state laws limit the distribution of prescription pharmaceutical product samples and impose requirements to ensure accountability in distribution.

 

Marketing Exclusivity

Market exclusivity provisions authorized under the FDCA can delay the submission or the approval of certain marketing applications. The FDCA provides a five-year period of non-patent data exclusivity within the United States to the first applicant to obtain approval of an NDA for a new chemical entity. A drug is a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance. During the exclusivity period, the FDA may not accept for review an ANDA or an NDA submitted under Section 505(b)(2), or 505(b)(2) NDA, submitted by another company for another drug based on the same active moiety, regardless of whether the drug is intended for the same indication as the original innovative drug or for another indication, where the applicant does not own or have a legal right of reference to all the data required for approval. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement to one of the patents listed with the FDA by the innovator NDA holder.

 

The FDCA alternatively provides three years of marketing exclusivity for an NDA, or supplement to an existing NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example new indications, dosages or strengths of an existing drug. This three-year exclusivity covers only the modification for which the drug received approval on the basis of the new clinical investigations and does not prohibit the FDA from approving ANDAs or 505(b)(2) NDAs for drugs containing the active agent for the original indication or condition of use. Five-year and three-year exclusivity will not delay the submission or approval of a full NDA. However, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to any preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness.

 

DEA Regulation

The CSA establishes registration, security, recordkeeping, reporting, storage, distribution and other requirements administered by the DEA. The DEA is concerned with the control of handlers of controlled substances, and with the equipment and raw materials used in their manufacture and packaging, in order to prevent loss and diversion into illicit channels of commerce.

 

The DEA regulates controlled substances as Schedule I, II, III, IV or V substances. Schedule I substances by definition have no established medicinal use, and may not be marketed or sold in the United States. A pharmaceutical product may be listed as Schedule II, III, IV or V, with Schedule II substances considered to present the highest risk of abuse and Schedule V substances the lowest relative risk of abuse among such substances.

 

Annual registration is required for any facility that manufactures, distributes, dispenses, imports or exports any controlled substance. The registration is specific to the particular location, activity and controlled substance schedule. For example, separate registrations are needed for import and manufacturing, and each registration will specify which schedules of controlled substances are authorized.

 

The DEA typically inspects a facility to review its security measures prior to issuing a registration. Security requirements vary by controlled substance schedule, with the most stringent requirements applying to Schedule I and Schedule II substances. Required security measures include background checks on employees and physical control of inventory through measures such as cages, surveillance cameras and inventory reconciliations. Records must be maintained for the handling of all controlled substances, and periodic reports made to the DEA, for example distribution reports for Schedule I and II controlled substances, Schedule III substances that are narcotics, and other designated substances. Reports must also be made for thefts or losses of any controlled substance, and to obtain authorization to destroy any controlled substance. In addition, special authorization and notification requirements apply to imports and exports.

 

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In addition, a DEA quota system controls and limits the availability and production of controlled substances in Schedule I or II. Distributions of any Schedule I or II controlled substance must also be accompanied by special order forms, with copies provided to the DEA. The DEA may adjust aggregate production quotas and individual production and procurement quotas from time to time during the year, although the DEA has substantial discretion in whether or not to make such adjustments. To meet its responsibilities, the DEA conducts periodic inspections of registered establishments that handle controlled substances. Individual states also regulate controlled substances.

 

Foreign Government Regulation

Our product candidates will be subject to similar laws and regulations imposed by jurisdictions outside of the United States, and, in particular, the EU, governing, among other things, clinical trials, marketing authorization, applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws and implementation of corporate compliance programs and reporting of payments or other transfers of value to healthcare professionals.

 

Whether or not we obtain FDA approval for a product candidate, we must obtain the requisite approvals from regulatory authorities in foreign countries prior to the commencement of clinical trials or marketing of the product candidates in those countries. The requirements and process governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country. Failure to comply with applicable foreign regulatory requirements, may be subject to, among other things, fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.

 

Non-clinical studies and clinical trials

Similarly to the United States, the various phases of non-clinical and clinical research in the EU are subject to significant regulatory controls.

 

Non-clinical studies are performed to demonstrate the health or environmental safety of new chemical or biological substances. Non-clinical studies must be conducted in compliance with the principles of good laboratory practice, or GLP, as set forth in EU Directive 2004/10/EC. In particular, non-clinical studies, both in vitro and in vivo, must be planned, performed, monitored, recorded, reported and archived in accordance with the GLP principles, which define a set of rules and criteria for a quality system for the organizational process and the conditions for non-clinical studies. These GLP standards reflect the Organization for Economic Co-operation and Development requirements.

 

Clinical trials of medicinal products in the EU must be conducted in accordance with EU and national regulations and the International Conference on Harmonization, or ICH, guidelines on Good Clinical Practices, or GCP, as well as the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki. If the sponsor of the clinical trial is not established within the EU, it must appoint an EU entity to act as its legal representative. The sponsor must take out a clinical trial insurance policy, and in most EU countries, the sponsor is liable to provide ‘no fault’ compensation to any study subject injured in the clinical trial.

 

The regulatory landscape related to clinical trials in the EU has been subject to recent changes. The EU Clinical Trials Regulation, or CTR, which was adopted in April 2014 and repeals the EU Clinical Trials Directive, became applicable on January 31, 2022. Unlike directives, the CTR is directly applicable in all EU member states without the need for member states to further implement it into national law. The CTR notably harmonizes the assessment and supervision processes for clinical trials throughout the EU via a Clinical Trials Information System, which contains a centralized EU portal and database.

 

While the Clinical Trials Directive required a separate clinical trial application, or CTA, to be submitted in each member state, to both the competent national health authority and an independent ethics committee, much like the FDA and IRB respectively, the CTR introduces a centralized process and only requires the submission of a single application to all member states concerned. The CTR allows sponsors to make a single submission to both the competent authority and an ethics committee in each member state, leading to a single decision per member state. The CTA must include, among other things, a copy of the trial protocol and an investigational medicinal product dossier containing information about the manufacture and quality of the medicinal product under investigation. The assessment procedure of the CTA has been harmonized as well, including a joint assessment by all member states concerned, and a separate assessment by each member state with respect to specific requirements related to its own territory, including ethics rules. Each member state’s decision is communicated to the sponsor via the centralized EU portal. Once the CTA is approved, clinical study development may proceed.

 

The CTR foresees a three-year transition period. The extent to which ongoing and new clinical trials will be governed by the CTR varies. For clinical trials whose CTA was made under the Clinical Trials Directive before January 31, 2022, the Clinical Trials Directive will continue to apply on a transitional basis for three years. Additionally, sponsors may still choose to submit a CTA under either the Clinical Trials Directive or the CTR until January 31, 2023, and, if authorized, those will be governed by the Clinical Trials Directive until January 31, 2025. By that date, all ongoing trials will become subject to the provisions of the CTR.

 

 

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Medicines used in clinical trials must be manufactured in accordance with Good Manufacturing Practice, or GMP. Other national and EU-wide regulatory requirements may also apply.

 

Marketing Authorization

In order to market our future product candidates in the EU and many other foreign jurisdictions, we must obtain separate regulatory approvals. More concretely, in the EU, medicinal product candidates can only be commercialized after obtaining a marketing authorization, or MA. To obtain regulatory approval of a product candidate under EU regulatory systems, we must submit a MA application, or MAA. The process for doing this depends, among other things, on the nature of the medicinal product. There are two types of MAs:

 

 

 

 “Centralized MA” are issued by the European Commission through the centralized procedure, based on the opinion of the Committee for Medicinal Product for Human Use, or CHMP, of the European Medicines Agency, or EMA, and are valid throughout the EU. The centralized procedure is mandatory for certain types of product candidates, such as: (i) medicinal products derived from biotechnology processes, such as genetic engineering, (ii) designated orphan medicines, (iii) medicinal products containing a new active substance indicated for the treatment of certain diseases, such as HIV/AIDS, cancer, neurodegenerative diseases, diabetes, auto-immune and other immune dysfunctions and viral diseases and (iv) advanced therapy medicinal products, or ATMPs, such as gene therapy, somatic cell therapy or tissue-engineered medicines. The centralized procedure is optional for product candidates containing a new active substance not yet authorized in the EU, or for product candidates that constitute a significant therapeutic, scientific or technical innovation or which are in the interest of public health in the EU.

 

 

 

“National MAs” are issued by the competent authorities of the EU member states, only cover their respective territory, and are available for product candidates not falling within the mandatory scope of the centralized procedure. Where a product has already been authorized for marketing in a EU member State, this national MA can be recognized in another member state through the mutual recognition procedure. If the product has not received a national MA in any member state at the time of application, it can be approved simultaneously in various member states through the decentralized procedure. Under the decentralized procedure an identical dossier is submitted to the competent authorities of each of the member states in which the MA is sought, one of which is selected by the applicant as the reference member state.

 

Under the above described procedures, before granting the MA, the competent authorities make an assessment of the risk-benefit balance of the product on the basis of scientific criteria concerning its quality, safety and efficacy.

 

Under the centralized procedure the maximum timeframe for the evaluation of a MAA by the EMA is 210 days. In exceptional cases, the CHMP might perform an accelerated review of a MAA in no more than 150 days (not including clock stops). Innovative products that target an unmet medical need and are expected to be of major public health interest may be eligible for a number of expedited development and review programs, such as the Priority Medicines, or PRIME, scheme, which provides incentives similar to the breakthrough therapy designation in the U.S. In March 2016, the EMA launched an initiative, the PRIME scheme, a voluntary scheme aimed at enhancing the EMA’s support for the development of medicines that target unmet medical needs. It is based on increased interaction and early dialogue with companies developing promising medicines, to optimize their product development plans and speed up their evaluation to help them reach patients earlier. Product developers that benefit from PRIME designation can expect to be eligible for accelerated assessment but this is not guaranteed. Many benefits accrue to sponsors of product candidates with PRIME designation, including but not limited to, early and proactive regulatory dialogue with the EMA, frequent discussions on clinical trial designs and other development program elements, and accelerated MAA assessment once a dossier has been submitted. Importantly, a dedicated contact and rapporteur from the CHMP is appointed early in the PRIME scheme facilitating increased understanding of the product at EMA’s committee level. An initial meeting initiates these relationships and includes a team of multidisciplinary experts at the EMA to provide guidance on the overall development and regulatory strategies.

 

Moreover, in the EU, a “conditional” MA may be granted in cases where all the required safety and efficacy data are not yet available. The conditional MA is subject to conditions to be fulfilled for generating the missing data or ensuring increased safety measures. It is valid for one year and has to be renewed annually until fulfillment of all the conditions. Once the pending studies are provided, it can become a “standard” MA. However, if the conditions are not fulfilled within the timeframe set by the EMA, the MA ceases to be renewed. Furthermore, MA may also be granted “under exceptional circumstances” when the applicant can show that it is unable to provide comprehensive data on the efficacy and safety under normal conditions of use even after the product has been authorized and subject to specific procedures being introduced. This may arise in particular when the intended indications are very rare and, in the present state of scientific knowledge, it is not possible to provide comprehensive information, or when generating data may be contrary to generally accepted ethical principles. This MA is close to the conditional MA as it is reserved to medicinal products to be approved for severe diseases or unmet medical needs and the applicant does not hold the complete data set legally required for the grant of a MA. However, unlike the conditional MA, the applicant does not have to provide the missing data and will never have to. Although the MA “under exceptional circumstances” is granted definitively, the risk-benefit balance of the medicinal product is reviewed annually and the MA is withdrawn in case the risk-benefit ratio is no longer favorable.

 

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Data and marketing exclusivity. In the EU, new product candidates authorized for marketing, or reference products generally receive eight years of data exclusivity and an additional two years of market exclusivity upon MA. If granted, the data exclusivity period prevents generic or biosimilar applicants from relying on the preclinical and clinical trial data contained in the dossier of the reference product when applying for a generic or biosimilar MA in the EU during a period of eight years from the date on which the reference product was first authorized in the EU. The market exclusivity period prevents a successful generic or biosimilar applicant from commercializing its product in the EU until 10 years have elapsed from the initial authorization of the reference product in the EU. The overall 10-year market exclusivity period can be extended to a maximum of eleven years if, during the first eight years of those 10 years, the MA holder obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are held to bring a significant clinical benefit in comparison with existing therapies. However, there is no guarantee that a product will be considered by the EU’s regulatory authorities to be a new chemical entity, and products may not qualify for data exclusivity.

 

Orphan drug designation

The criteria for designating an “orphan medicinal product” in the EU are similar in principle to those in the United States.. In the EU a medicinal product can be designated as an orphan if its sponsor can establish that: (1) the product is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating; (2) either (a) condition such condition affects no more than five in 10,000 persons in the EU when the application is made, or (b) the product, without the benefits derived from orphan status, would not generate sufficient return in the EU to justify investment; and (3) there exists no satisfactory method of diagnosis, prevention or treatment of the condition in question that has been authorized for marketing in the EU or, if such method exists, the product will be of significant benefit to those affected by that condition.

 

In the EEA, an application for designation as an orphan product can be made any time prior to the filing of an application for approval to market the product. Orphan medicinal products are eligible for financial incentives such as reduction of fees or fee waivers and are, upon grant of a MA, entitled to ten years of market exclusivity for the approved therapeutic indication which means that the EU regulatory authorities cannot accept another MAA or grant a MA, or accept an application to extend a MA for a similar medicinal product for the same indication for a period of ten years. The period of market exclusivity is extended by two years for orphan medicinal products that have also complied with an agreed pediatric investigation plan, or PIP. No extension to any supplementary protection certificate can be granted on the basis of pediatric studies for orphan indications. The application for orphan drug designation must be submitted before the application for MA. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.

 

The 10-year market exclusivity may, however, be reduced to six years if, at the end of the fifth year, it is established that the product no longer meets the criteria for which it received orphan drug destination, for example, where the prevalence of the condition has increased above the threshold or it is judged that the product is sufficiently profitable not to justify maintenance of market exclusivity. Additionally, MA may be granted to a similar product for the same indication at any time if (1) the second applicant can establish that its product, although similar, is safer, more effective or otherwise clinically superior; (2) the applicant consents to a second orphan medicinal product application; or (3) the applicant cannot supply enough orphan medicinal product. A company may voluntarily remove a product from the orphan register.

 

Controlled Substances

Controlled substances are not regulated at EU level and the EU legislation does not establish different classes of narcotic or psychotropic substances. However, the United Nations, or UN, Single Convention on Narcotic Drugs of 1961 and the UN Convention on Psychotropic Substances of 1971, or the UN Conventions, codify internationally applicable control measures to ensure the availability of narcotic drugs and psychotropic substances for medical and scientific purposes. The individual EU member states are all signatories to these UN Conventions. All signatories have a dual obligation to ensure that these substances are available for medical purposes and to protect populations against abuse and dependence.

 

The UN Conventions regulate narcotic drugs and psychotropic substances as Schedule I, II, III, IV substances with Schedule II substances presenting the lowest relative risk of abuse among such substances and Schedule I and IV substances considered to present the highest risk of abuse.