UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM C-AR
UNDER THE SECURITIES ACT OF 1933
Form C-AR: Annual Report
Name of issuer
Hera Health Solutions, Inc.
Legal status of issuer
Form
Corporation
Jurisdiction of Incorporation/Organization
Delaware
Date of organization
May 22, 2017
Physical address of issuer
11141 Wellshire Ln.
Frisco, TX 75035
Website of issuer
www.herahealthsolutions.com
Current number of employees
4
Most recent fiscal
year-end
Prior fiscal year-end
Total Assets
$831,820
$14,911
Cash and Cash
Equivalents
$831,820
$14,911
Accounts Receivable
0
0
Short-term Debt
$87,466
$4,615
Long-term Debt
0
0
Revenues/Sales
0
$100,000
Cost of Goods Sold
0
0
Taxes Paid
0
0
Net Income
-$148,081
-$89,235
April 22, 2020
FORM C-AR
Hera Health Solutions Inc.
This Form C-AR (including the cover page and
all exhibits attached hereto, the "Form C-AR") is
being furnished
by Hera Health Solutions Inc., a Delaware
Corporation (the "Company," as well as references
to "we," "us," or "our"),
for the sole purpose of providing certain
information about the Company as required by the
Securities and Exchange Commision ("SEC").
No federal or state securities commission or
regulatory authority has passed upon the
accuracy or adequacy of this document. The U.S.
Securities and Exchange Commission does not pass
upon the accuracy or completeness of any disclosure
document or literature. The Company is filing this
Form C-AR pursuant to Regulation CF (? 227.100 et
seq.) which requires that it must file a report
with the Commission annually and post the report on
its website at www.herahealthsolutions.com no later
than 120 days after the end of each fiscal year
covered by the report. The Company may terminate
its obligations in the future in accordance with
Rule 202(b) of Regulation CF (? 227.202(b)) by 1)
being required to file reports under Section 13(a)
or Section 15(d) of the Exchange Act of 1934, as
amended, 2) filing at least one annual report
pursuant to Regulation CF and having fewer than 300
holders of record, 3) filing annual reports for 3
years pursuant to Regulation CF and having assets
equal to or less than $10,000,000, 4) the
repurchase of all the Securities sold pursuant to
Regulation CF by the Company or another party, or
5) the liquidation or dissolution of the Company.
The date of this Form C-AR is April 22, 2020.
THIS FORM C-AR DOES NOT CONSTITUTE AN OFFER TO
PURCHASE OR SELL SECURITIES.
Forward Looking Statement Disclosure
This Form C-AR and any documents incorporated by
reference herein or therein contain forward-looking
statements and are subject to risks and
uncertainties. All statements other than statements
of historical fact or relating to present facts or
current conditions included in this Form C-AR are
forward-looking statements. Forward-looking
statements give the Company's current reasonable
expectations and projections relating to its
financial condition, results of operations, plans,
objectives, future performance and business. You
can identify forward-looking statements by the fact
that they do not relate strictly to historical or
current facts. These statements may include words
such as "anticipate," "estimate," "expect,"
"project," "plan," "intend," "believe," "may,"
"should," "can have," "likely" and other words and
terms of similar meaning in connection with any
discussion of the timing or nature of future
operating or financial performance or other events.
The forward-looking statements contained in this
Form C-AR and any documents incorporated by
reference herein or therein are based on reasonable
assumptions the Company has made in light of its
industry experience, perceptions of historical
trends, current conditions, expected future
developments and other factors it believes are
appropriate under the circumstances. As you read
and consider this Form C-AR, you should understand
that these statements are not guarantees of
performance or results. They involve risks,
uncertainties (many of which are beyond the
Company's control) and assumptions. Although the
Company believes that these forward-looking
statements are based on reasonable assumptions, you
should be aware that many factors could affect its
actual operating and financial performance and
cause its performance to differ materially from the
performance anticipated in the forward-looking
statements. Should one or more of these risks or
uncertainties materialize, or should any of these
assumptions prove incorrect or change, the
Company's actual operating and financial
performance may vary in material respects from the
performance projected in these forward-looking
statements.
Any forward-looking statement made by the Company
in this Form C-AR or any documents incorporated by
reference herein or therein speaks only as of the
date of this Form C-AR. Factors or events that
could cause our actual operating and financial
performance to differ may emerge from time to time,
and it is not possible for the Company to predict
all of them. The Company undertakes no obligation
to update any forward-looking statement, whether as
a result of new information, future developments or
otherwise, except as may be required by law.
ONGOING REPORTING
The Company will file a report electronically with
the Securities and Exchange Commission annually and
post the report on its website, no later than 120
days after the end of the Company's fiscal year.
Once posted, the annual report may be found on the
Company's website at: www.herahealthsolutions.com
The Company must continue to comply with the
ongoing reporting requirements until:
(1) the Company is required to file reports under
Section 13(a) or Section 15(d) of the Exchange Act;
(2) the Company has filed at least three annual
reports pursuant to Regulation CF and has total
assets that do not exceed $10,000,000;
(3) the Company has filed at least one annual
report pursuant to Regulation CF and has fewer than
300 holders of record;
(4) the Company or another party repurchases all of
the Securities issued in reliance on Section
4(a)(6) of the Securities Act, including any
payment in full of debt securities or any complete
redemption of redeemable securities; or
(5) the Company liquidates or dissolves its
business in accordance with state law.
About this Form C-AR
You should rely only on the information contained
in this Form C-AR. We have not authorized anyone to
provide you with information different from that
contained in this Form C-AR. You should assume that
the information contained in this Form C-AR is
accurate only as of the date of this Form C-AR,
regardless of the time of delivery of this Form C-
AR. Our business, financial condition, results of
operations, and prospects may have changed since
that date. Statements contained herein as to the
content of any agreements or other document are
summaries and, therefore, are necessarily selective
and incomplete and are qualified in their entirety
by the actual agreements or other documents.
SUMMARY
The following summary is qualified in its entirety
by more detailed information that may appear
elsewhere in this Form C-AR and the Exhibits
hereto.
Hera Health Solutions Inc. (the "Company") is a
Delaware Corporation, formed on May 22, 2017.
The Company is located at 11141 Wellshire Ln.,
Frisco, TX 75035.
The Company's website is
www.HeraHealthSolutions.com.
The information available on or through our website
is not a part of this Form C-AR.
The Business
Hera Health Solutions is a pharmaceutical device
company that specializes in the development and
commercialization of long acting treatments through
proprietary biodegradable implants. Hera Health
intends to sell its first product, the
contraceptive biodegradable implant Eucontra, to
OB/GYN practices as well as family planning clinics
in the U.S. market. Internationally, the Company
will seek to sell to nonprofit organizations and
large-scale Non-Governmental Organizations (NGOs)
that distribute contraceptives to countries with a
limited access to healthcare. It also intends to
price Eucontra at $800 per device, which the
Company believes is competitive with its
alternative, Nexplanon. The executive team
estimates a 98.5% gross margin for retail sales but
intends to heavily subsidize Eucontra for bulk
distribution to humanitarian partners.
RISK FACTORS
Risks Related to the Company's Business and
Industry
In order for the Company to compete and grow, it
must attract, recruit, retain and develop the
necessary personnel who have the needed experience.
Recruiting and retaining highly qualified personnel
is critical to our success. These demands may
require us to hire additional personnel and will
require our existing management personnel to
develop additional expertise. We face intense
competition for personnel. The failure to attract
and retain personnel or to develop such expertise
could delay or halt the development and
commercialization of our product candidates. If we
experience difficulties in hiring and retaining
personnel in key positions, we could suffer from
delays in product development, loss of customers
and sales and diversion of management resources,
which could adversely affect operating results. Our
consultants and advisors may be employed by third
parties and may have commitments under consulting
or advisory contracts with third parties that may
limit their availability to us.
Quality management plays an essential role in
determining and meeting customer requirements,
preventing defects, improving the Company's
products and services and maintaining the integrity
of the data that supports the safety and efficacy
of our products.
Our future success depends on our ability to
maintain and continuously improve our quality
management program. An inability to address a
quality or safety issue in an effective and timely
manner may also cause negative publicity, a loss of
customer confidence in us or our current or future
products, which may result in the loss of sales and
difficulty in successfully launching new products.
In addition, a successful claim brought against us
in excess of available insurance or not covered by
indemnification agreements, or any claim that
results in significant adverse publicity against
us, could have an adverse effect on our business
and our reputation.
We may implement new lines of business or offer new
products and services within existing lines of
business.
There are substantial risks and uncertainties
associated with these efforts, particularly in
instances where the markets are not fully
developed. In developing and marketing new lines of
business and/or new products and services, we may
invest significant time and resources. Initial
timetables for the introduction and development of
new lines of business and/or new products or
services may not be achieved and price and
profitability targets may not prove feasible. We
may not be successful in introducing new products
and services in response to industry trends or
developments in technology, or those new products
may not achieve market acceptance. As a result, we
could lose business, be forced to price products
and services on less advantageous terms to retain
or attract clients or be subject to cost increases.
As a result, our business, financial condition or
results of operations may be adversely affected.
The Company's success depends on the experience and
skill of the board of directors, its executive
officers and key employees.
In particular, the Company is dependent on Idicula
Mathew and Garrett Whitfield who are CEO and COO of
the Company. The Company has or intends to enter
into employment agreements with Idicula Mathew and
Garrett Whitfield although there can be no
assurance that it will do so or that they will
continue to be employed by the Company for a
particular period of time. The loss of Idicula
Mathew and Garrett Whitfield or any member of the
board of directors or executive officer could harm
the Company's business, financial condition, cash
flow and results of operations.
We rely on various intellectual property rights,
including patents in order to operate our business.
Such intellectual property rights, however, may not
be sufficiently broad or otherwise may not provide
us a significant competitive advantage. In
addition, the steps that we have taken to maintain
and protect our intellectual property may not
prevent it from being challenged, invalidated,
circumvented or designed-around, particularly in
countries where intellectual property rights are
not highly developed or protected. In some
circumstances, enforcement may not be available to
us because an infringer has a dominant intellectual
property position or for other business reasons, or
countries may require compulsory licensing of our
intellectual property. Our failure to obtain or
maintain intellectual property rights that convey
competitive advantage, adequately protect our
intellectual property or detect or prevent
circumvention or unauthorized use of such property,
could adversely impact our competitive position and
results of operations. We also rely on
nondisclosure and noncompetition agreements with
employees, consultants and other parties to
protect, in part, trade secrets and other
proprietary rights. There can be no assurance that
these agreements will adequately protect our trade
secrets and other proprietary rights and will not
be breached, that we will have adequate remedies
for any breach, that others will not independently
develop substantially equivalent proprietary
information or that third parties will not
otherwise gain access to our trade secrets or other
proprietary rights.
As we expand our business, protecting our
intellectual property will become increasingly
important. The protective steps we have taken may
be inadequate to deter our competitors from using
our proprietary information. In order to protect or
enforce our patent rights, we may be required to
initiate litigation against third parties, such as
infringement lawsuits. Also, these third parties
may assert claims against us with or without
provocation. These lawsuits could be expensive,
take significant time and could divert management's
attention from other business concerns. The law
relating to the scope and validity of claims in the
technology field in which we operate is still
evolving and, consequently, intellectual property
positions in our industry are generally uncertain.
We cannot assure you that we will prevail in any of
these potential suits or that the damages or other
remedies awarded, if any, would be commercially
valuable.
From time to time, third parties may claim that one
or more of our products or services infringe their
intellectual property rights.
Any dispute or litigation regarding patents or
other intellectual property could be costly and
time-consuming due to the complexity of our
technology and the uncertainty of intellectual
property litigation and could divert our management
and key personnel from our business operations. A
claim of intellectual property infringement could
force us to enter into a costly or restrictive
license agreement, which might not be available
under acceptable terms or at all, could require us
to redesign our products, which would be costly and
time-consuming, and/or could subject us to an
injunction against development and sale of certain
of our products or services. We may have to pay
substantial damages, including damages for past
infringement if it is ultimately determined that
our products infringe on a third party's
proprietary rights. Even if these claims are
without merit, defending a lawsuit takes
significant time, may be expensive and may divert
management's attention from other business
concerns. Any public announcements related to
litigation or interference proceedings initiated or
threatened against us could cause our business to
be harmed. Our intellectual property portfolio may
not be useful in asserting a counterclaim, or
negotiating a license, in response to a claim of
intellectual property infringement. In certain of
our businesses we rely on third party intellectual
property licenses and we cannot ensure that these
licenses will be available to us in the future on
favorable terms or at all.
Although dependent on certain key personnel, the
Company does not have any key man life insurance
policies on any such people.
The Company is dependent on Idicula Mathew and
Garrett Whitfield in order to conduct its
operations and execute its business plan, however,
the Company has not purchased any insurance
policies with respect to those individuals in the
event of their death or disability. Therefore, if
any of Idicula Mathew and Garrett Whitfield die or
become disabled, the Company will not receive any
compensation to assist with such person's absence.
The loss of such person could negatively affect the
Company and its operations.
We have not prepared any audited financial
statements.
Therefore, you have no audited financial
information regarding the Company's capitalization
or assets or liabilities on which to make your
investment decision. If you feel the information
provided is insufficient, you should not invest in
the Company.
We are subject to income taxes as well as non-
income based taxes, such as payroll, sales, use,
value-added, net worth, property and goods and
services taxes, in the U.S.
Significant judgment is required in determining our
provision for income taxes and other tax
liabilities. In the ordinary course of our
business, there are many transactions and
calculations where the ultimate tax determination
is uncertain. Although we believe that our tax
estimates are reasonable: (i) there is no assurance
that the final determination of tax audits or tax
disputes will not be different from what is
reflected in our income tax provisions, expense
amounts for non-income based taxes and accruals and
(ii) any material differences could have an adverse
effect on our financial position and results of
operations in the period or periods for which
determination is made.
We are not subject to Sarbanes-Oxley regulations
and lack the financial controls and safeguards
required of public companies.
We do not have the internal infrastructure
necessary, and are not required, to complete an
attestation about our financial controls that would
be required under Section 404 of the Sarbanes-Oxley
Act of 2002. There can be no assurance that there
are no significant deficiencies or material
weaknesses in the quality of our financial
controls. We expect to incur additional expenses
and diversion of management's time if and when it
becomes necessary to perform the system and process
evaluation, testing and remediation required in
order to comply with the management certification
and auditor attestation requirements.
Changes in employment laws or regulation could harm
our performance.
Various federal and state labor laws govern our
relationship with our employees and affect
operating costs. These laws include minimum wage
requirements, overtime pay, healthcare reform and
the implementation of the Patient Protection and
Affordable Care Act, unemployment tax rates,
workers' compensation rates, citizenship
requirements, union membership and sales taxes. A
number of factors could adversely affect our
operating results, including additional government-
imposed increases in minimum wages, overtime pay,
paid leaves of absence and mandated health
benefits, mandated training for employees,
increased tax reporting and tax payment changing
regulations from the National Labor Relations Board
and increased employee litigation including claims
relating to the Fair Labor Standards Act.
Successful development of our products is
uncertain.
The product candidates that we expect to develop
are based on processes and methodologies that are
not currently widely employed. Our development of
current and future product candidates are subject
to the risks of failure and delay inherent in the
development of new products and products based on
new technologies, including delays in product
development, clinical testing, or manufacturing;
unplanned expenditures in product development,
clinical testing, or manufacturing, a failure to
receive regulatory approvals, the inability to
manufacture on our own, or through any others,
product candidates on a commercial scale, or
failure to achieve market acceptance, and the
emergence of superior or equivalent products.
Because of these risks, our research and
development efforts may not result in any
commercially viable products. If a significant
portion of these development efforts are not
successfully completed, required regulatory
approvals are not obtained, or any approved
products are not commercially successfully, our
business, financial condition, and results of
operations may be materially harmed.
The Health Care Reform Law 2.3% excise tax on
domestic sales of medical devices by manufacturers
and importers beginning in 2013, and the fee on
branded prescription drugs and biologics that was
implemented in 2011, may adversely affect sales and
cost of goods sold.
The Health Care Reform Law 2.3% excise tax on
domestic sales of medical devices by manufacturers
and importers beginning in 2013, and the fee on
branded prescription drugs and biologics that was
implemented in 2011, may adversely affect sales and
cost of goods sold.
For example, (i) where we purchase medical devices
from third-party manufacturers, the manufacturers
may increase their prices to cover their payment of
the excise tax and our costs to purchase such
medical devices may therefore increase and (ii)
where we manufacture medical devices or are the
importer of record, our cost of goods sold may
increase because we are subject to paying the
excise tax. If either of these scenarios were to
occur, then there could be an adverse impact to our
results of operations and financial condition.
Political, economic and regulatory influences are
subjecting the healthcare industry to potential
fundamental changes that could substantially affect
our results of operations.
Government and private sector initiatives to limit
the growth of healthcare costs, including price
regulation, competitive pricing, coverage and
payment policies, comparative effectiveness of
therapies, technology assessments and alternative
payment models, are continuing in countries where
we do business, including the U.S. These changes
are causing the marketplace to put increased
emphasis on the delivery of more cost-effective
treatments. As a U.S. headquartered Company with
significant sales in the U.S., this healthcare
reform legislation will materially impact us.
Certain provisions of the legislation will not be
effective for a number of years and it is unclear
what the full impact of the legislation will be.
Provisions of this legislation, including Medicare
provisions aimed at improving quality and
decreasing costs, comparative effectiveness
research, an independent payment advisory board,
and pilot programs to evaluate alternative payment
methodologies, could meaningfully change the way
healthcare is developed and delivered, and may
adversely affect our business and results of
operations. Further, we cannot predict what
healthcare programs and regulations will be
ultimately implemented at the federal or state
level, or the effect of any future legislation or
regulation in the U.S. or internationally. However,
any changes that lower reimbursements for our
products, reduce medical procedure volumes or
increase cost containment pressures on us or other
participants in the healthcare industry could
adversely affect our business and results of
operations.
Changes to government health care programs that
reduce payments under Medicare and Medicaid may
negatively impact payments from commercial third-
party payers.
The Healthcare Reform Law will result in increased
state legislative and regulatory changes in order
for states to comply with new federal mandates,
such as the requirement to establish or participate
in Exchanges and to participate in grants and other
incentive opportunities. In its June 28, 2012
ruling, the U.S. Supreme Court struck down the
portion of the Health Reform Law that would have
allowed the Department of Health and Human Services
to penalize states that do not implement the
Medicaid expansion provisions with the loss of
existing federal Medicaid funding. Thus, states may
opt not to implement the expansion. In some cases,
commercial third-party payors rely on all or
portions of Medicare payment systems to determine
payment rates. Current or future health care reform
and deficit reduction efforts, changes in laws or
regulations regarding government health care
programs, other changes in the administration of
government health care programs and changes to
commercial third-party payers in response to health
care reform and other changes to government health
care programs could have a material, adverse effect
on our financial position and results of
operations.
Products that we manufacture, source, distribute or
market are required to comply with regulatory
requirements.
To lawfully operate our businesses, we are required
to hold permits, licenses and other regulatory
approvals from, and to comply with operating and
security standards of, governmental bodies. Failure
to maintain or renew necessary permits, licenses or
approvals, or noncompliance or concerns over
noncompliance may result in suspension of our
ability to distribute, import or manufacture
products, product recalls or seizures, or criminal
and civil sanctions and could have an adverse
effect on our results of operations and financial
condition.
The manufacture, distribution, marketing and use of
our products are subject to extensive regulation
and increased scrutiny by the Food and Drug
Administration (FDA) and other regulatory
authorities globally.
Any new product must undergo lengthy and rigorous
testing and other extensive, costly and time-
consuming procedures mandated by FDA and foreign
regulatory authorities. Changes to current products
may be subject to vigorous review, including
additional 510(k) and other regulatory submissions,
and approvals are not certain. Our facilities must
be approved and licensed prior to production and
remain subject to inspection from time to time
thereafter. Failure to comply with the requirements
of FDA or other regulatory authorities, including a
failed inspection or a failure in our adverse event
reporting system, could result in adverse
inspection reports, warning letters, product
recalls or seizures, monetary sanctions,
injunctions to halt the manufacture and
distribution of products, civil or criminal
sanctions, refusal of a government to grant
approvals or licenses, restrictions on operations
or withdrawal of existing approvals and licenses.
Any of these actions could cause a loss of customer
confidence in us and our products, which could
adversely affect our sales and results of
operations.
Federal and State Laws Pertaining to Healthcare
Fraud and Abuse Could Adversely Affect Our
Business.
We are subject to various federal and state laws
targeting fraud and abuse in the healthcare
industry, including anti-kickback laws, false
claims laws, laws constraining the sales, marketing
and other promotional activities of manufacturers
of medical devices by limiting the kinds of
financial arrangements we may enter into with
physicians, hospitals, laboratories and other
potential purchasers of medical devices, laws
requiring the reporting of certain transactions
between us and healthcare professionals and HIPAA,
as amended by HITECH, which governs the conduct of
certain electronic healthcare transactions and
protects security and privacy of protected health
information. Violations of these laws are
punishable by criminal or civil sanctions,
including substantial fines, imprisonment and
exclusion from participation in government
healthcare programs such as Medicare and Medicaid.
Many of the existing requirements are new and have
not been definitively interpreted by state
authorities or courts, and available guidance is
limited. Unless and until we are in full compliance
with these laws, we could face enforcement action
and fines and other penalties, and could receive
adverse publicity, all of which could materially
harm our business. In addition, changes in or
evolving interpretations of these laws,
regulations, or administrative or judicial
interpretations, may require us to change our
business practices or subject our business
practices to legal challenges, which could have a
material adverse effect on our business, financial
condition and results of operations.
We may rely on a group of third-party distributors
to effectively distribute our products outside the
United States.
We may depend, in part, on medical device
distributors for the marketing and selling of our
products in most geographies outside of the U.S. We
depend on these distributors' efforts to market our
products, yet we are unable to control their
efforts completely. These distributors typically
sell a variety of other, non-competing products
that may limit the resources they dedicate to
selling our products. In addition, we are unable to
ensure that our distributors comply with all
applicable laws regarding the sale of our products.
If our distributors fail to effectively market and
sell our products, in full compliance with
applicable laws, our operating results and business
may suffer. Recruiting and retaining qualified
third-party distributors and training them in our
technology and product offerings require
significant time and resources. To develop and
expand our distribution, we must continue to scale
and improve our processes and procedures that
support our distributors. Further, if our
relationship with a successful distributor
terminates, we may be unable to replace that
distributor without disruption to our business. If
we fail to maintain relationships with our
distributors, fail to develop new relationships
with other distributors, including in new markets,
fail to manage, train or incentivize existing
distributors effectively, or fail to provide
distributors with competitive products on
attractive terms, or if these distributors are not
successful in their sales efforts, our revenue may
decrease and our operating results, reputation and
business may be harmed.
The commercial success of our products will depend
in part upon the level of reimbursement we receive
from third parties for the cost of our products to
users.
The commercial success of any product will depend,
in part, on the extent to which reimbursement for
the costs of our products and related treatments
will be available from third-party payors such as
government health administration authorities,
private health insurers, managed care programs, and
other organizations. Adequate third-party insurance
coverage may not be available for us to establish
and maintain price levels that are sufficient for
us to continue our business or for realization of
an appropriate return on investment in product
development.
If we are unable to educate physicians on the safe
and effective use of our products, we may be unable
to achieve our expected growth.
An important part of our sales process includes the
education of physicians on the safe and effective
use of our products. There is a learning process
for physicians to become proficient in the use of
our products and it typically takes several
procedures for a physician to become comfortable
using the product. If a physician experiences
difficulties during an initial procedure or
otherwise, that physician may be less likely to
continue to use our product, or to recommend it to
other physicians. It is critical to the success of
our commercialization efforts to educate physicians
on the proper use of the product, and to provide
them with adequate product support during clinical
procedures. It is important for our growth that
these physicians advocate for the benefits of our
products in the broader marketplace. If physicians
are not properly trained, they may misuse or
ineffectively use our products. This may also
result in unsatisfactory patient outcomes, patient
injuries, negative publicity or lawsuits against
us, any of which could have an adverse effect on
our business.
We depend on fewer suppliers for our products and
therefore we may be less able to negotiate price
terms with suppliers.
In recent years, pharmaceutical suppliers have been
subject to increasing consolidation. As a result, a
small number of very large companies control a
significant share of the market. Many healthcare
organizations also have consolidated to create
larger healthcare enterprises with greater market
power. If this consolidation trend continues, it
could reduce the size of our target market and give
the resulting enterprises greater bargaining power,
which may lead to a decrease in the prices for our
products and services.
If third-party payors do not provide adequate
coverage and reimbursement for the use of our
products, our revenues will be negatively impacted.
Our success in marketing our products depends in
large part on whether U.S. and international
government health administrative authorities,
private health insurers and other organizations
will adequately cover and reimburse customers for
the cost of our products. In the United States, a
third-party payor's decision to provide coverage
for our products does not imply that an adequate
reimbursement rate will be obtained. Further, one
third-party payor's decision to cover our products
does not assure that other payors will also provide
coverage for the products or provide coverage at an
adequate reimbursement rate. Reimbursement systems
in international markets vary significantly by
country and by region within some countries, and
reimbursement approvals must be obtained on a
country-by-country basis. In many international
markets, a product must be approved for
reimbursement before it can be approved for sale in
that country. Further, many international markets
have government-managed healthcare systems that
control reimbursement for new devices and
procedures. In most markets there are private
insurance systems as well as government-managed
systems. If sufficient coverage and reimbursement
is not available for our current or future
products, in either the United States or
internationally, the demand for our products and
our revenues will be adversely affected.
We face heavy government regulation, and FDA
regulatory approval of our products is uncertain.
The research, testing, manufacturing and marketing
of drug products such as those that we are
developing are subject to extensive regulation by
federal, state and local government authorities,
including the FDA. To obtain regulatory approval of
a product, we must demonstrate to the satisfaction
of the applicable regulatory agency that, among
other things, the product is safe and effective for
its intended use. In addition, we must show that
the manufacturing facilities used to produce the
products are in compliance with current Good
Manufacturing Practices regulations (cGMP). The
process of obtaining FDA and other required
regulatory approvals and clearances will require us
to expend substantial time and capital. Despite the
time and expense expended, regulatory approval is
never guaranteed. The number of preclinical and
clinical trials that will be required for FDA
approval varies depending on the drug candidate,
the disease or condition that the drug candidate is
in development for, and the requirements applicable
to that particular drug candidate. The FDA can
delay, limit or deny approval of a drug candidate
for many reasons, including that a drug candidate
may not be shown to be safe or effective, the FDA
may not approve our manufacturing process, the FDA
may interpret data from preclinical and clinical
trials in different ways than we do, and the FDA
may not meet, or may extend, the Prescription Drug
User Fee Act date with respect to a particular New
Drug Application ("NDA").
For example, if certain of our methods for
analyzing our trial data are not accepted by the
FDA, we may fail to obtain regulatory approval for
our product candidates. Moreover, if and when our
products do obtain marketing approval, the
marketing, distribution and manufacture of such
products would remain subject to extensive ongoing
regulatory requirements. Failure to comply with
applicable regulatory requirements could result in
warning letters, fines, civil penalties,
injunctions, recall or seizure of products, total
or partial suspension of production, refusal of the
government to grant future approvals, withdrawal of
approvals, or criminal prosecution.
Any delay or failure by us to obtain regulatory
approvals for our product candidates could diminish
competitive advantages that we may attain and would
adversely affect the marketing of our products. To
date, we have not received regulatory approval to
market any of our product candidates in any
jurisdiction. Following regulatory approval of any
of our drug candidates, we will be subject to
ongoing regulatory obligations and restrictions,
which may result in significant expense and limit
our ability to commercialize our potential
products.
With regard to our drug candidates, if any are
approved by the FDA or by another regulatory
authority, we are held to extensive regulatory
requirements over product manufacturing, labeling,
packaging, adverse event reporting, storage,
advertising, promotion and record keeping.
Regulatory approvals may also be subject to
significant limitations on the indicated uses or
marketing of the drug candidates. Potentially
costly follow-up or post-marketing clinical studies
may be required as a condition of approval to
further substantiate safety or efficacy, or to
investigate specific issues of interest to the
regulatory authority. Previously unknown problems
with the drug candidate, including adverse events
of unanticipated severity or frequency, may result
in restrictions on the marketing of the drug, and
could include withdrawal of the drug from the
market.
In addition, the law or regulatory policies
governing pharmaceuticals may change. New statutory
requirements may be enacted or additional
regulations may be enacted that could prevent or
delay regulatory approval of our drug candidates.
We cannot predict the likelihood, nature or extent
of adverse government regulation that may arise
from future legislation or administrative action,
either in the United States or elsewhere. If we are
not able to maintain regulatory compliance, we
might not be permitted to market our drugs and our
business could suffer.
We may in the future be subject to various U.S.
federal and state laws pertaining to health care
fraud and abuse, including anti-kickback, self-
referral, false claims and fraud laws, and any
violations by us of such laws could result in fines
or other penalties.
If one or more of our product candidates is
approved, we will likely be subject to the various
U.S. federal and state laws intended to prevent
health care fraud and abuse. The federal anti-
kickback statute prohibits the offer, receipt, or
payment of remuneration in exchange for or to
induce the referral of patients or the use of
products or services that would be paid for in
whole or part by Medicare, Medicaid or other
federal health care programs. Remuneration has been
broadly defined to include anything of value,
including cash, improper discounts, and free or
reduced price items and services. Many states have
similar laws that apply to their state health care
programs as well as private payers. Violations of
the anti-kickback laws can result in exclusion from
federal health care programs and substantial civil
and criminal penalties.
The False Claims Act (FCA) imposes liability on
persons who, among other things, present or cause
to be presented false or fraudulent claims for
payment by a federal health care program. The FCA
has been used to prosecute persons submitting
claims for payment that are inaccurate or
fraudulent, that are for services not provided as
claimed, or for services that are not medically
necessary. The FCA includes a whistleblower
provision that allows individuals to bring actions
on behalf of the federal government and share a
portion of the recovery of successful claims. If
our marketing or other arrangements were determined
to violate the FCA or anti-kickback or related
laws, then our revenue could be adversely affected,
which would likely harm our business, financial
condition, and results of operations.
State and federal authorities have aggressively
targeted medical technology companies for alleged
violations of these anti-fraud statutes, based on
improper research or consulting contracts with
doctors, certain marketing arrangements that rely
on volume-based pricing, off-label marketing
schemes, and other improper promotional practices.
Companies targeted in such prosecutions have paid
substantial fines in the hundreds of millions of
dollars or more, have been forced to implement
extensive corrective action plans or Corporate
Integrity Agreements, and have often become subject
to consent decrees severely restricting the manner
in which they conduct their business. If we become
the target of such an investigation or prosecution
based on our contractual relationships with
providers or institutions, or our marketing and
promotional practices, we could face similar
sanctions, which would materially harm our
business.
If we are found to have violated laws protecting
the privacy or security of patient health
information, we could be subject to civil or
criminal penalties, which could increase our
liabilities and harm our reputation or our
business.
There are a number of U.S. federal and state laws
and foreign laws protecting the privacy and
security of individually identifiable health
information, or "protected health information"
including patient records, and restricting the use
and disclosure of that protected health information
that we are subject to. In the United States, the
U.S. Department of Health and Human Services
promulgated health information privacy and security
rules under the Health Insurance Portability and
Accountability Act of 1996 (HIPAA) and then
significantly strengthened and broadened the
applicability of HIPAA under the Health Information
Technology for Economic and Clinical Health Act
(HITECH, together HIPAA). HIPAA applies to health
care providers engaging in certain standard
transactions electronically; health plans and
health care clearing houses. These entities are
referred to as "covered entities." Certain HIPAA
provisions also apply to "business associates" of
covered entities, or third party providers of
services to covered entities that involve the use
or disclosure of protected health information.
HIPAA's privacy rules protect medical records and
protected health information in all forms by
limiting its use and disclosure, giving individuals
the right to access, amend and seek accounting of
their own health information and limiting, in some
circumstances, the use and disclosure of protected
health information to the minimum amount reasonably
necessary to accomplish the intended purpose of the
use or disclosure. HIPAA's security standards
require both covered entities and business
associates to implement administrative, physical
and technical security measures to maintain the
security of protected health information in
electronic form. Covered entities and business
associates must conduct initial and ongoing risk
assessments to ensure the ongoing effectiveness of
security measures and maintain a written
information security plan. We are a covered entity
and as such, we must comply with HIPAA and ensure
that all aspects of our operations comply with
relevant HIPAA standards. We are subject to random
audit by federal authorities, and enforcement by
both state and federal regulators. We are also
subject to investigation in response to complaints.
If we are found to be in violation of the HIPAA
requirements, we could be subject to civil or
criminal penalties as well as fines, which could
increase our liabilities and harm our reputation or
our business.
Beyond HIPAA, most states have adopted data
security laws protecting the personal data of state
residents. Personal data subject to protection
typically includes name coupled with social
security number, state-issued identification
number, or financial account number. Most states
require specific, technical security measures for
the protection of all personal data, including
employee data, and impose their own breach
notification requirements in the event of a loss of
personal data. State data security laws generally
overlap and apply simultaneously with HIPAA. Non-
U.S. privacy protection requirements such as the
European Union's Data Protection Directive
governing the processing of personal data, may be
stricter than the U.S. law and violation would
impose similar or more severe penalties. These laws
could create liability for us or increase our cost
of doing business, and any failure to comply could
result in harm to our reputation, and potentially
fines and penalties.
Healthcare legislative reform measures may have a
material adverse effect on our business and results
of operations.
In the United States, there have been and continue
to be a number of legislative initiatives to
contain healthcare costs. For example, in March
2010, the Patient Protection and Affordable Care
Act, as amended by the Health Care and Education
Reconciliation Act, or the Affordable Care Act, was
passed, which substantially changed the way health
care is financed by both governmental and private
insurers, and significantly impacted the U.S.
pharmaceutical industry. The Affordable Care Act,
among other things, subjected biologic products to
potential competition by lower-cost biosimilars,
addressed a new methodology by which rebates owed
by manufacturers under the Medicaid Drug Rebate
Program are calculated for drugs that are inhaled,
infused, instilled, implanted or injected,
increased the minimum Medicaid rebates owed by
manufacturers under the Medicaid Drug Rebate
Program and extended the rebate program to
individuals enrolled in Medicaid managed care
organizations, established annual fees and taxes on
manufacturers of certain branded prescription
drugs, and a new Medicare Part D coverage gap
discount program, in which manufacturers must agree
to offer 50% point-of-sale discounts off negotiated
prices of applicable brand drugs to eligible
beneficiaries during their coverage gap period, as
a condition for the manufacturer's outpatient drugs
to be covered under Medicare Part D.
We expect that additional state and federal
healthcare reform measures will be adopted in the
future, any of which could limit the amounts that
federal and state governments will pay for
healthcare products and services, which could
result in reduced demand for our products or
additional pricing pressures, which would
negatively affect our business.
New product development involves a lengthy,
expensive and complex process.
We may be unable to develop or commercialize any of
the product candidates we are currently
researching. Moreover, even if we develop such
candidates, they may be subject to significant
regulatory review, approval and other government
regulations. We are currently conducting research
and development on Eucontra for contraception.
There can be no assurance that our technologies
will be capable of reliably addressing resistant
infections or that we can develop and commercialize
our products at all. New product development
involves a lengthy, expensive and complex process
and we currently have no fully validated diagnostic
candidates. In addition, before we can
commercialize any new product candidates, we will
need to conduct substantial research and
development, conduct validation studies, expend
significant funds, develop and scale-up our
laboratory processes, and obtain regulatory
approval and acceptance of our product candidates.
This process involves a high degree of risk and
takes several years. Our product development
efforts may fail for many reasons, including
failure of the product at the research or
development stage, and lack of clinical validation
data to support the effectiveness of the product.
Few research and development projects result in
commercial products, and perceived viability in
early clinical trials often is not replicated in
later studies. At any point, we may abandon
development of a product candidate or we may be
required to expend considerable resources repeating
clinical trials, which would adversely impact the
timing for generating potential revenues from those
product candidates. In addition, as we develop
product candidates, we will have to make
significant investments in product development,
marketing and sales resources.
We may not be able to conduct clinical trials
necessary to commercialize and sell our proposed
products and formulations.
In order to conduct clinical trials that are
necessary to obtain approval by the FDA to market a
formulation or product, it is necessary to receive
clearance from the FDA to conduct such clinical
trials. The FDA can halt clinical trials at any
time for safety reasons or because we or our
clinical investigators do not follow the FDA's
requirements for conducting clinical trials. If we
are unable to receive clearance to conduct clinical
trials or the trials are halted by the FDA, we
would not be able to achieve any revenue from such
product as it is illegal to sell any drug or
medical device for human consumption without FDA
approval. Moreover, it is our stated intention to
attempt to avail ourselves of the FDA's Fast Track
approval procedure, which we believe is less costly
and time consuming. If this approval pathway is not
available to us with respect to a particular
formulation or product, or at all, the time and
cost associated with developing and commercializing
such formulations or products may be prohibitive
and our business strategy would be materially and
adversely affected.
Our long-term viability and growth will depend upon
successful clinical trials.
Product development is very expensive and involves
a high degree of risk. Only a small number of
research and development programs result in the
commercialization of a product. Success in
preclinical work or early stage clinical trials
does not ensure that later stage or larger scale
clinical trials will be successful. Conducting
clinical trials is a complex, time-consuming and
expensive process. Our ability to complete our
clinical trials in a timely fashion depends in
large part on a number of key factors including
protocol design, regulatory and institutional
review board approval, the rate of patient
enrollment in clinical trials, and compliance with
extensive current Good Clinical Practices. In
addition, if another Company is the first to file
for marketing approval of a competing orphan drug
candidate, that Company may ultimately receive
marketing exclusivity for its drug candidate,
preventing us from commercializing our orphan drug
candidate in the applicable market for several
years.
We face significant competition from other
biotechnology and pharmaceutical companies.
We are aware of several companies that are working
to develop drugs that would compete against our
drug candidates. Many of our existing or potential
competitors have substantially greater financial,
technical and human resources than we do and
significantly greater experience in the discovery
and development of drug candidates, as well as in
obtaining regulatory approvals of those drug
candidates in the U.S. and in foreign countries.
Our current and potential future competitors may
also have significantly more experience
commercializing drugs that have been approved for
marketing. Mergers and acquisitions in the
pharmaceutical and biotechnology industries could
result in even more resources being concentrated
among a small number of our competitors.
Competition may increase further as a result of
advances in the commercial applicability of
technologies and greater availability of capital
for investment in these industries. Our competitors
may succeed in developing, acquiring or licensing,
on an exclusive basis, drug candidates that are
more effective or less costly than any drug
candidate that we may develop.
Our ability to compete successfully will depend
largely on our ability to discover, develop and
commercialize drugs that are superior to other
products in the market, demonstrate through our
clinical trials that our drug candidates are
differentiated from existing and future therapies,
attract qualified scientific, product development
and commercial personnel, obtain patent or other
proprietary protection for our drugs and
technologies, obtain required regulatory approvals,
successfully collaborate with pharmaceutical
companies in the discovery, development and
commercialization of new drugs, and negotiate
competitive pricing and reimbursement with third
party payers
The availability of our competitors' products could
limit the demand, and the price we are able to
charge, for any drug candidate we develop. The
inability to compete with existing or subsequently
introduced drug candidates would have a material
adverse impact on our business, financial condition
and prospects.
Established pharmaceutical companies may invest
heavily to accelerate discovery and development of
novel compounds or to in license novel compounds
that could make our drug candidates less
competitive. In addition, any new product that
competes with an approved product must demonstrate
compelling advantages in efficacy, convenience,
tolerability and safety in order to overcome price
competition and to be commercially successful.
Accordingly, our competitors may succeed in
obtaining patent protection, discovering,
developing or receiving FDA approval for or
commercializing medicines before we do, which would
have a material adverse impact on our business.
Our research and development efforts may not
succeed in developing commercially successful
products and technologies, which may limit our
ability to achieve profitability.
We must continue to explore opportunities that may
lead to new products and technologies. To
accomplish this, we must commit substantial
efforts, funds, and other resources to research and
development. A high rate of failure is inherent in
the research and development of new products and
technologies. Any such expenditures that we make
will be made without any assurance that our efforts
will be successful. Failure can occur at any point
in the process, including after significant funds
have been invested.
Regardless of whether our clinical trials are
deemed to be successful, promising new product
candidates may fail to reach the market or may only
have limited commercial success because of efficacy
or safety concerns, failure to achieve positive
clinical outcomes, inability to obtain necessary
regulatory approvals or satisfy regulatory
criteria, limited scope of approved uses, excessive
costs to manufacture, the failure to establish or
maintain intellectual property rights, or
infringement of the intellectual property rights of
others.
Even if we successfully develop new products or
enhancements, they may be quickly rendered obsolete
by changing customer preferences, changing industry
standards, or competitors' innovations. Innovations
may not be quickly accepted in the marketplace
because of, among other things, entrenched patterns
of clinical practice or uncertainty over third-
party reimbursement. We cannot state with certainty
when or whether any of our products under
development will be launched, whether we will be
able to develop, license, or otherwise acquire drug
candidates or products, or whether any products
will be commercially successful. Failure to launch
successful new products or new indications for
existing products may cause our products to become
obsolete, which may limit our ability to achieve
profitability.
Even if we are able to obtain regulatory approvals
for our new pharmaceutical products, generic or
branded, the success of those products is dependent
upon market acceptance.
Levels of market acceptance for our new products
could be impacted by several factors, including but
not limited to: i) the availability of alternative
products from our competitors, ii) the price of our
products relative to that of our competitors, iii)
the timing of our market entry, iv) the ability to
market our products effectively to the retail level
and v) the acceptance of our products by government
and private entities. Some of these factors are not
within our control. Additionally, continuing
studies of the proper utilization, safety and
efficacy of pharmaceutical products are being
conducted by the industry, government agencies and
others. Such studies, which increasingly employ
sophisticated methods and techniques, can call into
question the utilization, safety and efficacy of
previously marketed products. In some cases,
studies have resulted, and may in the future
result, in the discontinuance of product marketing
or other risk management programs such as the need
for a patient registry. These situations, should
they occur, could have a material adverse effect on
our profitability, business, financial position and
results of operations.
Our manufacturing activity is subject to certain
risks.
We may manufacture the products sold to our
customers in a location to be obtained in the
future. As a result, we may be dependent upon the
uninterrupted and efficient operation of our
manufacturing facility and our distribution
facilities throughout the country. Our
manufacturing facilities and distribution
facilities may be subject to the risk of
catastrophic loss due to, among other things,
earthquake, fire, flood, terrorism or other natural
or man-made disasters, as well as occurrence of
significant equipment failures. If any of these
facilities were to experience a catastrophic loss,
it would be expected to disrupt our operations and
could result in personal injury or property damage,
damage relationships with our customers or result
in large expenses to repair or replace the
facilities or systems, as well as result in other
liabilities and adverse impacts.
We contract with third-party manufacturers to
produce our products in accordance with our
specifications and standards. These contract
manufacturers are subject to the same risks as our
manufacturing facility as noted above. While we
have implemented stringent quality control
procedures to verify that our contract
manufacturers comply with our specifications and
standards, we do not have full control over their
manufacturing activities. Any difficulties, delays
and defects in our products resulting from the
activities of our contract manufacturers may have
an adverse effect on our business and results of
operations.
In addition, the occurrence of manufacturing-
related compliance issues could require subsequent
withdrawal of the drug approval, reformulation of
the drug product, additional testing or changes in
labeling of the finished product. Any delay,
interruption or cessation of production by our
third-party manufacturers or strategic partners of
our commercial products or product candidates, or
their respective materials and components, as a
result of any of the above factors or otherwise,
may limit our ability to meet demand for commercial
products and/or delay ongoing clinical trials,
either of which could have a material adverse
effect on our business, results of operations and
financial condition.
We could experience difficulties and delays in the
manufacturing, distribution and sale of our
products.
Our product supply and related patient access could
be negatively impacted by, among other things: (i)
product seizures or recalls or forced closings of
manufacturing plants; (ii) disruption in supply
chain continuity including from natural or man-made
disasters at one of our facilities or at a critical
supplier, as well as our failure or the failure of
any of our suppliers to comply with Current Good
Manufacturing Practices and other applicable
regulations or quality assurance guidelines that
could lead to manufacturing shutdowns, product
shortages or delays in product manufacturing; (iii)
manufacturing, quality assurance/quality control,
supply problems or governmental approval delays;
(iv) the failure of a sole source or single source
supplier to provide us with the necessary raw
materials, supplies or finished goods within a
reasonable timeframe; (v) the failure of a third-
party manufacturer to supply us with bulk active or
finished product on time; (vi) construction or
regulatory approval delays for new facilities or
the expansion of existing facilities, including
those intended to support future demand for our
biologics products; (vii) the failure to meet new
and emerging regulations requiring products to be
tracked throughout the distribution channels using
unique identifiers to verify their authenticity in
the supply chain; and (viii) other manufacturing or
distribution issues, including limits to
manufacturing capacity due to regulatory
requirements, and changes in the types of products
produced, such as biologics, physical limitations
or other business interruptions, any of which could
have a negative effect on our business and results
of operations.
Increased concerns over the safety of our products
may result in negative publicity or increased
regulatory controls on our products.
The Company's reputation is the foundation of our
relationships with physicians, patients and other
customers. If we are unable to effectively manage
real or perceived issues, which could negatively
impact sentiments toward the Company, our business
could suffer. Pharmaceuticals and medical devices
are perceived to be dangerous products and our
customers may have a number of concerns about the
safety of our products whether or not such concerns
have a basis in generally accepted science or peer-
reviewed scientific research. These concerns may be
increased by negative publicity, even if the
publicity is inaccurate. In addition, government
investigations related to the use of our products,
but not the efficacy of the products themselves,
may cause reputational harm to the Company.
Negative publicity could also result in an
increased number of product liability claims,
whether or not these claims have a basis in
scientific fact.
We are also subject to adverse event reporting
regulations that require us to report to the FDA or
similar bodies in other countries if our products
are associated with a death or serious injury, even
if there is no available evidence of a causal
relationship between the adverse event and the
product. Such reports may be publicly released by
the FDA and other authorities. Furthermore, any
adverse publicity associated with adverse events
for our products, and related post-marketing
actions, could cause consumers to seek alternatives
to our products, and thereby cause our sales to
decline, even if our products are ultimately
determined not to have been the primary cause of
the adverse event.
Pharmaceutical products can develop unexpected
safety or efficacy concerns, which could have a
material adverse effect on our business.
Pharmaceutical products receive regulatory approval
based on data obtained in controlled clinical
trials of limited duration. After approval, the
products are used for longer periods of time by
much larger numbers of patients; we and others
(including regulatory agencies and private payers)
collect extensive information on the efficacy and
safety of our marketed products by continuously
monitoring the use of our products in the
marketplace. In addition, we or others may conduct
post-marketing clinical studies on efficacy and
safety of our marketed products. New safety or
efficacy data from market surveillance, post-
marketing clinical studies or general use may
result in product label changes, product recalls,
withdrawals, or declining sales, as well as product
liability, consumer fraud and/or other claims,
including potential civil or criminal governmental
actions.
Product labeling changes for our marketed products
could result in a negative impact on revenues.
We or regulatory authorities may need to change the
labeling for any pharmaceutical product, including
after a product has been marketed for several
years. These changes are often the result of
additional data from post-marketing studies, head-
to-head trials, adverse events reports, studies
that identify biomarkers (objective characteristics
that can indicate a particular response to a
product or therapy) or other studies or post-
marketing experience that produce important
additional information about a product. New
information added to a product's label can affect
its risk-benefit profile, leading to potential
recalls, withdrawals, or declining revenue, as well
as product liability claims. Sometimes additional
information from these studies identifies a portion
of the patient population that may be non-
responsive to a medicine or would be at higher risk
of adverse reactions and labeling changes based on
such studies may limit the patient population. The
studies providing such additional information may
be sponsored by us, but they could also be
sponsored by competitors, insurance companies,
government institutions, managed care
organizations, scientists, investigators, or other
interested parties. While additional safety and
efficacy information from such studies assist us
and healthcare providers in identifying the best
patient population for each product, it can also
negatively impact our revenues due to inventory
returns and a more limited patient population going
forward. Additionally, certain study results,
especially from head-to-head trials, could affect a
product's formulary listing, which could also
adversely affect our revenues.
We are dependent on our collaborative agreements
for the development of products and business
development, which exposes us to the risk of
reliance on the viability of third parties.
In conducting our research and development
activities, we currently rely, and will in the
future rely, on collaborative agreements with third
parties such as manufacturers, contract research
organizations, commercial partners, universities,
governmental agencies and not-for-profit
organizations for both strategic and financial
resources. The loss of, or failure to perform by us
or our partners under, any applicable agreements or
arrangements, or our failure to secure additional
agreements for other products in development, would
substantially disrupt or delay our research and
development and commercialization activities. Any
such loss would likely increase our expenses and
materially harm our business, financial condition
and results of operation.
We extensively outsource our clinical trial
activities and usually perform only a small portion
of the start-up activities in-house.
We rely on independent third-party contract
research organizations (CROs) to perform most of
our clinical studies, including document
preparation, site identification, screening and
preparation, pre-study visits, training, program
management and bioanalytical analysis. Many
important aspects of the services performed for us
by the CROs are out of our direct control. If there
is any dispute or disruption in our relationship
with our CROs, our clinical trials may be delayed.
Moreover, in our regulatory submissions, we rely on
the quality and validity of the clinical work
performed by third-party CROs. If any of our CROs'
processes, methodologies or results were determined
to be invalid or inadequate, our own clinical data
and results and related regulatory approvals could
be adversely impacted.
Reliance on third-party relationships and
outsourcing arrangements could adversely affect our
business.
We utilize third parties, including suppliers,
alliances with other pharmaceutical and
biotechnology companies, and third-party service
providers, for selected aspects of product
development, the manufacture and commercialization
of certain products, support for information
technology systems, and certain financial
transactional processes. For example, we may
outsource the day-to-day management and oversight
of our clinical trials to contract research
organizations and the manufacture of certain of our
products. Outsourcing these functions involves the
risk that the third parties may not perform to our
standards or legal requirements, may not produce
reliable results, may not perform in a timely
manner, may not maintain the confidentiality of our
proprietary information, or may fail to perform at
all. Failure of these third parties to meet their
contractual, regulatory, confidentiality, or other
obligations to us could have a material adverse
effect on our business.
Product liability claims could harm our business.
The development, manufacture, testing, marketing
and sale of pharmaceutical products are associated
with significant risks of product liability claims.
Side effects or adverse events known or reported to
be associated with, or manufacturing defects in,
the products sold by us could exacerbate a
patient's condition, or could result in serious
injury or impairments or even death. This could
result in product liability. Some of our products,
including Eucontra, will have boxed warnings in
their labels. Product liability claims may be
brought by individuals seeking relief for
themselves, or by groups seeking to represent a
class of injured patients. Further, third party
payers, either individually or as a putative class,
may bring actions seeking to recover monies spent
on one of our products. As sales of our products
increase, the risk that product liability claims
will be made against us increases. The risk of
product liability claims may also increase if a
company receives a warning letter from a regulatory
agency. We cannot predict the frequency, outcome or
cost to defend any such claims.
Product liability insurance coverage is expensive,
can be difficult to obtain and may not be available
to us in the future on acceptable terms, or at all.
Our product liability insurance may not cover all
of the future liabilities we might incur in
connection with the development, manufacture or
sale of our products. In addition, we may not
continue to be able to obtain insurance on
satisfactory terms or in adequate amounts. A
successful claim or claims brought against us in
excess of available insurance coverage could
subject us to significant liabilities and could
have a material adverse effect on our business,
financial condition, results of operations and
growth prospects. Such claims whether meritorious
or not could also harm our reputation and the
reputation of our products, adversely affecting our
ability to market our products successfully. In
addition, defending a product liability lawsuit is
expensive and can divert the attention of key
employees from operating our business.
In addition, product liability claims could result
in an investigation of the safety or efficacy of
our products, our manufacturing processes and
facilities, or our marketing programs conducted by
the FDA, the EMA, or the competent authorities of
the EU member states. Such investigations could
also potentially lead to a recall of our products
or more serious enforcement actions, limitations on
the indications for which they may be used, or
suspension, variation, or withdrawal of approval,
any of which would adversely affect our business.
If we are unable to negotiate and maintain
satisfactory arrangements with group purchasing
organizations with respect to the purchase of our
products, our business could be adversely affected.
Our ability to sell our products to hospitals in
the United States depends in part on our
relationships with group purchasing organizations,
or GPOs. Many existing and potential customers for
our products become members of GPOs. GPOs negotiate
pricing arrangements and contracts, sometimes on an
exclusive basis, with medical supply manufacturers
and distributors. These negotiated prices are then
made available to a GPO's affiliated hospitals and
other members. If we are not one of the providers
selected by a GPO, affiliated hospitals and other
members may be less likely to purchase our
products, and if the GPO has negotiated a strict
sole source, market share compliance or bundling
contract for another manufacturer's products, we
may be precluded from making sales to members of
the GPO for the duration of the contractual
arrangement. Our failure to renew contracts with
GPOs may cause us to lose market share and could
have a material adverse effect on our sales,
financial condition and results of operations. We
cannot assure you that we will be able to renew
these contracts at the current or substantially
similar terms. If we are unable to keep our
relationships and develop new relationships with
GPOs, our competitive position may suffer.
We are subject to complex government healthcare
legislation and reimbursement programs, as well as
other cost-containment pressures.
Many of our products will be purchased or
reimbursed by federal and state government
authorities, private health insurers and other
organizations, including heath maintenance and
managed care organizations. These third-party
payers increasingly challenge pharmaceutical and
medical device product pricing, which could result
in lower reimbursement rates and a reduction in
demand for our products.
In addition, legislative and regulatory proposals
and enactments to reform healthcare insurance
programs could significantly influence the manner
in which pharmaceutical products, biologic products
and medical devices are prescribed and purchased.
Individual states have also become increasingly
aggressive in passing legislation and implementing
regulations designed to control pharmaceutical
product pricing, including price or patient
reimbursement constraints, discounts, restrictions
on certain product access, and to encourage
importation from other countries and bulk
purchasing. Furthermore, regional healthcare
authorities and individual hospitals are
increasingly using bidding procedures to determine
what pharmaceutical products and which suppliers
will be included in their prescription drug and
other healthcare programs. Any legally mandated
price controls or utilization of bidding procedures
could negatively and materially impact our
revenues, results of operations and financial
condition.
Increased pricing pressure and other restrictions
in the U.S. and abroad from managed care
organizations, institutional Investors, and
government agencies and programs, among others,
could negatively affect our revenues and profit
margins.
Our products continue to be subject to increasing
pressures from market access, pricing and rebates
and other restrictions in the U.S., the EU and
other regions around the world, including from (i)
rules and practices of managed care organizations
and institutional and governmental Investors; (ii)
judicial decisions and governmental laws and
regulations for Medicare, Medicaid and U.S.
healthcare reform, including the 2010 Patient
Protection and Affordable Care Act; (iii) the
potential impact of pharmaceutical reimbursement,
Medicare Part D Formularies and product pricing in
general; (iv) delays in gaining reimbursement; (v)
government price erosion mechanisms across Europe
and in other countries, resulting in deflation for
pharmaceutical product pricing; (vi) collection
delays in government-funded public hospitals
outside the U.S. (vii) the impact on pricing from
parallel trade across borders; (viii) other
developments in technology and/or industry
practices that could impact the reimbursement
policies and practices of third-party payers; and
(ix) limited or blocked market access due to real
or perceived differences in value propositions for
our products compared to competing products.
The illegal importation of counterfeit products and
pharmaceutical and medical device products from
countries where government price controls or other
market dynamics result in lower prices may
adversely affect our sales and profitability in the
U.S. and other countries in which we operate.
Foreign imports are illegal under current U.S. law,
with the sole exception of limited quantities of
prescription drugs imported for personal use.
However, the volume of illegal imports continues to
rise as the ability of patients and other customers
to obtain these lower priced imports has grown
significantly. In addition, U.S. policy makers may
expand consumers' ability to import lower priced
versions of our products and competing products
from Canada, where there are government price
controls. Any future legislation or regulations
that increase consumer access to lower priced
medicines from outside the U.S. may lower the
prices we receive for our products, which could
adversely impact our revenues.
BUSINESS
Description of the Business
Hera Health Solutions is a pharmaceutical device
company that specializes in the development and
commercialization of long acting treatments through
proprietary bio-erodible implants.
Business Plan
Hera Health intends to sell its first product, the
contraceptive biodegradable implant Eucontra, to
OB/GYN practices as well as family planning clinics
in the U.S. market. Internationally, the Company
will seek to sell to nonprofit organizations and
large-scale Non-Governmental Organizations (NGOs)
that distribute contraceptives to countries with a
limited access to healthcare. It also intends to
price Eucontra at $800 per device, which the
Company believes is competitive with its
alternative, Nexplanon. The executive team
estimates a 98.5% gross margin for retail sales but
intends to heavily subsidize Eucontra for bulk
distribution to humanitarian partners.
Hera Health aims to spread awareness for Eucontra
mainly through partnerships and sponsorships within
the OB/GYN and family planning spaces, as well as
with global humanitarian organizations and
healthcare distributors who focus on areas related
to family planning and women's health. If the
product is approved for use by the FDA, the Company
also plans to launch an extensive commercial
marketing campaign involving sales representatives
and media advertisement. The Company's domestic
growth plan also heavily involves broadening
professionals' knowledge of its technology through
trade shows and conferences.
Nationally, the Company has mapped out potential
conferences in the U.S. to attend with the goal of
further networking with key opinion leaders on a
national level in the hopes of gaining additional
endorsements for its technology. The executive team
will seek to keep these connections engaged as the
Company continues to develop Eucontra and fulfill
the necessary regulatory requirements for FDA
approval.
Currently, the Company aims to finish its pre-
clinical trials by September 2020, its clinical
trials by November 2021, and obtain final FDA, and
WHO approval by December 2021. It hopes to commence
its market launch by April 2022 and begin
distributing Eucontra to OB/GYN medical providers.
History of the Business
The Company was incorporated on May 22, 2017 under
the laws of Delaware. The idea for Hera Health
started as a biomedical engineering capstone
project at Georgia Tech, where Bioengineering
students were given a task to locate and remove
lost implants in the arm. Along the way, the Hera
Health team developed a technology that would
eliminate the problem from ever occurring in the
first place. Now, the Company's goal is to provide
a drug delivery implant that could change the way
people take regimented medication all over the
world.
In May 2018, Hera Health participated in the
ZeroTo510 summer accelerator. The program is a 100-
day intensive, hands-on educational program that
speeds up the development of high-tech, high-growth
startup companies. The accelerator focused on four
industries including home services, medical device,
supply chain and logistics, and Agricultural
technology and innovation.
The Company's Products and/or Services
Product /
Service
Description
Potential
Market
Eucontra
A
biodegradable,
long-acting
contraceptive
arm implant
OB/GYNs with
private
practices,
family planning
organizations,
and/or midsize
to large non-
profit
organizations.
We are constantly researching and developing new
formulations of our products to move into other
long acting pharmaceutical markets. The total
addressable market for long acting medications is
$300 billion. Proceeds from this raise will be used
to help the Company continue research and
development and undergo the Food and Drug
Administration approval process.
In the U.S., we intend to sell and distribute our
product as a pharmaceutical device aligned with
other contraceptive products. Internationally, we
intend to sell the product through strategic non-
profit organization partnerships.
Competition
The Company's primary competitors are Merck, the
Bayer Group, Allergan, and Cooper Surgical. Similar
competitive devices include Nexplanon, Mirena,
Skyla, Liletta, and ParaGuard.
We believe our product is best suited to directly
address the removal issues associated with the
contraceptive arm implant. Other forms of available
long acting contraceptive options on the market
include Nexplanon, IUDs, and the birth control
pill. We believe many of these other options are
either more invasive, less effective, require a
strict pill taking regimen, and/or are not
discreet. We intend for the pricing of our product
to be very competitive compared to the other
options available in the market. Moreover, our
Company's long-acting drug delivery platform aims
to move into other generic medications in an
industry valued at an estimated $300 billion
industry.
Customer Base
We intended to market our product to OB/GYNs with
private practices, family planning organizations,
and/or midsize to large non-profit organizations.
Intellectual Property
Patents
Appl
icat
ion
or
Regi
stra
tion
#
Titl
e
Descri
ption
File
Date
Gran
t
Date
Co
un
tr
y
US20
1900
0879
2A1
Bio-
erod
ible
Drug
Deli
very
Impl
ants
Biodeg
radabl
e drug
delive
ry
device
s
includ
ing
one or
more
active
agents
, and
relate
d
method
s. The
device
s are
useful
for
admini
sterin
g a
wide
variet
y of
agents
over
prolon
ged
period
s of
time.
July
8,
2017
TBD
US
Governmental/Regulatory Approval and Compliance
Our business has been and will continue to be
subject to the Food and Drug Administration and
various other U.S. laws and regulations. Failure to
comply with these laws and regulations could
subject us to administrative and legal proceedings
and actions by these various governmental bodies.
Litigation
There are no existing legal suits pending, or to
the Company's knowledge, threatened, against the
Company.
Other
The Company's principal address is 11141 Wellshire
Ln., Frisco, TX 75035
The Company has the following additional addresses:
88 Union Ave. Suite 200 Memphis, TN 38103
The Company conducts business in Tennessee.
DIRECTORS, OFFICERS AND EMPLOYEES
Directors
The directors or managers of the Company are listed
below along with all positions and offices held at
the Company and their principal occupation and
employment responsibilities for the past three (3)
years and their educational background and
qualifications.
Name
[Idicula Mathew - CEO] [June 2016 - Present]
Officers
The officers of the Company are listed below along
with all positions and offices held at the Company
and their principal occupation and employment
responsibilities for the past three (3) years and
their educational background and qualifications.
Name
Idicula Mathew
All positions and offices held with the Company and
date such position(s) was held with start and
ending dates
Officer, June 13, 2017 to Present
President, Secretary and CEO, June 2017 to Present
Principal occupation and employment
responsibilities during at least the last three (3)
years with start and ending dates
Idicula is currently the President and CEO of Hera
Health solutions. He has been CEO since the
Company's inception, and his responsibilities
include providing vision, leading business
development, filling for intellectual property, and
the overall commercialization of the Company's
product. He has a background in product development
with a concentration in biotechnology research, and
he has prior startup experience.
Education
Idicula obtained a Bachelor of Science Degree in
Bioengineering and Biomedical Engineering from the
Georgia Institute of Technology.
Name
Garrett Whitfield
All positions and offices held with the Company and
date such position(s) was held with start and
ending dates
Officer, June 2017 to Present
Vice President and COO, June 13, 2017, to Present
Principal occupation and employment
responsibilities during at least the last three (3)
years with start and ending dates
Garret is currently the Vice President and COO of
Hera Health solutions. He has worked together with
Idicula since Eucontra's idea creation phase in
early 2016. His responsibilities include leading
the Company's internal processes, managing human
resources, and overseeing quality management.
Garrett co-founded Hera Health Solutions and has a
background in prototyping and manufacturing medical
device technology.
Education
Garret obtained a bachelor's degree in Biomedical
Engineering and Leadership Studies from the Georgia
Institute of Technology.
Indemnification
Indemnification is authorized by the Company to
directors, officers or controlling persons acting
in their professional capacity pursuant to Delaware
law. Indemnification includes expenses such as
attorney's fees and, in certain circumstances,
judgments, fines and settlement amounts actually
paid or incurred in connection with actual or
threatened actions, suits or proceedings involving
such person, except in certain circumstances where
a person is adjudged to be guilty of gross
negligence or willful misconduct, unless a court of
competent jurisdiction determines that such
indemnification is fair and reasonable under the
circumstances.
Employees
The Company currently has four employees in
Tennessee.
CAPITALIZATION AND OWNERSHIP
Capitalization
The Company has issued the following outstanding
Securities:
Type of
Security
Common Stock
Amount
Outstanding
711,000
Voting Rights
Each share of
common stock is
entitled to one
vote for the
election of
directors and
other matters upon
which the
stockholders of
the Company are
entitled to vote.
Anti-Dilution
Rights
No anti-dilution,
put or call rights
How this
Security may
limit, dilute
or qualify the
Notes/Bonds
issued
pursuant to
Regulation CF
N/A
Type of
Security
Series Seed
Preferred Stock
Amount
Outstanding
176,934
Voting Rights
Each share of
common stock is
entitled to one
vote for the
election of
directors and
other matters upon
which the
stockholders of
the Company are
entitled to
vote.
Anti-Dilution
Rights
No anti-dilution,
put or call rights
How this
Security may
limit, dilute
or qualify the
Notes/Bonds
issued
pursuant to
Regulation CF
N/A
Ownership
A majority of the Company is owned by two founders.
Those people are Idicula Mathew and Garrett
Whitfield.
Below the beneficial owners of 20% percent or more
of the Company's outstanding voting equity
securities, calculated on the basis of voting
power, are listed along with the amount they own.
Name
Percentage Owned
Founders:
Idicula Mathew
and Garrett
Whitfield
65%
FINANCIAL INFORMATION
Please see the financial information listed on the
cover page of this Form C-AR and attached hereto in
addition to the following information. Financial
statements are attached hereto as Exhibit A.
Recent Tax Return Information
Total Income
Taxable Income
Total Tax
-$148,081
0
0
Operations
Hera Health Solutions did not generate any revenue
in 2019. In 2018, the Company generated $32,700 of
income, of which $20,000 came from grants, and
$15,776 came from pitch competition winnings.
The Company does not expect to achieve
profitability in the next 12 months and intends to
focus on the FDA regulatory approval and
international WHO approval for its products.
Liquidity and Capital Resources
In July 2019 the Company started an offering
pursuant to Regulation CF, which was closed in
August 2019 raising $106,995.
The Company has the following sources of capital in
addition to the proceeds from the Regulation CF
Offering:
1. Innova Memphis- VC lead investor for Series Seed
round
2. BioExel- Series Seed Investor
3. Various investors - Accredited Series Seed
Investors
Capital Expenditures and Other Obligations
The Company does not intend to make any material
capital expenditures in the near future.
Material Changes and Other Information
Trends and Uncertainties
The financial statements are an important part of
this Form C-AR and should be reviewed in their
entirety. The financial statements of the Company
are attached hereto as Exhibit A.
Restrictions on Transfer
Any Securities sold pursuant to Regulation CF being
offered may not be transferred by any Investor of
such Securities during the one-year holding period
beginning when the Securities were issued, unless
such Securities were transferred: 1) to the
Company, 2) to an accredited investor, as defined
by Rule 501(d) of Regulation D of the Securities
Act of 1933, as amended, 3) as part of an Offering
registered with the SEC or 4) to a member of the
family of the Investor or the equivalent, to a
trust controlled by the Investor, to a trust
created for the benefit of a family member of the
Investor or the equivalent, or in connection with
the death or divorce of the Investor or other
similar circumstances. "Member of the family" as
used herein means a child, stepchild, grandchild,
parent, stepparent, grandparent, spouse or spousal
equivalent, sibling,
mother/father/daughter/son/sister/brother-in-law,
and includes adoptive relationships. Remember that
although you may legally be able to transfer the
Securities, you may not be able to find another
party willing to purchase them.
TRANSACTIONS WITH RELATED PERSONS AND CONFLICTS OF
INTEREST
Related Person Transactions
From time to time the Company may engage in
transactions with related persons. Related persons
are defined as any director or officer of the
Company; any person who is the beneficial owner of
10 percent or more of the Company's outstanding
voting equity securities, calculated on the basis
of voting power; any promoter of the Company; any
immediate family member of any of the foregoing
persons or an entity controlled by any such person
or persons.
The Company has conducted the following
transactions with related persons:
On May 5, 2018, the Company entered into loan
agreements with Idicula Mathew in the principal
amount of $4,184 with no interest. The loan does
not bare a prepayment penalty. The Company has
repaid $3,488 of the outstanding principal.
Pursuant to the terms of the loan, the Company
promises to repay the balance of the loan on or
before June 8th, 2020.
Bad Actor Disclosure
The Company is not subject to any Bad Actor
Disqualifications under any relevant U.S.
securities laws.
SIGNATURE
Pursuant to the requirements of Sections
4(a)(6) and 4A of the Securities Act of 1933 and
Regulation Crowdfunding (? 227.100 et seq.), the
issuer certifies that it has reasonable grounds to
believe that it meets all of the requirements for
filing on Form C-AR and has duly caused this Form
to be signed on its behalf by the duly authorized
undersigned.
The issuer also certifies that the attached
financial statements are true and complete in all
material respects.
___________________________
____
(Signature)
Idicula Mathew
(Name)
CEO
(Title)
Pursuant to the requirements of Sections
4(a)(6) and 4A of the Securities Act of 1933 and
Regulation Crowdfunding (? 227.100 et seq.), this
Form C-AR has been signed by the following persons
in the capacities and on the dates indicated.
(Signature)
Idicula Mathew
(Name)
President and Director
(Title)
4/27/2020
(Date)
EXHIBITS
Exhibit A Financial Statements
EXHIBIT A
Financial Statements
Hera Health Solutions Inc.
Consolidated Balance Sheets as of
December 31, 2019
Assets
2019
Cash and Cash Equivalents
$831,820
Receipts Receivable $0.00
Prepaid Expenses
$0.00
Total Current Assets
$831,820
Total Long-Term Assets $0.00
Intangible Assets $3,455,000
Total Assets
$4,286,820
Liabilities and Shareholders Equity
Liabilities
Founders Loan Account
$81,346
Accounts Payable $6,120
Total Current Liabilities
$87,466
SAFE $0.00
Total Liabilities $87,466
Shareholders' Equity
Authorized Stock 1,090,000 @
$5.00
Issued Stock 887,934 @
$5.00
$4,439,670
Retained Earnings
($240,316)
Total Liabilities and Shareholders' Equity
$4,286,820
Hera Health Solutions
Consolidated Statements of Income
Years Ended Dec 31, 2019
2019
Income from Operations $0
Gross Profit $0
Operating Expenses
Office/Lab Rent ($18,700)
Prototyping/Testing ($450)
Manufacturing testing ($4,525)
Accelerator Program Fee
Utilities ($1,254)
Travel ($20,836)
Running Expenses ($2,616)
Salary ($86,120)
Legal Fee ($5,250)
IP/Patent ($8,089)
Fees and Advertising
($241)
Total Other Expenses
($148,081)
Other Income (Expenses)
Non-Dilutive Grants
0.00
Winnings and Awards
0.00
Net Income:
($148,081)