EXHIBIT
99.1
2021 First
Quarter
Management
Discussion and Analysis
MANAGEMENT
DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED FEBRUARY 28, 2021
The
following Management Discussion and Analysis
(“MD&A”) should be read in conjunction with the
February 28, 2021 condensed unaudited interim consolidated
financial statements of Intellipharmaceutics International Inc. The
condensed unaudited interim consolidated financial statements have
been prepared in accordance with accounting principles generally
accepted in the United States of America (“U.S. GAAP”),
as outlined in the Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification
(“ASC”). Our accounting policies have the potential to
have a significant impact on our condensed unaudited interim
consolidated financial statements, either due to the significance
of the financial statement item to which they relate or because
they require judgment and/or estimation due to the uncertainty
involved in measuring, at a specific point in time, events which
are continuous in nature. The information contained in this
document is current in all material respects as of April 14, 2021
unless otherwise noted.
Unless
the context otherwise requires, the terms “we”,
“us”, “our”,
“Intellipharmaceutics”, and the “Company”
refer to Intellipharmaceutics International Inc. and its
subsidiaries. Any reference in this document to our
“products” includes a reference to our product
candidates and future products we may develop. Whenever we refer to
any of our current product candidates (including additional product
strengths of products we are currently marketing) and future
products we may develop, no assurances can be given that we, or any
of our strategic partners, will successfully commercialize or
complete the development of any of such product candidates or
future products under development or proposed for development, that
regulatory approvals will be granted for any such product candidate
or future product, or that any approved product will be produced in
commercial quantities or sold profitably, or at all.
Unless
stated otherwise, all references to “$” or “U.S.
Dollars” are to the lawful currency of the United States and
all references to “C$” are to the lawful currency of
Canada. We refer in this document to information regarding
potential markets for our products, product candidates and other
industry data. We believe that all such information has been
obtained from reliable sources that are customarily relied upon by
companies in our industry. However, we have not independently
verified any such information.
Intellipharmaceutics™, Hypermatrix™, Drug Delivery
Engine™, IntelliFoam™, IntelliGITransporter™,
IntelliMatrix™, IntelliOsmotics™, IntelliPaste™,
IntelliPellets™, IntelliShuttle™, nPODDDS™,
PODRAS™, Regabatin™ XR and Aximris
XRTM
are our trademarks. These trademarks
are important to our business. Although we may have omitted the
“TM” trademark designation for such trademarks in this
document, all rights to such trademarks are nevertheless reserved.
Unless otherwise noted, other trademarks used in this document are
the property of their respective holders.
We
initially named our oxycodone hydrochloride extended-release
tablets (“Oxycodone ER”) “Rexista™”,
but later changed the name of our product candidate to
“Aximris XR™” as the United States Food and Drug
Administration (“FDA”) did not approve the proposed
name “Rexista”. References in this document to
Oxycodone ER, Rexista™ or Aximris XR™ are intended to
refer to our oxycodone hydrochloride extended release tablets
product candidate.
Unless
the context otherwise requires, references in this document to
share amounts, per share data, share prices, exercise prices and
conversion rates have been adjusted to reflect the effect of the
1-for-10 reverse split of our common shares (the “reverse
split”) which became effective on each of The NASDAQ Capital
Market (“Nasdaq”) and the Toronto Stock Exchange
(“TSX”) at the open of market on September 14, 2018. As
described below, the common shares of the Company are currently
traded on the OTCQB Venture Market (“OTCQB”) and the
TSX.
FORWARD-LOOKING STATEMENTS
Certain
statements in this document constitute “forward-looking
statements” within the meaning of the United States Private
Securities Litigation Reform Act of 1995 and/or
“forward-looking information” under the Securities Act
(Ontario). These statements include, without limitation, statements
expressed or implied regarding our expectations, plans, goals and
milestones, status of developments or expenditures relating to our
business, plans to fund our current activities, and statements
concerning our partnering activities, health regulatory
submissions, strategy, future operations, future financial
position, future sales, revenues and profitability, projected costs
and market penetration and risks or uncertainties arising
from the
delisting of our shares from Nasdaq and our ability to comply with
OTCQB and TSX requirements. In some cases, you can identify
forward-looking statements by terminology such as
“appear”, “unlikely”, “target”,
“may”, “will”, “should”,
“expects”, “plans”, “plans to”,
“anticipates”, “believes”,
“estimates”, “predicts”,
“confident”, “prospects”,
“potential”, “continue”,
“intends”, "look forward", “could”,
“would”, “projected”, “set to”,
“goals”, “seeking” or the negative of such
terms or other comparable terminology. We made a number of
assumptions in the preparation of our forward-looking statements.
You should not place undue reliance on our forward-looking
statements, which are subject to a multitude of known and unknown
risks and uncertainties that could cause actual results, future
circumstances or events to differ materially from those stated in
or implied by the forward-looking statements.
1
Risks,
uncertainties and other factors that could affect our actual
results include, but are not limited to, the
effects of general economic conditions, securing and maintaining
corporate alliances, our estimates regarding our capital
requirements and the effect of capital market conditions and other
factors, including the current status of our product development
programs, capital availability, the estimated proceeds (and the
expected use of any proceeds) we may receive from any offering of
our securities, the potential dilutive effects of any financing,
potential liability from and costs of defending pending or future
litigation, risks associated with the novel coronavirus (COVID-19)
including its impact on our business and operations, our programs
regarding research, development and commercialization of our
product candidates, the timing of such programs, the timing, costs
and uncertainties regarding obtaining regulatory approvals to
market our product candidates and the difficulty in predicting the
timing and results of any product launches, the timing and amount
of profit-share payments from our commercial partners, and the
timing and amount of any available investment tax credits. Other
factors that could cause actual results to differ materially
include but are not limited to:
●
the actual or
perceived benefits to users of our drug delivery technologies,
products and product candidates as compared to others;
●
our ability to
establish and maintain valid and enforceable intellectual property
rights in our drug delivery technologies, products and product
candidates;
●
the scope of
protection provided by intellectual property rights for our drug
delivery technologies, products and product
candidates;
●
recent and future
legal developments in the United States and elsewhere that could
make it more difficult and costly for us to obtain regulatory
approvals for our product candidates and negatively affect the
prices we may charge;
●
increased public
awareness and government scrutiny of the problems associated with
the potential for abuse of opioid based medications;
●
pursuing growth
through international operations could strain our
resources;
●
our limited
manufacturing, sales, marketing and distribution capability and our
reliance on third parties for such;
●
the actual size of
the potential markets for any of our products and product
candidates compared to our market estimates;
●
our selection and
licensing of products and product candidates;
●
our ability to
attract distributors and/or commercial partners with the ability to
fund patent litigation and with acceptable product development,
regulatory and commercialization expertise and the benefits to be
derived from such collaborative efforts;
●
sources of revenues
and anticipated revenues, including contributions from distributors
and commercial partners, product sales, license agreements and
other collaborative efforts for the development and
commercialization of product candidates;
●
our ability to
create an effective direct sales and marketing infrastructure for
products we elect to market and sell directly;
●
the rate and degree
of market acceptance of our products;
●
delays in product
approvals that may be caused by changing regulatory
requirements;
●
the difficulty in
predicting the timing of regulatory approval and launch of
competitive products;
●
the difficulty in
predicting the impact of competitive products on sales volume,
pricing, rebates and other allowances;
●
the number of
competitive product entries, and the nature and extent of any
aggressive pricing and rebate activities that may
follow;
●
the inability to
forecast wholesaler demand and/or wholesaler buying
patterns;
2
●
seasonal
fluctuations in the number of prescriptions written for our generic
Focalin XR® capsules which may produce substantial
fluctuations in revenue;
●
the timing and
amount of insurance reimbursement regarding our
products;
●
changes in laws and
regulations affecting the conditions required by the FDA for
approval, testing and labeling of drugs including abuse or overdose
deterrent properties, and changes affecting how opioids are
regulated and prescribed by physicians;
●
changes in laws and
regulations, including Medicare and Medicaid, affecting among other
things, pricing and reimbursement of pharmaceutical
products;
●
the effect of
recent changes in U.S. federal income tax laws, including but not
limited to, limitations on the deductibility of business interest,
limitations on the use of net operating losses and application of
the base erosion minimum tax, on our U.S. corporate income tax
burden;
●
the success and
pricing of other competing therapies that may become
available;
●
our ability to
retain and hire qualified employees;
●
the availability
and pricing of third-party sourced products and
materials;
●
challenges related
to the development, commercialization, technology transfer,
scale-up, and/or process validation of manufacturing processes for
our products or product candidates;
●
the manufacturing
capacity of third-party manufacturers that we may use for our
products;
●
potential product
liability risks;
●
the recoverability
of the cost of any pre-launch inventory should a planned product
launch encounter a denial or delay of
approval by regulatory bodies, a delay in commercialization, or
other potential issues;
●
the successful
compliance with FDA, Health Canada and other governmental
regulations applicable to us and our third-party
manufacturers’ facilities, products and/or
businesses;
●
our reliance on
commercial partners, and any future commercial partners, to market
and commercialize our products and, if approved, our product
candidates;
●
difficulties,
delays, or changes in the FDA approval process or test criteria for
Abbreviated New Drug Applications (“ANDAs”) and New
Drug Applications (“NDAs”);
●
challenges in
securing final FDA approval for our product candidates, including
our Oxycodone ER product candidate in particular, if a patent
infringement suit is filed against us with respect to any
particular product candidates (such as in the case of Oxycodone
ER), which could delay the FDA’s final approval of such
product candidates;
●
healthcare reform
measures that could hinder or prevent the commercial success of our
products and product candidates;
●
the risk that the
FDA may not approve requested product labeling for our product
candidate(s) having abuse-deterrent properties and targeting common
forms of abuse (oral, intra-nasal and intravenous);
●
risks associated
with cyber-security and the potential vulnerability of our digital
information or the digital information of a current and/or future
drug development or commercialization partner of ours; and
●
risks arising from
the ability and willingness of our third-party commercialization
partners to provide documentation that may be required to support
information on revenues earned by us from those commercialization
partners.
Additional
risks and uncertainties relating to us and our business can be
found in our reports, public disclosure documents and other filings
with the securities commissions and other regulatory bodies in
Canada and the U.S. which are available on www.sedar.com and www.sec.gov. The forward-looking
statements reflect our current views with respect to future events
and are based on what we believe are reasonable assumptions as of
the date of this document. We disclaim any intention and have no
obligation or responsibility, except as required by law, to update
or revise any forward-looking statements, whether as a result of
new information, future events or otherwise.
3
This
discussion should not be construed to imply that the results
discussed herein will necessarily continue into the future, or that
any conclusion reached herein will necessarily be indicative of our
actual operating results.
●
On July 2, 2020 the
Company had announced that the parties in the cases, numbers
17-cv-392-RGA, 18-cv-404-RGA and 20-cv-515-RGA (the
“Litigations”) between Purdue Pharma L.P. et al
(“Purdue”) and Intellipharmaceutics entered into a
stipulated dismissal of the Litigations. The stipulated dismissal,
which was subject to approval by the bankruptcy court presiding
over Purdue Pharma’s pending chapter 11 cases, provides for
the termination of patent infringement proceedings commenced by
Purdue against the Company in the United States District Court for
the District of Delaware in respect of the Company’s NDA
filing for Aximris XRTM with the FDA. The
stipulated dismissal also provides that (i) for a thirty (30)
day period following a final approval of the Company’s
Aximris XRTM NDA the parties
will attempt to resolve any potential asserted patent infringement
claims relating to the NDA and (ii) if the parties fail to resolve
all such claims during such period Purdue Pharma will have fifteen
(15) days to pursue an infringement action against the Company. The
terms of the stipulated dismissal agreement are confidential.
On July
28, 2020 the United States District Court for the District of
Delaware signed the stipulations of dismissal into order thereby
dismissing the claims in the three cases without prejudice. In
consideration of the confidential stipulated dismissal agreement
and for future saved litigation expenses, Purdue has paid an amount
to the Company.
●
On January 15,
2020, at a joint meeting of the Anesthetic and Analgesic Drug
Products Advisory Committee and Drug Safety and Risk Management
Advisory Committee (“Advisory Committees”) of the FDA
to discuss our NDA for Aximris XR™, abuse-deterrent oxycodone
hydrochloride extended-release tablets, the Advisory Committees
voted 24 to 2 against the approval of our NDA for Aximris XR™
for the management of pain severe enough to require daily,
around-the-clock, long-term opioid treatment and for which
alternative treatment options are inadequate. We expect the FDA to
take action on our application, on completion of their review of
the NDA.
There can be no assurance that we will not be required to conduct
further studies for our Aximris XRTM
product candidate, that the FDA will
approve any of our requested abuse-deterrence label claims, that
the FDA will meet its deadline for review, or that the FDA will
ultimately approve the NDA for the sale of the product candidate in
the U.S. market, or that the product will ever be successfully
commercialized and produce significant revenue for us.
If the Aximris XRTM
NDA is approved, there can be no
assurance that the Company and Purdue will resolve any potential
asserted patent infringement claims relating to the NDA within a
thirty (30) day period following the final approval as provided in
the stipulated dismissal agreement of the Purdue litigations. There
can be no assurance that the Purdue parties will not pursue an
infringement claim against the Company again.
BUSINESS OVERVIEW
On
October 22, 2009, Intellipharmaceutics Ltd. and Vasogen Inc.
completed a court-approved plan of arrangement and merger (the
“IPC Arrangement Transaction”) resulting in the
formation of the Company, which is incorporated under the laws of
Canada and the common shares of which are currently traded on the
TSX and OTCQB.
We are
a pharmaceutical company specializing in the research, development
and manufacture of novel and generic controlled-release and
targeted-release oral solid dosage drugs. Our patented
Hypermatrix™ technology is a multidimensional
controlled-release drug delivery platform that can be applied to
the efficient development of a wide range of existing and new
pharmaceuticals. Based on this technology platform, we have
developed several drug delivery systems and a pipeline of products
(some of which have received FDA approval) and product candidates
in various stages of development, including ANDAs filed with the
FDA (and Abbreviated New Drug Submission (“ANDS”) filed
with Health Canada) and one NDA filing, in therapeutic areas that
include neurology, cardiovascular, gastrointestinal tract
(“GIT”), diabetes and pain.
In
November 2005, we entered into a license and commercialization
agreement with Par Pharmaceutical Inc. (“Par”) (as
amended on August 12, 2011 and September 24, 2013, the “Par
agreement”), pursuant to which we granted Par an exclusive,
royalty-free license to make and distribute in the U.S. all
strengths of our generic Focalin XR® (dexmethylphenidate
hydrochloride extended-release) capsules for a period of 10 years
from the date of commercial launch (which was November 19, 2013).
Under the Par agreement, we made a filing with the FDA for approval
to market generic Focalin XR® capsules in various strengths in
the U.S. (the “Company ANDA”), and are the owner of
that Company ANDA, as approved in part by the FDA. We retain the
right to make and distribute all strengths of the generic product
outside of the U.S. Calendar quarterly profit-sharing payments for
its U.S. sales under the Company ANDA are payable by Par to us as
calculated pursuant to the Par agreement. Within the purview of the
Par agreement, Par also applied for and owns an ANDA pertaining to
all marketed strengths of generic Focalin XR® (the “Par
ANDA”), and is now approved by the FDA, to market generic
Focalin XR® capsules in all marketed strengths in the U.S. As
with the Company ANDA, calendar quarterly profit-sharing payments
are payable by Par to us for its U.S. sales of generic Focalin
XR® under the Par ANDA as calculated pursuant to the Par
agreement.
We
received final approval from the FDA in November 2013 under the
Company ANDA to launch the 15 and 30 mg strengths of our generic
Focalin XR® capsules. Commercial sales of these strengths were
launched immediately by our commercialization partner in the U.S.,
Par.
4
In
January 2017, Par launched the 25 and 35 mg strengths of its
generic Focalin XR® capsules in the U.S., and in May 2017, Par
launched the 10 and 20 mg strengths, complementing the 15 and 30 mg
strengths of our generic Focalin XR® marketed by Par. The FDA
granted final approval under the Par ANDA for its generic Focalin
XR® capsules in the 5, 10, 15, 20, 25, 30, 35 and 40 mg
strengths, and subsequently Par launched the remaining 5 and 40 mg
strengths. Under the Par agreement, we receive quarterly profit
share payments on Par’s U.S. sales of generic Focalin
XR®. Revenues from sales of the generic Focalin XR®
capsules continue to be impacted by ongoing competitive pressures
in the generic market. There can be no assurance whether revenues
from this product will improve going forward. We depend
significantly on the actions of our marketing partner Par in the
prosecution, regulatory approval and commercialization of our
generic Focalin XR® capsules and on its timely payment to us
of the contracted calendar quarterly payments as they come
due.
In
October 2016, we announced we had entered into a license and
commercial supply agreement (the
“Mallinckrodt agreement”) with Mallinckrodt LLC
(“Mallinckrodt”), granting Mallinckrodt an
exclusive license to market, sell and distribute in the U.S. three
extended release drug products, including Quetiapine fumarate
extended-release tablets (generic of Seroquel
XR®).
We
agreed to manufacture and supply these licensed products
exclusively for Mallinckrodt on a cost-plus basis. The Mallinckrodt
agreement contained customary terms and conditions for an agreement
of this kind and was subject to early termination in the event we
did not obtain FDA approvals of the Mallinckrodt licensed products
by specified dates, or pursuant to any one of several termination
rights of each party.
In May
2017, we received final approval from the FDA for our ANDA for
quetiapine fumarate extended-release tablets in the 50, 150, 200,
300 and 400 mg strengths. Our approved product is a generic
equivalent for the corresponding strengths of the branded product
Seroquel XR® sold in the U.S. by AstraZeneca Pharmaceuticals
LP (“AstraZeneca”). Pursuant to a settlement agreement
between us and AstraZeneca dated July 30, 2012, we were permitted
to launch our generic versions of the 50, 150, 200, 300 and 400 mg
strengths of generic Seroquel XR®, on November 1, 2016,
subject to FDA final approval of our ANDA for those strengths. The
Company manufactured and shipped commercial quantities of all
strengths of generic Seroquel XR® to Mallinckrodt, our then
marketing and distribution partner, and Mallinckrodt launched all
strengths in June 2017; however, the arrangement did not generate
significant revenue. On April 12, 2019, we and Mallinckrodt
mutually agreed to terminate the Mallinckrodt agreement. Effective
August 12, 2019, the Mallinckrodt agreement was
terminated.
On
August 15, 2019, we announced a license and commercial supply
agreement with Tris Pharma, Inc. (“Tris Pharma”),
granting Tris Pharma the exclusive license to market, sell and
distribute in the United States Quetiapine fumarate extended
release tablets in the 50, 150, 200, 300 and 400 mg strengths.
Several other generic versions of these licensed products are
available in the market.
In May
2019, we received approval from the FDA for our ANDA for
desvenlafaxine extended-release tablets in the 50 and 100 mg
strengths. This product is a generic equivalent of the branded
product Pristiq® sold in the U.S. by Wyeth Pharmaceuticals,
LLC. On September 5, 2019, we announced an agreement with Tris
Pharma, granting Tris Pharma an exclusive license to market, sell
and distribute in the United States, Desvenlafaxine
extended-release tablets in the 50 and 100 mg
strengths.
In
November 2018, we received final approval from the FDA for our ANDA
for venlafaxine hydrochloride extended-release capsules in the
37.5, 75 and 150 mg strengths. The approved product is a generic
equivalent of the branded product Effexor XR® sold in the U.S.
by Wyeth Pharmaceuticals, LLC. On November 25, 2019, we announced
that we had entered into a license and commercial supply agreement
with Tris Pharma, by which we granted Tris Pharma an exclusive
license to market, sell and distribute in the United States,
Venlafaxine ER in the 37.5, 75, and 150 mg strengths.
All
three licensing agreements with Tris Pharma have an initial term of
five years and include two-year renewal periods until terminated,
and all provide for a share of net profits to us. The rights
granted include a license to intellectual property necessary to
distribute the licensed products in the US market. We will maintain
all ownership of the licensed products and responsibility to
manufacture the licensed products and supply exclusively to Tris
Pharma on a cost-plus basis. The Tris Pharma agreements contain
customary terms and conditions for agreements of this kind. There
can be no assurance that any of the products licensed to Tris
Pharma will be successfully commercialized and produce significant
revenue for us.
In
February 2017, we received final approval from the FDA for our ANDA
for metformin hydrochloride extended release tablets in the 500 and
750 mg strengths, a generic equivalent for the corresponding
strengths of the branded product Glucophage® XR sold in the
U.S. by Bristol-Myers Squibb. The Company is aware that several
other generic versions of this product are currently available that
serve to limit the overall market opportunity for this product. We
continue to evaluate possible options to realize commercial returns
on this product. In November 2018, we announced that we entered
into two exclusive licensing and distribution agreements with
pharmaceutical distributors in Vietnam and the Philippines pursuant
to which the distributors were granted the exclusive right, subject
to regulatory approval, to import and market our generic
Glucophage® XR in Vietnam and the Philippines, respectively.
There can be no assurance as to when and if the product will
receive regulatory approval for the sale in Vietnam or the
Philippines. Moreover, there can be no assurance that our metformin
hydrochloride extended release tablets in the 500 and 750 mg
strengths will be successfully commercialized and produce
significant revenues for us.
In
February 2016, we received final approval from the FDA of our ANDA
for generic Keppra XR® (levetiracetam extended-release)
tablets for the 500 and 750 mg strengths. Our generic Keppra
XR® is a generic equivalent for the corresponding strengths of
the branded product Keppra XR® sold in the U.S. by UCB, Inc.,
and is indicated for use in the treatment of partial onset seizures
associated with epilepsy. We are aware that several other generic
versions of this product are currently available that serve to
limit the overall market opportunity. We have been exploring
licensing and other options for this product. In November 2018, we
announced that we entered into two exclusive licensing and
distribution agreements with pharmaceutical distributors in Vietnam
and the Philippines pursuant to which the distributors were granted
the exclusive right, subject to regulatory approval, to import and
market our generic Keppra XR® in Vietnam and the Philippines,
respectively. There can be no assurance as to when and if such
product will receive regulatory approval for the sale in Vietnam or
the Philippines. Moreover, there can be no assurance that our
generic Keppra XR® for the 500 and 750 mg strengths will be
successfully commercialized and produce significant revenues for
us.
5
On
September 30, 2019, pursuant to an ANDA sale agreement (the
“Levetiracetam ANDA Agreement”), we sold all of the
assets relating to our ANDA for Levetiracetam extended-release
500mg and 750 mg tablets (collectively, the “Transferred
Levetiracetam ANDA”) to ANDA Repository, LLC (the
“Levetiracetam ANDA Purchaser”) in exchange for a
purchase price of $1. Additionally, pursuant to the Levetiracetam
ANDA Agreement, we agreed to pay the Levetiracetam ANDA Purchaser
an annual fee for each fiscal year equal to 50% of the difference
between the FDA Program Fee for 6 to 19 approved ANDAs and the FDA
Program Fee for 1 to 5 approved ANDAs. Under the Levetiracetam ANDA
Agreement, we have the option to repurchase the Transferred
Levetiracetam ANDA for a purchase price of $1 at any time, provided
that any outstanding fees are paid to ANDA Repository.
Our
goal is to leverage our proprietary technologies and know-how in
order to build a diversified portfolio of revenue generating
commercial products. We intend to do this by advancing our products
from the formulation stage through product development, regulatory
approval and manufacturing. We believe that full integration of
development and manufacturing will help maximize the value of our
drug delivery technologies, products and product candidates. We
also believe that out-licensing sales and marketing to established
organizations, when it makes economic sense, will improve our
return from our products while allowing us to focus on our core
competencies. We expect our expenditures for the purchase of
production, laboratory and computer equipment and the expansion of
manufacturing and warehousing capability to be higher as we prepare
for the commercialization of ANDAs, one NDA and one ANDS that are
pending FDA and Health Canada approval respectively, if and when
these events occur. We have recently reduced the levels of
development activities due to the financial condition of the
Company and the effects of COVID-19 as described
below.
There
can be no assurance that any of our product candidates will receive
regulatory approval from FDA, Health Canada or the regulatory
authorities of any other country in which our products are proposed
to be sold, or that any of our products will ever be successfully
commercialized and produce significant revenues for
us.
The
ongoing COVID-19 outbreak and pandemic present complex challenges
and uncertainties to organizations across the world. Businesses
face unprecedented times and with the situation being dynamic, the
ultimate duration and magnitude of COVID-19’s impact on the
economy and our business are not known at this time. Travel bans,
self-quarantines and social distancing have caused material
disruptions to businesses globally, resulting in economic slowdown,
with global equity markets experiencing volatility and weakness. We
have adjusted our R&D and business development/marketing
activities according to the pandemic effects as we continue to work
to try to ensure operations continue while we remain committed to
keeping our employees safe. We have also made arrangements for our
employees to work under a government workshare program for eligible
current employees whereby the Company is paying personnel only for
a certain number of days a week and the government of Canada
provides income support in the form of employment insurance. From
late 2019 the Company has had to reduce development activities and
staffing levels significantly due to ongoing financial problems
which have continued, coupled with the effect of the COVID-19
pandemic. It is not possible to reliably estimate the length and
severity of the developments and impact on the future financial
results and condition of the Company. The challenges and
uncertainties could impair the Company’s ability to raise
capital, postpone research activities, impact our ability to
maintain operations and launch new products; it could also impair
the value of our shares, our long-lived assets, and materially
adversely impact our ability to generate potential future
revenue.
STRATEGY
Our
Hypermatrix™ technologies are central to the development and
manufacture of novel and generic controlled-release and
targeted-release oral solid dosage drugs. The Hypermatrix™
technologies are a multidimensional controlled-release drug
delivery platform that we believe can be applied to the efficient
development of a wide range of existing and new pharmaceuticals. We
believe that the flexibility of these technologies allows us to
develop complex drug delivery solutions within an
industry-competitive timeframe. Based on this technology platform,
we have developed several drug delivery systems and a pipeline of
products (some of which have received FDA approval) and product
candidates in various stages of development, including ANDAs filed
with the FDA (and one ANDS filed with Health Canada) and one NDA
filing, in therapeutic areas that include neurology,
cardiovascular, GIT, diabetes and pain. We expect that certain, but
not all, of the products in our pipeline may be developed from time
to time for third parties pursuant to drug development agreements
with those third parties, under which our commercialization partner
may pay certain of the expenses of development, make certain
milestone payments to us and receive a share of revenues or profits
if the drug is developed successfully to completion, the control of
which would generally be in the discretion of our drug development
partner.
The
principal focus of our development activities previously targeted
difficult-to-develop controlled-release generic drugs which follow
an ANDA regulatory pathway. Later, our development program became
increasingly directed towards improved difficult-to-develop
controlled-release drugs which follow an NDA 505(b)(2) regulatory
pathway. We increased emphasis towards specialty new product
development, facilitated by the 505(b)(2) regulatory pathway, by
advancing the product development program for Oxycodone ER and
RegabatinTM XR, and commencing
other projects in our 505(b)(2) pipeline. We work on these and
other product candidates as resources permit. In January 2019, we
announced that we had commenced an R&D program of
pharmaceutical cannabidiol (“CBD”)-based products. As
part of the CBD-based R&D program, we filed provisional patent
applications with the United States Patent and Trademark Office
pertaining to the delivery and application of cannabinoid-based
therapeutics. There can be no assurance that any of our provisional
patent applications will successfully mature into patents. The
Company holds a Health Canada Cannabis Drug License
(“CDL”). Under the CDL, we are authorized to possess,
produce, sell and deliver drug products containing CBD in Canada.
We had also previously identified several additional 505(b)(2)
product candidates for development in various areas including
cardiovascular, dermatology, pulmonary disease and oncology. We are
still exploring the potential development of such product
candidates when resources are available. The technology that is central to our
abuse deterrent formulation of our Oxycodone ER is the
nPODDDS™, or novel Point of Divergence Drug Delivery System.
nPODDDS™ is designed to provide for certain unique drug
delivery features in a product. These include the release of the
active substance to show a divergence in a dissolution and/or
bioavailability profile. The divergence represents a point or a
segment in a release timeline where the release rate, represented
by the slope of the curve, changes from an initial rate or set of
rates to another rate or set of rates, the former representing the
usually higher rate of release shortly after ingesting a dose of
the drug, and the latter representing the rate of release over a
later and longer period of time, being more in the nature of a
controlled-release or sustained action. It is applicable for the
delivery of opioid analgesics in which it is desired to discourage
common methods of tampering associated with misuse and abuse of a
drug, and also dose dumping in the presence of alcohol. It can
potentially retard tampering without interfering with the
bioavailability of the product.
6
In
addition, our PODRAS™, or Paradoxical OverDose Resistance
Activating System, delivery technology was initially introduced to
enhance our Oxycodone ER (abuse deterrent oxycodone hydrochloride
extended release tablets) product candidate. The PODRAS™
delivery technology platform was designed to prevent an overdose
when more pills than prescribed are swallowed intact. Preclinical
studies of prototypes of oxycodone with PODRAS™ technology
suggest that, unlike other third-party abuse-deterrent oxycodone
products in the marketplace, if more tablets than prescribed are
deliberately or inadvertently swallowed, the amount of drug active
ingredient (“drug active”) released over 24 hours may
be substantially less than expected. However, if the prescribed
number of pills is swallowed, the drug release should be as
expected. Certain aspects of our PODRAS™ technology are
covered by U.S. Patent Nos. 9,522,119, 9,700,515, 9,700,516 and
9,801,939 and Canadian Patent No. 2,910,865 issued by the U.S.
Patent and Trademark Office and the Canadian Intellectual Property
Office in respect of “Compositions and Methods for Reducing
Overdose” in December 2016, July 2017 and October 2017,
respectively. The issuance of these patents provides us with the
opportunity to accelerate our PODRAS™ development plan by
pursuing proof of concept studies in humans. We intend to
incorporate this technology in future product candidates, including
Oxycodone ER and other similar pain products, as well as pursuing
out-licensing opportunities. The development of an Oxycodone
immediate-release (IR) product incorporating this technology as
resources permit is in the Company’s development
pipeline.
The NDA
505(b)(2) pathway (which relies in part upon the FDA’s
findings for a previously approved drug) both accelerates
development timelines and reduces costs in comparison to NDAs for
new chemical entities. An advantage of our strategy for development
of NDA 505(b)(2) drugs is that our product candidates can, if
approved for sale by the FDA, potentially enjoy an exclusivity
period which may provide for greater commercial opportunity
relative to the generic ANDA route.
The
market we operate in is created by the expiration of drug product
patents, challengeable patents and drug product exclusivity
periods. There are three ways that we employ our controlled-release
technologies, which we believe represent substantial opportunities
for us to commercialize on our own or develop products or
out-license our technologies and products:
For
branded immediate-release (multiple-times-per-day) drugs, we can
formulate improved replacement products, typically by developing
new, potentially patentable, controlled-release once-a-day drugs.
Among other out-licensing opportunities, these drugs can be
licensed to and sold by the pharmaceutical company that made the
original immediate-release product. These can potentially protect
against revenue erosion in the brand by providing a clinically
attractive patented product that competes favorably with the
generic immediate-release competition that arises on expiry of the
original patent(s). The regulatory pathway for this approach
requires NDAs via a 505(b)(2) application for the U.S. or
corresponding pathways for other jurisdictions where
applicable.
Some of
our technologies are also focused on the development of
abuse-deterrent and overdose preventive pain medications. The
growing abuse and diversion of prescription
“painkillers”, specifically opioid analgesics, is well
documented and is a major health and social concern. We believe
that our technologies and know-how are aptly suited to developing
abuse-deterrent pain medications. The regulatory pathway for this
approach requires NDAs via a 505(b)(2) application for the U.S. or
corresponding pathways for other jurisdictions where
applicable.
For
existing controlled-release (once-a-day) products whose active
pharmaceutical ingredients (APIs) are covered by drug molecule
patents about to expire or already expired, or whose formulations
are covered by patents about to expire, already expired or which we
believe we do not infringe, we can seek to formulate generic
products which are bioequivalent to the branded products. Our
scientists have demonstrated a successful track record with such
products, having previously developed several drug products which
have been commercialized in the U.S. by their former
employer/clients. The regulatory pathway for this approach requires
ANDAs for the U.S. and ANDSs for Canada.
We
intend to collaborate in the development and/or marketing of one or
more products with partners, when we believe that such
collaboration may enhance the outcome of the project. We also plan
to seek additional collaborations as a means of developing
additional products. We believe that our business strategy enables
us to reduce our risk by (a) having a diverse product portfolio
that includes both branded and generic products in various
therapeutic categories, and (b) building collaborations and
establishing licensing agreements with companies with greater
resources thereby allowing us to share costs of development and to
improve cash-flow. There can be no assurance that we will be able
to enter into additional collaborations or, if we do, that such
arrangements will be commercially viable or
beneficial.
OUR DRUG DELIVERY TECHNOLOGIES
HypermatrixTM
Our
scientists have developed drug delivery technology systems, based
on the Hypermatrix™ platform, that facilitate
controlled-release delivery of a wide range of pharmaceuticals.
These systems include several core technologies, which enable us to
flexibly respond to a wide range of drug attributes and patient
requirements, producing a desired controlled-release effect. Our
technologies have been incorporated in drugs manufactured and sold
by major pharmaceutical companies.
This
group of drug delivery technology systems is based upon the drug
active being imbedded in, and an integral part of, a homogeneous
(uniform), core and/or coatings consisting of one or more polymers
which affect the release rates of drugs, other excipients
(compounds other than the drug active), such as for instance
lubricants which control handling properties of the matrix during
fabrication, and the drug active itself. The Hypermatrix™
technologies are the core of our current marketing efforts and the
technologies underlying our existing development
agreements.
7
nPODDDSTM
In
addition to continuing efforts with Hypermatrix™ as a core
technology, our scientists continue to pursue novel research
activities that address unmet needs. Oxycodone ER (abuse deterrent
oxycodone hydrochloride extended release tablets) is an NDA
candidate with a unique long acting oral formulation of oxycodone
intended to treat moderate-to-severe pain. The formulation is
intended to present a significant barrier to tampering when
subjected to various forms of physical and chemical manipulation
commonly used by abusers. It is also designed to prevent dose
dumping when inadvertently co-administered with alcohol. The
technology that supports our abuse deterrent formulation of
oxycodone is the nPODDDS™ Point of Divergence Drug Delivery
System. The use of nPODDDS™ does not interfere with the
bioavailability of oxycodone. We intend to apply the nPODDDS™
technology platforms to other extended release opioid drug
candidates (e.g., oxymorphone, hydrocodone, hydromorphone and
morphine) utilizing the 505(b)(2) regulatory pathway.
PODRASTM
Our
Paradoxical OverDose Resistance Activating System (PODRAS™)
delivery technology is designed to prevent overdose when more pills
than prescribed are swallowed intact. Preclinical studies of
prototypes of oxycodone with PODRAS™ technology suggest that,
unlike other third-party abuse-deterrent oxycodone products in the
marketplace, if more tablets than prescribed are deliberately or
inadvertently swallowed, the amount of drug active released over 24
hours may be substantially less than expected. However, if the
prescribed number of pills is swallowed, the drug release should be
as expected. We have started, and intend to continue, working on an
alternate Oxycodone ER
product candidate incorporating our PODRAS™ delivery
technology. In April 2015, the FDA published Guidance for Industry:
Abuse-Deterrent Opioids — Evaluation and Labeling, which
cited the need for more efficacious abuse-deterrence technology. In
this Guidance, the FDA stated, “opioid products are often
manipulated for purposes of abuse by different routes of
administration or to defeat extended-release properties, most
abuse-deterrent technologies developed to date are intended to make
manipulation more difficult or to make abuse of the manipulated
product less attractive or less rewarding. It should be noted that
these technologies have not yet proven successful at deterring the
most common form of abuse—swallowing a number of intact
capsules or tablets to achieve a feeling of euphoria.” The
FDA reviewed our request for Fast Track designation for our abuse
deterrent Oxycodone ER development program incorporating
PODRAS™, and in May 2015 notified us that the FDA had
concluded that we met the criteria for Fast Track designation. Fast
Track is a designation assigned by the FDA in response to an
applicant’s request which meets FDA criteria. The designation
mandates the FDA to facilitate the development and expedite the
review of drugs intended to treat serious or life threatening
conditions and that demonstrate the potential to address unmet
medical needs.
In
December 2016, July 2017 and October 2017, U.S. Patent Nos.
9,522,119, 9,700,515, 9,700,516 and 9,801,939 and Canadian Patent
No. 2,910,865 were issued by the U.S. Patent and Trademark Office
and the Canadian Intellectual Property Office in respect of
“Compositions and Methods for Reducing Overdose”. The
issued patents cover aspects of the PODRAS™ delivery
technology. The issuance of these patents represents a significant
advance in our abuse deterrence technology platform. The
PODRAS™ platform has the potential to positively
differentiate our technology from others of which we are aware and
may represent an important step toward addressing the FDA’s
concern over the ingestion of a number of intact pills or tablets.
In addition to its use with opioids, the PODRASTM platform is
potentially applicable to a wide range of drug products, inclusive
of over-the-counter drugs, that are intentionally or inadvertently
abused and cause harm by overdose to those who ingest them. We
intend to apply the PODRAS™ technology platforms to other
extended release opioid drug candidates (e.g., oxymorphone,
hydrocodone, hydromorphone and morphine) utilizing the 505(b)(2)
regulatory pathway.
8
PRODUCTS AND
PRODUCT CANDIDATES
The
table below shows the present status of our ANDA, ANDS and NDA
products and product candidates that have been disclosed to the
public.
|
Generic name
|
Brand
|
Indication
|
Stage of
Development(1)
|
Regulatory Pathway
|
Rights(3)
|
|
Dexmethylphenidate hydrochloride extended-release
capsules
|
Focalin XR®
|
Attention deficit hyperactivity disorder
|
Received final approval for 5, 10, 15, 20, 25, 30, 35 and 40 mg
strengths from FDA(4)
|
ANDA
|
Intellipharmaceutics and Par (US)
Philippines rights subject to licensing and distribution
agreement
|
|
Levetiracetam extended-release tablets
|
Keppra XR®
|
Partial onset seizures for epilepsy
|
Received final approval for the 500 and 750 mg strengths from
FDA
|
ANDA
|
ANDA Repository(5)
|
|
Venlafaxine hydrochloride extended-release capsules
|
Effexor XR®
|
Depression
|
Received final approval for 37.5, 75 and 150 mg strengths from
FDA
|
ANDA
|
Intellipharmaceutics and Tris Pharma
(US)
|
|
Pantoprazole sodium delayed- release tablets
|
Protonix®
|
Conditions associated with gastroesophageal reflux
disease
|
ANDA Application for commercialization approval for 2 strengths
under review by FDA
|
ANDA
|
Intellipharmaceutics
|
|
Metformin hydrochloride extended-release tablets
|
Glucophage® XR
|
Management of type 2 diabetes
|
Received final approval for 500 and 750 mg strengths from
FDA
|
ANDA
|
Intellipharmaceutics
Philippines and Vietnamese rights subject to licensing and
distribution agreements
|
|
Quetiapine fumarate extended-release tablets
|
Seroquel XR®
|
Schizophrenia, bipolar disorder & major depressive
disorder
|
Received final FDA approval for all 5 strengths. ANDS under review
by Health Canada
|
ANDA
ANDS
|
Intellipharmaceutics and Tris Pharma (US)
Philippines, Malaysian and Vietnamese rights subject to licensing
and distribution agreements
|
|
Lamotrigine extended-release tablets
|
Lamictal® XR™
|
Anti-convulsant for epilepsy
|
ANDA application for commercialization approval for 6 strengths
under review by FDA
|
ANDA
|
Intellipharmaceutics
|
|
Desvenlafaxine extended-release tablets
|
Pristiq®
|
Depression
|
Received approval for the 50 and 100 mg strengths from
FDA
ANDS under review by Health Canada
|
ANDA
ANDS
|
Intellipharmaceutics and Tris Pharma (US)
|
|
Carvedilol phosphate extended-release capsules
|
Coreg CR®
|
Heart failure, hypertension
|
Late-stage development
|
ANDA
|
Intellipharmaceutics
|
|
Oxycodone hydrochloride controlled-release capsules
|
|
Pain
|
NDA application accepted February 2017 and under review by FDA.
Second FDA Advisory Committees meeting held January
2020
|
NDA 505(b)(2)
|
Intellipharmaceutics
|
|
Pregabalin extended-release capsules
|
|
Neuropathic pain
|
IND application submitted in August 2015
|
NDA 505(b)(2)
|
Intellipharmaceutics
|
|
Ranolazine extended-release tablets
|
Ranexa®
|
Chronic angina
|
ANDA application for commercialization approval for 2 strengths
under review by FDA
|
ANDA
|
Intellipharmaceutics
|
|
Oxycodone hydrochloride immediate release tablets
(IPCI006)
|
|
Pain
|
IND application submitted in November 2018
|
NDA 505(b)(2)
|
Intellipharmaceutics
|
9
Notes:
1.
There
can be no assurance as to when, or if at all, the FDA or Health
Canada will approve any product candidate for sale in the U.S. or
Canadian markets.
2.
For
information regarding the Par agreement, the Tris Pharma agreement,
and the licensing and distribution agreements with pharmaceutical
distributors in Malaysia, Vietnam and the Philippines, see
“Business Overview” and “Other Potential Products
and Markets” sections. There can be no assurance as to when,
or if at all, any of our products or product candidates, as the
case may be, will receive regulatory approval for sale in the
Philippines, Malaysia or Vietnam. For unpartnered products, we are
seeking licensing agreement opportunities or other opportunities.
While we believe that licensing agreements are possible, there can
be no assurance that any can be secured.
3.
Includes
a Company ANDA final approval for our 15 and 30 mg strengths, and a
Par ANDA final approval for their 5, 10, 15, 20, 25, 30, 35 and 40
mg strengths. Profit sharing payments to us under the Par agreement
are the same irrespective of the ANDA owner.
4.
As at September 30,
2019, pursuant to an ANDA sale agreement (the “Levetiracetam
ANDA Agreement”), we sold all of the assets relating to our
ANDA for Levetiracetam extended-release 500mg and 750 mg tablets
(collectively, the “Transferred Levetiracetam ANDA”) to
ANDA Repository, LLC (the “Levetiracetam ANDA
Purchaser”) in exchange for a purchase price of $1.
Additionally, pursuant to the Levetiracetam ANDA Agreement, we
agreed to pay the Levetiracetam ANDA Purchaser an annual fee for
each fiscal year equal to 50% of the difference between the FDA
Program Fee for 6 to 19 approved ANDAs and the FDA Program Fee for
1 to 5 approved ANDAs. Under the Levetiracetam ANDA Agreement, we
have the option to repurchase the Transferred Levetiracetam ANDA
for a purchase price of $1 at any time, provided
that any outstanding fees are paid to ANDA Repository.
We
typically select products for development that we anticipate could
achieve FDA or Health Canada approval for commercial sales several
years in the future. However, the length of time necessary to bring
a product to the point where the product can be commercialized can
vary significantly and depends on, among other things, the
availability of funding, design and formulation challenges, safety
or efficacy, patent issues associated with the product, and FDA and
Health Canada review times.
Dexmethylphenidate Hydrochloride – Generic Focalin
XR®
(a registered trademark of the brand
manufacturer)
Dexmethylphenidate
hydrochloride, a Schedule II restricted product (drugs with a high
potential for abuse) in the U.S., is indicated for the treatment of
attention deficit hyperactivity disorder. In November 2005, we
entered into the Par agreement pursuant to which we granted Par an
exclusive, royalty-free license to make and distribute in the U.S.
all of our FDA approved strengths of our generic Focalin XR®
(dexmethylphenidate hydrochloride extended-release) capsules for a
period of 10 years from the date of commercial launch (which was
November 19, 2013). We retain the right to make and distribute all
strengths of the generic product outside of the U.S. Calendar
quarterly profit-sharing payments for its U.S. sales of all
strengths of generic Focalin XR® are payable by Par to us as
calculated pursuant to the Par agreement.
We
received final approval from the FDA in November 2013 under the
Company ANDA to launch the 15 and 30 mg strengths of our generic
Focalin XR® capsules. Commercial sales of these strengths were
launched immediately by our commercialization partner in the U.S.,
Par. Our 5, 10, 20 and 40 mg strengths were also then tentatively
FDA approved, subject to the right of Teva Pharmaceuticals USA,
Inc. to 180 days of generic exclusivity from the date of first
launch of such products. In January 2017, Par launched the 25 and
35 mg strengths of its generic Focalin XR® capsules in the
U.S., and in May 2017, Par launched the 10 and 20 mg strengths,
complementing the 15 and 30 mg strengths of our generic Focalin
XR® marketed by Par. In November 2017, Par launched the
remaining 5 and 40 mg strengths providing us with the full line of
generic Focalin XR® strengths available in the U.S.
market.
10
In
November 2018, we announced that we entered into an exclusive
licensing and distribution agreement with a pharmaceutical
distributor in the Philippines pursuant to which the distributor
was granted the exclusive right, subject to regulatory approval, to
import and market our generic Focalin XR® in the Philippines.
Under the terms of the agreement, the distributor will be required
to purchase a minimum yearly quantity of our generic Focalin
XR® and we will be the exclusive supplier of such product.
This multi-year agreement is subject to early termination. There
can be no assurance as to when and if such product will receive
regulatory approval for the sale in the Philippines or that, if so
approved, the product will be successfully commercialized there and
produce significant revenues for us.
Levetiracetam – Generic Keppra XR® (a registered
trademark of the brand manufacturer)
We
received final approval from the FDA in February 2016 for the 500
and 750 mg strengths of our generic Keppra XR® (levetiracetam
extended-release) tablets. Keppra XR®, and the drug active
levetiracetam, are indicated for use in the treatment of partial
onset seizures associated with epilepsy. We are aware that several
other generic versions of this product are currently available and
serve to limit the overall market opportunity. We have been
exploring licensing and other options for this
product.
In
November 2018, we announced that we entered into two exclusive
licensing and distribution agreements with pharmaceutical
distributors in Vietnam and the Philippines pursuant to which the
distributors were granted the exclusive right, subject to
regulatory approval, to import and market our generic Keppra
XR® in Vietnam and the Philippines, respectively. Under the
terms of the agreements, the distributors will be required to
purchase a minimum yearly quantity of our generic Keppra XR®.
These multi-year agreements are each subject to early termination.
There can be no assurance that the Company’s generic Keppra
XR® for the 500 and 750 mg strengths will be successfully
commercialized. Further, there can be no assurance as to when and
if such product will receive regulatory approval for the sale in
Vietnam or the Philippines or that, if so approved, the product
will be successfully commercialized there and produce significant
revenues for us.
On
September 30, 2019, pursuant to an ANDA sale agreement (the
“Levetiracetam ANDA Agreement”), we sold all of the
assets relating to our ANDA for Levetiracetam extended-release
500mg and 750 mg tablets (collectively, the “Transferred
Levetiracetam ANDA”) to ANDA Repository, LLC (the
“Levetiracetam ANDA Purchaser”) in exchange for a
purchase price of $1. Additionally, pursuant to the Levetiracetam
ANDA sale agreement, we agreed to pay the Levetiracetam ANDA
Purchaser an annual fee for each fiscal year equal to 50% of the
difference between the FDA Program Fee for 6 to 19 approved ANDAs
and the FDA Program Fee for 1 to 5 approved ANDAs. Under the
Levetiracetam ANDA Agreement, we have the option to repurchase the
Transferred Levetiracetam ANDA for a purchase price of $1 at any
time, provided that any outstanding fees are paid to ANDA
Repository.
Metformin hydrochloride – Generic Glucophage® XR (a
registered trademark of the brand manufacturer)
We
received final approval from the FDA in February 2017 for the 500
and 750 mg strengths of our generic Glucophage® XR (metformin
hydrochloride extended release) tablets. Glucophage® XR, and
the drug active metformin, are indicated for use in the management
of type 2 diabetes treatment. The Company is aware that several
other generic versions of this product are currently available and
serve to limit the overall market opportunity; however, we are
continuing to evaluate options to realize commercial returns on
this product, particularly in international markets.
In
November 2018, we announced that we entered into two exclusive
licensing and distribution agreements with pharmaceutical
distributors in Vietnam and the Philippines pursuant to which the
distributors were granted the exclusive right, subject to
regulatory approval, to import and market our generic
Glucophage® XR in Vietnam and the Philippines, respectively.
Under the terms of the agreements, the distributors will be
required to purchase a minimum yearly quantity of our generic
Glucophage® XR. These multi-year agreements are each subject
to early termination.
There
can be no assurance that our generic Glucophage® XR for the
500 and 750 mg strengths will be successfully commercialized.
Further, there can be no assurance as to when and if such product
will receive regulatory approval for the sale in Vietnam or the
Philippines or that, if so approved, the product will be
successfully commercialized there and produce significant revenues
for us.
11
Venlafaxine hydrochloride – Generic Effexor XR® (a
registered trademark of the brand manufacturer)
We
received final approval from the FDA in November 2018 for our ANDA
for venlafaxine hydrochloride extended-release capsules in the
37.5, 75 and 150 mg strengths. The approved product is a generic
equivalent of the branded product Effexor XR® sold in the U.S.
by Wyeth Pharmaceuticals, LLC. Effexor XR®, and the drug
active venlafaxine hydrochloride, are indicated for the treatment
of MDD. On November 25, 2019, we announced that we had entered into
a license and commercial supply agreement with Tris Pharma, by
which we granted Tris Pharma an exclusive license to market, sell
and distribute in the United States, Venlafaxine extended-release
capsules in the 37.5, 75, and 150 mg strengths. Several other
generic versions of the licensed products are currently available
in the market and this limits the overall market opportunity. There
can be no assurance that the Company’s venlafaxine
hydrochloride extended-release capsules for the 37.5, 75, and 150
mg strengths will be successfully commercialized and produce
significant revenue for us.
Quetiapine fumarate extended-release tablets - Generic Seroquel
XR® (a registered trademark of the brand
manufacturer)
In May
2017, we received final approval from the FDA for our ANDA for
quetiapine fumarate extended-release tablets in the 50, 150, 200,
300 and 400 mg strengths. Our approved product is a generic
equivalent for the corresponding strengths of the branded product
Seroquel XR® sold in the U.S. by AstraZeneca. Seroquel
XR®, and the drug active quetiapine fumarate, are indicated
for use in the management of schizophrenia, bipolar disorder and
major depressive disorder (MDD). Pursuant to a settlement agreement
between us and AstraZeneca dated July 30, 2012, we were permitted
to launch our generic versions of the 50, 150, 200, 300 and 400 mg
strengths of generic Seroquel XR®, on November 1, 2016,
subject to FDA final approval of our ANDA for those strengths. Our
final FDA approval followed the expiry of 180-day exclusivity
periods granted to the first filers of generic equivalents to the
branded product, which were shared by Par and Accord Healthcare.
The Company manufactured and shipped commercial quantities of all
strengths of generic Seroquel XR® to our then marketing and
distribution partner Mallinckrodt, and Mallinckrodt launched all
strengths in June 2017. On April 12, 2019, we and Mallinckrodt
mutually agreed to terminate the Mallinckrodt agreement and
effective August 12, 2019 the Mallinckrodt agreement was
terminated.
In
November 2018, we announced that we entered into three exclusive
licensing and distribution agreements with pharmaceutical
distributors in Malaysia, Vietnam and the Philippines pursuant to
which the distributors were granted the exclusive right, subject to
regulatory approval, to import and market our generic Seroquel
XR® in Malaysia, Vietnam and the Philippines, respectively.
Under the terms of the agreements, the distributors will be
required to purchase a minimum yearly quantity of our generic
Seroquel XR®. The multi-year agreements are each subject to
early termination. There can be no assurance as to when and if such
product will receive regulatory approval for the sale in Malaysia,
Vietnam or the Philippines or that, if so approved, the product
will be successfully commercialized there and produce significant
revenues for us.
On
August 15, 2019, we announced a license and commercial supply
agreement with Tris Pharma, granting Tris Pharma an exclusive
license to market, sell and distribute all strengths of our generic
Seroquel XR® in the United States. The agreement provides for
the Company to have a profit-sharing arrangement with respect to
the licensed product. There can be no assurance that the product
will be successfully commercialized and produce significant revenue
for us. An abbreviated new drug submission (ANDS) is under review
with Health Canada.
Desvenlafaxine succinate extended-release tablets – Generic
Pristiq® (a registered trademark of the brand
manufacturer)
In May
2019, we received approval from the FDA for our ANDA for
desvenlafaxine extended-release tablets in the 50 and 100 mg
strengths. This product is a generic equivalent of the branded
product Pristiq® sold in the U.S. by Wyeth Pharmaceuticals,
LLC. Pristiq®, and the drug active desvenlafaxine succinate,
are indicated for use in the management of depression. We
previously announced that we had entered into the Mallinckrodt
agreement, which granted Mallinckrodt, subject to its terms, an
exclusive license to market, sell and distribute in the U.S. the
Company's desvenlafaxine extended-release tablets (generic
Pristiq®).
On
April 12, 2019, we and Mallinckrodt mutually agreed to terminate
the Mallinckrodt agreement, and effective August 12, 2019 the
Mallinckrodt agreement was terminated.
On
September 5, 2019, we announced a license and commercial supply
agreement with Tris Pharma, granting Tris Pharma an exclusive
license to market, sell and distribute the two strengths of the
product in the United States. The agreement provides for the
Company to have a profit-sharing arrangement with respect to the
licensed product. There can be no assurance that our desvenlafaxine
extended-release tablets in the 50 and 100 mg strengths will be
successfully commercialized and produce significant revenue for us.
An abbreviated new drug submission (ANDS) is under review with
Health Canada.
12
Oxycodone ER (Abuse Deterrent Oxycodone Hydrochloride Extended
Release Tablets)
One of
our non-generic products under development is our Oxycodone ER
(abuse deterrent oxycodone hydrochloride extended release tablets)
product candidate, intended as an abuse and alcohol-deterrent
controlled-release oral formulation of oxycodone hydrochloride for
the relief of pain. Our Oxycodone ER is a new drug candidate, with
a unique long acting oral formulation of oxycodone intended to
treat moderate-to-severe pain when a continuous, around the clock
opioid analgesic is needed for an extended period of time. The
formulation is intended to present a significant barrier to
tampering when subjected to various forms of physical and chemical
manipulation commonly used by abusers. It is also designed to
prevent dose dumping when inadvertently co-administered with
alcohol. Dose dumping is the rapid release of an active ingredient
from a controlled-release drug into the blood stream that can
result in increased toxicity, side effects, and a loss of efficacy.
Dose dumping can result by consuming the drug through crushing,
taking with alcohol, extracting with other beverages, vaporizing or
injecting. In addition, when crushed or pulverized and hydrated,
the proposed extended release formulation is designed to coagulate
instantaneously and entrap the drug in a viscous hydrogel, which is
intended to prevent syringing, injecting and snorting. Our
Oxycodone ER formulation is difficult to abuse through the
application of heat or an open flame, making it difficult to inhale
the active ingredient from burning.
In
March 2015, we announced the results of three definitive open
label, blinded, randomized, cross-over, Phase I pharmacokinetic
clinical trials in which our Oxycodone ER was compared to the
existing branded drug OxyContin® (extended release oxycodone
hydrochloride) under single dose fasting, single dose steady-state
fasting and single dose fed conditions in healthy volunteers. We
had reported that the results from all three studies showed that
Oxycodone ER met the bioequivalence criteria (90% confidence
interval of 80% to 125%) for all matrices, i.e., on the measure of
maximum plasma concentration or Cmax, on the measure of area under
the curve time (AUCt) and on the measure of area under the curve
infinity (AUCinf).
In May
2015, the FDA provided us with notification regarding our IND
submission for Oxycodone ER indicating that we would not be
required to conduct Phase III studies if bioequivalence to
OxyContin® was demonstrated based on pivotal bioequivalence
studies.
In
November 2016, we filed an NDA seeking authorization to market our
Oxycodone ER in the 10, 15, 20, 30, 40, 60 and 80 mg strengths,
relying on the 505(b)(2) regulatory pathway which allowed us to
reference data from Purdue’s file for its OxyContin®. In
February 2017, the FDA accepted for filing our NDA, and set a
Prescription Drug User Fee Act (“PDUFA”) goal date of
September 25, 2017. Our submission is supported by pivotal
pharmacokinetic studies that demonstrated that Oxycodone ER is
bioequivalent to OxyContin®. The submission also includes
abuse-deterrent studies conducted to support abuse-deterrent label
claims related to abuse of the drug by various pathways, including
oral, intra-nasal and intravenous, having reference to the
FDA’s “Abuse-Deterrent Opioids - Evaluation and
Labeling” guidance published in April 2015.
Our NDA
was filed under Paragraph IV of the Hatch-Waxman Act, as amended.
We certified to the FDA that we believed that our Oxycodone ER
product candidate would not infringe any of the OxyContin®
patents listed in the FDA’s Approved Drug Products with
Therapeutic Equivalence Evaluations, commonly known as the Orange
Book (the “Orange Book”), or that such patents are
invalid, and so notified all holders of the subject patents of such
certification. On April 7, 2017, we received notice that Purdue,
Purdue Pharmaceuticals L.P., The P.F. Laboratories, Inc., or
collectively the Purdue parties, Rhodes Technologies, and
Grünenthal GmbH, or collectively the “Purdue litigation
plaintiffs”, had commenced patent infringement proceedings,
or the Purdue litigation, against us in the U.S. District Court for
the District of Delaware (docket number 17-392) in respect of our
NDA filing for Oxycodone ER, alleging that our proposed Oxycodone
ER infringes 6 out of the 16 patents associated with the branded
product OxyContin®, or the OxyContin® patents, listed in
the Orange Book.
Subsequent
to the above-noted filing of lawsuit, 4 further such patents were
listed and published in the Orange Book. On March 16, 2018, we
received notice that the Purdue litigation plaintiffs had commenced
further such patent infringement proceedings adding the 4 further
patents. On April 15, 2020, Purdue filed a new patent infringement
suit against the Company. The suit was filed in the District of
Delaware, under docket number: 1:20-cv-00515. The new patent suit
relates to additional Paragraph IV certifications lodged against
two more listed Purdue patents.
13
As a
result of the commencement of the first of these legal proceedings,
the FDA was stayed for 30 months from granting final approval to
our Oxycodone ER product candidate. That time period commenced on
February 24, 2017, when the Purdue litigation plaintiffs received
notice of our certification concerning the patents, and would
expire on August 24, 2019, unless the stay is earlier terminated by
a final declaration of the courts that the patents are invalid, or
are not infringed, or the matter is otherwise settled among the
parties.
On or
about June 26, 2018, the court issued an order to sever 6
“overlapping” patents from the second Purdue case, but
ordered litigation to proceed on the 4 new (2017-issued) patents.
An answer and counterclaim was filed on July 9, 2018. On July 6,
2018, the court issued a so-called “Markman” claim
construction ruling on the first case. On July 24, 2018, the
parties to the case mutually agreed to and did have dismissed
without prejudice the infringement claims related to the
Grünenthal ‘060 patent, which is one of the six patents
included in the original litigation case. On April 4, 2019, the
U.S. Federal Circuit Court of Appeals affirmed the invalidity of
one Purdue OxyContin® formulation patent, subject to further
appeal to the U.S. Supreme Court.
On
October 4, 2018, the parties mutually agreed to postpone the
scheduled court date pending a case status conference scheduled for
December 17, 2018. At that time, further trial scheduling and other
administrative matters were postponed pending the Company’s
resubmission of the Oxycodone ER NDA to the FDA, which was made on
February 28, 2019. On January 17, 2019, the court issued a
scheduling order in which the remaining major portions are
scheduled. The trial was scheduled for June 2020.
Following
the filing of a bankruptcy stay by Purdue Pharma L.P., the
Company’s ongoing litigation case numbers 1:17-cv-00392-RGA
and 1:18-cv-00404-RGA-SRF between Purdue Pharma L.P. et al and
Intellipharmaceutics were stayed and the existing trial dates in
both cases vacated by orders issued in each case by the judge in
the District of Delaware on October 3, 2019. During a status update
March 13, 2020, the stay was ordered to be continued. The parties
were required to submit a joint status report no less than two
business days before June 3, 2020. On April 24, 2019, an order had
been issued, setting a trial date of November 12, 2019 for case
number 17-392 in the District of Delaware, and also extending the
30-month stay date for regulatory approval to March 2, 2020. With
the litigation stay order, the previous 30-month stay date of March
2, 2020 was unchanged.
On or
about July 2, 2020 the parties in the cases, numbers 17-cv-392-RGA,
18-cv-404-RGA and 20-cv-515-RGA (the “Litigations”)
between Purdue Pharma L.P. et al (“Purdue’) and
Intellipharmaceutics entered into a stipulated dismissal of the
Litigations. The stipulated dismissal provides for the termination
of patent infringement proceedings commenced by Purdue against the
Company in the United States District Court for the District of
Delaware in respect of the Company’s NDA filing for Aximris
XRTM with
the FDA. The stipulated dismissal also provides that (i) for a
thirty (30) day period following a final approval of the
Company’s Aximris XRTM NDA the parties
will attempt to resolve any potential asserted patent infringement
claims relating to the NDA and (ii) if the parties fail to resolve
all such claims during such period Purdue Pharma will have fifteen
(15) days to pursue an infringement action against the Company. The
terms of the stipulated dismissal agreement are confidential.On
July 28, 2020 the United States District Court for the District of
Delaware signed the stipulations of dismissal into order thereby
dismissing the claims in the three cases without prejudice. In
consideration of the confidential stipulated dismissal agreement
and for future saved litigation expenses, Purdue has paid an amount
of money to the Company.
In June
2017, we announced that a joint meeting of the Advisory Committees
of the FDA was scheduled for July 26, 2017 to review our NDA for
Oxycodone ER. The submission requested that our Oxycodone ER
product candidate include product label claims to support the
inclusion of language regarding abuse-deterrent properties for the
intravenous route of administration.
In July
2017, the Company announced that the FDA Advisory Committees voted
22 to 1 in finding that the Company’s NDA for Oxycodone ER
should not be approved at this time. The Advisory Committees also
voted 19 to 4 that the Company had not demonstrated that Oxycodone
ER has properties that can be expected to deter abuse by the
intravenous route of administration, and 23 to 0 that there was not
sufficient data for Oxycodone ER to support inclusion of language
regarding abuse-deterrent properties in the product label for the
intravenous route of administration. The Advisory Committees
expressed a desire to review the additional safety and efficacy
data for Oxycodone ER that may be obtained from human abuse
potential studies for the oral and intranasal routes of
administration.
14
In
September 2017, the Company received a Complete Response Letter
(“CRL”) from the FDA for the Oxycodone ER NDA, stating
that it could not approve the application at that time. In its CRL,
the FDA provided certain recommendations and requests for
information, including that the Company complete studies to assess
the abuse-deterrent properties of Oxycodone ER by the oral and
nasal routes of administration, provide additional information
related to the inclusion of the blue dye in the formulation of the
product, and submit an alternate proposed proprietary name for
Oxycodone ER. The FDA required a response within a year of issuing
the CRL but granted our request for an extension to resubmit by
February 28, 2019.
In
February 2018, the Company met with the FDA to discuss the
above-referenced CRL for Oxycodone ER, including issues related to
the blue dye in the product candidate. Based on those discussions,
the product candidate will no longer include the blue dye. The blue
dye was intended to act as an additional deterrent if Oxycodone ER
is abused and serve as an early warning mechanism to flag potential
misuse or abuse. The FDA confirmed that the removal of the blue dye
is unlikely to have any impact on formulation quality and
performance. As a result, the Company will not be required to
repeat in vivo bioequivalence studies and pharmacokinetic studies
submitted in the Oxycodone ER NDA. The FDA also indicated that,
from an abuse liability perspective, Category 1 studies will not
have to be repeated on Oxycodone ER with the blue dye
removed.
The
abuse liability studies for the intranasal route of abuse commenced
in May 2018 with subject screening, while the studies for the oral
route commenced in June 2018. The clinical part of both studies was
completed, and the results included in the NDA resubmission which
was filed February 28, 2019.
In
March 2019, the FDA acknowledged receipt of our resubmission of the
Oxycodone ER NDA. The FDA had informed the Company that it
considered the resubmission a complete response to the September
22, 2017 action letter it issued in respect of the
NDA.
On July
24, 2019, we announced that the Company had been advised by the FDA
that the FDA “is postponing product-specific advisory
committee meetings for opioid analgesics,” including the one
previously scheduled to discuss our NDA, “while it continues
to consider a number of scientific and policy issues relating to
this class of drugs.” According to the FDA, the reason for
the postponement was not unique to our product and the Anesthetic
and Analgesic Drug Products Advisory Committee
(“AADPAC”) meeting earlier planned by the FDA, to
discuss our NDA was going to be rescheduled at a future date. The
FDA informed the Company that it would continue to review the
Company’s NDA according to the existing PDUFA timeline, but
noted that, due to the postponement of the AADPAC meeting, it was
possible that the FDA may be unable to meet the PDUFA goal date of
August 28, 2019 that it set when the resubmission was filed. The
FDA did not meet the PDUFA goal date of August 28,
2019.
In
December 2019 we announced that a joint meeting of the Advisory
Committees of the FDA was scheduled for January 15, 2020 to review
the NDA for Aximris XRTM abuse-deterrent
oxycodone hydrochloride extended-release tablets.
On
January 15, 2020, at a joint meeting of the Advisory Committees of
the FDA to review our NDA for Aximris XR™, abuse-deterrent
oxycodone hydrochloride extended-release tablets, the Advisory
Committees voted 24 to 2 against the approval of our NDA for
Aximris XRTM for the management
of pain severe enough to require daily, around-the-clock, long-term
opioid treatment and for which alternative treatment options are
inadequate. We expect the FDA to take action on our application
after completion of their review. The 30-month stay date of March
2, 2020 has since expired.
There
can be no assurance that the studies submitted to the FDA will be
adequate, that we will not be required to conduct further studies
for Oxycodone ER, that the FDA will approve any of the
Company’s requested abuse-deterrent label claims, that the
FDA will ultimately approve our NDA for the sale of Aximris
XRTM in
the U.S. market, or that it will ever be successfully
commercialized and produce significant revenue for us. If the
Aximris XRTM NDA is approved,
there can be no assurance that the Company and Purdue will resolve
any potential asserted patent infringement claims relating to the
NDA within a thirty (30) day period following the final approval as
provided in the stipulated settlement agreement of the Purdue
litigations. There can be no assurance that the Purdue parties will
not pursue an infringement claim against the Company
again.
15
In
November 2018, we announced that we entered into an exclusive
licensing and distribution agreement with a pharmaceutical
distributor in the Philippines pursuant to which the distributor
was granted the exclusive right, subject to regulatory approval, to
import and market Oxycodone ER in the Philippines. Under the terms
of the agreement, the distributor will be required to purchase a
minimum yearly quantity of our Oxycodone ER and we will be the
exclusive supplier of our Oxycodone ER. This multi-year agreement
is subject to early termination. There can be no assurance as to
when and if such product candidate will receive regulatory approval
for the sale in the Philippines or that, if so approved, the
product will be successfully commercialized there and produce
significant revenues for us.
Regabatin™ XR (Pregabalin Extended-Release)
Another
non-generic controlled-release product under development is
Regabatin™ XR, pregabalin extended-release capsules.
Pregabalin is indicated for the management of neuropathic pain
associated with diabetic peripheral neuropathy, postherpetic
neuralgia, spinal cord injury and fibromyalgia. A
controlled-release version of pregabalin should reduce the number
of doses patients take, which could improve patient compliance, and
therefore possibly enhance clinical outcomes. Lyrica®
pregabalin, twice-a-day (“BID”) dosage and
three-times-a-day (“TID”) dosage, are drug products
marketed in the U.S. by Pfizer Inc. In October 2017, Pfizer also
received approval for a Lyrica® CR, a controlled-release
version of pregabalin. In 2014, we conducted and analyzed the
results of six Phase I clinical trials involving a twice-a-day
formulation and a once-a-day formulation. For formulations directed
to certain indications which include fibromyalgia, the results
suggested that Regabatin™ XR 82.5 mg BID dosage was
comparable in bioavailability to Lyrica® 50 mg
(immediate-release pregabalin) TID dosage. For formulations
directed to certain other indications which include neuropathic
pain associated with diabetic peripheral neuropathy, the results
suggested that Regabatin™ XR 165 mg once-a-day dosage was
comparable in bioavailability to Lyrica® 75 mg BID
dosage.
In
March 2015, the FDA accepted a Pre-Investigational New Drug, or
Pre-IND, meeting request for our once-a-day Regabatin™ XR
non-generic controlled release version of pregabalin under the NDA
505(b)(2) regulatory pathway, with a view to possible
commercialization in the U.S. at some time following the December
30, 2018 expiry of the patent covering the pregabalin molecule.
Regabatin™ XR is based on our controlled release drug
delivery technology platform which utilizes the symptomatology and
chronobiology of fibromyalgia in a formulation intended to provide
a higher exposure of pregabalin during the first 12 hours of
dosing. Based on positive feedback and guidance from the FDA, we
submitted an IND application for Regabatin™ XR in August
2015. The FDA completed its review of the IND application and
provided constructive input that we will use towards further
development of the program. We believe our product candidate has
significant additional benefits to existing treatments and have
been evaluating strategic options to advance this
opportunity.
There
can be no assurance that any additional Phase I or other clinical
trials we conduct will meet our expectations, that we will have
sufficient capital to conduct such trials, that we will be
successful in submitting an NDA 505(b)(2) filing with the FDA, that
the FDA will approve this product candidate for sale in the U.S.
market, or that it will ever be successfully
commercialized.
Oxycodone Hydrochloride IR Tablets (“IPCI006”) (Abuse
Deterrent and Overdose Resistant Oxycodone Hydrochloride Immediate
Release Tablets)
In
November 2018, we announced that we had submitted an
investigational new drug (“IND”) application to the FDA
for our IPCI006 oxycodone hydrochloride immediate release tablets
in the 5, 10, 15, 20 and 30 mg strengths. This novel drug
formulation incorporates the Company’s PODRASTM delivery technology
and its nPODDDS™ technology. IPCI006 is designed to prevent,
delay or limit the release of oxycodone hydrochloride when more
intact tablets than prescribed are ingested, thus delaying or
preventing overdose and allowing for sufficient time for a rescue
or medical intervention to take place. It is also intended to
present a significant barrier to abuse by snorting,
“parachuting,” injecting or smoking finely crushed
oxycodone hydrochloride immediate release tablets. The data
generated from the studies conducted under this IND is expected to
form part of an NDA seeking FDA approval for IPCI006 tablets. If
approved, IPCI006 may be the first immediate release formulation of
oxycodone hydrochloride intended to simultaneously prevent or delay
overdose and prevent abuse by intranasal or intravenous
routes.
There
can be no assurance that we will be successful in submitting any
NDA with the FDA, that the FDA will approve the Company’s
IPCI006 product candidate for sale in the U.S. market or any
related abuse-deterrent label claims, or that it will ever be
successfully commercialized and produce significant revenue for
us.
Other Potential Products and Markets
We are
continuing our efforts to identify opportunities internationally,
particularly in China, that could, if effectuated, provide product
distribution alternatives through partnerships and therefore would
not likely require an investment or asset acquisition by us.
Discussions toward establishing a partnership to facilitate future
development activities in China are ongoing. We have not at this
time entered into and may not ever enter into any such
arrangements.
16
In
addition, we are seeking to develop key relationships in several
other international jurisdictions where we believe there may be
substantial demand for our generic products. These opportunities
could potentially involve out-licensing of our products,
third-party manufacturing supply and more efficient access to
pharmaceutical ingredients and therefore assist with the
development of our product pipeline.
In
November 2018, we announced that we had entered into an exclusive
licensing and distribution agreement for our abuse resistant
Oxycodone ER product candidate and four generic drug products with
a pharmaceutical distributor in the Philippines. Under the terms of
the agreement the distributor was granted the exclusive right,
subject to regulatory approval, to import and market our first
novel drug formulation, abuse-deterrent Oxycodone ER, in the
Philippines. Additionally, this distributor was granted, subject to
regulatory approval, the exclusive right to import and market our
generics of Seroquel XR®, Focalin XR®, Glucophage®
XR, and Keppra XR® in the Philippines. Under the terms of the
agreement, the distributor will be required to purchase a minimum
yearly quantity of all products included in the agreement and we
will be the exclusive supplier of said products. The multi-year
agreement with the Philippines distributor is subject to early
termination. Financial terms of the agreement have not been
disclosed. There can be no assurance as to when or if any of our
products or product candidates will receive regulatory approval for
sale in the Philippines or that, if so approved, any such products
will be successfully commercialized there and produce significant
revenues for us. Moreover, there can be no assurance that we will
not be required to conduct further studies for Oxycodone ER, that
the FDA will approve any of our requested abuse-deterrent label
claims, that the FDA will meet its deadline for review, that the
FDA will ultimately approve the NDA for the sale of Oxycodone ER in
the U.S. market, or that it will ever be successfully
commercialized and produce significant revenue for us.
In
November 2018, we announced that we had entered into two exclusive
licensing and distribution agreements with pharmaceutical
distributors in Malaysia and Vietnam.
A
Malaysian pharmaceutical distribution company was granted the
exclusive right, subject to regulatory approval, to import and
market our generic Seroquel XR® (quetiapine fumarate
extended-release) in Malaysia. Under the terms of the agreement,
four strengths (50, 200, 300 and 400 mg) of generic Seroquel
XR® will be manufactured and supplied by us for distribution
in Malaysia. We are also in discussions to include other products
in the agreement with said distributor, who will be required to
purchase a minimum yearly quantity of all products included in the
agreement.
A
Vietnamese pharmaceutical distributor was granted the exclusive
right, subject to regulatory approval, to import and market our
generic Seroquel XR®, Glucophage® XR, and Keppra XR®
in Vietnam. Under the terms of the agreement, two strengths (500
and 750 mg) of generic Glucophage® XR, three strengths (50,
150 and 200 mg) of generic Seroquel XR® and one strength (500
mg) of generic Keppra XR® will be manufactured and supplied by
us for distribution in Vietnam. The Vietnamese distributor will be
required to purchase a minimum yearly quantity of all products
included in the agreement.
The
multi-year agreements with the Malaysian and Vietnamese
distributors are each subject to early termination. Financial terms
of the agreements have not been disclosed. There can be no
assurance as to when or if any of our products will receive
regulatory approval for sale in Malaysia or Vietnam or that, if so
approved, the products will be successfully commercialized there
and produce significant revenues for the Company.
Additionally,
in January 2018, we announced we had commenced a R&D program of
CBD-based products. As part of this R&D program, we filed
multiple provisional patent applications with the United States
Patent and Trademark Office pertaining to the delivery and
application of cannabinoid-based therapeutics, began talks with
potential commercialization partners in the cannabidiol industry
and identified a potential supplier of CBD. The patent filings,
together with certain of our already issued drug delivery patents,
are intended to form the basis of the development of a pipeline of
novel controlled-release product candidates with CBD as the main
active ingredient.
The
Company holds a Health Canada Cannabis Drug License
(“CDL”). Under the CDL, we are authorized to possess,
produce, sell and deliver drug products containing CBD in
Canada.
There
can be no assurance that we will be able to develop cannabis-based
products or that any cannabis-based product candidates we develop
will ever be successfully commercialized or produce significant
revenue for us. There can be no assurance that any patents
pertaining to the delivery and application of cannabinoid-based
therapeutics will be issued to the Company.
17
SELECTED FINANCIAL INFORMATION
|
|
For the three months ended
|
|
|
|
February 28,
|
February 29,
|
|
|
2021
|
2020
|
|
|
(unaudited)
|
(unaudited)
|
|
|
$
|
$
|
|
Revenue:
|
-
|
377,554
|
|
Expenses:
|
784,913
|
1,573,775
|
|
Loss
from operations
|
(784,913)
|
(1,196,221)
|
|
Loss
per common share
|
|
|
|
Basic and diluted
|
(0.04)
|
(0.08)
|
|
|
|
|
|
|
|
|
|
|
As at
|
|
|
|
February
28,
|
November
30,
|
|
|
2021
|
2020
|
|
|
(unaudited)
|
|
|
|
$
|
$
|
|
Cash
|
202,669
|
202,046
|
|
Total
assets
|
2,683,035
|
3,387,055
|
|
|
|
|
|
Convertible
debentures
|
1,773,728
|
1,791,791
|
|
Total
liabilities
|
9,868,973
|
9,700,644
|
|
Shareholders'
deficiency
|
(7,185,938)
|
(6,313,589)
|
|
Total
liabilities and shareholders' deficiency
|
2,683,035
|
3,387,055
|
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
We have
identified the following accounting policies that we believe
require application of management’s most significant
judgments, often requiring the need to make estimates about the
effect of matters that are inherently uncertain and may change in
subsequent periods.
Disclosure
regarding our ability to continue as a going concern is included in
Note 1 to our condensed unaudited interim consolidated financial
statements for the three months ended February 28,
2021.
18
Use of Estimates
The
preparation of the condensed unaudited interim 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 financial
statements and the reported amounts of revenue and expenses during
the period. Actual results could differ from those
estimates.
Areas
where significant judgment is involved in making estimates are: the
determination of the functional currency; the fair values of
financial assets and liabilities; the determination of units of
accounting for revenue recognition; the accrual of licensing and
milestone revenue; and forecasting future cash flows for assessing
the going concern assumption.
Revenue recognition
The
Company accounts for revenue in accordance with the provisions of
ASC 606 “Revenue from Contracts with Customers”
(“ASC 606”). Under ASC 606, the Company recognizes
revenue when the customer obtains control of promised goods or
services, in an amount that reflects the consideration the Company
expects to receive in exchange for those goods or services. The
Company recognizes revenue following the five-step model prescribed
under ASC 606: (i) identify contract(s) with a customer; (ii)
identify the performance obligations in the contract; (iii)
determine the transaction price; (iv) allocate the transaction
price to the performance obligations in the contract; and (v)
recognize revenues when (or as) the Company satisfies the
performance obligation(s). The Company earns revenue from
non-refundable upfront fees, milestone payments upon achievement of
specified research or development, exclusivity milestone payments
and licensing payments on sales of resulting products.
The
relevant revenue recognition accounting policy is applied to each
separate unit of accounting.
Licensing
The
Company recognizes revenue from the licensing of the Company's drug
delivery technologies, products and product candidates. Under the
terms of the licensing arrangements, the Company provides the
customer with a right to access the Company’s intellectual
property with regards to the license which is granted. Revenue
arising from the license of intellectual property rights is
recognized over the period the Company transfers control of the
intellectual property.
The
Company has a license and commercialization agreement with Par.
Under the exclusive territorial license rights granted to Par, the
agreement requires that Par manufacture, promote, market, sell and
distribute the product. Licensing revenue amounts receivable by the
Company under this agreement are calculated and reported to the
Company by Par, with such amounts generally based upon net product
sales and net profit which include estimates for chargebacks,
rebates, product returns, and other adjustments. Licensing revenue
payments received by the Company from Par under this agreement are
not subject to further deductions for chargebacks, rebates, product
returns, and other pricing adjustments. Based on this arrangement
and the guidance pursuant to ASC 606, the Company records licensing
revenue over the period the Company transfers control of the
intellectual property in the condensed unaudited interim
consolidated statements of operations and comprehensive
loss.
The
Company also had a license and commercial supply agreement with
Mallinckrodt which provided Mallinckrodt an exclusive license to
market, sell and distribute in the U.S. three drug product
candidates for which the Company has ANDAs filed with the FDA, one
of which (the Company’s generic Seroquel XR®) received
final approval from the FDA in 2017. Under the terms of this
agreement, the Company was responsible for the manufacture of
approved products for subsequent sale by Mallinckrodt in the U.S.
market. Following receipt of final FDA approval for its generic
Seroquel XR®, the Company began shipment of manufactured
product to Mallinckrodt. The Company recorded revenue once
Mallinckrodt obtained control of the product and the performance
obligation was satisfied. On April 12, 2019, Mallinckrodt and the
Company mutually agreed to terminate their Commercial Supply
Agreement (the “Mallinckrodt agreement”) effective no
later than August 31, 2019. Effective August 12, 2019, the
Mallinckrodt agreement was terminated.
19
Licensing
revenue in respect of manufactured product were reported as revenue
in accordance with ASC 606. Once product was sold by Mallinckrodt,
the Company received downstream licensing revenue amounts
calculated and reported by Mallinckrodt, with such amounts
generally based upon net product sales and net profit which
included estimates for chargebacks, rebates, product returns, and
other adjustments. Such downstream licensing revenue payments
received by the Company under this Mallinckrodt agreement were not
subject to further deductions for chargebacks, rebates, product
returns, and other pricing adjustments. Based on this Mallinckrodt
agreement and the guidance per ASC 606, the Company recorded
licensing revenue as earned on a monthly basis.
Milestones
For
milestone payments that are not contingent on sales-based
thresholds, the Company applies a most-likely amount approach on a
contract-by-contract basis. Management makes an assessment of the
amount of revenue expected to be received based on the probability
of the milestone outcome. Variable consideration is included in
revenue only to the extent that it is probable that the amount will
not be subject to a significant reversal when the uncertainty is
resolved (generally when the milestone outcome is
satisfied).
Research and development (R&D)
Under
arrangements where the license fees and R&D activities can be
accounted for as a separate unit of accounting, non-refundable
upfront license fees are deferred and recognized as revenue on a
straight-line basis over the expected term of the Company's
continued involvement in the R&D process.
Deferred revenue
Deferred
revenue represents the funds received from clients, for which the
revenues have not yet been earned, as the milestones have not been
achieved, or in the case of upfront fees for drug development,
where the work remains to be completed.
Research and development costs
R&D
costs related to continued R&D programs are expensed as
incurred in accordance with ASC topic 730. However, materials and
equipment are capitalized and amortized over their useful lives if
they have alternative future uses.
Inventory
Inventories
comprise raw materials, work in process, and finished goods, which
are valued at the lower of cost or market, on a first-in, first-out
basis. Cost for work in process and finished goods inventories
includes materials, direct labor, and an allocation of
manufacturing overhead. Market for raw materials is replacement
cost, and for work in process and finished goods is net realizable
value. The Company evaluates the carrying value of inventories on a
regular basis, taking into account such factors as historical and
anticipated future sales compared with quantities on hand, the
price the Company expects to obtain for products in their
respective markets compared with historical cost and the remaining
shelf life of goods on hand. As of February 28, 2021, the Company
had raw materials inventories of $112,672 (November 30, 2020 -
$112,672), work in process of $Nil (November 30, 2020 - $Nil) and
finished goods inventory of $Nil (November 30, 2020 - $Nil)
relating to the Company’s generic Seroquel XR® product.
The recoverability of the cost of any pre-launch inventories with a
limited shelf life is evaluated based on the specific facts and
circumstances surrounding the timing of the anticipated product
launch.
20
Translation of foreign currencies
Transactions
denominated in currencies other than the Company and its wholly
owned operating subsidiaries’ functional currencies, monetary
assets and liabilities are translated at the period end rates.
Revenue and expenses are translated at rates of exchange prevailing
on the transaction dates. All of the exchange gains or losses
resulting from these other transactions are recognized in the
condensed unaudited interim consolidated statements of operations
and comprehensive loss.
The
functional and reporting currency of the Company and its
subsidiaries is the U.S. dollar.
Convertible debentures
On
September 10, 2018, the Company completed a private placement
financing (the “2018 Debenture Financing”) of an
unsecured convertible debenture in the principal amount of $500,000
(the “2018 Debenture”). At issuance, the conversion
price was lower than the market share price, and the value of the
beneficial conversion feature related to the 2018 Debenture was
allocated to Additional paid-in capital in the condensed unaudited
interim consolidated statements of shareholders’ equity
(deficiency).
On
April 4, 2019, a tentative approval from TSX was received for a
proposed refinancing of the 2013 Debenture subject to certain
conditions being met. As a result of the refinancing, the principal
amount owing under the 2013 Debenture was refinanced by a new
debenture (the “May 2019 Debenture”). On May 1, 2019,
the May 2019 Debenture was issued in the principal amount of
$1,050,000, that was originally scheduled to mature on November 1,
2019, bears interest at a rate of 12% per annum and is convertible
into 1,779,661 common shares of the Company at a conversion price
of $0.59 per common share. At issuance, the conversion option was
not characterized as an embedded derivative as it did not meet the
criteria of ASC topic 815 Derivatives and Hedging. Also, at
issuance, as the conversion price was higher than the market share
price, conversion option was not bifurcated from its host contract
and the total value of the convertible debenture was recognized as
a liability.
On
August 26, 2019, the Company issued an unsecured convertible
debenture in the principal amount of $140,800 (the “August
2019 Debenture”). At issuance, the conversion price was lower
than the market share price, and the value of the beneficial
conversion feature related to the August 2019 Debenture was
allocated to Additional paid-in capital in the condensed unaudited
interim consolidated statements of shareholders’ equity
(deficiency). In November 2019, the August 2019 Debenture was paid
in full.
On
November 15, 2019, the Company issued an unsecured convertible
debenture in the principal amount of $250,000 (the “November
2019 Debenture”) that was originally scheduled to mature on
December 31, 2019, bears interest at a rate of 12% per annum and is
convertible into common shares of the Company at a conversion price
of $0.12 per share. At issuance, the conversion price was lower
than the market share price, and the value of the beneficial
conversion feature related to the November 2019 Debenture was
allocated to Additional paid-in capital in the condensed unaudited
interim consolidated statements of shareholders’ equity
(deficiency).
Investment tax credits
The
investment tax credits (“ITC") receivable are amounts
considered recoverable from the Canadian federal and provincial
governments under the Scientific Research & Experimental
Development (“SR&ED”) incentive program. The
amounts claimed under the program represent the amounts based on
management estimates of eligible R&D costs incurred during the
year. Realization is subject to government approval. Any adjustment
to the amounts claimed will be recognized in the year in which the
adjustment occurs. Refundable ITCs claimed relating to capital
expenditures are credited to property and equipment. Refundable
ITCs claimed relating to current expenditures are netted against
R&D expenditures.
Loss
per share
Basic
loss per share (“EPS”) is computed by dividing the loss
attributable to common shareholders by the weighted average number
of common shares outstanding. Diluted EPS reflects the potential
dilution that could occur from common shares issuable through the
exercise or conversion of stock options, restricted stock awards,
warrants and convertible securities. In certain circumstances, the
conversion of options, warrants and convertible securities are
excluded from diluted EPS if the effect of such inclusion would be
anti-dilutive. The dilutive effect of stock options is determined
using the treasury stock method.
21
RESULTS OF OPERATIONS
Our
results of operations have fluctuated significantly from period to
period in the past and are likely to do so in the future. We
anticipate that our quarterly and annual results of operations will
be impacted for the foreseeable future by several factors,
including the timing of approvals to market of our product
candidates in various jurisdictions and any resulting licensing
revenue, milestone revenue, product sales, the number of
competitive products and the extent of any aggressive pricing
activity, wholesaler buying patterns, the timing and amount of
payments received pursuant to our current and future collaborations
with third parties, the existence of any first-to-file exclusivity
periods, and the progress and timing of expenditures related to our
research, development and commercialization efforts. Due to these
fluctuations, we presently believe that the period-to-period
comparisons of our operating results are not a reliable indication
of our future performance.
|
|
For the three months ended
|
|
|
|
|
|
February 28,
|
February 29,
|
|
|
|
|
2021
|
2020
|
|
|
|
|
(unaudited)
|
(unaudited)
|
Change
|
|
|
|
$
|
$
|
$
|
%
|
|
Revenue:
|
|
|
|
|
|
Licensing
|
-
|
377,554
|
(377,554)
|
-100%
|
|
|
-
|
377,554
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
Research and development
|
547,485
|
947,845
|
(400,360)
|
-42%
|
|
Selling, general and administrative
|
172,046
|
523,231
|
(351,185)
|
-67%
|
|
Depreciation
|
65,382
|
102,699
|
(37,317)
|
-36%
|
|
|
784,913
|
1,573,775
|
(788,862)
|
-50%
|
|
|
|
|
|
|
|
Loss
from operations
|
(784,913)
|
(1,196,221)
|
411,308
|
-34%
|
|
Net
foreign exchange gain (loss)
|
(64,053)
|
22,788
|
(86,841)
|
-381%
|
|
Interest
expense
|
(75,600)
|
(573,940)
|
498,340
|
-87%
|
|
Net
loss for the period
|
(924,566)
|
(1,747,373)
|
822,807
|
-47%
|
Three months ended February 28, 2021 compared to the three months
ended February 29, 2020
Revenue
The
Company recorded revenues of $Nil for the three months ended
February 28, 2021 versus $377,554 for the three months ended
February 29, 2020. Such revenues consisted primarily of licensing
revenues from commercial sales of the 15, 25, 30 and 35 mg
strengths of our generic Focalin XR® under the Par
agreement.
22
Research and Development
Expenditures
for R&D for the three months ended February 28, 2021 were lower
by $400,360 compared to the three months ended February 29, 2020.
In the three months ended February 28, 2021 we recorded $8,592 of
expenses for stock-based compensation for R&D employees
compared to $43,428 for the three months ended February 29, 2020.
After adjusting for the stock-based compensation expenses discussed
above, expenditures for R&D for the three months ended February
28, 2021 were lower by $365,524 compared to the three months ended
February 29, 2020. The decrease is primarily due to significantly
reduced third party consulting fees, decreased materials expenses,
patent expenses, and the reduction in R&D staff consistent with
reduced R&D activities.
Selling, General and
Administrative
Selling,
general and administrative expenses were $172,046 for the three
months ended February 28, 2021 in comparison to $523,231 for the
three months ended February 29, 2020, resulting in a decrease of
$351,185. The decrease is due to a decrease in administrative costs
and a decrease in wages and marketing costs.
Administrative
costs for the three months ended February 28, 2021 were $103,601 in
comparison to $316,272 in the three months ended February 29, 2020.
The decrease for the three months ended February 28, 2021 was due
to the decrease in professional and legal fees.
Expenditures
for wages and benefits for the three months ended February 28, 2021
were $55,690 in comparison to $149,689 in the three months ended
February 29, 2020. For the three months ended February 28, 2021, we
recorded an expense of $1,958 against expense for stock-based
compensation compared to an expense of $10,321 for the three months
ended February 29, 2020. After adjusting for the stock-based
compensation expenses, expenditures for wages for the three months
ended February 28, 2021 were lower by $85,636 compared to the three
months ended February 29, 2020.
Marketing
costs for the three months ended February 28, 2021 were $7,180 in
comparison to $34,281 in the three months ended February 29, 2020.
This decrease is primarily the result of a decrease in travel
expenditures related to business development and investor relations
activities.
Occupancy
costs for the three months ended February 28, 2021 were $5,575 in
comparison to $22,989 for the three months ended February 29, 2020.
The decrease is due to lower facility operating expenses because
the Company was occupying only one building during the current
reporting period. The decrease is also due to the receipt of Canada
Emergency Rent Subsidy (CERS) in the three months ended February
28, 2021 as part of the CERS COVID-19 relief program.
Depreciation
Depreciation
expenses for the three months ended February 28, 2021 were $65,382
in comparison to $102,699 in the three months ended February 29,
2020.
Foreign Exchange Gain (Loss)
Foreign
exchange loss was $64,053 for the three months ended February 28,
2021 in comparison to a gain of $22,788 in the three months ended
February 29, 2020. The foreign exchange loss for the three months
ended February 28, 2021 was due to the weakening of the U.S. dollar
against the Canadian dollar during the three months ended February
28, 2021 as the exchange rates changed to $1.00 for C$1.2685 as at
February 28, 2021 from $1.00 for C$1.2965 as at November 30, 2020.
The foreign exchange gain for the three months ended February 29,
2020 was due to the strengthening of the U.S. dollar against the
Canadian dollar during the three months ended February 29, 2020 as
the exchange rates changed to $1.00 for C$1.3429 as at February 29,
2020 from $1.00 for C$1.3289 as at November 30, 2019.
23
Interest Expense
Interest
expense for the three months ended February 28, 2021 was $75,600 in
comparison to $573,940 in the three months ended February 29, 2020.
This decrease is primarily due to the November 2019 Debenture being
accreted at an annual effective interest rate of 44.9% during the
three months ended February 28, 2021. This is in comparison to the
May 2019 Debenture being accreted at an annual effective interest
rate of 782.7%; the 2018 Debenture being accreted at an annual
effective interest rate of approximately 7.3%; and the November
2019 Debenture being accreted at an annual effective interest rate
of approximately 504.4% during the three months ended February 29,
2020.
Net Loss
The
Company recorded net loss for the three months ended February 28,
2021 of $924,566 or $0.04 per common share, compared with a net
loss of $1,747,373 or $0.08 per common share for the three months
ended February 29, 2020. For the three months ended February 28,
2021, the net loss is attributed to expenditures related to ongoing
selling, general and administrative expenses related to
professional and legal fees, as well as ongoing R&D expenses.
For the three months ended February 29, 2020, the net loss is
attributed to higher accrued interest expenses as a result of
changes to the accreted interest rates due to extensions of
Debentures, and higher general, selling and administrative
expenses, offset by higher licensing revenues from commercial sales
of generic Focalin XR.
SUMMARY OF QUARTERLY RESULTS
The
table below outlines selected financial data for the eight most
recent quarters. The quarterly results are unaudited and have been
prepared in accordance with U.S. GAAP, for interim financial
information.
|
|
|
|
(Loss) income per share
|
|
|
|
Revenue
|
Net (loss) income
|
Basici
|
Dilutedi
|
|
Quarter Ended
|
$
|
$
|
$
|
$
|
|
February
28, 2021
|
-
|
(924,566)
|
(0.04)
|
(0.04)
|
|
November
30, 2020
|
299,442
|
(1,622,100)
|
(0.07)
|
(0.07)
|
|
August
31, 2020
|
328,781
|
1,026,941
|
0.04
|
0.04
|
|
May
31, 2020
|
395,740
|
(1,048,433)
|
(0.04)
|
(0.04)
|
|
February
29, 2020
|
377,554
|
(1,747,373)
|
(0.08)
|
(0.08)
|
|
November
30, 2019
|
232,519
|
(1,333,074)
|
(0.04)
|
(0.04)
|
|
August
31, 2019
|
1,689,941
|
(1,454,325)
|
(0.07)
|
(0.07)
|
|
May
31, 2019
|
1,214,520
|
(2,072,798)
|
(0.10)
|
(0.10)
|
(i)
Quarterly per share amounts may not sum due to
rounding
24
It is
important to note that historical patterns of revenue and
expenditures cannot be taken as an indication of future revenue and
expenditures. Net (loss) income has been somewhat variable over the
last eight quarters and is reflective of varying levels of
commercial sales of generic Focalin XR® capsules, the level of
our R&D spending, and the vesting or modification of
performance-based stock options. The lower net loss in the first
quarter of 2021 is primarily attributed to lower R&D spending
and lower selling, general and administrative expenses. The higher
net loss in the fourth quarter of 2020 is primarily attributed to
lower licensing revenue and higher R&D expenses and selling,
general and administrative expenses. The higher net income in the
third quarter of 2020 is primarily attributed to other income
received pursuant to the Purdue stipulated dismissal agreement and
lower R&D spending and selling, general and administrative
expenses. The lower net loss in the second quarter of 2020 is
primarily attributed to slightly higher licensing revenue and lower
R&D spending and selling, general and administrative expenses.
The higher net loss in the first quarter of 2020 is primarily
attributed to higher accrued interest expense, higher general,
selling, administrative spending partially offset by higher
licensing revenue and lower R&D spending. The lower net loss in
the fourth quarter of 2019 is primarily attributed to slightly
higher licensing revenue and lower R&D spending and selling,
general and administrative expenses. The lower net loss in the
third quarter of 2019 is primarily attributed to recognition of
upfront revenue due to the cancellation of Mallinckrodt agreement,
lower R&D spending and selling, general and administrative
expenses. The lower net loss in the second quarter of 2019 is
primarily attributed to recognition of upfront revenue due to the
cancellation of Mallinckrodt agreement and lower R&D spending
offset by higher selling, general and administrative
expenses.
LIQUIDITY AND CAPITAL RESOURCES
|
|
For the three months ended
|
|
|
|
|
|
February 28,
|
February 29,
|
|
|
|
|
2021
|
2020
|
|
|
|
|
(unaudited)
|
(unaudited)
|
Change
|
|
|
|
$
|
$
|
$
|
%
|
|
Cash
flows provided from (used in) operating activities
|
623
|
(58,570)
|
59,193
|
-101%
|
|
Increase
(decrease) in cash
|
623
|
(58,570)
|
59,193
|
-101%
|
|
Cash,
beginning of period
|
202,046
|
64,622
|
137,424
|
213%
|
|
Cash,
end of period
|
202,669
|
6,052
|
196,617
|
3249%
|
The
Company had cash of $202,669 as at February 28, 2021 compared to
$6,052 as at February 29, 2020. The increase in cash was mainly due
to the receipt of certain payments under the Purdue stipulated
dismissal agreement as well as lower expenditures for R&D and
selling, general, and administrative expenses.
For the
three months ended February 28, 2021, net cash flows provided from
operating activities increased to $623 as compared to net cash
flows used in operating activities of $58,570 for the three months
ended February 29, 2020. The increase was primarily a result of the
significantly lower loss from operations, due to a significant
decrease in R&D and selling, general and administrative
expense, payments received in relation to the Purdue stipulated
dismissal agreement, and a smaller change in accounts payable and
accrued liabilities.
25
R&D
costs, which are a portion of the cash flows used in operating
activities, related to continued internal R&D programs, are
expensed as incurred. However, equipment and supplies are
capitalized and amortized over their useful lives if they have
alternative future uses. For the three months ended February 28,
2021 and the three months ended February 29, 2020, R&D expense
was $547,485, and $947,845, respectively. The decrease is primarily
due to significantly reduced third party consulting fees, decreased
materials expense, decreased patent expenses, and the reduction in
R&D staff.
All
non-cash items have been added back or deducted from the condensed
unaudited interim consolidated statements of cash
flows.
With
the exception of the quarter ended February 28, 2014, the Company
has incurred losses from operations since inception. To date, the
Company has funded its R&D activities principally through the
issuance of securities, loans from related parties, funds from the
IPC Arrangement Transaction and funds received under commercial
license agreements. Since November 2013, research has also been
funded from revenues earned on sales of our generic Focalin
XR® capsules for the 15 and 30 mg strengths. Despite the
launch of the 25 and 35 mg strengths by Par in January 2017, the
launch of the 10 and 20 mg strengths in May 2017 along with the
launch of the 5 and 40 mg strengths in November 2017, we expect
sales of generic Focalin XR®, due to continued competitive
pressures, to continue to be negatively impacted for the next
several quarters. As of February 28, 2021, our cash balance was
$202,669. We currently expect to meet our short-term cash
requirements from quarterly profit share payments from Par and by
cost savings resulting from reduced R&D activities and staffing
levels. If we are able to obtain sufficient funds to supply
products to our marketing and distribution partner, Tris Pharma,
Inc. (“Tris Pharma”) and it achieves sales of our
generic Seroquel XR®, generic
Pristiq® and generic
Effexor XR® products at
anticipated rates, then we may satisfy some of our cash needs with
cost-saving measures. Even if that occurs, we will still need to
obtain additional funding to, among other things, further product
commercialization activities and development of our product
candidates. Potential sources of capital may include, if conditions
permit, equity and/or debt financing, payments from licensing
and/or development agreements and/or new strategic partnership
agreements. The Company has funded its business activities
principally through the issuance of securities, loans from related
parties (see “Related Party Transactions” for more
information related to the terms of such loans and applicable
maturities) and funds from development agreements. There is no
certainty that such funding will be available going forward or, if
it is, whether it will be sufficient to meet our needs. Our
future operations are highly dependent upon our ability to source
additional funding to support advancing our product candidate
pipeline through continued R&D activities and to expand our
operations. Our ultimate success will depend on whether our product
candidates are approved by the FDA, Health Canada, or the
regulatory authorities of other countries in which our products are
proposed to be sold and whether we are able to successfully market
our approved products. We cannot be certain that we will
receive such regulatory approval for any of our current or future
product candidates, that we will reach the level of revenues
necessary to achieve and sustain profitability, or that we will
secure other capital sources on terms or in amounts sufficient to
meet our needs, or at all. Our cash requirements for R&D during
any period depend on the number and extent of the R&D
activities we focus on. At present, we are focused principally on
the development of 505(b)(2) product candidates, such as our
Regabatin™ XR and Oxycodone ER 505(b)(2) product candidates,
and selected generic product candidates as resources permit. Our
development of Oxycodone ER required significant expenditures,
including costs to defend against the Purdue (as defined below)
litigation (as described in the “Legal Proceedings and
Regulatory Actions” section). Some of these costs remain to
be paid by the Company. For our Regabatin™ XR product
candidate, Phase III clinical trials can be capital intensive, and
will only be undertaken consistent with the availability of funds
and a prudent cash management strategy.
On
September 10, 2018, the Company completed a private placement
financing of the unsecured convertible 2018 Debenture in the
principal amount of $0.5 million. The 2018 Debenture was originally
scheduled to mature on September 1, 2020. The 2018 Debenture bears
interest at a rate of 10% per annum, payable monthly, is
pre-payable at any time at the option of the Company and is
convertible at any time into common shares of the Company at a
conversion price of $3.00 per common share at the option of the
holder. Effective September 1, 2020, the maturity date for the 2018
Debenture was extended to November 30, 2020. Effective November 30,
2020, the maturity date for the 2018 Debenture was further extended
to May 31, 2021. No interest was paid on the 2018 Debenture for the
three months ended February 28, 2021.
On
April 4, 2019, a tentative approval from TSX was received for
refinancing of the 2013 Debenture subject to certain conditions
being met. As a result of the refinancing, the principal amount
owing under the 2013 Debenture was refinanced by the May 2019
Debenture. On May 1, 2019, the May 2019 Debenture was issued in the
principal amount of $1,050,000, was originally scheduled to mature
on November 1, 2019, bears interest at a rate of 12% per annum and
is convertible into 1,779,661 common shares of the Company at a
conversion price of $0.59 per common share. Dr. Isa Odidi and Dr.
Amina Odidi, who are shareholders, directors, and executive
officers of the Company, are the holders of the May 2019 Debenture.
The maturity date for the May 2019 Debenture has been extended from
time to time and the maturity date for the May 2019 Debenture is
now May 31, 2021. No interest was paid on the May 2019 Debenture
for the three months ended February 28, 2021.
On
August 26, 2019, the Company completed a private placement
financing of the unsecured August 2019 Debenture in the principal
amount of $140,800. The August 2019 Debenture was originally
scheduled to mature on August 26, 2020, bore interest at a rate of
8% per annum, was pre-payable at any time at the option of the
Company up to 180 days from date of issuance with pre-payment
penalties ranging from 5% - 30% and was convertible at the option
of the holder into common shares after 180 days at a conversion
price which was equal to 75% of the market price (defined as the
average of the lowest three (3) trading prices for the common
shares during the twenty (20) trading day period prior to the
conversion date). The Company incurred $15,800 in debt issuance
costs. In November 2019, the August 2019 Debenture was fully
paid.
26
On
November 15, 2019, the Company completed a private placement
financing of the unsecured November 2019 Debenture in the principal
amount of $0.25 million. The November 2019 Debenture was originally
scheduled to mature on December 31, 2019. The November 2019
Debenture bears interest at a rate of 12% per annum, payable
monthly, is pre-payable at any time at the option of the Company
and is convertible at any time into common shares of the Company at
a conversion price of $0.12 per common share at the option of the
holder. Dr. Isa Odidi and Dr. Amina Odidi, who are shareholders,
directors and executive officers of the Company provided the
Company with the $0.25 million of proceeds for the November 2019
Debenture. The maturity date for the November 2019 Debenture has
been extended from time to time and the maturity date for the
November 2019 Debenture is now May 31, 2021. No interest was paid
on the November 2019 Debenture for the three months ended February
28, 2021.
The
availability of equity or debt financing will be affected by, among
other things, the results of our R&D, our ability to obtain
regulatory approvals, our success in commercializing approved
products with our commercial partners and the market acceptance of
our products, the state of the capital markets generally, our
delisting from Nasdaq, strategic alliance agreements, and other
relevant commercial considerations. In addition, if we raise
additional funds by issuing equity securities, our then existing
security holders will likely experience dilution, and the incurring
of indebtedness would result in increased debt service obligations
and could require us to agree to operating and financial covenants
that would restrict our operations. In the event that we do not
obtain sufficient additional capital, it will raise substantial
doubt about our ability to continue as a going concern, realize our
assets and pay our liabilities as they become due. Our cash
outflows are expected to consist primarily of internal and external
R&D, legal and consulting expenditures to advance our product
pipeline and selling, general and administrative expenses to
support our commercialization efforts. Depending upon the results
of our R&D programs, the impact of the litigation against us
and the availability of financial resources, we could decide to
accelerate, terminate, or reduce certain projects, or commence new
ones. Any failure on our part to successfully commercialize
approved products or raise additional funds on terms favorable to
us or at all, may require us to significantly change or curtail our
current or planned operations in order to conserve cash until such
time, if ever, that sufficient proceeds from operations are
generated, and could result in us not taking advantage of business
opportunities, in the termination or delay of clinical trials or us
not taking any necessary actions required by the FDA or Health
Canada for one or more of our product candidates, in curtailment of
our product development programs designed to identify new product
candidates, in the sale or assignment of rights to our
technologies, products or product candidates, and/or our inability
to file ANDAs, ANDSs or NDAs at all or in time to competitively
market our products or product candidates.
In
March 2019, we received formal notice that a Nasdaq Panel had
determined to delist our shares from Nasdaq based upon our
non-compliance with the $1.00 bid price requirement, as set forth
in Nasdaq Listing Rule 5550(a)(2). The suspension of trading on
Nasdaq took effect at the open of business on March 21, 2019. Our
shares began trading on the OTCQB under the symbol
“IPCIF”, commencing on March 21, 2019. Our shares are
also listed on the TSX under the symbol “IPCI” and our
non-compliance with Nasdaq's requirements did not impact our
listing or trading status on that exchange.
OUTSTANDING SHARE INFORMATION
As at
February 28, 2021, the Company had 23,678,105 common shares issued
and outstanding. There have been no changes to common shares since
November 30, 2020. The number of options outstanding as of February
28, 2021 is 1,554,901, a decrease of 142,737 from November 30,
2020. The decrease is due to the cancellation of 142,737 options
during the three months ended February 28, 2021. The warrants
outstanding as of February 28, 2021 represent 21,784,885 common
shares issuable upon the exercise of 21,923,624 outstanding
warrants. During the three months ended February 28, 2021, no
deferred share units (“DSUs”) were exercised and
converted into common shares. The number of DSUs outstanding as of
February 28, 2021 is Nil. As of April 14, 2021, the number of
common shares outstanding is 23,678,105.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT LIQUIDITY AND MARKET
RISK
Liquidity
risk is the risk that we will encounter difficulty raising liquid
funds to meet our commitments as they fall due. In meeting our
liquidity requirements, we closely monitor our forecasted cash
requirements with expected cash drawdown.
We are
exposed to interest rate risk, which is affected by changes in the
general level of interest rates. Due to the fact that our cash
is deposited with major financial institutions in an interest
savings account, we do not believe that the results of operations
or cash flows would be affected to any significant degree by a
sudden change in market interest rates given their relative
short-term nature.
Trade
accounts receivable potentially subjects us to credit risk. We
provide an allowance for doubtful accounts equal to the estimated
losses expected to be incurred in the collection of accounts
receivable.
27
The
Company is also exposed to credit risk at period end from the
carrying value of its cash. The Company manages this risk by
maintaining bank accounts with a Canadian Chartered Bank. The
Company’s cash is not subject to any external
restrictions.
We are
exposed to changes in foreign exchange rates between the Canadian
and U.S. Dollar which could affect the value of our cash. We had no
foreign currency hedges or other derivative financial instruments
as of February 28, 2021. The Company did not enter into financial
instruments for trading or speculative purposes and we do not
currently utilize derivative financial instruments.
We have
balances in Canadian dollars that give rise to exposure to foreign
exchange risk relating to the impact of translating certain
non-U.S. Dollar balance sheet accounts as these statements are
presented in U.S. Dollars. A strengthening U.S. Dollar will lead to
a foreign exchange loss while a weakening U.S. Dollar will lead to
a foreign exchange gain. For each Canadian dollar balance of $1.0
million, a +/- 10% movement in the Canadian currency held by us
versus the U.S. Dollar would affect our loss and other
comprehensive loss by $0.1 million.
WORKING CAPITAL
Working
capital (defined as current assets minus current liabilities) has
decreased by approximately $0.8 million from November 30, 2020 to
February 28, 2021, mainly as a result of an increase in employee
costs payable and accounts payable and decreases in trade and other
receivables. We continue to explore partnership opportunities for
both currently approved and yet-to-be-approved products, as well as
potential international partnership opportunities for both existing
and future products. We have reduced R&D and other activities,
and the number of employees because of the financial condition of
the Company. While the Company has some flexibility with its level
of expenditures, our future operations are highly dependent upon
our ability to source additional capital to support advancing our
product pipeline through continued R&D activities and to fund
any significant expansion of our operations. Our ultimate success
will depend on whether our product candidates receive the approval
of the FDA, Health Canada, and the regulatory authorities of other
countries in which our products are proposed to be sold and whether
we are able to successfully market our approved products. We cannot
be certain that we will receive FDA, Health Canada, or such other
regulatory approval for any of our current or future product
candidates, that we will reach the level of sales and revenues
necessary to achieve and sustain profitability, or that we can
secure other capital sources on terms or in amounts sufficient to
meet our needs, or at all.
As an
R&D company, we are eligible to receive investment tax credits
from various levels of government under the SR&ED incentive
programs. Depending on the financial condition of our operating
subsidiary, Intellipharmaceutics Corp., R&D expenses in any
fiscal year could be claimed. Eligible R&D expenses include
salaries for employees involved in R&D, cost of materials, new
equipment purchase as well as third party contract services. This
amount is not a reduction in income taxes, but a form of government
refundable credits based on the level of R&D that we carry
out.
In
January 2013, the Company completed the private placement financing
of the unsecured 2013 Debenture in the original principal amount of
$1.5 million. The 2013 Debenture bore interest at a rate of 12% per
annum, payable monthly, was pre-payable at any time at the option
of the Company and was convertible at any time into common shares
at a conversion price of $30.00 per common share at the option of
the holder. Drs. Isa and Amina Odidi, who are directors, executive
officers and shareholders of our Company, provided us with the
original $1.5 million of the proceeds for the 2013 Debenture. In
December 2016, a principal repayment of $150,000 was made on the
2013 Debenture and the maturity date was extended. In December 2018, a principal repayment of
$300,000 was made on the 2013 Debenture and the maturity date was
extended. The maturity date for the 2013 Debenture was
extended from time to time until it was refinanced into the May
2019 Debenture on May 1, 2019.
On
April 4, 2019, a tentative approval from TSX was received for
refinancing of the 2013 Debenture subject to certain conditions
being met. As a result of the refinancing, the principal amount
owing under the 2013 Debenture was refinanced by the May 2019
Debenture. On May 1, 2019, the May 2019 Debenture was issued in the
principal amount of $1,050,000, was originally scheduled to mature
on November 1, 2019, bears interest at a rate of 12% per annum and
is convertible into 1,779,661 common shares of the Company at a
conversion price of $0.59 per common share. Dr. Isa Odidi and Dr.
Amina Odidi, who are shareholders, directors, and executive
officers of the Company, are the holders of the May 2019 Debenture.
The maturity date for the May 2019 Debenture has been extended from
time to time and the maturity date for the May 2019 Debenture is
currently May 31, 2021. No interest was paid on the May 2019
Debenture for the three months ended February 28,
2021.
28
On
September 10, 2018, the Company completed a private placement
financing of the 2018 Debenture in the principal amount of $0.5
million. The 2018 Debenture was scheduled to mature on September 1,
2020. The 2018 Debenture bears interest at a rate of 10% per annum,
payable monthly, is pre-payable at any time at the option of the
Company and is convertible at any time into common shares at a
conversion price of $3.00 per common share at the option of the
holder. Drs.
Isa and Amina Odidi, who are directors, executive officers and
shareholders of our Company, provided the original $500,000 of the
proceeds for the 2018 Debenture. Effective September 1, 2020, the
maturity date for the 2018 Debenture was extended to November 30,
2020. Effective November 30, 2020, the maturity date for the 2018
Debenture was extended to May 31, 2021. No interest was paid on the
2018 Debenture for the three months ended February 28,
2021.
On
August 26, 2019, the Company completed a private placement
financing of the unsecured August 2019 Debenture in the principal
amount of $140,800. The August 2019 Debenture was originally
scheduled to mature on August 26, 2020, bore interest at a rate of
8% per annum, was pre-payable at any time at the option of the
Company up to 180 days from date of issuance with pre-payment
penalties ranging from 5% - 30% and was convertible at the option
of the holder into common shares after 180 days at a conversion
price which was equal to 75% of the market price (defined as the
average of the lowest three (3) trading prices for the common
shares during the twenty (20) trading day period prior to the
conversion date). The Company incurred $15,800 in debt issuance
costs. In November 2019, the August 2019 Debenture was fully
paid.
On
November 15, 2019, the Company completed a private placement
financing of the unsecured convertible November 2019 Debenture in
the principal amount of $0.25 million. The November 2019 Debenture
was originally scheduled to mature on December 31, 2019. The
November 2019 Debenture bears interest at a rate of 12% per annum,
payable monthly, is pre-payable at any time at the option of the
Company and is convertible at any time into common shares of the
Company at a conversion price of $0.12 per common share at the
option of the holder. Dr. Isa Odidi and Dr. Amina Odidi, who are
shareholders, directors and executive officers of the Company
provided the Company with the $0.25 million of proceeds for the
November 2019 Debenture.The maturity date for the November 2019
Debenture has been extended from time to time and the maturity date
for the November 2019 Debenture is currently May 31, 2021. No
interest was paid on the November 2019 Debenture for the three
months ended February 28, 2021.
CONTRACTUAL OBLIGATIONS
In the
table below, we set forth our enforceable and legally binding
obligations and future commitments and obligations related to all
contracts. Some of the figures we include in this table are based
on management’s estimate and assumptions about these
obligations, including their duration, the possibility of renewal,
anticipated actions by third parties, and other factors. Operating
lease obligations relate to the lease of premises for the combined
properties, comprising the Company’s premises that it
operates from at 30 Worcester Road as well as the adjoining
property at 22 Worcester Road, which is indirectly owned by the
same landlord, which will expire in November 2020, subject to a 5
year renewal option. The Company also has an option to purchase the
combined properties up to November 30, 2020, based on a fair value
purchase formula but did not exercise this option in fiscal 2020.
On June 21, 2020, the Company entered into a lease surrender
agreement and vacated the property at 22 Worcester Road on June 30,
2020. On August 20, 2020, the Company extended its lease for the
premises (30 Worcester Road) that it currently operates from, for
one year, commencing December 1, 2020, with an option to continue
on a month-to-month basis after November 30, 2021.
29
The
following are the contractual maturities of the undiscounted cash
flows of financial liabilities as at February 28,
2021:
|
|
Less
than
|
3 to
6
|
6 to
9
|
9
months
|
Greater
than
|
|
|
|
3
months
|
months
|
months
|
to 1
year
|
1
year
|
Total
|
|
|
$
|
$
|
$
|
$
|
$
|
$
|
|
Accounts
payable
|
4,250,690
|
-
|
-
|
-
|
-
|
4,250,690
|
|
Accrued
liabilities
|
1,748,746
|
-
|
-
|
-
|
-
|
1,748,746
|
|
Employee
costs payable
|
1,771,305
|
-
|
-
|
-
|
-
|
1,771,305
|
|
Operating
lease liability
|
41,880
|
41,880
|
41,880
|
-
|
-
|
125,640
|
|
Convertible
debentures
|
1,800,000
|
-
|
-
|
-
|
-
|
1,800,000
|
|
Promissory
notes payable
|
167,224
|
-
|
-
|
-
|
-
|
167,224
|
|
Total
contractual obligations
|
9,779,845
|
41,880
|
41,880
|
-
|
-
|
9,863,605
|
CONTINGENCIES AND LITIGATION
From
time to time, we may be exposed to claims and legal actions in the
normal course of business. As at February 28, 2021, and continuing
as at April 14, 2021, we are not aware of any pending or threatened
material litigation claims against us, other than the following as
described below.
In
November 2016, we filed an NDA for our Oxycodone ER product
candidate, relying on the 505(b)(2) regulatory pathway, which
allowed us to reference data from Purdue's file for its
OxyContin® extended release oxycodone hydrochloride. Our
Oxycodone ER application was accepted by the FDA for further review
in February 2017. We certified to the FDA that we believed that our
Oxycodone ER product candidate would not infringe any of the
OxyContin® patents listed in the Orange Book, or that such
patents are invalid, and so notified Purdue and the other owners of
the subject patents listed in the Orange Book of such
certification.
On
April 7, 2017, we received notice that Purdue, Purdue
Pharmaceuticals L.P., The P.F. Laboratories, Inc., or collectively
the Purdue parties, Rhodes Technologies, and Grünenthal GmbH,
or collectively the “Purdue litigation plaintiffs”, had
commenced patent infringement proceedings, or the Purdue
litigation, against us in the U.S. District Court for the District
of Delaware (docket number 17-392) in respect of our NDA filing for
Oxycodone ER, alleging that our proposed Oxycodone ER infringes 6
out of the 16 patents associated with the branded product
OxyContin®, or the OxyContin® patents, listed in the
Orange Book.
Subsequent
to the above-noted filing of lawsuit, 4 further such patents were
listed and published in the Orange Book. On March 16, 2018, we
received notice that the Purdue litigation plaintiffs had commenced
further such patent infringement proceedings adding the 4 further
patents. On April 15, 2020, Purdue filed a new patent infringement
suit against the Company. The suit was filed in the District of
Delaware, under docket number: 1:20-cv-00515. The new patent suit
relates to additional Paragraph IV certifications lodged against
two more listed Purdue patents.
30
As a
result of the commencement of the first of these legal proceedings,
the FDA was stayed for 30 months from granting final approval to
our Oxycodone ER product candidate. That time period commenced on
February 24, 2017, when the Purdue litigation plaintiffs received
notice of our certification concerning the patents, and would
expire on August 24, 2019, unless the stay is earlier terminated by
a final declaration of the courts that the patents are invalid, or
are not infringed, or the matter is otherwise settled among the
parties. On April 24, 2019, an order was issued, setting a trial
date of November 12, 2019 for case number 17-392 in the District of
Delaware, and also extending the 30-month stay date for regulatory
approval to March 2, 2020.
On or
about June 26, 2018, the court issued an order to sever 6
“overlapping” patents from the second Purdue case, but
ordered litigation to proceed on the 4 new (2017-issued) patents.
An answer and counterclaim was filed on July 9, 2018. On July 6,
2018, the court issued a so-called “Markman” claim
construction ruling on the first case. On July 24, 2018, the
parties to the case mutually agreed to and did have dismissed
without prejudice the infringement claims related to the
Grünenthal ‘060 patent, which is one of the six patents
included in the original litigation case.
On
October 4, 2018, the parties mutually agreed to postpone the
scheduled court date pending a case status conference scheduled for
December 17, 2018. At that time, further trial scheduling and other
administrative matters were postponed pending the Company’s
resubmission of the Oxycodone ER NDA to the FDA, which was made on
February 28, 2019. On January 17, 2019, the court issued a
scheduling order in which the remaining major portions are
scheduled. The trial was scheduled for June 2020.
On
April 4, 2019, the U.S. Federal Circuit Court of Appeals affirmed
the invalidity of one Purdue OxyContin® formulation patent,
subject to further appeal to the U.S. Supreme Court.
Following
the filing of a bankruptcy stay by Purdue Pharma L.P., the
Company’s ongoing litigation case numbers 1:17-cv-00392-RGA
and 1:18-cv-00404-RGA-SRF between Purdue Pharma L.P. et al and
Intellipharmaceutics were stayed and the existing trial dates in
both cases vacated by orders issued in each case by the judge in
the District of Delaware on October 4, 2019. With the litigation
stay order, the previous 30-month stay date of March 2, 2020 was
unchanged.
On or
about July 2, 2020 the parties in the cases, numbers 17-cv-392-RGA,
18-cv-404-RGA and 20-cv-515-RGA (the “Litigations”)
between Purdue Pharma L.P. et al (“Purdue’) and
Intellipharmaceutics entered into a stipulated dismissal of the
Litigations. The stipulated dismissal, which was subject to
approval by the bankruptcy court presiding over Purdue
Pharma’s pending chapter 11 cases, provides for the
termination of the patent infringement proceedings. The stipulated
dismissal also provides that (i) for a thirty (30) day period
following a final approval of the Company’s Aximris
XRTM NDA
the parties will attempt to resolve any potential asserted patent
infringement claims relating to the NDA and (ii) if the parties
fail to resolve all such claims during such period Purdue Pharma
will have fifteen (15) days to pursue an infringement action
against the Company. The terms of the stipulated dismissal
agreement are confidential. On July 28, 2020 the United States
District Court for the District of Delaware signed the stipulations
of dismissal into order thereby dismissing the claims in the three
cases without prejudice. In consideration of the confidential
stipulated dismissal agreement and for future saved litigation
expenses, Purdue paid an amount to the Company.
In July
2017, three complaints were filed in the U.S. District Court for
the Southern District of New York that were later consolidated
under the caption Shanawaz v. Intellipharmaceutics Int’l
Inc., et al., No. 1:17-cv-05761 (S.D.N.Y.). The lead plaintiffs
filed a consolidated amended complaint on January 29, 2018. In the
amended complaint, the lead plaintiffs assert claims on behalf of a
putative class consisting of purchasers of our securities between
May 21, 2015 and July 26, 2017. The amended complaint alleges that
the defendants violated Sections 10(b) and 20(a) of the U.S.
Securities Exchange Act of 1934, as amended, and Rule 10b-5
promulgated thereunder by making allegedly false and misleading
statements or failing to disclose certain information regarding our
NDA for Oxycodone ER abuse-deterrent oxycodone hydrochloride
extended release tablets. The complaint seeks, among other
remedies, unspecified damages, attorneys’ fees and other
costs, equitable and/or injunctive relief, and such other relief as
the court may find just and proper.
In an
order entered at the parties request on May 9, 2019, the Court
stayed proceedings in the action to permit the parties time to
conduct a mediation. As a result of subsequent extensions, the stay
was extended through October 10, 2019. The parties participated in
a mediation on August 1, 2019, during which the parties tentatively
agreed to the terms of a settlement of the action subject to the
satisfaction of certain financial conditions by the
Company.
31
On
November 7, 2019 the Company announced that the parties reached a
settlement that is subject to the approval of the court following
notice to class members. The stipulation of settlement provides for
a settlement payment of US$1.6 million by the Company, which has
been paid from available insurance coverage. As part of the
settlement, the Company also agreed to contribute to the settlement
fund specific anticipated Canadian tax refunds of up to US$400,000
to the extent received within 18 months after the entry of final
judgment. The stipulation of settlement acknowledges that the
Company and the other defendants continue to deny that they
committed any violation of the U.S. securities laws or engaged in
any other wrongdoing and that they are entering into the settlement
at this time based on the burden, expense, and inherent uncertainty
of continuing the litigation.
On
December 7, 2020 the court approved the settlement and entered an
order and final judgement to that effect, thereby concluding the
case.
On
February 21, 2019, the Company and its CEO, Dr. Isa Odidi, were
served with a Statement of Claim filed in the Superior Court of
Justice of Ontario for a proposed class action under the Ontario
Class Proceedings Act. The Action was brought by Victor Romita, the
proposed representative plaintiff, on behalf of a class of Canadian
persons who traded shares of the Company during the period from
February 29, 2016 to July 26, 2017. The Statement of Claim, under
the caption Victor Romita v. Intellipharmaceutics International
Inc. and Isa Odidi, asserted that the defendants knowingly or
negligently made certain public statements during the relevant
period that contained or omitted material facts concerning
Oxycodone ER abuse-deterrent oxycodone hydrochloride extended
release tablets. The plaintiff alleges that he and the class
suffered loss and damages as a result of their trading in the
Company’s shares during the relevant period. The plaintiff
seeks, among other remedies, unspecified damages, legal fees and
court and other costs as the Court may permit. On February 26,
2019, the plaintiff delivered a Notice of Motion seeking the
required approval from the Court, in accordance with procedure
under the Ontario Securities Act, to allow the statutory claims
under the Ontario Securities Act to proceed with respect to the
claims based upon the acquisition or disposition of the
Company’s shares on the TSX during the relevant period. On
June 28, 2019, the Court endorsed a timetable for the exchange of
material leading to the hearing of the Motion scheduled for January
27-28, 2020. On October 28, 2019, plaintiff’s counsel advised
the court that the Plaintiff intended to amend his claim and could
not proceed with the Leave Motion scheduled for January 27-28,
2020. As such, the Court released those dates. On January 28, 2020
the plaintiff served a Notice of Motion for leave to amend the
Statement of Claim. On April 2, 2020 the plaintiff delivered an
Amended Motion Record and Amended Notice of Motion seeking an order
for leave to issue a fresh as Amended Statement of Claim including
the addition of Christopher Pearce as a Plaintiff (“Amendment
Motion”). On May 1, 2020, the court granted the
plaintiff’s Amendment Motion. A tentative settlement has been
reached in this proceeding. A hearing for settlement approval has
now been scheduled for June 25, 2021.
On
October 7, 2019, a complaint was filed in the U.S. District Court
for the Southern District of New York by Alpha Capital Anstalt
(“Alpha”) against the Company, two of its existing
officers and directors and its former Chief Financial Officer. In
the complaint, Alpha alleges that the Company and the executive
officers/directors named in the complaint violated Sections 11,
12(a)(2) and 15 of the U.S. Securities Act of 1933, as amended, by
allegedly making false and misleading statements in the
Company’s Registration Statement on Form F-1 filed with the
U.S. Securities and Exchange Commission on September 20, 2018, as
amended, by failing to disclose certain information regarding the
resignation of the Company’s then Chief Financial Officer,
which was announced several weeks after such registration statement
was declared effective. In the complaint, Alpha seeks unspecified
damages, rescission of its purchase of the Company’s
securities in the relevant offering, attorneys’ fees and
other costs and further relief as the court may find just and
proper. On December 12, 2019, the Company and the other defendants
in the action filed a motion to dismiss for failure to state a
claim. The plaintiff filed an opposition to that motion on February
4, 2020 and a reply brief in further support of the motion to
dismiss the action was filed March 6, 2020. In addition, the Court
scheduled a mandatory settlement conference with the Magistrate
Judge for April 23, 2020 which the Company and its counsel
attended. On June 18, 2020, the court largely denied the
Company’s motion to dismiss the action. Fact discovery is
substantially complete. Motions for summary judgment have been
filed. The Company intends to continue to vigorously defend the
claims asserted in the complaint. However, there can be no
assurance that the case can be resolved in the Company's
favor.
On or
about August 5, 2020 a former employee filed a claim against the
Company for wrongful dismissal of employment plus loss of benefits,
unpaid vacation pay, interest and costs. The parties have agreed to
settlement terms in the matter.
32
RELATED PARTY TRANSACTIONS
In
January 2013, the Company completed the private placement financing
of the unsecured 2013 Debenture in the original principal amount of
$1.5 million. The 2013 Debenture bore interest at a rate of 12% per
annum, payable monthly, was pre-payable at any time at the option
of the Company and was convertible at any time into common shares
at a conversion price of $30.00 per common share at the option of
the holder. Drs. Isa and Amina Odidi, who are directors, executive
officers and shareholders of our Company, provided us with the
original $1.5 million of the proceeds for the 2013 Debenture. In
December 2016, a principal repayment of $150,000 was made on the
2013 Debenture and the maturity date was extended until April 1,
2017. The maturity date for the 2013 Debenture was further extended
from time to time. In December 2018, a
principal repayment of $300,000 was made on the 2013
Debenture. On April 4, 2019, a tentative approval from TSX
was received for refinancing of the 2013 Debenture subject to
certain conditions being met. As a result of the refinancing, the
principal amount owing under the 2013 Debenture was refinanced by
the May 2019 Debenture. On May 1, 2019, the May 2019 Debenture was
issued in the principal amount of $1,050,000, was originally
scheduled to mature on November 1, 2019, bears interest at a rate
of 12% per annum and is convertible into 1,779,661 common shares of
the Company at a conversion price of $0.59 per common share. Dr.
Isa Odidi and Dr. Amina Odidi, who are shareholders, directors, and
executive officers of the Company, are the holders of the May 2019
Debenture. The maturity date for the May 2019 Debenture has been
extended from time to time and the maturity date for the May 2019
Debenture is now May 31, 2021.
On
September 10, 2018, the Company completed the 2018 Debenture
Financing. The 2018 Debenture bears interest at a rate of 10% per
annum, payable monthly, may be prepaid at any time at our option,
and is convertible into common shares at any time prior to the
maturity date at a conversion price of $3.00 per common share at
the option of the holder. Drs. Isa and Amina Odidi, who are
directors, executive officers and shareholders of our Company,
provided us with the original $500,000 of proceeds for the 2018
Debenture. The 2018 Debenture was scheduled to mature on September
1, 2020. The
net proceeds of the 2018 Debenture were used for working capital
and general corporate purposes. Effective September 1, 2020, the
maturity date for the 2018 Debenture was extended to November 30,
2020. Effective November 30, 2020, the maturity date for the 2018
Debenture was extended to May 31, 2021.
In
September 2019, the Company issued two promissory notes payable.
The notes are unsecured, non-interest bearing with no fixed
repayment terms, in the amounts of US$6,500 and CDN$203,886, and
payable to Dr. Isa Odidi and Dr. Amina Odidi, who are stockholders,
directors and executive officers of the Company. The
proceeds from such notes were used for working capital and general
corporate purposes.
On
November 15, 2019, the Company issued the November 2019 Debenture,
an unsecured convertible debenture in the principal amount of
$250,000 that was originally scheduled to mature on December 31,
2019, bears interest at a rate of 12% per annum and is convertible
into common shares of the Company at a conversion price of $0.12
per share. The Company used the proceeds from the November 2019
Debenture for working capital and general corporate purposes. Dr.
Isa Odidi and Dr. Amina Odidi, who are shareholders, directors, and
executive officers of the Company, are the holders of the November
2019 Debenture. The maturity date for the November 2019 Debenture
has been extended from time to time and the maturity date for the
November 2019 Debenture is now May 31, 2021.
No
interest was paid on any of the September 2018, May 2019 and
November 2019 Debentures during the three months ended February 28,
2021.
33
To the
Company’s knowledge, Armistice Capital Master Fund, Ltd.
and/or its affiliates, previously a holder of in excess of 10% of
the Company’s outstanding common shares, participated in (i)
a registered direct offering in October 2017, pursuant to a
placement agent agreement dated October 10, 2017 between the
Company and H.C. Wainwright & Co., LLC
(“Wainwright”), and (ii) the registered direct
offerings completed in March 2018, pursuant to placement agent
agreements dated March 12, 2018 and March 18, 2018 between the
Company and Wainwright; and (iii) the underwritten public offering
completed in October 2018. Armistice Capital, LLC, Armistice
Capital Master Fund, Ltd., and Steven Boyd reported on a Schedule
13-G/A, filed with the SEC on February 14, 2019, that it was the
beneficial owner of less than 10% of the Company’s Common
Shares. A subsequent Schedule 13G filed with the SEC on February
16, 2021, reported that Armistice was the beneficial owner of
2,627,978, representing approximately 9.99% of the Company’s
common shares. Sabby Volatility Warrant Master Fund, Ltd. and its
affiliates reported on a Schedule 13-G/A, filed with the SEC on
January 21, 2020, that they were each the beneficial owner of
1,101,571 common shares of the Company, representing approximately
4.65% of the Company’s common shares at the
time.
The
Company’s Corporate Governance Committee, made up of
independent directors, oversees any potential transaction and
negotiation that could give rise to a related party transaction or
create a conflict of interest, and conducts an appropriate
review.
DISCLOSURE CONTROLS AND PROCEDURES
Under
the supervision and with the participation of our management,
including the Chief Executive Officer and the acting Chief
Financial Officer, we have evaluated the effectiveness of our
disclosure controls and procedures as of February 28, 2021.
Disclosure controls and procedures are designed to ensure that the
information required to be disclosed by the Company in the reports
it files or submits under securities legislation is recorded,
processed, summarized and reported on a timely basis and that such
information is accumulated and communicated to management,
including the Company’s Chief Executive Officer and acting
Chief Financial Officer, as appropriate, to allow required
disclosures to be made in a timely fashion. Based on that
evaluation, management has concluded that these disclosure controls
and procedures were effective as of February 28, 2021.
INTERNAL CONTROL OVER FINANCIAL REPORTING
The
management of our Company is responsible for establishing and
maintaining adequate internal control over financial reporting for
the Company. Internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements
in accordance with generally accepted accounting principles and
includes those policies and procedures that (i) pertain to the
maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the
Company’s assets, (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that the Company’s receipts and
expenditures are being made only in accordance with authorizations
of the Company’s management and directors, and (iii) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
Company’s assets that could have a material effect on the
financial statements.
Management
assessed the effectiveness of the Company’s internal control
over financial reporting using the 1992 Internal Control-Integrated
Framework developed by the Committee of Sponsoring Organizations of
the Treadway Commission ("COSO").
Based
on this assessment, management concluded that the Company’s
internal control over financial reporting was effective as of
February 28, 2021.
34
In the
second quarter of 2017, we initiated the transition from the COSO
1992 Internal Control - Integrated Framework to the COSO
2013 Internal Control - Integrated Framework. Management has
completed the business risk and information technology components
and is working towards completion of controls over financial
reporting as well as fraud risk. We currently expect the transition
to this new framework to continue through the fiscal year 2021.
Although we do not expect to experience significant changes in
internal control over financial reporting as a result of our
transition, we may identify significant deficiencies or material
weaknesses and incur additional costs in the future as a result of
our transition.
Changes in Internal Control over Financial Reporting
During
the three months ended February 28, 2021, there were no changes
made to the Company’s internal control over financial
reporting that have materially affected, or are reasonably likely
to materially affect, the Company’s internal control over
financial reporting, and specifically, there were no changes in
accounting functions, board or related committees and charters, or
auditors; no functions, controls or financial reporting processes
of any constituent entities were adopted as the Company’s
functions, controls and financial processes; and no other
significant business processes were implemented.
OFF-BALANCE
SHEET ARRANGEMENTS
The
Company, as part of its ongoing business, does not participate in
transactions that generate relationships with unconsolidated
entities or financial partnerships, such as entities often referred
to as structured finance or special purpose entities
(“SPE”), which would have been established for the
purpose of facilitating off-balance sheet arrangements or other
contractually narrow or limited purposes. As of February 28, 2021,
the Company was not involved in any material unconsolidated SPE
transactions.
RISKS AND UNCERTAINTIES
We are
a R&D company that received final FDA approval of our once
daily generic Focalin XR® capsules for the 15 and 30 mg
strengths in November 2013. We depend significantly on the actions
of our marketing partner Par in the prosecution, regulatory
approval and commercialization of our generic Focalin XR®
capsules and on their timely payment to us of the contracted
calendar quarterly payments as they come due. Our near-term ability
to generate significant revenue will depend upon successful
commercialization of our products in the U.S., where the branded
Focalin XR® product and the branded Seroquel XR® product
are in the market. Although we have several other products in our
pipeline, and received final approval from the FDA for our generic
Keppra XR® (levetiracetam extended-release tablets) for the
500 and 750 mg strengths, final approval from the FDA for our
generic Glucophage XR® in the 500 and 750 mg strengths, final
approval from the FDA for our generic Effexor XR® in the 37.5,
75, and 150 mg strengths and of our generic Seroquel XR®, and
final approval from the FDA for our generic Pristiq®
(desvenlafaxine extended-release tablets) in the 50 and 100 mg
strengths, the majority of the products in our pipeline are at
earlier stages of development. We are exploring licensing and
commercial alternatives for our generic Seroquel XR®, generic
Keppra XR®, generic Effexor XR® and generic Glucophage
XR® product strengths that have been approved by the FDA.
Potential licensing and commercial alternatives for these products
include licensing and distribution deals for regions outside of
North America. Because of these characteristics, the Company is
subject to certain risks and uncertainties, or risk factors. The
Company cannot predict or identify all such risk factors nor can it
predict the impact, if any, of the risk factors on its business
operations or the extent to which a factor, event or any such
combination may materially change future results of financial
position from those reported or projected in any forward looking
statements. Accordingly, the Company cautions the reader not to
rely on reported financial information and forward-looking
statements to predict actual future results. This document and the
accompanying financial information should be read in conjunction
with this statement concerning risks and uncertainties. Some of the
risks, uncertainties and events that may affect the Company, its
business, operations and results of operations are given in this
section. However, the factors and uncertainties are not limited to
those stated.
We
believe that the revenues derived from our generic Focalin XR®
capsules are subject to wholesaler buying patterns, increased
generic competition negatively impacting price, margins and market
share consistent with industry post-exclusivity experience and, to
a lesser extent, seasonality (as these products are indicated for
conditions including attention deficit hyperactivity disorder which
we expect may see increases in prescription rates during the school
term and declines in prescription rates during the summer months).
Accordingly, these factors may cause our operating results to
fluctuate.
35
Since
we commenced operations, we have incurred accumulated losses
through February 28, 2021. We had an accumulated deficit of
$98,021,116 as of February 28, 2021 and have incurred additional
losses since such date. As we engage in the development of products
in our pipeline, we will continue to incur further losses. There
can be no assurance that we will ever be able to achieve or sustain
profitability or positive cash flow. Our ultimate success will
depend on whether our product candidates receive the approval by
the FDA, Health Canada, and the regulatory authorities of the other
countries in which our products are proposed to be sold and whether
we are able to successfully market the approved products. We cannot
be certain that we will be able to receive FDA, Health Canada, or
such other regulatory approval for any of our current or future
product candidates, that we will reach the level of sales and
revenues necessary to achieve and sustain profitability, or that we
can secure other capital sources on terms or in amounts sufficient
to meet our needs, or at all.
Our
business requires substantial capital investment in order to
conduct the R&D, clinical and regulatory activities and to
defend against patent litigation claims in order to bring our
products to market and to establish commercial manufacturing,
marketing and sales capabilities. In the event that we do not
obtain sufficient additional capital, it will raise substantial
doubt about our ability to continue as a going concern, realize our
assets, and pay our liabilities as they become due.
Nasdaq
delisted our common shares from trading on its exchange which could
limit investors’ ability to make transactions in our shares
and subject us to additional trading restrictions. Subsequent
to Nasdaq delisting our shares from trading on its exchange, our
shares are quoted in the over-the-counter market on the OTCQB. We
could face material adverse consequences due to the delisting of
our shares from Nasdaq, including: (i) a limited availability of
market quotations for our shares; (ii) reduced liquidity for our
shares; (iii) a determination that our common shares are
“penny stock” which will require brokers trading in our
common shares to adhere to more stringent rules and possibly result
in a reduced level of trading activity in the secondary trading
market for our shares; (iv) a limited amount of news and analyst
coverage; and (v) restrictions on our ability to issue additional
securities or obtain additional financing in the
future.
Our
cash outflows are expected to consist primarily of internal and
external R&D, legal and consulting expenditures to advance our
product pipeline and selling, general and administrative expenses
to support our commercialization efforts. Depending upon the
results of our R&D programs, the impact of the litigation
against us and the availability of financial resources, we could
decide to accelerate, terminate, or reduce certain projects, or
commence new ones. Any failure on our part to successfully
commercialize approved products or raise additional funds on terms
favorable to us, or at all, may require us to significantly change
or curtail our current or planned operations in order to conserve
cash until such time, if ever, that sufficient proceeds from
operations are generated, and could result in us not taking
advantage of business opportunities, in the termination or delay of
clinical trials or in not taking any necessary actions required by
the FDA or Health Canada for one or more of our product candidates,
in curtailment of our product development programs designed to
identify new product candidates, in the sale or assignment of
rights to our technologies, products or product candidates, and/or
in our inability to file ANDAs, ANDSs or NDAs at all or in time to
competitively market our products or product
candidates.
We set
goals regarding the expected timing of meeting certain corporate
objectives, such as the commencement and completion of clinical
trials, anticipated regulatory approval and product launch dates.
From time to time, we may make certain public statements regarding
these goals. The actual timing of these events can vary
dramatically due to, among other things, insufficient funding,
delays or failures in our clinical trials or bioequivalence
studies, the uncertainties inherent in the regulatory approval
process, such as failure to secure requested product labeling
approvals, requests for additional information, delays in achieving
manufacturing or marketing arrangements necessary to commercialize
our product candidates and failure by our collaborators, marketing
and distribution partners, suppliers and other third parties to
fulfill contractual obligations. In addition, the possibility of a
patent infringement suit, such as the Purdue litigation, regarding
one or more of our product candidates could delay final FDA
approval of such candidates and materially adversely affect our
ability to market our products. Even if we are found not to
infringe Purdue’s or any other plaintiff’s patent
claims or the claims are found invalid or unenforceable, defending
any such infringement claims could be expensive and time-consuming
and could distract management from their normal responsibilities.
If we fail to achieve one or more of our planned goals, the price
of our common shares could decline.
Emerging
infectious diseases or the threat of outbreaks of viruses or other
contagions or epidemic diseases could have a material adverse
effect on the Company. The ongoing COVID-19 outbreak and pandemic
present complex challenges and uncertainties to organizations
across the world. Businesses face unprecedented times and with the
situation being dynamic, the ultimate duration and magnitude of
COVID-19’s impact on the economy and our business are not
known at this time. Travel bans, self-quarantines and social
distancing have caused material disruptions to businesses globally,
resulting in economic slowdown, with global equity markets
experiencing volatility and weakness. The limitations on travel and
interruption in global shipping could affect the transport of
supplies and raw materials. Any disruption of our suppliers would
likely impact our ability to conduct R&D and commercial
operations, and ultimately materially adversely affect our
operating results.
36
The
extent to which COVID-19 impacts our results will depend on future
developments, which are highly uncertain and cannot be predicted,
including the duration of the outbreak, new information which may
emerge concerning the severity of COVID-19 and the actions to
contain COVID-19 or treat its impact, among others. It is not
possible to reliably estimate length and severity of the
developments and impact on the future financial condition of the
company. The challenges and uncertainties could impair the
Company’s ability to raise capital, postpone research activities, impact
our ability to maintain operations and launch new products; it
could also impair the
value of our shares, our long-lived assets, and materially
adversely impact our ability to generate potential future
revenue.
Further risks and uncertainties affecting us can be found elsewhere
in this document, in our latest Annual Information Form, our latest
Form F-1 and F-3 registration
statements, each as amended or supplemented (including any
documents forming a part thereof or incorporated by reference
therein), and our latest Form 20-F, as amended, and other public
documents filed on SEDAR and EDGAR.
ADDITIONAL INFORMATION
Additional
information relating to the Company, including the Company’s
latest Annual Information Form, our latest Form F-1 and F-3
registration statements, each as amended or supplemented (including
any documents forming a part thereof or incorporated by reference
therein), and latest Form 20-F, as amended, can be located under
the Company’s profile on the SEDAR website at www.sedar.com and on the EDGAR section
of the SEC’s website at www.sec.gov.