VIVOS INC Management report and analysis of the financial situation and operating results. (Form 10-Q)
Except for statements of historical fact, certain information described in this Form 10-Q report contains "forward-looking statements" that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "should," "will," "would" or similar words. The statements that contain these or similar words should be read carefully because these statements discuss the Company's future expectations, including its expectations of its future results of operations or financial position, or state other "forward-looking" information.
Vivos Inc.believes that it is important to communicate its future expectations to its investors. However, there may be events in the future that the Company is not able to accurately predict or to control. Further, the Company urges you to be cautious of the forward-looking statements which are contained in this Form 10-Q report because they involve risks, uncertainties and other factors affecting its operations, market growth, service, products and licenses. The risk factors in the section captioned "Risk Factors" in Item 1A of the Company's previously filed Form 10-K, as well as other cautionary language in this Form 10-Q report, describe such risks, uncertainties and events that may cause the Company's actual results and achievements, whether expressed or implied, to differ materially from the expectations the Company describes in its forward-looking statements. The occurrence of any of the events described as risk factors could have a material adverse effect on the Company's business, results of operations and financial position. Vivos Inc.is a radiation oncology medical device company engaged in the development of its yttrium-90 (" Y-90") based brachytherapy device, RadioGel™, for the treatment of non-resectable tumors. A prominent team of radiochemists, scientists and engineers, collaborating with strategic partners, including national laboratories, universities and private corporations, lead the Company's development efforts. The Company's overall vision is to globally empower physicians, medical researchers and patients by providing them with new isotope technologies that offer safe and effective treatments for cancer. In 2013 the FDA issued the determination that RadioGel™ is a device for human therapy for non-resectable cancers in humans. This should result in a faster path than a drug for final approval. In January 2018, the Center for Veterinary Medicine Product Classification Groupruled that RadioGelTM should be classified as a device for animal therapy of feline sarcomas and canine soft tissue sarcomas. Additionally, after a legal review, the Company believes that the device classification obtained from the Food and Drug Administration("FDA") Center for Veterinary Medicineis not limited to canine and feline sarcomas, but rather may be extended to a much broader population of veterinary cancers, including all or most solid tumors in animals. We expect the result of such classification and label review will be that no additional regulatory approvals are necessary for the use of IsoPet® for the treatment of solid tumors in animals. The FDA does not have premarket authority over devices with a veterinary classification, and the manufacturers are responsible for assuring that the product is safe, effective, properly labeled, and otherwise in compliance with all applicable laws and regulations. Based on the FDA'srecommendation, RadioGelTM will be marketed as "IsoPet®" for use by veterinarians to avoid any confusion between animal and human therapy. The Company already has trademark protection for the "IsoPet®" name. IsoPet® and RadioGelTM are used synonymously throughout this document. The only distinction between IsoPet® and RadioGelTM is the FDA'srecommendation that we use "IsoPet®" for veterinarian usage, and reserve "RadioGelTM" for human therapy. Based on these developments, the Company has shifted its primary focus to the development and marketing of Isopet® for animal therapy, through the Company's IsoPet® Solutions division. The Company's IsoPet Solutions division was established in May 2016to focus on the veterinary oncology market, namely engagement of university veterinarian hospital to develop the detailed therapy procedures to treat animal tumors and ultimately use of the technology in private clinics. The Company has worked with three different university veterinarian hospitals on IsoPet® testing and therapy. Washington State Universitytreated five cats for feline sarcoma and served to develop the procedures which are incorporated in our label. They concluded that the product was safe and effective in killing cancer cells. Colorado State Universitydemonstrated the CT and PET-CT imaging of IsoPet®. A contract was signed with University of Missourito treat canine sarcomas and equine sarcoids starting in November 2017. 22 The dogs were treated for canine soft tissue sarcoma. Response evaluation criteria in solid tumors ("RECIST") is a set of published rules that define when tumors in cancer patients improve (respond), stay the same (stabilize), or worsen (progress) during treatment. The criteria were published by an international collaboration including the European Organisation for Research and Treatment of Cancer("EORTC"), National Cancer Institute of the United States, and the National Cancer Institute of Canada Clinical Trials Group. The testing at the University of Missourimet its objective to demonstrate the safety of IsoPet®. Using its advanced CT and PET equipment it was able to demonstrate that the dose calculations were accurate and that the injections perfused into the cell interstices and did not stay concentrated in a bolus. This results in a more homogeneous dose distribution. There was insignificant spread of Y-90outside the points of injection demonstrating the effectiveness of the particles and the gel to localize the radiation with no spreading to the blood or other organs nor to urine or fecal material. This confirms that IsoPet® is safe for same day therapy. The effectiveness of IsoPet® for life extension was not the prime objective, but it resulted in valuable insights. Of the cases one is still cancer-free but the others eventually recurred since there was not a strong focus on treating the margins. The University of Missourihas agreed to become a regional center to administer IsoPet® therapy and will incorporate the improvements suggested by the testing program. The Company anticipates that future profits, if any, will be derived from direct sales of RadioGel™ (under the name IsoPet®) and related services, and from licensing to private medical and veterinary clinics in the U.S.and internationally. The Company intends to report the results from the IsoPet® Solutions division as a separate operating segment in accordance with GAAP. Commencing in July 2019, the Company recognized its first commercial sale of IsoPet®. A veterinarian from Alaskabrought his cat with a re-occurrent spindle cell sarcoma tumor on his face. The cat had previously received external beam therapy, but now the tumor was growing rapidly. He was given a high dose of 400Gy with heavy therapy at the margins. This sale met the revenue recognition requirements under ASC 606 as the performance obligation was satisfied. The Company completed sales for an additional four animals that received the IsoPet® during 2019. Our plan is to incorporate the data assembled from our work with Isopet® in animal therapy to support the Company's efforts in the development of our RadioGel™ device candidate, including obtaining approval from the FDA to market and sell RadioGel™ as a Class II medical device. RadioGel™ is an injectable particle-gel for brachytherapy radiation treatment of cancerous tumors in people and animals. RadioGel™ is comprised of a hydrogel, or a substance that is liquid at room temperature and then gels when reaching body temperature after injection into a tumor. In the gel are small, less than two microns, Y-90phosphate particles. Once injected, these inert particles are locked in place inside the tumor by the gel, delivering a very high local radiation dose. The radiation is beta, consisting of high-speed electrons. These electrons only travel a short distance so the device can deliver high radiation to the tumor with minimal dose to the surrounding tissue. Optimally, patients can go home immediately following treatment without the risk of radiation exposure to family members. Since Y-90has a half-life of 2.7 days, the radioactivity drops to 5% of its original value after ten days. Recently, the Company modified its Indication for Use from skin cancel to cancerous tissue or solid tumors pathologically associated with locoregional papillary thyroid carcinoma and recurrent papillary thyroid carcinoma having discernable tumors associated with metastatic lymph nodes or extranodal disease in patients who are not surgical candidates or who have declined surgery, or patients who require post-surgical remnant ablation (for example, after prior incomplete radioiodine therapy). Papillary thyroid carcinoma belongs to the general class of head and neck tumors for which tumors are accessible by intraoperative direct needle injection. The Company's Medical Advisory Boardfelt that demonstrating efficacy in clinical trials was much easier with this new indication. The Company's lead brachytherapy products, including RadioGel™, incorporate patented technology developed for Battelle Memorial Institute("Battelle") at Pacific Northwest National Laboratory, a leading research institute for government and commercial customers. Battelle has granted the Company an exclusive license to patents covering the manufacturing, processing and applications of RadioGel™ (the "Battelle License"). This exclusive license is to terminate upon the expiration of the last patent included in this agreement ( May 2022). Other intellectual property protection includes proprietary production processes and trademark protection in 17 countries. 23 Intellectual Property
Our original license with
We have expanded our trademark protection from RadioGel to now include IsoPet. We obtained the International Certificate of Registration for ISOPET, which is the first step to file in several countries.
The company has received the Patent Cooperation Treaty (“PCT”) international search report for our patent application (no. 1811.191). Seven of our claims were immediately found to have novelty, inventive step and industrial applicability. This gives us the basis to extend patent protection for our proprietary Yttrium-90 phosphate particles used in Isopet® and Radiogel™ for many years.
Our patent team filed our particle patent in more than ten patent offices that collectively cover 63 countries throughout the world. We filed a continuation-in-part applications number 1774054 in the
USAto expand the claims on our particle patent. The US Patent office recently gave us the Notice of Allowance for our patent to produce our yttrium phosphate microparticles, US Patent Application Serial No: 16-459,466. We also filed an amendment to correct the wording on our claims at make them consistent with the USE claims. Ref: 4207-0005; European Patent Application NO. 20 834 229.5; VIVOS INC; Our Ref: FS/53791. We filed a hydrogel utility patent in the USAand PCT based on the last eighteen months of development work to optimize our hydrogel component. These include reducing the polymer production time and increasing the output by a factor of three. We have also further reduced the level of trace contaminants to be well below the FDA guidelines. We are continuously improving our injection system. We completed the development of a syringe shield and vial holder. We are now testing an advanced cooling system to hold the vial and syringes. We are also testing commercially available systems for deep injections, which will be useful in treating lung and pancreatic caners. We are considering filing a provisional patent on these injection system developments.
We currently have four regional therapy clinics:
Vista Veterinary Hospital- Kennewick, WA? University of Missouri - Columbia, MO? Johns Hopkins University- Baltimore, MD? New England Equine Practice - Patterson, NY Vista Veterinary Hospital("Vista") was selected as the pilot private clinic to initiate commercial sales of IsoPet®. It is good management practice to implement and learn from a pilot program before spreading to regional clinics across the country. Vista is located in the Tri-Cities Washington area which is convenient for interactions with key personnel of the Company. The pilot is being used to
? Refine the Memorandum of Understanding to define all relevant interfaces,
roles and responsibilities between
pilot responsiveness to document and share key aspects of all therapies with
? Create and implement proprietary certification training modules;
? Modify the authorization of radioactive material from the production center of IsoTherapeutics,
the Company’s IsoPet® production center, to enable distribution for commercial purposes
? Work with the pilot program to obtain a license for radioactive materials in a
NRC agreement state; ? Create equipment and supplies list; ? Create and post regulatory signage; ? Explore different IsoPet® pricing options; ? Evaluate different approaches to obtain patients; ? Optimize patient scheduling practices to reduce cost to the pet owners;
? Develop communication materials and accountability document for pet owners;
and ? Further refine the therapy techniques for advanced cancers. 24
Vista Veterinary Hospitalhas done well on two audits by the Washington State Department of Health. The Company is working closely with the Washington State Department of Healthto refine and improve the radioactive material license. The Company has added several detailed procedures, which will benefit future regional clinics. In addition, a second veterinarian has completed all the preliminary requirements to become certified. All that remains is to demonstrate proficiency in three therapies.
Tests at universities and at
There has been 97 expressions of interest in IsoPet® therapy from across
the United States, but only about 10% of these were treated and they were very advanced cases. The reasons are instructive. Most of the cases were for so advanced that the pet parents found out about IsoPet® on the Internet as a last hope. Several others were internal cancers that could not be reached, for example deep in the throat. Several cases were treatable, but the pets weighed more than 20 pounds and the pet parents were not willing to fly them in the "Safe Cargo" holds. Those patients would have been treated by regional clinics once we implement that strategy. Several cases were mast cell cancers. The Company is confident that those tumors could have been treated, but once killed they release mast cells in a process called granulation. This could cause a shock to the animal's system. The Company will focus one of our clinical studies on the optimum approach for those therapies. Vista Veterinary Hospitalaccepted advanced cancer cases and has gained experience to extend the animal's lives. The first cat was terminally ill and had previously had external beam, surgery and chemotherapy. The facial tumor was treated with 400 Gy and the biopsy confirmed that the cancer was killed. In about seven months the cancer returned in the throat and could not be treated so the cat had to be put down. Dr. Bauder, the veterinarian pet parent, was still elated about the life extension and is asking us to use him as a reference. The other cases were also very advanced with multiple tumors and they recurred since they had already spread before therapy. One animal, Yukonhad a large tumor on his leg that was recommended for amputation. The tumor size decreased 50% after the first treatment, but then stopped decreasing. For the first time a second therapy was administered and the tumor has continued to decrease in size. Yukon'slife was extended for more than a year until she finally succumbed to metastatic cancer in another location. Since IsoPet® has shown to be effective in killing cancer at the site of injection the current focus is in optimizing the techniques to help the pet resorb the necrotic tissue rapidly. In addition, IsoPet® was used to treat a mast cell tumor. When these cancers are destroyed, they release their mast cell. The animal was treated with a steroid to counter this effect and to date is doing well. The Company's efforts are now to obtain more early-stage cancer patients. The biggest obstacle is to convince the veterinarians of the pet parents to agree with IsoPet® therapy rather than using a more traditional method such as surgery. This is a slow process due to the conservative nature of the veterinarian professions. This is the prime motivation to continue with additional clinical trials and to publish the results. The Company worked closely with FX Masse to develop nine certification training modules for use in potential regional clinics. These modules are necessary to satisfy the radioactive material handling licenses. This approach is very cost effective. Johns Hopkins University VCTN, Veterinary Clinical Trials Network, is now an Isopet® regional clinic. Additionally, Johns Hopkinswill also perform new Isopet® animal studies on various specific cancers. They have the required radioactive material license and have completed their training certification for Isopet®. This important relationship will also help meet our objective of obtaining high quality data on a range of cancers that can be published in leading journals. These publications are the optimal way to increase awareness of Isopet® and to gain broader acceptance from the veterinarian/oncology community. Our objective is to open several regional clinics by the end of 2022 and to participate in a minimum of three conferences to spread the word about IsoPet in the veterinarian community for treating tumors in small animals and horses. We just created a Marketing Steering Board to provide advice on obtaining new
pet patients. 25 Regulatory History Human Therapy RadioGel™ has a long regulatory history with the
Food and Drug Administration("FDA"). Initially, the Company submitted a presubmission (Q130140) to obtain FDA feedback about the proposed product. The FDA requested that the Company file a request for designation with the Office of Combination Products(RFD130051), which led to the determination that RadioGel™ is a device for human therapy for non-resectable cancers, which must be reviewed and ultimately regulated by the Center for Devices and Radiological Health("CDRH"). The Company then submitted a 510(k) notice for RadioGel™ (K133368), which was found Not Substantially Equivalent due to the lack of a suitable predicate, and RadioGel™ was assigned to the Class III product code NAW (microspheres). Class III products or devices are generally the highest risk devices and are therefore subject to the highest level of regulatory review, control and oversight. Class III products or devices must typically be approved by FDA before they are marketed. Class II devices represent lower risk products or devices than Class III and require fewer regulatory controls to provide reasonable assurance of the product's or device's safety and effectiveness. In contrast, Class I products and devices are deemed to be lower risk than Class I or II, and are therefore subject to the least regulatory controls. A pre-submission meeting (Q140496) was held with the FDA on June 17, 2014, during which the FDA maintained that RadioGel™ should be considered a Class III device and therefore subject to pre-market approval. On December 29, 2014, the Company submitted a de novo petition for RadioGel™ (DEN140043). The de novo petition was denied by the FDA on June 1, 2015, with the FDA providing numerous comments and questions. On September 29, 2015, the Company submitted a follow-up pre-submission informational meeting request with the FDA (Q151569). This meeting took place on November 9, 2015, at which time the FDA indicated acceptance of the Company's applied dosimetry methods and clarified the FDA'soutstanding questions regarding RadioGel™. Following the November 2015pre-submission meeting, the Company prepared a new pre-submission package to obtain FDA feedback on the proposed testing methods, intended to address the concerns raised by the FDA staff and to address the suitability of RadioGel™ for de novo reclassification. This pre-submission package was presented to the FDA in a meeting on August 29, 2017. During the August 2017meeting, the FDA clarified their position on the remaining pre-clinical testing needed for RadioGel™. Specifically, the FDA addressed proposed dosimetry calculating techniques, dosimetry distribution between injections, hydrogel viscoelastic properties, and the details of the Company's proposed animal testing. The Company believes that its submissions to the FDA to date have addressed all the FDA staff's feedback over the past four years. Of particular importance, the Company has provided corresponding supporting data for proposed future testing of RadioGel™ to address any remaining questions raised by the FDA. We believe, although no assurances can be given, that the clinical testing modifications presented to the FDA in August 2017will result in a de novo reclassification for RadioGel™ by the FDA. In addition, in previous FDA submittals, the Company proposed applying RadioGel™ for a very broad range of cancer therapies, referred to as Indication for Use. The FDA requested that the Company reduce its Indications for Use. To comply with that request, the Company expanded its Medical Advisory Board("MAB") and engaged doctors from respected hospitals who have evaluated the candidate cancer therapies based on three criteria: (1) potential for FDA approval and successful therapy? (2) notable advantage over current therapies? and (3) probability of wide-spread acceptance by the medical community. In November 2020the Company submitted a request for a Breakthrough Device Designation. Ultimately, this was denied, but the FDA acknowledged, "The FDA does believe that RadioGel™ meets criterion #2a: Device represents breakthrough technology. Your device does meet this criterion because it is a novel application of a brachytherapy device outside of the liver." More importantly the process resulted in a rapid review of our existing data and approach. It led to a redirection of our efforts on writing the IDE and saved the Company much time in the review of that future application. 26 Based on advice from the FDA the Company has scheduled a Pre-Submission meeting on November 30, 2021to discuss a draft of an Investigational Device Exemptions (IDEs) for Early Feasibility Medical Device Clinical Studies, Including Certain First in Human (FIH) Studies. Using this process results in more rapid feedback to prepare the final IDE. The FDA was very supportive and had suggested this Q-Submission path for rapid turnaround and dialog. The Mayo Clinicphysicians did an excellent job presenting the need for Radiogel™ to treat recurrent thyroid cancer and to answer a range of questions from the new FDA review team. The FDA provided many helpful suggestions on a range of subjects from labeling to dosimetry to the Mayo protocol for clinical testing, and the need for some additional specific testing. They suggested having another Q-Sub Review and conference call dedicated to the details of the dosimetry calculations. In May of 2022 the Company held another Pre-Sub meeting with the FDA. They concurred with our dosimetry techniques and requested one more animal test to confirm that the Y-90stays at the injection site. We will be proposed a Pre-Sub meeting to discuss this new animal test of VX-2 tumors in rabbits at Johns Hopkins University. We have a meeting scheduled with the FDA in October to obtain their feedback on our new animal test plan. In the meantime, the Company is working to complete all the other required pre-clinical testing, such as biocompatibility since they are required for the submittal of the IDE.
At the same time, the Company working with the
The MAB selected eighteen applications for RadioGel™, each of which meet the criteria described above. This large number confirms the wide applicability of the device and defines the path for future business growth. The Company's application establishes a single Indication for Use - treatment of cancerous tissue or solid tumors pathologically associated with locoregional papillary thyroid carcinoma and recurrent papillary thyroid carcinoma. We anticipate that this initial application will facilitate each subsequent application for additional Indications for Use, and the testing for many of the subsequent applications could be conducted in parallel, depending on available resources. We are in initial discussions with
Mayo Clinicphysicians about the potential for RadioGel to treat lung and pancreatic cancers.
Funding and Strategy
The Company's stock offering under Regulation A+ was qualified by the
Securities and Exchange Commission("SEC") on June 3, 2020. A second Regulation A+ was qualified by the SECon September 15, 2021to raise capital for 50,000,000 shares at a price of $0.10for a maximum of $5,000,000. The Company amended this and was able to raise $1,200,000in July 2022at $0.08per share (15,000,0000 shares) and sold 20,000,000 warrants for $20,000. An amended Regulation A+ was filed in October 2022to raise the remaining $3,800,000of the $5,000,000.
The company’s A+ rule has raised approximately
For the pet therapy market:
? Fund the effort to communicate the benefits of IsoPet® to the veterinarian
community and pet owners.
? Conduct additional clinical studies to generate more data for the veterinarian
? Subsidize certain IsoPet® therapies, if necessary, to ensure that all
applicants are processed.
? Assisting a new regional clinic with its licensing and certification training.
For the human market:
? Improve the pedigree of the quality management system.
? Complete the preclinical tests previously defined and the additional tests on
an animal model closely aligned with our revised indication for use. Report
the results to the FDA at a pre-submission meeting.
? Use feedback from this meeting to write the IDE (Investigational Device
Exemption), which is necessary to initiate clinical trials.
Research and development of the Company's brachytherapy product line has been funded with proceeds from the sale of equity and debt securities. The Company may require additional funding of approximately
$2 millionannually to maintain current operating activities. Over the next 12 to 24 months, the Company believes it will cost approximately $9 millionto: (1) fund the FDA approval process to conduct human clinical trials, (2) conduct Phase I, pilot, clinical trials, (3) activate several regional clinics to administer IsoPet® across the county, (4) create an independent production center within the current production site to create a template for future international manufacturing, and (5) initiate regulatory approval processes outside of the United States. The proceeds to be raised from the recent qualified Regulation A+ will be used to continue to fund this development. 27 The continued deployment of the brachytherapy products and a worldwide regulatory approval effort will require additional resources and personnel. The principal variables in the timing and amount of spending for the brachytherapy products in the next 12 to 24 months will be the FDA'sclassification of the Company's brachytherapy products as Class II or Class III devices (or otherwise) and any requirements for additional studies which may possibly include clinical studies. Thereafter, the principal variables in the amount of the Company's spending and its financing requirements would be the timing of any approvals and the nature of the Company's arrangements with third parties for manufacturing, sales, distribution and licensing of those products and the products' success in the U.S.and elsewhere. The Company intends to fund its activities through strategic transactions such as licensing and partnership agreements or from proceeds to be raised from the recent qualified Regulation A+. Following receipt of required regulatory approvals and financing, in the U.S., the Company intends to outsource material aspects of manufacturing, distribution, sales and marketing. Outside of the U.S., the Company intends to pursue licensing arrangements and/or partnerships to facilitate its global commercialization strategy. In the longer-term, subject to the Company receiving adequate funding, regulatory approval for RadioGel™ and other brachytherapy products, and thereafter being able to successfully commercialize its brachytherapy products, the Company intends to consider resuming research efforts with respect to other products and technologies intended to help improve the diagnosis and treatment of cancer and other illnesses. Based on the Company's financial history since inception, the Company's independent registered public accounting firm has expressed substantial doubt as to the Company's ability to continue as a going concern. The Company has limited revenue, nominal cash, and has accumulated deficits since inception. If the Company cannot obtain sufficient additional capital, the Company will be required to delay the implementation of its business strategy and may not be able to continue operations.
The Company has been affected by the effects of COVID-19. The registered office of the Company is located at
September 30, 2022, the Company has $1,987,732cash on hand. There are currently commitments to vendors for products and services purchased. To continue the development of the Company's products, the current level of cash may not be enough to cover the fixed and variable obligations of the Company.
There can be no assurance that the Company will be able to raise additional funds or do so at a favorable price.
The company’s RadioGel™ device has the following features:
? Beta particles only travel a short distance so that the device can provide high
radiation to the tumor with minimal dose to nearby normal tissue. In
? Benefiting from the short penetration distance, the patient can go home
immediately without fear of exposure to family members, and there is a large
reduction of radiation risk for the doctor. A simple plastic tube around the
a syringe, gloves and safety glasses are sufficient. Other gamma
emitting products require much more protection;
? A half-life of 2.7 days means that only 5% of the radiation remains after ten
days. This is in contrast to the industry standard gamma irradiation product,
which has a half-life of 17 days;
? The short half-life also means that any medical waste can be stored for thirty
days and then disposed of as normal hospital waste;
? RadioGel™ can be administered with small diameter needles (27 gauge)
is minimal damage to normal tissue. This is in contrast to the injection
metallic seeds, which do considerable damage; and
? After about 120 days, the gel resorbs through a normal biological cycle, called
Krebs cycle. The only remaining evidence of treatment is phosphate
particles of diameter so small that they require a high resolution microscope
to find them. This contrasts with the permanent presence of metallic germs.
Stages from production to therapy
During the next two years, the Company intends to outsource material aspects of manufacturing and distribution. As future product volume increases, the Company will reassess its make-buy decision on manufacturing and will analyze the cost/benefit of a centrally located facility.
Manufacture of the hydrogel
RadioGel™ is manufactured with a proprietary process under ventilated sterile hood by following strict Good Laboratory Practices ("GLP") procedures. It is made in large batches that are frozen for up to three months. When the product is ready to ship, a small quantity of the gel is dissolved in a sterile saline solution. It is then passed through an ultra-fine filter to ensure sterility.
Production of Yttrium-90 phosphate particles
Y-90particles are produced with simple ingredients via a proprietary process, again following strict GLP procedures. They are then mixed into a phosphate-buffered saline solution. They can be produced in large batches for several shipments. The number of particles per shipment is determined by the dose prescribed by the doctor.
RadioGel™ is shipped in two containers, one with a solution of the gel and the other with a solution of the particles. Before shipment they are subjected to sterility testing, again by strict procedures. The vial with the
Y-90is put through a special radiation calibrator, which measures beta particles. The vials can be shipped via FedEx or UPSby following the proper protocols.
At the user
The user receives the two vials. The solution containing the RadioGel™ is mixed with the solution containing the
Y-90particles. This is then shaken to ensure homogeneity and withdrawn into a syringe. The quantities that are mixed are calculated from the information on the product label. The specific injection technique depends on the Indication for Use. For small tumors, one centimeter in diameter or less, the cancer is treated with a single injection. For larger tumors, the cancer is treated with a series of small injections from the same syringe or multiple syringes.
The Company currently pursues two synergistic business lines, medical and veterinary, each of which is summarized below.
29 Medical Sector RadioGel™ is currently fully developed, requiring only FDA approval before commercialization. The Company has been seeking FDA approval of RadioGel™ for almost five years. Recent progress has been delayed due to a lack of adequate funding. The principal issue preventing approval is that the Company attempted to obtain regulatory approval for a broad range of Indications for Use, including all non-resectable cancers, without sufficient supporting data. Building on the
FDA'sruling of RadioGel™ as a device, the Company is currently developing test plans to address issues raised in the Company's prior FDA submittal regarding RadioGel™. The Company intends to request FDA approval to submit RadioGel™ for de novo classification, which would reclassify the device from a Class III device to a Class II device and accelerate the regulatory approval path.
After analyzing the Company’s data and the last five years of communication from the FDA, the Company has taken the following measures:
1. Under new leadership, the Society implements all past recommendations
from the FDA. The Company intends to restrict the Indications for Use,
provide test plans for FDA review to address all previous FDA responses
questions, and request a pre-submission meeting;
2. Prepare a pre-submission request document and an FDA meeting request to obtain
feedback on the test plans in order to launch the tests, present the
content proposed for the final application and to ask permission to
submit a de novo;
3. Submit an Investigational Device Exemption (“IDE”) for permission to
conduct human clinical studies; and 4. File a de novo or Pre-Market Approval application.
The critical path is the testing required – in vitro, animal testing, human clinical studies – all of which are resource dependent.
In previous submittals, the Company proposed applying a very broad range of cancer therapies, referred to as Indications for Use, to RadioGel™. The FDA has strongly advised the Company to reduce its Indications for Use. To comply with that request, the Company has expanded its MAB, consisting of Drs.
Barry D. Pressman(Chairman), Albert DeNittis, and Howard Sandler. The MAB evaluated the candidate cancer therapies based on three criteria: (i) the potential for FDA approval and successful therapy; (ii) notable advantages of RadioGel™ over current therapies; and (iii) the likelihood that RadioGel™ can be widely accepted by the medical community and profitably commercialized. The MAB selected eighteen Indications for Use for RadioGel™, each of which meets the above-mentioned criteria. These eighteen Indications for Use are listed below. This large number confirms the wide applicability of the device and defines the path for future growth. The Company intends to apply to the FDA for a single Indication for Use, followed by subsequent applications for additional Indications for Use. The initial application should facilitate each subsequent application, and the testing for many of the subsequent applications could be conducted in parallel, depending on available resources. ? Skin cancer ? Non-dendritic brain ? Involved lymph nodes ? Pediatric cancers - several types ? Bladder ? Rectal ? Liver ? Gynecological ? Localized prostate ? Spinal ? Pancreas ? Recurrent esophageal ? Head and neck (including sino-nasal and ? Breast cancer resection cavity oropharyngeal) ? Ocular melanoma ? Anaplastic thyroid 30 Veterinary Sector
There are approximately 150 million pet dogs and cats in
the United States. Nearly one-half of dogs and one-third of cats are diagnosed with cancer at some point in their lifetime. The Veterinary Oncology & Hematology Center in Norwalk, Connecticut, reports that cancer is the number one natural cause of death in older cats and dogs, accounting for nearly 50 percent of pet deaths each year. The American Veterinary Medical Associationreports that half of the dogs ten years or older will die because of cancer. The National Cancer Institutereports that about six million dogs are diagnosed with cancer each year, translating to more than 16,000 a day. The Company's IsoPet® operating division focuses on the veterinary oncology market. Dr. Alice Villalobos, a founding member of the Veterinary Cancer Societyand the Chair of our Veterinary Medicine Advisory Board, has been providing guidance to management regarding this market. The Veterinary Medicine Advisory Boardgives us recommendations regarding the overall strategy for our animal business sector. Specially, they recommended the university veterinary hospitals for demonstration therapies, the specific cancers to be treated, and have provided business contact information to the private clinics. Development of the product and application techniques and animal testing is allowed under FDA regulation. Commercial sales of RadioGelTM for animals requires confirmation by the FDA Center for Veterinary Medicine("CVM"). In January 2018, the Center for Veterinary Medicine Product Classification Group, the entity within the CVM that is responsible for determining the classification of a product, ruled that RadioGelTM should be classified as a device for animal therapy of feline sarcomas and canine soft tissue sarcomas. Additionally, after a legal review, the Company believes that the device classification obtained from the FDA Center for Veterinary Medicineis not limited to canine and feline sarcomas, but rather may be extended to a much broader population of veterinary cancers, including all or most all solid tumors in animals. We expect the result of such classification and label approval will be that no additional regulatory approvals are necessary for the use of RadioGelTM for the treatment of solid tumors in animals. The FDA does not have premarket authority over devices with a veterinary classification, and the manufacturers are responsible for assuring that the product is safe, effective, properly labeled, and otherwise in compliance with all applicable laws and regulations. The Company currently intends to utilize university veterinary hospitals for therapy development, given that veterinary hospitals offer superior and plentiful veterinarians and students, a large number of animal patients, radioactive material handling licenses, and are respected by private veterinary centers and hospitals. Competitors
The Company is competitive in a market characterized by technological innovation, considerable research efforts and significant competition.
The pharmaceutical and biotechnology industries are intensely competitive and subject to rapid and significant technological changes. A number of companies are pursuing the development of pharmaceuticals and products that target the same diseases and conditions that our products target. We cannot predict with accuracy the timing or impact of the introduction of potentially competitive products or their possible effect on our sales. Certain potentially competitive products to our products may be in various stages of development. Also, there may be many ongoing studies with currently marketed products and other developmental products, which may yield new data that could adversely impact the use of our products in their current and potential future Indications for Use. The introduction of competitive products could significantly reduce our sales, which, in turn would adversely impact our financial and operating results. There are a wide variety of cancer treatments approved and marketed in the
U.S.and globally. General categories of treatment include surgery, chemotherapy, radiation therapy and immunotherapy. These products have a diverse set of success rates and side effects. The Company's products, including RadioGel™, fall into the brachytherapy treatment category. There are a number of brachytherapy devices currently marketed in the U.S.and globally. The traditional iodine-125 ( I-125) and palladium-103 (Pd-103) technologies for brachytherapy are well entrenched with powerful market players controlling the market. The industry-standard I-125-based therapy was developed by Oncura, which is a unit of General Electric Company. Additionally, C.R. Bard, a major industry player competes in the I-125brachytherapy marketplace. These market competitors are also involved in the distribution of Pd-103 based products. Cs-131 brachytherapy products are sold by IsoRay. Several Y-90therapies have been FDA approved including SIR-Spheres by Sirtex, TheraSphere by Biocompatibles UKand Zevalin by Spectrum Pharmaceuticals. 31 Raw Materials The Company currently subcontracts the manufacturing of RadioGelTM at IsoTherapeutics. Prior to 2021, Eckert and Ziegler was the only supplier of Y-90in the United States, and was the sole supplier of the Y-90used by IsoTherapeutics to manufacture the Company's RadioGel™. The Company obtains supplies, hardware, handling equipment and packaging from several different U.S.suppliers.
In 2021, used
The Company anticipates that potential customers for our potential brachytherapy products likely would include those institutions and individuals that currently purchase brachytherapy products or other oncology treatment products.
The Company's present and future intended activities in the development, manufacturing and sale of cancer therapy products, including RadioGel™, are subject to extensive laws, regulations, regulatory approvals and guidelines. Within
the United States, the Company's therapeutic radiological devices must comply with the U.S.Federal Food, Drug and Cosmetic Act, which is enforced by FDA. The Company is also required to adhere to applicable FDA Quality System Regulations, also known as the Good Manufacturing Practices, which include extensive record keeping and periodic inspections of manufacturing facilities. In the United States, the FDA regulates, among other things, new product clearances and approvals to establish the safety and efficacy of these products. We are also subject to other federal and state laws and regulations, including the Occupational Safety and Health Act and the Environmental Protection Act. The Federal Food, Drug, and Cosmetic Act and other federal statutes and regulations govern or influence the research, testing, manufacture, safety, labeling, storage, record keeping, approval, distribution, use, reporting, advertising and promotion of such products. Noncompliance with applicable requirements can result in civil penalties, recall, injunction or seizure of products, refusal of the government to approve or clear product approval applications, disqualification from sponsoring or conducting clinical investigations, preventing us from entering into government supply contracts, withdrawal of previously approved applications, and criminal prosecution. In the United States, medical devices are classified into three different categories over which the FDA applies increasing levels of regulation: Class I, Class II, and Class III. Most Class I devices are exempt from premarket notification 510(k); most Class II devices require premarket notification 510(k); and most Class III devices require premarket approval. RadioGel™ is currently classified as a Class III device. Approval of new Class III medical devices is a lengthy procedure and can take a number of years and require the expenditure of significant resources. There is a shorter FDA review and clearance process for Class II medical devices, the premarket notification or 510(k) process, whereby a company can market certain Class II medical devices that can be shown to be substantially equivalent to other legally marketed devices. The Company intends to apply for a de novo with an anticipated expenditure of $10.0 millionover the next four years. This expenditure estimate includes anticipated costs associated with in vitro and in vivo pre-clinical testing, our application for an Investigational Device Exemption, Phase I and Phase II clinical trials and our application for a de novo. 32
As a registered medical device manufacturer with the FDA, we are subject to inspection to ensure compliance with
FDA'scurrent Good Manufacturing Practices, or cGMP. These regulations require that we and any of our contract manufacturers design, manufacture and service products, and maintain documents in a prescribed manner with respect to manufacturing, testing, distribution, storage, design control, and service activities. Modifications or enhancements that could significantly affect the safety or effectiveness of a device or that constitute a major change to the intended use of the device require a new 510(k) premarket notification for any significant product modification. The Medical Device Reporting regulation requires that we provide information to the FDA on deaths or serious injuries alleged to be associated with the use of our devices, as well as product malfunctions that are likely to cause or contribute to death or serious injury if the malfunction were to recur. Labeling and promotional activities are regulated by the FDA and, in some circumstances, by the Federal Trade Commission. As a medical device manufacturer, we are also subject to laws and regulations administered by governmental entities at the federal, state and local levels. For example, our facility is licensed as a medical device manufacturing facility in the State of Washingtonand is subject to periodic state regulatory inspections. Our customers are also subject to a wide variety of laws and regulations that could affect the nature and scope of their relationships with us. In the United States, as a manufacturer of medical devices and devices utilizing radioactive byproduct material, we are subject to extensive regulation by not only federal governmental authorities, such as the FDA and FAA, but also by state and local governmental authorities, such as the Washington State Department of Health, to ensure such devices are safe and effective. In Washington State, the Department of Health, by agreement with the federal Nuclear Regulatory Commission("NRC"), regulates the possession, use, and disposal of radioactive byproduct material as well as the manufacture of radioactive sealed sources to ensure compliance with state and federal laws and regulations. RadioGel™ constitutes both medical devices and radioactive sealed sources and are subject to these regulations. Moreover, our use, management, and disposal of certain radioactive substances and wastes are subject to regulation by several federal and state agencies depending on the nature of the substance or waste material. We believe that we are in compliance with all federal and state regulations for this purpose.
Our business does not require us to comply with any extraordinary environmental regulations. Our RadioGel™ product is manufactured in an independently owned and operated facility. Any environmental effects or contamination event that could result would be from the shipping company during shipment and misuse by the treatment facility upon arrival.
Comparison of the nine months ended
The following table sets forth information from our income statements for the nine months ended
Nine Months Ended Nine Months Ended September 30, 2022 September 30, 2021 Revenues $ 30,000 $ 14,887 Cost of goods sold (18,053 ) (6,000 ) Gross profit 11,947 8,887 Operating expenses (1,824,043 ) (2,292,245 ) Operating loss (1,812,096 ) (2,283,358 ) Non-operating income (expense) 47,588 (66,178 ) Net loss $ (1,764,508 ) $ (2,349,536 ) 33
Revenue and Cost of Goods Sold
$30,000and $14,887for the nine months ended September 30, 2022and 2021, respectively. All revenue recognized in the nine months ended September 30, 2022and 2021 relate to consulting income with respect to the IsoPet® therapies. Management does not anticipate that the Company will generate sufficient revenue to sustain operations until such time as the Company secures multiple revenue-generating arrangements with respect to RadioGel™ and/or any of our other brachytherapy technologies.
Operating expenses for the nine months ended
Nine months ended
End of nine months
September 30, 2022 September 30, 2021 Professional fees, including stock-based compensation $ 1,191,807 $ 1,786,028 Payroll expenses 208,818 202,428 Research and development 312,066 221,154 General and administrative expenses 111,352 82,635 Total operating expenses $
Operating expenses for the nine months ended
September 30, 2022and 2021 was $1,824,043and $2,292,245, respectively. The decrease in operating expenses from 2021 to 2022 can be attributed to the decrease in professional fees ( $1,786,028for the nine months ended September 30, 2021versus $1,191,807for the nine months ended September 30, 2022) related to the vesting of the RSUs in 2022 versus 2021; the increase in general and administrative expense ( $82,635for the nine months ended September 30, 2021versus $111,352for the nine months ended September 30, 2022); the increase in research and development ( $221,154for the nine months ended September 30, 2021versus $312,066for the nine months ended September 30, 2022) as the Company ramped up the development of their products to include studies that are required to continue to have their products accepted by the FDA, and an increase in payroll expenses ( $202,428for the nine months ended September 30, 2021versus $208,818for the nine months ended September 30, 2022) related to the CEOs employment contract.
Non-operating income (expenses)
Non-operating income (expenses) for the nine months ended
Nine months ended Nine months ended September 30, 2022 September 30, 2021 Interest expense $ - $ (19,628 ) Forgiveness of debt 47,588 129,745 Loss on debt extinguishment - (176,295 Non-operating income (expense) $ 47,588 $ (66,178 ) 34
Non-operating income (expense) for the nine months ended
September 30, 2022varied from the nine months ended September 30, 2021primarily due to a decrease in interest expense from $19,628for the nine months ended September 30, 2021to $0for the nine months ended September 30, 2022as a result of conversions and repayments of notes payable. In addition, the Company converted a note in January 2021which resulted in a loss on conversion and recognized a gain on forgiveness of debt on old payables as they satisfied agreements with vendors to pay a portion of the payable with the remaining amount forgiven in both 2021 and 2022. Net Loss
Our net loss for the nine months ended
Comparison of the three months ended
The following table presents information from our income statements for the three months ended
Three Months Ended Three Months Ended September 30, 2022 September 30, 2021 Revenues $ 6,500 $ 14,887 Cost of goods sold (13,035 ) (6,000 ) Gross profit (6,535 ) 8,887 Operating expenses (270,530 ) (203,470 ) Operating loss (277,065 ) (194,583 ) Non-operating income (expense) - (6,577 ) Net loss $ (277,065 ) $ (201,160 ) 35
Revenue and Cost of Goods Sold
$6,500and $14,887for the three months ended September 30, 2022and 2021, respectively. All revenue recognized in the three months ended September 30, 2022and 2021 relate to consulting income with respect to the IsoPet®therapies. Management does not anticipate that the Company will generate sufficient revenue to sustain operations until such time as the Company secures multiple revenue-generating arrangements with respect to RadioGel™ and/or any of our other brachytherapy technologies.
Operating expenses for the three months ended
Three months ended
Three months completed
September 30, 2022 September 30, 2021 Professional fees, including stock-based compensation $ 93,300 $ 55,583 Payroll expenses 68,163 64,925 Research and development 70,765 60,831 General and administrative expenses 38,302 22,131 Total operating expenses $ 270,530 $ 203,470 Operating expenses for the three months ended
September 30, 2022and 2021 was $270,530and $203,470, respectively. The increase in operating expenses from 2021 to 2022 can be attributed to the increase in professional fees ( $55,583for the three months ended September 30, 2021versus $93,300for the three months ended September 30, 2022) related to the vesting of the RSUs in 2022 versus 2021 and amending the Regulation A+; the increase in general and administrati0ve expense ( $22,131for the three months ended September 30, 2021versus $38,302for the three months ended September 30, 2022); the increase in research and development ( $60,831for the three months ended September 30, 2021versus $70,765for the three months ended September 30, 2022) as the Company ramped up the development of their products to include studies that are required to continue to have their products accepted by the FDA, and an increase in payroll expenses ( $64,925for the three months ended September 30, 2021versus $68,163for the three months ended September 30, 2022) related to the CEOs employment contract and bonus in 2021.
Non-operating income (expenses)
Non-operating income (expenses) for the three months ended
Three months ended Three months ended September 30, 2022 September 30, 2021 Interest expense $ - $ (6,577 ) Forgiveness of debt - - Non-operating income (expense) $ - $ (6,577 ) 36 Non-operating income (expense) for the three months ended
September 30, 2022varied from the three months ended September 30, 2021primarily due to a decrease in interest expense from $6,577for the three months ended September 30, 2021to $0for the three months ended September 30, 2022as a result of conversions and repayments of notes payable. In addition, the Company recognized a gain on forgiveness of debt on old payables as they satisfied agreements with vendors to pay a portion of the payable with the remaining amount forgiven
in 2022. Net Loss
Our net loss for the three months ended
Cash and capital resources
September 30, 2022, the Company had working capital of $1,885,197, as compared to working capital of $1,467,383at December 31, 2021. During the nine months ended September 30, 2022and 2021, the Company experienced negative cash flow from operations of $838,391and $728,351and realized $1,220,000and $1,811,238of cash flows from financing activities. As of September 30, 2022, the Company did not have any commitments for capital expenditures. Cash used in operating activities increased from $728,351for the nine months ended September 30, 2021to $838,391for the nine months ended September 30, 2022. Cash used in operating activities was primarily a result of the Company's non-cash items, such as loss from operations, stock based compensation, loss conversion of debt as well as forgiveness of debt as well as the changes in prepaid expenses and accounts payable. Cash provided from financing activities decreased from $1,811,238for the nine months ended September 30, 2021to $1,220,000for the nine months ended September 30, 2022. The decrease in cash provided from financing activities was primarily a result of increase in proceeds from the Regulation A+ where the Company raised $1,811,238from common stock and warrant issuances in 2021 versus, $1,220,000in 2022. The Company has generated material operating losses since inception. The Company had a net loss of $1,764,508for the nine months ended September 30, 2022, and a net loss of $2,349,536for the nine months ended September 30, 2021. The Company expects to continue to experience net operating losses for the foreseeable future. Historically, the Company has relied upon investor funds to maintain its operations and develop the Company's business. The Company anticipates raising additional capital within the next twelve months for working capital as well as business expansion, although the Company can provide no assurance that additional capital will be available on terms acceptable to the Company, if at all. If the Company is unable to obtain additional financing to meet its working capital requirements, it may have to curtail its business or cease all operations. In July 2022, the Company raised $1,220,000through the sale of common stock and warrants through the Regulation A+, and in October 2022amended the Regulation A+ in an attempt to raise the additional $3,800,000. The Company requires funding of at least $5 millionper year to maintain current operating activities. Over the next 24 months, the Company believes it will cost approximately $9 millionto fund: (1) fund the FDA approval process to conduct human clinical trials, (2) conduct Phase I, pilot, clinical trials, (3) activate several regional clinics to administer IsoPet® across the county, (4) create an independent production center within the current production site to create a template for future international manufacturing, and (5) initiate regulatory approval processes outside of the United States. The principal variables in the timing and amount of spending for the brachytherapy products in the next 12 to 24 months will be the FDA'sclassification of the Company's brachytherapy products as Class II or Class III devices (or otherwise) and any requirements for additional studies, which may possibly include clinical studies. Thereafter, the principal variables in the amount of the Company's spending and its financing requirements would be the timing of any approvals and the nature of the Company's arrangements with third parties for manufacturing, sales, distribution and licensing of those products and the products' success in the U.S.and elsewhere. The Company intends to fund its activities through strategic transactions such as licensing and partnership agreements or additional capital raises. Although the Company is seeking to raise additional capital and has engaged in numerous discussions with investment bankers and investors, to date, the Company has not received firm commitments for the required funding. Based upon its discussions, the Company anticipates that if the Company is able to obtain the funding required to retire outstanding debt, pay past due payables and maintain its current operating activities, that the terms associated with such funding will result in material dilution to existing shareholders. Recent geopolitical events, including the inherent instability and volatility in global capital markets, as well as the lack of liquidity in the capital markets, could impact the Company's ability to obtain financing and its ability to execute its business plan. 37
Accounting policies and estimates
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in
the United States of Americarequires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed financial statements and accompanying notes. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates under different assumptions or conditions. During the period ended September 30, 2022, we believe there have been no significant changes to the items disclosed as significant accounting policies in management's notes to the financial statements in our annual report on Form 10-K for the year ended December 31, 2021, filed on March 7, 2022.
Off-balance sheet arrangements
The Company does not have any off-balance sheet arrangements that are reasonably likely to have a current or future effect on the Company's financial condition, revenues, results of operations, liquidity or capital expenditures.
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