RESPIRERX PHARMACEUTICALS INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q) – marketscreener.com

The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements (unaudited) and notes related thereto appearing elsewhere in this document. Overview The mission of the Company is to develop innovative and revolutionary treatments
to combat disorders caused by disruption of neuronal signalling. We are
developing treatment options that address conditions that affect millions of
people, but for which there are limited or poor treatment options, including
obstructive sleep apnea (“OSA”), attention deficit hyperactivity disorder
(“ADHD”) and recovery from spinal cord injury (“SCI”), as well as certain
neurological orphan diseases such as Fragile X Syndrome (“FXS”). With the
addition of the GABAkine program stemming from our UWMRF Patent License
Agreement (“UWMRF Patent License Agreement”) with the University of
Wisconsin-Milwaukee Research Foundation (“UWMRF”) effective August 1, 2020, we
have added development programs for treatment resistant epilepsy and other
convulsant disorders, and potentially migraine, inflammatory and neuropathic
pain, as well as other areas of interest based on results of animal studies to
date.
RespireRx is developing a pipeline of new drug products based on our broad patent portfolios across two distinct drug platforms:(i) our cannabinoids platform (which we refer to as Project ResolutionRx), including dronabinol (a synthetic form of ?9-tetrahydrocannabinol (“?9-THC”)), which that acts upon the nervous system’s endogenous cannabinoid receptors, and
(ii) our neuromodulators platform (which we refer to as Project EndeavourRx),which includes two programs: (a) our ampakines program, proprietarycompounds that positively modulate AMPA-type glutamate receptors to promoteneuronal function and (b) our GABAkines program, PAMs of GABAA receptors that are the subject of the UWMRF Patent License Agreement. I. Cannabinoids Background The term “cannabinoids” refers to the pharmacologically active, naturally
occurring substances found within the cannabis (marijuana) plant. While the
liberalization of state laws regulating the use and sales of marijuana has
created a major industry based on the commercialization of marijuana for both
medical and recreational use, the U.S. Food and Drug Administration (“FDA”) has
not recognized or approved the marijuana plant as medicine nor is it federally
legal to sell products that contain cannabinoids as drugs, dietary supplements
or foods (edibles) without its approval. From a scientific and pharmaceutical
perspective, however, we do not think that pharmaceutical cannabinoids should
suffer from the stigma that marijuana has, since it was declared a controlled
substance in the 1930’s. Rather, we believe that cannabinoids should be
considered pharmaceuticals to be developed under rules and regulations
established by the FDA and comparable international regulatory bodies in much
the same manner as other drugs originally derived from plants much like aspirin,
theophylline or tamoxifen. 40
In parallel with the widespread public attention given to the growth of the
recreational, dietary supplement, health and wellness and medical cannabis
industry, an alternate approach has focused on the development of cannabinoids
as pharmaceutical products. The term “pharmaceutical cannabinoids” refers to
cannabinoids developed according to FDA accepted regulatory pathways by which a
company receives FDA approval to market and sell any new drug. To date,
scientific study has focused on the two major cannabinoids, ?9-THC and
cannabidiol (“CBD”), although additional cannabinoids are gaining attention.
RespireRx has been one of the pioneers in the field of pharmaceutical
cannabinoids with its long-term commitment to developing ?9-THC for the
treatment of sleep-related breathing disorders. To date, the FDA has approved three cannabinoids: (1) dronabinol (Marinol® and
its generic equivalent and Syndros®), synthetically manufactured ?9-THC,
approved for the treatment of AIDS-related anorexia and chemotherapy induced
nausea and vomiting, (2) Epidiolex®, an oral formulation of plant-derived,
purified CBD, approved for seizures associated with Lennox-Gastaut syndrome or
Dravet syndrome, and (3) nabilone (Cesamet®), a synthetic analogue of
tetrahydrocannabinol, approved for chemotherapy induced nausea and vomiting.
Sativex®, an oral solution containing a complex botanical mixture of
tetrahydrocannabinol and CBD for the treatment of spasticity due to multiple
sclerosis, is sold in Europe and over 23 other countries, but is not approved in
the U.S. Management believes that the commercialization of these pharmaceutical
cannabinoids has opened the door to a potentially large, expanding
pharmaceutical cannabinoid market opportunity. Dronabinol is a synthetically manufactured ?9-THC, one of the pharmacologically
active substances naturally occurring in the cannabis plant. Dronabinol, in its
soft gel-cap formulation, is a Schedule III, controlled drug that has been
approved by the FDA for the treatment of AIDS-related anorexia and
chemotherapy-induced nausea and vomiting. Dronabinol is sold in the United
States as the branded prescription drug product Marinol® capsules as well as
numerous generic formulations, and is available in 2.5 mg, 5 mg, and 10 mg
capsules, with a maximum labelled dosage of 20 mg/day for the AIDS indication,
or 15 mg/m2 per dose for chemotherapy-induced nausea and vomiting. Syndros® is a
liquid formulation of dronabinol and is a Schedule II, controlled drug. 41 OSA and Existing Treatments
RespireRx has sought to develop dronabinol for the treatment of obstructive
sleep apnea (“OSA”). OSA is a sleep-related breathing disorder that afflicts an
estimated 29 million people in the United States according to the American
Academy of Sleep Medicine (“AASM”), and an additional 26 million in Germany and
8 million in the United Kingdom, as presented at the European Respiratory
Society’s annual Congress in Paris, France in September 2018. OSA involves a
decrease or complete halt in airflow despite an ongoing effort to breathe during
sleep. When the muscles relax during sleep, soft tissue in the back of the
throat collapses and obstructs the upper airway. OSA remains significantly
under-recognized, as only 20% of cases in the United States according to the
AASM and 20% of cases globally have been properly diagnosed. About 24 percent of
adult men and 9 percent of adult women are believed to have the breathing
symptoms of OSA with or without daytime sleepiness. OSA significantly impacts
the lives of sufferers who do not get enough sleep; their quality of sleep is
deteriorated such that daily function is compromised and limited. OSA is
associated with decreased quality of life, significant functional impairment,
and increased risk of road traffic accidents, especially in professions like
transportation and shipping. Research has established links between OSA and several important co-morbidities,
including hypertension, type II diabetes, obesity, stroke, congestive heart
failure, coronary artery disease, cardiac arrhythmias, and even early mortality.
The consequences of undiagnosed and untreated OSA are medically serious and
economically costly. According to the AASM, the estimated economic burden of OSA
in the United States is approximately $162 billion annually. We believe that a
new drug therapy that is effective in reducing the medical and economic burden
of OSA would have major benefits for the treatment of this costly disease
indication. Continuous Positive Airway Pressure (“CPAP”) is the most common treatment for
OSA. CPAP devices work by blowing pressurized air into the nose (or mouth and
nose), which keeps the pharyngeal airway open. CPAP is not curative, and
patients must use the mask whenever they sleep. Reduction of the apnea/hypopnea
index (“AHI”) is the standard objective measure of therapeutic response in OSA.
Apnea is the cessation of breathing for 10 seconds or more and hypopnea is a
reduction in breathing. AHI is the sum of apnea and hypopnea events per hour. In
the sleep laboratory, CPAP is highly effective at reducing AHI. However, the
device is cumbersome and difficult for many patients to tolerate. Most studies
describe that 25-50% of patients refuse to initiate or completely discontinue
CPAP use within the first several months and that most patients who continue to
use the device do so only intermittently. Oral devices may be an option for patients who cannot tolerate CPAP. Several
dental devices are available including the Mandibular Advancement Device (“MAD”)
and the Tongue Retaining Device (“TRD”). The MAD is the most widely used dental
device for sleep apnea and is similar in appearance to a sports mouth guard. It
forces the lower jaw forward and down slightly which keeps the airway more open.
The TRD is a splint that holds the tongue in place to keep the airway as open as
possible. Like CPAP, oral devices are not curative for patients with OSA. The
cost of these devices tends to be high and side effects associated with them
include night-time pain, dry lips, tooth discomfort, and excessive salivation. Patients with clinically significant OSA who cannot be treated adequately with
CPAP or oral devices may elect to undergo surgery. The most common surgery is
uvulopalatopharyngoplasty which involves the removal of excess tissue in the
throat to make the airway wider. Other possible surgeries include
tracheostomies, rebuilding of the lower jaw, and nose surgery. Patients who
undergo surgery for the treatment of OSA risk complications, including
infection, changes in voice frequency, and impaired sense of smell. Surgery is
often unsuccessful and, at present, no method exists to reliably predict
therapeutic outcome from these forms of OSA surgery. Recently, another surgical option has become available based on upper airway
stimulation. It is a combination of an implantable nerve stimulator and an
external remote controlled by the patient. The hypoglossal nerve is a motor
nerve that controls the tongue. The implanted device stimulates the nerve with
every attempted breath, regardless of whether such stimulation is needed for
that breath, to increase muscle tone to prevent the tongue and other soft
tissues from collapsing. The surgically implanted device is turned on at night
and off in the morning by the patient with the remote. 42
The Company’s Cannabinoid Rights In order to expand RespireRx’s respiratory disorders program and develop
cannabinoids for the treatment of OSA, RespireRx acquired 100% of the issued and
outstanding equity securities of Pier Pharmaceuticals, Inc. (“Pier”) effective
August 10, 2012 pursuant to an Agreement and Plan of Merger. Pier was a clinical
stage pharmaceutical company developing a pharmacologic treatment for OSA and
had been engaged in research and clinical development activities. Through the merger, RespireRx gained access to an Exclusive License Agreement
(as amended, the “2007 License Agreement”) that Pier had entered into with the
University of Illinois Chicago (“UIC”) on October 10, 2007. The 2007 License
Agreement covered certain patents and patent applications in the United States
and other countries claiming the use of certain compounds referred to as
cannabinoids, of which dronabinol is a specific example, for the treatment of
sleep-related breathing disorders, including sleep apnea. The 2007 License Agreement was terminated effective March 21, 2013 and the
Company entered into a new license agreement (the “2014 License Agreement”) with
UIC on June 27, 2014, the material terms of which were substantially similar to
the 2007 License Agreement. The 2014 License Agreement grants the Company, among
other provisions, exclusive rights: (i) to practice certain patents in the
United States, Germany and the United Kingdom, as defined in the 2014 License
Agreement, that are held by UIC; (ii) to identify, develop, make, have made,
import, export, lease, sell, have sold or offer for sale any related licensed
products; and (iii) to grant sub-licenses of the rights granted in the 2014
License Agreement, subject to the provisions of the 2014 License Agreement. The
Company is required under the 2014 License Agreement, among other terms and
conditions, to pay UIC a license fee, royalties, patent costs and certain
milestone payments. The 2014 License Agreement obligates the Company to comply with various
commercialization and reporting requirements that commenced in 2015. In
addition, the 2014 License Agreement provides for various royalty payments,
including a royalty on net sales of 4%, payment on sub-licensee revenues of
12.5%, and a minimum annual royalty beginning in 2015 of $100,000, which is due
and payable on December 31 of each year beginning on December 31, 2015. The
minimum annual royalty obligation of $100,000 due on December 31, 2019, was
extended to and paid on July 7, 2020. One-time milestone payments may become due
based upon the achievement of certain development milestones. $350,000 will be
due within five days after the dosing of the first patient in a Phase III human
clinical trial anywhere in the world. $500,000 will be due within five days
after the first NDA filing with the FDA, as defined below, or a foreign
equivalent. $1,000,000 will be due within twelve months of the first commercial
sale. One-time royalty payments may also become due and payable. Annual royalty
payments may also become due. In the year after the first application for market
approval is submitted to the FDA or a foreign equivalent and until approval is
obtained, the minimum annual royalty will increase to $150,000. In the year
after the first market approval is obtained from the FDA or a foreign equivalent
and until the first sale of a product, the minimum annual royalty will increase
to $200,000. In the year after the first commercial sale of a product, the
minimum annual royalty will increase to $250,000. For each of the three-month
and six-month periods ended June 30, 2020 and 2019, the Company recorded a
charge to operations of $25,000 and $50,000, respectively, as its minimum annual
royalty obligation, which is included in research and development expenses in
the Company’s condensed consolidated statements of operations for the
three-months and six-months ended June 30, 2020 and 2019, respectively.
The due date of the $100,000 annual amount payable to the University of Illinois that was originally due on December 31, 2019 pursuant to the 2014 License Agreement, was extended to and paid on July 7, 2020.The Company’s Research Efforts Regarding the Treatment of OSA with Cannabinoids The poor tolerance and long-term adherence to CPAP, as well as the limitations
of mechanical devices and surgery, make discovery of therapeutic alternatives
clinically relevant and important. RespireRx’s translational research results
demonstrate that dronabinol has the potential to become the first drug treatment
for this large and underserved market. The Company conducted a 21-day, randomized, double-blind, placebo-controlled,
dose escalation Phase 2A clinical study in 22 patients with OSA, in which
dronabinol produced a statistically significant reduction in AHI, the primary
therapeutic end-point, and was observed to be safe and well tolerated, with the
frequency of side effects no different from placebo. This clinical trial
provided data supporting the submission of patent applications claiming unique
dosage strengths, blood levels and controlled release formulations optimized for
use in the treatment of OSA. If approved, these pending patents would extend
market exclusivity until at least 2031. 43
With approximately $5 million in funding from the National Heart, Lung and Blood
Institute of National Institutes of Health (“NIH”), Dr. David Carley of UIC,
along with his colleagues at UIC and Northwestern University, completed a Phase
2B multi-center, double-blind, placebo-controlled clinical trial of dronabinol
in patients with OSA. This study, named “Pharmacotherapy of Apnea with
Cannabimimetic Enhancement” (“PACE”) replicated the earlier Phase 2A study. The
authors published in January 2018 in the journal SLEEP and reported that, in a
dose-dependent fashion, treatment with 2.5 mg and 10 mg of dronabinol once per
day at night, significantly reduced, compared to placebo, AHI during sleep in 56
evaluable patients with moderate to severe OSA who completed the study.
Additionally, treatment with 10 mg of dronabinol significantly improved daytime
sleepiness as measured by the Epworth Sleepiness Scale and achieved the greatest
overall patient satisfaction. As in the previous Phase 2A study, dronabinol was
observed to be safe and well tolerated, with the frequency of side effects no
different from placebo. The Company did not manage this clinical trial, which
was funded entirely by the National Heart, Lung and Blood Institute of NIH. We initially believed that the most direct route to commercialization was to
proceed directly to a Phase 3 pivotal clinical trial using the currently
available, FDA approved (for other indications), generically available
dronabinol gel-cap formulation and to commercialize, within the present
RespireRx public corporate structure, a RespireRx branded dronabinol capsule
under a 505(b)(2) FDA regulatory pathway in the United States. (see “Proposed
Regulatory Process” below). We planned to follow this product with a proprietary
formulation. However, several recent developments have caused us to re-evaluate
this approach and to consider accelerating the development of a new proprietary
formulation, as well as implementing an internal restructuring plan that
contemplates contributing the cannabinoid platform into what initially would be
a wholly owned subsidiary of RespireRx for the purpose of developing
pharmaceutical cannabinoids to further the aims of Project ResolutionRx. Upon
the potential formation of this subsidiary, the initial primary focus would be
to re-purpose dronabinol for the treatment of OSA using a new proprietary
formulation. Project ResolutionRx.
We are considering the formation of the Project ResolutionRx subsidiary for reasons described below, among others. ? Prospective Management We recently hired Mr. Timothy Jones, highly experienced in the cannabinoid
industry, to serve as the President and Chief Executive Officer of RespireRx and
have approached certain key opinion leaders to sit on the proposed Project
ResolutionRx subsidiary’s scientific advisory board (“SAB”). However, we cannot
provide assurance that the SAB candidates will join us. ? Business Plan
A detailed business plan with pro forma budgets has been prepared, which describes our strategy and plans for developing and commercializing the dronabinol platform for the treatment of OSA, including a review of the market opportunity, clinical development and regulatory pathway. ? Key contracts The Purisys Agreement and the 2014 License Agreement will need to be transferred
or otherwise made available to the Project ResolutionRx subsidiary. See “-Noramco Inc./Purisys, LLC – Dronabinol Development and Supply Agreement” and “-University of Illinois 2014 Exclusive License Agreement” in Note 8.
Commitments and Contingencies in the notes to condensed consolidated financial
statements as of June 30, 2020 for more information on these agreements. While
this subsidiary’s initial, primary focus will be on re-purposing dronabinol for
the treatment of OSA, we believe that our broad enabling patents and a new
proprietary formulation may provide a framework for expanding into the larger
burgeoning pharmaceutical cannabinoid industry. We believe that by creating this
subsidiary, it may be possible, through separate finance channels and potential
strategic transactions, to optimize the asset value not only of the cannabinoid
platform, but our neuromodulation platform as well. 44 ? Prospective Investors We have had discussions with a number of potential cannabinoid investors and
strategic partners who have expressed interest, mostly in the development of a
new, proprietary formulation with extended patent life. Forming a new subsidiary
for our cannabinoid platform or our neuromodulator platform may allow us to
attract financing from investors with a desire to invest in one platform but not
the other. ? Speaking Engagements and Event Participation
On August 17, 2020, an interview with RespireRx’s Chief Executive Officer and President, Mr. Timothy Jones was posted as a podcast by Stock Day Media. Jeff E. Margolis, the Company’s Senior Vice President, Chief Financial Officer,
Treasurer and Secretary is one of forty expert speakers participating in the 3rd
International Cannabinoid Derived Pharmaceuticals Summit, a digital event taking
place September 15 – 17, 2020. Mr. Margolis is leading Workshop B on September
15, 2020 from 9am – 12pm Eastern Daylight Savings Time (“EDT”), entitled
Investing and Financing for Early Stage Cannabinoid Drug Developers. Mr.
Margolis is also participating as a panel member on September 17, 2020 at 1:50pm
EDT as part of the same summit, for a panel discussion entitled: “Panel
Discussion: Dispelling Common Misconceptions About Biotech Funding and Applying
this Understanding to Cannabinoid Pharmaceuticals.” ? Intellectual Property RespireRx has exclusive rights to issued and pending patents claiming
cannabinoid compositions and methods for treating cannabinoid-sensitive
disorders, including sleep apnea, pain, glaucoma, muscular spasticity, anorexia
and other conditions. In October 2019, we filed a continuation-in-part for our
pending patent that describes and claims novel doses, controlled release
compositions and methods of use for cannabinoids, as well as a new U.S.
provisional patent application further disclosing novel dosage and controlled
release compositions and methods of use for cannabinoids, alone or in
combination, including with cannabinoid and non-cannabinoid molecules. Specific
claims describe low dosage strengths and controlled release formulations for
attaining a therapeutic window of cannabinoid blood levels that produce the
desired therapeutic effect(s) for a controlled period of time, while minimizing
undesirable side effects. As previously disclosed, the original patents were
filed by RespireRx and are now included in the 2014 License Agreement. See Note
8. Commitments and Contingencies-University of Illinois 2014 Exclusive License
Agreement in the notes to condensed consolidated financial statements as of June
30, 2020 for more information on the 2014 License Agreement. While no assurance
can be provided that the claims in this continuation-in-part or the U.S.
provisional patent application will be allowed in whole or in part, or that the
patents will ultimately issue, we believe that these new filings, if allowed,
will provide market protections through at least 2031. We believe our intellectual property initiatives may afford expanding strategic
options and market exclusivity in the burgeoning pharmaceutical cannabinoid
business sector. New cannabinoid formulation technology is headed in the
direction of enhanced absorption. These technologies, including nano- and
micro-emulsions and thin films, have been shown to bypass the normal route of
absorption and liver metabolism of cannabinoids, thus dramatically increasing
blood levels and allowing for the use of low doses. Similarly, technologies may
be used to achieve a controlled release of dronabinol, and we believe that our
pending patent priority relating back to 2010 predates the efforts of others
seeking to develop low-dose or extended release formulations of cannabinoids.
Thus, to the extent that new technologies result in lower doses and/or
controlled release formulations, we believe they would infringe on our pending
patents once issued, not only for use in the treatment of OSA but potentially a
wide variety of other indications as well. Data from our Phase 2 clinical trials has allowed us to design new proprietary
formulations of dronabinol, disclosed in our patent filings and optimized for
the treatment of not only OSA, but also other indications. Within the past 12 to
24 months, new formulation technology has emerged potentially allowing for the
creation of a proprietary dronabinol formulation with optimized dose and
duration of action for treating OSA. We have discussions in progress with a
number of companies that have existing cannabinoid formulation technologies,
expertise, and licensure capabilities, which may lead to the development of a
proprietary formulation of dronabinol for RespireRx based on our pending patents
for low-dose and extended release dronabinol and may lead to the development of
a marketable proprietary formulation of dronabinol. We believe that the
development of a novel, proprietary formulation of dronabinol would only extend
time to market entry by approximately 12 months compared to the currently
available generic soft gel capsules, but would dramatically extend market
exclusivity; however, no assurance can be provided that any of the formulation
technologies that we are currently analyzing will result in viable products or
that formulation agreements will be consummated on terms acceptable to us. The
failure to consummate a formulation agreement would materially and adversely
affect the Company. 45 ? The Opportunity to Improve Dronabinol Formulations
Dronabinol is currently marketed as a soft gelatin capsule that suffers from several major deficiencies: a. Dronabinol exhibits poor and erratic absorption. ?9-THC is not water soluble.
The market dominant commercial gelcap dronabinol is currently formulated as a
sesame oil-based liquid within a soft gelatin capsule. The absorption of
dronabinol after oral administration is poor and highly variable with some
patients achieving very high levels and others achieving very low levels. This
erratic absorption may be responsible for the variable therapeutic responses
observed in dronabinol clinical trials. Syndros®, on the other hand, is
formulated as a solution in dehydrated alcohol, polyethylene glycol and other
materials and exhibits its own challenges and deficiencies, including but not
limited to it being Schedule II as compared to the capsule that is Schedule III. b. Dronabinol is rapidly and extensively (approximately 80%) metabolized upon
first pass through the liver, resulting in low blood levels. Additionally,
dronabinol has a relatively short half-life (approximately 3 – 4 hours) and, in
its present formulation, is not optimally suited for therapeutic indications
requiring blood levels to be sustained for 6 hours or longer. c. In order to achieve sustained, therapeutic blood levels, we have found it
necessary to use higher doses of dronabinol in our OSA clinical trials. For
example, over an 8-hour period, the 2.5 mg and 10 mg doses produced
therapeutically equivalent effects during the first 4 hours, but only the 10 mg
dose produced therapeutic effects during the second 4 hours. Unfortunately, the
10 mg dose produces a higher occurrence of side effects than the 2.5 mg dose (as
described in the Marinol® package insert). We anticipate focusing on new
formulations that would achieve the blood levels produced by the lower doses for
a sustained time period, resulting in the desired therapeutic effect(s) while
minimizing undesirable side effects. ? Large Commercial Opportunity As a serious public health issue, the important need for diagnosing and
ultimately treating OSA has recently been highlighted by the FDA clearance of
several sleep apnea home test kits that are now third party reimbursed. Further
highlighting this need, CVS Health Corporation (NYSE: CVS) announced the
implementation of a program to diagnose and treat OSA initially within their own
in-store, walk-in MinuteClinics. If implemented throughout their HealthHUB store
network, the number of people diagnosed with sleep apnea and eligible for
treatment should increase dramatically. Fitbit (NYSE: FIT), the health oriented
smart watch company is seeking clearance from the FDA to diagnose sleep apnea.
We believe that the combination of more efficient and patient friendly
diagnostic procedures and, ultimately, pharmaceutical treatments such as those
we are developing will encourage more patients to seek diagnosis and treatment.
As noted above, there are approximately 29 million OSA patients in the U.S. and
an additional 26 million in Germany and 8 million in the United Kingdom. There
are currently no drugs approved for the treatment of OSA.
As noted below in “Proposed Regulatory Process,” there are several ways to achieve market exclusivity with respect to this large and underserved patient population. ? Proposed Regulatory Process In conjunction with its management and consultants, RespireRx intends to file a
new NDA under Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act (as
amended, the “FDCA” and such NDA a “505(b)(2) NDA”), claiming the efficacy and
safety of our proposed proprietary dronabinol formulation in the treatment of
OSA. We believe the use of dronabinol for the treatment of OSA is a novel
indication for an already approved drug, making it eligible for a 505(b)(2) NDA,
as opposed to the submission and approval of a full 505(b)(1) NDA. The 505(b)(2) NDA was created by the Hatch-Waxman Act, as amended (the “Hatch-Waxman Act”), which amended the FDCA to help avoid unnecessary
duplication of studies already performed on a previously approved drug. As
amended, the FDCA gives the FDA express permission to rely on data not developed
by the NDA applicant. Accordingly, a 505(b)(2) NDA contains full safety and
effectiveness reports but allows at least some of the information required for
NDA approval, such as safety and efficacy information on the active ingredient,
to come from studies not conducted by or for the applicant. This can result in a
less expensive and faster route to approval, compared with a traditional
development path, such as 505(b)(1), while still allowing for the creation of
new, differentiated products. The 505(b)(2) NDA regulatory path offers the
applicant market protections, such as market exclusivity, under the Hatch-Waxman
Act and the rules promulgated thereunder. Other, international regulatory routes
are available to pursue proprietary formulations of dronabinol and would provide
further market protections. For example, in Europe, a regulatory approval route
similar to the 505(b)(2) pathway is the hybrid procedure based on Article 10 of
Directive 2001/83/EC. 46
We have worked with regulatory consultants who will assist with FDA filings and
regulatory strategy. If we can secure sufficient financing, of which no
assurance can be provided, we anticipate requesting a pre-investigational new
drug (“IND”) meeting with the FDA. This meeting also could create the type of
dialogue with the FDA that is normally communicated at an end-of Phase 2
meeting. The FDA responses to this meeting will be incorporated into an IND. If we can secure sufficient financing, of which no assurance can be provided, we
plan to propose conducting the appropriate clinical studies with our proprietary
controlled release formulation in OSA patients to determine safety,
pharmacokinetics and efficacy, as well as a standard Phase 1 clinical study to
determine potential abuse liability. When a Phase 3 study is required for a
505(b)(2), usually only one study with fewer patients is necessary versus the
two, large scale, confirmatory studies generally required for the standard
505(b)(1) NDA. While no assurance can be provided, with an extensive safety
database tracking chronic, long-term use of Marinol® and generics, we believe
that the FDA should not have major safety concerns with dronabinol in the
treatment of OSA. RespireRx has worked with the PACE investigators and staff, as well as with our
Clinical Advisory Panel to design a draft Phase 3 protocol that, based on the
experience and results from the Phase 2A and Phase 2B trials, we believe will
provide sufficient data for FDA approval of a RespireRx dronabinol controlled
release formulation for OSA. The current version of the protocol is designed as
a 90-day randomized, blinded, placebo-controlled study of dronabinol in the
treatment of OSA. Depending on feedback from the FDA, RespireRx estimates that
the Phase 3 trial would require between 120 and 300 patients at 15 to 20 sites,
and take 18 to 24 months to complete, at a cost of between $10 million and
$14
million. We believe our rights under the Purisys Agreement would help facilitate
regulatory approval. Under the Purisys Agreement, Purisys has agreed to (i)
provide all of the API estimated to be needed for the clinical development
process for first- and second-generation products, three validation batches for
NDA filings and adequate supply for the initial inventory stocking for the
wholesale and retail channels, subject to certain limitations, (ii) maintain or
file valid DMFs with the FDA or any other regulatory authority and provide the
Company with access or a right of reference letter entitling the Company to make
continuing reference to the DMFs during the term of the agreement in connection
with any regulatory filings made with the FDA by the Company, (iii) participate
on a development committee, and (iv) make available its regulatory consultants,
collaborate with any regulatory consulting firms engaged by the Company and
participate in all FDA or DEA meetings as appropriate and as related to the
API. 47 In consideration for these supplies and services, RespireRx has agreed to (i)
purchase exclusively from Purisys, during the commercialization phase, all API
for these products at a pre-determined price subject to certain producer price
adjustments and (ii) allow Purisys’s participation in the economic success of
the commercialized Product or Products up to the earlier of the achievement of a
maximum dollar amount or the expiration of a period of time. See “-Noramco
Inc./Purisys, LLC – Dronabinol Development and Supply Agreement” in Note 8.
Commitments and Contingencies in the notes to condensed consolidated financial
statements as of June 30, 2020 for more information on the Purisys Agreement. II. Neuromodulators – Project EndeavourRx – Ampakines and GABAA Building upon our Project EndeavourRx ampakine and GABAkine programs as a
foundation, we are planning the establishment of a wholly owned subsidiary of
RespireRx that will focus on developing novel neuromodulators for disorders due
to alterations in neurotransmission. See Note 2.
Business-Neuromodulators-Project EndeavourRx in the notes to condensed
consolidated financial statements as of June 30, 2020 for background information
on neuromodulators and Project EndeavourRx. Below is a discussion of RespireRx’s
strategic plan with respect to Project EndeavourRx. Ampakines
Through an extensive translational research effort from the cellular level
through Phase 2 clinical trials, the Company has developed a family of novel,
low impact ampakines, including CX717, CX1739 and CX1942 that may have clinical
application in the treatment of CNS-driven neurobehavioral and cognitive
disorders, SCI, neurological diseases, and certain orphan indications. From our
ampakine program, our lead clinical compounds, CX717 and CX1739, have
successfully completed multiple Phase 1 safety trials. Both compounds have also
completed Phase 2 efficacy trials demonstrating target engagement, by
antagonizing the ability of opioids to induce respiratory depression. CX717 has
successfully completed a Phase 2 trial demonstrating the ability to
statistically significantly reduce the symptoms of adult ADHD. In an early Phase
2 study, CX1739 improved breathing in patients with CSA. Preclinical studies
have highlighted the potential ability of these ampakines to improve motor
function in animals with SCI. Subject to raising sufficient financing (of which
no assurance can be provided), we believe that we will be able to rapidly
initiate a human Phase 2 study with CX1739 in patients with SCI and a human
Phase 2 study in patients with ADHD with either CX717 or CX1739.
Ampakines development for ADHD, FXS and ASD, SCI and Other CNS-driven Disorders ADHD ADHD is one of the most common neurobehavioral disorders, with 9.4% of American
children (6.1 million) having ever been diagnosed with ADHD according to a
national 2016 parent survey. ADHD is estimated to affect 7.8% of U.S. children
aged 4 to 17 according to the U.S. Centers for Disease Control and Prevention
(“CDC”), or approximately 4.5 million children. The principal characteristics of
ADHD are inattention, hyperactivity and impulsivity, symptoms that are known to
persist into adulthood. In a study published in Psychiatry Res in May 2010, up
to 78% of children affected by this disorder showed at least one of the major
symptoms of ADHD when followed up 10 years later. According to the CDC,
approximately 4% of the US adult population has ADHD, which can negatively
impair many aspects of daily life, including home, school, work and
interpersonal relationships. 48
Currently available treatments for ADHD include amphetamine-type stimulants and
non-stimulant agents targeting monoaminergic neurotransmitter systems in the
brain. However, these neurotransmitter systems are not restricted to the brain
and are widely found throughout the body. Thus, while these agents can be
effective in ameliorating ADHD symptoms, they also can produce adverse
cardiovascular effects, such as increased heart rate and blood pressure.
Existing treatments also affect eating habits and can reduce weight gain and
growth in children and have been associated with suicidal ideation in
adolescents and adults. In addition, approved stimulant treatments are
DEA-classified as controlled substances and present logistical issues for
distribution and protection from diversion. Approved non-stimulant treatments,
such as atomoxetine (Strattera® and its generic equivalents), can take four to
eight weeks to become effective and undesirable side effects also have been
observed. Various investigators have generated data supporting the concept that
alterations in AMPA receptor function might underlie the production of some of
the symptoms of ADHD. In rodent and primate models of cognition, ampakines have
been demonstrated to reduce inattention and impulsivity, two of the cardinal
symptoms of ADHD. Furthermore, ampakines do not stimulate spontaneous locomotor
activity in either mice or rats, unlike the stimulants presently used for the
treatment of ADHD, nor do they increase the stimulation produced by amphetamine
or cocaine. These preclinical considerations prompted us to conduct a
randomized, double- blind, placebo controlled, two period crossover study to
assess the efficacy and safety of CX717 in adults with ADHD. In a repeated measures analysis, a statistically significant treatment effect on
ADHD Rating Scale (ADHD-RS), the primary outcome measure, was observed after a
three-week administration of CX717, 800 mg BID. Differences between this dose of
CX717 and placebo were seen as early as week one of treatment and continued
throughout the remainder of the study. The low dose of CX717, 200 mg BID, did
not differ from placebo. In general, results from both the ADHD-RS hyperactivity
and inattentiveness subscales, which were secondary efficacy variables,
paralleled the results of the total score. CX717 was considered safe and well
tolerated. Based on these clinical results, ampakines such as CX717 or CX1739 might
represent a breakthrough opportunity to develop a non- stimulating therapeutic
for ADHD with the rapidity of onset normally seen with stimulants. Subject to
raising sufficient financing (of which no assurance can be provided), we are
planning to continue this program with a Phase 2 clinical trial in patients with
adult ADHD using one of our two lead ampakine compounds. FXS and ASD
According to the Autism Society, more than 3.5 million Americans live with an
ASD, a complex neurodevelopmental disorder. FXS is the most common identifiable
single-gene cause of autism, affecting approximately 1.4 in every 10,000 males
and 0.9 in every 10,000 females, according to the CDC. Individuals with FXS and
ASD exhibit a range of abnormal behaviors comprising hyperactivity and attention
problems, executive function and cognitive deficits, hyper-reactivity to
stimuli, anxiety and mood instability. Also, according the Autism Society, the
prevalence rate of ASD has risen from 1 in 150 children in 2000 to 1 in 68
children in 2010, with current estimates indicating a significant rise in ASD
diagnosis to 1 in 59 births, placing a significant emotional and economic burden
on families and educational systems. The Autism Society estimates the economic
cost to U.S. citizens of autism services to be between $236 and $262 billion
annually. Since “autistic disturbances” were first identified in children in 1943,
extensive research efforts have attempted to identify the genetic, molecular,
environmental, and clinical causes of ASD, but until recently the underlying
etiology of the disorder remained elusive. Today, there are no medications that
can treat ASD or its core symptoms, and only two anti-psychotic drugs,
aripiprazole and risperidone, are approved by the FDA for the treatment of
irritability associated with ASD. Thanks to wide ranging translational research efforts, FXS and ASD are currently
recognized as disorders of the synapse with alterations in different forms of
synaptic communication and neuronal network connectivity. Focusing on the
proteins and subunits of the AMPA receptor complex, autism researchers at the
University of California San Diego (“UCSD”) have proposed that AMPA receptor
malfunction and disrupted glutamate signal transmission may play an etiologic
role in the behavioral, emotional and neurocognitive phenotypes that remain the
standard for ASD diagnosis. For example, Stargazin, also known as CACNG2 (Ca2+
channel ?2 subunit), is one of four closely related proteins recently
categorized as transmembrane AMPA receptor regulatory proteins (“TARPs”). 49 Researchers at UCSD have been studying genetic mutations in the AMPA receptor
complex that lead to cognitive and functional deficiencies along the autism
spectrum. They work with patients and their families to conduct detailed genetic
analyses in order to better understand the underlying mechanisms of autism. In
one case, they have been working with a teenage patient who has an autism
diagnosis, with a phenotype that is characterized by subtle Tourette-like
behaviors, extreme aggression, and verbal and physical outbursts with disordered
thought. Despite the behaviors, his language is normal. Using next generation
sequencing and genome editing technologies, the researchers identified a
specific mutation in Stargazin that alters the configuration and kinetics of the
AMPA receptor. When the aberrant sequence was introduced into C57bL6 mice using
CRISPR (Clustered Regulatory Interspaced Short Palindromic Repeats), the
heterozygous allele had a dominant negative effect on the trafficking of
post-synaptic AMPA receptors and produced behaviors consistent with a
glutamatergic deficit and similar to what has been observed in the teenage
patient. With funding from the National Institutes of Health to UCSD, RespireRx is
working with UCSD to explore the use of ampakines for the amelioration of the
cognitive and other deficits associated with AMPA receptor gene mutations.
Because CX1739 has an open IND application, subject to securing sufficient
funding (of which no assurance can be provided), we are considering a Phase
2A
clinical trial. SCI Ampakines also may have potential utility in the treatment and management of SCI
to enhance motor functions and improve the quality of life for SCI patients. An
estimated 17,000 new cases of SCI occur each year in the United States, most a
result of automobile accidents. Currently, there are roughly 282,000 people
living with spinal cord injuries, which often produce impaired motor function. SCI can profoundly impair neural plasticity leading to significant morbidity and
mortality in human accident victims. Plasticity is a fundamental property of the
nervous system that enables continuous alteration of neural pathways and
synapses in response to experience or injury. One frequently studied model of
plasticity is long-term facilitation of motor nerve output (“LTF”). A large body
of literature exists regarding the ability of ampakines to stimulate neural
plasticity, possibly due to an enhanced synthesis and secretion of various
growth factors. Recently, studies of acute intermittent hypoxia (“AIH”) in patients with SCI
demonstrate that neural plasticity can be induced to improve motor function.
This LTF is based on physiological mechanisms associated with the ability of
spinal circuitry to learn how to adjust spinal and brainstem synaptic strength
following repeated hypoxic bouts. Because AIH induces spinal plasticity, the
potential exists to harness repetitive AIH as a means of inducing functional
recovery of motor function following SCI. RespireRx has been working with Dr. David Fuller, at the University of Florida
with funding from the NIH, to evaluate the use of ampakines for the treatment of
compromised motor function in SCI. Using mice that have received spinal
hemi-sections, CX717 was observed to increase motor nerve activity bilaterally.
The effect on the hemisected side was greater than that measured on the intact
side, with the recovery approximating that seen on the intact side prior to
administration of ampakine. In addition, CX717 was observed to produce a
dramatic and long-lasting effect on LTF produced by AIH. The doses of ampakines
active in SCI were comparable to those demonstrating antagonism of OIRD,
indicating target engagement of the AMPA receptors. These animal models of motor nerve function following SCI support proof of
concept for a new treatment paradigm using ampakines to improve motor functions
in patients with SCI. With additional funding granted by NIH to Dr. Fuller,
RespireRx is continuing its collaborative preclinical research with him while it
is planning a clinical trial program focused on developing ampakines for the
restoration of certain motor functions in patients with SCI. The Company is
working with our Clinical Advisory Panel and with researchers at highly regarded
clinical sites to finalize a Phase 2 clinical trial protocol. We believe that a
clinical study could be initiated within several months of raising sufficient
financing. Currently, we do not have a source of such financing and we can
provide no assurance that we will be able to secure sufficient funding. 50 Other CNS-driven Disorders
As discussed above, ampakines enhance the excitatory actions of the neurotransmitter glutamate at the AMPA receptor complex, which mediates most excitatory transmission in the CNS. Ampakines do not have agonistic or antagonistic properties but instead positively modulate the receptor rate constants for transmitter binding, channel opening, and desensitization.In 2007, we determined that expansion of our strategic development into the areas of central respiratory dysfunction, including drug-induced respiratory dysfunction, represented cost-effective opportunities for potentially rapid development and commercialization of RespireRx’s ampakine compounds. RespireRx had previously completed studies and clinical trials indicating that
several of its ampakines, including CX717 and CX1739, were effective in treating
opioid induced respiratory depression (“OIRD”) without altering the analgesic
effects of the opioids or the anesthetic effects of the anesthetics. Unfortunately, rather than support novel approaches to opioid treatment, the
recent public and governmental discourses regarding the opioid epidemic have
focused almost entirely on (i) the distribution of naloxone, an opioid
antagonist used for acute emergency situations, (ii) so-called “non-abuseable”
opioid formulations, (iii) means of reducing opioid consumption by limiting
production of opioids and access to legal opioid prescriptions and (iv) the
development of non-opioid analgesics. It remains to be seen whether these
approaches will have an impact on the situation. Nevertheless, as a result, we
believe that there is an ongoing industry-wide pullback from opioids, as
evidenced by a reduction in opioid prescriptions and a major reduction in
manufacturing by two of the largest opioid manufacturers in the United States. These factors have made it difficult to raise capital or find strategic partners
for the development of ampakines for the treatment of OIRD. We have decided not
to pursue this program until the political climate is clarified and we are able
to either raise funding or enter into a strategic relationship for this purpose.
Nevertheless, the valuable data derived from these translational studies have
established antagonism of OIRD as a biomarker for demonstrating proof of
principle and target engagement in support of continued ampakine development for
other indications. 51
GABAkines – GABAA Receptor PAMs In order to expand the asset base of Project EndeavourRx, on August 1, 2020, the
Company exercised an option and entered into the UWMRF Patent License Agreement
granting commercialization rights to certain intellectual property regarding
GABAkine compounds that act as PAMs at GABAA sub-type specific receptors in the
brain (see Notes 1, 2 and 8 in the Notes to condensed consolidated financial
statements as of June 30, 2020). Certain of these compounds have shown
impressive activity in a broad range of animal models of refractory/resistant
epilepsy and other convulsant disorders, as well as in brain tissue samples
obtained from epileptic patients. Epilepsy is a chronic and highly prevalent
neurological disorder that affects millions of people world-wide. While many
anticonvulsant drugs have been approved to decrease seizure probability,
seizures frequently are not well controlled and, in as many as 60-70% of
patients, existing drugs are not efficacious at some point in the disease
progression. We believe that the medical and patient community are in clear
agreement that there is desperate need for improved antiepileptic drugs. In
addition, these compounds have shown positive activity in animal models of
migraine, inflammatory and neuropathic pain, as well as other areas of interest.
Because of their GABA receptor subunit specificity, the compounds have a greatly
reduced liability to produce sedation, motor incoordination, memory impairments
and tolerance, side effects commonly associated with non-specific GABA PAMs,
such as benzodiazepines. The GABAA receptor is a pentameric neurotransmitter gated chloride ion channel
composed of five transmembrane protein subunits. Multiple cDNAs that encode
GABAA receptor subunits have been cloned and, based on sequence homology, eight
subunit families (?, ?, ?, ?, ?, ?, ?, ?) comprising 20 distinct gene products
have been identified. Based on just the ?, ? and ? subunits, immunoprecipitation
studies suggest the presence of perhaps 10 distinct hetero-pentamers, creating a
considerable degree of receptor subtype heterogeneity. 52 Benzodiazepines (BDZ), such as Valium® (diazepam), Librium® (chlordiazepoxide)
and Xanax® (alprazolam) were the first major class of drugs reported to act as
GABAA PAMs, by binding at a site distinct from the binding site for GABA. These
drugs produced a wide range of pharmacological properties, including anxiety
reduction, sedation, hypnosis, anti-convulsant, muscle relaxation, respiratory
depression, cognitive impairment, as well as tolerance, abuse and withdrawal.
For this reason, it was not surprising that benzodiazepines were observed to act
as GABAA PAMs indiscriminately across all GABAA receptor subtypes. Following the
identification of BDZ binding sites on GABAA receptors, Dr. Lippa described
CL218,872, the first non-BDZ to demonstrate that these receptors were
heterogeneous by binding selectively to a subtype of GABAA receptor. This
demonstration of receptor heterogeneity led to the hypothesis that the various
pharmacological actions of the BDZs might be separable depending on the receptor
subtype involved. In animal testing, CL218,872 provided the proof of principle
that such a separation could be achieved by displaying anti-anxiety and
anti-convulsant properties in the absence of sedation and muscular
incoordination. These findings gave impetus to the search for novel therapeutic
drugs for neurological and psychiatric illnesses that display improvements in
efficacy and reductions in side effects. While CL218,872 was not clinically tested in humans, a related derivative
compound, ocinaplon, displayed similar receptor subtype selectivity and also
produced the same pharmacological profile in animal studies as did CL218,872. In
Phase 1 clinical studies, ocinaplon was safe and well-tolerated with no BDZ-like
side effects noted. In two Phase 2 clinical trials in patients suffering from
chronic general anxiety disorder (GAD), ocinaplon produced a rapid, highly
significant reduction in anxiety scores with no evidence of BDZ-like side
effects. Development of ocinaplon was halted due to elevations in liver function
tests observed in a small number of patients during the conduct of a larger
Phase 3 clinical trial. Nevertheless, these results with ocinaplon greatly
reinforced the hypothesis that drugs could be developed that selectively
produced certain therapeutic effects of the BDZs without displaying their
undesirable side effects. Over the last several years, a group of scientists led by Drs. James Cook and
Jeffrey Witkin, now advisors to our Project EndeavourRx, have synthesized and
tested a broad series of novel drugs that display GABAA receptor subtype
selectivity and pharmacological specificity. Dr. Cook is a Distinguished
Professor of Chemistry at University Wisconsin-Milwaukee with more than 40
years’ experience in organic and medicinal chemistry. He is a leading expert in
GABAA receptor drug targeting with more than 480 scientific publications and 50
patents. Dr Witkin, of the Indiana University School of Medicine, spent 17 years
directing the Neuroscience Discovery Laboratory at Lilly Research Labs where he
headed biological efforts to discover multiple antidepressants and novel
glutamate and GABAA receptor neuromodulators and prior to that he headed the
Drug Development Group for the intramural research program of the NIH for 14
years. Certain of these chemical compounds are the subject of the UWMRF Patent License
Agreement entered into on August 1, 2020, by the Company and UWMRF, an affiliate
of the University of Wisconsin-Milwaukee. Of these compounds, we have identified
KRM-II-81as a clinical lead. KRM-II-81 is the most advanced and druggable of a
series of compounds that display certain receptor subtype selective and
pharmacological specificity. In studies using cell cultures, brain tissues and
whole animals, KRM-II-81acts as a GABAAPAM at selective GABAA receptor subtypes
that we feel are intimately involved in neuronal processes underly epilepsy,
pain, anxiety and certain other indications. KRM-II-81 has demonstrated highly
desirable properties in animal models of these and other potential therapeutic
indications, in the absence of or with greatly reduced liability to produce
sedation, motor incoordination, cognitive impairments, respiratory depression,
tolerance, abuse and withdrawal seizures, all side effects associated with
benzodiazepines. We currently are focused on the potential treatment of epilepsy
and pain. Epilepsy Epilepsy is a chronic and highly prevalent neurological disorder that affects
millions of people world-wide and has serious consequences for the life of the
affected individual. A first-line approach to the control of epilepsy is through
the administration of anticonvulsant drugs. Repeated, uncontrolled seizures and
the side effects arising from seizure medications have a negative effect on the
developing brain and can lead to brain cell loss and severe impairment of
neurocognitive function. The continued occurrence of seizure activity also
increases the probability of subsequent epileptic events through sensitization
mechanisms called seizure kindling. Seizures that are unresponsive to
anti-epileptic treatments are life-disrupting and life-threatening with broad
health, life, and economic consequences. 53 Like many diseases, epilepsy is still remarkably underserved by currently
available medicines. Pharmaco-resistance to anticonvulsant therapy continues to
be one of the key obstacles to the treatment of epilepsy. Although many
anticonvulsant drugs are approved to decrease seizure probability, seizures are
not fully controlled and patients are generally maintained daily on multiple
antiepileptic drugs with the hope of enhancing the probability of seizure
control. Despite this polypharmacy approach, as many as 60 to 70% of patients
continue to have seizures. As a result of the lack of seizure control,
pharmaco-resistant epilepsy patients, including young children, sometimes
require and elect to have invasive therapeutic procedures such as surgical
resection. Despite the availability of a host of marketed drugs of different mechanistic
classes, the lack of seizure control in patients is the primary factor driving
the need for improved antiepileptic drugs emphasized by researchers and patient
advocacy communities. Increasing inhibitory tone in the central nervous system
through enhancement of GABAergic inhibition is a proven mechanism for seizure
control. However, GABAergic medications also exhibit liabilities that limit
their antiepileptic potential. Tolerance develops to GABAergic drugs such as
benzodiazepines, limiting their use in a chronic setting. These drugs can
produce cognitive impairment, somnolence, sedation, tolerance and withdrawal
seizures that create dosing limitations such that they are generally used only
for acute convulsive episodes. KRM-II-81 has demonstrated efficacy in multiple rodent models and measures of
antiepileptic drug efficacy in vivo. This includes 9 acute seizure provocation
models in mice and rats, 4 seizure sensitization models in rats and mice, 2
models of chronic epilepsy, and 3 models specifically testing pharmaco-resistant
antiepileptic drug efficacy. Because it appears to have a greatly reduced side
effect liability, it might be possible to use higher, more effective doses that
standard of care medications. Predictions of superior efficacy of KRM-II-81 over
standard of care anti-epileptics comes from the efficacy of this compound across
a broad range of animal models of epilepsy. Importantly, KRM-II-81 has been
shown to be effective in models assessing pharmaco-resistant epilepsy. Under
these conditions, KRM-II-81 is efficacious in cases where standard of care
medicines do not work. In the absence of seizure control by anti-epileptics, surgical resection of
affected brain tissue is one potential alternative to help with the control of
seizures. In the process of this surgery, epileptic brain tissue can become
available for research into epileptic mechanisms and the identification of novel
antiepileptic drugs. The anticonvulsant action of KRM-II-81 was confirmed by
microelectrode recordings from slices obtained from freshly excised cortex from
epileptic patients where KRM-II-81 suppressed epileptiform electrical activity.
While preliminary, these translational data lend considerable support to the
further development of KRM-II-81 for the treatment of epilepsy. Pain It is impossible not to be aware of the crisis that the “opioid epidemic” has
created in the treatment of chronic pain. While there is no question as to their
efficacy, the clinical use of opioids is severely limited due to the rapid
development of tolerance and the production of respiratory depression, the major
cause of opioid-induced lethality. Research programs are underway nationwide to
discover and develop new non-opioid drugs that are effective analgesics without
the tolerance and abuse liability ascribed to the opioids. Chronic pain is
especially difficult to treat due to its complex nature with a variety of
different etiologies. For example, chronic pain may be produced by injury,
surgery, the inflammation produced by arthritis or by certain drugs such as
cancer chemotherapeutics. For these reasons, management and control of chronic
pain continues to be a serious gap in medical practice with multiple alternative
medicines that either lack critical efficacy and/or produce unacceptable
side-effects. Data from both preclinical and clinical studies are consistent with the idea
that GABAergic neurotransmission is an important regulatory mechanism for the
control of pain. Gabapentin (Neurontin) and pregabalin (Lyrica) two commonly
used drugs for the treatment of chronic pain are believed to produce their
analgesic effects by enhancing GABAergic neurotransmission. However, although
they have received FDA approval, the clinical results have not been
overwhelming. In a published review of 37 clinical trials in which gabapentin
was compared to placebo in a total of 5914 patients with neuropathic pain, 30%
of patients with chronic pain caused by shingles reported a pain reduction of
>50% as compared to 30% for patients receiving placebo. In patients with
neuropathic pain caused by diabetes, 40% reported a pain reduction of >50% as
compared to 20% for patients receiving placebo. The most common side effects
produced by gabapentin were sedation, dizziness and problems walking. It is
uncertain whether greater efficacy was not observed because of poor intrinsic
pharmacological efficacy or insufficient dosages due to dose limiting side
effects. 54 An alternate approach to enhancing GABAergic neurotransmission, is the use of
GABAA PAMs. This approach has been under-utilized because of the general lack of
efficacy of the benzodiazepine PAMs. However, a strong case for the potential
value of subtype selective GABAA PAMs for the treatment of pain can be made.
First, GABAA receptor regulated pathways are integral to pain processing with
?2/3 containing GABAA receptor subtypes present on nerve pathways modulating
pain sensation and perception. Second, we believe that the analgesic properties
of benzodiazepines may be masked by concurrent activation of other receptor
subtypes that mediate the side effects. Diazepam has been reported to produce
maximal analgesia if the side effects are attenuated by GABAA subtype genetic
manipulation. Third, predecessor compounds, made by Dr. Cook, that selectively
amplify GABAA receptor subtype signalling are effective in pain models in
rodents at doses lower than those producing motor side effects. In a number of laboratory procedures, KRM-II-81has been shown to selectively
bind to GABAA receptor subtypes and enhance GABAergic neurotransmission. In
rodents, KRM-II-81 facilitated GABAA neurotransmission in the dorsal root
ganglion, a primary sensory relay in the pain pathway. In addition, oral
administration of KRM-II-81 to rats attenuated formalin-induced pain behaviors
and the chronic pain engendered by chronic spinal nerve ligation. KRM-II-81 was
also active against acute pain provocation (e.g., acid-induced pain) and
inflammatory pain. More recently, KRM-II-81 was shown to be effective against
chronic pain induced by a chemotherapeutic agent. Sub-chronic dosing for 22 days
with KRM-II-81 and the structural analogue, MP-III-80, demonstrated enduring
analgesic efficacy without tolerance development. In contrast, tolerance
developed to the analgesic effects of gabapentin. At a dose that produces
maximal analgesic effect in an inflammatory chronic pain model, KRM-II-81 does
not substitute for the benzodiazepine, midazolam, in a drug discrimination
assay, suggesting a reduced abuse liability. Furthermore, KRM-II-81 did not
produce the respiratory depression observed with alprazolam, a major problem
with benzodiazepines leading to emergency room visits and overdose. We believe that the ability to attenuate both acute and chronic pain combined
with a greatly reduced side effect profile, a lack of tolerance and a reduced
abuse potential makes KRM-II-81a promising clinical lead and a potential advance
in pain therapeutics. Results from preliminary chemistry, metabolism and
pharmacokinetic studies support its further development. Technology Rights
University of Illinois License AgreementSee Note 8. Commitments and Contingencies – Significant Agreements and Contracts – University of Illinois 2014 Exclusive License Agreement to our condensed consolidated financial statements at March 31, 2020.UWMRF Patent License AgreementSee Notes 1, 2, 8 and 9 to our condensed consolidated financial statements at June 30, 2020. Going Concern See Note 2. Business – Going Concern to our condensed consolidated financial statements at June 30, 2020.The Company’s regular efforts to raise capital and to evaluate measures to
permit sustainability are time-consuming and intensive. Such efforts may not
prove successful and may cause distraction, disruption or other adversity that
limits the Company’s development program efforts. 55
Recent Accounting PronouncementsSee Note 2 to the Company’s condensed consolidated financial statements at June 30, 2020. Management does not believe that any recently issued, but not yet effective,
authoritative guidance, if currently adopted, would have a material impact on
the Company’s financial statement presentation or disclosures. Concentration of Risk
See Note 2. Significant Accounting Policies – Concentration of Credit Risk to the Company’s condensed consolidated financial statements at June 30, 2020.See Note 8. Commitments and Contingencies – Significant Agreements and Contracts – University of Illinois 2014 Exclusive License Agreement to the Company’s condensed consolidated financial statements at June 30, 2020. See Note 8. Commitments and Contingencies – Significant Agreements and Contracts
– UWM Research Foundation Patent License Agreement to the Company’s condensed
consolidated financial statements at June 30, 2020.
Critical Accounting Policies and Estimates The Company prepared its condensed consolidated financial statements in
accordance with accounting principles generally accepted in the United States of
America. The preparation of these condensed consolidated financial statements
requires the use of estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amount of
revenues and expenses during the reporting period. Management periodically
evaluates the estimates and judgments made. Management bases its estimates and
judgments on historical experience and on various factors that are believed to
be reasonable under the circumstances. Actual results may differ from these
estimates as a result of different assumptions or conditions.
Critical accounting policies and estimates are described in the notes to the Company’s condensed consolidated financial statements and include: – Stock-based awards – Research and Development Costs – License Agreements – Patent Costs – Convertible Notes – Warrant Exercises See Critical Accounting Policies and Estimates in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 for a complete description. Results of Operations The Company’s consolidated statements of operations as discussed herein are
presented below. Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019
Operating expenses:
General and administrative,
including $147,255 and $122,025 to
related parties for the three
months ended June 30, 2020 and
2019, respectively, and $249,614
and $243,225 to related parties
for the six months ended June 30,
2020 and 2019, respectively $ 463,739$ 270,391$ 829,019$ 594,904
Research and development,
including $121,900 and $122,400 to
related parties for the three
months ended June 30, 2020 and
2019, respectively, and $244,800
and $244,800 to related parties
for the six months ended June 30,
2020 and 2019, respectively 153,176 148,000 308,466 297,350
Total operating expenses 616,915 418,391 1,137,485 892,254
Loss from operations (616,915 ) (418,391 ) (1,137,485 ) (892,254 )
Loss on extinguishment of debt and
other liabilities in exchange for
equity – – (323,996 ) –
Interest expense, including $2,817
and $2,561 to related parties for
the three months ended June 30,
2020 and 2019, respectively, and
$5,633 and $5,094 to related
parties for the six months ended
June 30, 2020 and 2019,
respectively (190,606 ) (70,533 ) (331,316 ) (151,645 )
Foreign currency transaction gain
(loss) (8,616 ) 11,711 29,942 26,354 Net loss attributable to common
stockholders $ (816,137 )$ (477,213 ) $
(1,762,855 ) $ (1,017,545 ) Net loss per common share – basic
and diluted $ (0.01 )$ (0.12 ) $
(0.04 ) $ (0.26 )Weighted average common shares outstanding – basic and diluted 86,606,705 3,872,076 49,320,761 3,872,076 56 Three-months Ended June 30, 2020 and 2019Revenues. The Company had no revenues during the three-months ended June 30, 2020 and 2019. General and Administrative. For the three-months ended June 30, 2020, general
and administrative expenses were $463,739, an increase of $193,348, as compared
to $270,391 for the three-months ended June 30, 2019. The increase in general
and administrative expenses for the three-months ended June 30, 2020, as
compared to the three-months ended June 30, 2019, is primarily due to an
increase in general and administrative salaries of $49,525 with the addition of
compensation and benefits for our new Chief Executive Officer and President
effective May 6, 2020, an increase general legal fees of $87,294, primarily
related to legal fees associated with the April 2020 and June 2020 convertible
note financings, the increase in the number of our authorized shares that
required the filing of a Form DEF 14C with the Securities and Exchange
Commission and a filing with the State of Delaware, and other general matters as
well as an increase in patent legal fees of $46,275 and an increase in directors
and officers liability insurance costs of $9,083, offset by the net effect of
increases and decreases in other general and administrative expenses.
There was no stock-based compensation in general and administrative expenses for the three-months ended June 30, 2020 or 2019. Research and Development. For the three-months ended June 30, 2020, research and
development expenses were $153,176, an increase of $5,176, as compared to
$148,000 for the three-months ended June 30, 2019. The increase in research and
development expenses for the three-months ended June 30, 2020, as compared to
the three-months ended June 30, 2019, is primarily a result of an adjustment to
one research contract and an increase in research and development related
insurance.
There was no stock-based compensation in research and development expenses for the three-months ended June 30, 2020 or 2019. Interest Expense. During the three-months ended June 30, 2020, interest expense
was $190,606 as compared to $49,605 for the three-months ended June 30, 2019.
The increase of $141,001 is primarily the result of interest and amortization of
note discounts to interest expense with respect to the convertible notes arising
in August, October and November 2019 that were included in the current year
three-month period but did not exist in the prior year comparable three-month
period.
Foreign Currency Transaction (Loss) Gain. Foreign currency transaction loss was
$8,616 for the three-months ended June 30, 2020, as compared to a foreign
currency transaction gain of $11,711 for the three-months ended June 30, 2019.
The foreign currency transaction (loss) gain relates to the $399,774 loan from
SY Corporation made in June 2012, which is denominated in the South Korean
Won. 57 Net Loss Attributable to Common Stockholders. For the three-months ended June
30, 2020, the Company incurred a net loss of $816,137 as compared to a net loss
of $477,213 for the three-months ended June 30, 2019.
Six-months Ended June 30, 2020 and 2019Revenues. The Company had no revenues during the six-months ended June 30, 2020 and 2019.General and Administrative. For the six-months ended June 30, 2020, general and
administrative expenses were $829,019, an increase of $234,115, as compared to
$594,904 for the six-months ended June 30, 2019. The increase in general and
administrative expenses for the six-months ended June 30, 2020, as compared to
the six-months ended June 30, 2019, is primarily due to an increase in general
and administrative salaries of $49,525 with the addition of compensation and
benefits for our new Chief Executive Officer and President effective May 6,
2020, an increase general legal fees of $154,326, primarily related to legal
fees associated with the April 2020 and June 2020 convertible note financings,
the increase in the number of our authorized shares that required the filing of
a Form DEF 14C with the Securities and Exchange Commission and a filing with the
State of Delaware, and other general matters as well as an increase in patent
legal fees of $13,659 and an increase in directors and officers liability
insurance and other insurance costs of $10,162, offset by the net effect of
increases and decreases in other general and administrative expenses.
There was no stock-based compensation in general and administrative expenses for the six-months ended June 30, 2020 or 2019.Research and Development. For the six-months ended June 30, 2020, research and
development expenses were $308,466, an increase of $11,116, as compared to
$297,350 for the six-months ended June 30, 2019. The increase in research and
development expenses for the six-months ended June 30, 2020, as compared to the
six-months ended June 30, 2019, is primarily a result of an adjustment to one
research contract, an increase in research and development related insurance and
the payment of option fee associated with the option agreement related to the
UWMRF Patent License Agreement.
There was no stock-based compensation in research and development expenses for the six-months ended June 30, 2020 or 2019. Interest Expense. During the six-months ended June 30, 2020, interest expense
was $331,316 as compared to $151,645 for the six-months ended June 30, 2019. The
increase of $179,671 is primarily the result of interest and amortization of
note discounts to interest expense with respect to the convertible notes arising
in August, October and November 2019 that were included in the current year
three-month period but did not exist in the prior year comparable three-month
period.
Foreign Currency Transaction (Loss) Gain. Foreign currency transaction gain was
$29,942 for the six-months ended June 30, 2020, as compared to a foreign
currency transaction gain of $26,354 for the six-months ended June 30, 2019. The
foreign currency transaction (loss) gain relates to the $399,774 loan from SY
Corporation made in June 2012, which is denominated in the South Korean Won. Loss on Extinguishment of Convertible Debt. The loss on extinguishment of
convertible debt during the six-months ended June 30, 2020 was $323,996 as
compared to $0 in the six-months ended June 30, 2019. On March 21, 2020, the
Company entered into exchange agreements with several note holders and exchanged
an aggregate of $255,786 of principal and accrued interest for 17,052,424 shares
of the Company’s stock with an exchange price of $0.015 per share which was less
than the closing price of $0.034 per share. There was no loss on extinguishment
of convertible debt during the six-months ended June 30, 2019. 58
Net Loss Attributable to Common Stockholders. For the six-months ended June 30,
2020, the Company incurred a net loss of $816,137 as compared to a net loss of
$477,213 for the six-months ended June 30, 2019. Included in the net loss is a
loss on extinguishment of convertible debt of $323,996.
Liquidity and Capital Resources – June 30, 2020 The Company’s condensed consolidated financial statements have been presented on
the basis that it is a going concern, which contemplates the realization of
assets and satisfaction of liabilities in the normal course of business. The
Company has incurred net losses of $1,762,854 and net losses from operations of
$1,137,484 for the six-months ended June 30, 2020 and $2,115,033 for the fiscal
year ended December 31, 2019, and negative operating cash flows of $106,448 for
the six-months ended June 30, 2020 and $487,745 for the fiscal year ended
December 31, 2019, had a stockholders’ deficiency of $7,846,748 at June 30,
2020, and expects to continue to incur net losses and negative operating cash
flows for at least the next few years. As a result, management has concluded
that there is substantial doubt about the Company’s ability to continue as a
going concern, and the Company’s independent registered public accounting firm,
in its report on the Company’s consolidated financial statements for the year
ended December 31, 2019, expressed substantial doubt about the Company’s ability
to continue as a going concern. At June 30, 2020, the Company had a working capital deficit of $7,846,748, as
compared to a working capital deficit of $7,444,819 at December 31, 2019
reflecting an increase in the working capital deficit of $401,929 for the
six-months ended June 30, 2020. The increase in the working capital deficit is
due to an increase in current liabilities of $442,284 and a decrease in cash of
$15,198 offset by an increase in prepaid expenses of $55,553.
At June 30, 2020, the Company had cash aggregating $1,492, as compared to $16,690 at December 31, 2019, reflecting a decrease in cash of $15,198 for the six-months ended June 30, 2020. The Company is currently, and has for some time, been in significant financial
distress. It has extremely limited cash resources and current assets and has no
ongoing source of revenue. Management is continuing to address numerous aspects
of the Company’s operations and obligations, including, without limitation, debt
obligations, financing requirements, intellectual property, licensing
agreements, legal and patent matters and regulatory compliance, and has taken
steps to continue to raise new debt and equity capital to fund the Company’s
business activities.
The Company is continuing its efforts to raise additional capital in order to be
able to pay its liabilities and fund its business activities on a going forward
basis and regularly evaluates various measures to satisfy the Company’s
liquidity needs, including development and other agreements with collaborative
partners and seeking to exchange or restructure some of the Company’s
outstanding securities. The Company is evaluating certain changes to its
operations and structure to facilitate raising capital from sources that may be
interested in financing only discrete aspects of the Company’s development
programs. Such changes could include a significant reorganization. Though the
Company actively pursues opportunities to finance its operations through
external sources of debt and equity financing, it has limited access to such
financing and there can be no assurance that such financing will be available on
terms acceptable to the Company, or at all. Operating Activities. For the six-months ended June 30, 2020, operating
activities utilized cash of $106,448, as compared to utilizing cash of $266,278
for the six-months ended June 30, 2019, to support the Company’s ongoing general
and administrative expenses as well as its research and development activities. 59 Financing Activities. For the six-months ended June 30, 2020, financing
activities consisted of a $1,250 advance from an executive officer, net proceeds
of $50,000 after payment of $3,000 of capitalized note costs from the April 2020
Note financing and net proceeds of $40,000 after payment of $3,000 of
capitalized note costs from the June 2020 Note financing. For the six-months
ended June 30, 2019, financing activities consisted of consisted of borrowings
on convertible notes with warrants of $213,500 less debt issuance costs of
$5,500 for net proceeds of $208,000 and the proceeds from a note payable to
an
officer of $25,000. Principal Commitments Employment Agreements See Note 8. Commitments and Contingencies – Significant Agreements and Contracts
– Employment Agreements to our condensed consolidated financial statements
at
March 31, 2020.
University of Illinois 2014 Exclusive License AgreementSee Note 8. Commitments and Contingencies – Significant Agreements and Contracts – University of Illinois 2014 Exclusive License Agreement to our condensed consolidated financial statements at March 31, 2019.UWM Research Foundation Patent License AgreementSee Note 8. Commitments and Contingencies – Significant Agreements and Contracts, UWMRF Patent License Agreement to our condensed consolidated financial statement at March 31, 2020. A table setting forth the Company’s principal cash obligations and commitments
for the next five fiscal years as of June 30, 2020, aggregating $2,289,770, is
set forth in Note 8. Commitments and Contingencies – Summary of Principal Cash
Obligations and Commitments
Off-Balance Sheet ArrangementsAt June 30, 2020, the Company did not have any transactions, obligations or relationships that could be considered off-balance sheet arrangements.© Edgar Online, source Glimpses Source: https://www.marketscreener.com/news/RESPIRERX-PHARMACEUTICALS-INC-MANAGEMENT-S-DISCUSSION-AND-ANALYSIS-OF-FINANCIAL-CONDITION-AND-RESU–31145460/

Latest posts