February 28,
2020
Andrew J. Ritter
Chief Executive Officer
Ritter Pharmaceuticals, Inc.
1880 Century Park East, Suite 1000
Los Angeles, CA 90067
Re: Ritter Pharmaceuticals, Inc.
Registration Statement on Form S-4
Filed February 4, 2020
File No. 333-236235
Dear Mr. Ritter:
We have reviewed your registration statement and have the following
comments. In
some of our comments, we may ask you to provide us with information so we may
better
understand your disclosure.
Please respond to this letter by amending your registration statement
and providing the
requested information. If you do not believe our comments apply to your facts
and
circumstances or do not believe an amendment is appropriate, please tell us why
in your
response.
After reviewing any amendment to your registration statement and the
information you
provide in response to these comments, we may have additional comments.
Registration Statement on Form S-4
Questions and Answers about the Merger
Q: What is the Pre-Closing Qualigen Financing?, page 12
1. Please file the financing commitment letter as an exhibit or tell us why
you don't believe
it's necessary.
Risks Related to Qualigen
Qualigen relies on its distribution partner Sekisui, page 54
2. Please file the distribution agreement with Sekisui as an exhibit or
tell us why you don't
believe it's necessary.
Andrew J. Ritter
FirstName LastNameAndrew J. Ritter
Ritter Pharmaceuticals, Inc.
Comapany NameRitter Pharmaceuticals, Inc.
February 28, 2020
Page 2
February 28, 2020 Page 2
FirstName LastName
Background of the Transaction, page 93
3. We note your disclosure that, beginning on October 7, 2019, Ritter
management consulted
with certain members of the Ritter Board on two occasions and
following such
consultations, selected a subset of candidates to progress to
in-person presentations and to
receive an initial draft of a letter of intent, respectively. Please
disclose which members of
the Ritter Board were consulted on both occasions and what criteria
was used to determine
the two subsets of candidates.
4. We note your disclosure that members of the Transaction Committee
received copies of
the full proposals submitted by Party B, Party C and Party D and a
summary of each of the
13 proposals submitted to AGP, including Qualigen's proposal, on
October 26, 2019.
Please disclose who determined to provide full copies of only three
proposals and how
that determination was made.
5. We note your disclosure that the Transaction Committee directed Ritter
management to
continue to explore a potential transaction with each of Qualigen and
Parties A, B, C, D, E
and F on October 30, 2019, but Qualigen was informed that Ritter would
be pursing an
alternative transaction and would not be pursuing a transaction with
Qualigen on
November 1, 2019. Please disclose what transpired between October 30,
2019 and
November 1, 2019 to change the Transaction Committee's decision and
what factors were
considered. Please also revise to disclose the material terms of the
bids from Qualigen and
Parties A, B, C, D, E and F. To the extent that you have not already
done so, please
disclose how the material terms of the Qualigen bid were negotiated,
including how the
deal value, pricing mechanism, exchange ratio and ownership split were
negotiated.
6. Please disclose what parts of the proposals from Parties B, C and D
led the Transaction
Committee to determine that Parties B, C and D were the candidates the
most likely to
have the ability to consummate a merger with Ritter within a
compressed timeframe and
on terms most likely to maximize shareholder value. Please also
discuss whether Ritter
considered reaching out to the other parties who submitted proposals
to see whether they
could make their offers more competitive.
7. We note your disclosure that AGP conducted a valuation analysis of
each proposal. Please
expand your disclosure to describe the analyses performed, including
comparables
selected for evaluation, the assumptions underlying such analyses and
the resulting
valuation or valuation range resulting from the analyses.
Ritter Business, page 151
8. We note your disclosure on page 39 that Ritter may continue to seek
partnering,
collaborative or similar strategic arrangements with third parties to
develop and
commercialize RP-G28 either as a prescription drug or OTC product or
as a dietary
supplement if the merger is not completed. Please disclose in this
section if the combined
company has any plans for RP-G28 if the merger is completed.
Andrew J. Ritter
FirstName LastNameAndrew J. Ritter
Ritter Pharmaceuticals, Inc.
Comapany NameRitter Pharmaceuticals, Inc.
February 28, 2020
Page 3
February 28, 2020 Page 3
FirstName LastName
9. Please remove statements in this section that RP-G28 could become the
first drug
approved by the FDA for the treatment of LI if approved and RP-G28 was
expected to
have the potential to become the first FDA-approved drug for the
reduction of symptoms
associated with LI. Since you disclose that all further development
efforts for RP-G28
have been suspended, it is not appropriate to make these statements.
Please also remove
the statement that clinical testing demonstrated that Lactagen was an
effective and safe
product for reducing symptoms for nearly 80% of the clinical
participants who were on
Lactagen. Determinations of safety and efficacy are solely within the
authority of the
FDA, and and it appears that Lactagen never received FDA approval.
Galacto-oligosaccharides (GOS), page 153
10. Please revise Figure 1 on page 154 to better differentiate the
control, glucose, GOS1 and
GOS2 lines.
Products and Solutions, page 169
11. We note your disclosure here that your products have been shown
preclinically to have the
potential to work together, alone or in combination with other
therapies, multiplying their
effectiveness. Please remove any reference to effectiveness for
product candidates which
have yet to receive FDA approval, and please do not refer to such
product candidates as
"products." Similarly, please remove any references to increased
potency in preclinical
studies for ALAN on page 170. Determinations of efficacy are solely
within the authority
of the FDA.
12. We note references to preclinical studies here and on page 170. To the
extent that you
reference preclinical data suggestive of the potential of your product
candidates, please
revise to discuss the studies and present the data supporting your
statements.
Qualigen's Business
Overview, page 169
13. Please make it clear in this section and in the Products and Solutions
section that the only
product that is currently commercially available is the FastPack
System. Please revise to
disclose in this section the current stage of development for each of
your product
candidates: ALAN, RAS-F3 and STARS.
ALAN (AS1411-GNP), page 170
14. Please revise your disclosure of the ULRF License Agreement and ACT
License
Agreement to provide the royalty term, the duration of the agreement
and the termination
provisions. We also note your disclosure that Qualigen has agreed to
pay ULRF and ACT
payments ranging from $100,000 to $5,000,000 upon the achievement of
certain milestones. If $5,000,000 is not the aggregate future
milestone payments to be
made, please revise your disclosure to include that number. Please
also file both license
agreements as exhibits or tell us why you don't believe it's
necessary.
Andrew J. Ritter
FirstName LastNameAndrew J. Ritter
Ritter Pharmaceuticals, Inc.
Comapany NameRitter Pharmaceuticals, Inc.
February 28, 2020
February 28, 2020 Page 4
Page 4
FirstName LastName
Regulatory Strategy, page 171
15. We note your disclosure that Qualigen has demonstrated success in
regulatory affairs,
having obtained 17 FDA approvals and 19 CE-Marks for its products to
date. Please
revise to disclose for which products these approvals and marks have
been received
and that Qualigen has never received FDA or other regulatory approval
for a drug
candidate.
16. We note your disclosure that your strategy for ALAN will not require
Phase 3 trials.
Please disclose your basis for this statement and that there is no
guarantee that the FDA
will not require you to conduct Phase 3 trials for ALAN.
Intellectual Property, page 173
17. Please revise to disclose the specific products, product groups and
technologies to which
your patents relate, whether they are owned or licensed, the type of
patent protection you
have, the expiration dates, the applicable jurisdictions and whether
there are any contested
proceedings or third-party claims.
Qualigen Management's Discussion and Analysis of Financial Condition and
Results of
Operations, page 193
18. Tell us whether you track any of your R&D costs incurred by program
area. If so, tell us
your consideration given for disclosing a breakdown of this
information in your filing to
provide additional context to your R&D activities. If not, tell us
your consideration for
disclosing the fact that you do not track these costs by pipeline
program area and for
providing other quantitative or qualitative disclosure that provides
transparency as to the
types of costs incurred and concentrations of effort expended.
19. Revise your MD&A to address the following:
Discuss the fluctuations in your cost of goods sold, both in terms
of dollars as well as
percentage of product sales.
Discuss the extent to which the amounts were affected by changes in
your inventory
reserves.
Discuss the reasons for the significant reserves against your
inventory, as well as the
reasons for the changes in the reserves between periods.
Unaudited Pro Forma Condensed Combined Financial Statements
Unaudited Pro Forma Condensed Combined Balance Sheet, page 208
20. Given that you have determined that Qualigen is the accounting
acquirer, revise your pro
forma presentations to start with the Qualigen historical financial
statements as the first
column, basing the presentation on the periods presented for Qualigen.
21. Please revise to address the following regarding your footnotes:
We note your footnotes here on page 208 as well as different
footnote descriptions on
page 215 which appear to be referring to the same adjustments.
Revise to provide a
Andrew J. Ritter
FirstName LastNameAndrew J. Ritter
Ritter Pharmaceuticals, Inc.
Comapany NameRitter Pharmaceuticals, Inc.
February 28, 2020
February 28, 2020 Page 5
Page 5
FirstName LastName
comprehensive footnote description that more clearly addresses
each adjustment.
Revise to ensure that your adjustments are self-balancing and
that you disclose an
amount or amounts for each of your adjustments as part of your
description,
providing sufficient detail so as to allow the reader to
recalculate.
22. Please address the following regarding adjustment K:
Revise to clearly explain how the $37,989,079 amount was determined.
Revise to disclose the transaction reflected in adjustment K in
greater detail.
Explain to us the basis for your pro forma adjustments for this
amount.
Tell us how you determined that there is no ongoing income statement
effect from the
financing that would warrant adjustment in your pro forma income
statements.
23. Please explain to us the basis for your pro forma additional paid-in
capital methodology
and the underlying adjustments. For example, explain why you include
both Ritter and
Qualigen's additional paid-in capital as part of the pro forma
combined. Explain why
Ritter's additional paid-in capital is not eliminated.
24. Please explain to us the basis for your pro forma accumulated deficit
amount and the
underlying adjustments. For example, explain why you include Ritter's
accumulated
deficit as part of the pro forma combined, and adjustments F and L.
Explain why Ritter's
accumulated deficit is not eliminated.
Unaudited Pro Forma Condensed Combined Statements of Operations, page 209
25. Pro forma weighted average common shares outstanding on a combined
basis should
retroactively reflect the recapitalization and related transactions
(e.g., conversion
of preferred stock and convertible notes from the beginning of the
periods presented or the
date of issuance if later). Accordingly, please provide pro forma
shares outstanding to
reflect the recapitalization and related transactions, and include a
tabular reconciliation of
the amount in the notes.
Notes to Unaudited Pro Forma Combined Condensed Financial Statements
1. Description of Transaction, page 212
26. Please address the following regarding the 5% commitment fee and the
7.5% advisory fee:
Revise to disclose how you will account for these fees, and provide
the related
amounts.
Explain to us the basis for your accounting for these fees,
referencing the accounting
literature on which you relied.
Tell us how you determined whether to give pro forma effect to these
fees in your pro
forma presentations.
2. Basis of Presentation, page 213
27. Please address the following:
You disclose throughout your document that you determined to apply
reverse
Andrew J. Ritter
FirstName LastNameAndrew J. Ritter
Ritter Pharmaceuticals, Inc.
Comapany NameRitter Pharmaceuticals, Inc.
February 28, 2020
Page 6
February 28, 2020 Page 6
FirstName LastName
recapitalization accounting for the merger. However, you disclose
on page 207 that
you will account for the merger as a reverse acquisition,
recognizing intangibles.
Please revise to reconcile this apparent inconsistency.
In light of the fact that Ritter Pharmaceuticals, Inc. was an
operating company for the
periods presented and not a shell company, explain to us how you
determined
recapitalization accounting for your transaction is appropriate.
As part of your response, explain how you considered the business
combination
accounting guidance in ASC 805 and determined that it was not
applicable to your
situation.
Specifically address how you considered that the contingent value
rights agreement
discussed on page 129 seems to imply that the legacy business of
Ritter still has some
value and continuity.
28. Please explain to us why Ritter's estimated transaction costs are part
of the purchase price.
29. Please disclose how the contingent value rights (CVRs) will be
accounted for as part of
the recapitalization transaction, and on a go forward basis. Tell us
the accounting guidance
on which you relied.
4. Adjustments to Unaudted Pro Forma Combined Financial Statements, page 215
30. Please explain to us why you do not show the pro forma impact from the
reverse stock
split.
Principal Stockholders of Qualigen, page 228
31. Please revise your disclosure to identify the natural person or
persons who have voting
and investment control of the shares held by Sekisui Diagnostics, LLC
and Alpha Capital
Anstalt.
Principal Stockholders of Combined Company, page 232
32. Please revise your disclosure to identify the natural person or
persons who have voting
and investment control of the shares held by GreenBlock Capital LLC.
Index to Qualigen, Inc. Consolidated Financial Statements, page F-34
33. We note that you have not provided audited financial statements for
Qualigen, Inc. Please
revise to provide audited financial statements as required. Refer to
Item 17 of Form S-4.
Annual Financial Statements of Qualigen, Inc.
Notes to Financial Statements
General, page F-39
34. Please provide the entity-wide disclosures required by ASC
280-10-50-40 through 50-42.
Andrew J. Ritter
FirstName LastNameAndrew J. Ritter
Ritter Pharmaceuticals, Inc.
Comapany NameRitter Pharmaceuticals, Inc.
February 28, 2020
Page 7
February 28, 2020 Page 7
FirstName LastName
1. Organization and Summary of Significant Accounting Policies
Net Product Sales, page F-41
35. As part of your disclosure, please describe your distributor
allowances and how you
determine an estimate of the allowance.
Multiple Element Arrangements, page F-42
36. Your accounting policy for the allocation of arrangement consideration
refers to "relative
fair value basis" here and "relative selling price" under Revenue
Recognition, above.
Please ensure that your wording is consistent and confirms your
compliance with ASC
605-25-55-3 and ASC 605-25-15-3A(b).
37. Your determination of selling price using VSOE is not clear as you
refer to the current
sales prices "as if they were sold separately." Please clarify your
policy so that it is
consistent with ASC 605-25-30-6A .
Research and Licenses, page F-42
38. Please explain to us how you determined that amounts received from
your various
agreements should be characterized as revenue on the statements of
operations, and not,
for example, a reimbursement of costs presented net.
39. Please revise your disclosure to address how you account for research
revenue when
there is a possibility of contingent payments related to unsuccessful
research and
development activities, as referred to on page F-46. Provide us
additional analysis to
support your accounting for research revenue and identify the
accounting literature you
are relying upon.
New Accounting Pronouncments, page F-45
40. You disclose that ASC 606 is effective for you for annual reporting
periods beginning
after December 15, 2019, including interim periods therein. Please
clarify how you made
this determination and how you considered the guidance in ASC
606-10-65-1(b).
5. Equipment held for Lease, net, page F-47
41. Please provide us your analysis of the lease classification criteria
under ASC 840-10-25-1,
840-10-25-42 and 25-43 for the leases in your multiple element
arrangements.
12. License Agreements, page F-51
42. For your various agreements where you might be required to make future
sponsored
research payments, milestone payments, funding payments, and royalty
payments, please
separately disclose possible future payments or range of payments, as
well as royalty
percentages. In addition, describe the milestones related to the
milestone payments.
43. Please disclose details of the contingent payments related to the
partnership with Sekisui,
Andrew J. Ritter
Ritter Pharmaceuticals, Inc.
February 28, 2020
Page 8
as referred to on page F-46.
Interim Financial Statements of Qualigen, Inc.
Balance Sheets, page F-62
44. Rather than presenting the balance sheet for the end of prior period
dated December 31,
2018, please revise to present the balance sheet as of March 31, 2019,
representing the end
of the most recent annual period. Refer to Rule 8-03 of Regulation S-X.
12. License Agreements, page F-78
45. You disclose here and on page 193 that as of December 31, 2019 you have
a payment
obligation due to Sekisui related to your agreement. Please explain to
us in further detail
the reason for this payment obligation. In addition, you refer to $7.2
million in future
financing. Clarify your disclosure to more clearly identify the party
that is providing the
funds and the party that is receiving the funds, and the amount that has
been provided to
date.
Consent of Independent Registered Public Accounting Firm, page II-7
46. Please have your auditor correct the report date contained in the
accountants' consent.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
Refer to Rules 460 and 461 regarding requests for acceleration. Please
allow adequate
time for us to review any amendment prior to the requested effective date of
the registration
statement.
You may contact Michael Fay at 202-551-3812 or Kevin Vaughn at
202-551-3494 if you
have questions regarding comments on the financial statements and related
matters. Please
contact Ada D. Sarmento at 202-551-3798 or Celeste Murphy at 202-551-3257 with
any other
questions.
Sincerely,
FirstName LastNameAndrew J. Ritter
Division of
Corporation Finance
Comapany NameRitter Pharmaceuticals, Inc.
Office of Life
Sciences
February 28, 2020 Page 8
cc: Wendy Grasso, Esq.
FirstName LastName