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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒
☐
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
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 001-36351
PLX PHARMA INC.
(Exact name of registrant as specified in its charter)
Delaware
(State of incorporation)
9 Fishers Lane, Suite E
Sparta, NJ
(Address of principal executive offices)
46-4995704
(I.R.S. employer identification no.)
07871
(Zip code)
Registrant’s telephone number, including area code: (973) 409-6541
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, $0.001 par value
Trading Symbol
PLXP
Name of Each Exchange on Which Registered
The NASDAQ Capital Market
Securities registered pursuant to Section 12(g) of the Act: Not applicable
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 15(d) of the Exchange Act.
Yes ☐ No ☒
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 ☐
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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 Exchange Act Rule 12b-2). Yes ☐ No ☒
As of June 28, 2020 (the last business day of the registrant’s most recently completed second fiscal quarter), the aggregate market value of the
common stock of the registrant (based upon the closing price of the registrant’s common stock at that date as reported by the NASDAQ Capital Market),
excluding outstanding shares beneficially owned by directors and executive officers, was $29.7 million.
As of March 9, 2021, there were 21,786,633 shares outstanding of the registrant’s common stock, $0.001 par value.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement relating to the 2021 annual meeting of stockholders to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A are incorporated by reference into Part III of this Annual Report on Form 10-K.
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PART I
ITEM 1. BUSINESS
ITEM 1A. RISK FACTORS
ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 2. PROPERTIES
ITEM 3. LEGAL PROCEEDINGS
ITEM 4. MINE SAFETY DISCLOSURES
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
ITEM 6. SELECTED FINANCIAL DATA
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9B. OTHER INFORMATION
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
ITEM 16. FORM 10-K SUMMARY
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Unless the context otherwise requires, references in this Annual Report on Form 10-K (this “Form 10-K”) to the “Company,” “we,” “us,” and
“our” refer to PLx Pharma Inc. and its consolidated subsidiaries.
Information Regarding Forward-Looking Statements
This Form 10-K and certain information incorporated herein by reference may contain “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995. These forward-looking statements are not based on historical fact and involve assessments of certain
risks, developments, and uncertainties in our business looking to the future, including statements regarding our future results of operations and financial
position, strategy and plans, and our expectations for future operations. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,”
“design,” “intend,” “expect” or the negative versions of these words and similar expressions are intended to identify forward-looking statements. These
forward-looking statements are based on our current expectations and projections about future events and trends that we believe may affect our financial
condition, results of operations, strategy, short- and long-term business operations and objectives, and financial needs that we believe to be reasonable as
of the date of this Form 10-K. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described
in Part I, Item 1A, “Risk Factors” of this Form 10-K, which could cause our future operating results to differ materially from those set forth in any
forward-looking statement. In light of these risks, uncertainties and assumptions, there can be no assurance that any such forward-looking events or
circumstances included herein can be realized, and actual results could differ materially and adversely from those anticipated or implied in the forward-
looking statements. Given these uncertainties, you should not place undue reliance on such forward-looking statements. We disclaim any obligation to
update any such factors or to publicly announce the results of any revisions to any of the forward-looking statements contained herein to reflect future
results, events or developments. Forward-looking statements include, but are not limited to, statements about:
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our ability to bring our lead product candidate, VAZALORE to market-readiness;
our ability to maintain regulatory approval of VAZALORE and any future product candidates;
the benefits of the use of VAZALORE;
the projected dollar amounts of future sales of established and novel gastrointestinal(“GI”)-safer technologies for non-steroidal anti-
inflammatory drugs (“NSAIDs”) and other analgesics;
our ability to successfully commercialize our VAZALORE products, or any future product candidates;
the rate and degree of market acceptance of our VAZALORE products or any future product candidates;
our expectations regarding government and third-party payor coverage and reimbursement;
our ability to scale up manufacturing of our VAZALORE products to commercial scale;
our ability to successfully build a specialty sales force and commercial infrastructure or collaborate with a firm that has these capabilities;
our ability to compete with companies currently producing GI-safer technologies for NSAIDs and other analgesics;
our reliance on third parties to conduct our clinical studies;
our reliance on third-party contract manufacturers to manufacture and supply our product candidates for us;
our reliance on our collaboration partners’ performance over which we do not have control;
our ability to retain and recruit key personnel, including development of a sales and marketing function;
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our ability to obtain and maintain intellectual property protection for our VAZALORE products or any future product candidates;
our estimates of our expenses, ongoing losses, future revenue, capital requirements and our needs for or ability to obtain additional financing;
our ability to identify, develop, acquire and in-license new products and product candidates;
our ability to successfully establish and successfully maintain appropriate collaborations and derive significant revenue from those
collaborations, including but not limited to any milestone payments or royalties;
legal, political judicial and regulatory changes;
our financial performance; and
developments and projections relating to our competitors or our industry.
Note Regarding Trademarks
We own various U.S. federal trademark registrations and applications and unregistered trademarks and service marks, including:
●PLX®
●PLX PHARMA®
●PLXGUARD™
●VAZALORE™
●FIRST LIQUID-FILLED ASPIRIN CAPSULES™
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Solely for convenience, the trademarks and trade names in this Form 10-K are sometimes referred to without the TM symbol, but such references
should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. We do
not intend the use or display of other companies’ trademarks and trade names to imply a relationship with, or endorsement or sponsorship of us by, any
other companies, products or services.
Summary Risk Factors
Investing in our common stock involves a high degree of risk. We have described below a number of risk factors which, in addition to
uncertainties, risks and other information presented elsewhere in this Form 10-K, including our consolidated financial statements and notes thereto,
may adversely affect our business, operating results and financial condition. The uncertainties and risks enumerated below, as well as those
presented elsewhere in this Form 10-K, should be considered carefully in evaluating the Company, our business and the value of our securities.
These risks are more fully described in Part I, Item 1A. Risk Factors These risks include, among others, the following:
Risks Related to Our Business and Capital Requirements
● We have not yet generated significant revenues, have a limited operating history, have incurred operating losses in each year since our
inception and anticipate that we will continue to incur significant losses for the foreseeable future, and if we are unable to achieve and
sustain profitability, the market value of our common stock will likely decline.
● We will need substantial additional funding. If we are unable to raise capital when needed, we could be forced to delay, reduce or
terminate our operations or commercialization efforts.
● We are substantially dependent on the success of our lead product candidate, VAZALORE. If we are unable to successfully
commercialize VAZALORE or experience significant delays in doing so, our business could be materially harmed.
● Serious adverse events, undesirable side effects or other unexpected properties of VAZALORE or any other product candidate may be
identified after approval that could delay, prevent or cause the withdrawal of regulatory approval, limit the commercial potential, or
result in significant negative consequences following marketing approval.
● Even though VAZALORE has already obtained regulatory approval, it may never achieve market acceptance by physicians, patients,
and others in the medical community necessary for commercial success and the market opportunity may be smaller than we estimate.
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● Our ability to market VAZALORE for long-term use may be hampered by lack of trial results demonstrating long-term GI-safety
benefits.
● For many new product candidates, we will rely on third parties to conduct our preclinical studies and all of our clinical trials. If these
third parties do not successfully carry out their contractual duties or meet expected deadlines, we may be unable to obtain regulatory
approval for or commercialize any of our product candidates.
● Clinical trials for future products may be delayed or prevented.
● We will rely on third-party contract manufacturing organizations to manufacture and supply VAZALORE and other product candidates
for us, as well as certain raw materials used in the production thereof. If one of our suppliers or manufacturers fails to perform
adequately, we may be required to incur significant delays and costs to find new suppliers or manufacturers.
● We may be subject to costly product liability claims related to our products and product candidates and, if we are unable to obtain
adequate insurance or are required to pay for liabilities resulting from a claim excluded from, or beyond the limits of, our insurance
coverage, a material liability claim could adversely affect our financial condition.
Risks Related to Product Safety and Efficacy Issues
● Our understanding of the safety and efficacy of VAZALORE could change as larger portions of the population begin using
VAZALORE.
● Adverse safety events involving our marketed products may have a negative impact on our business.
● Our business will be highly dependent on professional and public reputation and perception, which may change, leading to volatile
sales.
● We must be able to adapt to changed circumstances and quickly update product labels, which could be costly or harm our reputation.
Risks Related to Intellectual Property
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If we are unable to obtain and maintain sufficient intellectual property protection for VAZALORE or our future product candidates, or
if the scope of the intellectual property protection is not sufficiently broad, our competitors could develop and commercialize products
similar or identical to ours, and our ability to successfully commercialize our product candidates may be adversely affected.
If we are unable to protect the confidentiality of our trade secrets, the value of our technology could be materially adversely affected
and our business would be harmed.
If we are sued for infringing intellectual property rights of third parties, such litigation could be costly and time consuming and could
prevent or delay us from developing or commercializing our product candidates.
● We may be involved in lawsuits to protect or enforce our intellectual property rights which could be expensive, time consuming and
unsuccessful.
● We may not be able to protect our intellectual property rights throughout the world.
Risks Related to Government Regulation
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The regulatory approval process is expensive, time consuming and uncertain and may prevent us from obtaining, or cause delays in
obtaining, approvals for the commercialization of future product candidates, which will materially impair our ability to generate
revenue.
● We are subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense
and subject us to restrictions, withdrawal from the market, or penalties if we fail to comply with applicable regulatory requirements or
if we experience unanticipated problems with our product candidates, when and if approved.
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Failure to obtain regulatory approvals in foreign jurisdictions will prevent us from marketing our products internationally.
Healthcare reform measures could hinder or prevent our product candidates’ commercial success.
● We currently benefit from regulations that mandate full reimbursement without cost sharing for aspirin when prescribed by a health
care provider. Changes to these regulations could significantly reduce reimbursement rates in a manner that negatively affects our
sales.
Risks Related to Our Common Stock
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The price of our common stock may be volatile.
Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over
matters subject to stockholder approval.
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Future sales of our common stock or securities convertible or exchangeable for our common stock may depress our stock price.
● We may be at risk of securities class action litigation.
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Raising additional capital may cause dilution to our existing stockholders or involve the issuance of securities with rights, preferences
and privileges senior to those of holders of our common stock.
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ITEM 1. BUSINESS.
Overview
PART I
We are a specialty pharmaceutical company focused on our clinically-validated and patent-protected PLxGuardTM drug delivery platform
designed to provide more effective and safer products. The PLxGuard drug delivery platform works by targeting the release of active pharmaceutical
ingredients to various portions of the GI tract. We believe this platform has the potential to improve the absorption of many drugs currently on the market
or in development, and to reduce the risk of stomach erosions and ulcers associated with certain drugs.
VAZALORE, available in two doses 325 mg and 81 mg, is approved by the U.S. Food and Drug Administration (“FDA”). VAZALORE is a
novel formulation of aspirin clinically shown to provide fast, reliable and predictable platelet inhibition for patients with vascular disease and diabetic
patients who may be candidates for aspirin therapy as compared to the current standard of care, enteric-coated aspirin. It is also clinically shown to reduce
the risk of stomach erosions and ulcers as compared with immediate-release aspirin, after seven days of treatment.
Products and Strategy
Our commercialization strategy will target the over-the-counter (“OTC”) market, taking advantage of the existing distribution channels for
aspirin. We intend to market VAZALORE to the healthcare professional and the consumer through several sales and marketing channels. Our product
pipeline also includes other oral NSAIDs using the PLxGuard drug delivery platform that may be developed, including PL1200 Ibuprofen 200 mg and
PL1200 Ibuprofen 400 mg, for pain and inflammation in Phase I clinical stage.
PLxGuard™ Delivery System
Our PLxGuard delivery system uses surface acting lipids, such as phospholipids and free fatty acids, to modify the physiochemical properties of
various drugs with a targeted release to select portions of the GI tract. Unlike tablet or capsule polymer coating technologies (e.g., enteric coating), which
rely solely on drug release based on pH differences in the GI tract, the PLxGuard delivery system utilizes both the differential pH in the GI tract and the
presence of bile acid bicarbonate and pancreatic enzymes in the duodenum to target VAZALORE’s release. The PLxGuard drug delivery platform works
by targeting the release of active pharmaceutical ingredients to various portions of the GI tract. We believe this platform has the potential to improve the
absorption of many drugs currently on the market or in development, and to reduce the risk of stomach erosions and ulcers associated with certain drugs.
This approach is intended to target the release of active pharmaceutical ingredients in the duodenum and decrease their exposure to the stomach, which is
more susceptible to NSAID-induced bleeding and ulceration. The PLxGuard drug delivery is a platform technology that we believe may be useful in
improving the absorption of many acid labile, corrosive, and insoluble or impermeable drugs.
We believe our PLxGuard drug delivery platform has the potential to improve many already-approved drugs and drugs in development because it
may:
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enhance the bioavailability and efficacy of the drug using our technology;
improve the GI tolerance of the drug;
provide new or extended patent protection for an already-approved or development-stage drug; and
utilize the 505(b)(2) New Drug Application (“NDA”) regulatory path, which may provide a faster and lower-cost FDA approval route when
used with already-approved drugs.
The PLxGuard drug delivery platform with our novel formulations using aspirin and ibuprofen have undergone clinical and preclinical testing
described below. Other existing or new drugs in development that may benefit from the PLxGuard drug delivery platform will be evaluated either by us or
through collaboration agreements with other companies.
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Product Pipeline
Our lead product, VAZALORE 325 mg, has been approved by the FDA for OTC distribution and is the first-ever FDA-approved liquid-filled
aspirin capsule. In clinical trials in obese diabetic patients at risk for cardiovascular disease, VAZALORE 325 mg delivered fast, reliable and predictable
platelet inhibition consistent with immediate release aspirin. VAZALORE 325 mg provided complete antiplatelet effect with a median time to 99%
inhibition of serum Thromboxane B2 of two hours compared with 48 hours for enteric-coated aspirin after three days of treatment. This greater
bioavailability translates into consistent and sustained antiplatelet benefits with twice as many patients achieving a complete antiplatelet response after 3
days treatment compared with enteric-coated aspirin. Near complete inhibition of serum Thromboxane B2 (>99%) is a clinically accepted marker for
antiplatelet efficacy, which is sometimes referred to as aspirin response. The area under the curve (“AUC”) of plasma concentrations were VAZALORE
325 mg (2,523), immediate release aspirin (1,964) and enteric coated aspirin (456), thus absorption with VAZALORE was 5 times as high as enteric-
coated aspirin. The fast and reliable platelet inhibition achieved with VAZALORE 325 mg may be particularly important in the hospital management of
acute vascular events such as heart attacks and strokes where platelet inhibition is absolutely critical. VAZALORE 325 mg has also caused significantly
fewer erosions and ulcers than immediate release aspirin after seven days of treatment. In clinical trials, VAZALORE resulted in 47% lower risk of
erosions or ulcers with an NNT of five and 71% lower risk of ulcers with a number needed to treat (“NNT”) of eight. The lower risk for GI complications
can have important benefits including better drug tolerance for the patients (less dyspepsia, bloating, etc.) and potentially less use of stomach acid
reducers (antacids, proton pump inhibitors, etc.) in the acute setting. The reduction of adverse gastric events in the acute setting may also be particularly
important in the hospital setting where patients with acute vascular events such as heart attacks and strokes are at very high risk for gastric erosions and
ulcers due to the stress associated with the episode and the co-administration of other antiplatelet therapies that are standard components of the treatment
protocols. Finally, the lower risk of erosions and ulcers after seven days of treatment as compared to immediate release aspirin may also be used to
differentiate VAZALORE 325 mg from products intended for use in conditions associated with pain and inflammation, including other aspirin and
NSAID products, although significant additional development and clinical testing will need to be performed.
VAZALORE 81 mg is our lower-dose companion product for VAZALORE 325 mg (the two dose forms are sometimes referred to in this Form
10-K together as “VAZALORE”). This product utilizes exactly the same formulation as the 325 mg product (except delivered in a capsule one quarter the
size). SNDAs for VAZALORE 325 mg and VAZALORE 81 mg doses were approved by the FDA in February 2021.
We also believe our technology may be used with other selected NSAIDs, such as ibuprofen. We have used the PLxGuard drug delivery platform
to create a lipid-based formulation of ibuprofen, PL1200 Ibuprofen 200 mg, for the OTC market, and PL1100 Ibuprofen 400 mg, for prescription doses of
ibuprofen. We have OTC and prescription (“Rx”) Investigational New Drug applications (“INDs”) active with the FDA and have demonstrated
bioequivalence with the OTC 200 mg dose ibuprofen to support a 505(b)(2) NDA in fasted-state clinical trials at three different doses, 200 mg, 400 mg
and 800 mg. Using the PL1200 capsules at prescription doses, we demonstrated potentially better GI tolerability in osteoarthritic patients with equivalent
analgesic and anti-inflammatory efficacy, when compared with prescription ibuprofen in a six-week endoscopy pilot clinical trial. PL1200 and PL1100
Ibuprofen may be considered as being in Phase 1 in the FDA approval process and may qualify for the 505(b)(2) NDA path.
Manufacturing and Supplies
We do not own or operate manufacturing facilities for the production of our product candidates, nor do we have plans to develop or own
manufacturing operations in the foreseeable future. We currently rely on third-party contract manufacturers for all of our required ingredients and finished
products for VAZALORE and other product candidates. We have entered into a Manufacturing Services Agreement with Thermo Fisher Scientific’s
Pharma Services (“Thermo Fisher”) business to provide the capabilities to bring VAZALORE to market. We currently employ internal resources to
manage our manufacturing contractors. Our agreement with Thermo Fisher includes representations and warranties that Thermo Fisher will perform its
services under the agreement in compliance with current Good Manufacturing Practices (“cGMP”). There can be no assurance that VAZALORE or other
product candidates, if approved, can be manufactured in sufficient commercial quantities, in compliance with regulatory requirements and at an acceptable
cost.
We and our contract manufacturers are and will be subject to extensive government regulation in connection with the manufacture of any
pharmaceutical product. We and our contract manufacturers must ensure that all of the processes, methods and equipment are compliant with cGMP and
current Good Laboratory Practices (“cGLPs”) for drugs on an ongoing basis, as mandated by the FDA and other regulatory authorities, and conduct
extensive audits of vendors, contract laboratories and suppliers.
While we believe that most of the ingredients we require to manufacture VAZALORE are readily available from multiple suppliers and are
commonly used in the pharmaceutical industry, some key components are sourced from a limited number of suppliers.
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Competition
The pharmaceutical industry is characterized by rapidly advancing technologies, intense competition and a strong emphasis of proprietary
products. We face competition and potential competition from a number of sources, including pharmaceutical and biotechnology companies, generic drug
companies, drug delivery companies and academic and research institutions. We believe the key competitive factors that will affect the development and
commercial success of our product candidates include the therapeutic efficacy, safety and tolerability profiles and cost. Many of our competitors have
substantially greater financial, technical and human resources than we do, as well as more experience in the development of product candidates, obtaining
FDA and other regulatory approvals of products, and the commercialization of those products. Consequently, our competitors may develop products that
may be more effective, better tolerated and less costly than our product candidates. Our competitors may also be more successful in manufacturing and
marketing their products than we are. We will also face competition in recruiting and retaining qualified personnel and establishing clinical trial sites and
patient enrollment in clinical trials.
VAZALORE faces competition from many companies with OTC aspirin products. These include branded products from Bayer AG, Prestige
Brands, Inc. (Ecotrin, Goody’s, BC Powder) and Foundation Consumer Healthcare, LLC (St. Joseph) and private label or store brands (CVS, Walgreens).
Aspirin is approved in the United States for multiple uses. In addition to cardiovascular disease prevention and treatment, OTC aspirin may be used for
the treatment of pain, inflammation and fever. There are two aspirin products for cardiovascular disease prevention that are approved by the FDA for
prescription use owned by Innovida Pharmaceutique Inc. (Yosprala) and Espero BioPharma, Inc. (Durlaza) that are to the best of our knowledge not
currently marketed in the US. There are a variety of aspirin and NSAID products in various stages of development in the United States and globally that
represent potential competition when and if they become approved by the FDA and are commercialized. Companies and academic institutions involved
include Takeda Pharmaceutical Company Limited (Takeda), Oxford Pharmascience Group Plc, Antibe Therapeutics Inc. and The City College of New
York. VAZALORE and other pain and inflammation product candidates such as PL1200 Ibuprofen will face competition from many firms. These include
OTC and prescription products. Major competitors include Pfizer Inc. (Advil), Johnson & Johnson (MotrinIB, Tylenol), Bayer AG (Aleve) and private
label or store brands (CVS, Walgreens).
The aspirin market is currently predominantly composed of generic products either branded (e.g. Bayer) or private label (e.g. CVS). VAZALORE
is the only liquid-filled aspirin capsule product to be approved by the FDA. VAZALORE 325 mg went through a different regulatory approval process
than the current OTC aspirin products being marketed in the US. VAZALORE 325 mg was approved under the 505(b)(2) NDA process and, when
launched, is expected to be the only OTC available aspirin-based product that successfully passed this rigorous process. We believe the clinical trials that
demonstrated better efficacy and safety will assist us in differentiating VAZALORE from the competition. Other product candidates will undergo clinical
trials to provide differentiation as part of their product development and commercialization.
Intellectual Property
Our success depends, in part, upon our ability to protect our core novel technology. To establish and protect our proprietary rights we rely on a
combination of patents, patent applications, trademarks, copyrights, trade secrets and know-how, license agreements, confidentiality procedures, non-
disclosure agreements with third parties, employee disclosure and invention assignment agreements, and other contractual rights.
Patent Portfolio
We have developed our own patent applications, some of which have been issued and others, if issued with claims as filed, will provide patent
protection for VAZALORE 325 mg and 81 mg, other NSAID products and will broaden the opportunity for new products to include many different drug
classes. In the United States we have six patents issued from the “pH dependent carriers for targeted release of pharmaceuticals along the gastrointestinal
tract, compositions therefrom and making and using same” family consisting of U.S. patent numbers 9216150, 9226892, 9730884, 10179104, 10646431
and 10786444 expiring on September 29, 2032, in China issued number ZL201280058596X expiring on September 28, 2032, in Hong Kong issued
number HK1200098 expiring September 29, 2032, in Australia issued number 2012315545 expiring September 29, 2032 and in Mexico we have issued
patents numbered 340951 and 356017 expiring on September 29, 2032. In Japan we have patent number 6368645 issued expiring September 29, 2032 and
have received a Notice of Allowance for additional claims. In South Korea, we have patent numbers 10-2162901 and 10-2188840 expiring September 29,
2032 and have received a Notice of Allowance for additional claims. We have pending applications in Europe, Canada and India, a which, if issued, are
expected to provide patent protection through September 29, 2032.
We have filed in March 2020 a new patent application entitled Pharmaceuticals Carriers Capable of pH Dependent Reconstitution and Methods
for Making and Using Same in the United States and may file in other international jurisdictions. If issued with claims as filed this will provide additional
patent protection for VAZALORE 325 mg and 81 mg, other NSAID products and new products to include many different drug classes with expiration in
March 2041.
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On January 8, 2003, we entered into a worldwide, exclusive license agreement with The Board of Regents of the University of Texas System
(“UT”), as described in more detail in the section herein titled “License Agreements—UT License Agreement”, which was amended, restated on
December 11, 2009, and subsequently amended on April 15, 2011 and on December 17, 2011 (as amended, the “UT License Agreement”). The patents in-
licensed under the UT License Agreement constitute a part of our intellectual property. This family of patents includes composition of matter, methods of
manufacturing and methods of treatment that provide protection for VAZALORE, PL1200 Ibuprofen and other NSAID product candidates in the United
States and global markets. The following is a summary of the patents in-licensed under the UT License Agreement and their respective expiration dates:
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Methods and compositions employing formulations of lecithin oils and NSAIDs for protecting the gastrointestinal tract – includes five issued
U.S. patents with the earliest expiration on December 19, 2021 and the latest expiring on March 23, 2022 and 23 issued patents in other
jurisdictions expiring on December 19, 2021
Compositions and methods for treating and/or ameliorating cancer, the onset of cancers or the symptoms of cancers – includes one issued U.S.
patent expiring on May 22, 2026, and five issued patents in Australia, Canada, China, Hong Kong and Singapore, expiring on August 2, 2024.
Sterile preparations of phospholipids and anti-inflammatory pharmaceuticals and methods of making and using same – includes five issued
patents in Australia, Canada, India, Israel and Singapore, expiring on August 2, 2024.
Purified phospholipid non-steroidal anti-inflammatory drug associated compositions and methods of preparing and using same – includes one
issued U.S. patent expiring on June 3, 2026 and two issued patents in Australia and Mexico, expiring on October 12, 2025.
U.S. patent numbers 10646431 and 10786444 “pH dependent carriers for targeted release of pharmaceuticals along the gastrointestinal tract,
compositions therefrom and making and using same” are listed in the FDA Orange Book. As new patents are issued relative to FDA approved products
such as VAZALORE 325 mg and 81 mg, they will be added to the Orange Book and, as new products are approved by the FDA, the relevant patents will
be added to the Orange Book. The Orange Book lists patents that protect each drug. Patent listings and use codes are provided by the drug application
owner, and the FDA is obliged to list them. In order for a generic drug manufacturer to win approval of a drug under the Drug Price Competition and
Patent Term Restoration Act of 1984 (the “Hatch-Waxman Act”), the generic manufacturer must certify that they will not launch their generic
pharmaceutical product until after the expiration of the Orange Book-listed patent, or that the patent is invalid, unenforceable, or that the generic product
will not infringe the listed patent.
The term of individual patents depends upon the legal term for patents in the countries in which they are granted. In most countries, including the
United States, the patent term is generally 20 years from the earliest claimed filing date of a non-provisional patent application in the applicable country.
In the United States, a patent’s term may, in certain cases, be lengthened by patent term adjustment, which compensates a patentee for administrative
delays by the U.S. Patent and Trademark Office (“USPTO”) in examining and granting a patent or may be shortened if a patent is terminally disclaimed
over a commonly owned patent or a patent naming a common inventor and having an earlier expiration date. The Hatch-Waxman Act permits a patent
term extension of up to five years beyond the expiration date of a U.S. patent as partial compensation for the length of time the drug is under regulatory
review.
License Agreements
UT License Agreement
On January 8, 2003, we entered into the UT License Agreement. The patents in-licensed under this agreement constitute an important part of our
intellectual property. This family of patents includes composition of matter, methods of manufacturing and methods of treatment that provide protection
for VAZALORE, PL1200 Ibuprofen and other NSAID product candidates in the United States and in a number of global markets. Pursuant to the UT
License Agreement, UT granted us an exclusive license under its patents and know-how related to their NSAID-phospholipid technology to develop and
commercialize NSAID products for use anywhere in the world. Certain of the technology was developed with government funding, and the exclusivity of
our license is therefore subject to certain retained rights of the U.S. federal government. We are responsible for the development and commercialization of
the licensed products under the agreement. The UT License Agreement is in effect as long as the patents are valid and we may terminate the UT License
Agreement at our option with appropriate notice. Also, if we fail to actively attempt to commercialize licensed products for a specific period of time, UT
may have the option to terminate or limit the exclusivity of the license in certain territories. Specifically, Section 4.6 of the UT License Agreement
provides that “Reasonable commercial diligence shall require that the Company . . . . [o]n or before September 8, 2013, Sell or offer for Sale a Licensed
Product.” While we believe that we have exercised reasonable commercial diligence to actively attempt such commercialization, we have not yet
successfully commercialized a licensed product. As such, UT may have the option to terminate the UT License Agreement, or to limit the exclusivity of
the license in certain territories. The UT License Agreement provides for milestone payments related to the first product to obtain regulatory approval to
sell a licensed product, which milestone payments have been paid. The UT License Agreement provides for future potential milestone payments based
upon the aggregate revenue from the sale of all licensed products in aggregate totaling $350,000. These milestones may be triggered in the next twelve
months depending on the timing of the launch of VAZALORE. In addition to the milestone payments, we will owe a royalty on the net sales of the
licensed products. The amount of the royalty depends upon who is selling the product. Should we commercialize a product ourselves there is a running
royalty obligation in the low single digit range based upon net sales. If a product is commercialized by another company under a sublicense agreement
with us, then UT receives a share of consideration received by us that is in the low double-digit range. There is a minimum annual royalty payment
obligation. We are responsible for the prosecution and maintenance of the licensed patents at our expense and for the prosecution and control of any action
for infringement related to any product that does, or may, compete with one of our marketed licensed products and any claim within a licensed patent that
covers or relates to such marketed licensed product.
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Government Regulation
Government authorities in the United States, at the federal, state and local level, in the European Union, and in other countries and jurisdictions
extensively regulate, among other things, the research, development, testing, manufacture, including any manufacturing changes, packaging, storage,
recordkeeping, labeling, advertising, promotion, distribution, marketing, import and export of pharmaceutical products such as those we are developing.
The processes for obtaining regulatory approvals in the United States and in foreign countries and jurisdictions, along with subsequent compliance with
applicable statutes and regulations, require the expenditure of substantial time and financial resources.
U.S. Drug Approval Process
In the United States, the FDA regulates drugs under the federal Food, Drug, and Cosmetic Act (the “FDCA”), implementing regulations and
other federal and state statutes and regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal,
state, local and foreign statutes and regulations requires the expenditure of substantial time and financial resources. Failure to comply with the applicable
U.S. requirements at any time during the product development process, approval process or after approval may subject an applicant to a variety of
administrative or judicial sanctions, such as the FDA’s refusal to approve pending NDAs, withdrawal of an approval, imposition of a clinical hold,
issuance of untitled or warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines,
refusals of government contracts, restitution, disgorgement or civil or criminal penalties.
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 compliance with the FDA’s cGLP regulations;
submission to the FDA of an IND which must become effective before human clinical trials may begin;
approval by an independent institutional review board (“IRB”) at each clinical site before each trial may be initiated;
performance of adequate and well-controlled human clinical trials in accordance with current good clinical practices (“cGCP”) to establish the
safety and efficacy of the proposed drug or biological product for each indication;
submission to the FDA of an NDA;
satisfactory completion of an FDA advisory committee review, if applicable;
satisfactory completion of documentation of the manufacturing process and accompanying quality control system intended for raw materials, in-
process materials, and the finished dosage form suitable for administration;
satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance
with cGMP, and to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity; and
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Preclinical studies and submission of an IND
Preclinical studies include laboratory evaluation of product chemistry, toxicity and formulation, as well as animal studies to assess a product’s
potential safety and efficacy. An IND sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data and
any available clinical data or literature, among other things, to the FDA as part of an IND. Some preclinical testing may continue even after the IND is
submitted. An IND automatically becomes effective 30 days after receipt by the FDA, unless during such 30-day period the FDA raises concerns or
questions related to one or more proposed clinical trials and places the trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve
any outstanding concerns before the clinical trial can begin. As a result, submission of an IND may not result in the FDA allowing clinical trials to
commence.
Clinical trials
Clinical trials involve the administration of the investigational new drug to human subjects under the supervision of qualified investigators in
accordance with cGCP requirements, which include the requirement that all research subjects provide their informed consent (assent, if applicable) in
writing for their participation in any clinical trial. Clinical trials are conducted under protocols detailing, among other things, the objectives of the study,
the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. A protocol for each clinical trial and any subsequent protocol
amendments must be submitted to the FDA as part of the IND. In addition, an IRB at each institution participating in the clinical trial must review and
approve the plan for any clinical trial before it commences at that institution. Information about certain clinical trials must be submitted within specific
timeframes to the National Institutes of Health for public dissemination on their ClinicalTrials.gov website.
Human clinical trials are typically conducted in three sequential phases, which may overlap or be combined:
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Phase 1: The drug is initially introduced into healthy human subjects or patients with the target disease or condition and tested for safety, dosage
tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an early indication of its effectiveness.
Phase 2: The drug is administered to a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate
the efficacy of the product for specific targeted diseases, and to determine dosage tolerance and optimal dosage.
Phase 3: The drug is administered to an expanded patient population, generally at geographically dispersed clinical trial sites, in well-controlled
clinical trials to generate enough data to statistically evaluate the efficacy and safety of the product for approval, to establish the overall risk-
benefit profile of the product, and to provide adequate information for the labeling of the product. In most cases, the FDA requires two adequate
and well controlled Phase 3 clinical trials to demonstrate the efficacy of the drug. A single Phase 3 trial with other confirmatory evidence may
be sufficient in rare instances where the study is a large multicenter trial demonstrating internal consistency and a statistically persuasive finding
of a clinically meaningful effect on mortality, irreversible morbidity or prevention of a disease with a potentially serious outcome and
confirmation of the result in a second trial would be practically or ethically impossible.
Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently if serious adverse
events occur. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, or at all. Furthermore, the
sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the clinical trial patients are being exposed to an
unacceptable health risk. The FDA may order the temporary, or permanent, discontinuation of a clinical trial at any time, or impose other sanctions, if it
believes that the clinical trial either is not being conducted in accordance with FDA requirements or presents an unacceptable risk to the clinical trial
patients. 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.
Marketing approval
Assuming successful completion of the required clinical testing, the results of the preclinical and clinical studies, together with detailed
information relating to the product’s chemistry, manufacture, controls and proposed labeling, among other things, are submitted to the FDA as part of an
NDA requesting approval to market the product for one or more indications. In most cases, the submission of an NDA is subject to a substantial
application user fee, which is typically increased annually. Under the new Prescription Drug User Fee Act guidelines that are currently in effect, the FDA
has a goal of ten months from the date of the FDA’s acceptance for filing of a standard non-priority NDA to review and act on the submission.
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As a condition of NDA approval, the FDA also may require submission of a risk evaluation and mitigation strategy (“REMS”) plan to mitigate
any identified or suspected serious risks. The REMS plan could include medication guides, physician communication plans, assessment plans and
elements to assure safe use, such as restricted distribution methods, patient registries or other risk minimization tools.
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 application must be resubmitted with the additional information. The resubmitted application is also subject to review before the FDA
accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review. The FDA reviews an NDA to determine,
among other things, whether the drug is safe and effective and whether the facility in which it is manufactured, processed, packaged or held meets
standards designed to assure the product’s continued safety, quality and purity. The FDA may refer an application for a novel drug to an advisory
committee, which 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 typically will inspect the facility or facilities where the product is manufactured, which is not under the
control of the product sponsor. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in
compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before
approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with cGCP.
After the FDA evaluates the NDA and the manufacturing facilities, it issues either an approval letter or a complete response letter. A complete
response letter generally outlines the deficiencies in the submission and may require substantial additional testing, or information, in order for the FDA to
reconsider the application. The FDA has committed to reviewing such resubmissions in two or six months depending on the type of information included.
Even with submission of this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for
approval. If, or when, those conditions have been met to the FDA’s satisfaction, the FDA will issue an approval letter. An approval letter authorizes
commercial marketing of the drug with specific prescribing information for specific indications.
Even if the FDA approves a product, it may limit the approved indications for use for the product, require that contraindications, warnings or
precautions be included in the product labeling, require that post-approval studies, including Phase 4 clinical trials, be conducted to further assess a drug’s
safety after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including
distribution restrictions or other risk management mechanisms, which can materially affect the potential market and profitability of the product. The FDA
may prevent or limit further marketing of a product based on the results of post-marketing studies or surveillance programs. After approval, some types of
changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testing
requirements and FDA review and approval.
Post-approval requirements
Drugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among
other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion and reporting of
adverse experiences with 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 user fee requirements for any marketed products and the establishments at
which such products are manufactured, as well as new application fees for supplemental applications with clinical data.
The FDA may impose a number of post-approval requirements as a condition of approval of an NDA. For example, the FDA may require post-
marketing testing, including Phase 4 clinical trials, and surveillance to further assess and monitor the product’s safety and effectiveness after
commercialization.
In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their
establishments with the FDA and state agencies, and are subject to periodic unannounced inspections by the FDA and these state agencies to determine
compliance with cGMP requirements. Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being
implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting and documentation
requirements upon the sponsor and any third-party manufacturers that the sponsor may decide to use. Accordingly, manufacturers must continue to
expend significant time, money and effort in the area of production and quality control to maintain cGMP compliance.
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Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or
if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of
unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the
approved labeling to add new safety information, imposition of post-market studies or clinical trials to assess new safety risks, or imposition of
distribution or other restrictions under a REMS program. Other potential consequences include, among other things:
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restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls;
fines, untitled or warning letters or holds on post-approval clinical trials;
refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of product license approvals;
product seizure or detention, or refusal to permit the import or export of products; or
injunctions or the imposition of civil or criminal penalties.
The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Drugs may be promoted
only for the approved indications and in accordance with the provisions of the approved label, although doctors may prescribe drugs for off-label
purposes. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found
to have improperly promoted off-label uses may be subject to significant liability. In addition, the distribution of prescription pharmaceutical products is
subject to the Prescription Drug Marketing Act 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. In addition, prescription drug manufacturers in the United States must
comply with applicable provisions of the Drug Supply Chain Security Act and provide and receive product tracing information, maintain appropriate
licenses, ensure they only work with other properly licensed entities, and have procedures in place to identify and properly handle suspect and illegitimate
products.
Section 505(b)(2) NDAs
Most drug products obtain FDA marketing approval pursuant to an NDA or an abbreviated new drug application (“ANDA”). A third alternative
is a special type of NDA, commonly referred to as a Section 505(b)(2) NDA, which enables the applicant to rely, in part, on FDA’s prior findings of safety
and/or effectiveness for a similar product or published literature in support of its application.
505(b)(2) NDAs often provide an alternate path to FDA approval for new or improved formulations or new uses of previously approved
products. Section 505(b)(2) permits the filing of an NDA where at least some of the information required for approval comes from studies not conducted
by, or for, the applicant and for which the applicant has not obtained a right of reference. If the 505(b)(2) applicant can establish that reliance on the FDA’s
prior findings of safety and/or effectiveness is scientifically appropriate, it may eliminate the need to conduct certain preclinical or clinical studies of the
new product. The FDA may also require companies to perform additional studies or measurements to support the change from the approved product. The
FDA may then approve the new product candidate for all, or some, of the indications for which the referenced product has been approved, as well as for
any new indication sought by the Section 505(b)(2) applicant.
Hatch-Waxman exclusivity
Marketing exclusivity provisions under the FDCA can delay the submission or the approval of certain applications for competing products. The
FDCA provides a five-year period of non-patent exclusivity within the United States to the first applicant to gain approval of an NDA for a new chemical
entity. A drug is a new chemical entity (“NCE”) 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 NCE exclusivity period, the FDA may not accept for review an ANDA or
a 505(b)(2) NDA submitted by another company that references the previously approved drug. However, an ANDA or 505(b)(2) NDA may be submitted
after four years if it contains a certification of patent invalidity or non-infringement (a Paragraph IV certification). If the ANDA or 505(b)(2) applicant has
provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification to the NDA and patent holders
once the ANDA has been accepted for filing by the FDA. The NDA and patent holders may then initiate a patent infringement lawsuit in response to the
notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days of the receipt of a Paragraph IV certification
automatically prevents the FDA from approving the ANDA until the earlier of 30 months, expiration of the patent, settlement of the lawsuit, or a decision
in the infringement case that is favorable to the ANDA applicant.
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The FDCA also provides three years of marketing exclusivity for an NDA, 505(b)(2) NDA or supplement to an existing NDA or 505(b)(2) 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, for new indications, dosages, strengths or dosage forms of an existing drug. This three-year exclusivity
covers only the conditions of use associated with the new clinical investigations and, as a general matter, does not prohibit the FDA from approving
ANDAs or 505(b)(2) NDAs for generic versions of the original, unmodified drug product. 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 all of
the preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness.
NDA vs. OTC Monograph products
OTC drugs can be brought to market via two routes: the NDA approval process and the OTC monograph process. A drug product is eligible to be
brought to market via the OTC monograph process if it is not a new drug, and the drug product meets the FDA’s established conditions for general
recognition of safety and effectiveness (“GRASE”). The OTC drug monographs are a kind of “rule book” of conditions for each therapeutic category
covering acceptable ingredients, uses (indications), doses, formulations, labeling, and testing.
The OTC Drug Review is a three-phase public rulemaking process established by the FDA to evaluate the safety and effectiveness of OTC drug
products marketed in the United States prior to May 11, 1972. The three-phase rulemaking process can be summarized as follows:
1) Advisory Review Panel — Advisory review panel appointed by the FDA analyzes data available on OTC drug active ingredients to determine if
the active ingredients can be classified as GRASE, not GRASE, or insufficient data are available. Results of the advisory review panel’s analyses are
published in the Federal Register as an Advance Notice for Proposed Rulemaking (“ANPR”).
2) Tentative Final Monograph — After the FDA reviews the advisory review panel’s findings, as well as additional data that may have become
available and the public’s comments, the FDA publishes its conclusions in the Federal Register as a Proposed Rule also called a Tentative Final
Monograph (“TFM”).
3) Final Monograph — After publication of the TFM, a period of time is allotted for interested parties to submit comments or data in response to the
FDA’s proposal. The final regulations in the form of drug monographs provide a standard for GRASE OTC drug products.
If a product deviates from the conditions under the TFM or final monograph and was not marketed before May 1972, then the drug product is
considered a new drug and requires an NDA to be legally marketed. Aspirin was classified into the therapeutic class for Internal Analgesic, Antipyretic,
and Antirheumatic Drug Products (“IAAA”). The ANPR was published in 1977, and in 1988, the FDA published the TFM for IAAA. The IAAA TFM
recommends appropriate labeling, including therapeutic indications, dosage instructions, and warnings about side effects and ways of preventing misuse.
Although it has been updated and amended since its original publication, the IAAA monograph has not been finalized.
Differences between the NDA approval process and the OTC monograph process are listed below.
NDA Approval Process
Pre-market approval — FDA review and approves formulation
and labeling prior to marketing.
OTC Monograph Process
No pre-market approval — FDA sets forth specific conditions for GRASE, or in the case
of a developing monograph, sets forth conditions that allow for continued marketing
pending a final monograph.
Confidential filing
Drug-product specific
May require a user fee
Public process
Active ingredient-specific and evaluated by OTC drug category
No user fees
Potential for marketing exclusivity
No marketing exclusivity
FDA review timelines
Manufacturers responsible for ensuring compliant product with no FDA-mandated
review (either pre- or post-market)
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May require clinical studies, including studies on label
comprehension and actual use
Generally does not require clinical studies. Label comprehension and actual use studies
are not required for ingredients already covered by a final or tentative final monograph.
Approved labeling is unique to the drug
Labeling is defined by the monograph. Once marketed, FDA can review the complete
labeling at any time to determine whether it is truthful or misleading.
Approved NDA is “license” to market
Final monograph is open to anyone
Trade name reviewed prior to marketing
No review of trade name prior to marketing. Once marketed, FDA can review the trade
name at any time.
When VAZALORE is commercialized, we believe it will be the only NDA-approved OTC aspirin product available. Approval of the
VAZALORE NDA granted VAZALORE labeling similar to that of monograph aspirin products.
Professional Labeling
Although the IAAA TFM has not been finalized for OTC use, final regulations for the professional labeling of aspirin were published in 1988.
Professional labeling is labeling that provides specific information to health professionals for uses not included in OTC drug labeling. Professional
labeling can be provided solely to healthcare professionals. Professional labeling may not be used on consumer products or on consumer-directed
labeling. Under the IAAA regulations for professional labeling of aspirin, patients can only use aspirin for cardiovascular-related uses when directed to do
so by a physician.
Professional labeling for aspirin includes the following indications:
● Vascular Indications (Ischemic Stroke, Transient Ischemic Attack (“TIA”), Acute Myocardial Infarction (“MI”), Prevention of Recurrent MI,
Unstable Angina Pectoris, and Chronic Stable Angina Pectoris): Aspirin is indicated to: (1) reduce the combined risk of death and nonfatal
stroke in patients who have had ischemic stroke or transient ischemia of the brain due to fibrin platelet emboli, (2) reduce the risk of vascular
mortality in patients with a suspected acute MI, (3) reduce the combined risk of death and nonfatal MI in patients with a previous MI or unstable
angina pectoris, and (4) reduce the combined risk of MI and sudden death in patients with chronic stable angina pectoris.
● Revascularization Procedures (Coronary Artery Bypass Graft (“CABG”), Percutaneous Transluminal Coronary Angioplasty (“PTCA”), and
Carotid Endarterectomy): Aspirin is indicated in patients who have undergone revascularization procedures (i.e., CABG, PTCA, or carotid
endarterectomy) when there is a preexisting condition for which aspirin is already indicated.
● Rheumatologic Disease Indications (Rheumatoid Arthritis, Juvenile Rheumatoid Arthritis, Spondyloarthropathies, Osteoarthritis, and the
Arthritis and Pleurisy of Systemic Lupus Erythematosus (“SLE”)): Aspirin is indicated for the relief of the signs and symptoms of rheumatoid
arthritis, juvenile rheumatoid arthritis, osteoarthritis, spondyloarthropathies, and arthritis and pleurisy associated with SLE.
FDA Oversight vs. FTC Oversight
Since 1971, the FDA and the Federal Trade Commission (the “FTC”) have had a Memorandum of Understanding in place, which dictates that
the FDA has primary responsibility over OTC drug labeling, while the FTC has primary responsibility over OTC drug advertising.
Products
Labeling
Advertising
Rx
Products
FDA
FDA
OTC
Products
FDA
FTC
For an NDA-approved product, OTC labeling, including the labeling on the box, must be submitted to the FDA for review and approval prior to
distribution. As indicated above, this is different from monograph products, which are not subjected to the FDA’s labeling review and approval processes
prior to launching to market. Advertising for OTC products is under the purview of the FTC. Promotional material (including print, radio, and/or TV) is
not required to be submitted to the FTC prior to distribution, unlike Rx promotional materials submitted to the FDA.
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Under FTC regulations, claims in advertisements, including OTC medicine advertisements, must be truthful and cannot be misleading or unfair.
Advertisers must have substantiation that all objective express and implied claims in advertising are true before making the claims. The standard
for substantiation of health claims is “competent and reliable scientific evidence.” For drug claims, competent and reliable scientific evidence generally
has been interpreted as requiring at least one or two adequate and well-controlled human clinical studies of the product, or of an essentially equivalent
product, that conform to acceptable designs and protocols and whose results, when considered in light of the entire body of relevant and reliable scientific
evidence, are sufficient to substantiate that the representation is true.
Beyond FTC regulation of advertising, industry self-regulation plays an important role. The National Advertising Division (“NAD”) of the
Council of Better Business Bureaus reviews advertising complaints by competitors. NAD generally applies the same standard as the FTC. If NAD
determines that the substantiation does not support the claims or that it is otherwise false and misleading, it will recommend that the advertiser revise or
discontinue the advertisement. If the advertiser does not agree to do so, NAD will forward the case to the FTC or the FDA for review.
Foreign Regulatory Approval Process
In order to market any product outside of the United States, we would need to comply with numerous and varying regulatory requirements of
other countries and jurisdictions regarding quality, safety and efficacy and governing, among other things, clinical trials, marketing authorization,
commercial sales and distribution of our products. The cost of establishing a regulatory compliance system for numerous varying jurisdictions can be very
significant. Whether or not we obtain FDA approval for a product, we would need to obtain the necessary approvals by the comparable foreign regulatory
authorities before we can commence clinical trials or marketing of the product in foreign countries and jurisdictions. Although many of the issues
discussed above with respect to the United States apply similarly in the context of the European Union, the approval process varies between countries and
jurisdictions and can involve additional product testing and additional administrative review periods. The time required to obtain approval in other
countries and jurisdictions might differ from and be longer than that required to obtain FDA approval. Regulatory approval in one country or jurisdiction
does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country or jurisdiction may negatively impact
the regulatory process in others.
Pursuant to the European Clinical Trials Directive, a system for the approval of clinical trials in the European Union has been implemented
through national legislation of the member states. Under this system, we must obtain approval from both the competent national authority of a European
Union member state in which the clinical trial is to be conducted, and a favorable opinion from the competent ethics committee. Our clinical trial
application must be accompanied by an investigational medicinal product dossier with supporting information prescribed by the European Clinical Trials
Directive and corresponding national laws of the member states and further detailed in applicable guidance documents.
To obtain marketing approval of a drug under European Union regulatory systems, we may submit a Marketing Authorization Application
(“MAA”) either under a centralized or decentralized procedure. The centralized procedure provides for the grant of a single marketing authorization by
the European Commission that is valid for all European Union member states. The centralized procedure is compulsory for specific products, including
medicines produced by certain biotechnological processes, products designated as orphan medicinal products, advanced therapy products and products
with a new active substance indicated for the treatment of certain diseases. For products with a new active substance indicated for the treatment of other
diseases and products that are highly innovative or for which a centralized process is in the interest of patients, the centralized procedure may be optional.
Under the centralized procedure, the Committee for Medicinal Products for Human Use (the “CHMP”) established at the European Medicines Agency
(the “EMA”) is responsible for conducting the initial assessment of a drug. The CHMP also is responsible for several post-authorization and maintenance
activities, such as the assessment of modifications or extensions to an existing marketing authorization. Under the centralized procedure in the European
Union, the maximum timeframe for the evaluation of an MAA is 210 days, excluding clock stops, when additional information or written or oral
explanation is requested by the CHMP but has not yet been provided. Accelerated evaluation might be granted by the CHMP in exceptional cases, when a
medicinal product is of major interest from the point of view of public health and in particular from the viewpoint of therapeutic innovation. In this
circumstance, the EMA ensures that the opinion of the CHMP is given within 150 days.
The decentralized procedure is available to applicants who wish to market a product in various European Union member states where such
product has not previously received marketing approval in any European Union member state. The decentralized procedure provides for approval by one
or more other, or concerned, member states of an assessment of an application performed by one member state designated by the applicant, known as the
reference member state. Under this procedure, an applicant submits an application based on identical dossiers and related materials, including a draft
summary of product characteristics, and draft labeling and package leaflet, to the reference member state and concerned member states. The reference
member state prepares a draft assessment report and drafts of the related materials within 120 days after receipt of a valid application. Within 90 days of
receiving the reference member state’s assessment report and related materials, each concerned member state must decide whether to approve the
assessment report and related materials.
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If a member state cannot approve the assessment report and related materials on the grounds of potential serious risk to public health, the
disputed points are subject to a dispute resolution mechanism and may eventually be referred to the European Commission, whose decision is binding on
all member states.
In the European Union, new chemical entities qualify for eight years of data exclusivity upon marketing authorization and an additional two
years of market exclusivity. This data exclusivity, if granted, prevents regulatory authorities in the European Union from referencing the innovator’s data
to assess a generic (abbreviated) application for eight years, after which generic marketing authorization can be submitted, and the innovator’s data may
be referenced, but not approved for two years. The overall ten-year period will be extended to a maximum of eleven years if, during the first eight years of
those ten years, the marketing authorization 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. Even if a compound is
considered to be a new chemical entity and the sponsor is able to gain the prescribed period of data exclusivity, another company nevertheless could also
market another version of the drug if such company can complete a full MAA with a complete database of pharmaceutical test, preclinical tests and
clinical trials and obtain marketing approval of its product.
Pharmaceutical Coverage, Pricing and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of any drug products for which we may obtain regulatory approval.
Sales of any of our product candidates, if approved, will depend, in part, on the extent to which the costs of the products will be covered by third-party
payors, including government health programs such as Medicare and Medicaid, commercial health insurers and managed care organizations. The process
for determining whether a third-party payor will provide coverage for a drug product typically is separate from the process for setting the price of a drug
product or for establishing the reimbursement rate that a payor will pay for the drug product once coverage is approved. Third-party payors may limit
coverage to specific drug products on an approved list, also known as a formulary, which might not include all of the approved drugs for a particular
indication.
In order to secure coverage and reimbursement for any product that might be approved for sale, we may need to conduct expensive
pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of the product, in addition to the costs required to obtain
FDA or other comparable regulatory approvals. Whether or not we conduct such studies, our product candidates may not be considered medically
necessary or cost-effective. A third-party payor’s decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will
be approved. Third party reimbursement may not be sufficient to enable us to maintain price levels high enough to realize an appropriate return on our
investment in product development.
The containment of healthcare costs has become a priority of federal, state and foreign governments, and the prices of drugs have been a focus in
this effort. Third-party payors are increasingly challenging the prices charged for medical products and services, examining the medical necessity and
reviewing the cost-effectiveness of drug products and medical services and questioning safety and efficacy. If these third-party payors do not consider our
products to be cost-effective compared to other available therapies, they may not cover our products after FDA approval or, if they do, the level of
payment may not be sufficient to allow us to sell our products at a profit. The U.S. government, state legislatures and foreign governments have shown
significant interest in implementing cost-containment programs to limit the growth of government-paid healthcare costs, including price controls,
restrictions on reimbursement and requirements for substitution of generic products for branded prescription drugs. Adoption of such controls and
measures, and tightening of restrictive policies in jurisdictions with existing controls and measures, could limit payments for pharmaceuticals such as our
drug product candidates and could adversely affect our net revenue and results.
Pricing and reimbursement schemes vary widely from country to country. Some countries provide that drug products may be marketed only after
a reimbursement price has been agreed. Some countries may require the completion of additional studies that compare the cost-effectiveness of a
particular product candidate to currently available therapies. For example, the European Union provides options for its member states to restrict the range
of drug products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use.
European Union member states may approve a specific price for a drug product or it may instead adopt a system of direct or indirect controls on the
profitability of the company placing the drug product on the market. Other member states allow companies to fix their own prices for drug products, but
monitor and control company profits. The downward pressure on healthcare costs in general, particularly prescription drugs, has become intense. As a
result, increasingly high barriers are being erected to the entry of new products. In addition, in some countries, cross-border imports from low-priced
markets exert competitive pressure that may reduce pricing within a country. Any country that has price controls or reimbursement limitations for drug
products may not allow favorable reimbursement and pricing arrangements for any of our products.
The marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and third-party
payors fail to provide adequate coverage and reimbursement. In addition, emphasis on managed care in the United States has increased and we expect will
continue to increase the pressure on drug pricing. Coverage policies, third-party reimbursement rates and drug pricing regulation may change at any time.
In particular, the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010, which we
collectively refer to as the Affordable Care Act (“ACA”), contains provisions that have the potential to substantially change healthcare financing,
including impacting the profitability of drugs. For example, the ACA revised the methodology by which rebates owed by manufacturers to the state and
federal government for covered outpatient drugs under the Medicaid Drug Rebate Program, extended the Medicaid Drug Rebate Program to utilization of
prescriptions of individuals enrolled in Medicaid managed care organizations and subjected manufacturers to new annual fees and taxes for certain
branded prescription drugs. Even if favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory
approval, less favorable coverage policies and reimbursement rates may be implemented in the future.
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Healthcare Law and Regulation
Healthcare providers, physicians and third-party payors play a primary role in the recommendation and prescribing of any product candidates for
which we may obtain marketing approval. Our business operations and arrangements with investigators, healthcare professionals, consultants, third-party
payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations. These laws may constrain the
business or financial arrangements and relationships through which we research, market, sell and distribute our products that obtain marketing approval.
Restrictions under applicable federal and state healthcare laws and regulations, include, but are not limited to, the following:
●
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●
the federal healthcare Anti-Kickback Statute prohibits, among other things, persons or entities from knowingly and willfully soliciting, offering,
receiving or paying any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to
induce or reward either the referral of an individual for, or the purchase, lease, order or recommendation of, any good, facility, item or service,
for which payment may be made, in whole or in part, under a federal healthcare program such as Medicare and Medicaid;
the federal false claims laws and civil monetary penalties law impose penalties and provide for civil whistleblower or qui tam actions against
individuals or entities for, among other things, knowingly presenting, or causing to be presented, to the federal government, claims for payment
or approval that are false or fraudulent or making a false record or statement to avoid, decrease or conceal an obligation to pay money to the
federal government;
the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) among other things, imposes criminal liability for
knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or making false statements
relating to healthcare matters;
● HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, also
imposes certain obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of
individually identifiable health information without written authorization;
●
●
●
the federal false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any
materially false statement in connection with the delivery of or payment for healthcare benefits, items or services;
the federal transparency requirements under the ACA require manufacturers of drugs, devices, biologics and medical supplies to report annually
to the U.S. Department of Health and Human Services information related to payments and other transfers of value to physicians and teaching
hospitals and certain physician ownership and investment interests; and
analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, that may apply to our business operations,
including our sales or marketing arrangements, and claims involving healthcare items or services reimbursed by governmental third-party
payors, and in some instances, also such claims reimbursed by non-governmental third-party payors, including private insurers.
Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the
relevant compliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report information related to
payments to physicians and other healthcare providers or marketing expenditures. State and foreign laws also govern the privacy and security of health
information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating
compliance efforts.
Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve
substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes,
regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any
of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and/or administrative penalties,
damages, fines, disgorgement, exclusion from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or
restructuring of our operations. If any of the physicians or other providers or entities with whom we expect to do business are found to be not in
compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded
healthcare programs.
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The Foreign Corrupt Practices Act
The Foreign Corrupt Practices Act (the “FCPA”) prohibits any U.S. individual or business from paying, offering or authorizing payment or
offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of
the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are
listed in the United States to comply with accounting provisions requiring us to maintain books and records that accurately and fairly reflect all
transactions of the Company, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for
international operations.
As we pursue international licensing and sales arrangements outside the United States, we will be heavily regulated and expect to have
significant interaction with foreign officials. Additionally, in many countries outside the United States, the health care providers who prescribe human
pharmaceuticals are employed by the government and the purchasers of human pharmaceuticals are government entities; therefore, our interactions with
these prescribers and purchasers would be subject to regulation under the FCPA.
In addition to the U.S. application and enforcement of the FCPA, the various jurisdictions in which we operate and supply our products have laws
and regulations aimed at preventing and penalizing corrupt and anticompetitive behavior. In recent years, several jurisdictions, including China, Brazil,
and the United Kingdom, have enhanced their laws and regulations in this area, increased their enforcement activities, and/or increased the level of cross-
border coordination and information sharing.
Employees
As of December 31, 2020, we had 11 employees, of which 8 are full time employees. Of these full-time employees, one works on research and
development and clinical operations and seven work in sales, marketing, management and administration. We also use the services of numerous outside
consultants in business and scientific matters. None of our employees are represented by a labor union or covered by collective bargaining agreements.
We consider our relationship with our employees to be good.
Compliance with Environmental Regulations
Our third-party manufacturers’ activities and our own activities may involve the controlled storage, use and disposal of hazardous materials,
including the components of our pharmaceutical product candidates, test samples and reagents, biological materials and other hazardous compounds. We
and our manufacturers are subject to federal, state, local and foreign laws and regulations governing the use, generation, manufacture, storage, handling
and disposal of these hazardous materials. We currently carry no insurance specifically covering environmental claims relating to the use of hazardous
materials. Although we believe that our safety procedures for handling and disposing of these materials and waste products comply with the standards
prescribed by these laws and regulations, we cannot eliminate the risk of accidental injury or contamination from the use, storage, handling or disposal of
hazardous materials. In the event of an accident, state or federal or other applicable authorities may curtail our use of these materials and/or interrupt our
business operations. In addition, if an accident or environmental discharge occurs, or if we discover contamination caused by prior operations, including
by prior owners and operators of properties we acquire, we could be liable for cleanup obligations, damages and fines. If such unexpected costs are
substantial, this could significantly harm our financial condition and results of operations.
Corporate Information
We were originally incorporated in Texas in 2002 and re-incorporated in Delaware in 2015. Our principal executive offices are located at 9
Fishers Lane, Suite E, Sparta, NJ 07871, and our telephone number is (973) 409-6541. Our website address is www.plxpharma.com. We have not
incorporated by reference into this Form 10-K the information in, or that can be accessed through, our website and you should not consider it to be a part
of this Form 10-K.
On April 19, 2017, Dipexium Acquisition Corp., a Delaware corporation (“Merger Sub”) and a wholly-owned subsidiary of Dipexium
Pharmaceuticals, Inc., a Delaware corporation (“Dipexium”), merged with and into PLx Pharma Inc., a privately-held Delaware corporation (“Old PLx”),
pursuant to the terms of that certain Agreement and Plan of Merger and Reorganization dated as of December 22, 2016 by and among Dipexium, Merger
Sub and Old PLx (the “Merger”). As part of the Merger, Dipexium was re-named PLx Pharma Inc. and Old PLx was re-named PLx Opco Inc. Following
completion of the Merger, Old PLx became a wholly-owned subsidiary of the Company. Since the completion of the Merger, the business we have
conducted has been primarily the business of Old PLx.
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ITEM 1A. RISK FACTORS.
Investing in our common stock involves a high degree of risk. We have described below a number of risk factors which, in addition to
uncertainties, risks and other information presented elsewhere in this Form 10-K, including our consolidated financial statements and notes thereto, may
adversely affect our business, operating results and financial condition. The uncertainties and risks enumerated below, as well as those presented
elsewhere in this Form 10-K, should be considered carefully in evaluating the Company, our business and the value of our securities. If any of the
following risks actually occur, our business, financial condition, results of operations and future prospects could be materially and adversely affected.
Please also read carefully the section entitled “Information Regarding Forward-Looking Statements” included in this Form 10-K.
Risks Related to Our Business and Capital Requirements
We have not yet generated significant revenues, have a limited operating history, have incurred operating losses in each year since our inception and
anticipate that we will continue to incur significant losses for the foreseeable future, and if we are unable to achieve and sustain profitability, the
market value of our common stock will likely decline.
We have not generated any revenue from the sale of products, have generated minimal revenue from grant activities, and have incurred operating
losses since we commenced operations. The Company’s operating loss for the year ended December 31, 2020 was $13.5 million. As of December 31,
2020, we had an accumulated deficit of approximately $102.1 million. We expect to continue to incur significant expenses and increasing operating losses
for the foreseeable future as we continue the development and commercialization of VAZALORE and our other product candidates. Our expenses will
also increase substantially if and when we:
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discover and develop additional product candidates;
establish a sales, marketing and distribution infrastructure to commercialize VAZALORE and any other product candidates for which we may
obtain marketing approval;
establish a manufacturing and supply chain sufficient for commercial quantities of VAZALORE and any other product candidates for which we
may obtain marketing approval;
● maintain, expand and protect our intellectual property portfolio;
●
●
hire additional clinical, scientific, regulatory and commercial personnel;
add operational, financial and management information systems and personnel, including personnel to support our product development and
planned future; and
●
acquire or in-license other product candidates and technologies.
Even if we do generate revenues, we may never achieve profitability. If we do achieve profitability in the future, we may not be able to sustain
profitability in subsequent periods. Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our
stockholders’ equity and working capital. If we are unable to achieve and sustain profitability, the market value of our common stock will likely decline.
Because of the numerous risks and uncertainties associated with developing biopharmaceutical products, we are unable to predict the extent of any future
losses or when, if ever, we will become profitable.
We may need additional funding. If we are unable to raise capital when needed, we could be forced to delay, reduce or terminate our operations or
commercialization efforts.
As of December 31, 2020, we had working capital of approximately $19.4 million and cash and cash equivalents of approximately $22.4 million.
We anticipate that we may need to raise additional financing in the future to fund our operations.
We may obtain additional financing through public or private equity offerings, debt financings (including related-party financings), a credit
facility or strategic collaborations. On August 9, 2017, the Company entered into a Loan and Security Agreement with Silicon Valley Bank (“SVB”) that
provided for a Term Loan Facility (the “Term Loan Facility” and all amounts borrowed thereunder, the “Term Loan”). Under the Term Loan Facility, the
Company borrowed an initial amount of $7.5 million, and had the right to borrow an additional $7.5 million on or before December 31, 2018, provided
that the Company first obtained (a) net new capital of not less than $20,000,000 and (ii) FDA approval for the 81 mg formulation of VAZALORE, the
Company’s lead product. The Company did not satisfy the requirements for the additional $7.5 million by the December 31, 2018 deadline. The Company
made a final payment on the Term Loan Facility on February 9, 2021.
On December 20, 2018, the Company entered into a Purchase Agreement (the “Series A Purchase Agreement”) pursuant to which the Company
agreed to issue 15,000 shares of Series A Convertible Preferred Stock (the “Series A Preferred Stock”) to certain investors for gross proceeds of $15
million, subject to stockholder approval which was received on February 19, 2019, and the financing was completed on February 20, 2019 (the “Series A
Private Placement”).
On March 12, 2020, the Company entered into a Purchase Agreement pursuant to which the Company agreed to issue 8,000 shares of Series B
Convertible Preferred Stock (the “Series B Preferred Stock”) to certain investors for gross proceeds of $8 million, subject to stockholder approval which
was received on May 15, 2020, and the financing was completed on May 15, 2020 (the “Series B Private Placement”). On November 16, 2020, the
Company entered into a Securities Purchase Agreement pursuant to which the Company agreed to issue an aggregate of 4,755,373 immediately separable
units (the “Units”), with each Unit being comprised of (i) one share of common stock (such shares, the “Unit Shares”) and (ii) a warrant to purchase 1.1
shares of common stock (a “Warrant,” and such shares, the “Warrant Shares”), at a price per Unit of $3.787 to certain investors for gross proceeds of
approximately $18 million.
On March 5, 2021, the Company completed an underwritten public offering (the “Public Offering”), in which we issued and sold 7,875,000
shares of our common stock at a price to the public of $8.00 per share. Gross proceeds of the Public Offering were $63 million before deducting
underwriting discounts and commissions and other offering expenses payable by the Company. The underwriters retained a 30-day option to purchase up
to 1,181,250 shares of common stock at the public offering price, less underwriting discounts and commission.
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In March 2019, we entered into an equity distribution agreement (the “Equity Distribution Agreement”) with JMP Securities LLC (“JMP”) to
issue and sell shares of our common stock, having an aggregate offering price of up to $12.5 million, from time to time during the term of the Equity
Distribution Agreement, through an “at-the-market” equity offering program (the “ ATM Offering”) at our sole discretion, under which JMP acted as our
agent. The Company paid JMP a commission of 3.0% of the gross proceeds from each sale of shares pursuant to the Equity Distribution Agreement,
reimbursed legal fees and disbursements and provided JMP with customary indemnification and contribution rights. As of December 31, 2020, we had
sold approximately $2.3 million of shares of our common stock pursuant to the Equity Distribution Agreement on a gross basis. Effective as of March 2,
2021, the Equity Distribution Agreement and the ATM Offering were terminated.
Additional financing may not be available to us when we need it or it may not be available to us on favorable terms, if at all. Our failure to raise
capital as and when needed could have a negative impact on our financial condition and our ability to pursue our business strategies. Our future financing
requirements will depend on many factors, some of which are beyond our control, including:
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the timing of, and costs involved in, seeking and obtaining FDA and other regulatory approvals;
the scope, progress, expansion, and costs of manufacturing our product candidates;
the emergence of competing technologies and other adverse market developments;
the resources we devote to marketing, and, if approved, commercializing our product candidates;
our revenue, if any, from successful commercialization of our product candidates;
the costs associated with being a public company;
the rate of progress and cost of our clinical trials, preclinical studies and other discovery and research and development activities;
the costs of preparing, filing, prosecuting, maintaining and enforcing any patent claims and other intellectual property rights, including litigation
costs and the
results of such litigation;
our ability to enter into additional collaboration, licensing or other arrangements, including collaborative agreements to support the development
of our product candidates, and the terms and timing of such arrangements; and
●
the type, number, costs and results of the product candidate development programs which we are pursuing or may choose to pursue in the future.
Future capital requirements will also depend on the extent to which we acquire or invest in additional complementary businesses, products and
technologies. We currently have no understandings, commitments or agreements relating to any of these types of transactions. If we are unable to raise
additional funds when needed, we may be required to sell or license to others technologies or clinical product candidates or programs that we would prefer
to develop and commercialize ourselves. Without additional funding — or, alternatively, a partner willing to collaborate and fund development — we will
be unable to continue development of PL1200 Ibuprofen or any other development-stage products in our pipeline.
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We are substantially dependent on the success of our lead product candidate, VAZALORE. If we are unable to successfully commercialize
VAZALORE or experience significant delays in doing so, our business could be materially harmed.
Our future success is substantially dependent on our ability to successfully commercialize VAZALORE, which will depend on several factors,
including the following:
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Establishing and maintaining commercial manufacturing and supply arrangements;
establishing and maintaining a commercial infrastructure;
identifying and successfully establishing one or more collaborations to commercialize VAZALORE;
acceptance of the product by the medical community, patients and third-party payors;
obtaining market share while competing with more established companies;
a continued acceptable safety and adverse event profile of the product; and
qualifying for, identifying, registering, maintaining, enforcing and defending intellectual property rights and claims covering the product.
Serious adverse events, undesirable side effects or other unexpected properties of VAZALORE or any other product candidate may be identified after
approval that could delay, prevent or cause the withdrawal of regulatory approval, limit the commercial potential, or result in significant negative
consequences following marketing approval.
Serious adverse events or undesirable side effects caused by, or other unexpected properties of, VAZALORE or our other product candidates
could cause us, an IRB, or regulatory authorities to interrupt, delay or halt our manufacturing and distribution operations and could result in a more
restrictive label, the imposition of distribution or use restrictions or the delay or denial of regulatory approval by the FDA or comparable foreign
regulatory authorities. If VAZALORE or any of our other product candidates are associated with serious adverse events or undesirable side effects or have
properties that are unexpected, we may need to abandon their development or limit development to certain uses or subpopulations in which the
undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. Many compounds that
initially showed promise in clinical or earlier stage testing have later been found to cause undesirable or unexpected side effects that prevented further
development of the compound.
Undesirable side effects or other unexpected adverse events or properties of VAZALORE or any of our other product candidates could arise or
become known either during clinical development or, if approved, after the approved product has been marketed. If such an event occurs during
development, our trials could be suspended or terminated and the FDA or comparable foreign regulatory authorities could order us to cease further
development of, or deny approval of, our other product candidates. If such an event occurs with respect to VAZALORE, a number of potentially
significant negative consequences may result, including:
●
●
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regulatory authorities may withdraw the approval of such product;
regulatory authorities may require additional warnings on the label or impose distribution or use restrictions;
regulatory authorities may require one or more post-market studies;
● we may be required to create a medication guide outlining the risks of such side effects for distribution to patients;
● we could be sued and held liable for harm caused to patients; and
●
our reputation may suffer.
Any of these events could prevent us from achieving or maintaining market acceptance of the affected product candidate, or could substantially
increase commercialization costs and expenses, which could delay or prevent us from generating revenue from the sale of our products and harm our
business and results of operations.
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Even though VAZALORE has already obtained regulatory approval, it may never achieve market acceptance by physicians, patients, and others in the
medical community necessary for commercial success and the market opportunity may be smaller than we estimate.
Even if we are able to launch VAZALORE commercially, it may not achieve market acceptance among physicians, patients, hospitals (including
pharmacy directors) and third-party payors and, ultimately, may not be commercially successful. Market acceptance of VAZALORE and any potential
product candidate for which we receive approval depends on a number of factors, including:
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the efficacy and safety of the product candidate as demonstrated in clinical trials;
relative convenience and ease of administration;
the clinical indications for which the product candidate is approved;
the potential and perceived advantages and disadvantages of the product candidate, including cost and clinical benefit relative to alternative
treatments;
the strength of competitive products;
the effectiveness of our sales and marketing efforts;
the strength of marketing and distribution support;
the willingness of physicians to recommend or prescribe the product;
the willingness of hospital pharmacy directors to purchase our products for their formularies;
our ability to maintain regulatory approvals for the product candidate;
acceptance by physicians, operators of hospitals and treatment facilities and parties responsible for reimbursement of the product;
the availability of adequate coverage and reimbursement by third-party payors and government authorities;
limitations or warnings, including distribution or use restrictions, contained in the product’s approved labeling or an approved risk evaluation
and mitigation
strategy;
the approval of other new products for the same indications;
the timing of market introduction of the approved product as well as competitive products; and
adverse publicity about the product or favorable publicity about competitive products.
For example, while we believe that the safety profile and certain efficacy data will allow us to differentiate VAZALORE from other aspirin
products in the market, we may not be able to make direct comparative claims regarding the safety or efficacy of VAZALORE and other aspirin products
in our promotional materials for VAZALORE. Any failure by VAZALORE or any other product candidate that obtains regulatory approval to achieve
market acceptance or commercial success would adversely affect our business prospects.
Our ability to market VAZALORE for long-term use may be hampered by lack of trial results demonstrating long-term GI-safety benefits.
While demonstrating a statistically significant reduction in mucosal damage at 42 days when evaluated using the same clinical endpoints used for
early studies involving enteric-coated aspirin, VAZALORE 325 mg did not demonstrate a reduction in ulcer risk over the course of a 42-day trial when
more contemporary clinical endpoints were used. This lack of demonstrated long-term GI benefits could hamper our ability to market VAZALORE 325
mg for long-term use.
For many new product candidates, we will rely on third parties to conduct our preclinical studies and all of our clinical trials. If these third parties do
not successfully carry out their contractual duties or meet expected deadlines, we may be unable to obtain regulatory approval for or commercialize
any of our product candidates.
If we elect to pursue new products, we will rely on medical institutions, clinical investigators, contract laboratories and other third parties, such
as contract research organizations, to conduct our preclinical studies and clinical trials on our product candidates in compliance with applicable regulatory
requirements. These third parties are not our employees and, except for restrictions imposed by our contracts with such third parties, we have limited
ability to control the amount or timing of resources that they devote to our programs. Although we rely on these third parties to conduct our preclinical
studies and clinical trials, we remain responsible for ensuring that each of our preclinical studies and clinical trials is conducted in accordance with its
investigational plan and protocol and the applicable legal, regulatory, and scientific standards, and our reliance on these third parties does not relieve us of
our regulatory responsibilities. The FDA and regulatory authorities in other jurisdictions require us to comply with regulations and standards, commonly
referred to as cGCPs for conducting, monitoring, recording and reporting the results of clinical trials, in order to ensure that the data and results are
scientifically credible and accurate and that the trial subjects are adequately informed of the potential risks of participating in clinical trials. If we or any of
our third-party contractors fail to comply with applicable cGCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA
or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. In addition,
we are required to report certain financial interests of our third-party investigators if these relationships exceed certain financial thresholds and meet other
criteria. Our clinical trials must also generally be conducted with products produced under cGMP regulations. Our failure to comply with these regulations
may require us to repeat clinical trials, which would delay the regulatory approval process.
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Many of the third parties with whom we contract may also have relationships with other commercial entities, some of which may compete with
us. If the third parties conducting our preclinical studies or our clinical trials do not perform their contractual duties or obligations or comply with
regulatory requirements, we may need to enter into new arrangements with alternative third parties. This could be costly, and our preclinical studies or
clinical trials may need to be extended, delayed, terminated or repeated, and we may not be able to obtain regulatory approval in a timely fashion, or at all,
for the applicable product candidate, or to commercialize such product candidate being tested in such studies or trials. If any of our relationships with
these third parties terminate, we may not be able to enter into arrangements with alternative third-party contractors or to do so on commercially reasonable
terms. Though we carefully manage our relationships with our contract research organizations, there can be no assurance that we will not encounter
similar challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition
and prospects.
Clinical trials for future products may be delayed or prevented.
Clinical trials may be delayed or prevented for a broad range of reasons, including:
● Difficulties obtaining regulatory approval to begin trials;
● Delays in reaching agreements on acceptable terms with contract manufacturers and contract research organizations;
●
Insufficient or inadequate supply or quality of a product candidate or other materials necessary to conduct our clinical trials;
● Challenges recruiting and enrolling subjects to participate in clinical trials for a variety of reasons, including size and nature of subject
population, proximity of subjects to clinical sites, eligibility criteria for the trial, nature of trial protocol, the availability of approved effective
treatments for the relevant disease and competition from other clinical trial programs for similar indications;
● Difficulties maintaining contact with subjects after treatment, which results in incomplete data;
● Receipt by a competitor of marketing approval for a product targeting an indication that our product targets, such that we are not “first to
market” with our product candidate;
● Governmental or regulatory delays and changes in regulatory requirements, policy and guidelines;
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Inspection of the clinical trial operations or trial sites by the FDA or other regulatory authorities;
● Unforeseen safety issues, including serious adverse events associated with a product candidate, or lack of effectiveness; and
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Lack of adequate funding to continue the clinical trial.
One or more of these difficulties could result in delayed or cancelled trials and have a significant negative impact on our earnings.
We will rely on third-party contract manufacturing organizations to manufacture and supply VAZALORE and other product candidates for us, as well
as certain raw materials used in the production thereof. If one of our suppliers or manufacturers fails to perform adequately, we may be required to
incur significant delays and costs to find new suppliers or manufacturers.
We currently have limited experience in, and we do not own facilities for, manufacturing our product candidates, including VAZALORE. We rely
upon third-party manufacturing organizations to manufacture and supply our product candidates and certain raw materials used in the production thereof.
Some of our key components for the production of VAZALORE have a limited number of suppliers.
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We will not control the manufacturing process of, and will be completely dependent on, our contract manufacturing partners for compliance with
cGMP regulations for manufacture of our drug products. We will be relying on our contract manufacturers to successfully manufacture material that
conforms to our specifications and the strict regulatory requirements of the FDA or a comparable foreign regulatory authority. In addition, although we
will have no day-to-day control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified
personnel, we are nonetheless responsible for ensuring that our drug products are manufactured in accordance with cGMPs. If the facilities that
manufacture our drug products fail to maintain a cGMP compliance status acceptable to the FDA or a comparable foreign regulatory authority, we may
need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market our
product candidates, if approved. The FDA or a comparable foreign regulatory authority could also take enforcement action with regard to the facilities or
the drug products.
We have entered into a Manufacturing Services Agreement with Thermo Fisher’s Pharma Services business, to provide the capabilities to bring
VAZALORE to market. We do not have commercial supply agreements with all of our raw material suppliers. In the event that we and our suppliers
cannot agree to the terms and conditions for them to provide clinical and commercial supply needs, we would not be able to manufacture our product
candidates until a qualified alternative supplier is identified, which could also delay the development of, and impair our ability to commercialize, our
product candidates.
Our third-party suppliers may not be able to meet our supply needs or timelines and this may negatively affect our business. The failure of third-
party manufacturers or suppliers to perform adequately or the termination of our arrangements with any of them may adversely affect our business.
We may be subject to costly product liability claims related to our products and product candidates and, if we are unable to obtain adequate insurance
or are required to pay for liabilities resulting from a claim excluded from, or beyond the limits of, our insurance coverage, a material liability claim
could adversely affect our financial condition.
We face the risk that the use of our product candidates may result in adverse side effects and as a result may expose us to significant product
liability claims. Although we currently have product liability insurance coverage in the amount of $5 million, our insurance may be insufficient to
reimburse us for any expenses or losses we may suffer, and we may be required to increase our product liability insurance coverage as we increase the size
of our operations. We do not know whether we will be able to continue to obtain product liability coverage and obtain expanded coverage if we require it,
on acceptable terms, if at all. We may not have sufficient resources to pay for any liabilities resulting from a claim excluded from, or beyond the limits of,
our insurance coverage. To the extent that we are required to provide indemnities in favor of third parties, there is also a risk that these third parties could
incur liability and bring a claim under such indemnities. An individual may bring a product liability claim against us alleging that one of our product
candidates or products has caused an injury or is found to be unsuitable for consumer use. Any product liability claim brought against us, with or without
merit, could result in:
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the inability to commercialize VAZALORE or future product candidates;
decreased demand for VAZALORE or future candidates;
regulatory investigations that could require costly recalls or product modifications;
loss of revenue;
substantial costs of litigation;
liabilities that substantially exceed our product liability insurance, which we would then be required to pay ourselves;
an increase in our product liability insurance rates or the inability to maintain insurance coverage in the future on acceptable terms, if at all;
the diversion of management’s attention from our business; and
damage to our reputation and the reputation of our products.
Product liability claims may subject us to the foregoing and other risks, which could have a material adverse effect on our business, results of
operations, financial condition and prospects.
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We currently have no sales, marketing and distribution organization. If we are unable to establish effective sales, marketing and distribution
capabilities or enter into third party arrangements for sales, marketing and distribution, we may not be able to effectively market, sell and distribute
our product candidates, if approved.
We are currently in the process of building our sales and marketing staff and distribution processes. If we are unable to develop a sales and
marketing and distribution capability on our own or through third parties, we will not be successful in commercializing our future products.
To achieve
commercial success for any approved product candidate, we must either develop a sales, marketing and distribution organization or outsource these
functions to third parties. If we rely on third parties for marketing and distributing our approved products, any revenue we receive will depend upon the
efforts of third parties, which may not be successful and are only partially within our control, and our product revenue may be lower than if we directly
marketed or sold our products. We have no historical operations in this area, and if such efforts were necessary, we may not be able to successfully
commercialize our future products. If we are not successful in commercializing our future products, either on our own or through third parties, any future
product revenue will be materially and adversely affected.
We face substantial competition and our competitors may discover, develop or commercialize products faster or more successfully than us.
The development and commercialization of new drug products is highly competitive. We face competition from major pharmaceutical companies
and biotechnology companies worldwide with respect to VAZALORE and other product candidates that we may seek to develop or commercialize in the
future. There are a number of pharmaceutical and biotechnology companies that currently market and sell products or are pursuing the development of
product candidates that compete directly or indirectly with VAZALORE. Potential competitors also include academic institutions, government agencies
and other public and private research organizations. Our competitors may succeed in developing, acquiring or licensing technologies and drug products
that are more effective, safer or less costly than VAZALORE or any other product candidates that we are currently developing or that we may develop,
which could render our product candidates obsolete and noncompetitive.
Many of our competitors have materially greater name recognition and financial, manufacturing, marketing, research and drug development
resources than we do. Additional mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being
concentrated in our competitors. Large pharmaceutical companies in particular have extensive expertise in commercial sales, preclinical and clinical
testing and in obtaining regulatory approvals for drugs. In addition, academic institutions, government agencies, and other public and private
organizations conducting research may seek patent protection with respect to potentially competitive products or technologies. These organizations may
also establish exclusive collaborative or licensing relationships with our competitors.
Finally, the success of any product that is commercialized will depend in large part on our ability to prevent competitors from launching a generic
version that would compete with such product. If such competitors are able to establish that our patents are invalid or that the generic version would not
infringe upon our product, they may be able to launch a generic product prior to the expected expiration of our relevant patents, and any generic
competition could have a material adverse effect on our business, results of operations, financial condition and prospects.
We may fail to innovate and be competitive.
We cannot state with certainty when or whether any of our products under development will be launched, whether we will be able to develop,
license, or otherwise acquire compounds or products, or whether any products will be commercially successful. Failure to launch successful new products
or new indications for existing products may cause our products to become obsolete, causing our revenues and operating results to suffer.
We expect to compete with a large number of multinational pharmaceutical companies, biotechnology companies, and generic pharmaceutical
companies. To successfully expand our product offerings, we must continue to deliver to the market innovative, cost-effective products that meet
important medical needs. Our product revenues can be adversely affected by the introduction by competitors of branded products that are perceived as
superior by the marketplace, by generic or biosimilar versions of our branded products, and by generic or biosimilar versions of other products in the same
therapeutic class as our branded products. Our revenues can also be adversely affected by treatment innovations that eliminate or minimize the need for
treatment with drugs.
We may attempt to form collaborations in the future with respect to our products, but we may not be able to do so, which may cause us to alter our
development and commercialization plans.
We may form strategic alliances, create joint ventures or collaborations or enter into licensing arrangements with third parties with respect to our
programs that we believe will complement or augment our existing business. We may attempt to find strategic partners for the commercialization of
VAZALORE in other geographic jurisdictions and we may also attempt to find one or more strategic partners for the development or commercialization
of one or more of our other product candidates. We face significant competition in seeking appropriate strategic partners, and the negotiation process to
secure appropriate terms is time-consuming and complex. We may not be successful in our efforts to establish such a strategic partnership for any product
candidates and programs on terms that are acceptable to us, or at all.
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Any delays in identifying suitable collaborators and entering into agreements to develop or commercialize our product candidates could
negatively impact the development or commercialization of our product candidates in geographic regions where we do not have development and
commercialization infrastructure. Absent a collaboration partner, we would need to undertake development or commercialization activities at our own
expense. If we elect to fund and undertake development or commercialization activities on our own, we may need to obtain additional expertise and
additional capital, which may not be available to us on acceptable terms or at all. If we are unable to do so, we may not be able to develop our product
candidates or bring them to market and our business may be materially and adversely affected.
We may be unable to realize the potential benefits of any collaboration.
Even if we are successful in entering into a collaboration with respect to the development or commercialization of one or more product
candidates, there is no guarantee that the collaboration will be successful. Collaborations may pose a number of risks, including:
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collaborators may not perform their obligations as expected;
disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the course of development, might
cause delays or termination of the development or commercialization of product candidates, and might result in legal proceedings, which would
be time-consuming, distracting and expensive;
collaborators may be impacted by changes in their strategic focus or available funding, or business combinations involving them, which could
cause them to divert resources away from the collaboration;
collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability;
the collaborations may not result in our achieving revenue to justify such transactions; and
collaborations may be terminated and, if terminated, may result in a need for us to raise additional capital to pursue further development or
commercialization of the applicable product candidate.
As a result, a collaboration may not result in the successful development or commercialization of our product candidates.
We will need to grow our organization, and we may experience difficulties in managing growth.
As of December 31, 2020, we had 11 employees, of which 8 are full time employees. We will need to expand our managerial, operational,
financial and other resources in order to manage our operations, continue our development activities, commercialize VAZALORE or other product
candidates and comply with our obligations as a public reporting company. Our management and personnel, systems and facilities currently in place may
not be adequate to support this future growth. Our need to effectively execute our business strategy requires that we:
● manage our internal discovery and development efforts effectively while carrying out our contractual obligations to licensors, contractors,
government agencies, any future collaborators and other third parties;
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continue to improve our operational, financial and management controls, reporting systems and procedures; and
identify, recruit, maintain, motivate and integrate additional employees.
If we are unable to expand our managerial, operational, financial, and other resources to the extent required to manage our development and
commercialization activities, our business will be materially adversely affected.
We are highly dependent on the services of our executive management team, and on our ability to attract and retain qualified personnel.
We may
not be able to attract or retain qualified management and scientific and clinical personnel in the future due to the intense competition for qualified
personnel among biotechnology, pharmaceutical and other businesses. We are highly dependent on the principal members of our management, particularly
our Executive Chairman of the Board, Michael J. Valentino, our President and Chief Executive Officer, Natasha Giordano, and our Chief Financial
Officer, Rita O’Connor. If we are not able to retain Mr. Valentino, Ms. Giordano, or Ms. O’Connor, or are not able to attract, on acceptable terms,
additional qualified personnel necessary for the continued development of our business, we may not be able to sustain our operations or grow. Although
we have executed employment agreements with each member of our current executive management team, including Mr. Valentino, Ms. Giordano and Ms.
O’Connor, we may not be able to retain their services as expected.
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In addition, we have scientific and clinical advisors who assist us in formulating our product development and clinical strategies. These advisors
are not our employees and may have commitments to, or consulting or advisory contracts with, other entities that may limit their availability to us, or may
have arrangements with other companies to assist in the development of products that may compete with ours.
If we are not able to attract, retain and motivate necessary personnel to accomplish our business objectives, we may experience constraints that
will significantly impede the achievement of our development objectives, our ability to raise additional capital and our ability to implement our business
strategy.
Our business involves the use of hazardous materials and we and our third-party manufacturers must comply with environmental laws and
regulations, which may be expensive and restrict how we do business.
Our third-party manufacturers’ activities and our own activities may involve the controlled storage, use and disposal of hazardous materials,
including the components of our pharmaceutical product candidates, test samples and reagents, biological materials and other hazardous compounds. We
and our manufacturers are subject to various environmental, health and safety laws and regulations, including federal, state, local and foreign laws and
regulations governing the use, generation, manufacture, storage, handling and disposal of these hazardous materials. We currently carry no insurance
specifically covering environmental claims relating to the use of hazardous materials, with the exception of workers’ compensation coverage for our
employees. Although we believe that our safety procedures for handling and disposing of these materials and waste products comply with the standards
prescribed by these laws and regulations, we cannot eliminate the risk of accidental injury or contamination from the use, storage, handling or disposal of
hazardous materials. In the event of an accident, state or federal or other applicable authorities may curtail our use of these materials and/or interrupt our
business operations. In addition, if an accident or environmental discharge occurs, or if we discover contamination caused by prior operations, including
by prior owners and operators of properties we acquire, we could be liable for cleanup obligations, damages and fines. If such unexpected costs are
substantial, this could significantly harm our financial condition and results of operations.
We or the third parties upon whom we depend may be adversely affected by natural disasters.
Changes to global climate, extreme weather and natural disasters could affect demand for our products and services, cause disruptions in
manufacturing and distribution networks, alter the availability of goods and services within the supply chain, and affect the overall design and integrity of
our operations.
Our corporate headquarters is located in Sparta, New Jersey, which in the past has experienced weather-related incidents. Natural disasters could
severely disrupt our operations, and have a material adverse effect on our business, operations, financial condition and prospects. If a natural disaster,
power outage or other event occurred that prevented us from using all or a significant portion of our headquarters, that damaged critical infrastructure,
such as our information technology systems, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible for us to continue
our business for a substantial period of time.
If such an event were to affect our supply chain, it could have a material adverse effect on our business.
Our employees, independent contractors, principal investigators, consultants and vendors may engage in misconduct or other improper activities,
including noncompliance with regulatory standards and requirements.
We are exposed to the risk that our employees, independent contractors, principal investigators, consultants and vendors may engage in
fraudulent or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct or disclosure of unauthorized
activities to us that violates:
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FDA regulations, including those laws requiring the reporting of true, complete and accurate information to the FDA;
● manufacturing standards;
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federal and state healthcare fraud and abuse laws and regulations; or
laws that require the true, complete and accurate reporting of financial information or data.
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Specifically, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to
prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing,
discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Activities subject to these laws
also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our
reputation.
It is not always possible to identify and deter misconduct by our employees and other third parties, and the precautions we take to detect and
prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or
other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us, and we
are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of
civil, criminal and administrative penalties, damages, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal
healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations, any of which
could adversely affect our ability to operate our business and our results of operations.
If we are not able to implement the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 in a timely manner or with adequate compliance,
we may be subject to sanctions by regulatory authorities.
As a public company, we are required to comply with significant legal, accounting, and other requirements and as such, have incurred significant
regulatory compliance-related expenses. The Sarbanes-Oxley Act of 2002 as well as rules implemented by the SEC and NASDAQ, impose various
requirements on public companies, including those related to corporate governance practices. Our management and other personnel devote a substantial
amount of time to these requirements. Some members of management do not have significant experience in addressing these requirements. Moreover,
these rules and regulations have increased our legal and financial compliance costs relative to those of previous years and make some activities more time
consuming and costly.
The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal controls for financial reporting and disclosure controls
and procedures. In particular, we must perform system and process evaluation and testing of our internal controls over financial reporting to allow
management to report on the effectiveness of our internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. The
Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) provides a framework for companies to assess and improve their
internal control systems. Our compliance with these requirements has required that we incur substantial accounting and related expenses and expend
significant management efforts. Moreover, if we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act, are unable to
assert that our internal controls over financial reporting are effective, or identify deficiencies that are deemed to be material weaknesses, investors could
lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline and we could be subject to
sanctions or investigations by NASDAQ, the SEC, or other regulatory authorities. Any of these events could have a material adverse effect on our
business, financial position, and operating results.
Our ability to utilize the Company’s or Dipexium’s net operating loss and tax credit carryforwards in the future is subject to substantial limitations
and may be further limited as a result of the Merger and any new tax law changes.
Under Section 382 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change” (generally defined as a
greater than 50 percent change (by value) in its equity ownership over a three-year period), the corporation’s ability to use its pre-change net operating
loss carryforwards and other pre-change tax attributes to offset its post-change income may be limited. Further, if the historic business of Dipexium is not
treated as being continued by us for the two- year period beginning on the date of the merger (referred to as the “continuity of business requirement”), the
pre-Merger net operating loss carryforward deductions become substantially reduced or unavailable for use by the surviving corporation in the transaction.
It is expected that the Merger resulted in an “ownership change” of Dipexium. Accordingly, our ability to utilize the Company’s and Dipexium’s net
operating loss and tax credit carryforwards may be substantially limited. These limitations, in turn, could result in increased future tax payments for the
combined organization, which could have a material adverse effect on the business, financial condition or results of operations of the combined
organization.
Risks Related to Product Safety and Efficacy Issues
Our understanding of the safety and efficacy of VAZALORE could change as larger portions of the population begin using VAZALORE.
VAZALORE, like all NSAIDs, poses specific risks, including stomach bleeding and, for aspirin, Reyes syndrome. As the product is used by
additional patients, we may discover new risks associated with VAZALORE which may result in changes to the distribution program and additional
restrictions on the use of VAZALORE which may decrease demand for the product. Regulatory authorities have been moving towards more active and
transparent pharmacovigilance and are making greater amounts of standalone safety information and clinical trial data directly available to the public
through websites and other means, e.g., periodic safety update report summaries, risk management plan summaries and various adverse event data. Safety
information, without the appropriate context and expertise, may be misinterpreted and lead to misperception or legal action which may potentially cause
our product sales or stock price to decline. Further, if serious safety, resistance or drug interaction issues arise with our marketed products, sales of these
products could be limited or halted by us or by regulatory authorities and our results of operations would be adversely affected.
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Adverse safety events involving our marketed products may have a negative impact on our business.
Discovery of safety issues with our products could create product liability and could cause additional regulatory scrutiny and requirements for
additional labeling, withdrawal of products from the market, and the imposition of fines or criminal penalties. Adverse safety events may also damage
physician and patient confidence in our products and our reputation. Any of these could result in liabilities, loss of revenue, material write-offs of
inventory, material impairments of intangible assets, goodwill and fixed assets, material restructuring charges and other adverse impacts on our results of
operations. The reporting of adverse safety events involving our products or products similar to ours and public rumors about such events may increase
claims against us and may also cause our product sales or stock price to decline or experience periods of volatility. Restrictions on use or significant safety
warnings that may be required to be included in the label of our products — such as the risk of developing an allergic reaction to soy, stomach bleeding or
Reyes syndrome, in the label for VAZALORE — may significantly reduce expected revenues for this product and require significant expense and
management time.
Unexpected safety or efficacy concerns can arise with respect to marketed products, whether or not scientifically justified, leading to product
recalls, withdrawals, or declining sales, as well as product liability, consumer fraud and/or other claims, including potential civil or criminal governmental
actions.
Our business will be highly dependent on professional and public reputation and perception, which may change, leading to volatile sales.
Market perceptions of the Company are very important to our business, especially market perceptions of our company and brands and the safety
and quality of our products. If we, our partners and suppliers, or our brands suffer from negative publicity, or if any of our products or similar products
which other companies distribute are subject to market withdrawal or recall or are proven to be, or are claimed to be, ineffective or harmful to consumers,
then this could have a material adverse effect on our business, financial condition, results of operations, cash flows, and/or share price. Also, because we
are dependent on market perceptions, negative publicity associated with product quality, patient illness, or other adverse effects resulting from, or
perceived to be resulting from, our products, or our partners’ and suppliers’ manufacturing facilities, could have a material adverse effect on our business,
financial condition, results of operations, cash flows, or share price.
We must be able to adapt to changed circumstances and quickly update product labels, which could be costly or harm our reputation.
We may be required by regulatory authorities to change the labeling for any pharmaceutical product, including after a product has been marketed
for several years. These changes are often the result of additional data from post-marketing studies, head-to-head trials, adverse events reports, studies that
identify biomarkers (objective characteristics that can indicate a particular response to a product or therapy) or other studies or post-marketing experience
that produce important additional information about a product. New information added to a product’s label can affect its risk-benefit profile, leading to
potential recalls, withdrawals, or declining revenue, as well as product liability claims. Sometimes additional information from these studies identifies a
portion of the patient population that may be nonresponsive to a medicine or would be at higher risk of adverse reactions and labeling changes based on
such studies may limit the patient population. The studies providing such additional information may be sponsored by us, but they could also be
sponsored by competitors, insurance companies, government institutions, managed care organizations, scientists, investigators, or other interested parties.
While additional safety and efficacy information from such studies can assist us and healthcare providers in identifying the best patient population for
each product, it can also negatively impact our revenues due to inventory returns and a more limited patient population going forward. Additionally,
certain study results, especially from head-to-head trials, could affect a product’s reimbursement status or priority with certain payors, which could also
adversely affect revenues.
Risks Related to Intellectual Property
If we are unable to obtain and maintain sufficient intellectual property protection for VAZALORE or our future product candidates, or if the scope of
the intellectual property protection is not sufficiently broad, our competitors could develop and commercialize products similar or identical to ours,
and our ability to successfully commercialize our product candidates may be adversely affected.
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We rely upon a combination of patents, trade secret protection and confidentiality agreements to protect the intellectual property related to our
technologies. If we do not adequately protect our intellectual property, competitors may be able to use our technologies and erode or negate any
competitive advantage we may have, which could harm our business and ability to achieve profitability. In particular, our success depends in large part on
our ability to obtain and maintain patent protection in the United States and other countries with respect to our product candidates. However, we may not
be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. We may also fail to identify
patentable aspects of our research and development before it is too late to obtain patent protection.
Further, the patentability of inventions, and the validity, enforceability and scope of patents in the pharmaceutical field involve complex legal and
scientific questions and can be uncertain. As a result, patent applications that we own or license may fail to result in issued patents in the United States or
in other foreign countries for many reasons. For example, since patent applications in the United States and most other countries are confidential for a
period of time after filing, we cannot be certain that we were the first to file any patent application related to our product candidates. Even if patents have
issued, or do successfully issue, from patent applications, third parties may challenge the validity, enforceability or scope thereof, which may result in
such patents being narrowed, invalidated or held unenforceable. Furthermore, even if they are unchallenged, our patents and patent applications may not
adequately protect our intellectual property or prevent others from designing around our claims. If the breadth or strength of protection provided by the
patents and patent applications we hold, license or pursue with respect to our product candidates is threatened, it could threaten our ability to
commercialize our product candidates. Further, if we encounter delays in our clinical trials, the period of time during which we could market any of our
product candidates under patent protection, if approved, would be reduced. Changes to the patent laws in the United States and other jurisdictions could
also diminish the value of our patents and patent applications or narrow the scope of our patent protection.
If we are unable to protect the confidentiality of our trade secrets, the value of our technology could be materially adversely affected and our business
would be harmed.
In addition to the protection afforded by patents, we rely on confidential proprietary information — including trade secrets and know-how — to
develop and maintain our competitive position. Any disclosure to or misappropriation by third parties of our confidential proprietary information could
enable competitors to quickly duplicate or surpass our technological achievements, thus eroding our competitive position in our market. We seek to
protect our confidential proprietary information, in part, by confidentiality agreements and invention assignment agreements with our employees and
confidentiality agreements with consultants, scientific advisors, contractors and collaborators. These agreements are designed to protect our proprietary
information. However, we cannot be certain that such agreements have been entered into with all relevant parties, and we cannot be certain that our trade
secrets and other confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or
independently develop substantially equivalent information and techniques. For example, any of these parties may breach the agreements and disclose our
proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. We also seek to preserve the
integrity and confidentiality of our confidential proprietary information by maintaining physical security of our premises and physical and electronic
security of our information technology systems, but it is possible that these security measures could be breached. If any of our confidential proprietary
information were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent such competitor from using that
technology or information to compete with us, which could harm our competitive position. If we are unable to prevent material disclosure of the
intellectual property related to our technologies to third parties, we will not be able to establish or maintain a competitive advantage in our market, which
could materially adversely affect our business, results of operations and financial condition.
If we are sued for infringing intellectual property rights of third parties, such litigation could be costly and time consuming and could prevent or delay
us from developing or commercializing our product candidates.
There is a substantial amount of intellectual property litigation in the biotechnology and pharmaceutical industries, and we may become party to,
or threatened with, litigation or other adversarial proceedings regarding intellectual property rights with respect to our technology or product candidates,
including post-grant or inter-partes proceedings, interference or derivation proceedings before the USPTO. Third parties may assert infringement claims
against us based on existing or future intellectual property rights. The outcome of intellectual property litigation is subject to uncertainties that cannot be
adequately quantified in advance. The pharmaceutical and biotechnology industries have produced a significant number of patents, and it may not always
be clear to industry participants, including us, which patents cover various types of products or methods of use. The coverage of patents is subject to
interpretation by the courts, and the interpretation is not always uniform. If we are sued for patent infringement, we would need to demonstrate that our
product candidates, products or methods either do not infringe the patent claims of the relevant patent or that the patent claims are invalid, and we may not
be able to do this. Proving that a patent is invalid is difficult. For example, in the United States, proving invalidity requires a showing of clear and
convincing evidence to overcome the presumption of validity enjoyed by issued patents. Even if we are successful in these proceedings, we may incur
substantial costs and the time and attention of our management and scientific personnel could be diverted in pursuing these proceedings, which could have
a material adverse effect on us.
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If we are found to infringe a third party’s intellectual property rights, we could be forced, including by court order, to cease developing,
manufacturing or commercializing the infringing product candidate or product. Alternatively, we may be required to obtain a license from such third party
in order to use the infringing technology and continue developing, manufacturing or marketing the infringing product candidate. However, we may not be
able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be nonexclusive, thereby
giving our competitors access to the same technologies licensed to us. In addition, we could be found liable for monetary damages, including treble
damages and attorneys’ fees, if we are found to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our
product candidates or force us to cease some of our business operations, which could materially harm our business. We may also elect to enter into license
agreements in order to settle patent infringement claims or to resolve disputes prior to litigation, and any such license agreements may require us to pay
royalties and other fees that could be significant. Claims that we have misappropriated the confidential information or trade secrets of third parties could
have a similar negative impact on our business.
We may be involved in lawsuits to protect or enforce our intellectual property rights which could be expensive, time consuming and unsuccessful.
Competitors may infringe or otherwise violate our patents, the patents of our licensors, or our other intellectual property rights. To counter
infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming. Any claims that we assert
against perceived infringers could also provoke these parties to assert counterclaims against us alleging that we infringe their intellectual property rights.
In addition, in an infringement proceeding, a court may decide that a patent of ours is not valid or is unenforceable, in whole or in part, or may refuse to
stop the other party in such infringement proceeding from using the technology at issue on the grounds that our patents do not cover the technology in
question. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated, held unenforceable
or interpreted narrowly, and could put any of our patent applications at risk of not yielding an issued patent.
Post-grant or inter-parte proceedings, interference or derivation proceedings provoked by third parties or brought by the USPTO or any foreign
patent authority may be necessary to determine the priority of inventions or other matters of inventorship with respect to our patents or patent
applications. We may also become involved in other proceedings, such as reexamination or opposition proceedings, before the USPTO or its foreign
counterparts relating to our intellectual property or the intellectual property rights of others. An unfavorable outcome in any such proceedings could
require us to cease using the related technology or to attempt to license rights to it from the prevailing party, or could cause us to lose valuable intellectual
property rights. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms, if any license is
offered at all. Litigation or other proceedings may fail and, even if successful, may result in substantial costs and distract our management and other
employees. We may also become involved in disputes with others regarding the ownership of intellectual property rights. For example, we jointly develop
intellectual property with certain parties, and disagreements may therefore arise as to the ownership of the intellectual property developed pursuant to
these relationships. If we are unable to resolve these disputes, we could lose valuable intellectual property rights.
We may not be able to prevent misappropriation of our trade secrets or confidential information, particularly in countries where the laws may not
protect those rights as fully as in the United States. Furthermore, because of the substantial amount of discovery required in connection with intellectual
property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. In addition,
there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors
perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Even if resolved in our favor, litigation
or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses, and could distract our technical and/or
management personnel from their normal responsibilities. Such litigation or proceedings could substantially increase our operating losses and reduce the
resources available for development activities or any future sales, marketing or distribution activities. Uncertainties resulting from the initiation and
continuation of intellectual property litigation or other proceedings could negatively affect our ability to compete in the marketplace.
We may not be able to protect our intellectual property rights throughout the world.
Filing, prosecuting and defending patents on all of our product candidates throughout the world would be prohibitively expensive. Competitors
may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise
infringing products to territories where we have patent protection but where enforcement is not as strong, or where standards are different than they are in
the United States. These products may compete with our products in jurisdictions where we do not have any issued patents and our patent claims or other
intellectual property rights may not be effective or sufficient to prevent them from so competing. Many companies have encountered significant problems
in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing
countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biopharmaceuticals, which could
make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally.
Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial cost and divert our efforts and attention from other aspects of
our business.
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If we breach any of the agreements under which we license the use, development and commercialization rights to our product candidates from third
parties, we could lose license rights that are important to our business.
In addition to our own patents, an important patent family covering VAZALORE is owned by UT. Our development and commercialization of
VAZALORE is subject to our UT License Agreement. Under our UT License Agreement, we are subject to various obligations, including diligence
obligations with respect to development and commercialization activities, payment obligations for achievement of certain milestones and royalties on
product sales, as well as other material obligations. If we fail to comply with any of these obligations or otherwise breach UT License Agreement, UT
may have the right to terminate the applicable license in whole or in part. Specifically, Section 4.6 of our UT License Agreement provides that
“Reasonable commercial diligence shall require that [the Company] . . . . [o]n or before September 8, 2013, Sell or offer for Sale a Licensed Product.”
While we believe that we have exercised reasonable commercial diligence to actively attempt such commercialization, we have not yet successfully
commercialized a licensed product. As such, UT may have the option to terminate the UT License Agreement, or to limit the exclusivity of the license in
certain territories.
The loss of our license agreement with UT could materially adversely affect our ability to proceed with the development or potential
commercialization of VAZALORE as currently planned, and could materially adversely affect our ability to proceed with any development or potential
commercialization of PL1200 Ibuprofen and other NSAID programs. The risks described elsewhere pertaining to our patents and other intellectual
property rights also apply to the intellectual property rights that we license, and any failure by us or our licensors to obtain, maintain and enforce these
rights could have a material adverse effect on our business. In some cases, we do not have control over the prosecution, maintenance or enforcement of
the patents that we license, and may not have sufficient ability to consult and input into the patent prosecution and maintenance process with respect to
such patents, and our licensors may fail to take the steps that we believe are necessary or desirable in order to obtain, maintain and enforce the licensed
patents.
Limitations on intellectual property rights may result in other threats to our competitive advantage.
The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and
may not adequately protect our business or permit us to maintain our competitive advantage. The following examples are illustrative:
●
others may be able to make compounds that are similar to VAZALORE or our future product candidates but that are not covered by the claims
of the patents that we own or license;
● we or our licensors or collaborators might not have been the first to make the inventions covered by an issued patent or pending patent
application that we own or license;
● we or our licensors or collaborators might not have been the first to file patent applications covering an invention;
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others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual
property rights;
pending patent applications that we own or license may not lead to issued patents;
issued patents that we own or license may not provide us with any competitive advantages, or may be held invalid or unenforceable, as a result
of legal challenges by our competitors;
our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information
learned from such activities to develop competitive products for sale in our major commercial markets; and
● we may not develop or in-license additional proprietary technologies that are patentable.
We may be subject to claims that our employees or consultants have wrongfully used or disclosed alleged trade secrets of former or other employers.
Some of our employees, consultants, advisors, and members of our Board of Directors, including our senior management, have been employed or
retained by other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our
employees and consultants do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or
these individuals have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such individuals’ former or
other employer. We are not aware of any material threatened or pending claims related to these matters, but in the future litigation may be necessary to
defend against such claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property
rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to
management.
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Risks Related to Government Regulation
The regulatory approval process is expensive, time consuming and uncertain and may prevent us from obtaining, or cause delays in obtaining,
approvals for the commercialization of future product candidates, which will materially impair our ability to generate revenue.
The design, development, research, testing, manufacturing, labeling, storage, recordkeeping, approval, selling, import, export, advertising,
promotion, and distribution of drug products are subject to extensive and evolving regulation by federal, state and local governmental authorities in the
United States, principally by the FDA, and foreign regulatory authorities, with regulations differing from country to country. Failure to obtain marketing
approval for a product candidate will prevent us from commercializing the product candidate.
We have not obtained marketing approval for any product candidate other than VAZALORE anywhere in the world. An NDA must include
extensive preclinical and clinical data and supporting information to establish to the FDA’s satisfaction the product candidate’s safety and efficacy for
each desired indication. The NDA must also include significant information regarding the chemistry, manufacturing and controls for the product
candidate. Obtaining regulatory approval of an NDA can be a lengthy, expensive and uncertain process. In addition, failure to comply with FDA and other
applicable U.S. and foreign regulatory requirements may subject us to administrative or judicially imposed sanctions, including:
● warning or untitled letters;
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civil and criminal penalties;
injunctions;
● withdrawal of approved products;
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product recalls;
seizure of products;
total or partial suspension of production; and
refusal to approve pending NDAs or supplements to approved NDAs.
These actions could result in, among other things, substantial modifications to our business practices and operations, refunds of our products, the
inability to obtain future approvals or marketing authorizations, and withdrawals or suspensions of current products from the market. Any of these events
could disrupt our business and have a material adverse effect on our revenues, profitability and financial condition.
Prior to receiving approval to commercialize any future product candidates in the United States or abroad, we and any applicable collaboration
partners must demonstrate with substantial evidence from well-controlled clinical trials, and to the satisfaction of the FDA and other regulatory authorities
abroad, that such product candidates are safe and effective for their intended uses. Preclinical testing and clinical trials are long, expensive and uncertain
processes. We may spend several years completing our testing for any particular product candidate, and failure can occur at any stage. Negative or
inconclusive results or adverse medical events during a clinical trial could also cause the FDA or us to terminate a clinical trial or require that we repeat it
or conduct additional clinical trials. Additionally, data obtained from preclinical studies and clinical trials can be interpreted in different ways and the
FDA or other regulatory authorities may interpret the results of our studies and trials less favorably than we do. Even if we believe the preclinical or
clinical data for a product candidate is promising, such data may not be sufficient to support approval by the FDA and other regulatory authorities.
Administering any product candidates to humans may produce undesirable side effects, which could interrupt, delay or halt clinical trials of such product
candidates and result in the FDA or other regulatory authorities denying approval of such product candidates for any or all targeted indications. The FDA
or other regulatory authorities may determine that any product candidate that we develop is not effective, or are only moderately effective, or have
undesirable or unintended side effects, toxicities, safety profile or other characteristics that preclude marketing approval or prevent or limit commercial
use. In addition, any marketing approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the
approved product not commercially viable.
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We are subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense and subject us
to restrictions, withdrawal from the market, or penalties if we fail to comply with applicable regulatory requirements or if we experience unanticipated
problems with our product candidates, when and if approved.
An approved product and its manufacturer are subject to continual review by the FDA and, as applicable, non-U.S. regulatory authorities. Any
regulatory approval that we receive for our product candidates may be subject to limitations on the indicated uses for which the product may be marketed
or contain requirements for potentially costly post-marketing follow-up studies or surveillance to monitor the safety and efficacy of the product. In
addition, if the FDA or non-U.S. regulatory authorities approve any of our product candidates, we will be subject to extensive and ongoing regulatory
requirements by the FDA and other regulatory authorities with regard to labeling, packaging, adverse event reporting, storage, distribution, advertising,
promotion, recordkeeping and submission of safety and other post-market information. Manufacturers of our products and manufacturers’ facilities are
required to comply with cGMP regulations, which include requirements related to quality control and quality assurance as well as the corresponding
maintenance of records and documentation. Further, regulatory authorities must approve these manufacturing facilities before they can be used to
manufacture our products, and these facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for
compliance with cGMP regulations. Accordingly, we and others with whom we work must continue to expend time, money and effort in all areas of
regulatory compliance, including manufacturing, production and quality control.
We, and our direct and indirect suppliers, remain subject to the periodic inspection of our plants and facilities, review of production processes,
and testing of our products to confirm that we are in compliance with all applicable regulations. For example, the FDA conducts ongoing inspections to
determine whether our record keeping, production processes and controls, personnel and quality control are in compliance with the cGMP regulations, and
other FDA regulations. Adverse findings during regulatory inspections may result in the implementation of REMS programs, completion of government
mandated post-marketing clinical studies, and government enforcement action relating to labeling, advertising, marketing and promotion, as well as
regulations governing manufacturing controls noted above. The FDA has increased its enforcement activities related to the advertising and promotion of
pharmaceutical, biological and medical device products. We will also be required to report certain adverse reactions and production problems, if any, to
the FDA and to comply with requirements concerning advertising and promotion for our products. If we, any future collaboration partner or a regulatory
authority discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the
facility where the product is manufactured, a regulatory authority may impose restrictions on that product, the collaboration partner, the manufacturer or
us, including requiring withdrawal of the product from the market or suspension of manufacturing.
The FDA closely regulates the post-approval marketing and promotion of drugs to ensure drugs are marketed only for the approved indications
and in accordance with the provisions of the approved labeling and regulatory requirements. The FDA also imposes stringent restrictions on
manufacturers’ communications regarding off-label use and if we do not restrict the promotion of our products only to their approved indications, we may
be subject to enforcement action for off-label promotion. If we, our product candidates or the manufacturing facilities for our product candidates fail to
comply with regulatory requirements of the FDA and/or other non-U.S. regulatory authorities, we could be subject to administrative or judicially imposed
sanctions, including:
● mandated modifications to promotional materials or the required provision of corrective information to healthcare practitioners;
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restrictions imposed on the product or its manufacturers or manufacturing processes;
restrictions imposed on the labeling or marketing of the product;
restrictions imposed on product distribution or use;
requirements for post-marketing clinical trials;
suspension of any ongoing clinical trials;
suspension of or withdrawal of regulatory approval;
voluntary or mandatory product recalls and publicity requirements;
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refusal to approve pending applications for marketing approval of new products or supplements to approved applications filed by us;
restrictions on operations, including costly new manufacturing requirements;
seizure or detention of our products;
refusal to permit the import or export of our products;
required entry into a consent decree, which can include imposition of various fines (including restitution or disgorgement of profits or revenue),
reimbursements
for inspection costs, required due dates for specific actions and penalties for noncompliance;
civil or criminal penalties; or
injunctions.
Widely publicized events concerning the safety risk of certain drug products have resulted in the withdrawal of drug products, revisions to drug
labeling that further limit use of the drug products and the imposition by the FDA of REMS to ensure that the benefits of the drug outweigh its risks. In
addition, because of the serious public health risks of high profile adverse safety events with certain products, the FDA may require, as a condition of
approval, costly REMS programs.
The regulatory requirements and policies may change and additional government regulations may be enacted with which we may also be
required to comply. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative
action, either in the United States or in other countries. If we or any future collaboration partner are not able to maintain regulatory compliance, we or
such collaboration partner, as applicable, will not be permitted to market our future products and our business will suffer.
Failure to obtain regulatory approvals in foreign jurisdictions will prevent us from marketing our products internationally.
We may seek a distribution and marketing collaborator for VAZALORE or other product candidates commercialized outside of the United States.
In order to market our product candidates in the European Economic Area (which comprises the 28 member states of the European Union, plus Norway,
Iceland and Liechtenstein), and many other foreign jurisdictions, we or our collaboration partners must obtain separate regulatory approvals. We have had
limited interactions with foreign regulatory authorities, and approval procedures vary among countries and can involve additional clinical testing. In
addition, the time required to obtain approval from foreign regulatory authorities may differ from that required to obtain FDA approval. Clinical trials
conducted in one country may not be accepted by regulatory authorities in other countries. Approval by the FDA does not ensure approval by regulatory
authorities in other countries, and approval by one or more foreign regulatory authorities does not ensure approval by regulatory authorities in other
foreign countries or by the FDA. However, a failure or delay in obtaining regulatory approval in one country may have a negative effect on our ability to
obtain approval in other countries. The foreign regulatory approval process generally includes all of the risks associated with obtaining FDA approval. In
addition, in many countries outside the United States, it is required that the product be approved for reimbursement before the product can be approved for
sale in that country. We may or may not obtain foreign regulatory approvals on a timely basis, if at all. We may not be able to file for regulatory approvals
and even if we file, we may not receive necessary approvals to commercialize our product candidates in any market.
Healthcare reform measures could hinder or prevent our product candidates’ commercial success.
In the United States, there have been, and we expect there will continue to be, a number of legislative and regulatory changes to the healthcare
system that could affect our future revenue and profitability and the future revenue and profitability of our potential customers. Federal and state
lawmakers regularly propose and, at times, enact legislation that results in significant changes to the healthcare system, some of which is intended to
contain or reduce the costs of medical products and services. The ACA contained a number of provisions, including those governing enrollment in federal
healthcare programs, reimbursement changes and fraud and abuse measures that have impacted and will continue to impact existing government
healthcare programs and will result in the development of new programs.
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We currently benefit from regulations that mandate full reimbursement without cost sharing for aspirin when prescribed by a health care provider.
Changes to these regulations could significantly reduce reimbursement rates in a manner that negatively affects our sales.
As a result of regulations enacted as part of the ACA, we expect that VAZALORE will qualify for coverage when prescribed by physicians for
the prevention of cardiovascular disease in patients with certain age-associated risks, requiring no out-of-pocket payments. While this will initially have
the potential to expand the demand for VAZALORE, changes to these regulations could have a significant adverse effect on reimbursement rates and,
indirectly, on sales of VAZALORE.
We are subject to healthcare laws, regulation and enforcement and our failure to comply with those laws could adversely affect our business,
operations and financial condition.
Even though we do not and will not control referrals of healthcare services or bill directly to Medicare, Medicaid or other third-party payors,
certain federal and state healthcare laws and regulations pertaining to fraud and abuse and patients’ rights are and will be applicable to our business. We
could be subject to healthcare fraud and abuse and patient privacy regulation by both the federal government and the states in which we conduct our
business. The regulations that may affect our ability to operate include, without limitation:
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the federal Anti-Kickback Statute, which prohibits, among other things, any person from knowingly and willfully offering, soliciting,
receiving or providing remuneration, directly or indirectly, to induce either the referral of an individual, for an item or service or the
purchasing or ordering of a good or service, for which payment may be made under federal healthcare programs such as the Medicare and
Medicaid programs;
the federal False Claims Act, which prohibits, among other things, individuals or entities from knowingly presenting, or causing to be
presented, false claims, or knowingly using false statements, to obtain payment from the federal government, and which may apply to entities
that provide coding and billing advice to customers;
federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to
healthcare matters;
the federal physician sunshine requirements under the ACA, which require manufacturers of drugs, devices, biologics, and medical supplies
to report annually to the Centers for Medicare & Medicaid Services information related to payments and other transfers of value to
physicians, other healthcare providers, and teaching hospitals, and ownership and investment interests held by physicians and other
healthcare providers and their immediate family members; and
HIPAA, which governs the conduct of certain electronic healthcare transactions and protects the security and privacy of protected health
information.
In addition, recent healthcare reform legislation has strengthened these laws. For example, the ACA, among other things, amended the intent
requirement of the Federal Anti-Kickback Statute and criminal healthcare fraud statutes. A person or entity no longer needs to have actual knowledge of
the statute or specific intent to violate it. In addition, the ACA provides that the government may assert that a claim including items or services resulting
from a violation of the Federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act.
These laws and regulations are broad in scope and they are subject to change and evolving interpretations, which could require us to incur
substantial costs associated with compliance or to alter one or more of our sales or marketing practices. In addition, any action against us for violation of
these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the
operation of our business. If our operations are found to be in violation of any of the laws described above or any other governmental regulations that
apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, the exclusion from participation in federal and state
healthcare programs, imprisonment, or the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our
business and our financial results.
Failure to comply with domestic and international privacy and security laws can result in the imposition of significant civil and criminal
penalties. The costs of compliance with these laws, including protecting electronically stored information from cyberattacks, and potential liability
associated with failure to do so could adversely affect our business, financial condition and results of operations. We are subject to various domestic and
international privacy and security regulations, including but not limited to HIPAA. HIPAA mandates, among other things, the adoption of uniform
standards for the electronic exchange of information in common healthcare transactions, as well as standards relating to the privacy and security of
individually identifiable health information, which require the adoption of administrative, physical and technical safeguards to protect such information.
In addition, many states have enacted comparable laws addressing the privacy and security of health information, some of which are more stringent than
HIPAA.
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Our international operations will be subject to the Foreign Corrupt Practices Act.
As we pursue international licensing, sales and co-promotion arrangements outside the United States, we will be heavily regulated and expect to
have significant interaction with foreign officials. Additionally, in many countries outside the United States, the health care providers who prescribe
human pharmaceuticals are employed by the government and the purchasers of human pharmaceuticals are government entities; therefore, our interactions
with these prescribers and purchasers would be subject to regulation under the FCPA, which prohibits any U.S. individual or business from paying,
offering or authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose
of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business.
Compliance with these regulations may be costly, and may limit our ability to expand into certain markets. Further, we may inadvertently be
found to be in violation of these and other regulations, which could result in material sanctions and penalties.
Risks Related to Our Common Stock
The price of our common stock may be volatile.
The market price for the shares of our common stock may fluctuate significantly in response to a number of factors including:
ability to commercialize or delays in commercializing VAZALORE;
ability to commercialize or obtain regulatory approval for our product candidates, or delays in commercializing or obtaining regulatory
approval;
any need to suspend or discontinue clinical trials due to side effects or other safety risks, or any need to conduct studies on the long-term effects
associated with the use of our product candidates;
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● manufacturing issues related to VAZALORE, our product candidates for clinical trials or future products for commercialization;
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commercial success and market acceptance of our product candidates;
undesirable side effects caused by product candidates after they have entered the market;
ability to discover, develop and commercialize additional product candidates;
announcements relating to collaborations that we may enter into with respect to the development or commercialization of our product
candidates, or the timing of payments we may make or receive under these arrangements;
success of our competitors in discovering, developing or commercializing products;
strategic transactions undertaken by us;
additions or departures of key personnel;
product liability claims related to our clinical trials or product candidates;
prevailing economic conditions;
business disruptions caused by earthquakes or other natural disasters;
disputes concerning our intellectual property or other proprietary rights;
FDA or other U.S. or foreign regulatory actions affecting us or our industry;
healthcare reform measures in the United States;
sales of our common stock by our officers, directors or significant stockholders;
future sales or issuances of equity or debt securities by us;
fluctuations in our operating results; and
the issuance of new or changed securities analysts’ reports or recommendations regarding us.
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In addition, the stock markets in general, and the markets for pharmaceutical stocks in particular, have experienced extreme volatility that has
often been unrelated to the operating performance of the issuer. These broad market fluctuations may adversely affect the trading price or liquidity of our
common stock. In the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action
litigation against the issuer. If any of our stockholders were to bring such a lawsuit against us, we could incur substantial costs defending the lawsuit and
the attention of our management would be diverted from the operation of our business.
Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters
subject to stockholder approval.
As of December 31, 2020, our officers and directors, together with holders of 5% or more of our outstanding common stock and their respective
affiliates, beneficially owned approximately 37.1% of our common stock. Accordingly, these stockholders have significant influence over the outcome of
corporate actions requiring stockholder approval, including the election of directors, any merger, consolidation or sale of all or substantially all of our
assets or any other significant corporate transaction. The interests of these stockholders may not be the same as or may even conflict with your interests.
For example, these large stockholders could delay or prevent a change of control of our company, even if such a change of control would benefit our other
stockholders, which could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our company or our
assets and might affect the prevailing market price of our common stock. The significant concentration of stock ownership may adversely affect the
trading price of our common stock due to investors’ perception that conflicts of interest may exist or arise.
We currently have Series A Preferred Stock and Series B Preferred Stock outstanding and our certificate of incorporation authorizes our Board to
create new series of preferred stock without further approval by our stockholders, which could adversely affect the rights of the holders of our
common stock.
Our Board has the authority to fix and determine the relative rights and preferences of preferred stock. Our Board also has the authority to issue
preferred stock without further stockholder approval. We currently have 15,000 shares of Series A Preferred Stock and 8,000 shares of Series B Preferred
Stock outstanding, which is convertible at the holder’s option at any time into shares of common stock with an initial conversion price of $2.60 and $3.10
per share, respectively, subject to certain adjustments. Each of the Series A Preferred Stock and Series B Preferred Stock Certificate of Designations
provide for the payment of cash dividends on the Series A Preferred Stock and Series B Preferred Stock at a rate of 8.00% per annum, provided that we
may pay dividends in-kind through the issuance of additional shares to holders of the Series A Preferred Stock and Series B Preferred Stock. Our Series A
Preferred Stock and Series B Preferred Stock gives its holders the preferred right to our assets upon liquidation and the right to receive dividend payments
before dividends are distributed to the holders of common stock, among other things. In addition, our Board could authorize the issuance of additional
series of preferred stock with such rights preferential to the rights of our common stock, including the issuance of a series of preferred stock that has
greater voting power than our common stock or that is convertible into our common stock, which could decrease the relative voting power of our common
stock or result in dilution to our existing stockholders.
Future sales of our common stock or securities convertible or exchangeable for our common stock may depress our stock price.
If our existing stockholders or holders of our options or warrants sell, or indicate an intention to sell, substantial amounts of our common stock in
the public market, the trading price of our common stock could decline. The perception in the market that these sales may occur could also cause the
trading price of our common stock to decline.
We may be at risk of securities class action litigation.
We may be at risk of securities class action litigation. This risk is especially relevant for us due to our dependence on positive clinical trial
outcomes and regulatory approvals of each of our product candidates. In the past, pharmaceutical companies have experienced significant stock price
volatility, particularly when associated with binary events such as clinical trials and product approvals. If we face such litigation, it could result in
substantial costs and a diversion of management’s attention and resources, which could harm our business and result in a decline in the market price of our
common stock.
Raising additional capital may cause dilution to our existing stockholders or involve the issuance of securities with rights, preferences and privileges
senior to those of holders of our common stock.
To raise capital, we may from time to time issue additional shares of common stock at a discount from the then-current trading price of our
common stock. As a result, our common stockholders would experience immediate dilution upon the purchase of any shares of our common stock sold at
such discount. In addition, as opportunities present themselves, we may enter into financing or similar arrangements in the future, including the issuance
of debt securities, preferred stock or common stock. Whether or not we issue additional shares of common stock at a discount, any issuance of common
stock will, and any issuance of other equity securities or of options, warrants or other rights to purchase common stock may, result in additional dilution of
the percentage ownership of our stockholders and could cause our stock price to decline. New investors could also gain rights, preferences and privileges
senior to those of holders of our common stock, which could cause the price of our common stock to decline.
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Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us more difficult and may prevent attempts
by our stockholders to replace or remove management.
Provisions in our certificate of incorporation and bylaws may delay or prevent an acquisition or a change in management. In addition, because
we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits
stockholders owning in excess of 15% of the outstanding combined company voting stock from merging or combining with the combined company.
Although we believe these provisions collectively will provide for an opportunity to receive higher bids by requiring potential acquirors to negotiate with
our board of directors, they would apply even if the offer may be considered beneficial by some stockholders. In addition, these provisions may frustrate
or prevent any attempts by our stockholders to replace or remove then current management by making it more difficult for stockholders to replace
members of the board of directors, which is responsible for appointing the members of management.
Provisions of our charter documents limit the liability of our officers and directors, which could limit the ability of stockholders (and outside parties)
to bring claims against such officers and directors.
Our certificate of incorporation contains provisions that limit the liability of our current and former directors for monetary damages to the fullest
extent permitted by Delaware law. Delaware law provides that directors of a corporation will not be personally liable for monetary damages for any
breach of fiduciary duties as directors, except liability for:
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●
any breach of the director’s duty of loyalty to the corporation or its stockholders;
any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
unlawful payments of dividends or unlawful stock repurchases or redemptions; or
any transaction from which the director derived an improper personal benefit.
Such limitation of liability does not apply to liabilities arising under federal securities laws and does not affect the availability of equitable
remedies, such as injunctive relief or rescission.
Our certificate of incorporation and our bylaws provide that we are required to indemnify our directors to the fullest extent permitted by
Delaware law. Our bylaws also provide that, upon satisfaction of certain conditions, we shall advance expenses incurred by a director in advance of the
final disposition of any action or proceeding, and permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability
arising out of his or her actions in that capacity regardless of whether we would otherwise be permitted to indemnify him or her under the provisions of
Delaware law. Our certificate of incorporation and bylaws provide our board of directors with discretion to indemnify our officers and employees when
determined appropriate by the board. We have entered and expect to continue to enter into agreements to indemnify our directors and executive officers.
With certain exceptions, these agreements provide for indemnification for related expenses including, among other things, attorneys’ fees, judgments,
fines and settlement amounts incurred by any of these individuals in any action or proceeding. We believe that these bylaw provisions and indemnification
agreements are necessary to attract and retain qualified persons as directors and officers. We also maintain customary directors’ and officers’ liability
insurance.
The limitation of liability and indemnification provisions in our certificate of incorporation and bylaws may discourage stockholders from
bringing a lawsuit against our directors for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against our directors
and officers, even though an action, if successful, might benefit us and other stockholders. Further, a stockholder’s investment may be adversely affected
to the extent that we pay the costs of settlement and damage awards against directors and officers as required by these indemnification provisions. At
present, there is no pending litigation or proceeding involving any of our directors, officers or employees for which indemnification is sought, and we are
not aware of any threatened litigation that may result in claims for indemnification.
We do not anticipate paying any cash dividends on our capital stock in the foreseeable future; therefore capital appreciation, if any, of our common
stock will be your sole source of gain for the foreseeable future.
We have never declared or paid cash dividends on our common stock. We do not anticipate paying any cash dividends on our common stock in
the foreseeable future. We currently intend to retain all available funds and any future earnings to fund the development and growth of our business. In
addition, no dividends will be declared or paid or set apart for payment on our common stock unless all accumulated accrued and unpaid dividends in
respect of our Series A Preferred Stock and Series B Preferred Stock have been paid or declared and set apart for payment to the holders of Series A
Preferred Stock and Series B Preferred Stock.
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If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, our stock price and
trading volume could decline.
The trading market for our common stock will depend, in part, on the research and reports that securities or industry analysts publish about us or
our business. Securities and industry analysts may never, publish research on us. If no securities or industry analysts commence coverage, the trading
price for our stock would likely be negatively impacted. In the event one or more of the security or industry analysts who cover us downgrade our stock or
publish inaccurate or unfavorable research about our business, our stock price would likely decline. In addition, if our operating results fail to meet the
forecast of analysts, our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly,
demand for our stock could decrease, which might cause our stock price and trading volume to decline.
The novel coronavirus ("COVID-19") global pandemic could adversely impact our business, including our supply chain.
As a result of the outbreak of novel COVID-19, we may experience disruptions that could impact our supply chain. For example, COVID-19 has
resulted in increased travel restrictions and the shutdown or delay of business activities in various regions. To the extent our suppliers and contract
manufacturer are unable to comply with their obligations under our agreements with them, our ability to continue advancing the manufacturing of
VAZALORE may become impaired. COVID-19 continues to rapidly evolve. The extent to which COVID-19 may impact our business will depend on
future developments, which are highly uncertain and cannot be predicted with confidence, such as the duration of the pandemic, travel restrictions and
social distancing in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United
States and other countries to contain and treat the pandemic.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
ITEM 2. PROPERTIES.
Our principal facility consists of office space in Sparta, New Jersey under two operating leases. In Sparta, we occupy approximately 2,463 and
2,232 square feet of office space, with rent of $5,542 and an average of $4,408 per month, respectively, under leases that expire September 30, 2021 and
July 1, 2024, respectively. In addition, we lease 5,006 square feet of office space in New York, New York from the former Dipexium headquarters with
rent of $19,720 per month under a lease that expires July 31, 2021. We currently sublease the New York facility, which generates income of $17,970 per
month.
ITEM 3. LEGAL PROCEEDINGS.
We are parties to legal proceedings that we believe to be ordinary, routine litigation incidental to the business of present or former operations. It
is management’s opinion, based on the advice of counsel, that the ultimate resolution of such litigation will not have a material adverse effect on our
financial condition, results of operations or cash flows.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES.
Market Information
Our common stock trades on the NASDAQ Capital Market under the symbol “PLXP.”
Stockholder Information
As of March 9, 2021, there were approximately 81 holders of record of our common stock, which does not include stockholders that beneficially
own shares held in a “nominee” or in “street” name.
Dividends
We have never paid cash dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future. The Certificates
of Designation for our Series A Preferred Stock and Series B Preferred Stock prohibit the payment of dividends at any time that we are not current in the
payment of dividends with respect to the Series A Preferred Stock or Series B Preferred Stock.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table provides information as of December 31, 2020, with respect to the shares of our common stock that may be issued under our
existing equity compensation plans.
Number of
Securities to be
Issued upon
Exercise of
Outstanding
Options,
Warrants and
Rights
(a)
Weighted-
average
Exercise Price
of Outstanding
Options,
Warrants and
Rights
(b)
Number of
Securities
Remaining
Available for
Future Issuance
Under Equity
Compensation
Plans
(excluding
securities
reflected in
column (a))
(c)
2,979,047 $
- $
2,979,047 $
9.35
-
99.35
1,027,650
-
1,027,650
Plan Category
Equity compensation plans approved by stockholders
Equity compensation plans not approved by stockholders
Total
Recent Sales of Unregistered Securities and Use of Proceeds from Registered Securities
In December 2018, we entered into the Purchase Agreement with Park West Investors Master Fund, Limited, a Cayman Islands exempted
company, and Park West Partners International, Limited, a Cayman Islands exempted company, for the Series A Private Placement of $15.0 million of our
Series A Preferred Stock, at a price of $1,000 per share, in reliance upon the exemption from securities registration afforded by the provisions of
Regulation D under the Securities Act of 1933. Following the attainment of stockholder approval of the transaction at a special meeting of stockholders on
February 19, 2019, the Series A Private Placement closed on February 20, 2019. Pursuant to the Certificate of Designations of the Series A Preferred
Stock, each share of Series A Preferred Stock can be converted, at the holder’s option at any time, into shares of the Company’s common stock at a
conversion rate equal to the quotient of (i) the $1,000 stated value divided by (ii) the initial conversion price of $2.60, subject to specified adjustments for
stock splits, cash or stock dividends, recapitalizations, combinations, subdivisions or other similar events as set forth in the Certificate of Designations. In
connection with the Purchase Agreement, we also issued warrants to purchase an aggregate of 500,000 shares of our common stock to the investors,
exercisable at a price of $3.50 per share, provided that the Series A Private Placement did not close by April 15, 2019. Following the closing of the Series
A Private Placement, the investors surrendered the warrants to the Company for cancellation. In March 2019, the Company filed a registration statement
on Form S-3 to register for resale the shares issuable upon conversion of the Series A Preferred Stock.
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In March 2020, the Company entered into a purchase agreement with certain accredited investors for the private placement of $8.0 million of
Series B Preferred Stock pending stockholders' approval, which approval was subsequently obtained on May 15, 2020. Accordingly, the Company
completed the Series B Private Placement on May 15, 2020, raising $8.0 million through the issuance of 8,000 shares of Series B Preferred Stock in
reliance upon the exemption from securities registration afforded by the provisions of Regulation D under the Securities Act of 1933. The Series B
Preferred Stock was issued at $1,000 per share and is convertible into common shares at a conversion price of $3.10 per share, subject to certain
adjustments. Holders of the Series B Preferred Stock are entitled to an initial dividend rate of 8.0% per annum, which will stop accruing on the date of the
FDA’s approval of the supplemental NDA of VAZALORE 325 mg and VAZALORE 81mg. The dividends are compounded quarterly and payable in cash
or shares of Series B Preferred Stock at the Company’s option. The Series B Preferred Stock carries a liquidation preference equal to its stated value of
$1,000 plus accrued and unpaid dividends. In June 2020, the Company filed a registration statement on Form S-3 to register for resale the shares issuable
upon conversion of the Series B Preferred Stock.
On November 16, 2020, the Company entered into a securities purchase agreement with certain institutional and accredited investors, pursuant to
which the Company agreed to issue and sell to the Investors an aggregate of 4,755,373 Units, with each Unit being comprised of (i) one share of the
Company’s common stock, and (ii) a warrant to purchase 1.1 shares of Common Stock , at a price per Unit of $3.787, for gross proceeds of approximately
$18 million in reliance upon the exemption from securities registration afforded by the provisions of Regulation D under the Securities Act of 1933.
Raymond James & Associates, Inc. (the “Placement Agent”) acted as placement agent in connection with the private placement. Pursuant to the terms of a
Placement Agency Agreement, dated November 16, 2020, between the Company and the Placement Agent (the “Placement Agency Agreement”), upon
the closing of the private placement, the Company paid the Placement Agent an aggregate cash fee equal to 6.0% of the aggregate gross proceeds from the
Private Placement plus the reimbursement of certain expenses with respect to the private placement. In December 2020, the Company filed a registration
statement on Form S-3 to register for resale the shares issuable upon the exercise of the Warrants.
Issuer Purchases of Equity Securities
None.
ITEM 6. SELECTED FINANCIAL DATA.
Not Applicable.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Statements in this Form 10-K that are not strictly historical are forward-looking statements and include statements about products in
development, results and analyses of pre-clinical studies, clinical trials and studies, research and development expenses, cash expenditures, and
alliances and partnerships, among other matters. You can identify these forward-looking statements because they involve our expectations, intentions,
beliefs, plans, projections, anticipations, or other characterizations of future events or circumstances. These forward-looking statements are not
guarantees of future performance and are subject to risks and uncertainties that may cause actual results to differ materially from those in the forward-
looking statements as a result of any number of factors. These factors include, but are not limited to, risks relating to our ability to conduct and obtain
successful results from ongoing clinical trials, commercialize our technology, obtain regulatory approval for our product candidates, contract with third
parties to adequately test and manufacture our proposed therapeutic products, protect our intellectual property rights and obtain additional financing
to continue our development efforts. Some of these factors are more fully discussed in Part I, Item 1A, “Risk Factors” and in our consolidated financial
statements and related notes, included elsewhere herein. We do not undertake to update any of these forward-looking statements or to announce the
results of any revisions to these forward-looking statements except as required by law. For further information regarding forward-looking statements,
please refer to the “Information Regarding Forward-Looking Statements” at the beginning of Part I of this Form 10-K.
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Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is provided in addition to the
accompanying financial statements and notes to assist readers in understanding our results of operations, financial condition and cash flows.
Overview
We are a specialty pharmaceutical company focused on our clinically-validated and patent-protected PLxGuard drug delivery platform to provide
more effective and safer products. Our PLxGuard drug delivery platform works by targeting the release of active pharmaceutical ingredients to various
portions of the gastrointestinal tract. We believe this has the potential to improve the absorption of many drugs currently on the market or in development,
and to reduce the risk of stomach erosions and ulcers associated with certain drugs.
VAZALORE, available in two doses, 325 mg and 81 mg, is an FDA-approved liquid-filled aspirin capsule that provides patients with vascular
disease and diabetic patients who are candidates for aspirin therapy based on physician recommendation, with fast, reliable and predictable platelet
inhibition. It also reduces the risk of stomach erosions and ulcers, as compared to immediate release aspirin, common in an acute setting.
Our commercialization strategy will target the over-the-counter (“OTC’) market, taking advantage of the existing distribution channels for
aspirin. We intend to market VAZALORE to the healthcare professional and the consumer through several sales and marketing channels. Our product
pipeline also includes other oral nonsteroidal anti-inflammatory drugs using the PLxGuard drug delivery system that may be developed, including PL1200
Ibuprofen 200 mg and PL1200 Ibuprofen 400 mg, for pain and inflammation in Phase 1 clinical stage.
Critical Accounting Policies
Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of
America (“U.S. GAAP”). The preparation of these financial statements requires management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, revenues and expenses. Note 3 of the Notes to Consolidated Financial Statements included elsewhere herein describes the
significant accounting policies used in the preparation of the financial statements. Certain of these significant accounting policies are considered to be
critical accounting policies, as defined below.
A critical accounting policy is defined as one that is both material to the presentation of our financial statements and requires management to
make difficult, subjective or complex judgments that could have a material effect on our financial condition and results of operations. Specifically, critical
accounting estimates have the following attributes: (1) we are required to make assumptions about matters that are highly uncertain at the time of the
estimate; and (2) different estimates we could reasonably have used, or changes in the estimate that are reasonably likely to occur, would have a material
effect on our financial condition or results of operations.
Estimates and assumptions about future events and their effects cannot be determined with certainty. We base our estimates on historical
experience and on various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new
events occur, as additional information is obtained and as our operating environment changes. These changes have historically been minor and have been
included in the financial statements as soon as they became known. Based on a critical assessment of our accounting policies and the underlying
judgments and uncertainties affecting the application of those policies, management believes that our financial statements are fairly stated in accordance
with U.S. GAAP and present a meaningful presentation of our financial condition and results of operations. We believe the following critical accounting
policies reflect our more significant estimates and assumptions used in the preparation of our consolidated financial statements:
Use of Estimates
The preparation of our consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amount of revenues and expenses during the reporting period. In the accompanying consolidated financial
statements, estimates are used for, but not limited to, the impairment assessment of goodwill, the fair value of warrant liability, the fair value of stock-
based compensation, allowance for inventory obsolescence, contingent liabilities, fair value and depreciable lives of long-lived assets, and deferred taxes
and associated valuation allowance. Actual results could differ from those estimates.
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Fair Value Measurements
Fair value is defined as the price that would be received in the sale of an asset or that would be paid to transfer a liability in an orderly transaction
between market participants at the measurement date. The Company has categorized all investments recorded at fair value based upon the level of
judgment associated with the inputs used to measure their fair value.
Hierarchical levels, directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as
follows:
●
●
●
Level 1: Quoted prices in active markets for identical assets or liabilities that the organization has the ability to access at the reporting date.
Level 2: Inputs other than quoted prices included in Level 1, which are either observable or that can be derived from or corroborated by
observable data as of the reporting date.
Level 3: Inputs include those that are significant to the fair value of the asset or liability and are generally less observable from objective
resources and reflect the reporting entity’s assumptions about the assumptions market participants would use in pricing the asset or liability.
The Company’s financial instruments (cash and cash equivalents, receivables, accounts payable and accrued liabilities) are carried in the
consolidated balance sheet at cost, which reasonably approximates fair value based on their short-term nature. The Company’s warrant liability is
recorded at fair value, with changes in fair value being reflected in the statements of operations for the period of change. The fair value of the term loan
approximates its face value of $0.6 million based on the Company’s current financial condition and on the variable nature of term loan’s interest feature as
compared to current rates.
Research and Development Expenses
Costs incurred in connection with research and development activities are expensed as incurred. Research and development expenses consist of
direct and indirect costs associated with specific projects, manufacturing activities, and include fees paid to various entities that perform research related
services for the Company.
Stock-Based Compensation
The Company recognizes expense in the consolidated statements of operations for the fair value of all stock-based compensation to key
employees, nonemployee directors and advisors, generally in the form of stock options and stock awards. The Company uses the Black-Scholes option
valuation model to estimate the fair value of stock options on the grant date. Compensation cost is amortized on a straight-line basis over the vesting
period for each respective award. The Company accounts for forfeitures as they occur.
Adopted Accounting Guidance
For a discussion of significant accounting guidance recently adopted or unadopted accounting guidance that has the potential of being significant,
see Note 3 of the Notes to the Consolidated Financial Statements included elsewhere herein.
Results of Operations
Revenue
Total revenues were $0.03 million and $0.6 million for the years ended December 31, 2020 and 2019, respectively. All the revenue recognized in
2020 and 2019 is attributable to work performed under a federal grant from the National Institutes of Health grant which came to an end in the second
quarter of 2020.
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Operating Expenses
Total operating expenses were $13.5 million during the year ended December 31, 2020, a 9% decrease from operating expenses of $14.8 million
during the year ended December 31, 2019. Operating expenses for the years ended December 31, 2020 and 2019 were as follows:
Operating Expenses
Research and development expenses
General and administrative expenses
Total operating expenses
Research and Development Expenses
Years Ended December 31,
2020
2019
Increase (Decrease)
%
$
$
$
4,338,974 $
9,150,568
13,489,542 $
4,741,130 $
10,026,627
14,767,757 $
(402,156)
(876,059)
(1,278,215)
(8.5)%
(8.7)%
(8.7)%
Research and development expenses totaled $4.3 million for the year ended December 31, 2020, compared to $4.7 million for the year ended
December 31, 2019, reflecting continued product development and manufacturing activities for VAZALORE. This decrease was due to 2020 activities
which included the bioequivalence study to provide data for the sNDA filing, stability and validation work compared to manufacture, packaging, stability,
and analytical costs related to the registration batches in 2019. We expect the research and development costs to be about the same in 2021 as
manufacturing activities continue with the development and stability of VAZALORE.
General and Administrative Expenses
General and administrative expenses totaled $9.2 million for the year ended December 31, 2020, compared to $10.0 million for the year ended
December 31, 2019. The decrease is due to lower compensation related expenses combined with savings from COVID-19 restrictions on conference and
travel costs. We expect our selling, general and administrative expenses to increase as a result of the expected commercial launch of VAZALORE.
Other expense
Other expense totaled $1.8 million for the year ended December 31, 2020, compared to $6.3 million for the year ended December 31, 2019. The
change is primarily attributable to the non-cash change in fair value of warrant liability primarily due to the fluctuation of the price of the Company’s
common stock ($1.4 million of other expense for the year ended December 31, 2020, as compared to $5.7 million of other expense in the prior year).
Liquidity and Capital Resources
The following table summarizes the primary uses and sources of cash for the periods indicated:
Net cash used in operating activities
Net cash used in investing activities
Net cash provided by financing activities
Net Cash Used in Operating Activities
Years Ended December 31,
2019
2020
$
$
$
(12,243,592) $
(102,000) $
20,792,939 $
(12,659,035)
(230,294)
12,640,366
Net cash used in operating activities was $12.2 million and $12.7 million for the years ended December 31, 2020 and 2019, respectively. The
decrease was due to lower compensation and COVID-19 impacted conference and travel costs offset somewhat by the increase in the settlement of 2019
year-end liabilities in 2020.
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Net Cash Used in Investing Activities
Net cash used in investing activities totaled $0.1million and $0.2 million for the years ended December 31, 2020 and 2019, respectively, and
reflects the purchase of manufacturing equipment for VAZALORE.
Net Cash Provided by Financing Activities
Net cash provided by financing activities totaled $20.8 million and $12.6 million for the years ended December 31, 2020 and 2019, respectively,
and reflects $7.7 million net proceeds from the issuance of Series B Preferred Stock and $16.8 million net proceeds from the issuance of common stock in
the 2020 period, which was higher than the net proceeds of $13.7 million from the issuance of Series A Preferred Stock and $2.1 million net proceeds
from the sale of common stock in the prior year. The current year period also includes higher payments of the Term Loan as the prior year period reflected
two less payments due to the start of the payment amortization period.
Future Liquidity and Capital Needs
As of December 31, 2020, we had working capital of $19.4 million, including cash and cash equivalents of $22.4 million. In addition, during
March 2019, we entered into an equity distribution agreement (the "Equity Distribution Agreement") with JMP Securities, Inc. (“JMP”) to issue and sell
shares of our common stock, having an aggregate offering price of up to $12.5 million, from time to time during the term of the Equity Distribution
Agreement, through an “at-the-market” equity offering program (the “ATM Offering”) at our sole discretion, under which JMP acted as our agent. At
December 31, 2020, we had $10.2 million available under this ATM Offering. The JMP Equity Distribution Agreement and related ATM Offering was
terminated on March 2, 2021.
On March 5, 2021 the Company completed an underwritten public offering (the “Public Offering”) in which we issued 7,875,000 shares of our
common stock at a price to the public of $8.00 per share. Gross proceeds of the Public Offering were $63 million, before deducting underwriting
discounts and commissions and other offering expenses payable by the Company. Net proceeds of the Public Offering were $59 million. The underwriters
retained a 30-day option to purchase up to 1,181,250 shares of common stock at the public offering price, less underwriting discounts and commission.
We have not generated any revenue from the sale of products and have incurred operating losses in each year since we commenced operations.
As of December 31, 2020, we had an accumulated deficit of $102.1 million. We expect to continue to incur significant operating expenses and operating
losses for the foreseeable future as we continue the development and commercialization of VAZALORE. Although these losses and expected losses give
rise to substantial doubt, the Company's cash on hand at December 31, 2020 combined with the proceeds from the Public Offering support that the
Company can fund its obligations for at least one year from the date these financial statements were issued and mitigate the substantial doubt
consideration.
Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders’ equity and
working capital. If we are unable to achieve and sustain profitability, the market value of our common stock will likely decline. Because of the numerous
risks and uncertainties associated with developing biopharmaceutical products, we are unable to predict the extent of any future losses or when, if ever, we
will become profitable. We may need to obtain additional financing in the future, in addition to the proceeds from the Public Offering, to execute our
commercialization plan. We may obtain additional financing through public or private equity offerings, debt financings (including related-party
financings), a credit facility or strategic collaborations.
Additional financing may not be available to us when we need it or it may not be available to us on favorable terms, if at all. Our failure to raise
capital as and when needed could have a negative impact on our financial condition and our ability to pursue our business strategies. We currently have no
understandings, commitments or agreements relating to any of these types of transactions, other than in connection with the underwriters' over-allotment
option as part of the Public Offering. If we are unable to raise additional funds when needed, we may be required to sell or license our technologies or
clinical product candidates or programs that we would prefer to develop and commercialize ourselves.
Impact of COVID-19 Pandemic on Financial Statements
On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 as a “pandemic”, or a worldwide spread of a new
disease. Many countries imposed quarantines and restrictions on travel and mass gatherings to slow the spread of the virus and have closed non-essential
businesses.
In response to COVID-19, the Company has not experienced a disruption or delay in the development of VAZALORE™. However, the extent to which
COVID-19 may impact our business will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the
duration of the pandemic, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions and the
effectiveness of actions taken in the United States and other countries to contain and treat the pandemic.
The Company has not experienced any significant negative impact on the December 31, 2020 audited consolidated financial statements related to COVID-
19. For more discussion on our risks related to COVID-19, please see risk factors included under “Item 1A. Risk Factors” herein.
Inflation
The Company believes that the rates of inflation in recent years have not had a significant impact on its operations.
Off-Balance Sheet Arrangements
The Company did not have any off-balance sheet arrangements as of December 31, 2020 or 2019.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Our consolidated financial statements and supplementary data required to be filed pursuant to this Item 8 are listed in Item 15 of this Form 10-K
beginning on page F-1 and are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Form 10-K, under the supervision and with the participation of management, including the Chief
Executive Officer and the Chief Financial Officer of the Company (collectively, the “Certifying Officers”), the Company conducted an evaluation of its
disclosure controls and procedures. As defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, the term “disclosure controls and procedures”
means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it
files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.
Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an
issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including the
Certifying Officer, to allow timely decisions regarding required disclosure. Based on this evaluation, our Certifying Officers have concluded that, as of
December 31, 2020, our disclosure controls and procedures were effective.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. Internal control over
financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, a company’s
principal executive and principal financial officers and effected by a company’s board of directors, management and other personnel to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP.
Our internal control over financial reporting includes those policies and procedures that:
●
●
●
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of our assets;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S.
GAAP, and that receipts and expenditures are being made only in accordance with authorizations of management and directors; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of assets that could
have a material effect on our consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
Management, including the Company’s principal executive officer and principal financial officer, does not expect that the Company’s internal
controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation
of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of the
effectiveness of controls with respect to future periods is subject to the risk that those internal controls may become inadequate because of changes in
business conditions, or that the degree of compliance with the policies or procedures may deteriorate.
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Based on its evaluation of the Company’s internal control over financial reporting as of December 31, 2020, using the criteria set forth by COSO
in Internal Control — Integrated Framework (2013), our management has concluded that, as of December 31, 2020, our internal control over financial
reporting was effective based on those criteria.
This Form 10-K does not include an attestation report of our independent registered public accounting firm regarding internal control over
financial reporting. Pursuant to Item 308(b) of Regulation S-K, management’s report is not subject to attestation by our independent registered public
accounting firm because the Company is neither an “accelerated filer” nor a “large accelerated filer” as those terms are defined by the SEC.
Changes in Internal Control Over Financial Reporting
We have not experienced any material impact to our internal controls over financial reporting despite the fact that most of our employees are
working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 situation on our internal controls to
minimize the impact on their design and operating effectiveness.
ITEM 9B. OTHER INFORMATION.
None.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
PART III
Information required by this Item will be set forth in our definitive proxy statement for our 2021 annual meeting, to be filed with the SEC
pursuant to Regulation 14A no later than 120 days after the close of our fiscal year, and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
Information required by this Item will be set forth in our definitive proxy statement for our 2021 annual meeting, to be filed with the SEC
pursuant to Regulation 14A no later than 120 days after the close of our fiscal year, and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS.
Information required by this Item will be set forth in our definitive proxy statement for our 2021 annual meeting, to be filed with the SEC
pursuant to Regulation 14A no later than 120 days after the close of our fiscal year, and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Information required by this Item will be set forth in our definitive proxy statement for our 2021 annual meeting, to be filed with the SEC
pursuant to Regulation 14A no later than 120 days after the close of our fiscal year, and is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Information required by this Item will be set forth in our definitive proxy statement for our 2021 annual meeting, to be filed with the SEC
pursuant to Regulation 14A no later than 120 days after the close of our fiscal year, and is incorporated herein by reference.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
PART IV
Documents filed as part of this Form 10-K:
(a) Financial Statements:
The consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of operations, changes
in temporary equity and stockholders’ equity (deficit), and cash flows for each of the years ended December 31, 2020 and 2019, the footnotes thereto, and
the reports of Marcum LLP, independent registered public accounting firms, are set forth on pages F-1 through F-21 of this Form 10-K.
50
Table of Contents
(b) Exhibits:
See Exhibit Index of this Form 10-K for a description of the exhibits filed as part of, or incorporated by reference in, this Form 10-K.
(c) Financial Statement Schedules:
All schedules have been omitted because they are not applicable or the required information is included in the consolidated financial statements
or notes thereto.
ITEM 16. FORM 10-K SUMMARY.
None.
51
Table of Contents
PLx Pharma Inc.
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Changes in Series A and Series B Convertible Preferred Stock and Stockholders' Equity (Deficit)
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
F-2
F-4
F-5
F-6
F-7
F-8
F-1
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
PLx Pharma Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of PLx Pharma Inc. (the “Company”) as of December 31, 2020 and 2019, the related
consolidated statements of operations, changes in series A and series B convertible preferred stock and stockholders’ deficit and cash flows for each of the
two years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial
statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations
and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the
United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial
statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules
and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor
were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of
internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over
financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in
the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or
required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2)
involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion
on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical
audit matters or on the accounts or disclosures to which they relate.
F-2
Evaluation of Warrant Liability
As discussed in Note 8 to the consolidated financial statements, the Company’s warrant liability is determined using a binomial asset pricing model that
consisted of a conditional probability weighted expected return method that values the Company’s equity securities assuming various possible future
outcomes to estimate the allocation of value within one or more of the scenarios. Using this method, unobservable assumptions included the Company’s
equity value, expected timing of possible outcomes, risk free interest rates and stock price volatility. As of December 31, 2020, the stock price volatility
used to determine the warrant liability is 92%.
We identified the evaluation of the stock price volatility used to determine the Company’s warrant liability as a critical audit matter. Evaluating the
Company’s stock price volatility relating to its warrant liability is highly subjective and requires a higher degree of auditor judgment as the Company’s
stock price volatility was determined by using comparable peer companies. Further, specialized valuation skills were needed to assess the Company’s
process and evaluate the stock price volatility used in the determination of the warrant liability and the impact of the stock price volatility on the binomial
asset pricing model.
The primary procedures we performed to address this critical audit matter included the following:
● We identified and considered the relevance, reliability and sufficiency of the sources of data used by the Company in developing the assumptions
used to determine the stock price volatility.
● We obtained an understanding of the factors considered and assumptions made by management and the Company’s valuation specialist in
developing the estimate of the stock price volatility, the sources of data relevant to these factors and assumptions and the procedures used to obtain
the data and the methods used to calculate the estimate.
● With the assistance of our valuation specialists, we performed an independent estimate of the stock price volatility and compared the results to the
Company’s estimate.
● We evaluated the reasonableness of the valuation methods and assumptions used by management and the Company’s valuation specialist to
estimate the stock price volatility by (i) developing an independent estimate of the stock price volatility with the assistance of our valuation
specialists by utilizing third party historical data related to the Company and (2) performing a sensitivity analysis on the stock price volatility used
to determine the Company’s warrant liability.
/s/ Marcum LLP
Marcum LLP
We have served as the Company’s auditor since 2015.
New York, NY
March 12, 2021
F-3
PLx Pharma Inc.
CONSOLIDATED BALANCE SHEETS
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Accounts receivable
Inventory, net
Prepaid expenses and other current assets
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Property and equipment, net
Right of use assets
Goodwill
Security deposit
TOTAL ASSETS
LIABILITIES, SERIES A AND SERIES B CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued liabilities
Accrued bonuses
Accrued interest
Current portion of term loan, net of discount and fees
Other current liabilities
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Accrued interest, net of current portion
Term loan, net of discount, fees and current portion
Warrant liability
Accrued dividends
Other liabilities
TOTAL LIABILITIES
Commitments and contingencies
December 31,
2020
December 31,
2019
$
$
$
22,448,651 $
-
143,380
393,470
22,985,501
1,225,879
327,161
2,061,022
17,036
26,616,599 $
862,568 $
1,184,823
597,411
622,265
275,247
3,542,314
-
-
9,691,271
2,795,795
134,184
16,163,564
14,001,304
18,683
-
263,268
14,283,255
1,466,646
618,158
2,061,022
73,665
18,502,746
928,921
1,166,821
34,964
3,658,121
304,603
6,093,430
501,826
622,265
8,247,679
1,058,498
409,431
16,933,129
Series A convertible preferred stock: $0.001 par value; liquidation value of $17,385,970; 45,000 shares
authorized, 15,000 shares issued and outstanding
Series B convertible preferred stock: $0.001 par value; liquidation value of $8,409,825; 25,000 shares
authorized, 8,000 and 0 shares issued and outstanding
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock; $0.001 par value; 930,000 shares authorized; none issued and outstanding
Common stock; $0.001 par value; 100,000,000 shares authorized; 13,911,633 and 9,156,260 shares issued
and outstanding
Additional paid-in capital
Accumulated deficit
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)
TOTAL LIABILITIES, SERIES A AND SERIES B CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY (DEFICIT)
13,661,578
13,661,578
7,723,312
-
-
-
13,912
91,203,050
(102,148,817)
(10,931,855)
9,156
74,837,046
(86,938,163)
(12,091,961)
$
26,616,599 $
18,502,746
See accompanying notes to consolidated financial statements.
F-4
PLx Pharma Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
Table of Contents
REVENUES:
Federal grant
TOTAL REVENUES
OPERATING EXPENSES:
Research and development
General and administrative
TOTAL OPERATING EXPENSES
OPERATING LOSS
OTHER EXPENSE:
Interest and other expense, net
Change in fair value of warrant liability
TOTAL OTHER EXPENSE
LOSS BEFORE INCOME TAXES
Income taxes
NET LOSS
Deemed dividends
Preferred dividends
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS
Net loss per common share - basic and diluted
Weighted average shares of common shares - basic and diluted
See accompanying notes to consolidated financial statements.
F-5
Years ended December 31,
2019
2020
$
30,430 $
30,430
565,464
565,464
4,338,974
9,150,568
13,489,542
(13,459,112)
(307,950)
(1,443,592)
(1,751,542)
(15,210,654)
-
(15,210,654) $
-
(1,737,297)
(16,947,951) $
4,741,130
10,026,627
14,767,757
(14,202,293)
(589,740)
(5,710,362)
(6,300,102)
(20,502,395)
-
(20,502,395)
(12,692,308)
(1,058,498)
(34,253,201)
(1.74) $
(3.84)
9,714,951
8,916,190
$
$
$
Table of Contents
PLx Pharma Inc.
CONSOLIDATED STATEMENTS OF CHANGES IN SERIES A AND SERIES B CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
Temporary Equity
Series A Convertible
Preferred Stock
Shares Amount
Series B Convertible
Preferred Stock
Shares Amount
Permanent Equity
Additional
Common stock
Shares
Amount
paid-in Accumulated
capital
deficit
Total
stockholders'
equity
(deficit)
Balance at December 31,
2018
- $
-
- $
- 8,743,950 $ 8,744 $ 72,871,317 $ (66,435,768) $
6,444,293
Stock-based compensation
expense
Issuance of Series A
Preferred Stock, net of
issuance costs
Common shares issued to
vendor
Common shares issued, net of
issuance costs
Series A Preferred -
declared dividends
Net loss
15,000 13,661,578
875,851
875,851
13,601
13
44,987
398,709
399 2,103,389
(1,058,498)
(20,502,395)
-
45,000
2,103,788
(1,058,498)
(20,502,395)
Balance at December 31,
2019
15,000 $ 13,661,578
- $
- 9,156,260 $ 9,156 $ 74,837,046 $ (86,938,163) $ (12,091,961)
Stock-based compensation
expense
Issuance of Series B
Preferred Stock, net of
issuance costs
Series A Preferred -
declared dividends
Series B Preferred -
declared dividends
Private placement of common stock
and warrants
Net loss
1,288,430
1,288,430
8,000 7,723,312
(1,327,471)
(409,826)
4,755,373
4,756 16,814,871
(15,210,654)
-
(1,327,471)
(409,826)
16,819,627
(15,210,654)
Balance at December 31,
2020
15,000 $ 13,661,578 8,000 $ 7,723,312 13,911,633 $ 13,912 $ 91,203,050 $ (102,148,817) $ (10,931,855)
See accompanying notes to consolidated financial statements.
F-6
Table of Contents
PLx Pharma Inc.
CONSOLIDATED STATEMENTS OF CASH FLOW
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation of property and equipment
Stock-based compensation
Amortization of right of use assets
Amortization of debt discounts and issuance costs
Change in fair value of warrant liability
Loss on disposal of property and equipment
Changes in operating assets and liabilities
Accounts receivable
Inventory
Prepaid expenses and other assets
Accounts payable and accrued liabilities
Accrued bonuses
Accrued interest
Other current and long-term liabilities
Net cash used in operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment
Proceeds from sale of property and equipment
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of Series A convertible preferred stock
Net proceeds from issuance of Series B convertible preferred stock
Net proceeds from issuance of common stock
Repayments of long term debt
Net cash provided by financing activities
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
SUPPLEMENTAL INFORMATION
Cash paid during the period for:
Income taxes
Interest
NON-CASH INVESTING AND FINANCING TRANSACTIONS
Property and equipment included in accounts payable
Preferred stock beneficial conversion feature and dividends
Value of common shares issued to vendor for services
Years ended December 31,
2019
2020
$
(15,210,654) $
(20,502,395)
124,617
1,288,430
290,997
91,879
1,443,592
218,150
18,683
(143,380)
(73,573)
(66,353)
18,002
60,621
(304,603)
(12,243,592)
158,253
875,851
94,376
215,292
5,710,362
12,398
(449)
-
152,714
448,867
118,428
166,984
(109,716)
(12,659,035)
(102,000)
-
(102,000)
(241,736)
11,442
(230,294)
-
7,723,312
16,819,627
(3,750,000)
20,792,939
8,447,347
14,001,304
22,448,651 $
13,661,578
-
2,103,788
(3,125,000)
12,640,366
(248,963)
14,250,267
14,001,304
- $
212,856 $
-
600,303
- $
1,737,297 $
- $
12,773
13,750,806
45,000
$
$
$
$
$
$
See accompanying notes to consolidated financial statements.
F-7
Table of Contents
PLx Pharma Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE 1. BACKGROUND AND ORGANIZATION
Business Operations
PLx Pharma Inc. (the “Company”, “we”, “our” or “us”), together with its subsidiary PLx Opco Inc., is a late stage startup specialty pharmaceutical
company focusing on commercializing two patent-protected lead products: VAZALORE 325 mg and VAZALORE 81 mg (referred to together as
“VAZALORE”). VAZALORE is approved by the U.S. Food and Drug Administration (“FDA”) for over-the-counter distribution and is the first ever liquid-
filled aspirin capsule.
Impact of COVID-19 Pandemic on Financial Statements
On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 as a “pandemic”, or a worldwide spread of a new disease. Many
countries imposed quarantines and restrictions on travel and mass gatherings to slow the spread of the virus and have closed non-essential businesses.
In response to COVID-19, the Company has not experienced a disruption or delay in the development of VAZALORE. However, the extent to which
COVID-19 may impact our business will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the
duration of the pandemic, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions and the
effectiveness of actions taken in the United States and other countries to contain and treat the pandemic. The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
The Company has not experienced any significant negative impact on the December 31, 2020 audited consolidated financial statements related to COVID-
19.
NOTE 2. LIQUIDITY
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates
continuity of operations, realization of assets, and satisfaction of liabilities in the ordinary course of business. The propriety of using the going-concern
basis is dependent upon, among other things, the achievement of future profitable operations, the ability to generate sufficient cash from operations and
potential other funding sources, in addition to cash on-hand, to meet its obligations as they become due.
The Company has not generated any revenue from sale of products and has incurred operating losses in each year since it commenced operations. As of
December 31, 2020, the Company had an accumulated deficit of $102.1 million. The Company expects to continue to incur significant operating expenses
and operating losses for the foreseeable future as the Company continues the development and commercialization of VAZALORE. As of December 31,
2020, the Company had working capital of $19.4 million, including cash and cash equivalents of $22.4 million. In addition, in March 2019, the Company
entered into an equity distribution agreement (the “Equity Distribution Agreement”) with JMP Securities, Inc. (“JMP”) to issue and sell shares of its
common stock, having an aggregate offering price of up to $12.5 million, from time to time during the term of the Equity Distribution Agreement, through
an “at-the-market” equity offering program (the “ATM Offering”) at the Company’s sole discretion, under which JMP acted as its agent.. At December 31,
2020, the Company had $10.2 million available under this ATM Offering. Effective March 2, 2021, the Equity Distribution Agreement and the ATM
Offering were terminated.
On March 5, 2021 the Company completed an underwritten public offering (the “Public Offering”), in which the Company issued and sold 7,875,000
shares of its common stock at a price to the public of $8.00 per share. Gross proceeds of the Public Offering were $63 million before deducting
underwriting discounts and commissions and other offering expenses payable by the Company. The underwriters retained a 30-day option to purchase up to
1,181,250 shares of common stock at the public offering price, less underwriting discounts and commission.
Although these losses and expected losses give rise to substantial doubt, the Company’s cash on hand at December 31, 2020
combined with the net proceeds from the Public Offering support that the Company can fund its obligations for at least one year
from the date these financial statements were issued and mitigate the substantial doubt consideration.
F-8
Table of Contents
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis and Accounting and Principles of Consolidation
The Company prepares its consolidated financial statements in accordance with generally accepted accounting principles in the United States of America
(“U.S. GAAP”).
The accompanying consolidated financial statements include the accounts of the Company and its direct and indirect wholly-owned subsidiaries, PLx Opco
Inc. and PLx Chile SpA. All significant intercompany balances and transactions have been eliminated within the consolidated financial statements. The
Company dissolved its subsidiary, PLx Chile SpA, in March 2020. The Company operates in one business segment.
Use of Estimates
The preparation of our consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and
the reported amount of revenues and expenses during the reporting period. In the accompanying consolidated financial statements, estimates are used for,
but not limited to, the impairment assessment of goodwill, the fair value of warrant liability, the fair value of stock-based compensation, allowance for
inventory obsolescence, contingent liabilities, fair value and depreciable lives of long-lived assets, and deferred taxes and associated valuation allowance.
Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. The
Company maintains cash and cash equivalents in a financial institution that at times exceeds federally insured limits. Management believes that the
Company’s credit risk exposure is mitigated by the financial strength of the banking institution in which the deposits are held. As of December 31, 2020,
the Company had cash and cash equivalents of $22.4 million in U.S. bank accounts which were not fully insured by the Federal Deposit Insurance
Corporation.
Allowance for Uncollectible Accounts Receivable
An allowance for uncollectible accounts receivable is estimated based on historical experience, credit quality, age of the accounts receivable balances, and
economic conditions that may affect a customer’s ability to pay. The allowance for uncollectible accounts receivable was zero as of December 31, 2020 and
2019, respectively.
Inventory
Inventory is stated at the lower of cost or net realizable value, using the average cost method. Inventory as of December 31, 2020 and 2019 was comprised
of raw materials for the manufacture of VAZALORE™. The Company regularly reviews inventory quantities on hand and assesses the need for an
allowance for obsolescence. The allowance for obsolete inventory was $0 and $0.5 million as of December 31, 2020 and 2019, respectively, resulting in net
inventory of $0.1 million and $0, respectively.
F-9
Table of Contents
Fair Value of Financial Instruments
All financial instruments classified as current assets and liabilities are carried at cost, which approximates fair value, because of the short-term maturities of
those instruments. The fair value of the term loan approximates its face value of $0.6 million based on the Company’s current financial condition and on
the variable nature of the term loan’s interest feature as compared to current rates. For disclosures concerning fair value measurements, see Note 8.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. The Company capitalizes additions that have a tangible future economic life.
Maintenance and repairs that do not improve or extend the lives of property and equipment are charged to operations as incurred. Depreciation expense is
computed using the straight-line method over the estimated useful lives of each class of depreciable assets. Management reviews property and equipment
for possible impairment whenever events or circumstances indicate the carrying amount of an asset may not be recoverable. If there is an indication of
impairment, management prepares an estimate of future cash flows (undiscounted and without interest charges) expected to result from the use of the asset
and its eventual disposition. If these cash flows are less than the carrying amount of the asset, an impairment loss is recognized to write down the asset to
its estimated fair value.
Leases
At the inception of a contract, the Company determines if the arrangement is, or contains, a lease. Right-of-use (“ROU”) assets represent the Company’s
right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease
ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Rent expense is
recognized on a straight-line basis over the lease term.
The Company has made certain accounting policy elections whereby the Company (i) does not recognize ROU assets or lease liabilities for short-term
leases (those with original terms of 12-months or less) and (ii) combines lease and non-lease elements of its operating leases. Operating lease ROU assets
are included in right of use assets and operating lease liabilities are included in other current and non-current liabilities in the Company’s consolidated
balance sheets. As of December 31, 2020 and 2019, the Company did not have any finance leases.
Goodwill
Goodwill is not amortized but is subject to periodic review for impairment. Goodwill is reviewed annually, as of October 31, and whenever events or
changes in circumstances indicate that the carrying amount of the goodwill might not be recoverable. Management performs its review of goodwill on its
one reporting unit.
The Company performs a one-step test in its evaluation of the carrying value of goodwill, if qualitative factors determine it is necessary to complete a
goodwill impairment test. In the evaluation, the fair value of the relevant reporting unit is determined and compared to the carrying value. If the fair value
is greater than the carrying value, then the carrying value is deemed to be recoverable, and no further action is required. If the fair value estimate is less
than the carrying value, goodwill is considered impaired for the amount by which the carrying amount exceeds the reporting unit’s fair value, and a charge
is reported in impairment of goodwill in the Company’s consolidated statements of operations.
The Company has not identified any events or changes in circumstances that indicate that a potential impairment of goodwill occurred during the years
ended December 31, 2020 or 2019.
Revenue Recognition
The Company analyzes contracts to determine the appropriate revenue recognition using the following steps: (i) identification of contracts with customers;
(ii) identification of distinct performance obligations in the contract; (iii) determination of contract transaction price; (iv) allocation of contract transaction
price to the performance obligations; and (v) determination of revenue recognition based on timing of satisfaction of the performance obligation. The
Company recognizes revenues upon the satisfaction of its performance obligations (upon transfer of control of promised goods or services to customers) in
an amount that reflects the consideration to which it expects to be entitled to in exchange for those goods or services. Deferred revenue results from cash
receipts from or amounts billed to customers in advance of the transfer of control of the promised services to the customer and is recognized as
performance obligations are satisfied. When sales commissions or other costs to obtain contracts with customers are considered incremental and
recoverable, those costs are deferred and then amortized as selling and marketing expenses on a straight-line basis over an estimated period of benefit.
F-10
Table of Contents
The Company’s sole revenue arrangement is a cost-reimbursable federal grant with the National Institutes of Health. This federal grant was completed in
the second quarter of 2020. The Company recognizes revenue on this grant as grant-related expenses are incurred by the Company or its subcontractors.
The Company recognized $0.03 million and $0.6 million of revenue under this arrangement during the years ended December 31, 2020 and 2019,
respectively.
The Company has not incurred incremental costs to obtain contracts with customers or material costs to fulfill contracts with customers and did not have
any material contract assets or liabilities as of December 31, 2020 and December 31, 2019.
Research and Development Expenses
Costs incurred in connection with research and development activities are expensed as incurred. Research and development expenses consist of direct and
indirect costs associated with specific projects, manufacturing activities, and include fees paid to various entities that perform research related services for
the Company combined with reimbursable costs related to the federal grant with the National Institutes of Health.
Stock-Based Compensation
The Company recognizes expense in the consolidated statements of operations for the fair value of all stock-based compensation to key employees,
nonemployee directors and advisors, generally in the form of stock options. The Company uses the Black-Scholes option valuation model to estimate the
fair value of stock options on the grant date. Compensation cost is amortized on a straight-line basis over the vesting period for each respective award. The
Company accounts for forfeitures as they occur.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the expected future tax
consequences attributable to temporary differences between financial statement carrying amounts of existing assets and liabilities and their respective tax
basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date. A valuation allowance is established when necessary to reduce deferred income tax assets to the amount expected
to be realized.
Tax benefits are initially recognized in the financial statements when it is more likely than not that the position will be sustained upon examination by the
tax authorities. Such tax positions are initially, and subsequently, measured as the largest amount of tax benefit that is greater than 50% likely of being
realized upon ultimate settlement with the tax authority, assuming full knowledge of the position and all relevant facts.
The Company currently has tax returns open for examination by the applicable taxing authority for all years since 2015.
Income (Loss) Per Share
In periods of net loss, basic loss per share is computed by dividing net loss available to common stockholders by the weighted average number of shares of
common stock outstanding during the period. The Series A and Series B convertible preferred stock (the “Series A Preferred Stock” and the “Series B
Preferred Stock”) contains non-forfeitable rights to dividends, and therefore are considered to be participating securities; in periods of net income, the
calculation of basic earnings per share excludes from the numerator net income attributable to the Series A Preferred Stock and Series B Preferred Stock
and excludes the impact of those shares from the denominator.
In periods of net loss, diluted loss per share is calculated similarly to basic loss per share because the impact of all potential dilutive common shares is anti-
dilutive. In periods of net income, diluted earnings per share is computed using the more dilutive of the “two class method” or the “treasury method.”
Dilutive earnings per share under the “two class method” is calculated by dividing net income available to common stockholders as adjusted for the
participating impacts of the Series A Preferred Stock and Series B Preferred Stock, by the weighted-average number of shares outstanding plus the dilutive
impact of all other potential dilutive common shares, consisting primarily of common shares underlying common stock options and stock purchase
warrants using the treasury stock method. Dilutive earnings per share under the “treasury method” is calculated by dividing net income available to
common stockholders by the weighted-average number of shares outstanding plus the dilutive impact of all potential dilutive common shares, consisting
primarily of common shares underlying common stock options and stock purchase warrants using the treasury stock method, and convertible preferred
stock using the if-converted method.
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None of the potential dilutive securities had a dilutive impact during the years ended December 31, 2020 and 2019.
The number of anti-dilutive shares for the years ended December 31, 2020 and 2019 was 20.3 million and 10.5 million, respectively, consisting of common
shares underlying (i) common stock options of 3.0 million and 1.7 million, respectively, (ii) stock purchase warrants of 7.9 million and 2.7 million,
respectively, and (iii) convertible preferred stock of 9.4 million and 6.2 million which have been excluded from the computation of diluted income per
share.
Recent Accounting Developments
Unadopted Guidance
In August 2020, the Financial Accounting Standards Board issued Accounting Standards Update 2020-06 Debt – Debt with Conversion and Other Options
(Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (subtopic 815-40) that provides new guidance on the accounting for
convertible debt instruments and contracts in an entity’s own equity. The guidance simplifies the accounting for convertible instruments by reducing the
various accounting models that can require the instrument to be separated into a debt component and equity component or derivative component.
Additionally, the guidance eliminated certain settlement conditions previously required to be able to classify a derivative in equity. The new guidance is
effective on a modified or full retrospective basis for fiscal years beginning after December 15, 2023, including interim periods with those fiscal years. The
Company will evaluate the impact on the consolidated financial statements.
In November 2019, the Financial Accounting Standards Board (“FASB”) issued guidance (ASU 2019-12) simplifying the accounting for income taxes by
removing the following exceptions: 1) exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations
and income or a gain from other items, 2) exception requirement to recognize a deferred tax liability for equity method investments when a foreign
subsidiary becomes an equity method investment, 3) exception to the ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign
equity method investment becomes a subsidiary, and 4) exception to the general methodology for calculating income taxes in an interim period when a
year-to-date loss exceeds the anticipated loss the year. The amendments also simplify accounting for income taxes by doing the following: 1) requiring that
an entity recognize a franchise tax or similar tax that is partially based on income as an income-based tax and account for any incremental amount incurred
as a non-income-based tax, 2) requiring that an entity evaluate when a step up in the tax basis of goodwill should be considered part of the business
combination in which the book goodwill was originally recognized and when it should be considered a separate transaction, 3) specifying that an entity is
not required to allocate the consolidated amount of current and deferred tax expense to a legal entity that is not subject to tax in its separate financial
statements, 4) requiring that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim
period that includes the enactment date, and 5) making minor Codification improvements for income taxes related to employee stock ownership plans and
investments in qualified affordable housing projects accounted for using the equity method. The guidance is effective for reporting periods beginning after
December 15, 2020, including interim periods within that fiscal year. Early adoption was permitted, including adoption in an interim period. The Company
does not expect the adoption of ASU 2019-12 will have a material impact on its financial position, results of operations and cash flows.
The Company does not believe that any other recently issued effective standards, or standards issued but not yet effective, if adopted, would have a material
effect on the accompanying consolidated financial statements.
Reclassifications
Certain reclassifications have been made to the prior-year financial statements to conform to the current-year presentation. These reclassifications had no
effect on the reported results of operations.
Subsequent Events
The Company’s management reviewed all material events through the date the consolidated financial statements were issued for subsequent event
disclosure consideration.
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NOTE 4. LONG-LIVED ASSETS
Property and Equipment
Property and equipment at December 31, 2020 and 2019 consisted of the following:
Asset Descriptions
Computer equipment
Lab equipment
Office equipment, furniture and fixtures
Leasehold improvements
Manufacturing equipment
Subtotal
Less: Accumulated depreciation and amortization
Total property and equipment, net
Useful Lives
(years)
4
5
5
lease term
7
December 31,
2020
December 31,
2019
$
$
41,839 $
17,019
106,486
184,989
1,324,045
1,674,378
(448,499)
1,225,879 $
41,839
17,019
106,486
184,989
1,559,195
1,909,528
(442,882)
1,466,646
Depreciation and amortization expense for the years ended December 31, 2020 and 2019 was $124,617 and $158,253, respectively. During the year ended
December 31, 2020 the Company disposed of manufacturing equipment and recognized a loss of $218,150. During the year ended December 31, 2019, the
Company sold equipment for proceeds of $11,442 and recognized a loss of $12,398.
Goodwill
The Company established goodwill in 2017 in connection with the Merger. The Company’s goodwill at December 31, 2020 and 2019 was $2.1 million.
The Company has not identified any events or changes in circumstances that indicate that a potential impairment of goodwill occurred during the years
ended December 31, 2020 or 2019. As such, the Company believes goodwill is not impaired.
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NOTE 5. DEBT
Term Loan Facility
On August 9, 2017, the Company entered into a Loan and Security Agreement with Silicon Valley Bank (“SVB”) that provides for a Term Loan Facility
(the “Term Loan Facility” and all amounts borrowed thereunder, the “Term Loan”). Under the Term Loan Facility, the Company borrowed an initial
amount of $7.5 million. The Company had the right to borrow an additional $7.5 million on or before December 31, 2018; this right expired unexercised.
The Term Loan Facility carried interest at a floating rate of 4.0% above the prime rate per annum (for a total interest rate of 7.25% at December 31, 2020),
with interest payable monthly. The monthly payments consisted of interest-only for the first 18 months, after which the Term Loan was payable in 24 equal
monthly installments of principal, plus accrued interest. All outstanding principal and accrued and unpaid interest under the Term Loan was due and paid
on February 9, 2021. The Term Loan may not be reborrowed.
In connection with entry into the Term Loan Facility, the Company issued to SVB and one of its affiliates, stock purchase warrants to purchase an
aggregate of 58,502 shares of the Company’s common stock at an exercise price of $6.41 per share. The warrants are immediately exercisable, have a 10-
year term, contain a cashless exercise provision, and are classified in equity. The relative fair value of the warrants, net of issuance costs, which was
recorded as debt discount of $304,201 on the date of issuance.
At December 31, 2020 and 2019, $0.6 million and $4.4 million, respectively, of face value of the Term Loan was presented in the accompanying
consolidated balance sheets net of current unamortized discounts and issuance costs of $2,735 and $91,879, and long-term unamortized discounts and
issuance costs of $0 and $2,735, respectively. Total interest expense recognized for the years ended December 31, 2020 and 2019 was $0.4 million and
$1.0 million, respectively.
NOTE 6. STOCKHOLDERS’ EQUITY
Common Stock
In November 2020, the Company entered into a securities purchase agreement for the sale of units comprised of shares of common stock and a warrant to
purchase shares of common stock in a private placement that resulted in gross proceeds to the Company of $18.0 million and net proceeds of $16.8 million
after deducting placement agent and other offering expenses, for the issuance of 4,755,373 shares of common stock and warrants to purchase up to an
additional 5,230,910 shares of common stock for a per unit price of $3.787. The private placement closed on November 18, 2020. The warrants will
become exercisable on the date of issuance, have an exercise price of $4.31 per share and will expire five years from the date of issuance.
Equity Distribution Agreement
In March 2019, the Company entered into the Equity Distribution Agreement with JMP. Pursuant to the terms of the Equity Distribution Agreement, the
Company was able to sell from time to time, at its option, shares of the Company’s common stock, through JMP, as sales agent, with an aggregate sales
price of up to $12.5 million. Any sales of shares pursuant to the Equity Distribution Agreement were made under the Company’s effective “shelf”
registration statement, which allowed it to sell debt or equity securities in one or more offerings up to a total public offering price of $75 million. In 2019,
the Company issued 398,709 shares under the Equity Distribution Agreement generating gross proceeds of $2.3 million and net proceeds of $2.1 million
after deducting legal and commission costs. There have been no issuances in 2020 under the Equity Distribution Agreement. As of December 31, 2020,
$10.2 million remained available under the ATM Offering. Effective March 2, 2021, the Equity Distribution Agreement and ATM Offering was terminated.
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Convertible Preferred Stock
Series A Preferred Stock
In December 2018, the Company entered into a purchase agreement with certain accredited investors for the private placement of $15.0 million of Series A
Convertible Preferred Stock, par value $0.001 per share (the “Series A Preferred Stock”) pending stockholders’ approval, which approval was subsequently
obtained on February 19, 2019. Accordingly, the Company completed the private placement on February 20, 2019, raising $15.0 million through the
issuance of 15,000 shares of Series A Preferred Stock. The Series A Preferred Stock was issued at $1,000 per share and is convertible into common shares
at a conversion price of $2.60 per share, subject to certain adjustments. Holders of the Series A Preferred Stock will be entitled to an initial dividend rate of
8.0% per annum, which will stop accruing on the date of the FDA’s approval of the supplemental sNDA of VAZALORE 325 mg and VAZALORE 81mg.
The dividends are compounded quarterly and payable in cash or shares of Series A Preferred Stock at the Company’s option. The Series A Preferred Stock
carries a liquidation preference equal to its stated value of $1,000 plus accrued and unpaid dividends. The Series A Preferred Stock is classified as
temporary equity due to the presence of certain contingent cash redemption features. As a result of the excess value of the Company’s common stock on the
issuance date over the conversion price of the Series A Preferred Stock, a beneficial conversion feature in the amount of $12.7 million was bifurcated from
the host instrument and accounted for separately as an increase in additional paid-in capital in equity, and resulted in a deemed dividend during the year
ended December 31, 2019 of $12.7 million which was accounted for as a decrease in additional paid-in capital in equity due to the Company’s accumulated
deficit position. At December 31, 2020, the carrying value of the temporary equity was $13.7 million, net of $1.3 million in offering costs.
The Company recognized $1.3 million (or $0.14 per share) of total dividends on the Series A Preferred Stock during the year ended December 31, 2020.
The Company recognized $1.1 million (or $0.12 per share) of total dividends on the Series A Preferred Stock during the year ended December 31, 2019.
Series B Preferred Stock
In March 2020, the Company entered into a purchase agreement with certain accredited investors for the private placement of $8.0 million of Series B
Preferred Stock pending stockholders' approval, which approval was subsequently obtained on May 15, 2020. Accordingly, the Company completed the
private placement on May 15, 2020, raising $8.0 million through the issuance of 8,000 shares of Series B Preferred Stock. The Series B Preferred Stock
was issued at $1,000 per share and is convertible into common shares at a conversion price of $3.10 per share, subject to certain adjustments. Holders of
the Series B Preferred Stock are entitled to an initial dividend rate of 8.0% per annum, which will stop accruing on the date of the FDA’s approval of the
supplemental NDA of VAZALORE 325 mg and VAZALORE 81mg. The dividends are compounded quarterly and payable in cash or shares of Series B
Preferred Stock at the Company’s option. The Series B Preferred Stock carries a liquidation preference equal to its stated value of $1,000 plus accrued and
unpaid dividends.
The Series B Preferred Stock is classified as temporary equity due to the presence of certain contingent cash redemption features. At December 31, 2020,
the carrying value of the temporary equity was $7.7 million, net of $0.3 million in offering costs.
The Company recognized $0.4 million (or $0.04 per share) of total dividends on the Series B Preferred Stock during the year ended December 31, 2020.
No dividends were recognized on common stock during any of the periods presented.
Warrants
In June 2017, the Company issued stock purchase warrants to purchase 2,646,091 shares of common stock at an exercise price of $7.50 per share. The
warrants, exercisable beginning six months and one day after issuance, have a 10-year term, contain a cashless exercise provision, and are liability
classified due the holders’ right to require the Company to repurchase the warrants for cash upon certain deferred fundamental transactions. See Note 8 for
the fair value measurement of the warrant liability.
In connection with the entry into the Term Loan Facility, the Company issued to SVB and one of its affiliates stock purchase warrants to purchase an
aggregate of 58,502 shares of the Company’s common stock at an exercise price of $6.41 per share (see Note 5). These warrants are immediately
exercisable, have a 10-year term, contain a cashless exercise provision, and are classified in equity.
In November 2020, the Company issued warrants to purchase 5,230,910 shares of common stock which have an exercise price of $4.31 per share, contain a
cashless exercise provision, will expire five years from the date of issuance and are equity classified.
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Stock Options
Following is a summary of option activities for the years ended December 31, 2020 and 2019:
Outstanding, December 31, 2018
Granted
Cancelled
Outstanding, December 31, 2019
Granted
Cancelled
Outstanding, December 31, 2020
Exercisable, December 31, 2020
Weighted
Average
Remaining
Contractual
Term
(in years)
Weighted
Average
Exercise
Price
Aggregate
Intrinsic
Value
17.93
5.76
9.78
13.96
4.03
7.52
9.35
6.97 $
-
7.22 $
91,475
7.84 $
2,074,150
17.34
5.38 $
15,360
Number of
Options
1,206,709 $
714,350 $
(254,262) $
1,666,797 $
1,511,000 $
(198,750) $
2,979,047 $
1,131,314 $
On September 13, 2018, the Company’s stockholders approved the 2018 Incentive Plan (the “2018 Plan”). The 2018 Plan provides that the Company may
grant equity interests to employees, consultants, and members of the Board of Directors in the form of incentive and nonqualified stock options, restricted
stock and restricted stock units, stock appreciation rights and various other forms of stock-based awards. On November 10, 2020, the Company held its
2020 annual meeting of stockholders at which the Company’s stockholders approved an amendment to the 2018 Plan, to increase the number of shares of
the Company’s common stock issuable under the 2018 Plan by 1,750,000 shares (the “Plan Amendment”). The Board of Directors of the Company
previously approved the Plan Amendment on September 23, 2020, subject to stockholder approval. There are 3,000,000 shares authorized to be issued
pursuant to the 2018 Plan, of which 957,650 shares are available for issuance under the 2018 Plan.
Prior to the approval of the 2018 Plan, the Company granted options to employees, directors, advisors, and consultants from two former plans – the Old
PLx Omnibus Stock Option Plan and the Dipexium 2013 Equity Incentive Plan (the “Prior Plans”). Upon the adoption of the 2018 Plan, the Prior Plans
were frozen, and no new awards can be issued pursuant to the Prior Plans. The Company is no longer authorized to grant awards under these two plans.
The Company granted 1,511,000 options during the year ended December 31, 2020 with an aggregate fair value of $4.3 million calculated using the Black-
Scholes model on the grant date. Variables used in the Black-Scholes model include: (1) discount rate range from 0.4% to 0.7%, (2) expected life of 6.0
years, (3) expected volatility of 81% to 84%, and (4) zero expected dividends.
The Company granted 714,350 options during the year ended December 31, 2019 with an aggregate fair value of $2.9 million calculated using the Black-
Scholes model on the grant date. Variables used in the Black-Scholes model include: (1) discount rate range from 1.9% to 2.5%, (2) expected life of 6.0
years, (3) expected volatility of 82%, and (4) zero expected dividends.
As of December 31, 2020, the Company had $4.8 million in unamortized expense related to unvested options which is expected to be expensed over a
weighted average of 2.5 years.
During the years ended December 31, 2020 and 2019, the Company recorded $1.3 million and $0.9 million, respectively, in total compensation expense
related to the stock options. For the year ended December 31, 2020, $1.27 million of stock-based compensation expense was classified as general and
administrative expenses and $0.02 million was classified as research and development expenses in the accompanying consolidated statement of operations.
For the year ended December 31, 2019, $0.9 million of stock-based compensation expense was classified as general and administrative expenses and
$3,607 was classified as research and development expenses in the accompanying consolidated statement of operations.
NOTE 7. COMMITMENTS AND CONTINGENCIES
Lease Agreements
The Company presently leases office space under operating lease agreements expiring on July 31, 2021, October 3, 2021, and June 30, 2024. The office
leases require the Company to pay for its portion of taxes, maintenance, and insurance. Rental expense under these agreements was $0.4 million and $0.4
million for the years ended December 31, 2020 and 2019, respectively.
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All the Company’s existing leases as of December 31, 2020 are classified as operating leases. As of December 31, 2020, the Company has four operating
leases for facilities and office equipment with remaining terms expiring from 2019 through 2024 and a weighted average remaining lease term of 2.0 years.
Many of the Company’s existing leases have fair value renewal options, none of which the Company considers certain of being exercised or included in the
minimum lease term. Weighted-average discount rates used in the calculation of the Company’s lease liability are approximately 9.5%. In addition, the
Company is the lessor for office space in New York that it sublets to a tenant; the sublease expires in 2021.
Lease costs, net of sublease income, for the year ended December 31, 2020 consisted of the following:
Operating lease cost
Sublease income
Total lease costs
A maturity analysis of the Company’s operating leases follows:
Future undiscounted cash flows:
2021
2022
2023
2024
2025
Total
Discount factor
Total lease liability
Current lease liability
Non-current lease liability
$
$
$
$
350,905
(243,217)
107,688
262,850
60,819
60,264
30,132
-
414,065
(38,842)
375,223
(241,039)
134,184
Patent License Agreement with the Board of Regents of the University of Texas (NSAIDs)
On January 8, 2003, the Company entered into a patent license agreement with the Board of Regents of The University of Texas System (“UT”), under
which it acquired an exclusive license for several patents and patent applications both inside and outside of the United States relating to gastrointestinal
safer formulations of NSAIDs. Additionally, the Company acquired worldwide rights to commercialize licensed products which allow for the Company to
grant sublicenses subject to royalty payments.
Under terms of the agreement, the Company is responsible for conducting clinical trials involving investigational use of a licensed product for the
determination of metabolic and pharmacologic actions in humans, the side effects associated with increasing doses, examination of suspected indications,
determination of the potential short-term side effects in humans and for establishing the safety, efficacy, labeled indications and risk-benefit profile in
humans. The patent license agreement also requires the Company to provide reimbursement for all expenses incurred by The University of Texas Health
Science Center at Houston for filing, prosecuting, enforcing, and maintaining patent rights and requires an annual nonrefundable license management fee.
In addition, the Company is obligated to pay certain milestone payments in future years relating to royalties resulting from the approval to sell licensed
products and the resulting sales of such licensed products. The Company recognized total expenses of $0.3 million and $0.4 million related to the UT in the
years ended December 31, 2020 and 2019, respectively.
NOTE 8. FAIR VALUE MEASUREMENTS
Fair value is defined as the price that would be received in the sale of an asset or that would be paid to transfer a liability in an orderly transaction between
market participants at the measurement date. The Company has categorized all investments recorded at fair value based upon the level of judgment
associated with the inputs used to measure their fair value.
Hierarchical levels, directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:
● Level 1: Quoted prices in active markets for identical assets or liabilities that the organization has the ability to access at the reporting date.
● Level 2: Inputs other than quoted prices included in Level 1, which are either observable or that can be derived from or corroborated by
observable data as of the reporting date.
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● Level 3: Inputs include those that are significant to the fair value of the asset or liability and are generally less observable from objective resources
and reflect the reporting entity’s subjective determinations regarding the assumptions market participants would use in pricing the asset or liability.
Financial assets and liabilities measured at fair value on a recurring basis
The Company evaluates financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level at which to
classify them each reporting period. This determination requires the Company to make subjective judgments as to the significance of inputs used in
determining fair value and where such inputs lie within the hierarchy.
The stock purchase warrants issued in June 2017 contain certain cash settlement features and, accordingly, the Company considered them to be liabilities
and accounted for them at fair value using Level 3 inputs. The Company determined the fair value of this warrant liability using a binomial asset pricing
model that consisted of a conditional probability weighted expected return method that values the Company’s equity securities assuming various possible
future outcomes to estimate the allocation of value within one or more of the scenarios. Using this method, unobservable inputs included the Company’s
equity value, expected timing of possible outcomes, risk free interest rates and stock price volatility.
The following table sets forth a summary of changes in the fair value of Level 3 liabilities measured at fair value on a recurring basis for the years ended
December 31, 2020 and 2019:
Description
Warrant liability
Description
Warrant liability
Balance at
December 31,
2018
Established
in 2019
Change in
Fair Value
Balance at
December 31,
2019
$
2,537,317 $
- $
5,710,362 $
8,247,679
Balance at
December 31,
2019
Established
in 2020
Change in
Fair Value
Balance at
December 31,
2020
$
8,247,679 $
- $
1,443,592 $
9,691,271
The following table identifies the carrying amounts of such liabilities at December 31, 2020 and 2019:
Warrant liability
Balance at December 31, 2019
Warrant liability
Balance at December 31, 2020
Level 1
Level 2
Level 3
Total
- $
- $
- $
- $
8,247,679 $
8,247,679 $
8,247,679
8,247,679
Level 1
Level 2
Level 3
Total
- $
- $
- $
- $
9,691,271 $
9,691,271 $
9,691,271
9,691,271
$
$
$
$
Financial assets and liabilities carried at fair value on a non-recurring basis
The Company does not have any financial assets or liabilities measured at fair value on a non-recurring basis.
Non-financial assets and liabilities carried at fair value on a recurring basis
The Company does not have any non-financial assets or liabilities measured at fair value on a recurring basis.
Non-financial assets and liabilities carried at fair value on a non-recurring basis
The Company measures its long-lived assets, including property and equipment and goodwill, at fair value on a non-recurring basis when they are deemed
to be impaired. No such impairment was recognized in the years ended December 31, 2020 and 2019.
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NOTE 9. INCOME TAXES
Income tax (expense) benefit for the years ended December 31, 2020 and 2019 consisted of the following:
Current:
Federal
State
Foreign
Deferred:
Federal
State
Foreign
Change in valuation allowance
Total Benefit for Income Taxes
Year Ended
December 31,
2020
Year Ended
December 31,
2019
$
$
- $
-
-
-
-
-
3,210,579
1,101,055
-
(4,311,634)
7,432,665
1,459,313
-
(8,891,978)
- $
-
Significant components of the Company's deferred tax assets and liabilities consisted of the following at December 31, 2020 and 2019:
Deferred tax assets:
Stock-based compensation
Tax credit carryforwards
Net operating loss carryforwards
Intangible assets
Other
Total deferred tax assets
Deferred tax liabilities:
Property and equipment and right of use assets
Total deferred tax liabilities
Net deferred tax assets
Less valuation allowance
Total deferred tax assets (liabilities)
December 31,
2020
December 31,
2019
$
4,898,535 $
2,203,211
23,118,049
598,762
442,731
31,261,288
4,514,806
1,966,817
19,381,496
564,880
637,687
27,065,686
215,199
215,199
331,231
331,231
31,046,039
(31,046,039)
- $
26,734,455
(26,734,455)
-
$
In connection with the adoption of ASC 842 in 2019 (see Note 3), the Company recorded, outside of the tax provision, deferred tax assets and deferred tax
liabilities of $174,963 and $193,872, respectively, and reduced its valuation allowance by $18,909.
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The following table reconciles the U.S. federal statutory income tax rate in effect for 2020 and 2019 and the Company's effective tax rate:
U.S. federal statutory income tax expense (benefit)
State and local income tax, net of benefits
Change in fair value of derivatives
Change in tax rates
True-up and other
Change in valuation allowance for deferred income tax assets
Effective income tax rate
Year Ended
December 31,
2020
Year Ended
December 31,
2019
21.0%
7.2%
(2.7%)
1.0
1.8%
(28.3%)
0.0%
21.0%
6.8%
(7.8%)
-
23.3%
(43.3%)
0.0%
The Company had net operating loss carry-forwards of $97.7 million as of December 31, 2020, that may be offset against future taxable income. The carry-
forwards will begin to expire in 2035. Use of these carry-forwards may be subject to annual limitations based upon previous significant changes in stock
ownership. The Company does not believe that it has any uncertain income tax positions.
Utilization of NOL and tax credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations that may have
occurred or that could occur in the future, as required by the Internal Revenue Code (the “Code” and “IRC”), as amended, as well as similar state
provisions. In general, an ownership change as defined by the Code results from a transaction or series of transactions over a three-year period resulting in
an ownership change of more than 50 percent of the outstanding common stock of a company by certain stockholders or public groups. The Company
experienced an ownership change within the meaning of IRC Section 382 during the year ended December 31, 2017. As a result, certain limitations apply
to the annual amount of net operating losses that can be used to offset post ownership change taxable income.
As of December 31, 2020, the tax returns for the years from 2015 through 2019 remain open to examination by the Internal Revenue Service and various
state authorities. ASC 740, “Income Taxes” requires that a valuation allowance is established when it is more likely than not that all, or a portion of,
deferred tax assets will not be recognized. A review of all available positive and negative evidence needs to be considered, including the Section 382
limitation, the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies. After consideration of all the
information available, management believes that uncertainty exists with respect to the future realization of its deferred tax assets and has, therefore,
established a full valuation allowance as of December 31, 2020, and 2019. For the year ended December 31, 2020, the change in valuation allowance was
$4.3 million.
As of December 31, 2020, and 2019, the Company has evaluated and concluded that there were no material uncertain tax positions requiring recognition in
the Company’s financial statements. The Company’s policy is to classify assessments, if any, for tax-related interest as income tax expenses. No interest or
penalties were recorded during the years ended December 31, 2020 and 2019. The Company does not expect its unrecognized tax benefit position to
change during the next twelve months.
NOTE 10. SUBSEQUENT EVENTS
SVB Term Loan Facility
As discussed in Note 5, on August 9, 2017, the Company entered into a Term Loan Facility with SVB pursuant to which the Company borrowed $7.5
million. On February 9, 2021, the Company made a final payment of the outstanding principal balance and accrued interest.
Equity Distribution Agreement and ATM Offering
As discussed in Note 2, effective as of March 2, 2021, the Company terminated the JMP Equity Distribution Agreement and related “at-the-market” equity
offering program.
Public Offering
As discussed in Note 2, on March 5, 2021, the Company completed the Public Offering, in which the Company issued and sold 7,875,000 shares of its
common stock at a price to the public of $8.00 per share. Gross proceeds of the Public Offering were $63 million before deducting underwriting discounts
and commissions and other offering expenses payable by the Company. The underwriters retained a 30-day option to purchase up to 1,181,250 shares of
common stock at the public offering price, less underwriting discounts and commission.
F-20
Table of Contents
The representations and warranties contained in the agreements listed in this Exhibit Index are not for the benefit of any party other than the parties to such
agreement and are not intended as a document for investors or the public generally to obtain factual information about the Company or its shares of
common stock.
Exhibit Index
Number Exhibit Table
2.1
Agreement and Plan of Merger and Reorganization (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K
filed on December 22, 2016 (File No. 001-36351)).
3.1
Amended and Restated Certificate of Incorporation of PLx Pharma Inc. (incorporated by reference to Exhibit 3.3 to the Company’s Quarterly
Report on Form 10-Q filed on August 11, 2017 (File No. 001-36351)).
3.2
Certificate of Amendment to the Amended Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the
Company’s Current Report on Form 8-K filed on February 20, 2019 (File No. 001-36351)).
3.3
Amended and Restated Bylaws of PLx Pharma Inc. (incorporated by reference to Exhibit 3.3 to the Company’s Annual Report on Form 10-K
filed on January 20, 2017) (File No. 001-36351)).
4.1
Form of Warrant, to be issued by PLx Pharma Inc. to the Investors on June 14, 2017 (incorporated by reference to Exhibit 4.1 to the
Company’s Form 8-K filed on June 12, 2017 (File No. 001-36351)).
4.2
Form of Warrant to Purchase Common Stock issued by PLx Pharma Inc. in connection with the Loan and Security Agreement among PLx
Pharma Inc., PLx Opco Inc., and Silicon Valley Bank, dated as of August 9, 2017 (incorporated by reference to Exhibit 4.1 to the Company’s
Current Report on Form 8-K filed on August 10, 2017 (File No. 001-36351)).
4.3
Form of Warrant to Purchase Common Stock issued by PLx Pharma Inc. in connection with the Securities Purchase Agreement among PLx
Pharma Inc. and the investors set forth on the signature pages thereto, dated as of November 16, 2020 (incorporated by reference to Exhibit 4.1
to the Company’s Current Report on Form 8-K filed on November 16, 2020).
4.4
Amended and Restated Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock of the Company
(incorporated by reference to Exhibit 3.3 to the Company’s Current Report on Form 8-K filed on February 20, 2019 (File No. 001-36351)).
4.5
Certificate of Designations, Preferences and Rights of Series B Convertible Preferred Stock of the Company (incorporated by reference to
Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on May 18, 2020.
4.6
Description of Registered Securities.*
10.1
Employment Agreement with Natasha Giordano, dated January 1, 2016 (incorporated by Reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K filed on April 20, 2017 (File No. 001-36351)).
10.2
Amended and Restated Employment Agreement with Michael J. Valentino, dated April 1, 2016 (incorporated by Reference to Exhibit 10.4 to
the Company’s Current Report on Form 8-K filed on April 20, 2017 (File No. 001-36351)).
10.3
PLx Pharma 2015 Omnibus Incentive Plan (incorporated by reference to Annex G to the Company’s Registration Statement on Form S-4 filed
on January 25, 2017 (File No. 333-215684)).
10.4
Separation and Settlement Agreement and Release of All Claims between PLx Pharma Inc. and David E. Jorden, dated May 1, 2017
(incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on May 2, 2017 (File No. 001-36351)).
10.5
Executive Employment Agreement of Rita M. O’Connor, dated May 1, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s
Form 8-K filed on May 2, 2017 (File No. 001-36351)).
10.6
Amended and Restated Patent License Agreement, dated December 11, 2009 (incorporated by reference to Exhibit 10.1 to the Company’s
Form 8-K filed on June 12, 2017 (File No. 001-36351)).
10.7
Amendment No. 1 to Amended and Restated Patent License Agreement, dated April 15, 2011 (incorporated by reference to Exhibit 10.2 to the
Company’s Form 8-K filed on June 12, 2017 (File No. 001-36351)).
10.8
Amendment No. 2 to Amended and Restated Patent License Agreement, dated December 17, 2011 (incorporated by reference to Exhibit 10.3
to the Company’s Form 8-K filed on June 12, 2017 (File No. 001-36351)).
Table of Contents
10.9
Loan and Security Agreement among PLx Pharma Inc., PLx Opco Inc., and Silicon Valley Bank, dated as of August 9, 2017 (incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 10, 2017 (File No. 001-36351)).
10.10
Form of Indemnification Agreement (incorporated by Reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on April
20, 2017 (File No. 001-36351)).
10.11
PLx Pharma Inc. 2018 Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on
November 9, 2018 (File No. 001-36351)).
10.12
PLx Pharma Inc. 2018 Incentive Plan, as amended (incorporated herein by reference to the Annex A of the Company’s Definitive Proxy
Statement on Schedule 14A filed on September 25, 2020)(File No. 001-36351)).
10.13
Employment Agreement of Efthymios Deliargyris, dated as of August 29, 2018 (incorporated by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K filed on August 31, 2018 (File No. 001-36351)).
10.14
10.15
10.16
10.17
Purchase Agreement, dated December 20, 2018, by and among the Company and the Investors set forth on the signature pages thereto
(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 21, 2018 (File No. 001-36351)).
Form of Securities Purchase Agreement, dated November 16, 2020, by and among the Company and the Investors set forth on the signature
pages thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 18, 2020 (File No.
001-36351)).
Registration Rights Agreement, dated December 20, 2018, by and among the Company and the Investors set forth on the signature pages
thereto (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on December 21, 2018 (File No. 001-
36351)).
Form of Registration Rights Agreement, dated November 16, 2020, by and among the Company and the Investors set forth on the signature
page thereto (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on November 18, 2020 (File No.
001-36351)).
10.18
Amendment to Employment Agreement with Natasha Giordano, dated March 7, 2019 (incorporated by reference to Exhibit 10.18 to the
Company’s Annual Report on Form 10-K filed on March 8, 2019 (File No. 001-36351)).
10.19
Amendment to Employment Agreement with Rita O’Connor, dated March 7, 2019 (incorporated by reference to Exhibit 10.19 to the
Company’s Annual Report on Form 10-K filed on March 8, 2019 (File No. 001-36351)).
10.20
Amendment to Employment Agreement with Rita O’Connor, dated March 16, 2018 (incorporated by reference to Exhibit 10.20 to the
Company’s Annual Report on Form 10-K filed on March 8, 2019 (File No. 001-36351)).
10.21
Amendment to Employment Agreement with Efthymios Deliargyris, dated March 7, 2019 (incorporated by reference to Exhibit 10.21 to the
Company’s Annual Report on Form 10-K filed on March 8, 2019 (File No. 001-36351)).
10.22
Amendment to Employment Agreement with Michael Valentino, dated March 7, 2019 (incorporated by reference to Exhibit 10.22 to the
Company’s Annual Report on Form 10-K filed on March 8, 2019 (File No. 001-36351)).
10.23
Equity Distribution Agreement, dated March 25, 2019, by and between the Company and JMP Securities LLC (incorporated by reference to
Exhibit 1.2 to the Registration Statement on Form S-3 filed on March 25, 2019 (File No. 333-230478)).
10.24
Placement Agency Agreement, dated November 16, 2020, by and between the Company and Raymond James & Associates, Inc. (incorporated
by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on November 16, 2020 (File No. 001-36351)).
10.25
Manufacturing Services Agreement, dated June 28, 2019, between the Company and Patheon Pharmaceuticals Inc. (incorporated by reference
to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on August 9, 2019 (File No. 001-36351)).+
10.26
Termination of Equity Distribution Agreement, dated as of March 2, 2021, between the Company and JMP Securities LLC (incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 2, 2021 (File No. 001-36351)).
10.27
Underwriting Agreement, dated March 3, 2021, between the Company and Raymond James & Associates, Inc., as representative of the several
underwriters listed on Schedule I thereto (incorporate by reference to Exhibit 1.1 to the Company Current Report on Form 8-K filed on March
3, 2021 (File No. 001-36351)).
21.1
23.1
31.1
31.2
32.1
Subsidiaries of the Company.*
Consent of Marcum LLP.*
Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
Certification of the Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
Certification of the Principal Executive Officer and Principal Financial and Accounting Officer pursuant to U.S.C. Section 1350 as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
Table of Contents
101.INS XBRL Instance Document.*
101.SCH XBRL Taxonomy Extension Schema Document.*
101.CAL XBRL Taxonomy Calculation Linkbase Document.*
101.DEF XBRL Taxonomy Extension Definition Linkbase Document.*
101.LAB XBRL Taxonomy Label Linkbase Document.*
101.PRE XBRL Taxonomy Presentation Linkbase Document.*
+ Filed with confidential portions omitted pursuant to a request for confidential treatment. The omitted portions have been separately filed with
the SEC.
* Filed herewith.
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
PLx Pharma Inc.
By: /s/ Natasha Giordano
Natasha Giordano
President and Chief Executive Officer
(principal executive officer)
Date: March 12, 2021
By: /s/ Rita O’Connor
Rita O’Connor
Chief Financial Officer
(principal financial and accounting officer)
Date: March 12, 2021
POWER OF ATTORNEY
Each person whose individual signature appears below hereby authorizes and appoints Natasha Giordano and Rita O’Connor, and each of them,
with full power of substitution and resubstitution and full power to act without the other, as his or her true and lawful attorney-in-fact and agent to act in his
or her name, place and stead and to execute in the name and on behalf of each person, individually and in each capacity stated below, and to file any and all
amendments to this annual report on Form 10-K and to file the same, with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each
and every act and thing, ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitute or substitutes may
lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Name
/s/ Natasha Giordano
Natasha Giordano
/s/ Michael J. Valentino
Michael J. Valentino
/s/ Gary Balkema
Gary Balkema
/s/ Anthony Bartsh
Anthony Bartsh
/s/ Robert Casale
Robert Casale
/s/ Kirk Calhoun
Kirk Calhoun
/s/ John W. Hadden II
John W. Hadden II
Capacity
Director, President and
Chief Executive Officer
Date
March 12, 2021
Director and Executive Chairman of the Board
March 12, 2021
Director
Director
Director
Director
Director
March 12, 2021
March 12, 2021
March 12, 2021
March 12, 2021
March 12, 2021
DESCRIPTION OF THE REGISTRANT’S SECURITIES REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES
EXCHANGE ACT OF 1934
PLx Pharma Inc. (the “Company”) has one class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”): its common stock, par value $0.001 per share (“Common Stock”). The following is a summary of the material terms of the
Common Stock. This summary is qualified in its entirety by reference to the Company’s Amended Certificate of Incorporation, as amended (the
“Charter”), and Amended and Restated Bylaws (the “Bylaws”), which are incorporated herein by reference as Exhibit 3.1 and Exhibit 3.3, respectively, to
the Company’s Annual Report on Form 10-K of which this Exhibit 4.6 is a part. We encourage you to read the Charter, the By-laws and applicable
provisions of the Delaware General Corporation Law for additional information.
Exhibit 4.6
Authorized Capital Stock
Description of Common Stock
The Company is authorized to issue 100,000,000 shares of Common Stock and 1,000,000 shares of preferred stock, par value $0.001 per share.
The Company’s Board of Directors (the “Board”) is authorized to provide for the issuance of shares of preferred stock in one or more series and to fix for
each such series such voting powers, designations, preferences and relative, participating, optional or other special rights and such qualifications,
limitations or restrictions thereon, as determined by the Board.
Voting Rights and Requirements
Each share of Common Stock entitles its record holder to one vote on all matters to be voted on by the common stockholders of the Company.
Except as otherwise provided by law, actions by the common stockholders of the Company may be approved by a majority vote of the stockholders
present at a duly called meeting of the stockholders at which a quorum is present; however, an amendment to the Bylaws by the stockholders requires the
affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the then outstanding shares of the capital
stock of the Company entitled to vote at a meeting of stockholders, duly called. The Board of the Company may, by majority vote of those present at any
meeting at which a quorum is present, amend the Bylaws, or enact such other Bylaws as in their judgment may be advisable for the regulation of the
conduct of the affairs of the Company. At all meetings of stockholders for the election of directors (except the Series A Director elected by the holders of
the Series A Preferred Stock, voting separately as a class), a majority of the votes cast is sufficient to elect. No provision of the Company’s Charter or
Bylaws provides for cumulative voting in the case of the election of directors or on any other matter.
In addition to the Company’s outstanding common stock, the Company has outstanding options to purchase its common stock held by its
employees and directors and additional shares available for issuance under several equity compensation plans, as further described in the Company’s
periodic reports filed with the SEC.
Dividends and Liquidation Rights
Each holder of Common Stock of the Company is entitled to share pro rata in any dividends paid on the Common Stock out of assets legally
available for that purpose, when, and if declared by the Board of the Company. Upon the liquidation, dissolution or winding up of the Company, the assets
of the Company shall be distributed pro rata among the holders of Common Stock. However, the aforementioned dividend and liquidation rights are
limited and qualified by the Series A Preferred Stock and Series B Preferred Stock, which has a preference to any such distribution of the assets or funds.
Other than the rights described above, the holders of Common Stock have no redemption, preemptive, subscription or conversion rights, nor any rights to
payment from any sinking or similar fund, and are not subject to any calls or assessments. There are no restraints in the Charter or Bylaws of the
Company on the right of holders of shares of Common Stock to sell or otherwise alienate their shares of stock in the Company, and there are no provisions
discriminating against any existing or prospective holder of shares of Common Stock as a result of such security holder owning a substantial amount of
securities.
Stock Exchange Listing
The Common Stock is listed on the Nasdaq Capital Market under the trading symbol “PLXP”.
Transfer Agent and Registrar
The transfer agent and registrar for the Common Stock is VStock Transfer, LLC.
Subsidiaries of PLx Pharma Inc.
Exhibit 21.1
1.
PLx Opco Inc., organized under the laws of Delaware
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENT
We consent to the incorporation by reference in the Registration Statements No. 333-251554, No. 333-239547, No. 333-204830, No. 333-230478 and No.
333-230550 on Form S-3 and Registration Statements No. 333-196824 and No. 333-212421 on Form S-8 of PLx Pharma Inc. of our report dated March 12,
2021, with respect to our audits of the consolidated financial statements of PLx Pharma Inc. as of December 31, 2020 and 2019 and for each of the two
years in the period ended December 31, 2020, which report is included in this Annual Report on Form 10-K of PLx Pharma Inc. for the year ended
December 31, 2020.
Exhibit 23.1
/s/ Marcum LLP
Marcum LLP
New York, NY
March 12, 2021
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.1
I, Natasha Giordano, certify that:
1.
I have reviewed this Annual Report on Form 10-K of PLx Pharma Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–
15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting.
Date: March 12, 2021
/s/ Natasha Giordano
Natasha Giordano
President and
Chief Executive Officer
(principal executive officer)
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.2
I, Rita O’Connor, certify that:
1.
I have reviewed this Annual Report on Form 10-K of PLx Pharma Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–
15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting.
Date: March 12, 2021
/s/ Rita O’Connor
Rita O’Connor
Chief Financial Officer
(principal financial officer)
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the annual report on Form 10-K of PLx Pharma Inc. (the “Company”) for the year ended December 31, 2020 (the “Report”) as filed
with the Securities and Exchange Commission on the date hereof, the undersigned Chief Executive Officer and Chief Financial Officer of the Company
hereby certify that, to such officer’s knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
This certification is provided solely pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Dated: March 12, 2021
Dated: March 12, 2021
/s/ Natasha Giordano
Natasha Giordano
President and
Chief Executive Officer
(principal executive officer)
/s/ Rita O’Connor
Rita O’Connor
Chief Financial Officer
(principal financial officer)
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished
to the Securities and Exchange Commission or its staff upon request.