| LOW | HIGH | |||||||
| August 2012 | 0.9938 | 1.0139 | ||||||
| September 2012 | 1.0099 | 1.0299 | ||||||
| October 2012 | 0.9996 | 1.0243 | ||||||
| November 2012 | 0.9972 | 1.0074 | ||||||
| December 2012 | 1.0048 | 1.0162 | ||||||
| January 2013 (through January 29, 2013) | 0.9923 | 1.0164 |
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The exchange rates are based upon the noon buying rate as quoted by The Bank of Canada. At May 25, 2010,January 29, 2013, the exchange rate for one Canadian dollar expressed in terms of one U.S. dollar, as quoted by The Bank of Canada at 4 p.m. Eastern Time, equalled $0.9346.equaled $1.0024.
B. | Capitalization and Indebtedness |
Short term debt-due to related parties (1) | $ | 2,360,181 | ||
| Shareholder’s Equity | ||||
Common shares, unlimited amount authorized, 10,907,057 issued and outstanding: | $ | 16,969 | ||
Preference shares, unlimited amount authorized, none issued: | - | |||
Additional paid-in capital: | $ | 18,263,340 | ||
Accumulated other comprehensive loss: | (341,844 | ) | ||
| Deficit: | $ | (13,306,451 | ) | |
Total Shareholders’ Equity: | $ | 4,632,014 |
C. | Reasons for the Offer and Use of Proceeds |
Not Applicable.
| Risk Factors |
Prospects for companies in the pharmaceutical industry generally may be regarded as uncertain given the research and development nature of the industry and uncertainty regarding the prospects of successfully commercializing product candidates and, accordingly, investments in companies such as ours should be regarded as very speculative. An investor should carefully consider the risks and uncertainties described below, as well as other information contained in this annual report. The list of risks and uncertainties described below is not an exhaustive list. Additional risks and uncertainties not presently known to us or that we believe to be immaterial may also adversely affect our business. If any one or more of the following risks occur, our business, financial condition and results of oper ationsoperations could be seriously harmed. Further, if we fail to meet the expectations of the public market in any given period, the market price of our common shares could decline. If any of the following risks actually occurs, our business, operating results, or financial condition could be materially adversely affected.
Our activities entail significant risks. In addition to the usual risks associated with a business, the following is a general description of certain significant risk factors which may be applicable to us.
Risks related to our Company
the research and development, clinical and regulatory activities we believe are necessary to bring our products to market and to establish commercial manufacturing, marketing and sales capabilities. It may be difficult or impossibleAs of November 30, 2012, we had a cash balance of $0.5 million. As of December 31, 2012, our cash balance was $0.1 million.
In order for us to continue operations at existing levels, we expect that for at least the next twelve months we will require significant additional capital. While we expect to satisfy our operating cash requirements over the next twelve months from cash on hand, collection of anticipated revenues resulting from future commercialization activities, development agreements or marketing license agreements, through managing operating expense levels, using funds from senior management through the convertible debenture described elsewhere herein, equity and/or debt financings, and/or new strategic partnership agreements funding some or all costs of development, there can be no assurance that we will be able to obtain any such capital on terms or in amounts sufficient to meet our needs or at all. The availability of equity or debt financing will be affected by, among other things, the results of our research and development, our ability to obtain regulatory approvals, the market acceptance of our products, the state of the capital markets generally, strategic alliance agreements, and other relevant commercial considerations. In addition, if we raise additional funds by issuing equity securities, our then existing security holders will likely experience dilution, and the incurring of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. In the event that we do not obtain additional capital when needed orover the next twelve months, there may be substantial doubt about our ability to continue as a going concern and realize our assets and pay our liabilities as they become due. Any failure by the Company to raise additional funds on terms acceptablefavorable to us.
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Delays, suspensions and terminations in our preclinical studies and clinical trials could result in increased costs to us and delay our ability to generate product revenues.
The commencement of clinical trials can be delayed for a variety of reasons, including delays in:
| · | demonstrating sufficient safety and efficacy to obtain regulatory approval to commence a clinical trial; |
| · | reaching agreement on acceptable terms with prospective contract research organizations and clinical trial sites; |
| · | manufacturing sufficient quantities of a drug candidate; |
| · | obtaining institutional review board approval to conduct a clinical trial at a prospective clinical trial site; and |
| · | patient enrollment. |
Once a clinical trial has begun, it may be delayed, suspended or terminated due to a number of factors, including:
| · | the number of patients that participate in the trial; |
| · | the length of time required to enroll suitable subjects; |
| · | the duration of patient follow-up; |
| · | the number of clinical sites included in the trial; |
| · | changes in regulatory requirements or regulatory delays or clinical holds requiring suspension or termination of the trials; |
| · | delays, suspensions or termination of clinical trials due to the institutional review board overseeing the study at a particular site; |
| · | failure to conduct clinical trials in accordance with regulatory requirements; |
| · | unforeseen safety issues, including serious adverse events or side effects experienced by participants; and |
| · | inability to manufacture, through third party manufacturers, adequate supplies of the product candidate being tested. |
Based on results at any stage of product development, we may decide to repeat or redesign preclinical studies or clinical trials, conduct entirely new studies or discontinue development of products for one or all indications. In addition, our products may not demonstrate sufficient safety and efficacy in pending or any future preclinical testing or clinical trials to obtain the requisite regulatory approvals. Even if such approvals are obtained for our products, they may not be accepted in the market as a viable alternative to other products already approved or pending approvals.
If we experience delays, suspensions or terminations in a preclinical study or clinical trial, the commercial prospects for our products will be harmed, and our ability to generate product revenues will be delayed or we may never be able to generate such revenues.
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We have a history of losses.operating losses, which may continue in the foreseeable future.
We have incurred net losses from 2002 (when Intellipharmaceutics Ltd., our predecessor company, commenced operations)inception through November 30, 2009 and continue to incur losses. As at November 30, 2009, we2012 had an accumulated deficit of U.S.$13.3 million. For the year ended November 30, 2009 we had a loss$30.1 million as of U.S.$1.8 million. Oursuch date and have incurred additional losses for the fiscal periods ended December 31, 2008, 2007, 2006, and 2005 were U.S.$3.8 million, U.S.$1.3 million, U.S.$1.3 million, and U.S.$2.5 million, respectively. These historical financial losses and our continued losses and financial condition could make it more difficult for us to obtain financing in the future or could reduce the value the market places on our common shares.
since such date. As we engage in the development of product candidatesproducts in our pipeline, we will continue to incur further losses. There can be no assurance that we will ever be able to achieve or sustain profitability or positive cash flow. Our ultimate success will depend on whether our drug formulations receive the approval of the U.S.United States Food and Drug Administration (“FDA”) or other applicable regulatory agencies needed to commercially market them and if we will beare able to successfully market approved products. We cannot be certain that we will be able to receive FDA approval for any of our drug formulations, or if we do, that we will reach the level of sales and revenues necessary to achieve and sustain profitability.
We are dependent upon the scientific expertise of Dr. Isa Odidi, our Chairman and Chief Executive Officer, and Dr. Amina Odidi, our President and Chief Operating Officer. Although we now employ, and will in the future expect to continue to employ other qualified scientists, we are substantially dependent upon the efforts of Drs. Isa and Amina Odidi as they are our only employees who havewith the knowledge and know-how relating to the development of controlled-release products that we believe isexperience necessary for us to continue development of controlled-release products. We do not maintain key-person life insurance on any of our products.
officers or employees. Although we have employment agreements with key members of our management team, each of our employees may terminate his or her employment at any time. The success of our business depends, in large part, on our continued ability to attract and retain highly qualified management, scientific, manufacturing and sales and marketing personnel, on our ability to successfully integrate large number ofmany new employees, into our corporate culture, and on our ability to develop and maintain important relationships with leading research and medical institutions and key distributors. Competition for these typesIf we lose the services of our executive officers or other qualified personnel and relationships is intense, and the failureor are unable to obtainattract and retain such personnelqualified individuals to fill these roles or develop key relationships, our business, financial condition and results of operations could have material adverse consequences.be materially adversely affected.
Our intellectual property may not provide meaningful protection for our product candidates.
We hold certain U.S., Canadian and foreign patents and have pending applications for additional patents.patents outstanding. We intend to continue to seek patent protection for, or maintain as trade secrets, all of theour commercially promising drug delivery platforms and technologies that we have discovered, developed or acquired that we believe may be commercially promising.technologies. Our success depends, in part, on our ability, and our collaborative partners’ ability to obtain and maintain patent protection for new product candidates, maintain trade secret protection and operate without infringing the proprietary rights of third parties. As with most pharmaceutical companies, our patent position is highly uncertain and involves complex legal and factual questions. Without patent and other similar protection, other companies could offer substantially identic alidentical products for sale without incurring the sizeable development costs that we have incurred. Ourwhich could diminish our ability to recover these expendituresexpenses of and realize profits upon the sale of products could be diminished. The process of obtaining patents can be time-consuming and expensive, with no certainty of success. Even if we spend the necessary time and money, a patent may not be issued or it may insufficiently protect the technology it was intended to protect. We can never be certain that we were first to develop the technology or that we were the first to file a patent application for the particular technology because of the time that elapses between patent filing and publication, and because publications in the scientific or patent literature lag behind actual discoveries.on our developed products. If our pending patent applications are not approved, for any reason, or if we are unable to receive patent protectionobtain patents for additional proprietarydeveloped technologies, that we develop, the degree of future protection for our proprietary technologytechnologies will remain uncertain. Furthermore, third parties may independently develop similar or alternative technologies, duplicate some or all of our technologies, design around our patented technologies or challenge our issued patents. Such third parties may have filed patent applications, or hold issued patents, relating to products or processes competitive with those we are developing. The patents of our competitors may impairdeveloping or otherwise restricting our ability to do business in a particular area. Our success will depend, in part, on our abilityIf we are unable to obtain patents or otherwise protect our trade secrets andor other proprietary informationintellectual property and operate without infringing on the proprietary rights of others.others, our business, financial condition and results of operations could be materially adversely affected.
We may be subject to intellectual property claims that could be costly and could disrupt our business.
Third parties may claim we have infringed their patents, trademarks, copyrights or other rights. We may be unsuccessful in defending against such claims, which could result in the inability to protect our intellectual property rights or in substantial damages, fines or other penalties. The resolution of a claim could also require us to change how we do business or enter into burdensome royalty or license agreements. Insurance coverage may not be adequate to cover every claim that third parties could assert against us. Even unsuccessful claims could result in significant legal fees and other expenses, diversion of management’s time and disruptions in our business. Any of these claims could also harm our reputation.
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We rely on maintaining as trade secrets our competitively sensitive know-how and other information. Intentional or unintentional disclosure of this information could impair our competitive position.
As to many technical aspects of our business, we have concluded that competitively sensitive information is either not patentable or that for competitive reasons it is not commercially advantageous to seek patent protection. In these circumstances, we seek to protect this know-how and other proprietary information by maintaining it in confidence as a trade secret. To maintain the confidentiality of our trade secrets, we generally enter into agreements that contain confidentiality provisions with our employees, consultants, collaborators, contract manufacturers and advisors upon commencement of their relationships with us. These provisions generally require that all confidential information developed by the individual or made known to the individual by us during the course of the individual’s relationship with us be kept confidential and not disclosed to third parties. We may not have these arrangements in place in all circumstances, and the confidentiality provisions in our favour may be breached. We may not become aware of, or have adequate remedies in the event of, any such breach. In addition, in some situations, the confidentiality provisions in our favour may conflict with, or be subject to, the rights of third parties with whom our employees, consultants, collaborators, contract manufacturers or advisors have previous employment or consulting relationships. To the extent that our employees, consultants, collaborators, contract manufacturers or advisors use trade secrets or know-how owned by others in their work for us, disputes may arise as to the ownership of relative inventions. Also, others may independently develop substantially equivalent trade secrets, processes and know-how, and competitors may be able to use this information to develop products that compete with our products, which could adversely impact our business. The disclosure of our trade secrets could impair our competitive position. Adequate remedies may not exist in the event of unauthorized use or disclosure of our confidential information.
We operate in a highly litigious environment.
There has been substantial litigation in the pharmaceutical industry concerning the manufacture, use and sale of new products that are the subject of conflicting patent rights. When we file an abbreviated new drug application (“ANDA”) for a bioequivalent version of a drug, we may, in some circumstances, be required to certify to the FDA that any patent which has been listed with the FDA as covering the branded product has expired, the date any such patent will expire, or that any such patent is invalid or will not be infringed by the manufacture, sale or use of the new drug for which the application is submitted. Approval of an ANDA is not effective until each listed patent expires, unless the applicant certifies that the patents at issue are not infringed or are invalid and so notifies the patent holder and the holder of the branded product. A patent holder may challenge a notice of non-infringement or invalidity by suing for patent infringement within 45 days of receiving notice. Such a challenge would preventprevents FDA approval for a period which ends 30 months after the receipt of notice, or sooner if an appropriate court rules that the patent is invalid or not infringed. From time to time, in the ordinary course of business, we face and have faced such challenges and may continue to do so in the future.
Brand-name pharmaceutical manufacturers routinely bring patent infringement litigation against ANDA applicants seeking FDA approval to manufacture and market generic forms of their branded products. We are routinely subject to patent litigation that can delay or prevent our commercialization of products, force us to incur substantial expense to defend, and expose us to substantial liability.
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We cannot ensure the availability of raw materials.
Certain raw materials which may be necessary for the development and subsequent commercial manufacturingmanufacture of our product candidates may be proprietary products of other companies. WeWhile we attempt to manage the risk associated with such proprietary raw materials, by the imposition of contractual provisions in supply contracts that we believe are favourable to us, by management of inventories and by the continued search for alternative authorized suppliers of such materials or their equivalents. If this fails,if our efforts fail, or if there is a material shortage, contamination, and/or recall of such materials, the resulting scarcity could adversely affect our ability to develop or manufacture our product candidates. In addition, many third party suppliers are subject to governmental regulation and, accordingly, we are dependent on the regulatory compliance of, as well as on the strength, enforceability and terms of our various contracts with, these third party suppliers.
Our product candidates may not be successfully developed or commercialized.
Successful development of our products is highly uncertain and is dependent on numerous factors, many of which are beyond our control. Products that appear promising in research or early phases of development may fail to reach later stages of development or the market for several reasons including:
| · | for ANDA candidates, bioequivalence studies results may not meet regulatory requirements or guidelines for the demonstration of bioequivalence; |
| · | for |
| · | for NDA candidates, a product may not be effective in treating a specified condition or illness; |
| · | a product may have harmful side effects on humans; |
| · | products may fail to receive the necessary regulatory approvals from the FDA or other regulatory bodies, or there may be delays in receiving such |
| · | difficulties may be encountered in formulating products, scaling up manufacturing processes or in getting approval for manufacturing; |
| · | manufacturing costs, pricing or reimbursement issues, other competitive therapeutics, or other commercial factors may make the product uneconomical; and |
| · | the proprietary rights of others, and their competing products and technologies, may prevent the product from being developed or commercialized. |
As a result, there can be no assurance that any of our products currently in development will ever be successfully commercialized.
We have invested a significant portion of our financial resourcestime and effort in the development of our lead product, our extended releaseonce daily generic dexmethylphenidate hydrochloride (dexmethylphenidate XR).XR. Although it remains our most advanced product, it has not yet received regulatory approval, and there can be no assurance as to when or if such regulatory approval will be received. We anticipate thatdepend significantly on the actions of our development partner Par Pharmaceutical, Inc. (“Par”) in the mid-termprosecution, regulatory approval and commercialization of our generic dexmethylphenidate XR product. Our near term ability to generate significant revenuesrevenue will depend substantially on theupon receipt of regulatory approval and successful commercialization of this product especially in the United States, where the branded Focalin XR® product remains under review byis in the FDA.market. Although we have several other products under development,in our pipeline, they also remain subject to regulatory approval or are at an earlier stagestages of development.
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Our significant expenditures on research and development may not lead to successful product introductions.
We conduct research and development primarily to enable us to manufacture and market pharmaceuticals in accordance with FDA regulations. We are required to obtain FDA approval before marketing our drug products. The FDA approval process is rigorous, time consuming and costly. Typically, research expenses related to the development of innovative compounds and the filing of NDAs are significantly greater than those expenses associated with ANDAs. As we continue to develop new products, our research expenses will likely increase. We are required to obtain FDA approval before marketing our drug products and the approval process is costly and time consuming. Because of the inherent risk associated with research and development efforts in our industry, particularly with respect to new drugs, our research and development expenditures may not result in the successful introduction of FDA approved new pharmaceuticals that have been approved by the FDA .
We may not have the ability to develop or license, or otherwise acquire, and introduce new products on a timely basis.
Product development is inherently risky, especially for new drugs for which safety and efficacy have not been established and the market is not yet proven. Likewise, product licensing involves inherent risks including uncertainties due to matters that may affect the achievement of milestones, as well as the possibility of contractual disagreements with regard to terms such as license scope or termination rights. The development and commercialization process, particularly with regard to new drugs, also requires substantial time, effort and financial resources. The process of obtaining FDA or other regulatory approval to manufacture and market new and generic pharmaceutical products is rigorous, time consuming, costly and largely unpredictable. We, or a partner, may not be successful in obtaining FDA or other required regulatory approval or in commercializing any of the products that we are currently developing or licensing or any future products.licensing.
We may not achieve our projected development goals in the time frames we announce and expect.
We set goals for and make public statements regarding ourthe expected timing of meeting thecertain corporate objectives, material to our success, such as the commencement and completion of clinical trials, anticipated regulatory approval and product launch dates. From time to time, we may make certain public statements regarding these goals. The actual timing of these forward looking events can vary dramatically due to, factors such asamong other things, insufficient funding, delays or failures in our clinical trials or bioequivalence studies, the need to develop additional data required by regulators as a condition of approval, the uncertainties inherent in the regulatory approval process, such as requests for additional information, delays in achieving manufacturing or marketing arrangements necessary to commercialize our product candidates and failure by our collaborators, marketing and distribution partners, suppliers and other third parties with whom we have contractual arrangements, to fulfill in whole or in par t, their contractual obligations towards us.obligations.
Our products may not achieve expected levels of market acceptance.acceptance, thereby limiting our potential to generate revenue.
Even if we are able to obtain regulatory approvals for our proposed products, the success of those products will be dependent upon market acceptance. Levels of market acceptance for any products to be marketed by us could be affected by several factors, including:
| · | the availability of alternative products from competitors; |
| · | the prices of our products relative to those of our competitors; |
| · | the timing of our market entry; |
| · | the ability to market our products effectively at the retail level; and |
| · | the acceptance of our products by government and private formularies. |
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Some of these factors are not within our control, and our proposed products may not achieve levels of market acceptance anticipated by us. Additionally, continuing and increasingly sophisticated studies of the proper utilization, safety and efficacy of pharmaceutical products are being conducted by the industry, government agencies and others which can call into question the utilization, safety and efficacy of products we are currently developing or may develop in the future. These studies could also impact a future product after it has been marketed. In some cases, studies have resulted, and may in the future result, in the discontinuance of product marketing or requirement of other risk management programs such as the need for a patient registry. The failure of our product candidates, once approved, to achieve market acceptance would limit our ability to generate revenue and would adversely affect our results of operations.
There are a number of risks and uncertainties associated with clinical trials.trials, which may be exacerbated by our relatively limited experience in conducting and supervising clinical trials and preparing NDAs. The results of initial clinical trials may not be indicative of results that would be obtained from large scale testing. Clinical trials are often conducted with patients having advanced stages of disease and, as a result, during the course of treatment these patients can die or suffer adverse medical effects for reasons that may not be related to the pharmaceutical agents being tested, but which nevertheless affect the clinical trial results. In addition, side effects experienced by the patients may cause delay of approval of our product or a limited application of an approved product. Moreover, our clinical trials may not demonstrate sufficient safety and efficacy to obtain FDA approval.
Failure can occur at any time during the clinical trial process and, in addition, the results from early clinical trials may not be predictive of results obtained in later and larger clinical trials, and product candidates in later clinical trials may fail to show the desired safety or efficacy despite having progressed successfully through earlier clinical testing. A number of companies in the pharmaceutical industry have suffered significant setbacks in clinical trials, even in advanced clinical trials after showing positive results in earlier clinical trials. In the future, the completion of clinical trials for our product candidates may be delayed or halted for many reasons, including:including those relating to the following:
| · | delays in patient |
| · | regulators or institutional review boards may not allow us to commence or continue a clinical trial; |
| · | our inability, or the inability of our partners, to manufacture or obtain from third parties materials sufficient to complete our clinical trials; |
| · | delays or failures in reaching agreement on acceptable clinical trial contracts or clinical trial protocols with prospective clinical trial sites; |
| · | risks associated with trial design, which may result in a failure of the trial to show statistically significant results even if the product candidate is effective; |
| · | difficulty in maintaining contact with patients after treatment commences, resulting in incomplete data; |
| · | poor effectiveness of product candidates during clinical trials; |
| · | safety issues, including adverse events associated with product candidates; |
| · | the failure of patients to complete clinical trials due to adverse side effects, dissatisfaction with the product candidate, or other reasons; |
| · | governmental or regulatory delays or changes in regulatory requirements, policy and guidelines; and |
| · | varying interpretation of data by the FDA or other applicable foreign regulatory agencies. |
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In addition, our product candidates could be subject to competition for clinical study sites and patients from other therapies under development by other companies which may delay the enrolment in or initiation of our clinical trials. Many of these companies have significantly more significant resources than we do.
The FDA or other foreign regulatory authorities may require us to conduct unanticipated additional clinical trials, which could result in additional expense and delays in bringing our product candidates to market. Any failure or delay in completing clinical trials for our product candidates would prevent or delay the commercialization of our product candidates. There iscan be no assurance our expenses related to clinical trials will lead to the development of brand-name drugs which will generate revenues in the near future. Delays or failure in the development and commercialization of our own branded products could have a material adverse effect on our results of operations, liquidity, financial condition, and our growth prospects.
We rely on third parties to conduct clinical trials.trials for our product candidates, and if they do not properly and successfully perform their legal and regulatory obligations, as well as their contractual obligations to us, we may not be able to obtain regulatory approvals for our product candidates.
If third parties do not successfully carry out their duties under their agreements with us; if the quality or accuracy of the data they obtain is compromised due to failure to adhere to our clinical protocols or regulatory requirements; or if they otherwise fail to comply with clinical trial protocols or meet expected deadlines, our clinical trials may not meet regulatory requirements. If our clinical trials do not meet regulatory requirements or if these third parties need to be replaced, such clinical trials may be extended, delayed, suspended or terminated. If any of these events occur, we may not be able to obtain regulatory approval of our product candidates.candidates, which could have a material adverse effect on our results of operations, financial condition and growth prospects.
Competition in our industry is intense, and developments by other companies could render our product candidates obsolete.
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We rely on collaborative arrangements with third parties whothat provide manufacturing and/or marketing support for some or all of our product candidates. Even if we find a potential partner, we may not be able to negotiate an arrangement on favourable terms or achieve results that we consider satisfactory. In addition, such arrangements can be terminated under certain conditions and do not assure a product’s success. We also face and will continue to face, intense competition from other companies for collaboration arrangements with other pharmaceutical and biotechnology companies.
Although we believe that our ownership of patents for some of our drug delivery products will limit direct competition with these products, we must also compete with established existing products and other promising technologies and other products and delivery alternatives that may be more effective than our products and proposed products. In addition, we may not be able to compete effectively with other commercially available products or drug delivery technologies.
We have not received regulatory approval for any product that uses our drug delivery technologies.
Our drug delivery technologies can be quite complex, with many different components. The development required to take a technology from its earliest stages to its incorporation in a product that is sold commercially can take many years and cost a substantial amount of money. Significant technical challenges are common as products incorporating our technologies progress through development, particularly in the first product candidate incorporating a new technology.
Our RexistaRexista™ product for an abuse-deterrent form of oxycodone is one such new technology. No product employing our abuse deterrent technology has received regulatory approval. In addition, any particular technology such as our abuse-deterrent technology may not perform in the same manner when used with different therapeutic agents, and therefore this technology may not prove to be as useful or valuable as originally thought, resulting in additional development work and expenditures.work.
If our efforts do not repeatedly lead to successful development of product candidates, we may not be able to grow our pipeline or to enter into agreements with marketing and distribution partners or collaborators that are willing to distribute or develop our product candidates. Delays or unanticipated increases in costs of development at any stage, or failure to solve a technical challenge, could adversely affect our operating results.
If third-partycontract manufacturers of our product ingredients or products fail to devote sufficient time and resources to our concerns, or if their performance is substandard, the commercialization of our products could be delayed or prevented, and this may result in higher costs or deprive us of potential product revenues.
respects will expose us to the followingseveral risks any of which could delay or prevent the commercialization of our products, result in higher costs, or deprive us of potential product revenues:revenues, including:
| · |
| · |
| · |
| · |
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| · | The potential for us to be in breach of our collaboration and marketing and distribution arrangements with third parties for the failure of our contract manufacturers |
A large majority of our expenses are payable in Canadian dollars and our financial results are reported in U.S. dollars. There may be instances where we have net foreign currency exposure. Any fluctuations in exchange rates will impact our financial results.
We have limited sales, marketing and distribution experience.
We have limited experience in the sales, marketing, and distribution of pharmaceutical products. There can be no assurance that, if required, we would be able to establish sales, marketing, and distribution capabilities or make arrangements with third-party manufacturers,our collaborators, licensees, or others to perform such activities or that such efforts would be successful. If we may commitfail to supply theseestablish successful marketing and sales capabilities or to make arrangements with third parties, with product. Inour business, financial condition and results of operations will be materially adversely affected.
Our significant shareholders will have the eventability to exercise significant influence over certain corporate actions.
Our principal shareholders, Drs. Amina and Isa Odidi, our President and Chief Operating Officer and our Chairman and Chief Executive Officer, respectively, and Odidi Holdings Inc., a privately-held company controlled by Drs. Amina and Isa Odidi, owned in the aggregate approximately 33.5% of our issued and outstanding common shares as of the date of this annual report (and collectively beneficially owned in the aggregate approximately 40.8% of our common shares, including common shares issuable upon the exercise of outstanding options and the conversion of the convertible debenture held by Drs. Amina and Isa Odidi that we are unable to fulfill such obligations asexercisable or convertible within 60 days of the date hereof). As a result, the principal shareholders will have the ability to exercise significant influence over all matters submitted to our shareholders for approval whether subject to approval by a majority of a failureholders of our contract manufacturers, we may be in breachcommon shares or subject to a class vote or special resolution requiring the approval of 66⅔% of the votes cast by holders of our obligations under those arrangements.common shares, in person or by proxy.
Our effective tax rate may vary.
Various internal and external factors may have favorable or unfavorable effects on our future effective tax rate. These factors include, but are not limited to, changes in tax laws, regulations and/or rates, changing interpretations of existing tax laws or regulations, future levels of research and development spending, the availability of tax credit programs for the reimbursement of all or a significant proportion of research and development spending, and changes in overall levels of pre-tax earnings. At present, we qualify in Canada for certain research tax credits for qualified scientific research and experimental development pertaining to our drug delivery technologies and drug products in research stages. If Canadian tax laws relating to research tax credits were substantially negatively altered or eliminated, or if a substantial portion of our claims for tax credits were denied by the relevant taxing authorities, pursuant to an audit or otherwise, it would have a material adverse effect upon our financial results.
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Risks related to our Industry
Because part of our product development strategy involves the novel reformulation of existing drugs with active ingredients that are off-patent, our products are likely to face competition from generic versions of such drugs. Regulatory approval for generic drugs may be obtained without investing in costly and time-consumingtime consuming clinical trials. Because of substantially reduced development costs, manufacturers of generic drugs are often able to charge much lower prices for their products than the original developer of a new product. If we face competition from manufacturers of generic drugs on products we may commercialize, such as our once-daily Rexista abuse-deterrentRexista™ oxycodone product, the prices at which such products are sold and the revenues we expect tomay receive maycould be reduced.
Market acceptance of our products will be limited if users of our products are unable to obtain adequate reimbursement from third-party payers.
Government health administration authorities, private health insurers and other organizations generally provide reimbursement for products like ours, and our commercial success will depend in part on whether appropriate reimbursement levels for the cost of our products and related treatments are obtained from government authorities, private health insurers and other organizations, such as health maintenance organizations and managed care organizations. Even if we succeed in bringing any of our products to market, third-party payers may not provide reimbursement in whole or in part for their use.
Significant uncertainty exists as to the reimbursement status of newly approved health care products. Some of our product candidates, such as our once-daily RexistaRexista™ abuse-deterrent oxycodone product, are intended to replace or alter existing therapies or procedures. These third-party payers may conclude that our products are less safe, less effective or less economical than those existing therapies or procedures. Therefore, third-party payers may not approve our products for reimbursement. We may be required to make substantial pricing concessions in order to gain access to the formularies of large managed-care organizations. If third party payers do not approve our products for reimbursement or fail to reimburse them adequately, sales will suffer as some physicians or their patients may opt for a competing product that is approved fo rfor reimbursement or is adequately reimbursed. Even if third-party payers make reimbursement available, these payers’ reimbursement policies may adversely affect our ability and our potential marketing and distribution partners’ ability to sell our products on a profitable basis.
We are subject to significant costs and uncertainties related to compliance with the extensive regulations that govern the manufacturing, labelling,labeling, distribution, and promotion of pharmaceutical products as well as environmental, safety and health regulations.
Governmental authorities in the United States and Canada regulate the research and development, testing and safety of pharmaceutical products. The regulations applicable to our existing and future products may change. Regulations require extensive clinical trials and other testing and government review and final approval before we can market our products. The cost of complying with government regulation can be substantial and may exceed our available resources, causing delay or cancellation of our product introductions.
Some abbreviated application procedures for controlled-release drugs and other products, including those related to our ANDA filings, or to the ANDA filings of unrelated third parties in respect of drugs similar to or chemically related to those of our ANDA filings, are or may become the subject of petitions filed by brand-name drug manufacturers or other ANDA filers seeking changes from the FDA in the interpretation of the statutory approval requirements for particular drugs as part of their strategy to thwart or advance generic competition. We cannot predict whether the FDA will make any changes to its interpretation of the requirements applicable to our ANDA applicationapplications as a result of these petitions, or whether unforeseen delays will occur in our ANDA filings while the FDA considers such petitions or changes or otherwise, or the effect that any changes may have on us. Any such changes in FDA interpretation of the statutes or regulations, or any legislated changes in the statutes or regulations, may make it more difficult for us to file ANDAs or obtain approval of our ANDAs and generate revenues and thus may materially harm our business and financial results.
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Any failure or delay in obtaining regulatory approvals could make it so that we are unable to market any products we develop and therefore adversely affect our business, results of operations, financial condition and cash flows. Even if approved in the United States or Canada, regulatory authorities in other countries must approve a product prior to the commencement of marketing the product in those countries. The time required to obtain any such approval may be longer than in the United States or Canada, which could cause the introduction of our products in other countries to be cancelled or materially delayed.
The manufacturing, distribution, processing, formulation, packaging, labellinglabeling and advertising of our products are subject to extensive regulation by federal agencies, including in the United States, the FDA, Drug Enforcement Administration, Federal Trade Commission, Consumer Product Safety Commission and Environmental Protection Agency, among others. We are also subject to state and local laws, regulations and agencies. Compliance with these regulations requires substantial expenditures of time, money and effort in such areas as production and quality control to ensure full technical compliance. Failure to comply with FDA and other governmental regulations can result in fines, disgorgement, unanticipated compliance expenditures, recall or seizure of products, total or partial suspension of production or distribution, suspension of th ethe FDA’s review of NDAs or ANDAs, enforcement actions, injunctions and civil or criminal prosecution.
Environmental laws have changed in recent years and we may become subject to stricter environmental standards in the future and face larger capital expenditures in order to comply with environmental laws. We are subject to extensive federal, state, provincial and local environmental laws and regulations which govern the discharge, emission, storage, handling and disposal of a variety of substances that may be used in, or result from, our operations. We are also subject periodically to environmental compliance reviews by environmental, safety, and health regulatory agencies and to potential liability for the remediation of contamination associated with both present and past hazardous waste generation, handling, and disposal activities. We cannot accurately predict the outcome or timing of future expenditures that we may be required to make in order to comply with the federal, state, local and localprovincial environmental, safety, and health laws and regulations that are applicable to our operations and facilities.
We are subject to product liability costs for which we may not have or be able to obtain adequate insurance coverage.
The testing and marketing of pharmaceutical products entails an inherent risk of product liability. Liability exposures for pharmaceutical products can be extremely large and pose a material risk. In some instances, we may be or may become contractually obligated to indemnify third parties for such liability. Our researchbusiness may be materially and development activitiesadversely affected by a successful product liability claim or claims in excess of any insurance coverage that we may have. Further, even if claims are not successful, the costs of defending such claims and potential adverse publicity could be harmful to our business.
While we currently have, and in some cases are contractually obligated to maintain, insurance for our business, property and our products as they are administered in bioavailability/bioequivalence studies, first and third party insurance is increasingly costly and narrow in scope. Therefore, we may be unable to meet such contractual obligations or we may be required to assume more risk in the future. If we are subject to third party claims or suffer a loss or damage in excess of our insurance coverage, we may be required to bear that risk in excess of our insurance limits. Furthermore, any first or third party claims made on our insurance policy may impact our ability to obtain or maintain insurance coverage at reasonable costs or at all in the future.
Our products involve the use of hazardous materials and waste, and as a result we are exposed to potential liability claims and to costs associated with complying with laws regulating hazardous waste.
Our research and development activities involve the use of hazardous materials, including chemicals, and are subject to Canadian federal, provincial and local laws and regulations governing the use, manufacture, storage, handling and disposal of hazardous materials and waste products. It is possible that accidental injury or contamination from these materials may occur. In the event of an accident, we could be held liable for any damages, which could exceed our available financial resources. Further, we may not be able to maintain insurance to cover these costs on acceptable terms, or at all. In addition, we may be required to incur significant costs to comply with environmental laws and regulations in the future.
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Our operations may be adversely affected by risks associated with international business.
We may be subject to certain risks that are inherent in an international business. These include:business, including:
| · | varying regulatory restrictions on sales of our products to certain markets and unexpected changes in regulatory requirements; |
| · | tariffs, customs, duties, and other trade barriers; |
| · | difficulties in managing foreign operations and foreign distribution partners; |
| · | longer payment cycles and problems in collecting accounts receivable; |
| · | political risks; |
| · | foreign exchange controls that may restrict or prohibit repatriation of funds; |
| · | export and import restrictions or prohibitions, and delays from customs brokers or government agencies; |
| · | seasonal reductions in business activity in certain parts of the world; and |
| · | potentially adverse tax consequences. |
Depending on the countries involved, any or all of the foregoing factors could materially harm our business, financial condition and results of operations.
Risks related to our Common Shares
Our share price has been highly volatile and our shares could suffer a further decline in value.
The trading price of our common shares has been highly volatile and could continue to be subject to wide fluctuations in price in response to various factors, many of which are beyond our control, including:
| · | sales of our common shares, including any sales made in connection with future financings; |
| · | announcements regarding new or existing corporate |
| · | announcements by us of significant acquisitions, joint ventures, or capital commitments; |
| · | actual or anticipated period-to-period fluctuations in financial results; |
| · | clinical and regulatory development regarding our product candidates; |
| · | litigation or threat of litigation; |
| · | failure to achieve, or changes in, financial estimates by securities analysts; |
| · | comments or opinions by securities analysts or members of the medical community; |
| · | announcements regarding new or existing products or services or technological innovations by us or our competitors; |
| · | conditions or trends in the pharmaceutical and biotechnology industries; |
| · | additions or departures of key personnel or directors; |
| · | economic and other external factors or disasters or crises; |
| · | limited daily trading volume; and |
| · | developments regarding our patents or other intellectual property or that of our competitors. |
In addition, the stock market in general and the market for drug development companies in particular have experienced significant price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Further, there has been significant volatility in the market prices of securities of pharmaceutical and biotechnologylife science companies. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted. A securities class action suit against us could result in substantial costs, potential liabilities, and the diversion of management’s attention and resources.
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As of the date of this annual report, there are currently common shares issuable upon the exercise of outstanding options and warrants and the conversion of the outstanding convertible debenture for an aggregate of approximately 8.3 million common shares. To the extent any of our options and warrants are exercised and the convertible debenture is converted, a shareholder’s percentage ownership will be diluted and our stock price could be further adversely affected. Moreover, as the underlying shares are sold, the market price could drop significantly if the holders of these restricted shares sell them or if the market perceives that the holders intend to sell these shares.
We have no history or foreseeable prospect of paying cash dividends.
We have not paid any cash dividends on our common shares and do not intend to pay cash dividends in the foreseeable future. We intend to retain future earnings, if any, for reinvestment in the development and expansion of our business. Dividend payments in the future may also be limited by other loan agreements or covenants contained in other securities which we may issue. Any future determination to pay cash dividends will be at the discretion of our board of directors and depend on our financial condition, results of operations, capital and legal requirements and such other factors as our board of directors deems relevant.
There may not be an active, liquid market for our common shares.
There is no guarantee that an active trading market for our common shares will be maintained on the NASDAQ Capital Market (“NASDAQ”), or the Toronto Stock Exchange (“TSX”) or elsewhere.. Investors may not be able to sell their shares quickly or at the latest market price if trading in our common shares is not active or if our shares cease to trade on a recognized securities exchange.active.
Future issuances of our shares could adversely affect the trading price of our common shares and could result in substantial dilution to shareholders.
We may need to issue substantial amounts of our common shares in the future. To the extent that the market price of our common shares declines, we will need to issue an increasing number of common shares per dollar of equity investment. In addition to our common shares issuable in connection with the exercise of our outstanding warrants, our employees, and directors will hold rights to acquire substantial amounts of our common shares. In order to obtain future financing if required, it is likely that we will issue additional common shares or financial instruments that are exchangeable for or convertible into common shares.
Also, in order to provide incentives to employees and induce prospective employees and consultants to work for us, we may offer and issue options to purchase common shares and/or rights exchangeable for or convertible into common shares. Future issuances of shares could result in substantial dilution to shareholders. Capital raising activities, if available, and dilution associated with such activities could cause our share price to decline. In addition, the existence of common share purchase warrants may encourage short selling by market participants. Also, in order to provide incentives to current employees and directors and induce prospective employees and consultants to work for us, we have historically granted options and deferred share units (“DSUs”), and intend to continue to do so or offer and issue options to purchase common shares and/orother rights exchangeable for or convertible into common shares. These activitiesFuture issuances of shares could result in substantial dilution to all our shareholders. Capital raising activities and dilution associated with such activities could cause our share price to decline.
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We may in the future issue preference shares which could adversely affect the rights of holders of our common shares and the value of such shares.
Our board of directors has the ability to authorize the issue of an unlimited number of preference shares in series, and to determine the price, rights, preferences and privileges of those shares without any further vote or action by the holders of our common shares.
Although we have no preference shares issued and outstanding, preference shares issued in the future could adversely affect the rights and interests of holders of our common shares.
Our common shares may not continue to be listed on the TSX.
If our common shares are no longer listed on the TSX, they may be eligible for listing on the TSX Venture Exchange. In the event that we are not able to maintain a listing for our common shares on the TSX or the TSX Venture Exchange, it may be extremely difficult or impossible for shareholders to sell their common shares in Canada. Moreover, if we are delisted andfrom the TSX, but obtain a substitute listing for our common shares on the TSX Venture Exchange, our common shares will likely have less liquidity and more price volatility than experienced on the TSX.
Shareholders may not be able to sell their common shares on any such substitute exchange in the quantities, at the times, or at the prices that could potentially be available on a more liquid trading market. As a result of these factors, if our common shares are delisted from the TSX, the price of our common shares is likely to decline. In addition, a decline in the price of our common shares will impair our ability to obtain financing in the future.
Our common shares may not continue to be listed on NASDAQ.
If our common shareswe are no loner listed ondelisted from the NASDAQ whether as a result of a failure to meet the Minimum Bid Price Rule or otherwise,Capital Market, our common shares may be eligible for trading on an over-the-counter market in the United States. In the event that we doare not able to obtain a listing on another U.S. stock exchange or quotation service for our common shares, it may be extremely difficult or impossible for shareholders to sell their common shares in the United States. Moreover, if our common shares cease to be listed onwe are delisted from the NASDAQ and weCapital Market, but obtain a substitute listing for our common shares in the United States, it will likely be on a market with less liquidity, and therefore potentially more price volatility, than Thethe NASDAQ Capital Market. Shareholders may not be able to sell their common shares on any such substitute U.S. market in the quantities, at the times, or at the prices that could potentially be available on a more liquid trading market. As a result of these factors, if our common shares are delisted from NASDAQ, the price of our common shares is likely to decline. In addition, a decline in the price of our common shares will impair our ability to obtain financing in the future.
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Our shares are listed for trading in the United States and may become subject to the SEC’s penny stock rules.
Transactions in securities that are traded in the United States that are not traded on NASDAQ or on other securities exchange by companies with net tangible assets of U.S.$5,000,000$5,000,000 or less and a market price per share of less than U.S.$5.00,$5.00 that are not traded on NASDAQ or on other securities exchanges may be subject to the “penny stock” rules promulgated under the Securities Exchange Act of 1934.1934, as amended (“U.S. Exchange Act”). Under these rules, broker-dealers who recommend such securities to persons other than institutional investors:investors must:
| · |
| · | receive the purchaser’s written agreement to a transaction prior to sale; |
| · | provide the purchaser with risk disclosure documents which identify risks associated with investing in “penny stocks” and which describe the market for these “penny stocks” as well as a purchaser’s legal remedies; and |
| · | obtain a signed and dated acknowledgment from the purchaser demonstrating that the purchaser has actually received the required risk disclosure document before a transaction in a “penny stock” can be completed. |
As a result of these requirements, if our common shares are at such time subject to the “penny stock” rules, broker-dealers may find it difficult to effectuate customer transactions and trading activity in these shares in the United States may be significantly limited. Accordingly, the market price of the shares may be depressed, and investors may find it more difficult to sell the shares.
As a foreign private issuer in the United States, we are subject to different U.S. securities laws and rules than a domestic U.S. issuer.
As a foreign private issuer under U.S. securities laws we are not required to comply with all the periodic disclosure requirements of the SecuritiesU.S. Exchange Act of 1934 (“Exchange Act”) applicable to domestic United States companies and therefore the publicly available information about us may be different or more limited than if we were a United States domestic issuer. In addition, our officers, directors, and principal shareholders are exempt from the “real time” reporting and ‘‘short swing’’ profit recovery provisions of Section 16 of the U.S. Exchange Act and the rules thereunder. Although under Canadian rules, our officers, directors and principal shareholders are generally required to file on SEDI (www.sedi.ca) reports of transact ionstransactions involving our common shares within tenfive calendar days of such transaction, (five calendar days effective after October 31, 2010), our shareholders may not know when our officers, directors and principal shareholders purchase or sell our common shares as timely as they would if we were a United States domestic issuer.
We are exposed to risks if we are unable to comply with laws and future changes to laws affecting public companies, including the Sarbanes-Oxley Act of 2002, and also to increased costs associated with complying with such laws.
Any future changes to the laws and regulations affecting public companies, as well as compliance with existing provisions of the Sarbanes-Oxley Act of 2002 (“SOX”) in the United States and applicable Canadian securities laws, regulations, rules and policies, may cause us to incur increased costs to comply with such laws and requirements, including, among others, hiring additional personnel and increased legal, accounting and advisory fees. Delays or a failure to comply with the new laws, rules and regulations could result in enforcement actions, the assessment of other penalties and civil suits. The new laws and regulations may increase potential costs to be borne under indemnities provided by us to our officers and directors and may make it more difficult to obtain certain types of insurance, including liability insurance for directors and officers; as such, we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult to attract and retain qualified persons to serve on our board of directors, or as executive officers.
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We are required annually to review and report on the effectiveness of our internal control over financial reporting in accordance with Sarbanes Oxley Act of 2002 (‘‘SOX’’) section 404 and Multilateral Instrument 52-109 – Certification of Disclosure in Issuer’s Annual and Interim Filings of the Canadian Securities Administrators. The results of this review are reported in our Annual Report. Our independent registered public accounting firm is also required to reportReport on the effectiveness ofForm 20-F and in our internal control over financial reporting beginning in fiscal 2010.Management Discussion and Analysis.
Management’s review is designed to provide reasonable, assurance, not absolute, assurance that all material weaknesses existing withinin our internal controls are identified. Material weaknesses represent deficiencies existing in our internal controls that may not prevent or detect a misstatement occurring which could have a material adverse affecteffect on our quarterly or annual financial statements. In addition, we cannot assure youthere can be no assurance that any remedial actions taken by uswe take to address any material weaknesses identified will be successful, nor can we assure youthere be any assurance that nofurther material weaknesses will not be identified within our internal controls over financial reporting in future years.
We may be classified as a “passive foreign investment company” or “PFIC” for U.S. income tax purposes, which could have significant and adverse tax consequences to U.S. investors.
The possible classification of our company as a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes could have significant and adverse tax consequences for U.S. holders of our common shares.shares and preference shares (collectively, “shares”). It may be possible for U.S. holders of common shares to mitigate certain of these consequences by making an election to treat us as a “qualified electing fund” or “QEF” under Section 1295 of the Internal Revenue Code of 1986, as amended (the “Code”) (a “QEF Election”) or a mark-to-market election under Section 1296 of the Internal Revenue Code of 1986, as amended (the “Code”), (a “Mark-to-Market Election”). A QEF Election requires treating the PFIC as a pass-through entity for federal income tax pu rposes, and the Mark-to-Market Election requires inclusion as taxable income or loss the increase or decrease in the fair market value of the PFIC stock each year, even if there is no
The determination of whether we are, or will be, a PFIC for a taxable year depends, in part, on the application of complex U.S. federal income tax rules, which are subject to various interpretations. In addition, whether we will be a PFIC for the current taxable year and each subsequent taxable year depends on our assets and income over the course of each such taxable year and, as a result, cannot be predicted with certainty. Absent one of the elections described above, if we are a PFIC for any taxable year during which a U.S. holder holds our ordinary shares, we generally will continue to be treated as a PFIC regardless of whether we cease to meet the PFIC tests in one or more subsequent years. Accordingly, no assurance can be given that we will not constitute a PFIC in the current (or any future) tax year or that the Internal Revenue Service (the “IRS”) will not challenge any determination made by us concerning our PFIC status.
If we are a PFIC, the U.S. federal income tax consequences to a U.S. Holderholder of the ownership and disposition of our shares will depend on whether such U.S. Holderholder makes a QEF or Mark-to-Market Election. Under recently passed legislation, unlessUnless otherwise provided by the Internal Revenue Service,IRS, a U.S. holder of our shares during any year in which we are a PFIC willis generally be required to file an informational return annually to report its ownership interest in the PFIC during any year in which we are a PFIC.
The foregoing does not purport to be a complete enumeration or explanation of the tax risks involved in an investment in our company. Prospective investors should read this entire annual report and consult with their own legal, tax and financial advisors before deciding to invest in our company.
It may be difficult to obtain and enforce judgments against us because of our Canadian residency.
We are governed by the laws of Canada. Most of our directors and officers are residents of Canada or other jurisdictions outside of the United States and all or a substantial portion of our assets and the assets of such persons may be located outside of the United States. As a result, it may be difficult for shareholders to effect service of process upon us or such persons within the United States or to realize in the United States on judgments of courts of the United States predicated upon the civil liability provisions of the U.S. federal securities laws or other laws of the United States. In addition, there is doubt as to the enforceability in Canada of liabilities predicated solely upon U.S. federal securities law against us, our directors, controlling persons and officers who are not residents of the United States, in original actions or in actions for enforcements of judgments of U.S. courts.
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| Information on the Company |
Our registered principal office is located at 30 Worcester Road, Toronto, Ontario, Canada M9W 5X2. Our telephone number is (416) 798-3001 and our facsimile number is (416) 798-3007.
On October 19, 2009, the shareholders of Intellipharmaceutics Ltd. (“IPC Ltd.”) and Vasogen Inc. (“Vasogen”) approved the court approved plan of arrangement and merger (the “IPC Arrangement Agreement”) that resulted in the October 22, 2009 combination of IPC Ltd. and Intellipharmaceutics Corp. combining with 7231971 Canada Inc., a new Vasogen company that acquired substantially all of the assets and certain liabilities of Vasogen, including the proceeds from its non-dilutive financing transaction with Cervus LP (“Cervus”) as described further below.below (the “IPC Arrangement Transaction”). The completion of the IPC Arrangement AgreementTransaction on October 22, 2009, resulted in a new pub licly-tradedpublicly-traded company, Intellipharmaceutics International Inc., incorporated under the laws of Canada, and whose common shares are traded on the TSX and NASDAQ. IPC Ltd. shareholders were issued approximately 86% of the outstanding common shares of Intellipharmaceutics and Vasogen’s shareholders were issued approximately 14% of the outstanding common shares of Intellipharmaceutics. Each former Vasogen shareholder received 0.065963061 common shares of
Separately, Vasogen entered into an arrangement agreement with Cervus, LP (“Cervus”), an Alberta based limited partnership that resulted in Vasogen being reorganized prior to completion of the arrangement transaction with IPC Ltd. and provided gross proceeds to Vasogen of approximately Cdn.$C$7.5 million in non-dilutive capital.
As a result of the transaction we selected a November 30 year end, which resulted in the Company having an eleven month fiscal period in 2009. All comparable information is that of the accounting predecessor company, IPC Ltd., which had a December 31 year end.
For the eleven month periodyears ended November 30, 2009,2012, 2011 and the years ended December 31, 2008, and 2007,2010, we spent a total of $1,554,859, $419,187,$5,992,417, $5,125,608, and $483,050,$4,533,310, respectively, on research and development. Over the past three fiscal years and up to January 31, 2013, we have raised approximately $14,055,400$18,500,000 in gross proceeds from the issuance of equity and convertible debt and equity securities to investors.securities. Our common shares are listed on the TSX under the symbol “I” and on the NASDAQ under the symbol “IPCI”.
During the last and current financial year, we have not been aware of any indications of public takeover offers by third parties in respect of the Company’s shares or by the Company in respect of other companies’ shares.
For additional information on key events, see Item 4.B below.
| B. |
Our Drug Delivery Technology
Our scientists have developed drug delivery technology systems, based on the Hypermatrix™ platform, that facilitate controlled-release delivery of a wide range of pharmaceuticals. We have branded these technology systems collectively as the Drug Delivery Engine™. These systems include several core technologies, which enable us to flexibly respond to varyinga wide range of drug attributes and patient requirements, producing a desired controlled-release effect. In our opinion, these systems offer superior performance to traditional drug delivery systems, while retaining simplicity and cost effectiveness associated with their manufacture for the reasons described below:
| Our |
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This group of our Drug Delivery Engine™ technologies, our Hypermatrix™ technologiesdrug delivery technology systems are based upon the drug active ingredient (“drug active”) being imbedded in, and an integral part of, a homogeneous (uniform), core and/or coatings consisting of one or more polymers which affect the release rates of drugs, other excipients (compounds other than the drug active), such as for instance lubricants which control handling properties of the matrix during fabrication, and the drug active itself. The Hypermatrix™ technologies are the core of our current marketingproduct development efforts and the technologies underlying our existing development agreements.
Our platform of Hypermatrix™ drug delivery technology includes IntelliGIT™technologies include, but are not limited to, IntelliFoam™, IntelliGITransporter™, IntelliMatrix™, IntelliOsmotics™, IntelliPaste™, IntelliPellets™, IntelliShuttle™ and Intellifoam™IntelliShuttle™. Some of their key attributes are described below.
These technologies provide a broad range of release profiles, taking into account the physical and chemical characteristics of a drug product, the therapeutic use of the particular drug, and the optimal site for release of the active pharmaceutical ingredientAPI in the GIT.gastrointestinal tract (“GIT”). At present those technologies have been applied in the laboratory and/or in bioavailability/bioequivalence studies in man to such orally administered small molecule drugs as are used in the treatment of neurological, cardiovascular, central nervous system, gastrointestinal,GIT, diabetes, pain diabetes and other significant disorders.indications.
The Hypermatrix™ Family of Drug Delivery Engine™ Technologies
The IntelliGIT™IntelliFoam™ technology is based on the drug active being embedded in, but separate from a syntactic foam substrate, the properties of which are used to modulate the release of the drug active. The drug actives are embedded in a resin polymer matrix.
IntelliGITransporter™
The IntelliGITransporter™ technology consists of an active drug immobilized in a homogeneous (uniform) matrix structure. A precise choice of mix ratios, polymers, and other ingredients imparts characteristics which protect the drug composition from mechanical degradation due to digestion, and/or from chemical degradation in the acidic stomach environment, and ensures that this technology allows control of release as well as releasing the medication at certain parts of the stomach or intestines without significant food effects or unintentional premature release of the entire drug dose. We believe that this technology is most useful for drug molecules with characteristics such as very low or very high potency, opiate analgesics (pain medications derived from the chemical compounds found in opium), or susceptibility to acid degradation. It is also useful for products where a zero-order (constant rate over time, independent of the amount of drug available for dissolution) release profile is desirable.
IntelliMatrix™
The IntelliMatrix™ technology is a proprietary blend of several polymers. Depending on the constituents of the blend and the manner in which these interact, the use of the blend with a drug allows the drug to be released at predetermined rates, while imparting protective characteristics to both the drug and the GIT. This results in protection from the delivered active drug, for the stomach, if required. This is most useful for drugs which require precisely controlled first orderfirst-order release profiles, where the amount released with time is dependent on one component like the amount of drug available for dissolution.
IntelliOsmotics™
The IntelliOsmotics™ technology is based upon the inclusion of multiple populations of polymers with distinct chemical bonding characteristics. These set up a complex matrix of hydrophilic (water attracting) and hydrophobic (water repelling) domains. When the tablet or bead is in an aqueous environment, like gastric contents, a “mixture” of water-soluble polymer and drug core is surrounded by gel layer(s) of water-insoluble polymer. Osmotic pressure drives the drug out when solvent passes through the gel layer while the polymer molecules remain. This permits control of the rate of release of the drug active by the variation of polymer ratios. This technology is most useful for drug molecules which require precisely controlled pseudo-first-order release profiles, where the rate of release is proportional to the amount available for dissolution as well as being proportional to one other component; however the effect of the amount of drug is overriding, so that the rate appears first order.first-order. This type of release control can be useful when attempting to match difficult profiles for generic formulation.
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IntelliPaste™
The IntelliPaste™ technology is comprised of blends of multiple polymers, oils, excipients and drug active(s) which result in a paste-in-a-capsule dosage form. The physical attributes of the paste include that it is thixotropic, pseudoplastic and non-Newtonian or, in layman’s terms, like toothpaste. Typically, it is formulated as having very low solubility in water or oil, and low solubility in alcohol. These characteristics enable the resulting drug product to have tamper-deterrent properties, and to resist dissolution in even high concentrations of alcohol. As a result, IntelliPaste™ is the Company’s preferred delivery technology for the controlled delivery of opiates, narcotics and other central nervous system drug products which are susceptible to unlawful diversion or abuse.
IntelliPellets™
The IntelliPellets™ technology consists of one or more type (population) of granule, bead, pellet, or tablet in a holding chamber or reservoir, such as a hard gelatin capsule. Each type (population) may be uniquely different from the other in the manner or rate it releases the drug. Our IntelliPellets™ technology is designed to control, prolong, delay or modify the release of drugs. It is particularly useful for the delivery of multiple drugs, for delayed, timed, pulsed or for chronotherapeutic drug delivery, designed to mimic our internal clocks for therapeutic optimization (the drug is delivered in the right amount for the patient at the right time). This technology is most useful for the delivery of multiple-drug cocktails, or in situations where the timing of a single dose or the sequencing of multiple doses of the same drug is important.
IntelliShuttle™
The IntelliShuttle™ technology provides for drug release past the stomach, such as for drugs required for action beyond the stomach, for drugs which could be destroyed by the stomach environment, or for drugs which could harm the stomach itself. This technology “shuttles” the drug past the stomach to be released at predetermined times or sites where appropriate for optimum therapeutic effect. This technology is most useful for acid labile drug molecules (drugs that are destroyed in acid environment), such as the proton pump inhibitors, of which well-known omeprazole (Prilosec) and lansoprazole (Prevacid) are examples, or for drug molecules which may harm the stomach, of which the well-known aspirin is an example.
Each of the above-noted proprietary technologies has beenwas fully developed and is ready for application to potential product candidates.client drug delivery requirements from the date of our inception. Each of them has been utilized and applied to client drug delivery requirements under our existing and previous development contracts; in several instances more than one technology has been applied to a single drug development. We continue to marketdevelop all of our existing technologies and to conduct the necessary research to develop new products and technologies. To date, none of the development contracts has proceeded to the point of commercialization, and therefore we have not yet seen our proprietary technologies utilized in products sold to consumers.
Our Strategy
We believe that our Hypermatrix™ technologies are a multidimensional controlled-release drug delivery platform that can be applied to the efficient development of a wide range of existing and new pharmaceuticals. We believe that the flexibility of these technologies allow us to develop complex drug delivery solutions within a rapid timeframe. Based on our technologies, we have a pipeline of product candidates in various stages of development, including eight ANDAs filed with the FDA in therapeutic areas that include neurology, cardiovascular, GIT, diabetes and pain. Certain, but not all, of the products in our pipeline may be developed from time to time for third parties pursuant to drug development agreements with those third parties, under which our development partner generally pays certain of the expenses of development, sometimes makes certain milestone payments to us and receives a share of revenues or profits if the drug is developed successfully to completion, the control of which is generally in the discretion of our drug development partner. At this time, there is one such product in multiple strengths being developed in cooperation with a development partner.
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The Hypermatrix™ technologies are applied to the development of both existing and new pharmaceuticals across a range of therapeutic classes. The competitive advantages of these technologies allow us to focus our development activities in two areas; difficult-to-develop controlled-release generic drugs, which follow an ANDA regulatory path; and improved current therapies through controlled release, which follow a NDA 505(b)(2) regulatory path.
The market we operate in is created by the expiration of drug product patents, challengeable patents and drug product exclusivity periods. There are three ways that we employ our controlled-release technologies, which we believe represent substantial opportunities for us to commercialize on our own or develop products or out-license our technologies and products:
| · | For existing controlled-release (once-a-day) products whose APIs are covered by drug molecule patents about to expire or already expired, or whose formulations are covered by patents about to expire, already expired or which we believe we do not infringe, we can seek to formulate generic products which are bioequivalent to the branded products. Our scientists have demonstrated a successful track record with such products, having previously developed several drug products which have been commercialized in the United States by their former employer/clients. The regulatory pathway for this approach requires ANDAs for the United States and corresponding pathways for other jurisdictions. |
| · | For branded immediate-release (multiple-times-per-day) drugs, we can formulate improved replacement products, typically by developing new, potentially patentable, controlled-release once-a-day drugs. Among other out-licensing opportunities, these drugs can be licensed to and sold by the pharmaceutical company that made the original immediate-release product. This can potentially protect against revenue erosion in the brand by providing a clinically attractive patented product that competes favorably with the generic immediate-release competition that arises on expiry of the original patent(s). The regulatory pathway for this approach requires NDAs via a 505(b)(2) application for the U.S. or corresponding pathways for other jurisdictions where applicable. The 505(b)(2) pathway (which relies in part upon the approving agency’s findings for a previously approved drug) both accelerates development timelines and reduces costs in comparison to NDAs for new chemical entities. |
| · | Some of our technologies are also focused on the development of abuse-deterrent pain medications. The growing abuse and diversion of prescription “painkillers”, specifically opioid analgesics, is well documented and is a major health and social concern. We believe that our technologies and know-how are aptly suited to developing abuse-deterrent pain medications. The regulatory pathway for this approach requires NDAs via a 505(b)(2) application for the U.S. or corresponding pathways for other jurisdictions where applicable. |
We intend to collaborate in the development and/or marketing of one or more products with partners, when we believe that such collaboration may enhance the outcome of the project. We also plan to seek additional collaborations as a means of developing additional products. We believe that our business strategy enables us to reduce our risk by (a) having a diverse product portfolio that includes both branded and generic products in various therapeutic categories, and (b) building collaborations and establishing licensing agreements with companies with greater resources thereby allowing us to share costs of development and to improve cash-flow. There can be no assurance that we will be able to enter into additional collaborations or, if we do, that such arrangements will be beneficial.
Our Products
The table below shows the present status of our ANDA and NDA product candidates that have been disclosed publicly.
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| Generic name | Brand | Indication | Stage of Development | Regulatory Pathway | Rights |
Dexmethylphenidate hydrochloride extended-release capsules | Focalin XR® | Attention-deficit hyperactivity disorder | FDA | ANDA | |
Venlafaxine hydrochloride extended-release capsules | Effexor XR® | Depression | FDA | ANDA | Intellipharmaceutics |
| Pantoprazole sodium delayed- release tablets | Protonix® | Conditions associated with gastroesophageal reflux disease | ANDA application for commercialization approval for 2 strengths under review by FDA | ANDA | Intellipharmaceutics |
| Metformin hydrochloride extended-release tablets | Glucophage® XR | Management of type 2 diabetes | ANDA application for commercialization approval for 2 strengths under review by FDA | ANDA | Intellipharmaceutics |
| Quetiapine fumarate extended-release tablets | Seroquel XR® | Schizophrenia, bipolar disorder & major depressive disorder | ANDA application for commercialization approval for 5 strengths under review by FDA | ANDA | Intellipharmaceutics |
| Lamotrigine extended-release tablets | Anti-convulsant for epilepsy | ANDA application for commercialization approval for 4 strengths under review by FDA | ANDA | Intellipharmaceutics | |
| Levetiracetam extended-release tablets | Keppra XR® | Partial onset seizures for epilepsy | ANDA application for commercialization for 2 strengths under review by FDA | ANDA | Intellipharmaceutics |
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| Desvenlafaxine extended-release tablets | Pristiq® | Depression | ANDA application for commercialization approval for 2 strengths filed with the FDA | ANDA | Intellipharmaceutics |
| Carvedilol phosphate extended- release capsules | Coreg CR® | Heart failure, hypertension | ANDA | Intellipharmaceutics | |
| Oxycodone | N/A | Pain | NDA 505(b)(2) | Intellipharmaceutics | |
| Pregabalin extended-release capsules | Lyrica® | Neuropathic pain | Phase I clinical trial | NDA 505(b)(2) | Intellipharmaceutics |
We typically select products for development that we intend to licenseanticipate could achieve FDA approval for commercial sales several years in the future. However, the length of time necessary to bring a product to the point where wethe product can license the productbe commercialized can vary significantly and depends on, among other things, the availability of funding, design and formulation challenges, safety or efficacy, and patent issues associated with the product.product, and FDA review times.
ANDA Product Candidates
Dexmethylphenidate Hydrochloride – Generic Focalin XR® (a registered trademark of the brand manufacturer)
In 2005, we entered into a license and commercialization arrangement with Par for the development of a generic version of Focalin XR®. Under the arrangement, we
Our dexmethylphenidate hydrochloride extended-release capsules are responsible for all laboratory development costs and Par is responsible for bioequivalence costs, API costs, scale up / stability costs and marketing. Par is also responsible for costs associated with litigation. This includes a ten year profit-sharing agreement with Par which commences with the commercial launchgeneric version of the product.marketed drug Focalin XR contains dexmethylphenidateXR®. Dexmethylphenidate hydrochloride, anda Schedule II restricted product in the United States, is usedindicated for the treatment of Attention Deficit Hyperactivity Disorder. In 2008, Focalin®, includingattention deficit hyperactivity disorder (“ADHD”). According to Source Healthcare Analytics, sales for the 12 months ended December 2012 of Focalin XR®, had in the U.S. sales ofwere approximately U.S. $350 million.$614 million (TRx MBS Dollars, which represents projected new and refilled prescriptions representing a standardized dollar metric based on manufacturer’s published catalog or list prices to wholesalers, and does not represent actual transaction prices and does not include prompt pay or other discounts, rebates or reductions in price).
Effective May 2007, we filed an ANDA for our generic Dexmethylphenidate XR,version of Focalin XR® with the FDA. As at that date, the application was accepted by the FDA as being complete and in condition for further review. In the period since our filing, we have filed a number of amendments to the application, some of which were at the request of the FDA.
Intellipharmaceutics and Par, together with five complainants in patent litigation in the District Courts for New Jersey and Delaware (Novartis Pharmaceuticals Corporation, Novartis Pharma AG, Celgene Corporation, Elan Corporation, plc and Elan Pharma International Ltd) stipulated to the dismissal of that litigation and, in 2010, entered into settlement and license agreements with the Company and with Par in respect of our ANDA application to the FDA for 5, 10, 15 and 20 mg strengths of dexmethylphenidate hydrochloride. Subject to FDA approval, we may market these generic versions of the product in the U.S. We have a ten year profit-sharing agreement with Par for the sale of dexmethylphenidate hydrochloride extended-release capsules in the U.S., which commences with the commercial launch of the product by Par.
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In December 2010, we filed an amendment to the ANDA to include the 30 mg strength of dexmethylphenidate hydrochloride extended-release capsules. Elan Corporation, plc and Elan Pharma International Ltd., filed a Complaint against Intellipharmaceutics Corp., IPC Ltd., and Par for alleged patent infringement in the United States District Court for the District of Delaware, relating to Intellipharmaceutics’ generic version of 30 mg Focalin XR®. Separately, Celgene Corporation, Novartis Pharmaceuticals Corporation and Novartis Pharma AG, filed a Complaint against Intellipharmaceutics Corp. for alleged patent infringement in the United States District Court for the District of New Jersey, relating to Intellipharmaceutics’ generic version of 30 mg Focalin XR®. In July 2012, the parties stipulated to a full and final dismissal of the pending patent litigation in the states of New Jersey and Delaware.
In February 2012, we filed an amendment to the ANDA for a generic version of Focalin XR® to include the 40 mg strength of dexmethylphenidate hydrochloride extended-release capsules. Celgene Corporation, Novartis Pharmaceuticals Corporation, and Novartis Pharma AG, filed a Complaint against Intellipharmaceutics Corp. for alleged patent infringement in the United States District Court for the District of New Jersey. Also, Alkermes Pharma Ireland Limited (successor in title to Elan Pharma International Limited) filed a Complaint against Intellipharmaceutics Corp. and Intellipharmaceutics Ltd., in June 29, 2012, for alleged patent infringement in the United States District Court for the District of Delaware. Both Complaints are in relation to Intellipharmaceutics’ generic version of 40 mg Focalin XR®. Both of these actions have been stayed on the consent of all parties pending settlement discussions. In view of the previous settlements related to the five dosage strengths of the same drug product, the Company believes it is reasonable to expect that the litigation relating to the 40 mg strength could also be settled on terms satisfactory to the Company, although no assurance can be provided to this effect. Lawsuits such as these are an ordinary and expected part of the process of obtaining approval to commercialize a generic drug product in the United States. Intellipharmaceutics remains confident that its generic version of 40 mg Focalin XR® does not in any event infringe the patents in issue.
On August 18, 2011, we announced that we had added the development and commercialization of additional strengths of generic Focalin XR® to the existing license and commercialization arrangement with Par for the U.S. market. This includes the 30 and 40 mg strengths.
Our ANDA application for all of the above strengths remains under review, and there can be no assurance when, or if at all, the FDA will approve the various dosages of the product for commercial launchsale in the U.SU.S. market.
Venlafaxine Hydrochloride – Generic Effexor XR® (a registered trademark of the brand manufacturer)
Our ANDA in respect of this product is under review; there can be no assurance when, or if at all, the FDA will approve the product for sale in the U.S. market.
Wyeth LLC, a wholly owned subsidiary of Pfizer Inc., had filed a Complaint for patent infringement against us in the United States District Court for the District of Delaware and for the Southern District of New York, relating to our generic version of Effexor XR® branded products had estimatedcapsules. On June 21, 2011, the Company announced that the patent infringement litigation was settled, granting the Company a non-exclusive license to the patents in suit that will permit the Company to launch a generic version of Effexor XR® in the U.S. salesfollowing FDA approval of approximately $3.0 billion in 2009.this product. There can be no assurance that such approval will be granted.
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An ANDA has been filed with the FDA, and the application is under review. The brand owner did not initiate patent infringement litigation. There are no unexpired patents associated with this product. As a result, we will not be subject to the automatic 30-month stay of FDA approval to market the product and we will be in a position to market our product in the United States upon FDA approval. There can be no assurance when, or if at all, the FDA will approve the product for sale in the U.S. market.
We are exploring licensing agreement opportunities or other possibilities for this product. While we believe that a licensing agreement is possible, there can be no assurance that one can be secured.
Metformin Hydrochloride – Generic Glucophage® XR (a registered trademark of the brand manufacturer)
Our metformin hydrochloride extended-release tablets are a generic version of the marketed drug Glucophage® XR. Metformin hydrochloride is an oral antihyperglycemia drug indicated for the management of type 2 diabetes. According to Source Healthcare Analytics, sales of metformin hydrochloride extended-release tablets in the United States were approximately $388 million (TRx MBS Dollars) for the 12 months ended December 2012.
An ANDA has been filed with the FDA, and the application is under review. The brand owner did not initiate patent infringement litigation. As a result, we will not be subject to the automatic 30-month stay of FDA approval to market the product and we will be in a position to market our generics pipelineproduct in the United States upon FDA approval. There can be no assurance when, or if at all, the FDA will approve the product for sale in the U.S. market.
We are exploring licensing agreement opportunities or other possibilities for this product. While we believe that a licensing agreement is possible, there can be no assurance that one can be secured.
Quetiapine Fumarate – Generic Seroquel XR®(a registered trademark of the brand manufacturer)
Our quetiapine fumarate extended-release tablets are a generic version of the marketed drug Seroquel XR®. Quetiapine fumarate is an oral psychotropic agent indicated for the treatment of schizophrenia, bipolar disorder, and major depressive disorder. According to Source Healthcare Analytics, sales of Seroquel XR® in the United States were approximately $1.1 billion (TRx MBS Dollars) for the 12 months ended December 2012.
The ANDA application is under review and there can be no assurance when, or if at all, the FDA will accept our application for further review or approve the product for sale in the U.S. market.
On or about May 25, 2011, AstraZeneca Pharmaceuticals LP and AstraZeneca UK Limited (together “AstraZeneca”), the owners of the rights in the United States in Seroquel XR® tablets, filed a lawsuit for patent infringement against the Company in the United States District Court for the District of New Jersey, relating to Intellipharmaceutics' generic version of the 150, 200, 300 and 400 mg dosage forms of Seroquel XR®. The Company filed a motion to contest New Jersey as a proper forum for the litigation. That motion was successful, and the litigation against the Company in the United States District Court for the District of New Jersey was dismissed on February 15, 2012.
On or about June 30, 2011, the same AstraZeneca entities also filed a substantially identical lawsuit for patent infringement against the Company in the United States District Court for the Southern District of New York. On or about April 11, 2012, the same AstraZeneca entities filed a lawsuit for patent infringement against the Company in the United States District Court for the Southern District of New York, relating to Intellipharmaceutics' generic version of the 50 mg dosage form of Seroquel XR®. On July 30, 2012, and pursuant to the settlement, AstraZeneca and the Company filed proposed Consent Judgments in the District Court for the Southern District of New York to conclude the litigation, subject to other regulatory review. There was no further regulatory comment or action, and the settlement is now final. The settlement provides, in part, that the Company is permitted to launch its generic versions of the 50, 150, 200, 300 and 400 mg strengths of Seroquel XR® on November 1, 2016, or earlier in certain circumstances, subject only to prior FDA approval of the Company's ANDA for those strengths. All other terms of the settlement are confidential. The Company's actual launch may also be subject to a six month statutory delay relating to a prior filer of a generic equivalent of the branded product, such delay to commence from the first date of commercialization by the prior filer.
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We are exploring licensing agreement opportunities or other possibilities for this product. While we believe that a licensing agreement is possible, there can be no assurance that one can be secured.
Lamotrigine – Generic Lamictal® XR™(a registered trademark of the brand manufacturer)
Our lamotrigine extended-release tablets are a generic version of the marketed drug Lamictal®XR™. Lamotrigine is an oral anticonvulsant drug used in the treatment of epilepsy. According to Source Healthcare Analytics, sales of Lamictal®XR™ in the United States were approximately $279 million (TRx MBS Dollars) for the 12 months ended December 2012.
An ANDA has been filed with the FDA, and the application is under review. The brand owner did not initiate patent infringement litigation. There are no unexpired patents associated with this product. As a result, we will not be subject to the automatic 30-month stay of FDA approval to market the product and we will be in a position to market our product in the United States upon FDA approval. There can be no assurance when, or if at all, the FDA will approve the product for sale in the U.S. market.
We are exploring licensing agreement opportunities or other possibilities for this product. While we believe that a licensing agreement is possible, there can be no assurance that one can be secured.
Levetiracetam – Generic Keppra XR® (a registered trademark of the brand manufacturer)
Our levetiracetam extended-release tablets are a generic version of the marketed drug Keppra XR®. Levetiracetam is an oral antiepileptic drug used in the treatment of partial onset seizures in patients with epilepsy. According to Source Healthcare Analytics, sales of levetiracetam extended-release tablets in the United States were approximately $145 million (TRx MBS Dollars) for the 12 months ended December 2012.
An ANDA has been filed with the FDA, and the application is under review. There can be no assurance when, or if at all, the FDA will approve the product for sale in the U.S. market.
We are exploring licensing agreement opportunities or other possibilities for this product. While we believe that a licensing agreement is possible, there can be no assurance that one can be secured.
Desvenlafaxine – Generic Pristiq® (a registered trademark of the brand manufacturer)
Our desvenlafaxine extended-release tablets are a generic version of the marketed drug Pristiq®. Desvenlafaxine is a selective serotonin and norepinephrine reuptake inhibitor indicated for the treatment of major depressive disorder. According to Source Healthcare Analytics, sales of Pristiq® in the United States were approximately $640 million (TRx MBS Dollars) for the 12 months ended December 2012.
An ANDA has been filed with the FDA. There can be no assurance when, or if at all, the FDA will approve the product for sale in the U.S. market.
We are exploring licensing agreement opportunities or other possibilities for this product. While we believe that a licensing agreement is possible, there can be no assurance that one can be secured.
Carvedilol Phosphate – Generic Coreg CR® (a registered trademark of the brand manufacturer)
Our carvedilol phosphate extended release capsule. It iscontrolled-release capsules, in development, are intended to be a generic version of the marketed drug Coreg CR®. COREG CRCarvedilol phosphate is available for once-a-day administration as controlled-release oral capsules containing 10, 20, 40, or 80 mg of the active pharmaceutical agent. It is usedindicated for the treatment of hypertension and heart conditions.failure. According to Source Healthcare Analytics, sales of Coreg CR® in the United States were approximately $282 million (TRx MBS Dollars) for the 12 months ended December 2012.
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This product is currently in late-stage development and we are planning on conducting additional pivotal bioequivalence studies later in fiscal 2010.late stage development. We are exploring licensing agreement opportunities or other possibilities for this product. There iscan be no assurance that an ANDA will be filed, or if filed, that an approval to market can be obtained, or if approved, that a licensing agreement can be secured.secured to market the product.
In February 2009,July 2012, the FDA announced that it plans to implementapproved a new Risk Evaluation and Mitigation Strategy (“REMS”) requirement for all extended-release and long-acting opioid analgesics.medications. The new safety measures requires companies to make education programs available to prescribers based on an FDA Blueprint, make available FDA-approved patient education materials on the safe use of these drugs, and perform periodic assessments of the implementation of the REMS and the success of the program in meeting its goals. By March 1, 2013, the first education programs are expected to be offered to prescribers. Also in April 2011, a mandatory training program on responsible opioid prescribing practices was endorsed by the U.S. Government. We believe that the REMS will ultimately drive prescribing of newer tamper-resistant extended releasetamper-deterrent extended-release opioids. Several “tamper-resistant”“tamper-deterrent” formulations of oral opioid analgesics are being developed by other companies. We believe that the FDA’s move to restrict prescribing of extended-release opioid analgesicsREMS should benefit tamper-resistanttamper-deterrent products.
We believe that we can leverage our core competencecompetencies in drug delivery and formulation for the development of products targeted towards tamper-resistanttamper-deterrent opioid analgesics used in pain management. The advantage of our strategy for development of NDA drugs is that our products can, if approved for sale, enjoy a sales exclusivity period. Furthermore, we believe it ismay be possible to establish and defend the intellectual property surrounding our tamper-resistanttamper-deterrent opioid analgesic products.
We have completed proofa proof-of-concept Phase I clinical study of concept pilotRexista™ oxycodone, which yielded positive results. We have also concluded a pre-Investigational New Drug (“pre-IND”) meeting with a panel of the FDA’s Center for Drug Evaluation and Research clarifying the Rexista™ oxycodone development plan. Finally, we have completed clinical batch manufacturing of Rexista™ oxycodone, and initiated Phase I studies of Rexista andRexista™ oxycodone. Preliminary Phase I data from this trial is expected in fiscal 2010 plan to complete manufacture clinical batches of Rexista™ for use in phase 1 clinical trials. We also plan to initiate discussions with the FDA on the clinical development plan for Rexista™.early 2013. There can be no assurance that thethis and additional clinical trials will meet the expected outcomes or that we will be able to successfully produce scaled up batches for use in clinical trials orour expectations, that we will be successful in submitting ana NDA 505 (b)505(b)(2) filing.filing with the FDA, that the FDA will approve this product candidate for sale in the U.S. market, or that it will ever be successfully commercialized.
There can be no assurance as to whether or when the FDA will approve any Intellipharmaceutics' application.
Pregabalin (Pregabalin Extended-Release)
Another Intellipharmaceutics non-generic controlled-release product is pregabalin extended-release capsules. Pregabalin is indicated for the management of neuropathic pain associated with diabetic peripheral neuropathy, postherpetic neuralgia, spinal cord injury and fibromyalgia. There is no controlled-release formulation on the market at this time. A controlled-release version of pregabalin should reduce the number of doses patients take, potentially improving patient compliance, and therefore potentially improving clinical outcomes. According to Source Healthcare Analytics, U.S. sales for the 12 months ended December 2012 for Lyrica® (pregabalin capsules) were approximately $2.0 billion (TRx MBS Dollars).
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The company successfully completed an initial Phase I clinical trial of a controlled-release pregabalin formulation. This was the first bioavailability study of our controlled-release pregabalin versus Lyrica® (immediate release pregabalin). The study was carried out in 14 subjects. The results showed that our 150 mg pregabalin once-a-day dosage was comparable in bioavailability to Lyrica® 50 mg three-times-a-day dosage. We plan to initiate additional Phase I clinical trials in 2013. There can be no assurance that additional clinical trials will meet our expectations, that we will be successful in submitting a NDA 505(b)(2) filing with the FDA, that the FDA will approve this product candidate for sale in the U.S. market, or that it will ever be successfully commercialized.
There can be no assurance as to whether or when the FDA will approve any Intellipharmaceutics' application.
COMPETITIVE ENVIRONMENT
We are engaged in a business characterized by extensive research efforts, rapid technological developments and intense competition. Our competitors include medical technology, pharmaceutical, biotechnology and other companies, universities and research institutions. All of these competitors currently engage in, have engaged in or may engage in the future, in the development, manufacturing, marketing and commercialization of new pharmaceuticals and existing pharmaceuticals, some of which may compete with our present or future product candidates.
Our drug delivery technologies willmay compete with existing drug delivery technologies, as well as new drug delivery technologies that may be developed or commercialized in the future. Any of these drugs and drug delivery technologies may receive government approval or gain market acceptance more rapidly than our product candidates. As a result, our product candidates may become non-competitivenoncompetitive or obsolete.
We believe that our ability to successfully compete will depend on, among other things, the efficacy, safety and reliability of our product candidates, the timing and scope of regulatory approval, the speed at which we develop product candidates, our ability to manufacture and sell commercial quantities of a product to the market, product acceptance by physicians and other professional health carehealthcare providers, the quality and breadth of our technology,technologies, the skills of our employees and our ability to recruit and retain skilled employees, the protection of our intellectual property, and the availability of substantial capital resources to fund development and commercialization activities.
MANUFACTURING
We have internal manufacturing capabilities consisting of Current Good Laboratory Practices (“cGLP”) research laboratories and a cGMP manufacturing plant for solid oral dosage forms at our 30 Worcester Road facility in Toronto. Raw materials used in manufacturing our products are available from a number of commercial sources and the prices for such raw materials are generally not particularly volatile.
INTELLECTUAL PROPERTY
Proprietary rights are an important aspect of our business. These include know-how, trade secrets and patents. Know-how and trade secrets are protected by internal company policies and operating procedures, and where necessary, by contractual provisions with development partners and suppliers. We also seek patent protection for inventive advances which form the bases of our drug delivery technologies. With respect to particular products, we may seek patent protection on the commercial composition, theour methods of production and the intended uses of drug productsour uses, to prevent the unauthorized marketing and sale of competitive products.
Patents which relate to and protect various aspects of our familiesHypermatrix™ family of propriety drug delivery technologies includedinclude the following United States and Canadian patents which have been issued to us: (i) U.S. Patent No. 6,296,876, issued October 2, 2001 and projected to expire October 6, 2017 and U.S. Patent No. 6,479,075, issued November 12, 2002 and projected to expire October 1, 2018, which concern pharmaceutical formulations for acid labile [drug actives] and compositions which protect the drug active and composition from destruction in acidic environments in the GIT; and (ii) U.S. Patent No. 6,607,751, issued August 19, 2003 and projected to expire October 10, 2017 and U.S. Patent No. 7,090,867, issued on August 15, 2006 and projected to expire October 9, 2018, which describe a controlled-release drug delivery tec hnology incorporating a microbial polysaccharide gum. Other patents relate to and protect various aspects of our Intellifoam drug delivery technologies. These include U.S. Patent No. 6,800,668, issued October 15, 2004 and projected to expire January 19, 2021, and the corresponding issued Canadian Patent No. 2,435,276, which relate to novel syntactic deformable foam compositions used as a carrier or substrate for drug actives, and methods for making these compositions.
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| Country | Issue Date | Issue No. | Title |
| U.S.A | Mar 15, 2011 | 7,906,143 | Controlled Release Pharmaceutical Delivery Device and Process of Preparation Thereof |
| U.S.A | Dec 28, 2010 | 7,858,119 | Extended Release Pharmaceuticals |
| U.S.A | Aug 15, 2006 | 7,090,867 | Novel Controlled Release Delivery Device for Pharmaceutical Agents Incorporating Microbial Polysaccharide Gum |
| U.S.A | Oct 5, 2004 | 6,800,668 | Syntactic Deformable Foam Compositions and Methods for Making |
| U.S.A | Nov 25, 2003 | 6,652,882 | Controlled Release Formulation Containing Bupropion |
| U.S.A | Aug 19, 2003 | 6,607,751 | Novel Controlled Release Delivery Device for Pharmaceutical Agents Incorporating Microbial Polysaccharide Gum |
| U.S.A | Nov 12, 2002 | 6,479,075 | Pharmaceutical Formulations for Acid Labile Substances |
| U.S.A | Oct 2, 2001 | 6,296,876 | Pharmaceutical Formulations for Acid Labile Substances |
| Canada | Jun 19, 2012 | 2,626,558 | Pharmaceutical Composition Having Reduced Abuse Potential |
| Canada | Sep 25, 2012 | 2,529,984 | Oral Multi-Functional Pharmaceutical Capsule Preparations Of Proton Pump Inhibitors |
| Canada | Feb 22, 2011 | 2,459,857 | Combinatorial Type Controlled Release Drug Delivery Device |
| Canada | Mar 15, 2005 | 2,435,276 | Syntactic Deformable Foam Compositions and Methods for Making |
In addition to these issued patents, we have several U.S. Patentpatent applications, and corresponding foreign applications pending, including Patent Cooperation Treaty - national stage processing and entry applications, relating to various aspects of our HyperMatrix drug delivery technologies, including methods and compositions for coating of tablets and beads, compositions incorporating disintegrants to assist in controlled release, compositions incorporating multiple drug actives, and compositions directed to classes of drug actives designed
as therapies for specific indications and compositions intended to enhance deterrence of wilfulwillful abuse of narcotic compositions.
REGULATORY REQUIREMENTS
We focus on the development of both branded drug products (which require NDAs) and generic drug products (which require ANDAs). The research and development, manufacture and marketing of controlled-release pharmaceuticals are subject to regulation by U.S., Canadian and other governmental authorities and agencies. Such national agencies and other federal, state, provincial and local entities regulate the testing, manufacturing, safety and promotion of our products. The regulations applicable to our products may change as the currently limited number of approved controlled-release products increases and regulators acquire additional experience in this area.
United States Regulation
New Drug Application
We will be required by the FDA to comply with NDA procedures for our branded products prior to commencement of marketing these products in the United States by us or our licensees. New drug compounds and new formulations for existing drug compounds which cannot be filed as ANDAs are subject to NDA procedures. These procedures include (a) pre-clinicalpreclinical laboratory and animal toxicology tests; (b) scaling and testing of production batches; (c) submission of an Investigational New Drug Application (“IND”), and subsequent approval is required before any human clinical trials can commence; (d) adequate and well controlled replicate human clinical trials to establish the safety and efficacy of the drug for its intended indication; (e) the submission of a nan NDA to the FDA; and (f) FDA approval of an NDA prior to any commercial sale or shipment of the product, including pre-approval and post-approval inspections of our manufacturing and testing facilities. If all of this data in the product application is owned by the applicant, the FDA will issue its approval without regard to patent rights that might be infringed or exclusivity periods that would affect the FDA’s ability to grant an approval if the application relied upon data which the applicant did not own. We intend to generate all data necessary to support FDA approval of the applications we file.
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Preclinical laboratory and animal toxicology tests may have to be performed to assess the safety and potential efficacy of the product. The results of these pre-clinicalpreclinical tests, together with information regarding the methods of manufacture of the products and quality control testing, are then submitted to the FDA as part of an IND requesting authorization to initiate human clinical trials. Once the IND notice period has expired, clinical trials may be initiated, unless an FDA hold on clinical trials has been issued.
Clinical trials involve the administration of a pharmaceutical product to individuals under the supervision of qualified medical investigators who are experienced in conducting studies under “Good Clinical Practice” guidelines. Clinical studies are conducted in accordance with protocols that detail the objectives of a study, the parameters to be used to monitor safety and the efficacy criteria to be evaluated. Each protocol is submitted to the FDA and to an Institutional Review Board prior to the commencement of each clinical trial. Clinical studies are typically conducted in three sequential phases, which may overlap. In Phase I, the initial introduction of the product into human subjects, the compound is tested for absorption, safety, dosage, tolerance, metabolic interaction, d istribution,distribution, and excretion. Phase II involves studies in a limited patient population with the disease to be treated to (1) determine the efficacy of the product for specific targeted indications, (2) determine optimal dosage and (3) identify possible adverse effects and safety risks. In the event Phase II evaluations demonstrate that a pharmaceutical product is effective and has an acceptable safety profile, Phase III clinical trials are undertaken to further evaluate clinical efficacy of the product and to further test its safety within an expanded patient population at geographically dispersed clinical study sites. Periodic reports on the clinical investigations are required.
We, or the FDA, may suspend clinical trials at any time if either party believes the clinical subjects are being exposed to unacceptable health risks. The results of the product development, analytical laboratory studies and clinical studies are submitted to the FDA as part of an NDA for approval of the marketing and commercialization of a pharmaceutical product.
Abbreviated New Drug Application
In certain cases, where the objective is to develop a generic version of an approved product already on the market in controlled-release dosages, an ANDA may be filed in lieu of filing an NDA. Under the ANDA procedure, the FDA waives the requirement to submit complete reports of pre-clinicalpreclinical and clinical studies of safety and efficacy and instead requires the submission of bioequivalency data, demonstratingthat is, demonstration that the generic drug produces the same effect in the body as its brand-name counterpart and has the same pharmacokinetic profile, or change in blood concentration over time. The ANDA procedure is available to us for a generic version of a drug product approved by the FDA. In certain cases, an ANDA applicant may submit a suitability petition to the FDA requesting permission to submit an ANDA for a dr ugdrug product that differs from a previously approved reference drug product (the “Listed Drug”) when the change is one authorized by statute. Permitted variations from the Listed Drug include changes in: (1) route of administration, (2) dosage form, (3) strength and (4) one of the active ingredients of the Listed Drug when the Listed Drug is a combination product. The FDA must approve the petition before the ANDA may be submitted. An applicant is not permitted to petition for any other kinds of changes from Listed Drugs. The information in a suitability petition must demonstrate that the change from the Listed Drug requested for the proposed drug product may be adequately evaluated for approval without data from investigations to show the proposed drug product’s safety or effectiveness. The advantages of an ANDA over an NDA include reduced research and development costs associated wi thwith bringing a product to market, and generally a shorter review and approval time at the FDA.
Patent Certification and Exclusivity Issues
ANDAs are required to include certifications with respect to any third party patents that claim the Listed Drug or that claim a use for the Listed Drug for which the applicant is seeking approval. If applicable third party patents are in effect and this information has been submitted to the FDA, the FDA must delay approval of the ANDA until the patents expire. If the applicant believes it will not infringe the patents, it can make a patent certification to the holder of patents on the drug for which a generic drug approval is being sought, which may result in patent infringement litigation which could delay the FDA approval of the ANDA for up to 30 months. If the drug product covered by an ANDA were to be found by a court to infringe another company’s patents, approval of the ANDA could be delaye ddelayed until the patents expire. Under the Food Drug and Cosmetic Act (“FDC”), the first filer of an ANDA with a “non-infringement” certification is entitled to receive 180 days of market exclusivity. Subsequent filers of generic products would be entitled to market their approved product six months after the earlier of the first commercial marketing of the first filer’s generic product or a successful defense of a patent infringement suit.
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The 180-day exclusivity period can be forfeited if the first applicant withdraws its application or the FDA considers the application to have been withdrawn, the first applicationapplicant amends or withdraws Paragraph IV Certification for all patents qualifying for 180 day exclusivity, or failure of the first applicant fails to obtain tentative approval within 30 months after the date filed unless, such failure wasis due to a change in review requirements. The preservation of the 180 day exclusivity period related to the first-to-file status of a drug not approved within 30 months after the date filed, generally requires that an application be made to the FDA for extension of the time period where the delay has been due to a change in the review requirements for the drug. The approval of the continued first-to-file status in such circumstances is subject to the discretion of the FDA. There can be no assurance that the FDA would accede to such a request if made.
Patent expiration refers to expiry of U.S. patents (inclusive of any extensions) on drug compounds, formulations and uses. Patents outside the United States may differ from those in the United States. Under U.S. law, the expiration of a patent on a drug compound does not create a right to make, use or sell that compound. There may be additional patents relating to a person’s proposed manufacture, use or sale of a product that could potentially prohibit such person’s proposed commercialization of a drug compound.
The FDC contains non-patent market exclusivity provisions that offer additional protection to pioneer drug products and are independent of any patent coverage that might also apply. Exclusivity refers to the fact that the effective date of approval of a potential competitor’s ANDA to copy the pioneer drug may be delayed or, in certain cases, an ANDA may not be submitted until the exclusivity period expires. Five years of exclusivity are granted to the first approval of a “new chemical entity”. Three years of exclusivity may apply to products which are not new chemical entities, but for which new clinical investigations are essential to the approval. For example, a new indication for use, or a new dosage strength of a previously approved product, may be entitled to exclusivi ty,exclusivity, but
only with respect to that indication or dosage strength. Exclusivity only offers protection against a competitor entering the market via the ANDA route, and does not operate against a competitor that generates all of its own data and submits a full NDA.
If applicable regulatory criteria are not satisfied, the FDA may deny approval of an NDA or an ANDA or may require additional testing. Product approvals may be withdrawn if compliance with regulatory standards is not maintained or if problems occur after the product reaches the market. The FDA may require further testing and surveillance programs to monitor the pharmaceutical product that has been commercialized. Non-compliance with applicable requirements can result in additional penalties, including product seizures, injunction actions and criminal prosecutions.
Canadian Regulation
The requirements for selling pharmaceutical drugs in Canada are substantially similar to those of the United States described above.
Investigational New Drug Application
Before conducting clinical trials of a new drug in Canada, we must submit a Clinical Trial Application (“CTA”) to the Therapeutic Products Directorate (“TPD”). This application includes information about the proposed trial, the methods of manufacture of the drug and controls, pre-clinicalpreclinical laboratory and animal toxicology tests on the safety and potential efficacy of the drug, and information on any previously executed clinical trials with the new drug. If, within 30 days of receiving the application, the TPD does not notify us that our application is unsatisfactory, we may proceed with clinical trials of the drug. The phases of clinical trials are the same as those des cribeddescribed above under “United States Regulation – New Drug Application”.
New Drug Submission
Before selling a new drug in Canada, we must submit a New Drug Submission (“NDS”) or Supplemental New Drug Submission (“sNDS”) to the TPD and receive a Notice of Compliance (“NOC”) from the TPD to sell the drug. The submission includes information describing the new drug, including its proper name, the proposed name under which the new drug will be sold, a quantitative list of ingredients in the new drug, the methods of manufacturing, processing, and packaging the new drug, the controls applicable to these operations, the tests conducted to establish the safety of the new drug, the tests to be applied to control the potency, , purity, stability and safety of the new drug, the results of bio-pharmaceutics and clinical trials as appropriate, the intended indications for which the new drug may be prescribed and the effectiveness of the new drug when used as intended. The TPD reviews the NDS or sNDS. If the submission meets the requirements of Canada’s Food and Drugs Act and Regulations, the TPD will issue an NOC for the new drug.
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Where the TPD has already approved a drug for sale in controlled-release dosages, we may seek approval from the TPD to sell an equivalent generic drug through an Abbreviated New Drug Submission (“ANDS”). In certain cases, the TPD does not require the manufacturer of a proposed drug that is claimed to be equivalent to a drug that has already been approved for sale and marketed, to conduct clinical trials; instead, the manufacturer must satisfy the TPD that the drug is bioequivalent to the drug that has already been approved and marketed.
The TPD may deny approval or may require additional testing of a proposed new drug if applicable regulatory criteria are not met. Product approvals may be withdrawn if compliance with regulatory standards is not maintained or if problems occur after the product reaches the market. Contravention of Canada’s Food and Drugs Act and Regulations can result in fines and other sanctions, including product seizures and criminal prosecutions.
Proposals have recently been made that, if implemented, would significantly change Canada’s drug approval system. In general, the recommendations emphasize the need for efficiency in Canadian drug review. Proposals include establishment of a separate agency for drug regulation and modeling the approval system on those found in European Union countries. There is no assurance, however, that such changes will be implemented or, if implemented, the changes will expedite the approval of new drugs.
The Canadian government has regulations which can prohibit the issuance of an NOC for a patented medicine to a generic competitor, provided that the patentee or an exclusive licensee has filed a list of its Canadian patents covering that medicine with the Minister of Health and Welfare. After submitting the list, the patentee or an exclusive licensee can commence a proceeding to obtain an order of prohibition directed to the Minister prohibiting him or her from issuing an NOC. The minister may be prohibited from issuing an NOC permitting the importation or sale of a patented medicine to a generic competitor until patents on the medicine expire or the waiver of infringement and/or validity of the patent(s) in question is resolved by litigation in the manner set out in such regulations. There may be addi tionaladditional patents relating to a company’s proposed manufacture, use or sale of a product that could potentially prohibit such company’s proposed commercialization of a drug compound.
Certain provincial regulatory authorities in Canada have the ability to determine whether the consumers of a drug sold within such province will be reimbursed by a provincial government health plan for that drug by listing drugs on formularies. The listing or non-listing of a drug on provincial formularies may affect the prices of drugs sold within provinces and the volume of drugs sold within provinces.
Additional Regulatory Considerations
Sales of our products by our licensees outside the United States and Canada arewill be subject to regulatory requirements governing the testing, registration and marketing of pharmaceuticals, which vary widely from country to country.
Under the U.S. Generic Drug Enforcement Act, ANDA applicants (including officers, directors and employees) who are convicted of a crime involving dishonest or fraudulent activity (even outside the FDA regulatory context) are subject to debarment. Debarment is disqualification from submitting or participating in the submission of future ANDAs for a period of years or permanently. The Generic Drug Enforcement Act also authorizes the FDA to refuse to accept ANDAs from any company which employs or uses the services of a debarred individual. We do not believe that we receive any services from any debarred person.
In addition to the regulatory approval process, pharmaceutical companies are subject to regulations under provincial, state and federal law, including requirements regarding occupational safety, laboratory practices, environmental protection and hazardous substance control, and may be subject to other present and future local, provincial, state, federal and foreign regulations, including possible future regulations of the pharmaceutical industry. We believe that we are in compliance in all material respects with such regulations as are currently in effect.
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Before medicinal products can be distributed commercially, a submission providing detailed information must be reviewed and approved by the applicable government or agency in the jurisdiction in which the product is to be marketed. The regulatory review and approval process varies from country to country.
The following chart shows the corporate relationship structure of Intellipharmaceutics and its fourthree wholly-owned subsidiaries, including jurisdictions of incorporation, as at May 24, 2010.January 31, 2013.
In the second quarter of 2006, we completed renovation and construction of our administrative facilities and cGLP research laboratories and construction of a cGMP manufacturing plant for solid oral dosage forms at our 30 Worcester Road facility in Toronto. The cost of the build-out and equipping of our administrative, laboratory and manufacturing facility was approximately $1,685,000, includingwith approximately $810,000 for plant and $950,000 for equipment. The facility now consists of approximately 4,900 sq. ft. for administrative space, 4,300 sq. ft. for research and development (“R&D”), 9,200 sq. ft. for manufacturing, and 3,000 sq. ft. for warehousing.
We continually monitor our facility requirements in the context of our needs and we expect these requirements to change commensurately with our activities.
| Item 4A. |
None.
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| Item 5. | Operating and Financial Review and Prospects |
The following discussion and analysis should be read in conjunction with the audited annual consolidated financial statements of the Company and notes thereto. See “Item 18. Financial Statements”Statements.” The consolidated financial statements have been prepared in accordance with USU.S. GAAP. All amounts are expressed in United States dollars unless otherwise noted. Annual references are to the Company’s fiscal years, which ended on November 30, 20102012, 2011 and December 31 of 2008 and 2009.2010.
Our results of operations have fluctuated significantly from period to period in the past and are likely to do so in the future. We anticipate that our quarterly and annual results of operations will be impacted for the foreseeable future by several factors, including the timing of approvals to market our productsproduct candidates in various jurisdictions and any resulting product sales, the timing and amount of payments received pursuant to our current and future collaborations with third-parties,third parties, and the progress and timing of expenditures related to our research,
development and commercialization efforts. Due to these fluctuations, we presently believe that the period-to-period comparisons of our operating results are not a reliable indication of our future performance.
| For periods ended | Dollar and Percentage change | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
November 30 2009 | December 31 2008 | December 31 2007 | 2009 vs 2008 | 2008 vs 2007 | For years ended | Dollar and Percentage change | ||||||||||||||||||||||||||||||||||||||||||||||||||
| (11 Months) | (12 Months) | (12 Months) | November 30, 2012 | November 30, 2011 | November 30, 2010 | 2012 vs 2011 | 2011 vs 2010 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Research and Development | $ | 630,179 | $ | 1,277,704 | $ | 2,297,316 | (647,525 | ) | -50.7 | % | (1,019,612 | ) | -44.4 | % | ||||||||||||||||||||||||||||||||||||||||||
| Research and development | $ | 107,091 | $ | 501,814 | $ | 1,459,385 | $ | (394,723 | ) | -79 | % | $ | (957,571 | ) | -66 | % | ||||||||||||||||||||||||||||||||||||||||
| Expenses | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cost of revenue | 382,597 | 1,885,790 | 1,641,245 | (1,503,193 | ) | -79.7 | % | 244,545 | 14.9 | % | ||||||||||||||||||||||||||||||||||||||||||||||
| Research and development | 1,554,859 | 419,187 | 483,050 | 1,135,672 | 270.9 | % | (63,863 | ) | -13.2 | % | 5,992,417 | 5,125,608 | 4,533,310 | 866,809 | 17 | % | 592,298 | 13 | % | |||||||||||||||||||||||||||||||||||||
| Selling , general and administrative | 975,197 | 1,365,461 | 1,137,780 | (390,264 | ) | -28.6 | % | 227,681 | 20.0 | % | 3,672,313 | 2,925,454 | 2,699,204 | 746,859 | 26 | % | 226,250 | 8 | % | |||||||||||||||||||||||||||||||||||||
| Depreciation | 344,768 | 574,851 | 399,160 | (230,083 | ) | -40.0 | % | 175,691 | 44.0 | % | 452,303 | 227,456 | 242,778 | 224,847 | 99 | % | (15,322 | ) | -6 | % | ||||||||||||||||||||||||||||||||||||
| Write-down on long lived assets | 107,123 | - | 36,481 | 107,123 | N/A | (36,481 | ) | -100 | % | |||||||||||||||||||||||||||||||||||||||||||||||
| 3,257,421 | 4,245,289 | 3,661,235 | (987,868 | ) | -23.3 | % | 584,054 | 16.0 | % | 10,224,156 | 8,278,518 | 7,511,773 | 1,945,638 | 24 | % | 766,745 | 10 | % | ||||||||||||||||||||||||||||||||||||||
| Loss before the undernoted | (2,627,242 | ) | (2,967,585 | ) | (1,363,919 | ) | 340,343 | -11.5 | % | (1,603,666 | ) | 117.6 | % | |||||||||||||||||||||||||||||||||||||||||||
| FMV on adjustment of warrants | 286,983 | - | - | 286,983 | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign exchange (loss) gain | 587,642 | (817,407 | ) | 85,634 | 1,405,049 | -171.9 | % | (903,041 | ) | -1054.5 | % | |||||||||||||||||||||||||||||||||||||||||||||
| Loss from operations | (10,117,065 | ) | (7,776,704 | ) | (6,052.388 | ) | (2,340,361 | ) | 30 | % | (1,724,316 | ) | 28 | % | ||||||||||||||||||||||||||||||||||||||||||
| Fair value adjustment of derivative liability | 3,841,233 | 5,346,878 | 223,782 | (1,505,645 | ) | -28 | % | 5,123,096 | 2289 | % | ||||||||||||||||||||||||||||||||||||||||||||||
| Financing expense | - | (2,357,732 | ) | - | 2,357,732 | -100 | % | (2,357,732 | ) | N/A | ||||||||||||||||||||||||||||||||||||||||||||||
| Net foreign exchange gain (loss) | 181,682 | (70,036 | ) | 138,949 | 251,718 | -359 | % | (208,985 | ) | -150 | % | |||||||||||||||||||||||||||||||||||||||||||||
| Interest income | 1,822 | 95,282 | 91,985 | (93,460 | ) | -98.1 | % | 3,297 | 3.6 | % | 20,691 | 60,790 | 27,001 | (40,099 | ) | -66 | % | 33,789 | 125 | % | ||||||||||||||||||||||||||||||||||||
| Interest expense | (87,940 | ) | (75,464 | ) | (104,492 | (12,476 | ) | 16.5 | % | 29,028 | -27.8 | % | (63,406 | ) | (83,473 | ) | (98,435 | ) | 20,067 | -24 | % | 14,962 | -15 | % | ||||||||||||||||||||||||||||||||
| Loss for the year | (1,838,735 | ) | (3,765,174 | ) | (1,290,792 | ) | 1,926,439 | -51.2 | % | (2,474,382 | ) | 191.7 | % | |||||||||||||||||||||||||||||||||||||||||||
| Loss | $ | (6,136,865 | ) | $ | (4,880,277 | ) | $ | (5,761,091 | ) | $ | (1,256,588 | ) | 26 | % | $ | 880,814 | -15 | % | ||||||||||||||||||||||||||||||||||||||
| Loss per common share, basic and diluted | $ | (0.36 | ) | $ | (0.33 | ) | $ | (0.53 | ) | $ | (0.03 | ) | 9 | % | $ | 0.20 | -38 | % | ||||||||||||||||||||||||||||||||||||||
