General
Burzynski Research Institute, Inc.
(the “Company”) was incorporated under the laws of the State of Delaware in 1984 in order to engage in the research,
production, marketing, promotion and sale of certain medical chemical compounds composed of growth-inhibiting peptides, amino acid
derivatives and organic acids which are known under the trade name “Antineoplastons.” The Company believes Antineoplastons
are useful in the treatment of human cancer and is currently reviewing data of its Phase II clinical trials of Antineoplastons
relating to the treatment of various cancers. Antineoplastons have not been approved for sale or use by the Food and Drug Administration
of the United States Department of Health and Human Services (“FDA”) or anywhere in the world. In the event Antineoplastons
receive such approval and are registered in the United States, Canada, or Mexico, of which there can be no assurance, the Company
will commence commercial operations, which shall include the production, marketing, promotion and sale of Antineoplastons in the
United States, Canada, or Mexico. In 2004, the FDA approved the designation of Antineoplastons as an “orphan drug”
under the Orphan Drug Act of 1983. See “Orphan Drug Designation” below for a detailed description of this designation
and its meaning. The Company currently provides Antineoplastons solely for use by Stanislaw R. Burzynski, M.D., Ph.D. (“Dr. Burzynski”)
in clinical research.
The Company has not generated any significant
operating revenue since its inception. The Company’s sole source of funding for its operations has been and continues to
be payments made by Dr. Burzynski from funds generated from Dr. Burzynski’s medical practice pursuant to various
arrangements between the Company and Dr. Burzynski. See “Certain Relationships and Related Transactions, and
Director Independence.” The Company reports funds pursuant to such arrangements as additional paid-in capital. See
“Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The Company
does not expect to generate significant operating revenue until such time, if any, as Antineoplastons are approved for use and
sale by the FDA. However, the Company may seek additional funding for operations through the sale of its securities.
Antineoplastons
Dr. Burzynski commenced his cancer
research in 1967 focusing on the isolation of various biochemicals produced by the human body as part of the body’s possible
defense against cancer. In the course of his research, Dr. Burzynski identified certain peptides, amino acid derivatives and
organic acids in these biochemicals which appear to inhibit the growth of cancer cells. These derivatives were given the name “Antineoplastons”
by Dr. Burzynski.
Antineoplastons are found in the bodily
fluids of humans and food and were initially isolated by Dr. Burzynski from normal human blood and urine. Dr. Burzynski
believes these substances counteract the development of cancerous growth through a biochemical process which does not inhibit the
growth of normal tissues. To date, Dr. Burzynski has developed six formulations of natural Antineoplastons and six synthetic
formulations of Antineoplastons. The Phase III clinical trial currently sponsored by the Company (which has not started enrollment)
will involve the use of two formulations of synthetic Antineoplastons known as A10 and AS2-1 injections.
Orphan Drug Designation
On September 3, 2004, the FDA granted
the Company’s request for “orphan drug designation” (“ODD”) for the Company’s Antineoplastons
(A10 & AS2-1 Antineoplaston) for treatment for patients with brain stem glioma and, on October 30, 2008, the FDA
granted the Company’s request for ODD for Antineoplastons (A10 and AS2-1 Antineoplaston) for the treatment of gliomas. In
enacting the Orphan Drug Act of 1983, Congress sought to provide incentives to promote the development of drugs for the treatment
of rare diseases. A drug may be considered for orphan drug designation if the drug is intended to treat a rare disease or condition
affecting fewer than 200,000 people in the United States or, even if the drug treats a disease affecting more than 200,000 people
in the United States, the drug is not expected to be profitable from sales in the United States. Subject to applicable laws and
regulations, the first sponsor to obtain FDA marketing approval for a drug with orphan drug designation for the designated disease
or condition receives limited marketing exclusivity for seven years; no other sponsor may bring to market the “same drug”
for the treatment of the same disease or condition for a period of seven years from the date the application is approved by the
FDA. A drug with orphan drug designation must meet the same criteria for safety and efficacy as a drug without orphan drug designation.
Please see “Government Regulation” for a description of the regulatory approval process with the FDA and other
regulatory agencies.
Phase II Clinical Trials
The Company began Phase II clinical studies
in 1994 with four studies. At that time, a number of patients were also receiving Antineoplastons at Dr. Burzynski’s
clinic in Houston, Texas (the “Burzynski Clinic”) outside these clinical trials. On February 23, 1996, the FDA
requested that all then-current patients of the Burzynski Clinic desiring to continue Antineoplaston treatment be admitted to a
Phase II Study, according to Protocol CAN-1. This action resulted in the formation of six cohorts of patients in the CAN-1 study,
with the largest group suffering from primary brain tumors.
The Company received IRB approval on February 4,
2015 for FDA reviewed, open label, phase II study of Antineoplaston A10 and AS2-1 in patients with a Diffuse Intrinsic Brainstem
Glioma (DIPG) in five treatment groups based on patients age and prior treatment.
On April 20, 2016, the Company received
a full clinical hold letter from the FDA based on FDA’s inspection of S.R. Burzynski’s manufacturing facility in March 2015.
On April 27, 2016, the Company requested to change the full clinical hold to partial clinical hold to allow patient #1 (“patient
#1”) to continue the Antineoplaston treatment according to protocol BT-55, since the patient was enrolled before the full
clinical hold was imposed. Based on the FDA’s position regarding the Company’s request on April 27, 2016 and the
Company’s teleconference with the FDA on May 3, 2016, the Company removed patient #1 from the study.
A temporary restraining order from the US
District Court of Rhode Island allowed the resumption of patient #1’s Antineoplaston therapy on May 17, 2016. As a result
of such temporary restraining order, a subsequent letter from the FDA dated May 26, 2016 informed the Company that the full
clinical hold was replaced and a partial clinical hold was imposed. As a result, patient #1 restarted treatment under IND 43742.
On June 14, 2016, the FDA issued a
letter to the Company in connection with the FDA’s inspection of S.R. Burzynski’s manufacturing facility (the “SRB
Manufacturing”) in March 2015. The SRB Manufacturing addressed the issues raised in the letter in a response letter
submitted to the FDA on July 5, 2016 and in subsequent letters.
On February 20, 2017, BRI informed
the FDA the death of patient #1 on February 19, 2017. No new patients can be enrolled to protocol BT-55 or BT-52 until partial
hold on IND 43742 is lifted. On August 24, 2017, the FDA imposed a full clinical hold on IND 43742 until deficiencies regarding
the SRB Manufacturing are resolved.
All Phase II clinical trials were for the
treatment of a wide variety of cancers using only a combination of Antineoplastons A10 and AS2-1. Most of the trials involve the
use of intravenous formulations of Antineoplastons; however, a few trials use oral formulations. Dr. Burzynski acts as principal
investigator for all clinical trials pursuant to a Royalty Agreement between the Company and Dr. Burzynski. See “Certain
Relationships and Related Transactions, and Director Independence.” All of the clinical trials were conducted at the
Burzynski Clinic. Each trial provided for the admission of up to 40 patients, except the CAN-1 study, in which 133 patients were
enrolled.
Nineteen publications by Burzynski Clinic
resulting from the trials have been published in peer-reviewed medical journals:
(1) Burzynski, S., Janicki, T., Burzynski,
G., Marszalek, A. Long-term survival (>13 years) in a child with recurrent diffuse pontine gliosarcoma: A case report. J Ped
Hematol Oncol 2013; doi: 10.1097/MPH.0000000000000020;
(2) Burzynski, S.R., Janicki, T.J.,
Burzynski, G.S. A phase II study of antineoplastons A10 and AS2-1 in adult patients with recurrent glioblastoma multiforme. Final
report (Protocol BT-21). J Cancer Ther 2014;5:946-956;
(3) Burzynski, S.R., Janicki, T.J.,
Burzynski, G.S., Marszalek, A., Brookman, S. A phase II study of antineoplastons A10 and AS2-1 in children with recurrent, refractory
or progressive primary brain tumors. Final report (Protocol BT-22). J Cancer Ther 2014;5:977-988;
(4) Burzynski, S.R., Janicki, T.J.,
Burzynski, G.S., Marszalek, A. A phase II study of antineoplastons A10 and AS2-1 in children with high-grade glioma. Final report
(Protocol BT-06), and review of recent trials. J Cancer Ther 2014;5:565-577;
(5)Burzynski S.R., Burzynski G.S., Janicki
T.J. Recurrent glioblastoma multiforme - A strategy for long-term survival. Journal of Cancer Therapy, 2014,5,957-976;
(6) Burzynski, S.R., Janicki, T.J.,
Burzynski, G.S. A phase II study of antineoplastons A10 and AS2-1 in adult patients with recurrent anaplastic astrocytoma. Final
report (Protocol BT-15). Cancer and Clinical Oncology; Vol. 4, No. 2, 2015;
(7) Burzynski, S.R., Janicki, T.J.,
Burzynski, G.S., Marszalek, A. A phase II study of antineoplastons A10 and AS2-1 in patients with brainstem gliomas. The report
on non-diffuse intrinsic pontine glioma (Protocol BT-11). J Cancer Ther 2015;6:334-344;
(8) Burzynski, S.R., Janicki, T.J.,
Burzynski, G.S., Marszalek, A. A phase II study of antineoplastons A10 and AS2-1 in adult patients with newly-diagnosed anaplastic
astrocytoma. Final report (Protocol BT-08). Cancer Clin Oncol 2015;4(1):28-38;
(9) Burzynski, S.R., Janicki, T.J.,
Burzynski, G.S., Marszalek, A. The response and survival of children with recurrent diffuse intrinsic pontine glioma based on phase
II study of antineoplastons A10 and AS2-1 in patients with brainstem glioma. Child’s Nervous System 2014;30(12):2051-2061;
(10) Burzynski, S.R., Burzynski,.
Marszalek, A., Janicki, J., Martinez-Canca, J. Long-term survival (over 20 years), complete response and normal childhood development
in medulloblastoma treated with Antineoplastons A10 and AS2-1. J Neurol Stroke 2015, 2(3): 00054;
(11) Burzynski, S.R., Burzynski, G.S., Marszalek,
A., Janicki, T.J., Martinez-Canca, J.F. Long-term survival over 21 years and pathologically confirmed complete response in pediatric
anaplastic astrocytoma: A case report. J Neurol Stroke 2015;2(6):00072;
(12) Burzynski, S.R., Janicki, J., Burzynski,
G. Comprehensive genomic profiling of recurrent classic glioblastoma in a patient surviving eleven years following antineoplaston
therapy. Cancer Clin Oncol 2015;4(2)41-52;
(13) Burzynski, S.R., Burzynski, G., Janicki,
J., Marszalek, A. Complete response and Long-term survival (>20 years) of a child with tectal glioma: A case report. Pediatr
Neurosurg DOI: 10.1159/000369907;
(14) Burzynski, S.R., Janicki, J., Burzynski,
G. A phase II study of Antineoplastons A10 and AS2-1 adult patients with primary brain tumors. Final Report (Protocol BT-09) Journal
of Cancer Therapy, 2015, 6, 1063-1074;
(15) Burzynski, S.R., Janicki, J., Burzynski,
G. Primary CNS tumors and Leptomeningeal, Disseminated and/or Multicentric disease in children treated in Phase II studies with
Antineoplastons A10 and AS2-1. Cancer and Clinical Oncology; Vol. 5, No. 2; 2016;
(16) Burzynski, S.R., Janicki, J., Burzynski,
G. A phase II study of antineoplastons A10 and AS2-1 in children with low-grade astrocytomas—Final report (Protocol BT-13).
Cancer Ther 2016; 7(12):837-850.
(17) Burzynski, S.R., Janicki, J., Burzynski,
G. Antineoplastons A10 and AS2-1 in the Treatment of children with optic pathway glioma: Final Report for protocol BT-23. Cancer
and Clinical Oncology; Vol. 6, No. 1; 2017.
(18) Burzynski, S.R., Janicki, J., Burzynski,
G. A phase II study of Antineoplastons A10 and AS2-1 in children with brain tumors. Final Report (Protocol BT-10). Journal of Cancer
Therapy, 2017,8, 173-187.
(19) Burzynski S.R., Janicki, T., Beenken,
S. Treatment of Recurrent Glioblastoma Multiforme (rGBM) with Antineoplaston AS2-1 in Combination with Targeted Therapy. Cancer
and Clinical Oncology; Vol.8, No. 1; 2019.
One additional publication has been published
in 2015 by Kurume University Medical Center in Japan: (20) Ogata, Y., Matono K., Tsuda, H., Ushijima, M., Uchida, S., Akagi, Y.,
Shirouzu, K. Randomized Phase II Study of 5-Fluorouracil Hepatic Arterial Infusion with or without Antineoplastons as an Adjuvant
Therapy after Hepatectomy for Liver Metastases from Colorectal Cancer. PLOS One (Public Library of Science) DOI:10.1371/journal.pone.0120064.
Prior to approving a New Drug Application
(“NDA”), the FDA requires that a drug’s safety and efficacy be demonstrated in “well-controlled”
clinical trials. The efficacy of the Company’s trials is determined by the protocol specified endpoint of “objective
response” (i.e., significant shrinkage or disappearance of the tumor). Several types of controls are acceptable to the FDA.
One of these is a “Historic Control.” Under a Historic Control if the course of a disease is well-known, the response
of patients taking a drug can be compared to a historic group of patients with that disease. For example, it is known that the
tumors of patients suffering from primary malignant brain tumors (“PMBT”) will continue to grow, eventually causing
the patient’s death. If a drug is administered to a patient with PMBT and the tumors of the patient disappear or shrink significantly,
an assumption is made that there has been a response to the drug. The results of other clinical trials conducted or published when
the Company’s protocol were active are used by us as historical control.
All of the Company’s clinical trials,
except one, involve the use of Historic Controls. Further, all trials except the CAN-1 study are “prospective clinical trials”
(“PCT”). A PCT is a clinical trial wherein patients are accrued into and follow the clinical trial protocol from the
very beginning of the trial. A retrospective trial is a trial in which data from patients treated prior to the start of a clinical
trial is considered. Results of retrospective trials are, in most instances, not acceptable to the FDA. In addition, there are
no clinical trials being conducted that involve “double blind” studies and all but one clinical trial involve no randomization
into multiple treatment groups.
The ultimate goal of any treatment for cancer
is patient survival. However, the FDA has determined that requiring exhaustive data showing improved patient survival may unnecessarily
delay the approval of new cancer drugs. For that reason, the FDA may grant marketing approval for a new drug product on the basis
of adequate and well-controlled clinical trials establishing that the drug has an effect on a surrogate endpoint (“Milestone”)
that is reasonably likely to predict clinical benefit. Each of the Company’s Phase II trials describes such Milestones which
are used to determine success or failure of the treatment employed. In most of the trials, the Milestones are radiographic evidence
of tumor shrinkage by X-ray, computer aided tomography or magnetic resonance imaging. Where appropriate, tumor markers such as
Prostate Specific Antigen, blood counts, or bone marrow biopsy are used in order to assess a tumor’s growth.
Where tumor size is used as the Milestone,
each clinical trial protocol describes a “complete response” as a complete disappearance of all tumors with no recurrence
of tumors for at least four weeks. A “partial response” is described as at least a 50% reduction in total tumor size,
with such reduction lasting at least four weeks. An “objective response” is described as either a complete or partial
response for protocols BT-06, BT-07, BT-08, BT-09, BT-10, BT-11, BT-12, BT-13, BT-15, BT-21, BT-22 and BT-23. “Stable disease”
is described as less than 50% reduction in size but no more than 25% increase in size of the tumor mass lasting for at least twelve
weeks and 50% increase in CAN-1 protocol.
The protocols of the Company’s clinical
trials involve a two-stage design, wherein the first stage proceeds until the Company admits 20 patients into the trial. After
a specified time period, if there were zero responses by the first 20 patients, the trial would be discontinued and the drug declared
to have less than desired activity. If there was at least one response, the trial would be continued until forty patients had been
accrued. If the study continued, the following conclusions according to protocols based on 40 patients can be made: If there were
three or fewer responses, then there is less than desired activity. If there were four or more responses, then there was sufficient
evidence to conclude that the Antineoplaston regimen used showed beneficial activity.
Certain prospective Phase II protocols which
reached a Milestone as of February 29, 2020:
|
|
·
|
Protocol BT-06, involving the study of Antineoplastons A10 and AS2-1 in children with high grade glioma (study and special
exception patients). Objective responses: 4 patients (2 patients with a complete response and 2 patients with a partial response);
Stable disease: 3 patients.
|
|
|
·
|
Protocol BT-07, involving the study of Antineoplastons A10 and AS2-1 in patients with glioblastoma multiforme, not treated
with radiation therapy or chemotherapy (study and special exception patients). Objective responses: 5 patients (2 patients with
a complete response and 3 patients with a partial response); Stable disease: 5 patients.
|
|
|
·
|
Protocol BT-08, involving the study of Antineoplastons A10 and AS2-1 in patients with anaplastic astrocytoma. Objective responses:
4 patients (3 patients with a complete response and 1 patient with a partial response); Stable disease: 5 patients.
|
|
|
·
|
Protocol BT-09, involving the study of Antineoplastons A10 and AS2-1 in patients with brain tumors. Objective responses: 9
patients (4 patients with a complete response and 5 patients with a partial response); Stable disease: 12 patients.
|
|
|
·
|
Protocol BT-10, involving the study of Antineoplastons A10 and AS2-1 in children with brain tumors. Objective responses: 7
patients (2 patients with a complete response and 5 patients with a partial response); Stable disease: 5 patients.
|
|
|
·
|
Protocol BT-11, involving the study of Antineoplastons A10 and AS2-1 in patients with brainstem glioma. Objective responses:
9 patients (5 patients with a complete response and 4 patients with a partial response); Stable disease: 8 patients.
|
|
|
·
|
Protocol BT-12, involving the study of Antineoplastons A10 and AS2-1 in children with primitive neuroectodermal tumors (PNET).
Objective responses: 4 patients (3 patients with a complete response and 1 patient with a partial response); Stable disease: 1
patient.
|
|
|
·
|
Protocol BT-13, involving the study of Antineoplastons A10 and AS2-1 in children with low grade astrocytoma. Objective responses:
5 patients (4 patients with a complete response and 1 patient with a partial response); Stable disease: 4 patients.
|
|
|
·
|
Protocol BT-15, involving the study of Antineoplastons A10 and AS2-1 in adult patients with anaplastic astrocytoma. Objective
responses: 5 patients (2 patients with a complete response and 3 patients with a partial response); Stable disease: 6 patients.
|
|
|
·
|
Protocol BT-21, involving the study of Antineoplastons A10 and AS2-1 in adults with primary malignant brain tumors. Objective
responses: 4 patients (2 patients with a complete response and 2 patients with a partial response); Stable disease: 4 patients.
|
|
|
·
|
Protocol BT-22, involving a study of Antineoplastons A10 and AS2-1 in children with primary malignant brain tumors (study and
special exception patients). Objective responses: 5 patients (1 patient with a complete response and 4 patients with a partial
response); Stable disease: 8 patients.
|
|
|
·
|
Protocol BT-23, involving a study of Antineoplastons A10 and AS2-1 in children with visual pathway glioma. Objective responses:
4 patients (2 patients with a complete response and 2 patients with a partial response); Stable disease: 3 patients.
|
|
|
·
|
Protocol CAN-1, involving a study of Antineoplastons A-10 and AS2-1 in 35 evaluable brain tumor patients. Complete and partial
responses were obtained in patients diagnosed with glioblastoma multiforme, astrocytoma, oligodendroglioma, mixed glioma, medulloblastoma,
and malignant meningioma. Objective responses: 17 patients (12 patients with a complete response and 5 patients with a partial
response); Stable disease: 11 patients.
|
The results of Protocols BT-06, BT-07, BT-08,
BT-09, BT-10, BT-11, BT-12, BT-13, BT-15, BT-20, BT-21, BT-22 and BT-23 are set forth below (as of November 30, 2019).
Protocol
Number
|
|
Patients
Accrued
|
|
|
Evaluable
Patients
|
|
|
Number and
Percentage of
Patients Showing
Complete
Response**
|
|
|
Number and
Percentage of
Patients Showing
Partial
Response**
|
|
|
Number and
Percentage of
Patients Showing
Stable Disease**
|
|
|
Number and
Percentage of
Patients Showing
Progressive
Disease**
|
|
|
BT-06*
|
|
|
19
|
|
|
|
11
|
|
|
|
2
|
|
|
|
18.2
|
%
|
|
|
2
|
|
|
|
18.2
|
%
|
|
|
3
|
|
|
|
27.3
|
%
|
|
|
4
|
|
|
|
36.4
|
%
|
|
BT-07*
|
|
|
102
|
|
|
|
69
|
|
|
|
2
|
|
|
|
2.9
|
%
|
|
|
3
|
|
|
|
4.3
|
%
|
|
|
5
|
|
|
|
7.2
|
%
|
|
|
59
|
|
|
|
85.5
|
%
|
|
BT-08
|
|
|
19
|
|
|
|
18
|
|
|
|
3
|
|
|
|
16.7
|
%
|
|
|
1
|
|
|
|
5.5
|
%
|
|
|
5
|
|
|
|
27.8
|
%
|
|
|
9
|
|
|
|
50.0
|
%
|
|
BT-09
|
|
|
40
|
|
|
|
31
|
|
|
|
4
|
|
|
|
12.9
|
%
|
|
|
5
|
|
|
|
16.1
|
%
|
|
|
12
|
|
|
|
38.7
|
%
|
|
|
10
|
|
|
|
32.3
|
%
|
|
BT-10
|
|
|
34
|
|
|
|
30
|
|
|
|
2
|
|
|
|
6.7
|
%
|
|
|
5
|
|
|
|
16.7
|
%
|
|
|
5
|
|
|
|
16.7
|
%
|
|
|
18
|
|
|
|
60.0
|
%
|
|
BT-11
|
|
|
40
|
|
|
|
31
|
|
|
|
5
|
|
|
|
16.1
|
%
|
|
|
4
|
|
|
|
12.9
|
%
|
|
|
8
|
|
|
|
25.8
|
%
|
|
|
14
|
|
|
|
45.2
|
%
|
|
BT-12
|
|
|
13
|
|
|
|
12
|
|
|
|
3
|
|
|
|
25.0
|
%
|
|
|
1
|
|
|
|
8.3
|
%
|
|
|
1
|
|
|
|
8.3
|
%
|
|
|
7
|
|
|
|
58.3
|
%
|
|
BT-13
|
|
|
11
|
|
|
|
9
|
|
|
|
4
|
|
|
|
44.4
|
%
|
|
|
1
|
|
|
|
11.1
|
%
|
|
|
4
|
|
|
|
44.4
|
%
|
|
|
0
|
|
|
|
0.0
|
%
|
|
BT-15
|
|
|
27
|
|
|
|
21
|
|
|
|
2
|
|
|
|
9.5
|
%
|
|
|
3
|
|
|
|
14.3
|
%
|
|
|
6
|
|
|
|
28.6
|
%
|
|
|
10
|
|
|
|
47.6
|
%
|
|
BT-21
|
|
|
40
|
|
|
|
27
|
|
|
|
2
|
|
|
|
7.4
|
%
|
|
|
2
|
|
|
|
7.4
|
%
|
|
|
4
|
|
|
|
14.8
|
%
|
|
|
19
|
|
|
|
70.4
|
%
|
|
BT-22*
|
|
|
43
|
|
|
|
32
|
|
|
|
1
|
|
|
|
3.1
|
%
|
|
|
4
|
|
|
|
12.5
|
%
|
|
|
8
|
|
|
|
25.0
|
%
|
|
|
19
|
|
|
|
59.4
|
%
|
|
BT-23
|
|
|
12
|
|
|
|
8
|
|
|
|
2
|
|
|
|
25.0
|
%
|
|
|
2
|
|
|
|
25.0
|
%
|
|
|
3
|
|
|
|
37.5
|
%
|
|
|
1
|
|
|
|
12.5
|
%
|
|
|
*
|
includes Special Exception patients
|
|
|
**
|
percentage is calculated vs. evaluable patients
|
The Phase II Study according to Protocol
CAN-1 included 35 evaluable brain tumor patients. Complete and partial responses were obtained in patients diagnosed with glioblastoma
multiforme, astrocytoma, oligodendroglioma, mixed glioma, medulloblastoma, and malignant meningioma. The treatment with Antineoplastons
A10 and AS2-1 resulted in 17 (48.6%) cases of objective responses and 11 (31.4%) cases of stable disease defined as less than 50%
reduction, or less than 50% increase in size of the tumor mass, lasting for at least 12 weeks. The largest group of evaluable patients
involved in the study had glioblastoma multiforme. Six of the cases were classified as complete and partial responses, four obtained
stabilization and four developed progression of the disease.
Of the 2,297 patients who have received
at least one dose of Antineoplastons, the serious adverse events (SAEs) which have been experienced are as follows: hemoglobin
(grade 3: 3 patients; grade 4: 1 patient), extravasation (grade 3: 1 patient), pain related to the central venous catheter (grade
3: 1 patient), fatigue (grade 3: 2 patients; grade 4: 1 patient), fever (grade 3: 2 patients), injection site reaction (grade 3:
1 patient), vomiting (grade 3: 2 patients), hypernatremia (grade 3: 2 patients; grade 4: 28 patients; grade 5: 6 patients-not confirmed
by autopsy), confusion (grade 3: 1 patient), seizure (grade 3: 1 patient), somnolence (grade 3: 8 patients; grade 4: 1 patient),
pain: head/headache (grade 3: 2 patients) and pain: joint (grade 3: 1 patient). 491 out of 2,298 patients experienced hypernatremia
that was possibly related to the study drug, regardless of severity.
Notwithstanding the response results of
the trials that have reached a Milestone, management believes it is likely that the FDA may require additional clinical trials
based upon such protocols to be conducted by an institution not affiliated with the Company or Dr. Burzynski before advising
that an NDA filing is warranted. In addition, the FDA has indicated it will not accept the efficacy data, but will accept toxicity
data generated by the Phase II study according to Protocol CAN-1 because the trial was partially retrospective. At this time, the
Company cannot predict if and/or when it will submit an NDA to the FDA, nor can the Company estimate the number or type of additional
trials the FDA may require. Further, there can be no assurance that an NDA for Antineoplastons, as a treatment for cancer, will
ever be approved by the FDA.
No assurance can be given that any new IND
for clinical tests on humans will be approved by the FDA for human clinical trials on cancer or other diseases, that the results
of such human clinical trials will prove that Antineoplastons are safe or effective in the treatment of cancer or other diseases,
or that the FDA would approve the sale of Antineoplastons in the United States.
Phase III Clinical Trials
On January 13, 2009, the Company announced
that it reached an agreement with the FDA that enabled the Company to move forward immediately with a pivotal Phase III clinical
trial of combination Antineoplaston therapy plus radiation therapy in patients with newly-diagnosed, diffuse, intrinsic brainstem
glioma. The agreement was made under the FDA’s Special Protocol Assessment procedure and means that the design and planned
analysis of the Phase III study is acceptable to support a regulatory submission seeking new drug approval. However, the FDA placed
a full clinical hold on IND 43,742 regarding such Phase III clinical trial. Please see the section below entitled “Clinical
Hold on Phase II and Phase III Clinical Trials.”
Clinical Hold on Phase II and Phase III Clinical Trials
In a letter dated June 25, 2012, the
Company informed the FDA of a serious adverse event in which a patient who was receiving Antineoplastons developed grade 4 hypernatremia
and subsequently died. The Antineoplaston-related hypernatremia was categorized by the investigator as possibly related to the
study drug. Of the 2297 patients who have received at least one dose of Antineoplastons, the serious adverse events (SAEs) which
have been experienced are as follows: hemoglobin (grade 3: 0.13%; grade 4: 0.04%), extravasation (grade 3: 0.04%), pain (grade
3: 0.04%), fatigue (grade 3: 0.09%; grade 4: 0.04%), fever (grade 3: 0.09%), injection site reaction (grade 3: 0.04%), vomiting
(grade 3: 0.09%), hypernatremia (grade 3: 0.09%; grade 4: 1.12%; grade 5: 0.26%), confusion (grade 3: 0.04%), seizure (grade 3:
0.04%), somnolence (grade 3: 0.35%; grade 4: 0.04%), pain: head/headache (grade 3: 0.09%) and pain: joint (grade 3: 0.04%).
On July 30, 2012, the FDA placed a
partial clinical hold for enrollment of new pediatric patients under single patient protocols or in any of the active Phase II
or Phase III studies under investigational new drug application (“IND”) 43,742. The FDA imposed this partial clinical
hold because, according to the FDA, insufficient information had been submitted by the Company to allow the FDA to determine whether
the potential patient benefit justifies the potential risks of treatment use, and that the potential risks are not unreasonable
in the context of the disease or condition to be treated. The FDA cited 21 C.F.R. § 312.42(b)(2)(i), 21 C.F.R. § 312.42(b)(1)(iv),
and 21 C.F.R. § 312.42(b)(3)(i), as grounds for imposition of a clinical hold; and 21 C.F.R. § 312.305(a)(2), a criteria
for expanded access use. The FDA advised the Company that until it resolved the matter to FDA’s satisfaction, the Company
could not enroll new pediatric patients in any protocol under such IND. The Company later notified the FDA in a September 24,
2012 letter that it was closing pediatric protocol BT-10 (under IND 43,742) for enrollment effective September 25, 2012, and
that it would also terminate the protocol once all active patients had completed the study. As of February 17, 2015, all patients
discontinued treatment under protocol BT-10 and such protocol was closed as of March 10, 2015.
In a teleconference on January 9, 2013
between the FDA and the Company, followed by a letter of the same date, the FDA notified the Company that the agency was placing
IND 43,742 on partial clinical hold, due to a lack of a complete response to the issues raised by the FDA and what the FDA deemed
a misleading, erroneous, and incomplete investigator brochure. The FDA cited 21 C.F.R. § 312.42(b)(2)(i) and 21 C.F.R.
§ 312.42(b)(1)(iii), as grounds for imposition of a clinical hold. The FDA further advised the Company that until it resolved
the matter to the FDA’s satisfaction, that the Company could not enroll new adult or pediatric patients in any protocol under
such IND. The FDA also placed protocol BT-52 on clinical hold due to what the FDA deemed to be an unreasonable and significant
risk of illness or injury to human subjects. The FDA cited 21 C.F.R. § 312.42(b)(2)(i) and 21 C.F.R.§ 312.42(B)(1)(i),
as grounds for imposition of a clinical hold. The FDA advised the Company that until it resolved the matter to FDA’s satisfaction,
the Company could not legally conduct the identified clinical study under such IND. In a teleconference with the FDA on September 16,
2013 and pursuant to the Company’s notification letter dated September 17, 2013, the Company notified the FDA that the
proposed Phase III protocol BT-54 had been withdrawn from further consideration.
After several amendments to the IND which
were reviewed by the FDA, the FDA concluded that BT-52 can be initiated and partial clinical hold was removed by the FDA on June 20,
2014.
Additionally, the Company received IRB approval
on February 4, 2015 for FDA reviewed, open label, phase II study of Antineoplaston A10 and AS2-1 in patients with a Diffuse
Intrinsic Brainstem Glioma (DIPG) in five treatment groups based on patients age and prior treatment.
On April 20, 2016, the Company received
a full clinical hold letter from the FDA based on FDA’s inspection of S.R. Burzynski’s manufacturing facility in March 2015.
On April 27, 2016, the Company requested to change the full clinical hold to partial clinical hold to allow patient #1 to
continue the Antineoplaston treatment according to protocol BT-55, since the patient was enrolled before the full clinical hold
was imposed. Based on the FDA’s position regarding the Company’s request on April 27, 2016 and the Company’s
teleconference with the FDA on May 3, 2016, the Company removed patient #1 from the study.
A temporary restraining order from the US
District Court of Rhode Island allowed the resumption of patient #1’s Antineoplaston therapy on May 17, 2016. As a result
of such temporary restraining order, a subsequent letter from the FDA dated May 26, 2016 informed the Company that the full
clinical hold was replaced and a partial clinical hold was imposed. As a result, Patient #1 restarted treatment under IND 43742.
On June 14, 2016, the FDA issued a
letter to the Company in connection with the FDA’s inspection of S.R. Burzynski’s manufacturing facility in March 2015.
The SRB Manufacturing addressed the issues raised in the letter in a response letter submitted to the FDA on July 5, 2016
and in subsequent letters.
On February 20, 2017, BRI informed
the FDA the death of patient #1 on February 19, 2017. No new patients can be enrolled to protocol BT-55 or BT-52 until partial
hold on IND 43742 is lifted. On August 24, 2017, the FDA imposed a full clinical hold on IND 43742 until deficiencies regarding
the SRB Manufacturing are resolved.
Complaint Filed by the Texas Medical Board Against Dr. Burzynski
On March 3, 2017, the Texas Medical
Board issued their final ruling regarding the complaint filed on December 11, 2013 and subsequently amended in July 2014
and November 2014, against Dr. Stanislaw R. Burzynski, who serves as our President and the Chairman of our Board of Directors.
The Texas Medical Board made allegations that Dr. Burzynski had acted unprofessionally and failed to meet standards of care
under the state’s Medical Practice Act. In the final ruling, the Texas Medical Board found that Dr. Burzynski was subject
to sanction for various failures that included supervision of foreign medical graduates, untimely and insufficient informed consent,
medical record support documentation, tumor measurement reporting inaccuracy, and lack of disclosure of ownership interest in a
pharmacy. As a result, Dr. Burzynski was reprimanded. His Texas license was suspended for five years but that
suspension was stayed and he was placed under probation under terms and conditions that include having billing practice monitored
by a billing monitor for 12 consecutive monitoring cycles, enrolling and completing a physicians education program ethics course,
following informed consent protocol, passing the Medical Jurisprudence Examination, and compliance with the Medical Practice Act
and other statutes regulating Dr. Burzynski’s practice. As requested as part of the terms and conditions, Dr. Burzynski
has completed payment of an administrative penalty and restitution, submission of all informed consent forms for review, submission
of an ownership interest disclosure form for review, and he has completed continuing medical education. The Company does
not believe that the final order will have an adverse impact on current activities at the Burzynski clinic. However,
if any outcomes or changes arise relating to similar matters or future allegations, this could result in substantial harm to the
Company’s business and operations.
Government Regulation
The FDA imposes substantial requirements
upon, and conditions precedent to, the introduction of therapeutic drug products to the marketplace. Seeking marketing authorization
for a new drug is a lengthy, complex, and costly process. To seek FDA approval for Antineoplastons, the Company must first complete
extensive preclinical and clinical research, and submit data from this research and supporting information to the FDA to demonstrate
that the use of Antineoplastons for the indication sought meets the statutory standards for safety and effectiveness, manufacturing
and controls, and labeling.
The approval process takes many years, requires
the expenditure of substantial resources and may involve ongoing requirements for post-marketing studies. Additional government
regulation may be established that could prevent or delay regulatory approval of Antineoplastons. Moreover, there can be no assurance
that the Company can satisfy FDA requirements to gain approval for Antineoplastons in the United States or that FDA approval for
the sale of Antineoplastons in the United States will be obtained. If regulatory approval is granted, the approval may include
significant limitations on the indicated uses for which Antineoplastons may be marketed.
The effect of the FDA drug approval process
for Antineoplastons may impose costly procedures upon the Company’s activities which may furnish a competitive advantage
to the other companies that compete with the Company in the field of cancer treatment drugs. The extent of potentially adverse
government regulations which might arise from future legislation or administrative action cannot be predicted.
The Investigational New Drug Application
Process in the United States is governed by regulations established by the FDA which strictly control the use and distribution
of investigational drugs in the United States. The guidelines require that an IND, filed by a sponsor, contain sufficient information
to justify administering the drug to humans, that the application include relevant information on the chemistry, pharmacology and
toxicology of the drug derived from chemical, laboratory and animal or in vitro testing, and that a protocol be provided for the
initial study of the new drug to be conducted on humans.
In order to conduct a clinical trial of
a new drug on humans, a sponsor must prepare and submit to the FDA a comprehensive IND. Such application must contain an investigator’s
brochure, a description of the composition, manufacture and control of the drug substance and the drug product, sufficient information
to assure the proper identification, quality, purity and strength of the investigational drug, a description of the drug substance,
including its physical, chemical, and biological characteristics, the general method of preparation of the drug substance, a list
of all components including interactive ingredients, adequate information about pharmacological and toxicological studies of the
drug involving laboratory animals or in vitro tests on the basis of which the sponsor has concluded that it is reasonably safe
to conduct the proposed clinical investigation and a summary of any previous human experience with the drug. Where there has been
widespread use of the drug outside of the United States or otherwise, it is possible in some limited circumstances to use well-documented
clinical experience in place of some other pre-clinical work.
The focal point of the IND is on the general
investigational plan and the protocols for specific human studies. The sponsor of the study is subject to numerous requirements
for the proper conduct and oversight of the study, including the protection of human subjects. The plan is carried out in three
phases, and earlier phase trials are not necessarily predictive of results in later clinical trials. Phase I includes the initial
introduction of an investigational new drug into humans and may be conducted in patients or normal volunteer subjects. The studies
are closely monitored to determine the metabolism and pharmacologic actions of the drug in humans and the potential side effects
and, if possible, to gain early evidence on effectiveness. During Phase I testing, sufficient information about the drug is gathered
to design well-controlled, scientifically valid Phase II studies. Phase II includes controlled clinical studies conducted to evaluate
the effectiveness of the drug for a particular indication in patients with the disease or condition under study and to determine
the common short-term side effects and risks associated with the drug. Phase II studies are controlled, closely monitored and conducted
in a relatively small number of patients, usually involving no more than several hundred subjects. Phase III includes expanded
controlled and uncontrolled trials and are intended to gather the additional information about effectiveness and safety that is
needed to evaluate the overall benefit-risk relationship of the drug and to provide an adequate basis for physician labeling. Phase
III studies usually include anywhere from several hundred to several thousand subjects.
An IND will automatically become effective
30 days after receipt by the FDA, unless before that time the FDA raises concerns about issues such as the conduct of the trials
as outlined in the IND. After the IND becomes effective, the investigation is permitted to proceed, during which the sponsor must
keep the FDA informed of new studies, including animal studies, make progress reports on the study or studies covered by the IND,
and also be responsible for informing FDA and clinical investigators immediately of unforeseen serious side effects or injuries.
There can be no assurance that Phase I, Phase II or Phase III testing will be completed successfully by the Company within any
specified period of time, if at all. Furthermore, the Company or the FDA may suspend clinical trials at any time on various grounds,
including a finding that the subjects or patients are being exposed to an unacceptable health risk.
Assuming successful completion of the clinical
studies, the results of the studies, together with other detailed information, including, among other information, details concerning
the manufacture and composition of the drug, proposed labeling, environmental impact and the scientific rationale for the drug,
its intended use and the potential benefits of the drug product are submitted to the FDA in the form of an NDA requesting approval
to market the drug. If the FDA finds the NDA submission and the manufacturing process to be acceptable and to meet the criteria
for approval, the FDA will issue an approval letter. If the FDA determines that an NDA cannot be approved as submitted, it will
send the applicant a “Complete Response” letter to indicate that the review cycle for an application is complete, that
the application is not ready for approval, and to describe specific deficiencies. In addition to the postmarketing requirements
that apply to all marketed drugs, the FDA may impose, as a condition of approval, postmarketing requirements such as postmarketing
study commitments, or other limitations or restrictions. Product approvals may be withdrawn by the FDA, following notice of opportunity
for a hearing if problems concerning safety or efficacy of a drug or the sponsor’s compliance with regulatory requirements.
The Company’s use of Milestones to
predict the benefits of Antineoplastons is relevant to the FDA approval process. If surrogate endpoints are used, for regular approval
(i.e., the longstanding FDA route of drug approval based on the demonstration of clinical benefit) an applicant must show direct
evidence of clinical benefit or improvement in an established surrogate for clinical benefit. For “accelerated approval,”
a process potentially available for pharmaceutical agents that treat serious or life-threatening diseases and conditions, surrogate
endpoints must be reasonably likely to predict clinical benefit. When appropriate, the Company intends to pursue opportunities
for accelerated review of its products. However, the Company has not yet received any accelerated approvals for any of the Company’s
product candidates. The Company cannot predict the ultimate effect of this review process on the timing or likelihood of FDA review
of any of its products. Adequacy as a surrogate endpoint for regular or accelerated approval is highly dependent upon a variety
of factors including effect size, effect duration, and benefits of other available therapy.
A drug’s approval under the accelerated
approval regulations is conditioned on the conduct of postapproval clinical studies to verify and describe the actual clinical
benefit. Further, the FDA may also impose postmarketing restrictions to assure safe use of a drug product that was subject to accelerated
approval. For drugs approved under FDA’s accelerated procedures, the FDA may withdraw approval of the drug on an expedited
basis if the applicant fails to perform the required postmarketing study with due diligence, use of the drugs demonstrates that
post-marketing restrictions are inadequate to assure safe use of the drug, the applicant fails to adhere to the postmarketing restrictions
agreed upon, the promotional materials are false or misleading, or other evidence demonstrates that the drug is not shown to be
safe or effective under its conditions of use.
The testing and approval process requires
substantial time, effort and financial resources, and there can be no assurance that any approval will be granted for any product
or that approval will be granted according to any schedule. Moreover, if regulatory approval of a drug is granted, the approval
will be limited to specific indications. There can be no assurance that any of the Company’s product candidates will receive
regulatory approvals for commercialization.
Please see “Orphan Drug Designation”
for a description of the FDA’s orphan drug designation under the Orphan Drug Act of 1983 as it applies to the Company’s
Antineoplastons.
Even if the regulatory approvals for the
Company’s products are obtained, its products and its manufacturing facility are subject to ongoing compliance obligations.
The FDA will require postmarketing monitoring and reporting related to the safety of the Company’s products. The Company’s
drug manufacturing facility, and the facility of any third-party contracted to manufacture the products, must comply with the FDA’s
current good manufacturing practice (“GMP”) regulations, which are strictly enforced. Manufacturing facilities will
be subject to periodic inspection by FDA. Full technical compliance requires manufacturers to expend funds, time and effort in
the area of production and quality control. In addition, discovery of problems with a product after approval or failure to comply
with applicable FDA or other applicable regulatory requirements may result in enforcement actions and restrictions on a product,
manufacturer, or holder of an approved NDA, including restrictions on the product, manufacturer or facility, including warning
letters, suspension of regulatory approvals, operating restrictions, delays in obtaining new product approvals, withdrawal of the
product from the market, product recalls, fines, injunctions and criminal prosecution. New government requirements may be established
that could delay or prevent regulatory approval of the Company’s products under development or impose additional compliance
obligations before or after approval.
The Company’s research and development
involves the controlled use of hazardous materials, chemicals and various radioactive compounds. Although the Company believes
its procedures for handling and disposing of those materials comply with state and federal regulations, the risk of accidental
contamination or injury from these materials cannot be eliminated. If an accident of this type occurs, the Company could be held
liable for resulting damages, which could be material to its financial condition and business. The Company is also subject to numerous
environmental, health and workplace safety laws and regulations, including those governing laboratory procedures and the handling
of biohazardous materials. Additional federal, state and local laws and regulations affecting the Company may be adopted in the
future. Any violation of these laws and regulations, and the cost of compliance, could materially and adversely affect the Company.
For the year ended February 29, 2020, the Company spent approximately $6,000 on environmental compliance matters. The Company
expects to spend approximately $10,000 for repairs and upgrades during the fiscal year ending February 28, 2021.
Government Notices and Regulations
On March 15, 2013, the Company received
a Notice of Inspectional Observations (FDA Form 483) from the FDA. During an inspection, the FDA observed (1) failure
to monitor the progress of an investigation conducted under the IND and (2) failure to obtain from an investigator sufficient
financial information to allow complete and accurate certification or disclosure statements. In response to the observations, the
Company provided explanation as to the nature of monitoring procedures, initiated new monitoring practices (effective May 2013)
engaging scientifically qualified individuals to conduct Good Clinical Practice (GCP) monitoring and project management, initiated
a process to collect financial disclosure information from sub-investigators and amended protocols to reflect current understanding
of response criteria.
On December 3, 2013, the Company received
a Warning Letter from the FDA. The FDA noted concerns regarding the (1) failure to ensure proper monitoring of the investigations
and failure to ensure that the investigations are conducted in accordance with the general investigational plan and protocols contained
in the IND; and (2) failure to obtain from an investigator sufficient financial information to allow the sponsor to submit
complete and accurate certification or disclosure statements. In order to address the FDA concerns, the Company provided information
regarding ongoing review of patient information, agreed to submit protocol amendments to reflect current standard of practice for
corticosteroid use, separated monitoring activities between the Company and the Burzynski Clinic, revised the informed consent
and checklist, and updated financial disclosures.
The Company received IRB approval on February 4,
2015 for FDA reviewed, open label, phase II study of Antineoplaston A10 and AS2-1 in patients with a Diffuse Intrinsic Brainstem
Glioma (DIPG) in five treatment groups based on patients age and prior treatment.
On April 20, 2016, the Company received
a full clinical hold letter from the FDA based on FDA’s inspection of S.R. Burzynski’s manufacturing facility in March 2015.
On April 27, 2016, the Company requested to change the full clinical hold to partial clinical hold to allow patient #1 to
continue the Antineoplaston treatment according to protocol BT-55, since the patient was enrolled before the full clinical hold
was imposed. Based on the FDA’s position regarding the Company’s request on April 27, 2016 and the Company’s
teleconference with the FDA on May 3, 2016, the Company removed patient #1 from the study.
A temporary restraining order from the US
District Court of Rhode Island allowed the resumption of patient #1’s Antineoplaston therapy on May 17, 2016. As a result
of such temporary restraining order, a subsequent letter from the FDA dated May 26, 2016 informed the Company that the full
clinical hold was replaced and a partial clinical hold was imposed. As a result, patient #1 restarted treatment under IND 43742.
On June 14, 2016, the FDA issued a
letter to the Company in connection with the FDA’s inspection of S.R. Burzynski’s manufacturing facility in March 2015.
The Company addressed the issues raised in the letter in a response letter submitted to the FDA on July 5, 2016 and in subsequent
letters.
On February 20, 2017 BRI informed the
FDA the death of patient #1 on February 19, 2017. No new patients can be enrolled to protocol BT-55 or BT-52 until full hold
on IND 43742 is lifted.
Phase 3 clinical trial will commence upon
availability of funds and until full hold on IND 43742 is lifted.
Research and Development
The Company’s principal research and
development efforts currently focus on Antineoplastons. The anticancer activity of these compounds has been documented in preclinical
studies employing the methods of cell culture, pharmacology, cell biology, molecular biology, experimental therapeutics and animal
models of cancer. At the level of Phase II clinical studies, the Company believes the anticancer activity of Antineoplastons is
supported by preliminary results from FDA-authorized, Phase II clinical trials.
The cellular mechanism underlying the anticancer
effects of Antineoplastons continues to be investigated in both the Company’s own basic preclinical research program and
in independent laboratories around the world. A review of this work suggests several mechanisms that may underlie the antineoplastic
activity of Antineoplastons. For example, it has been found, in cell culture experiments, that Antineoplastons induce pathologically
undifferentiated cancer cells to assume a more normal state of differentiation. Cell culture experiments have also shown that Antineoplaston
components can kill some cancer cells by activating the cell’s intrinsic “suicide” program. It must be noted
that data collected in cell culture experiments may or may not indicate the mechanism of action of Antineoplastons in humans.
At a more molecular or sub-cellular level,
cell culture experiments have shown that Antineoplastons can block biochemical pathways involving oncogenes required to produce
abnormal cell growth. In addition, cell culture experiments have shown that Antineoplastons can increase the expression of anticancer
tumor suppressor genes. Although these experiments were conducted using human cancer cells, they may or may not indicate the mechanism
of Antineoplaston action in humans.
In addition to the original family of Antineoplaston
compounds (the “Parental Generation”), the Company continues its development of a second generation of Antineoplastons.
In cell culture experiments, the second generation Antineoplastons, which were developed by the Company, have been shown to be
significantly more potent than the Parental Generation.
The Company uses various scientific reagents
from several different suppliers to conduct its research activities.
Total research and development costs for
the fiscal years ended February 29, 2020 and February 28, 2019 were approximately $1,203,000 and 1,146,000, respectively.
Intellectual Property
Since 1984, eight patents involving the
formulation, preparation, manufacture, production, use, dosage and treatment of cancer with Antineoplastons (the “Patents”)
have been issued to Dr. Burzynski by the United States Patent Office and the Patent Offices of 34 other countries. The Patents
for cancer treatment and diagnosis in the United States and Canada were licensed to the Company pursuant to a License Agreement
dated June 29, 1983, as superseded by an Amended License Agreement dated April 24, 1989 and a Second Amended License
Agreement dated March 1, 1990 (collectively, the “License Agreement”). Pursuant to the License Agreement, the
Company held an exclusive right in the United States, Canada, and Mexico (the “Territory”) to use, manufacture, develop,
sell, distribute, sub-license and otherwise exploit all of Dr. Burzynski’s rights, title, and interests, including patent
rights, in Antineoplastons in the treatment and diagnosis of cancer. See “Certain Relationships and Related Transactions,
and Director Independence.” The Company will not be able to exploit such rights until such time as Antineoplastons are
approved, of which there can be no assurance, by the FDA for sale in the United States. The License Agreement was in effect until
the expiration of the last Patent that was licensed under the agreement or termination pursuant to certain other provisions. The
Company and Dr. Burzynski also entered into a Royalty Agreement, dated March 25, 1997, and a First Amended Royalty Agreement,
dated September 29, 1997 (collectively, the “Royalty Agreement”), pursuant to which Dr. Burzynski will receive
a royalty interest from all future sales, distribution, and manufacture of Antineoplastons by the Company. The Company had, pursuant
to the License Agreement, exclusive rights to eight issued United States Patents, four issued Canadian Patents and one issued Mexican
Patent, which have all expired.
The five initial United States Patents (the
“Initial Patents”) relate to: (i) Determination of Antineoplastons in body tissue or fluids as a testing procedure
to aid in the diagnosis of cancer; (ii) Processes for the preparation of purified fractions of Antineoplastons from human
urine; (iii) Processes for the synthetic production of Antineoplastons and methods of treating neoplastic disease (cancer);
(iv) Administration of Antineoplastons to humans; and (v) Methods of synthesizing A-10. The last of the Initial Patents
expired on January 11, 2009.
The sixth United States Patent (the “2000
U.S. Patent”) covers Liposomal Antineoplaston therapies with markedly improved anticancer activity. The 2000 U.S. Patent
expired on May 14, 2017.
The seventh United States Patent (the “2001
U.S. Patent”) is for a treatment regimen for the administration of phenylacetylglutamine, phenylacetylisoglutamine, and/or
phenylacetate. The 2001 U.S. Patent expired on July 23, 2018.
The eighth United States Patent (the “2005
U.S. Patent”) relates to a divisional application to the 2001 U.S. Patent. The 2005 U.S. Patent expired on July 31,
2018.
The four Canadian Patents (the “Canadian
Patents”) relate to: (i) Processes for the preparation of purified fractions of Antineoplastons from human urine, (ii) Processes
for the synthetic production of Antineoplastons and methods of treating neoplastic disease (cancer), (iii) Liposomal formulation
of Antineoplastons and (iv) Treatment regimen for the administration of phenylacetylglutamine. The last of the Canadian Patents
expired on July 2, 2019.
The
Mexican Patent relates to a treatment regimen for the administration of phenylacetylglutamine. This patent expired on January 14,
2019.
Pursuant to the terms of the License Agreement,
the License Agreement terminated on July 2, 2019 upon the expiration of the last patent licensed to the Company from Dr. Burzynski.
As of July 2, 2019, all patents previously licensed by the Company under the License Agreement have expired.
The Company depends upon unpatented proprietary
technology, and may determine in appropriate circumstances that its interest would be better served by reliance upon trade secrets
or confidentiality agreements rather than patents.
The Company’s success will depend
in part on its ability to obtain future patents for its products, preserve its trade secrets, and operate without infringing on
the proprietary rights of third parties in the United States, Canada, and Mexico. Because of the substantial length of time and
expense associated with bringing new products through development and regulatory approval to the marketplace, the pharmaceutical
and biotechnology industries place considerable importance on obtaining and maintaining patent and trade secret protection for
new technologies, products and processes. There can be no assurance that the Company will develop additional products and methods
that are patentable or that present or future patents will provide sufficient protection to the Company’s present or future
technologies, products and processes. In addition, there can be no assurance that others will not independently develop substantially
equivalent proprietary information, design around the Company’s products or obtain access to the Company’s know-how
or that others will not successfully challenge the validity of the Company’s future patents, if any, or be issued patents
which may prevent the sale of one or more of the Company’s product candidates, or require licensing and the payment of significant
fees or royalties by the Company to third parties in order to enable the Company to conduct its business. Legal standards relating
to the scope of claims and the validity of patents in the fields in which the Company is pursuing research and development are
still evolving, are highly uncertain and involve complex legal and factual issues. No assurance can be given as to the degree of
protection or competitive advantage any patents issued to the Company will afford, the validity of any such patents or the Company’s
ability to avoid violating or infringing any patents issued to others. Further, there can be no guarantee that any patents issued
to or licensed by the Company will not be infringed upon by the products of others. Litigation and other proceedings involving
the defense and prosecution of patent claims can be expensive and time consuming, even in those instances in which the outcome
is favorable to the Company, and can result in the diversion of resources from the Company’s other activities. An adverse
outcome could subject the Company to significant liabilities to third parties, require the Company to obtain licenses from third
parties or require the Company to cease any related research and development activities or sales.
The Company depends upon the knowledge,
experience and skills (which are not patentable) of its key scientific and technical personnel. To protect its rights to its proprietary
information, the Company requires all employees, consultants, advisors and collaborators to enter into confidentiality agreements
which prohibit the disclosure of confidential information to anyone outside the Company and require disclosure and assignment to
the Company of their ideas, developments, discoveries and inventions. There can be no assurance that these agreements will effectively
prevent the unauthorized use or disclosure of the Company’s confidential information.
ANTINEOPLASTON® is a trademark
registered with the U.S. Patent and Trademark Office.
Competition
There are many companies, universities,
research teams and scientists, both private and government-sponsored, that are engaged in research to produce cancer treatment
agents and that have greater financial resources and larger research staffs and facilities than the Company. In addition, there
are other companies and entities, both private and government-sponsored, that are engaged in research aimed at compounds similar
or related to the Company’s Antineoplastons. To the extent that the United States Government also conducts research or supports
other companies or individuals in their research, such companies or individuals may have a competitive advantage over the Company.
Employees
As of February 29, 2020, the Company
had no full-time employees.
An investment in our common stock involves significant risks.
You should carefully consider the risks described below and the other information in this Annual Report on Form 10-K, including
our financial statements and related notes, before you decide to invest in our common stock. If any of the following risks or uncertainties
actually occurs, our business, results of operations or financial condition could be materially harmed, the trading price of our
common stock could decline and you could lose all or part of your investment. The risks and uncertainties described below are those
that we currently believe may materially affect us; however, they may not be the only ones that we face. Additional risks and uncertainties
of which we are unaware or currently deem immaterial may also become important factors that may harm our business.
Risks Relating to our Business
Products that appear promising in research and development
may be delayed or may fail to reach later stages of clinical development.
The successful development of pharmaceutical products is highly
uncertain. Products that appear promising in research and development may be delayed or fail to reach later stages of development.
Additionally, the ongoing or future trials for Antineoplaston may fail to demonstrate that our product candidate is sufficiently
safe and effective to warrant further development. Furthermore, decisions regarding the further development of product candidates
must be made with limited and incomplete data, which makes it difficult to accurately predict whether the allocation of limited
resources and the expenditure of additional capital on specific product candidates will result in desired outcomes. Preclinical
and clinical data can be interpreted in different ways, and negative or inconclusive results or adverse medical events during a
clinical trial could delay, limit or prevent the development of a product candidate, which could harm our business, financial condition
or the trading price of our securities. There can be no assurance as to whether or when we will receive regulatory approvals for
any of our product candidates.
There is no assurance that Antineoplaston will be safe,
effective or receive regulatory approval.
The risks associated with the development of Antineoplaston
are significant. Clinical data may fail to establish that Antineoplaston is effective in treating brain cancer or may indicate
safety profile concerns not indicated by our current clinical data. If the results of our current trials or of future trials do
not indicate a favorable safety and efficacy profile for Antineoplaston, or otherwise fail to support the continued development
of Antineoplaston, a substantial decline in the price of our common stock could result. There can be no assurance as to whether
we will be able to successfully develop and commercialize Antineoplaston.
Our source of funding is limited. If we fail to obtain
additional financing when needed, we may be unable to complete the development, regulatory approval and commercialization of Antineoplaston.
The Company has incurred negative cash flows since inception,
and expects to continue to expend substantial funds to continue its research and development programs. The Company’s existing
resources may be insufficient to fund the Company’s operating expenses and capital requirements. The Company’s sole
source of funding for its operations has been and continues to be payments made by Dr. Burzynski from funds generated from
Dr. Burzynski’s medical practice pursuant to the Research Funding Agreement. While the Company anticipates that Dr. Burzynski
will continue to fund the Company’s research costs, there is no assurance that Dr. Burzynski will be able to continue
to fund the Company’s operations pursuant to the Research Funding Agreement or otherwise. Because the Company currently is
entirely dependent upon the contributions for research provided by Dr. Burzynski under the Research Funding Agreement, the
Company would not be able to continue conducting its clinical trials if Dr. Burzynski ceased funding the Company’s research.
In such event, the Company would be required to find immediate funding which may not be available on acceptable terms or at all.
If this were to occur and the Company were not able to find adequate sources of funding, the Company would be required to cease
operations. Even with Dr. Burzynski’s continued contributions under the Research Funding Agreement, the Company may
be required to seek additional capital through equity or debt financing or the sale of assets until the Company’s operating
revenues are sufficient to cover operating costs and provide positive cash flow; however, there can be no assurance that the Company
will be able to raise such additional capital on acceptable terms to the Company. In addition, there can be no assurance that the
Company will achieve positive operating cash flow.
If financing is available, it may be on terms that adversely
affect the interests of our existing stockholders or restrict our ability to conduct our operations. To the extent that we raise
additional funds through collaboration and licensing arrangements, we may be required to relinquish some rights to our technologies
or product candidates, or grant licenses on terms that are not favorable to us. Our actual capital requirements will depend on
numerous factors, including:
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activities and arrangements related to the commercialization of our product candidates;
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the progress of our research and development programs;
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the progress of pre-clinical and clinical testing of our product candidates;
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the time and cost involved in obtaining regulatory approvals for our product candidates;
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the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights with respect
to our intellectual property;
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our capacity to enter into collaborative or licensing agreements;
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the effect of competing technological and market developments; and
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the terms of any collaborative, licensing and other arrangements that we may establish.
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If we require additional financing and cannot secure sufficient
financing on acceptable terms, we may need to delay, reduce or eliminate some or all of our research and development programs,
any of which could have a material adverse effect on our business and financial condition.
We have a history of net losses, we anticipate additional
losses and we may not become profitable.
We have incurred net losses in each fiscal year since we commenced
our research activities. Our losses have resulted primarily from expenses incurred in research and development of our product candidate.
We may make significant capital commitments to fund the development of our product candidates. If these development efforts are
unsuccessful, the development costs would be incurred without any future revenue, which could have a material adverse effect on
our financial condition. We do not know when or if we will complete our product development efforts, receive regulatory approval
for any of our product candidates, or successfully commercialize any approved products. As a result, it is difficult to predict
the extent of any future losses or the time required to achieve profitability, if at all. Any failure of our products to complete
successful clinical trials and obtain regulatory approval and any failure to become and remain profitable could adversely affect
the price of our common stock and our ability to raise capital and continue operations.
The failure to enroll patients for clinical trials may
cause delays in developing our product candidates.
We may encounter delays if we are unable to enroll enough patients
to timely initiate or complete clinical trials. Patient enrollment depends on many factors, including, the size of the patient
population, the nature of the protocol, the proximity of patients to clinical sites and the eligibility criteria for the trial
and competition for patients in completing trials. We are focused on the treatment of cancer patients, which can be a difficult
patient population to recruit. If we fail to enroll patients for clinical trials, our clinical trials may be delayed or suspended,
which could delay our ability to generate revenues or raise capital to fund our operations.
There is no assurance that we will be granted regulatory
approval for Antineoplaston.
There can be no assurance that our clinical trials for Antineoplaston
will demonstrate sufficient safety and efficacy to obtain the requisite regulatory approvals. A number of companies in the biotechnology
and pharmaceutical industries, including our company, have suffered significant setbacks in advanced clinical trials, even after
promising results in earlier trials. Further, we may be unable to submit applications to regulatory agencies within the time frame
we currently expect. Once submitted, applications must be approved by various regulatory agencies before we can commercialize the
product described in the application. Additionally, even if applications are submitted, regulatory approval may not be obtained
for any of our product candidates, and regulatory agencies could require additional studies to verify safety or efficacy, which
could make further development of our product candidates impracticable. If our product candidates are not shown to be safe and
effective in clinical trials, we may not receive regulatory approval, which would have a material adverse effect on our business,
financial condition and results of operations.
Clinical trials are expensive and time consuming, and
any failure or delay in commencing or completing clinical trials for our product candidates could severely harm our business.
Our product candidates must undergo extensive pre-clinical studies
and clinical trials as a condition to regulatory approval. Pre-clinical studies and clinical trials are expensive and take many
years to complete. The commencement and completion of clinical trials for our product candidates may be delayed by many factors,
including:
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safety issues or side effects;
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delays in patient enrollment and variability in the number and types of patients available for clinical trials, including the
placement by the FDA of any clinical hold for the enrollment of new patients;
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poor effectiveness of product candidates during clinical trials;
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governmental or regulatory delays and changes in regulatory requirements, policy and guidelines;
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our ability to obtain regulatory approval to commence a clinical trial and conduct a trial in accordance with good clinical
practices;
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our ability to manufacture or obtain from third parties materials sufficient for use in pre-clinical studies and clinical trials;
and
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varying interpretation of data by the FDA and similar foreign regulatory agencies.
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It is possible that Antineoplaston will never complete clinical
trials in any of the markets in which we intend to sell those product candidates. Accordingly, we may not receive the regulatory
approvals necessary to market Antineoplaston. Any failure or delay in commencing or completing clinical trials or obtaining regulatory
approvals for product candidates would prevent or delay their commercialization and severely harm our business and financial condition.
We depend on the Burzynski Clinic (and, possibly, in the
future, other third-parties) to conduct and manage our clinical trials. If the Burzynski Clinic and these other third-parties do
not successfully carry out their contractual duties or meet expected timelines, we may face costs and delays that may prevent or
delay us from obtaining regulatory approval for or commercializing our product candidates, which could substantially harm our business.
We rely on clinical investigators and the Burzynski Clinic to
enroll patients and to manage our clinical trials. We control only certain aspects of these third-parties’ activities. Nevertheless,
we are responsible for ensuring that each of our studies is conducted in accordance with the prescribed protocol, and the applicable
legal, regulatory and scientific standards. Moreover, the FDA and foreign regulatory agencies require us to comply with regulations
and standards, commonly referred to as good clinical practices, for conducting, recording and reporting the results of clinical
trials to assure that data and reported results are credible and accurate and that the trial participants are adequately protected.
Our reliance on third parties does not relieve us of these responsibilities and requirements. If these third parties do not successfully
carry out their contractual duties or regulatory obligations or meet expected deadlines, if the third parties need to be replaced
or if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to our clinical protocols or
regulatory requirements or for other reasons, our pre-clinical development activities or clinical trials may be extended, delayed,
suspended or terminated, and we may not be able to obtain regulatory approval for our product candidates.
Antineoplaston may never achieve market acceptance even
if we obtain regulatory approval.
Even if we receive regulatory approvals for the commercial sale
of Antineoplaston, the commercial success of Antineoplaston will depend on, among other things, its acceptance by physicians, patients,
third-party payers such as health insurance companies and other members of the medical community as a therapeutic and cost-effective
alternative to competing products and treatments. New patterns of care, alternative new treatments or different reimbursement and
payor paradigms, possibly due to economic conditions or governmental policies, could negatively impact the commercial viability
of Antineoplaston. If our product candidates fail to gain market acceptance, we may be unable to earn sufficient revenue to continue
our business. Market acceptance of, and demand for, any product that we may develop and commercialize will depend on many factors,
including:
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our ability to provide acceptable evidence of safety and efficacy;
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the prevalence and severity of adverse side effects;
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availability, relative cost and relative efficacy of alternative and competing treatments;
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the effectiveness of our marketing and distribution strategy;
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publicity concerning our products or competing products and treatments; and
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our ability to obtain sufficient third-party insurance coverage or reimbursement.
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If our product candidates do not become widely accepted by physicians,
patients, third-party payers and other members of the medical community, our business, financial condition and results of operations
would be materially and adversely affected.
Our product candidates may cause undesirable side effects
that could delay or prevent their regulatory approval or commercialization.
Common side effects that occur in cancer patients undergoing
treatment with our product candidates include hypokalemia, fatigue, hypernatremia, nausea, somnolence, vomiting, headaches, edema,
and hyponatremia. Because our product candidates have been tested in relatively small patient populations and for limited durations
to date, additional side effects may be observed as their development progresses. Undesirable side effects caused by any of our
product candidates could cause us or regulatory authorities to interrupt, delay or discontinue clinical trials and could result
in the denial, cancellation or withdrawal of regulatory approval by the FDA or other regulatory authorities for any or all targeted
indications. This, in turn, could prevent us from commercializing our product candidates and generating revenues from their sale.
Even if regulatory approval is received for our product
candidates, the later discovery of previously unknown problems with a product, manufacturer or facility may result in restrictions,
including withdrawal of the product from the market.
Approval of a product candidate may be conditioned upon certain
limitations and restrictions as to the drug’s use, or upon the conduct of further studies, and may be subject to continuous
review. After approval of a product, if any, there will be significant ongoing regulatory compliance obligations, and if we fail
to comply with these requirements, we could be subject to penalties, including:
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withdrawal of regulatory approval;
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operating restrictions;
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disgorgement of profits;
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Regulatory agencies may require us to delay, restrict or discontinue
clinical trials on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health
risk. In addition, all statutes and regulations governing the conduct of clinical trials are subject to change in the future, which
could affect the cost of such clinical trials. Any unanticipated delays in clinical studies could delay our ability to generate
revenues and harm our financial condition and results of operations.
If we are unable to maintain and enforce our proprietary
rights, we may not be able to compete effectively or operate profitably.
Our success is dependent in part on maintaining and enforcing
our intellectual property and will depend in large part on our ability and Dr. Burzynski to:
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defend patents once issued;
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preserve trade secrets; and
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operate without infringing the patents and proprietary rights of third parties.
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The degree of future protection for our proprietary rights is
uncertain. For example:
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Dr. Burzynski might not have been the first to make the inventions covered by any of his patents, if issued, or his pending
patent applications;
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Dr. Burzynski might not have been the first to file patent applications for these inventions;
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others may independently develop similar or alternative technologies or products and/or duplicate any of our technologies and/or
products;
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it is possible that none of Dr. Burzynski’s pending patent applications will result in issued patents or, if issued,
these patents may not be sufficient to protect our technology or provide us with a basis for commercially-viable products and may
not provide us with any competitive advantages;
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if Dr. Burzynski’s pending applications issue as patents, they may be challenged by third parties as infringed,
invalid or unenforceable under U.S. or foreign laws;
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if issued, the patents under which we hold rights may not be valid or enforceable, or have expired; or
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we and/or Dr. Burzynski may develop additional proprietary technologies that are not patentable and which may not be adequately
protected through trade secrets, if for example a competitor were to independently develop duplicative, similar or alternative
technologies.
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If we are unable to obtain intellectual property rights
to develop or market our products or we infringe on a third-party patent or other intellectual property rights, we may need to
alter or terminate a product development program.
If our product candidates infringe or conflict with the rights
of others, we may not be able to manufacture or market our product candidates, which could have a material and adverse effect on
us. Issued patents held by others may limit our ability to develop commercial products. All issued patents are entitled to a presumption
of validity under the laws of the United States. If we need licenses to such patents to permit us to develop or market our product
candidates, we may be required to pay significant fees or royalties, and we cannot be certain that we would be able to obtain such
licenses on commercially reasonable terms, if at all. Competitors or third parties may obtain patents that may cover subject matter
we use in developing the technology required to bring our products to market, that we use in producing our products, or that we
use in treating patients with our products. Our License Agreement with Dr. Stanislaw Burzynski terminated upon the expiration of
the last patent licensed to the Company under such agreement. As such, we currently do own any patents or have licenses to any
patents with respect to Antineoplastons.
Additionally, it is not possible to predict with certainty what
patent claims may issue from pending patent applications. In the United States, for example, patent prosecution can proceed in
secret prior to issuance of a patent. As a result, third parties may be able to obtain patents with claims relating to our product
candidates or technology, which they could attempt to assert against us. Further, as we develop our products, third parties may
assert that we infringe the patents currently held or licensed by them and it is difficult to provide the outcome of any such action.
Ultimately, we could be prevented from commercializing a product, or forced to cease some aspect of our business operations, as
a result of claims of patent infringement or violation of other intellectual property rights, which could have a material and adverse
effect on our business, financial condition and results of operations.
We may incur substantial costs as a result of litigation
or other proceedings relating to patent and other intellectual property rights, and we may be unable to protect our rights in,
or to use, our technology.
There has been significant litigation in the biotechnology industry
over patents and other proprietary rights and if we become involved in any litigation, it could consume a substantial portion of
our resources, regardless of the outcome of the litigation. Others may challenge the validity, inventorship, ownership, enforceability
or scope of any of our future licensed patents or other technology used in or otherwise necessary for the development and commercialization
of our product candidates. We may not be successful in defending against any such challenges. If these legal actions are successful,
in addition to any potential liability for damages, we could be required to obtain a license, grant cross-licenses and pay substantial
royalties in order to continue to manufacture or market the affected products.
Epidemic diseases, or the perception of their effects,
could have a material adverse effect on our business, financial condition, results of operation, or cash flows.
Outbreaks of epidemic, pandemic, or contagious diseases, such
as the recent novel coronavirus or, historically, the Ebola virus, Middle East Respiratory Syndrome, Severe Acute Respiratory Syndrome,
or the H1N1 virus, could divert medical resources and priorities towards the treatment of that disease. Business disruptions could
include disruptions or restrictions on our ability to travel or to conduct business, as well as temporary closures of our offices.
In addition, a significant outbreak of epidemic, pandemic, or contagious diseases in the human population could result in a widespread
health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn
that could affect the operation of our business. Any of these events could have a material adverse effect on our business, financial
condition, results of operations, or cash flows. Although we are monitoring the situation, it is currently unknown whether the
outbreak will continue to disrupt our business operations over a prolonged period. If such disruption were to extend over a prolonged
period, it could have a material impact on our business.
Moreover, the cost of litigation to uphold the validity of patents
to prevent infringement or to otherwise protect our proprietary rights can be substantial. If the outcome of litigation is adverse
to us, third parties may be able to use the challenged technologies without payment to us. There is also the risk that, even if
the validity of a patent were upheld, a court would refuse to stop the other party from using the inventions, including on the
ground that its activities do not infringe that patent. There is no assurance that we would prevail in any legal action or that
any license required under a third-party patent would be made available on acceptable terms or at all. If any of these events were
to occur, our business, financial condition and results of operations would be materially and adversely effected.
We face substantial competition, which may result in others
discovering, developing or commercializing products before, or more successfully, than we do.
The life sciences industry is highly competitive, and we face
significant competition from many pharmaceutical, biopharmaceutical and biotechnology companies that are researching and marketing
products designed to address cancer indications for which we are currently developing products or for which we may develop products
in the future. Our future success depends on our ability to demonstrate and maintain a competitive advantage with respect to the
design, development and commercialization of our product candidates. We expect any product candidate that we commercialize on our
own will compete with existing, market-leading products and products in development.
Many of our potential competitors have substantially greater
financial, technical and personnel resources than we have. In addition, many of these competitors have significantly greater commercial
infrastructures than we have. Our ability to compete successfully will depend largely on our ability to:
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design and develop products that are superior to other products in the market;
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attract qualified scientific, medical, sales and marketing and commercial personnel;
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obtain patent and/or other proprietary protection for our processes and product candidates;
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obtain required regulatory approvals; and
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successfully collaborate with others in the design, development and commercialization of new products.
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Established competitors may invest heavily to quickly discover
and develop novel compounds that could make our product candidates obsolete. In addition, any new product that competes with a
generic market-leading product must demonstrate compelling advantages in efficacy, convenience, tolerability and safety in order
to overcome severe price competition and to be commercially successful. If we are not able to compete effectively against our current
and future competitors, our business will not grow and our financial condition and operations will suffer.
If we are unable to enter into agreements with partners
to perform sales and marketing functions, or build these functions ourselves, we will not be able to commercialize our product
candidates.
We currently do not have any internal sales, marketing or distribution
capabilities. In order to commercialize any of our product candidates, we must either acquire or internally develop a sales, marketing
and distribution infrastructure or enter into agreements with partners to perform these services for us. We may not be able to
enter into such arrangements on commercially acceptable terms, if at all. Factors that may inhibit our efforts to commercialize
our product candidates without entering into arrangements with third parties include:
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our inability to recruit and retain adequate numbers of effective sales and marketing personnel;
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the inability of sales personnel to obtain access to or persuade adequate numbers of physicians to prescribe our products;
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the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative
to companies with more extensive product lines; and
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unforeseen costs and expenses associated with creating a sales and marketing organization.
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If we are not able to partner with a third party and are not
successful in recruiting sales and marketing personnel or in building a sales and marketing and distribution infrastructure, we
will have difficulty commercializing our product candidates, which would adversely affect our business and financial condition.
We depend on key individuals to maintain and manage our
business in a rapidly changing market.
The continued services of our executive officers are essential
to our success. Any of our executive officers, including our Chief Executive Officer, Dr. Stanislaw Burzynski, M.D., and Chief
Financial Officer, Patryk Goscianski, may resign at any time. These individuals are in charge of the strategic planning and operations
of our business and the loss of the services of one or more of these individuals could disrupt our operations and damage our ability
to grow our business. We do not currently have key person life insurance policies covering any of our officers.
Our business is subject to complex environmental legislation
that increases both our costs and the risk of noncompliance.
Our business involves the use of hazardous material, which requires
us to comply with environmental regulations. We face increasing complexity in our product development as we adjust to new and upcoming
requirements relating to the materials composition of many of our product candidates. If we use hazardous materials in a manner
that causes contamination or injury or violates laws, we may be liable for damages. Environmental regulations could have a material
adverse effect on the results of our operations and our financial position. We maintain insurance for any liability associated
with our hazardous materials activities, and it is possible in the future that our coverage would be insufficient if we incurred
a material environmental liability.
If we fail to establish and maintain proper and effective
internal controls, our ability to produce accurate financial statements on a timely basis could be impaired, which would adversely
affect our consolidated operating results, our ability to operate our business, and our stock price, and could result in litigation
or similar actions.
Ensuring that we have adequate internal financial and accounting
controls and procedures in place to produce accurate financial statements on a timely basis is a costly and time-consuming effort
that needs to be re-evaluated frequently. Failure on our part to have effective internal financial and accounting controls would
cause our financial reporting to be unreliable, could have a material adverse effect on our business, operating results, and financial
condition, and could cause the trading price of our common stock to fall dramatically. Our management is responsible for establishing
and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of
our financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Our management
does not expect that our internal control over financial reporting will prevent or detect all errors and all fraud. A control system,
no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s
objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute
assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within
the company will have been detected.
We cannot be certain that the actions we have taken to ensure
we have adequate internal controls over financial reporting will be sufficient. In future periods, if the process required by Section 404
of the Sarbanes-Oxley Act reveals any material weaknesses or significant deficiencies, the correction of any such material weaknesses
or significant deficiencies could require remedial measures which could be costly and time-consuming. In addition, in such a case,
we may be unable to produce accurate financial statements on a timely basis. Any associated accounting restatement could create
a significant strain on our internal resources and cause delays in our release of quarterly or annual financial results and the
filing of related reports, increase our cost and cause management distraction. Any of the foregoing could cause investors to lose
confidence in the reliability of our consolidated financial statements, which could cause the market price of our common stock
to decline and make it more difficult for us to finance our operations and growth.
We may face risks related to securities litigation that
could result in significant legal expenses and settlement or damage awards.
We may in the future become subject to claims and litigation
alleging violations of the securities laws or other related claims, which could harm our business and require us to incur significant
costs. We are generally obliged, to the extent permitted by law, to indemnify our current and former directors and officers who
are named as defendants in these types of lawsuits. Any future litigation may require significant attention from management and
could result in significant legal expenses, settlement costs or damage awards that could have a material impact on our financial
position, results of operations, and cash flows.
Risks Related to the Ownership of Our Common Stock
An active, liquid trading market for our common stock
may not develop.
We cannot predict the extent to which investor interest in our
company will lead to the development of an active and liquid trading market. If an active and liquid trading market does not develop,
you may have difficulty selling any of our common stock that you purchase. The market price of our common stock may decline, and
you may not be able to sell your shares of our common stock at or above the price you paid, or at all.
Our principal shareholders, executive officers and directors
own a significant percentage of our common stock and will continue to have significant control of our management and affairs, and
they can take actions that may be against your best interests.
Our executive officers, current directors and holders of five
percent or more of our common stock beneficially own an aggregate of approximately 81.0% of our outstanding common stock as of
May 1, 2020. This significant concentration of share ownership may adversely affect the trading price for our common stock
because investors often perceive disadvantages in owning stock in companies with controlling shareholders. Also, as a result, these
shareholders, acting together, may be able to control our management and affairs and matters requiring shareholder approval, including
the election of directors and approval of significant corporate transactions, such as mergers, consolidations or the sale of substantially
all of our assets. Consequently, this concentration of ownership may have the effect of delaying or preventing a change in control,
including a merger, consolidation or other business combination involving us, or discouraging a potential acquirer from making
a tender offer or otherwise attempting to obtain control, even if such a change in control would benefit our other shareholders.
Investors may face significant restrictions on the resale
of our common stock due to federal regulations of penny stocks.
Our common stock will be subject to the requirements of Rule 15(g)-9,
promulgated under the Securities Exchange Act as long as the price of our common stock is below $5.00 per share. Under such rule,
broker-dealers who recommend low-priced securities to persons other than established customers and accredited investors must satisfy
special sales practice requirements, including a requirement that they make an individualized written suitability determination
for the purchaser and receive the purchaser’s consent prior to the transaction. The Securities Enforcement Remedies and Penny
Stock Reform Act of 1990, also requires additional disclosure in connection with any trades involving a stock defined as a penny
stock.
Generally, the SEC defines a penny stock as any equity security
not traded on an exchange or quoted on NASDAQ that has a market price of less than $5.00 per share. The required penny stock disclosures
include the delivery, prior to any transaction, of a disclosure schedule explaining the penny stock market and the risks associated
with it. Such requirements could severely limit the market liquidity of the securities and the ability of purchasers to sell their
securities in the secondary market.
In addition, various state securities laws impose restrictions
on transferring “penny stocks” and as a result, investors in the common stock may have their ability to sell their
shares of the common stock impaired.
The trading price of our common stock may be volatile.
The market prices for and trading volumes of securities of biotechnology
companies, including our securities, have been historically volatile. The market has from time to time experienced significant
price and volume fluctuations unrelated to the operating performance of particular companies. The market price of our common shares
may fluctuate significantly due to a variety of factors, including:
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the results of pre-clinical testing and clinical trials by us, our competitors and/or companies that are developing products
that are similar to ours (regardless of whether such products are potentially competitive with ours);
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public concern as to the safety of products developed by us or others;
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changes in the expected or actual timing of our development programs or our competitors’ potential development programs;
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governmental regulations;
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developments in patent or other proprietary rights;
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general market conditions in our industry or in the economy as a whole;
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Additions or departures of key personnel;
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comments made on social media platforms, including magazines, blogs, websites, message boards and other forms of Internet-based
communications;
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difficulty with the market quickly interpreting and understanding complex data;
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the issuance of additional shares of common stock, or securities convertible into, or exercisable or exchangeable for, shares
of our common stock in connection with financings, acquisitions or otherwise;
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the incurrence of debt; and
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development concerning collaborations.
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We may seek to raise additional capital in the future;
however, such capital may not be available to us on reasonable terms, if at all, when or as we require additional funding. If we
issue additional shares of our common stock or other securities that may be convertible into, or exercisable or exchangeable for,
our common stock, our existing stockholders would experience further dilution.
Future financings may involve the issuance of debt, equity and/or
securities convertible into or exercisable or exchangeable for our equity securities. These financings may not be available to
us on reasonable terms or at all when and as we require funding. If we are able to consummate financings, the trading price of
our common stock could be adversely affected and/or the terms of such financings may adversely affect the interests of our existing
stockholders. Any failure to obtain additional working capital when required would have a material adverse effect on our business
and financial condition and would be expected to result in a decline in our stock price. Any issuances of our common stock, preferred
stock, or securities such as warrants or notes that are convertible into, exercisable or exchangeable for, our capital stock, would
have a dilutive effect on the voting and economic interest of our existing stockholders.
Because we do not expect to pay dividends on our common
stock, stockholders will benefit from an investment in our common stock only if it appreciates in value.
We have never paid cash dividends on our common shares and have
no present intention to pay any dividends in the future. We are not profitable and do not expect to earn any material revenues
for at least several years, if at all. As a result, we intend to use all available cash and liquid assets in the development of
our business. Any future determination about the payment of dividends will be made at the discretion of our board of directors
and will depend upon our earnings, if any, capital requirements, operating and financial conditions and on such other factors as
our board of directors deems relevant. As a result, the success of an investment in our common stock will depend upon any future
appreciation in its value. There is no guarantee that our common stock will appreciate in value or even maintain the price at which
stockholders have purchased their shares.
We may fail to comply with public company obligations,
including the securities laws and regulations. Such compliance is costly and requires significant management resources.
We are a small company with limited resources. The federal securities
laws and regulations, including the corporate governance and other requirements of the Sarbanes-Oxley Act of 2002, impose complex
and continually changing regulatory requirements on our operations and reporting. These requirements have increased and will continue
to increase our legal compliance costs.