UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

(Mark One)

☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the fiscal year ended December 31, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

OR

☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

Commission file number: 001-36582

ALTAMIRA THERAPEUTICS LTD.

(Exact name of Registrant as specified in its charter)

Bermuda

(Jurisdiction of Incorporation or Organization)

Clarendon House

2 Church Street

Hamilton HM11

Bermuda

(Address of principal executive offices)

Thomas Meyer

Tel: +1 (441) 295 59 50

Clarendon House

2 Church Street

Hamilton HM11

Bermuda

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Copies to:

Michael J. Lerner, Esq.

Steven M. Skolnick, Esq.

Lowenstein Sandler LLP

1251 Avenue of the Americas

New York, NY 10020

Tel: (212) 262-6700

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital stock or common stock as of the close of the period covered by the annual report.

Common shares: 1,180,053

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

☐ Yes ☒ No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

☐ Yes ☒ No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer”, “non-accelerated filer” or “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☒

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If “Other” has been checked in response to the previous question indicate by check mark which financial statement item the registrant has elected to follow.

☐ Item 17 ☐ Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes ☒ No

ALTAMIRA THERAPEUTICS LTD.

TABLE OF CONTENTS

Unless otherwise indicated or the context otherwise requires, all references in this annual report on Form 20-F (the “Annual Report”) to “Altamira Therapeutics Ltd.”, or “Altamira”, the “Company,” “we,” “our,” “ours,” “us” or similar terms refer to (i) Auris Medical Holding Ltd. a Bermuda company, or Auris Medical (Bermuda), the successor issuer to Auris Medical Holding AG (“Auris Medical (Switzerland)”) under Rule 12g-3(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), after the effective time at which Auris Medical (Switzerland) continued its corporate existence from Switzerland to Bermuda (the “Redomestication”), which occurred on March 18, 2019, and (ii) to Altamira Therapeutics Ltd. after adoption of the new company name by resolution of Special General Meeting of Shareholders held on July 21, 2021. The trademarks, trade names and service marks appearing in this report are property of their respective owners.

On May 1, 2019, the Company effected a one-for-twenty reverse share split (the “2019 Reverse Share Split”) of the Company’s issued and outstanding common shares. On October 25, 2022, the Company effected a one-for-twenty reverse share split (the “2022 Reverse Share Split”) of the Company’s issued and outstanding common shares. Unless indicated or the context otherwise requires, all per share amounts and numbers of common shares in this report have been retrospectively adjusted for the 2019 Reverse Share Split and 2022 Reverse Share Split.

The terms “dollar,” “USD” or “$” refer to U.S. dollars and the term “Swiss Franc” and “CHF” refer to the legal currency of Switzerland.

FORWARD-LOOKING STATEMENTS

This Annual Report contains statements that constitute forward-looking statements. Many of the forward-looking statements contained in this Annual Report can be identified by the use of forward-looking words such as “anticipate,” “believe,” “could,” “expect,” “should,” “plan,” “intend,” “will,” “estimate” and “potential,” among others, or the negatives thereof.

Forward-looking statements appear in a number of places in this Annual Report and include, but are not limited to, statements regarding our intent, belief or current expectations. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. Such statements are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied in the forward-looking statements due to various factors, including, but not limited to, those identified under the section “Item 3. Key Information-D. Risk factors” in this Annual Report. These risks and uncertainties include factors relating to:

Our actual results or performance could differ materially from those expressed in, or implied by, any forward-looking statements relating to those matters. Accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what impact they will have on our results of operations, cash flows or financial condition. Except as required by law, we are under no obligation, and expressly disclaim any obligation, to update, alter or otherwise revise any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future events or otherwise.

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

Not applicable.

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

Not applicable.

ITEM 3. KEY INFORMATION

Not applicable.

Not applicable.

You should carefully consider the risks and uncertainties described below and the other information in this Annual Report. Our business, financial condition or results of operations could be materially and adversely affected if any of these risks occurs, and as a result, the market price of our common shares could decline. This Annual Report also contains forward-looking statements that involve risks and uncertainties. See “Forward-Looking Statements.” Our actual results could differ materially and adversely from those anticipated in these forward-looking statements as a result of certain factors.

Summary of Risk Factors

An investment in our common shares is subject to a number of risks. The following summarizes some, but not all, of these risks. Please carefully consider all of the information discussed in “Item 3. Key Information-D. Risk Factors” in this annual report for a more thorough description of these and other risks.

Risks Related to Our Business and Industry

Most of our products are still in the development-stage and we have a limited operating history and a history of operating losses. We anticipate that we will continue to incur losses for the foreseeable future.

We are a biopharmaceutical company with most of our products still in the development stage and a limited operating history. Since inception, we have incurred significant operating losses. We incurred net losses (defined as net loss attributable to owners of the Company) of CHF 26.5 million, CHF 17.1 million and CHF 8.2 million for the years ended December 31, 2022, 2021 and 2020, respectively. As of December 31, 2022, we had an accumulated deficit of CHF 201.4 million.

Our losses have resulted principally from expenses incurred in research and development of our product candidates, pre-clinical research and general and administrative expenses that are required for maintaining our business infrastructure and operating as a publicly listed company. In 2021 we started to incur sales and marketing expenses as we initiated the commercialization of Bentrio®. We expect to continue to incur significant operating losses in the future as we continue our research and development efforts for our product candidates in clinical development and continue with the roll-out of Bentrio®. In our financial year ended December 31, 2022, we incurred CHF 26.1 million in operating loss or CHF 13.7 million before a one-time non-cash write-off of capitalized development expenditures for our AM-125 project based on the impairment test performed under IFRS. We expect our total additional cash need in 2023 to be in the range of CHF 15 to 17 million.

To date, we have financed our operations through an initial public offering and follow-on offerings of our common shares, private placements of equity securities and short- and long-term loans.

We have only one product approved for commercialization and have generated limited revenues from product sales. Biopharmaceutical product development is a highly speculative undertaking and involves a substantial degree of risk. It may be several years, if ever, before we have another product candidate approved for commercialization and begin to generate more revenues from product sales. Our failure to become and remain profitable would decrease the value of the Company and could impair our ability to raise capital, expand our business and/or continue our operations.

We have never generated meaningful revenue from product sales and may never be profitable.

We only started to generate first revenues with Bentrio®, our first commercial product, in late 2021. Such revenues to date have not been meaningful or sufficient to support our operations. Our ability to generate meaningful revenue and achieve profitability depends on our ability to successfully commercialize Bentrio® through our own efforts and through our distributors and to successfully complete the development of OligoPhore™, SemaPhore™, AM-401 and AM-411 and out-license them. Our ability to generate future revenue from product sales and out-licensing depends heavily on our success in many areas, including but not limited to:

Even as we have started to commercialize Bentrio® in Germany and several other European markets, we anticipate incurring significant costs associated with penetrating markets and building revenues. Because of the numerous risks and uncertainties with medical device and pharmaceutical product development and commercialization, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability. Our expenses could increase beyond expectations if we are required by the FDA, the European Medicines Agency (EMA), or other regulatory agencies, domestic or foreign, to change our manufacturing processes, or to perform clinical, nonclinical, or other types of trials in addition to those that we currently anticipate. In cases where we are successful in obtaining regulatory approvals to market further of our product candidates, our revenue will be dependent, in part, upon the size of the markets in the territories for which we gain regulatory approval, the accepted price for the product, the ability to obtain coverage and reimbursement at any price, and whether we own the commercial rights for that territory. If the number of our addressable patients is not as significant as we estimate, the indication approved by regulatory authorities is narrower than we expect, or the treatment population is narrowed by competition, physician choice or treatment guidelines, we may not generate significant revenue from sales of such products, even if approved. Additionally, if we are not able to generate sufficient revenue from the sale of any approved products, we may never become profitable.

We may be unable to develop and out-license OligoPhore™, SemaPhore™, AM-401, AM-411 or any other product candidate or we may be unable to grow revenues for Bentrio® to meaningful levels, and, even if we do, may never achieve profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a semiannual or annual basis. Our failure to become and remain profitable would decrease the value of the Company and could impair our ability to raise capital, expand our business or continue our operations.

We expect that we will need substantial additional funding before we can expect to become profitable from sales of our products, and there is substantial doubt about our ability to continue as a going concern. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts.

We expect our research and development expenses to remain significant as we advance or initiate the pre-clinical and clinical development of AM-401, AM-411 or any other product candidate. We expect our total additional cash need in 2023 to be in the range of CHF 15 to 17 million. As of December 31, 2022, our cash and cash equivalents were CHF 15 thousand. Our assumptions may prove to be wrong, and we may have to use our capital resources sooner than we currently expect. To the extent that we will be unable to generate sufficient cash proceeds from the planned divestiture or partnering of our legacy assets or other partnering activities, we will need substantial additional financing to meet these funding requirements. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements included in this report have been prepared on a going concern basis, which contemplates the continuity of normal activities and realization of assets and settlement of liabilities in the normal course of business. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The lack of a going concern assessment may negatively affect the valuation of the Company’s investments in its subsidiaries and result in a revaluation of these holdings. The board of directors will need to consider the interests of our creditors and take appropriate action to restructure the business if it appears that we are insolvent or likely to become insolvent. Our future funding requirements will depend on many factors, including but not limited to:

We expect that we will require additional funding to continue our roll out of Bentrio® and our ongoing clinical development activities and seek to obtain regulatory approval for, and commercialize, our product candidates. If we receive regulatory approval or clearance for any of our product candidates, and if we choose to not grant any licenses to partners, we expect to incur significant commercialization expenses related to product manufacturing, sales, marketing and distribution, depending on where we choose to commercialize. We also expect to continue to incur additional costs associated with operating as a public company. Additional funds may not be available on a timely basis, on favorable terms, or at all, and such funds, if raised, may not be sufficient to enable us to continue to implement our long-term business strategy. If we are not able to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts, which could materially harm our business, prospects, financial condition and operating results. This could then result in bankruptcy, or the liquidation of the Company.

Raising additional capital may cause dilution to our shareholders, restrict our operations or require us to relinquish rights to our intellectual property or future revenue streams.

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings, grants, and license and development agreements in connection with any collaborations. We do not have any committed external source of funds. In the event we need to seek additional funds, we may raise additional capital through the sale of equity or convertible debt securities. In such an event, our shareholders’ ownership interests will be diluted, and the terms of these new securities may include liquidation or other preferences that adversely affect our shareholders’ rights as holders of our common shares. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our intellectual property or future revenue streams. If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

We do not have a history of commercializing medical devices or pharmaceutical products, which may make it difficult to evaluate the prospects for our future viability.

Our operations to date have been limited to financing and staffing the Company, developing our technology and developing our product candidates. We have not yet demonstrated an ability to successfully complete large-scale, pivotal clinical trials, obtain marketing approvals, manufacture a commercial scale product or conduct sales and marketing activities necessary for successful product commercialization. Consequently, predictions about our future success or viability may not be as accurate as they could be if we had a history of successfully developing and commercializing medical devices or pharmaceutical products.

We are working to reposition our company around RNA delivery technology and intend to divest or partner our business in neurotology, rhinology and allergology. We cannot give any assurance that this repositioning will be successful and that we will be able to divest or partner our non-RNA business at attractive conditions and within a reasonable period of time.

In June 2021 we acquired Trasir Therapeutics Inc. (“Trasir”) whose main asset is the proprietary peptide polyplex platform OligoPhore™ / SemaPhore™ that can engage any type of RNA in rapid self-assembly and is designed to allow for oligonucleotide delivery to extrahepatic tissues using systemic or local administration. We announced on that occasion our intention to strategically reposition the Company to focus on the development of RNA delivery technology while in the medium term evaluating opportunities to partner or divest its existing business in neurotology, rhinology and allergology within the next 12-18 months. Our non-RNA business comprises Bentrio® for the protection against airborne allergens and viruses, AM-125 for the treatment of vertigo, Keyzilen® (AM-101) for the treatment of acute tinnitus, Sonsuvi® (AM-111) for the treatment of acute hearing loss and certain early-stage assets such as AM-102 for the treatment of tinnitus.

Any sale or partnering process is time consuming and requires substantial management time and attention, which may have an effect on our business and results of operations.

Valuation of assets in one or several partial divestiture or partnering transactions depends on a variety of factors such as the valuation of comparable assets, interest for the type of assets and conditions on capital markets. We can provide no assurances that we will successfully sell or partner the non-RNA business, that we will do so in accordance with our expected timeline or that we will recover the carrying value of the assets. Additionally, any decisions made regarding our deployment or use of any sales or out-licensing proceeds we receive in any sale or partnering transaction involves risks and uncertainties. As a result, our decisions with respect to such proceeds may not lead to increased long-term shareholder value or may result in a material charge to our statement of operations. If a sale or the out-licensing of the non-RNA business at what we consider to be a reasonable price is not available, we may decide to cease efforts to sell or partner the non-RNA business.

The purchase price and availability of certain components of Bentrio® could be affected as a result of the Russian invasion of the Ukraine.

In the context of Russia’s invasion of the Ukraine, oil and gas prices, which are key input factors for plastic parts such as those used for the primary packaging of Bentrio®, have increased significantly and shown high volatility. Continued escalation of political tensions, economic instability, military activity or civil hostilities in Ukraine could result in significant further price increases for such components or difficulties of our component suppliers to supply such components on a timely basis. If we are unable to pass on such price increases, or if component supplies are interrupted, our business, financial condition and results of operation could be adversely affected.

Cyber-attacks or other failures in telecommunications or information technology systems could result in information theft, data corruption and significant disruption of our business operations.

We and certain of our collaborators depend on information technology and telecommunications systems for significant aspects of operations. These information technology and telecommunications systems support a variety of functions, including clinical trial management, clinical data capture and analysis, purchasing and production planning, production, logistics, quality control, customer service and support, billing, and general and administrative activities. Information technology and telecommunications systems are vulnerable to damage from a variety of sources, including telecommunications or network failures, malicious human acts and natural disasters. If we are subjected to one or more cyber-attacks or security breaches, we would suffer financial loss. Furthermore, as use of digital technologies has increased, cyber incidents, including deliberate attacks and attempts to gain unauthorized access to computer systems and networks, have increased in frequency and sophistication and make us even more at risk. These threats pose a risk to the security of our systems and networks, the confidentiality and the availability and integrity of our data. Any disruption or loss of information technology or telecommunications systems on which critical aspects of our operations depend could have an adverse effect on business.

Risks Related to the Development and Clinical Testing of Our Product Candidates

The OligoPhore™ and SemaPhore™ platforms and the AM-401 and AM-411 programs are still in preclinical development. If our development programs are unsuccessful, or we are unable to out-license the platforms or programs, or we experience significant delays in doing so, our business, financial condition and results of operations will be materially adversely affected.

We have invested a significant portion of our efforts and financial resources in the acquisition and development of OligoPhore™, SemaPhore™ and AM-401 and AM-411, which are still in preclinical development. Our ability to generate product revenues from the out-licensing of these RNA delivery platforms and drug product candidates, will depend heavily on successful development, obtaining regulatory approval or clearance and eventual commercialization of these product candidates. The success of AM-401 or AM-411 and our other product candidates will depend on several factors, including the following:

If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully out-license OligoPhore™ / SemaPhore™, AM-401 or AM-411, which would materially adversely affect our business, financial condition and results of operations.

We face risks related to health epidemics and outbreaks, including the COVID-19 pandemic, which could significantly disrupt our preclinical studies and clinical trials, and therefore our receipt of necessary regulatory approvals could be delayed or prevented.

In December 2019, a novel strain of coronavirus COVID-19 was reported to have surfaced in Wuhan, China. The extent to which COVID-19 may impact our preclinical and clinical trial operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the duration and geographic reach of the outbreak, the severity of COVID-19, and the effectiveness of actions to contain and treat COVID-19. In particular, the COVID-19 outbreak impacted enrollment of patients into our “TRAVERS” phase 2 trial with AM-125. Candidates for participation in this trial underwent certain types of neurosurgery, which are elective procedures.

The continued spread of COVID-19 globally could otherwise adversely impact our clinical trial operations, including our ability to recruit and retain patients and principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19 if an outbreak occurs in their geography. Disruptions or restrictions on our ability to travel to monitor data from our clinical trials, or to conduct clinical trials, or the ability of patients enrolled in our studies to travel, or the ability of staff at study sites to travel, as well as temporary closures of our facilities or the facilities of our clinical trials partners and their contract manufacturers, would negatively impact our clinical trial activities. In addition, we rely on independent clinical investigators, contract research organizations and other third-party service providers to assist us in managing, monitoring and otherwise carrying out our preclinical studies and clinical trials, including the collection of data from our clinical trials, and the outbreak may affect their ability to devote sufficient time and resources to our programs or to travel to sites to perform work for us. Similarly, our preclinical trials could be delayed and/or disrupted by the outbreak. As a result, the expected timeline for data readouts of our preclinical studies and clinical trials and certain regulatory filings may be negatively impacted, which would adversely affect our ability to obtain regulatory approval for and to commercialize our product candidates, increase our operating expenses and have a material adverse effect on our financial results.

Clinical drug and device development involves a lengthy and expensive process with uncertain timelines and uncertain outcomes, and results of earlier studies and trials may not be predictive of future trial results. If clinical trials of our drug product or device candidates are prolonged or delayed, we may be unable to obtain required regulatory approvals, and therefore be unable to commercialize our drug product candidates on a timely basis or at all.

To obtain the requisite regulatory approvals or approvals to market and sell any of our drug product or device candidates, we must demonstrate through extensive pre-clinical studies and clinical trials that our products are safe and effective in humans. Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. The results of pre-clinical studies and early clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials. For example, positive results generated to date in clinical trials for our product candidates do not ensure that later clinical trials will demonstrate similar results. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through pre-clinical studies and initial clinical trials. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. Our future clinical trial results may not be successful.

Clinical trials must be conducted in accordance with FDA, EMA and comparable foreign regulatory authorities’ legal requirements, regulations or guidelines, and are subject to oversight by these governmental agencies and Institutional Review Boards, or IRBs, at the medical institutions where the clinical trials are conducted. In addition, clinical trials must be conducted with supplies of our product candidates produced under applicable current good manufacturing practices, (cGMP) for drug products, or quality system regulation (QSR) requirements for devices, and other requirements. We depend on medical institutions and clinical research organizations, or CROs, to conduct our clinical trials in compliance with current good clinical practice, or cGCP, standards. To the extent the CROs fail to enroll participants for our clinical trials, fail to conduct the trials to cGCP standards or are delayed for a significant time in the execution of trials, including achieving full enrollment, we may be affected by increased costs, program delays or both, which may harm our business.

We may need to generate additional clinical data should we decide to seek the approval of Bentrio® for protection against airborne viruses. In addition, we may decide to conduct a Phase 1 clinical for AM-401 or AM-411 or both prior to seeking their out-licensing.

The completion of clinical trials may be delayed, suspended or terminated as a result of many factors, including but not limited to:

Any delays in completing our clinical trials will increase our costs, slow down our development and approval process and jeopardize our ability to commence product sales and generate revenues. Any of these occurrences may harm our business, financial condition and prospects significantly. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our drug product candidates.

Positive or timely results from pre-clinical or early-stage trials do not ensure positive or timely results in late-stage clinical trials or product approval by the FDA, the EMA or comparable foreign regulatory authorities. Product candidates that show positive pre-clinical or early clinical results may not show sufficient safety or efficacy in later stage clinical trials and therefore may fail to obtain regulatory approvals.

Also, pre-clinical and clinical data are often susceptible to varying interpretations and analyses. Many companies that believed their product candidates performed satisfactorily in pre-clinical studies and clinical trials have nonetheless failed to obtain marketing approval for the product candidates. The FDA, the EMA and comparable foreign regulatory authorities have substantial discretion in the approval process and in determining when or whether regulatory approval will be obtained for any of our product candidates.

In some instances, there can be significant variability in safety and/or efficacy results between different trials of the same product candidate due to numerous factors, including changes in trial procedures set forth in protocols, differences in the size and type of the patient populations, adherence to the dosing regimen and other trial protocols and the rate of dropouts among clinical trial participants.

Our product development costs will also increase if we experience delays in testing or if we are required to conduct additional trials or other testing beyond the trials and testing that we currently contemplate or conduct and we may be required to obtain additional funds to complete such additional clinical trials. We cannot assure you that our clinical trials will begin as planned or be completed on schedule, if at all, or that we will not need to restructure our trials after they have begun. Significant clinical trial delays also could shorten any periods during which we or potential licensees of ours may have the exclusive right to commercialize our product candidates or allow competitors to bring products to market before we or our potential licensees do or shorten any periods during which we or our potential licensees have the exclusive right to commercialize our product candidates, which may harm our business and results of operations.

If serious adverse, undesirable or unacceptable side effects are identified during the development of our product candidates or following approval, if any, we may need to abandon our development of such product candidates, the commercial profile of any approved label may be limited, or we may be subject to other significant negative consequences following marketing approval, if any.

If our product candidates are associated with serious adverse, undesirable or unacceptable side effects, we or our potential licensees may need to abandon their development or limit development to certain uses or sub-populations in which such side effects are less prevalent, less severe or more acceptable from a risk-benefit perspective. Many compounds that initially showed promise in pre-clinical or early-stage testing have later been found to cause side effects that restricted their use and prevented further development of the compound for larger indications.

Additionally, if one or more of our product candidates receives marketing approval, and we or others later identify undesirable side effects caused by such products, a number of potentially significant negative consequences could result, including:

Any of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, or of our RNA delivery technology and could significantly harm our business, results of operations and prospects.

We may become exposed to costly and damaging liability claims, either when testing our product candidates in the clinic or at the commercial stage; and our product liability insurance may not cover all damages from such claims.

We are exposed to potential product liability and professional indemnity risks that are inherent in the research, development, manufacturing, marketing and use of pharmaceutical products and medical devices. The current and future use of product candidates by us in clinical trials, and the sale of Bentrio® or any future-approved products, may expose us to liability claims. These claims might be made by patients that use the product, healthcare providers, medical device or pharmaceutical companies or others selling such products. Any claims against us, regardless of their merit, could be difficult and costly to defend and could materially adversely affect the market for our product candidates, commercial products or any prospects for commercialization of our product candidates.

Although the clinical trial process is designed to identify and assess potential side effects, it is always possible that a drug or medical device, even after regulatory approval, may exhibit unforeseen side effects. If any of our product candidates were to cause adverse side effects during clinical trials or after approval of the product candidate, we may be exposed to substantial liabilities. Physicians and patients may not comply with any warnings that identify known potential adverse effects and patients who should not use our product candidates.

We purchase liability insurance in connection with each of our clinical trials and for commercial stage products. It is possible that our liabilities could exceed our insurance coverage. However, we may not be able to maintain insurance coverage at a reasonable cost or obtain insurance coverage that will be adequate to satisfy any liability that may arise. If a successful product liability claim or series of claims is brought against us for uninsured liabilities or in excess of insured liabilities, our assets may not be sufficient to cover such claims and our business operations could be impaired.

Should any of the events described above occur, this could have a material adverse effect on our business, financial condition and results of operations.

Due to our limited resources and access to capital, we must and have in the past decided to prioritize development of certain product candidates; these decisions may prove to have been wrong and may adversely affect our revenues.

Because we have limited resources and access to capital to fund our operations, we must decide which product candidates to pursue and the amount of resources to allocate to each. As such, our current development and commercial focus is limited to Bentrio®, AM-401 and AM-411 while we have deprioritized AM-201, and Keyzilen® and Sonsuvi® until we will be able to out-license or sell these programs. Our decisions concerning the allocation of research, collaboration, management and financial resources toward particular compounds, product candidates or therapeutic areas may not lead to the development of viable commercial products and may divert resources away from better opportunities. Similarly, our potential decisions to delay, terminate or collaborate with third parties in respect of certain product development programs may also prove not to be optimal and could cause us to miss valuable opportunities. If we make incorrect determinations regarding the market potential of our product candidates or misread trends in the biopharmaceutical industry our business, financial condition and results of operations could be materially adversely affected.

We have announced our intention to reposition the Company around RNA delivery technology while exploring strategic options to either divest or partner our non-RNA traditional businesses. In particular, we have announced that we are in active discussions for the partnering of Bentrio® for North America, Europe and other key markets and have been active in the process of selling or partnering our inner ear therapeutics assets.

Our research and development activities could be affected or delayed as a result of possible restrictions on animal testing.

Certain laws and regulations require us to test our product candidates on animals before initiating clinical trials involving humans. Animal testing activities have been the subject of controversy and adverse publicity. Animal rights groups and other organizations and individuals have attempted to stop animal testing activities by pressing for legislation and regulation in these areas and by disrupting these activities through protests and other means. To the extent the activities of these groups are successful, our research and development activities may be interrupted, delayed or become more expensive.

Risks Related to Regulatory Approval of Our Product Candidates

We cannot give any assurance that any of our product candidates will receive regulatory approval, which is necessary before they can be commercialized.

Our future success is dependent on our ability and the ability of potential licensees to successfully develop, obtain regulatory approval for, and then successfully commercialize one or more product candidates. We currently have one drug product candidate, AM-125, in Phase 2 clinical development, and two other product candidates, AM-401 and AM-411, in preclinical development. We or any potential potential licensee are not permitted to market or promote any of our drug product candidates before we or any potential licensee receive regulatory approval from the FDA, EMA or comparable foreign regulatory authorities, and we or any potential licensee may never receive such regulatory approval for any of our product candidates.

Applications for our product candidates could fail to receive regulatory approval for many reasons, including but not limited to the following:

In addition, our current product candidates or any of our other future product candidates could take a significantly longer time to gain regulatory approval than expected or may never gain regulatory approval. This could delay or eliminate any potential product or license revenue by delaying or terminating the potential commercialization of our product candidates.

We generally plan to seek regulatory approval to commercialize our product candidates in the United States, the European Union and in additional foreign countries where we have commercial rights. To obtain regulatory approval in other countries, we must comply with numerous and varying regulatory requirements of such other countries regarding safety, efficacy, chemistry, manufacturing and controls, clinical trials, commercial sales, pricing, and distribution of our product candidates. Even if we are successful in obtaining approval in one jurisdiction, we cannot ensure that we will obtain approval in any other jurisdictions. Failure to obtain marketing authorization for our product candidates will result in our being unable to market and sell such products, which would materially adversely affect our business, financial conditional and results of operations. If we or our potential licensees fail to obtain approval in any jurisdiction, the geographic market for our product candidates could be limited. Similarly, regulatory agencies may not approve the labeling claims that are necessary or desirable for the successful commercialization of our product candidates.

We cannot give any assurance that Bentrio® will receive regulatory clearance in the U.S. for use in viral infection prevention or treatment, which is necessary before it can be commercialized for such indication in the US.

Bentrio® is a spray product designed for intranasal protection against airborne viruses or allergens.

Unless an exemption applies, any medical device that is to be marketed in the U.S. must first receive from the FDA either 510(k) clearance, by filing a 510(k) premarket notification, or premarket application (PMA) approval, after submitting a PMA. Alternatively, the device may be cleared through the de novo classification process by the FDA. In September 2021 we submitted a 510(k) application for premarket clearance of Bentrio® as a Class II device for the intended use of promoting alleviation of mild allergic symptoms triggered by the inhalation of various airborne allergens. On June 24, 2022, we received 510(k) clearance.

Bentrio® was also developed for use in the reduction of the intranasal infectious viral load following inspiration of airborne viruses such as SARS-CoV-2. The FDA did not accept that this proposed intended use could proceed on the medical device pathway. The rationale provided is that it makes a drug-like claim that would require a drug approval. Feedback received from FDA in 2021, prior to the Bentrio® 510(k) clearance, suggested that the regulatory pathway for this intended use and interpretation of mechanism of action would result in the product being regulated as a drug rather than a medical device. That interpretation by FDA is arguable, especially in light of the subsequent 510(k) clearance for allergens. Additional work and engagement with FDA is needed to finalize the device vs. drug regulation pathway and associated nonclinical and clinical evidence requirements. If the device pathway is deemed appropriate, but FDA concludes there is no valid predicate device available for this intended use, we may have to submit a de novo request to the FDA. Under the de novo pathway, we would have to prove that Bentrio® provides benefit and does not present substantial risk to the patient. This standard for granting de novo is different from the comparative 510(k) standard of being “substantially equivalent” to a predicate device that is already cleared. De novo requires an independent demonstration of a reasonable assurance safety and effectiveness, as with a high-risk PMA device, albeit in a PMA-lite, moderate risk sense. Once cleared, a de novo device creates “special controls” and becomes a 510(k) predicate for future devices. This allows subsequent devices to claim the de novo device as a new 510(k) predicate which will be cleared by FDA if the special controls are met. To grant a de novo, FDA typically requires more testing than for a 510(k) but less than for a PMA. The review by the FDA in the de novo process is longer than the 510(k) process and requires higher fees. Any device that has been classified through the de novo process may be marketed and used as predicate for future 510(k) submissions. The FDA may also, instead of accepting a 510(k) submission, require us to submit a PMA, which is typically a much more complex, lengthy, and burdensome application than a 510(k). To support a PMA, the FDA would likely require that we conduct one or more clinical studies to demonstrate that the device is safe and effective. In some cases, such studies may be requested for a 510(k) as well. We may not be able to meet the requirements to obtain 510(k) clearance or PMA approval, in which case the FDA may not grant any necessary clearances or approvals. In addition, the FDA may place significant limitations upon the intended use of our products as a condition to a 510(k) clearance, grant of a de novo, or PMA approval. Product applications can also be denied or withdrawn due to failure to comply with regulatory requirements or the occurrence of unforeseen problems following clearance or approval. Any delays or failure to obtain FDA clearance or approval of new products we develop, any limitations imposed by the FDA on new product use, or the costs of obtaining FDA clearance or approvals could have a material adverse effect on our business, financial condition and results of operations.

The marketing and commercialization of Bentrio® in other countries is subject to varying regulatory requirements, including in some cases also the approval of certain marketing materials and messages, which are evolving over time.

Many foreign countries in which we currently commercialize or intend to market Bentrio® have regulatory bodies and restrictions similar to those of the FDA. International sales are subject to foreign government regulation, the requirements of which vary substantially from country to country. The time required to obtain approval by a foreign country may be longer or shorter than that required for FDA clearance and the requirements may differ.

In particular, marketing of medical devices in the European Union (EU) is subject to compliance with the Medical Devices Directive 93/92/EEC (MDD). A medical device may be placed on the market within the EU only if it conforms to certain “essential requirements” and bears the CE Mark. The most fundamental and essential requirement is that a medical device must be designed and manufactured in such a way that it will not compromise the clinical condition or safety of patients, or the safety and health of users and others. In addition, the device must achieve the essential performance(s) intended by the manufacturer and be designed, manufactured and packaged in a suitable manner.

Manufacturers must demonstrate that their devices conform to the relevant essential requirements through a conformity assessment procedure. The nature of the assessment depends upon the classification of the device. The classification rules are mainly based on three criteria: the length of time the device is in contact with the body, the degree of invasiveness and the extent to which the device affects the anatomy. Conformity assessment procedures for all but the lowest risk classification of device involve a notified body. Notified bodies are often private entities and are authorized or licensed to perform such assessments by government authorities. Manufacturers usually have some flexibility to select a notified body for the conformity assessment procedures for a particular class of device and to reflect their circumstances, e.g., the likelihood that the manufacturer will make frequent modifications to its products. Conformity assessment procedures require an assessment of available clinical evidence, literature data for the product and post-market experience in respect of similar products already marketed. Notified bodies also may review the manufacturer’s quality systems. If satisfied that the product conforms to the relevant essential requirements, the notified body issues a certificate of conformity, which the manufacturer uses as a basis for its own declaration of conformity and application of the CE Mark. Application of the CE Mark allows the general commercializing of a product in the EU. The product can also be subjected to local registration requirements depending on the country. We maintain CE Marking on all of our products that require such markings as well as local registrations as required.

In May 2017, the EU adopted a new Medical Devices Regulation (EU) 2017/745 (MDR), which replaced the MDD with effect from May 26, 2021. The MDR clearly envisages, among other things, stricter controls of medical devices, including strengthening of the conformity assessment procedures, increased expectations with respect to clinical data for devices and pre-market regulatory review of high-risk devices. The MDR also envisages greater control over notified bodies and their standards, increased transparency, more robust device vigilance requirements and clarification of the rules for clinical investigations. Under transitional provisions, medical devices such as Bentrio® with certificates of conformity issued under the MDD prior to May 26, 2021 may continue to be placed on the market for the remaining validity of the certificate, until May 27, 2024 at the latest. After the expiry of any applicable transitional period, only devices that have been CE marked under the MDR may be placed on the market in the EU. On February 16, 2023, the Council of the European Union and the European Parliament Commission approved an extension of the MDR transition periods; for Class I medical devices (such as Bentrio®) an extension to May 26, 2028 was approved.

Under the MDD, Bentrio® is classified as a Class I device which does not require a notified body for the conformity assessment procedure. Under the MDR, Bentrio® will be classified as a Class II device which will require a notified body. We expect to register Bentrio® in the EU prior to the transition from the MDD to the MDR and plan to meet the requirements for conformity as Class II during the transition period. We cannot assure you that we will be able to meet the requirements for conformity for Bentrio® as Class II medical device under MDR and that we will be able to maintain the current labelling of the product. Failure to do so in a timely manner will require us to cease marketing Bentrio® in the EU until such time, if ever, that such registration is obtained.

The labelling and promotion of treatments for infectious diseases such as SARS-CoV-2 is subject to special regulations in many countries. For example, in Germany such treatments must not be marketed directly to consumers but must be presented to health care providers only. ANSM, the French National Agency for the Safety of Medicines and Health Products, requested that our indication of use for viral infections such as SARS-CoV-2 be supported by clinical data, which we initially did not have, unlike preclinical data. Therefore, in July 2022 we had to stop marketing Bentrio® for the viral infection indication in the EU and Switzerland and relaunched it in October 2022 solely for the allergic rhinitis indication. In other countries, Bentrio® is cleared for both indications. As a consequence, the access to certain markets requires substantial adaptations to packaging materials, instructions for use, labelling and marketing materials, may take much longer than usual, and the sales potential for Bentrio® may be substantially restrained.

Because we are developing therapies for which there is little clinical experience and, in some cases, using new endpoints, there is more risk that the outcome of our clinical trials will not be favorable. Even if the results of our trials with AM-125 are favorable, there is risk that they will not be acceptable to regulators or physicians.

To our knowledge, there are currently no drugs with proven efficacy for acute vestibular syndrome. In addition, there has been limited historical clinical trial experience generally for the development of drugs to treat this condition. Regulatory authorities in the United States and European Union have not issued definitive guidance as to how to measure the efficacy of treatments for acute vestibular syndrome, and regulators have not yet established what is required to be demonstrated in a clinical trial in order to signify a clinically meaningful result and/or obtain marketing approval.

Whereas various balance tests and questionnaires are widely used in the diagnosis and management of vertigo, there is no universally recognized definition of the clinical meaningfulness of outcomes, and regulatory authorities have not issued guidelines for demonstrating efficacy for drug-based treatments such as AM-125. Therefore, we cannot be certain that AM-125 will be approved even if it were to show statistically significant improvements in these tests.

Even if our product candidates obtain regulatory approval, we will be subject to ongoing obligations and continued regulatory review, which may result in significant additional expense. Additionally, our product candidates, if approved, could be subject to labeling and other restrictions and market withdrawal and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our products.

If marketing authorization is obtained for any of our product candidates, the product will remain subject to continual regulatory review and therefore authorization could be subsequently withdrawn or restricted. Any regulatory approvals that we receive for our product candidates may also be subject to limitations on the approved indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials and surveillance to monitor the safety and efficacy of the product candidate. In addition, if the FDA or a comparable foreign regulatory authority approves any of our product candidates, we will be subject to ongoing regulatory obligations and oversight by regulatory authorities, including with respect to the manufacturing processes, labeling, packing, distribution, adverse event reporting, storage, advertising and marketing restrictions, and recordkeeping and, potentially, other post-marketing obligations, all of which may result in significant expense and limit our ability to commercialize such products. These requirements include submissions of safety and other post-marketing information and reports, registration, as well as continued compliance with cGMPs, cGDPs and cGCPs for any clinical trials that we conduct post-approval. In the European Union, the marketing authorization holder has to operate a pharmacovigilance system which conforms with and is equivalent to the respective Member State’s pharmacovigilance system, requiring the holder to evaluate all information scientifically, to consider options for risk minimization and prevention and to take appropriate measures as necessary. As part of this system, we will have to, inter alia, have a qualified person responsible for pharmacovigilance, maintain a pharmacovigilance system master file, operate a risk management system for each medicinal product, monitor the outcome of risk minimization measures, and update continuously all pharmacovigilance data to update the risk assessment.

Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in, among other things:

If any of these events occurs, our ability to sell such drug product may be impaired, and we may incur substantial additional expense to comply with regulatory requirements, which could materially adversely affect our business, financial condition and results of operations. The FDA’s or any other regulatory authority’s policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained, which would adversely affect our business, prospects and ability to achieve or sustain profitability.

Healthcare legislative or regulatory reform measures, including government restrictions on pricing and reimbursement, may have a negative impact on our business and results of operations.

In the United States and some foreign jurisdictions, there have been, and continue to be, several legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of product candidates, restrict or regulate post-approval activities, and affect our ability to profitably sell any product candidates for which we obtain marketing approval.

Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives. For example, in the United States, the Patient Protection and Affordable Care Act of 2010 (“ACA”) substantially changed the way healthcare is financed by both the government and private insurers, and significantly affects the pharmaceutical industry. Many provisions of the ACA impact the biopharmaceutical industry, including that in order for a biopharmaceutical product to receive federal reimbursement under the Medicare Part B and Medicaid programs or to be sold directly to U.S. government agencies, the manufacturer must extend discounts to entities eligible to participate in the drug pricing program under the Public Health Services Act, or PHS. Since its enactment, there have been judicial and Congressional challenges and amendments to certain aspects of the ACA. There is continued uncertainty about the implementation of the ACA, including the potential for further amendments to the ACA and legal challenges to or efforts to repeal the ACA.

Additionally, there has been heightened governmental scrutiny in the United States of pharmaceutical pricing practices in light of the rising cost of prescription drugs and biologics. Such scrutiny has resulted in several recent congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products. At the federal level, the now-departed Trump administration proposed numerous prescription drug cost control measures. Similarly, the new Biden administration has made lowering prescription drug prices one of its priorities. The Biden administration has not yet proposed any specific plans, but we expect that these will be forthcoming in the near term. At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. Other examples of proposed changes include, but are not limited to, expanding post-approval requirements, changing the Orphan Drug Act, and restricting sales and promotional activities for pharmaceutical products.

We cannot be sure whether additional legislative changes will be enacted, or whether government regulations, guidance or interpretations will be changed, or what the impact of such changes would be on the marketing approvals, sales, pricing, or reimbursement of our drug candidates or products, if any, may be. We expect that these and other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approved drug. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our drugs.

In addition, FDA regulations and guidance may be revised or reinterpreted by the FDA in ways that may significantly affect our business and our products. Any new regulations or guidance, or revisions or reinterpretations of existing regulations or guidance, may impose additional costs or lengthen FDA review times for our product candidates. We cannot determine how changes in regulations, statutes, policies, or interpretations when and if issued, enacted or adopted, may affect our business in the future. Such changes could, among other things, require:

Such changes would likely require substantial time and impose significant costs or could reduce the potential commercial value of our product candidates. In addition, delays in receipt of or failure to receive regulatory clearances or approvals for any other products would harm our business, financial condition, and results of operations.

In the European Union, a new clinical trial regulation centralizes clinical trial approval, which eliminates redundancy, but in some cases this may extend timelines for clinical trial approvals due to potentially longer wait times. The regulation requires specific consents for use of data in research which, among other measures, may increase the costs and timelines for our product development efforts. The regulation also provides an obligation for clinical trial sponsors to make summaries of all trial results, accompanied by a summary understandable to laypersons, as well as the clinical trial report publicly available in a new database. Beyond this obligation, the EMA makes available to the public all clinical trials submitted with the EMA as well as raw data results (“individual patient data”). These publication requirements can conflict with legitimate secrecy interests of the sponsors and may lead to valuable clinical trial data falling into the public domain.

Austerity measures in certain European nations may also affect the prices we are able to seek if our products are approved, as discussed below.

Both in the United States and in the European Union, legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We do not know whether additional legislative changes will be enacted, or whether the regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our product candidates, if any, may be.

Our relationships with customers and payors are subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which, if violated, would expose us to criminal sanctions, civil penalties, exclusion from government healthcare programs, contractual damages, reputational harm and diminished profits and future earnings, among other penalties.

Healthcare providers, payors and others play a primary role in the recommendation and prescription of any products for which we obtain marketing approval. Our future arrangements with third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations, primarily in the United States, that may constrain the business or financial arrangements and relationships through which we market, sell and distribute our products for which we obtain marketing approval. Restrictions under applicable U.S. healthcare laws and regulations, include the following:

Similar laws exist in other jurisdictions.

In the European Union, there is currently no central European anti-bribery or similar legislation. However, more and more European Union member states as well as life sciences industry associations are enacting increasingly specific anti-bribery rules for the healthcare sector which are as severe and sometimes even more severe than in the United States. Germany, for example, has recently adopted new criminal provisions dealing with granting benefits to healthcare professionals. This new law has increased the legal restrictions as well as the legal scrutiny for the collaboration and contractual relationships between the pharmaceutical industry and its customers.

Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available under the U.S. federal Anti-Kickback Statute, it is possible that some of our future business activities could be subject to challenge under one or more of such laws. In addition, recent health care reform legislation has strengthened these laws. For example, the Health Care Reform Law, among other things, amends the intent requirement of the federal anti-kickback and criminal healthcare fraud statutes. A person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it. Moreover, the Health Care Reform Law provides that the government may assert that a claim including items or services resulting from a violation of the federal anti-kickback statute constitutes a false or fraudulent claim for purposes of the False Claims Act.

Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, exclusion from U.S. government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations. If any of the physicians or other providers or entities with whom we expect to do business with are found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.

Risks Related to Commercialization of Our Products and Product Candidates

The high level of competition in Over-the-Counter, or OTC, consumer health care, much of which comes from competitors with greater resources, could adversely affect our business, financial condition and results of operations.

The business of selling brand name consumer products in the OTC Healthcare category is highly competitive. This market includes numerous manufacturers, distributors, marketers and retailers that actively compete for consumers’ business both in the United States and abroad. Many of these competitors are larger and have substantially greater resources than we do and may therefore have the ability to spend more aggressively on research and development, advertising and marketing, and to respond more effectively to changing business and economic conditions. If this were to occur, it could have a material adverse effect on our financial condition and results of operations.

We compete for consumers’ attention based on a number of factors, including brand recognition, product quality, performance, value to consumers, price and product availability at the retail level. Advertising, promotion, merchandising and packaging also have a significant impact on consumer buying decisions and, as a result, on our sales. Our markets are highly sensitive to the introduction of new products, which may rapidly capture a significant share of the market. New product innovations by our competitors or our failure to develop new products or the failure of a new product launch by the Company, could have a material adverse effect on our business, financial condition and results of operations. If our advertising, marketing and promotional programs are not effective, we may be unable to grow our revenues to profitable levels or our sales may decline.

Price increases for raw materials, labor, energy, transportation costs and other manufacturer, logistics provider or distributor demands could have an adverse impact on our margins.

The costs to manufacture and distribute Bentrio® are subject to fluctuation based on a variety of factors. Increases in commodity raw material, packaging component prices, and labor, energy and fuel costs and other input costs could have a significant impact on our financial condition and results of operations if our third party manufacturers, logistics providers or distributors pass along those costs to us. If we are unable to increase the price for our products to our customers or continue to achieve cost savings in a rising cost environment, any such cost increases would reduce our gross margins and could have a material adverse effect on our financial condition and results of operations. If we increase the price of Bentrio® in order to maintain our current gross margins for our products, such increase may adversely affect demand for, and sales of, Bentrio®, which could have a material adverse effect on our business, financial condition and results of operations. Indeed, continental Europe has seen a significant rate of inflation during the last twelve months.

Product liability claims and product recalls and related negative publicity could adversely affect our sales and operating results.

We are dependent on consumers’ perception of the safety and quality of Bentrio®. Negative consumer perception may arise from product liability claims and product recalls, regardless of whether such claims or recalls involve us or our product. The mere publication of information asserting concerns about the safety of our product or the ingredients used in our product could have a material adverse effect on our business and results of operations.

Product liability claims could be based on allegations that, among other things, Bentrio® contains contaminants, include inadequate instructions or warnings regarding their use or include inadequate warnings concerning side effects and interactions with other substances. Whether or not successful, product liability claims could result in negative publicity that could adversely affect the reputation of our brand and our business, sales and operating results. Additionally, we may be required to pay for losses or injuries purportedly caused by our products. In addition, we could be required for a variety of reasons to initiate product recalls. Any product recalls could have a material adverse effect on our business, financial condition and results of operations.

In addition, although we maintain, and require our suppliers and third party manufacturers to maintain, product liability insurance coverage, potential product liability claims may exceed the amount of insurance coverage or may be excluded under the terms of the policy, which could have a material adverse effect on our financial condition. In addition, in the future we may not be able to obtain adequate insurance coverage or we may be required to pay higher premiums and accept higher deductibles in order to secure adequate insurance coverage.

We operate in highly competitive and rapidly changing industries, which may result in others discovering, developing or commercializing competing products before or more successfully than we do.

The biopharmaceutical and pharmaceutical industries are highly competitive and subject to significant and rapid technological change. Our success is highly dependent on our ability to discover, develop and obtain marketing approval for new and innovative products on a cost-effective basis and to market them successfully. In doing so, we face and will continue to face intense competition from a variety of businesses, including large, fully integrated pharmaceutical companies, specialty pharmaceutical companies and biopharmaceutical companies, academic institutions, government agencies and other private and public research institutions in Europe, the United States and other jurisdictions. These organizations may have significantly greater resources than we do and conduct similar research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and marketing of products that compete with our product candidates.

The highly competitive nature of and rapid technological changes in the biotechnology and pharmaceutical industries could render our product candidates or our technology obsolete or non-competitive. Our competitors may, among other things:

Should any of these occur, our business, financial condition and results of operations could be materially adversely affected.

The successful commercialization of our product candidates will depend in part on the extent to which governmental authorities and health insurers establish adequate coverage and reimbursement levels and pricing policies.

The successful commercialization of any of our drug products or product candidates will depend, in part, on the extent to which coverage and reimbursement for our products or procedures using our products will be available from government and health administration authorities, private health insurers and other third-party payors. To manage healthcare costs, many governments and third-party payors increasingly scrutinize the pricing of new technologies and require greater levels of evidence of favorable clinical outcomes and cost-effectiveness before extending coverage. In light of such challenges to prices and increasing levels of evidence of the benefits and clinical outcomes of new technologies, we cannot be sure that coverage will be available for our products or product candidates that we commercialize and, if available, that the reimbursement rates will be adequate.

Third-party payors may deny coverage and reimbursement status altogether of a given drug product, or cover the product but may also establish prices at levels that are too low to enable us to realize an appropriate return on our investment in product development. Because the rules and regulations regarding coverage and reimbursement change frequently, in some cases at short notice, even when there is favorable coverage and reimbursement, future changes may occur that adversely impact the favorable status. Further, the net reimbursement for drug products may be subject to additional reductions if there are changes to laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States.

The unavailability or inadequacy of third-party coverage and reimbursement could have a material adverse effect on the market acceptance of our products and product candidates and the future revenues we may expect to receive from those products. In addition, we are unable to predict what additional legislation or regulation relating to the healthcare industry or third-party coverage and reimbursement may be enacted in the future, or what effect such legislation or regulation would have on our business.

Our products may not gain market acceptance, in which case we may not be able to generate product revenues, which will materially adversely affect our business, financial condition and results of operations.

Even if the FDA, the EMA or other regulatory authority clears or approves the marketing of any product candidates that we develop, physicians, healthcare providers, patients or the medical community may not accept or use them. Efforts to educate the medical community and third-party payors on the benefits of our product candidates may require significant resources and may not be successful. If Bentrio® or our drug product candidates do not achieve an adequate level of acceptance, we may not generate significant product revenues or any profits from operations. The degree of market acceptance of Bentrio® or any of our drug product candidates that is cleared or approved for commercial sale will depend on a variety of factors, including:

If our product candidates fail to gain market acceptance, this will have a material adverse impact on our ability to generate revenues to provide a satisfactory, or any, return on our investments. Even if some products achieve market acceptance, the market may prove not to be large enough to allow us to generate significant revenues.

In addition, the potential market opportunity of Bentrio® and our drug product candidates are difficult to precisely estimate. Our estimates of the potential market opportunity are predicated on several key assumptions such as industry knowledge and publications, third-party research reports and other surveys. While we believe that our internal assumptions are reasonable, these assumptions involve the exercise of significant judgment on the part of our management, are inherently uncertain and the reasonableness of these assumptions could not have been assessed by an independent source in every detail. If any of the assumptions proves to be inaccurate, then the actual market for Bentrio® or our drug product candidates could be smaller than our estimates of the potential market opportunity. If the actual market for Bentrio® or our drug product candidates is smaller than we expect, or if the products fail to achieve an adequate level of acceptance by physicians, health care payors and patients, our product revenue may be limited and it may be more difficult for us to achieve or maintain profitability.

We may lack the necessary expertise, personnel and resources to successfully commercialize our products on our own or together with suitable partners.

Before Bentrio® we have never commercialized a product candidate. To achieve commercial success for Bentrio® and our drug product candidates, we will have to continue to develop our own sales, marketing and distribution organization or outsource these activities to third parties. There can be no assurance that we will be able to develop the resources or outsource these activities in a sufficient or timely manner.

Risks Related to Our Reliance on Third Parties

If we fail to maintain our current strategic relationship with Washington University or Nuance Pharma, our business, commercialization prospects and financial condition may be materially adversely affected.

We have an exclusive license agreement with Washington University located in St. Louis, Missouri (“WU”). Under this agreement with WU, we are given an exclusive, worldwide, royalty-bearing license (with the right to sublicense) under certain patent rights owned or controlled by WU to research, develop, make, have made, sell, offer for sale, use and import pharmaceutical products covered under such patent rights for all fields of use. Such licensed products may include drug products formulated as nanoparticles, comprising a peptide for delivery as well as a therapeutic nucleotide, for intracellular delivery. These intellectual property rights have been the basis of our research and development of AM-401 and AM-411.

A good relationship with WU is important for our business prospects. If our relationship with WU was to deteriorate substantially or WU challenges our use of their intellectual property or our calculations of the payments we owe under our agreements, our business, financial condition, commercialization prospects and results of operations could be materially adversely affected.

We have entered into exclusive distribution and marketing agreements for Bentrio® with a number of partners. Under these agreements, these distributors have the exclusive right to market and distribute Bentrio® for a certain period of time in their territory subject to certain conditions. In order to maintain their exclusive rights, they are required to purchase certain quantities of Bentrio®. Good relationships with the distributors are important for our business prospects. If our relationships with them were to deteriorate substantially, or they fail to perform adequately, our business, financial condition, commercialization prospects and results of operations could be materially adversely affected.

In particular, on March 4, 2022, we announced that we had entered into an exclusive licensing and distribution agreement for Bentrio® with Nuance in Chinese Mainland, Hong Kong, Macau and South Korea (the “Territory”). Under the terms of the agreement, we will initially supply Bentrio® to Nuance. Nuance made an upfront payment of $1 million (CHF 0.9 million) and may pay to Altamira development and commercial milestones of up to $3 million and up to $19.5 million, respectively. In a second stage, Nuance will assume local production of the product for the Territory upon certain milestones. Once Nuance assumes local production of Bentrio®, it will pay to us a staggered royalty on net sales in the Territory at a high-single to low-double-digit percentage.

We may seek to form additional strategic alliances in the future with respect to Bentrio® or our drug product candidates, and if we do not realize the benefits of such alliance, our business, financial condition, commercialization prospects and results of operations may be materially adversely affected.

The commercialization of Bentrio® requires substantial cash to fund expenses and access to distribution networks, which we do not currently possess. Therefore, in addition to our relationships with Nuance and other distributors, we may decide to enter into strategic alliances, or create joint ventures or collaborations with further OTC consumer health companies, notably in Europe and North America for the further commercialization of Bentrio^®.

Our product development programs and the potential commercialization of our drug product candidates will require substantial additional cash to fund expenses and may require expertise, such as sales and marketing expertise, which we do not currently possess. Therefore, in addition to our relationship with WU for our AM-401 and AM-411 product candidates, for one or more of our drug product candidates, we may decide to enter into strategic alliances, or create joint ventures or collaborations with pharmaceutical or biopharmaceutical companies for the further development and potential commercialization of those product candidates.

We face significant competition in seeking appropriate collaborators. Collaborations are complex and time-consuming to negotiate and document. Any delays in entering into new strategic partnership agreements related to our product candidates could delay the development and commercialization of our product candidates and reduce their competitiveness even if they reach the market. We may also be restricted under existing and future collaboration agreements from entering into strategic partnerships or collaboration agreements on certain terms with other potential collaborators. We may not be able to negotiate collaborations on acceptable terms, or at all, for any of our existing or future product candidates and programs because the potential partner may consider that our research and development pipeline is insufficiently developed to justify a collaborative effort, or that our product candidates and programs do not have the requisite potential to demonstrate safety and efficacy in the target population. If we are unsuccessful in establishing and maintaining a collaboration with respect to a particular product candidate, we may have to curtail the development of that product candidate, reduce the scope of or delay its development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of our sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense for which we have not budgeted. If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms or at all. If we do not have sufficient funds, we will not be able to bring our product candidates to market and generate product revenue. Even if we are successful in establishing a new strategic partnership or entering into a collaboration agreement, we cannot be certain that, following such a strategic transaction or license, we will be able to progress the development and commercialization of the applicable product candidates as envisaged, or that we will achieve the revenues that would justify such transaction, and we could be subject to the following risks, each of which may materially harm our business, commercialization prospects and financial condition:

We rely on third parties to conduct our nonclinical and clinical trials and perform other tasks for us. If these third parties do not successfully carry out their contractual duties, meet expected deadlines, or comply with regulatory requirements, we may not be able to obtain regulatory approval for or commercialize our product candidates and our business could be substantially harmed.

We have relied upon and plan to continue to rely upon third-party contract research organizations, or CROs, to monitor and manage data for our ongoing nonclinical and clinical program. We rely on these parties for execution of our nonclinical and clinical studies and control only certain aspects of their activities. Nevertheless, we are responsible for ensuring that each of our trials is conducted in accordance with the applicable protocol, legal, regulatory, and scientific standards and our reliance on the CROs does not relieve us of our regulatory responsibilities. We and our CROs and other vendors are required to comply with cGMP, cGCP, and Good Laboratory Practice, or GLP, which are regulations and guidelines enforced by the FDA, the Competent Authorities of the Member States of the EU and comparable foreign regulatory authorities for all of our product candidates in nonclinical and clinical development. Regulatory authorities enforce these regulations through periodic inspections of study sponsors, principal investigators, trial sites and other contractors. If we or any of our CROs or vendors fail to comply with applicable regulations, the data generated in our nonclinical and clinical trials may be deemed unreliable and the EMA, FDA, other regulatory authorities may require us to perform additional nonclinical and clinical trials before approving our marketing applications. We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that all of our clinical trials comply with cGCP regulations. In addition, our clinical trials must be conducted with product produced under cGMP regulations. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process.

If any of our relationships with these third-party CROs terminate, we may not be able to enter into arrangements with alternative CROs or do so on commercially reasonable terms. In addition, our CROs are not our employees, and except for remedies available to us under our agreements with such CROs, we cannot control whether or not they devote sufficient time and resources to our on-going nonclinical and clinical programs. If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to our protocols, regulatory requirements, or for other reasons, our clinical trials may be extended, delayed, or terminated and we may not be able to obtain regulatory approval for or successfully commercialize our product candidates. CROs may also generate higher costs than anticipated. As a result, our results of operations and the commercial prospects for our product candidates would be harmed, our costs could increase, and our ability to generate revenue could be delayed.

Switching or adding additional CROs involves additional cost and requires management time and focus. In addition, there is a natural transition period when a new CRO commences work. As a result, delays occur, which can materially impact our ability to meet our desired clinical development timelines. Though we carefully manage our relationships with our CROs, there can be no assurance that we will not encounter similar challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition, and prospects.

We rely on a single source for the production of Bentrio® and may face difficulties in case of delivery problems, delays, issues with product quality or other aspects.

Bentrio® is produced by a single third-party manufacturer. Our ability to retain our current manufacturing relationship is critical to our ability to deliver quality products to our customers in a timely manner. Without adequate supplies of quality merchandise, our sales would decrease materially and our business would suffer. In the event that our contract manufacturer is unable or unwilling to ship products to us in a timely manner, or is not able to increase supply as needed, we would have to identify and qualify new manufacturing relationships. Because of the unique manufacturing requirement of Bentrio®, we may be unable to qualify new suppliers in a timely way or at the quantities, quality and price levels needed. In addition, identifying alternative manufacturers without adequate lead times may involve additional manufacturing expense, delay in production or product disadvantage in the marketplace. In general, the consequences of not securing adequate, high quality and timely supplies of merchandise would negatively impact inventory levels, which could damage our reputation and result in lost customers and sales, and could have a material adverse effect on our business, financial condition and results of operations.

We currently rely on third-party suppliers and other third parties for production of our drug product candidates and our dependence on these third parties may impair the advancement of our research and development programs and the development of our drug product candidates.

We currently rely on and expect to continue to rely on third parties, for the manufacturing and supply of chemical compounds for preclinical studies and clinical trials of our product candidates, including AM-401 and AM-411 and others for the manufacturing and supply of the drug product candidates. For the foreseeable future, we expect to continue to rely on such third parties for the manufacture of any of our drug product candidates on a clinical or commercial scale, if any of our product candidates receives regulatory approval. Reliance on third-party providers may expose us to different risks than if we were to manufacture product candidates ourselves. The facilities used by our contract manufacturers to manufacture our drug product candidates must be approved by the FDA or other regulatory authorities pursuant to inspections that will be conducted after we submit our NDA or comparable marketing application to the FDA or other regulatory authority. Although we have auditing rights with all our manufacturing counterparties, we do not have control over a supplier’s or manufacturer’s compliance with these laws, regulations and applicable cGMP standards and other laws and regulations, such as those related to environmental health and safety matters. If our contract manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or others, they will not be able to secure and/or maintain regulatory approval for their manufacturing facilities. In addition, we have no control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or a comparable foreign regulatory authority does not approve these facilities for the manufacture of our drug product candidates or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market our drug product candidates, if approved. Any failure to achieve and maintain compliance with these laws, regulations and standards could subject us to the risk that we may have to suspend the manufacturing of our drug product candidates or that obtained approvals could be revoked, which would adversely affect our business and reputation. Furthermore, third-party providers may breach agreements they have with us because of factors beyond our control. They may also terminate or refuse to renew their agreements because of their own financial difficulties or business priorities, potentially at a time that is costly or otherwise inconvenient for us. If we were unable to find adequate replacement or another acceptable solution in time, our clinical trials could be delayed or our commercial activities could be harmed.

In addition, the fact that we are dependent on our suppliers and other third parties for the manufacture, storage and distribution of our drug product candidates means that we are subject to the risk that our product candidates and, if approved, commercial products may have manufacturing defects that we have limited ability to prevent or control. The sale of drug products containing such defects could result in recalls or regulatory enforcement action that could adversely affect our business, financial condition and results of operations.

Growth in the costs and expenses of components or raw materials may also adversely influence our business, financial condition and results of operations. Supply sources could be interrupted from time to time and, if interrupted, it is not assured that supplies could be resumed (whether in part or in whole) within a reasonable time frame and at an acceptable cost or at all.

Our current and anticipated future dependence upon others for the manufacturing of AM-401, AM-411 and any other product candidate that we develop may adversely affect our future profit margins and our ability to commercialize any drug products that receive marketing approval on a timely and competitive basis.

Certain ingredients and the primary packaging for Bentrio® and our drug product candidates are currently acquired from single-source suppliers. The loss of these suppliers, or their failure to supply us with the ingredients or the primary packaging, could materially and adversely affect our business.

We do not currently, and do not expect to in the future, independently conduct manufacturing activities for Bentrio® and our drug product candidates, including AM-401 and AM-411. We currently have a relationship with one supplier each, for the supply of the peptide for AM-401 and AM-411, and for the key component of Bentrio®. We do not currently have any other suppliers for the drug substance, certain other ingredients, and primary packaging of our drug product candidates and Bentrio® and, although we believe that there are alternate sources of supply that could satisfy our clinical and commercial requirements, and we have performed some preliminary investigations to assess this availability, we cannot assure you that identifying alternate sources and establishing relationships with such sources would not result in significant delay in the development of our drug product candidates or in significant interruptions in commercial supplies of Bentrio®. Additionally, we may not be able to enter into supply arrangements with alternative suppliers on commercially reasonable terms, or at all. A delay in the development of our drug product candidates, interruption in commercial supplies of Bentrio® or having to enter into a new agreement with a different third party on less favorable terms than we have with our current suppliers could have a material adverse impact upon on our business.

Risks Related to Intellectual Property

If we or our licensors are unable to obtain and maintain effective patent rights for our technologies, commercial products, drug product candidates or any future product candidates, or if the scope of the patent rights obtained is not sufficiently broad, we may not be able to compete effectively in our markets.

We rely upon a combination of patents, trade secret protection, and confidentiality agreements to protect the intellectual property related to our technologies, commercial products and drug product candidates. Our success depends in large part on our and our licensors’ ability to obtain and maintain patent and other intellectual property protection in the United States and in other countries with respect to our proprietary technology and products.

We have sought to protect our proprietary position by filing patent applications in the United States and abroad related to our novel technologies and products that are important to our business. This process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost, in a timely manner or in all jurisdictions. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. Moreover, in some circumstances, we do not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the patents, covering technology that we license from third parties. Therefore, these patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business.

The patent position of biotechnology and pharmaceutical companies generally is highly uncertain and involves complex legal and factual questions for which legal principles remain unsolved. The patent applications that we own or in-license may fail to result in issued patents with claims that cover our product candidates in the United States or in other foreign countries. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions remain confidential for a period of time after filing, and some remain so until issued. We cannot be certain that we were the first to file any patent application related to our product candidates, or whether we were the first to make the inventions claimed in our owned patents or pending patent applications, nor can we know whether those from whom we license patents were the first to make the inventions claimed or were the first to file. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. There is no assurance that all potentially relevant prior art relating to our patents and patent applications has been found, which can invalidate a patent or prevent a patent from issuing from a pending patent application. Even if patents do successfully issue, and even if such patents cover our product candidates, third parties may challenge their validity, enforceability, or scope, which may result in such patents being narrowed, found unenforceable or invalidated, which could allow third parties to commercialize our technology or products and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third party patent rights. Furthermore, even if they are unchallenged, our patents and patent applications may not adequately protect our intellectual property, provide exclusivity for commercial products or drug product candidates, prevent others from designing around our claims or provide us with a competitive advantage. Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact on our business.

We, independently or together with our licensors, have filed several patent applications covering various aspects of our commercial products, drug product candidates or technologies. We cannot offer any assurances about which, if any, patents will issue, the breadth of any such patent or whether any issued patents will be found invalid and unenforceable or will be challenged by third parties. Any successful opposition to these patents or any other patents owned by or licensed to us after patent issuance could deprive us of rights necessary for the successful commercialization of our commercial products or any drug product candidates that we may develop. Further, if we encounter delays in regulatory approvals, the period of time during which we could market a product candidate under patent protection could be reduced.

We may not have sufficient patent terms to effectively protect our products and business.

Patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after it is filed. Although various extensions may be available, the life of a patent, and the protection it affords, is limited. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours or otherwise provide us with a competitive advantage. Even if patents covering our product candidates are obtained, once the patent life has expired for a product, we may be open to competition from generic medications.

While patent term extensions under the Hatch-Waxman Act in the United States and under supplementary protection certificates in Europe may be available to extend the patent exclusivity term for Bentrio® and our drug product candidates, we cannot provide any assurances that any such patent term extension will be obtained and, if so, for how long. In addition, upon issuance in the United States any patent term can be adjusted based on certain delays caused by the applicant(s) or the U.S. Patent and Trademark Office, or USPTO. For example, a patent term can be reduced based on certain delays caused by the patent applicant during patent prosecution.

While in the United States there is a possibility of obtaining market protection independent from any patent protection for up to three and five years from approval, and in the European Union one may obtain data exclusivity of eight years from approval with an additional two years of market exclusivity (which can potentially be extended by one year), there is no assurance that we can obtain such data exclusivity and market protection with respect to Bentrio®, AM-125, AM-401, AM-411, or any of our other drug product candidates. Our issued patents and pending patent applications are expected to expire for AM-125 in 2038, for AM-401 in 2034 and 2043, for AM-411 in 2034 and for Bentrio® in 2040, prior to any patent term extensions to which we may be entitled under applicable laws.

If we are unable to maintain effective proprietary rights for our technologies, commercial products, drug product candidates or any future drug product candidates, we may not be able to compete effectively in our markets.

In addition to the protection afforded by patents, we rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable or that we elect not to patent, processes for which patents are difficult to enforce and any other elements of our product candidate discovery and development processes that involve proprietary know-how, information or technology that is not covered by patents. However, trade secrets can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements with our employees, consultants, scientific advisors, and contractors. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems. While we have confidence in these individuals, organizations and systems, agreements or security measures may be breached, and we may not have adequate remedies for any breach. Moreover, if any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent such competitor from using that technology or information to compete with us, which could harm our competitive position.

Although we expect all of our employees and consultants to assign their inventions to us, and all of our employees, consultants, advisors, and any third parties who have access to our proprietary know-how, information or technology to enter into confidentiality agreements, we cannot provide any assurances that all such agreements have been duly executed or that our trade secrets and other confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. Misappropriation or unauthorized disclosure of our trade secrets could impair our competitive position and may have a material adverse effect on our business. Additionally, if the steps taken to maintain our trade secrets are deemed inadequate, we may have insufficient recourse against third parties for misappropriating such trade secrets. In addition, others may independently discover our trade secrets and proprietary information. For example, the FDA, as part of its Transparency Initiative, is currently considering whether to make additional information publicly available on a routine basis, including information that we may consider to be trade secrets or other proprietary information, and it is not clear at the present time how the FDA’s disclosure policies may change in the future, if at all.

Further, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the U.S. As a result, we may encounter significant problems in protecting and defending our intellectual property both in the U.S. and abroad. If we are unable to prevent material disclosure of the intellectual property related to our technologies to third parties, we will not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, financial condition and results of operations.

Third-party claims of intellectual property infringement may expose us to substantial liability or prevent or delay our development and commercialization efforts.

Our commercial success depends in part on our ability to develop, manufacture, market and sell our commercial products or drug product candidates and use our proprietary technology without alleged or actual infringement, misappropriation, or other violation of the patents and proprietary rights of third parties. There have been many lawsuits and other proceedings involving patent and other intellectual property rights in the biotechnology and pharmaceutical industries, including patent infringement lawsuits, interferences, oppositions, and reexamination proceedings before the USPTO and corresponding foreign patent offices. Numerous U.S.- and foreign-issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are marketing commercial products or developing drug product candidates. Some claimants may have substantially greater resources than we do and may be able to sustain the costs of complex intellectual property litigation to a greater degree and for longer periods of time than we could. In addition, patent holding companies that focus solely on extracting royalties and settlements by enforcing patent rights may target us. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our commercial products and drug product candidates may be subject to claims of infringement of the patent rights of third parties.

Third parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture, or methods of treatment related to the use or manufacture of our commercial products or drug product candidates. Although we generally conduct certain freedom to operate search and review with respect to our product candidates, we cannot guarantee that any of our search and review is complete and thorough, nor can we be sure that we have identified each and every patent and pending application in the United States and abroad that is relevant or necessary to the commercialization of our commercial products or drug product candidates. Because patent applications can take many years to issue, there may be currently pending patent applications that may later result in issued patents that our commercial products or drug product candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents. If any third-party patents were held by a court of competent jurisdiction to cover the manufacturing process of any of our commercial products or drug product candidates, any molecules formed during the manufacturing process or any final product itself, the holders of any such patents may be able to block our ability to continue commercialization of such commercial product or to commercialize such drug product candidate unless we obtained a license under the applicable patents, or until such patents expire or are finally determined to be invalid or unenforceable. Similarly, if any third-party patents were held by a court of competent jurisdiction to cover aspects of our formulations, processes for manufacture, or methods of use, the holders of any such patents may be able to block our ability to continue the commercialization of our commercial products or to develop and commercialize the applicable drug product candidate unless we obtained a license or until such patent expires or is finally determined to be invalid or unenforceable. In either case, such a license may not be available on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us.

Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further commercialize our commercial products or develop and commercialize one or more of our drug product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringing products or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure.

Additional competitors could enter the market with generic versions of our products, which may result in a material decline in sales of affected products.

Under the Hatch-Waxman Act, a pharmaceutical manufacturer may file an abbreviated new drug application, or ANDA, seeking approval of a generic copy of an approved innovator product. Under the Hatch-Waxman Act, a manufacturer may also submit an NDA under section 505(b)(2) that references the FDA’s prior approval of the innovator product. A 505(b)(2) NDA product may be for a new or improved version of the original innovator product. Hatch-Waxman also provides for certain periods of regulatory exclusivity, which preclude FDA approval (or in some circumstances, FDA filing and reviewing) of an ANDA, or 505(b)(2) NDA. These include, subject to certain exceptions, the period during which an FDA-approved drug is subject to orphan drug exclusivity. In addition to the benefits of regulatory exclusivity, an innovator NDA holder may have patents claiming the active ingredient, product formulation or an approved use of the drug, which would be listed with the product in the FDA publication, “Approved Drug Products with Therapeutic Equivalence Evaluations,” known as the “Orange Book.” If there are patents listed in the Orange Book, a generic or 505(b)(2) applicant that seeks to market its product before expiration of the patents must include in the ANDA what is known as a “Paragraph IV certification,” challenging the validity or enforceability of, or claiming non-infringement of, the listed patent or patents. Notice of the certification must be given to the innovator, too, and if within 45 days of receiving notice the innovator sues to protect its patents, approval of the ANDA is stayed for 30 months, or as lengthened or shortened by the court.

Accordingly, if AM-125, AM-401 and AM-411 are approved, competitors could file ANDAs for generic versions of AM-125, AM-401 and AM-411, or 505(b)(2) NDAs that reference AM-125, AM-401 and AM-411, respectively. If there are patents listed for AM-125, AM-401 and AM-411 in the Orange Book, those ANDAs and 505(b)(2) NDAs would be required to include a certification as to each listed patent indicating whether the ANDA applicant does or does not intend to challenge the patent. We cannot predict whether any patents issuing from our pending patent applications will be eligible for listing in the Orange Book, how any generic competitor would address such patents, whether we would sue on any such patents, or the outcome of any such suit.

We may not be successful in securing or maintaining proprietary patent protection for drug products and technologies we develop or license. Moreover, if any patents that are granted and listed in the Orange Book are successfully challenged by way of a Paragraph IV certification and subsequent litigation, the affected drug product could immediately face generic competition and its sales would likely decline rapidly and materially. Should sales decline, we may have to write off a portion or all of the intangible assets associated with the affected drug product and our results of operations and cash flows could be materially and adversely affected.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

Periodic maintenance fees on any issued patent are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Non-compliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. In such an event, our competitors might be able to enter the market, which would have a material adverse effect on our business.

If we fail to comply with the obligations in our Exclusive License Agreement with WU, we could lose intellectual property rights that are important to our AM-401 and AM-411 drug product candidates and further potential drug product candidates.

Our Exclusive License Agreement with WU imposes various development, milestone payment, royalty, and other obligations on us. If we fail to comply with our obligations under the agreement and fail to cure such breach, or we are subject to a bankruptcy, WU has the right to terminate the agreement, in which event we would not be able to develop or market AM-401 or AM-411 or any future drug product candidates covered by the license.

In particular, we are required to use commercially reasonable efforts to meet the following development milestones: a) to file an IND application (or regulatory equivalent in foreign jurisdiction) by June 30, 2023, b) to complete a Phase 1 clinical trial 3.5 years after achieving the first milestone, and c) to complete a Phase 2 clinical trial four years after achieving the second milestone. We may elect to extend each of these milestones once by a period of twelve months, and second time by a period of an additional twelve months, by paying WU a nonrefundable fee in the amount of $50,000 for the first extension and $100,000 for the second extension.

We may be involved in lawsuits to protect or enforce our patents or the patents of our licensors, which could be expensive, time-consuming, and unsuccessful.

Competitors may infringe our patents or the patents of our licensors. To counter such infringement, we may be required to file claims against those competitors, which can be expensive and time-consuming. If we or one of our licensing partners were to initiate legal proceedings against a third party to enforce a patent covering one of our commercial products or drug product candidates, the defendant could counterclaim that the patent covering our commercial product or drug product candidate is invalid, overbroad and/or unenforceable, or that we infringe the defendant’s patents. In patent litigation in the United States, defendant counterclaims alleging invalidity, overbreadth and/or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO, or made a misleading statement, during prosecution. The outcome following legal assertions of invalidity and unenforceability is unpredictable. A court may decide that a patent of ours is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to stop a third party from using the technology in question on the grounds that our patents do not cover that technology. An adverse result in any litigation proceeding could put one or more of our patents at risk of being invalidated or interpreted narrowly, which could adversely affect us.

Interference proceedings provoked by third parties or brought by us or declared by the USPTO may be necessary to determine the priority of inventions with respect to our patents or patent applications or those of our licensors. An unfavorable outcome could require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms or at all. Our defense of litigation or interference proceedings may fail and, even if successful, may result in substantial costs and distract our management and other employees. In addition, the uncertainties associated with litigation could have a material adverse effect on our ability to raise the funds necessary to continue the commercial roll-out of Bentrio®, our clinical trials, continue our research programs, license necessary technology from third parties, or enter into development partnerships that would help us bring our drug product candidates to market. We may not be able to prevent, alone or with our licensors, misappropriation of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions, or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our common shares.

We may be subject to claims that our employees, consultants, or independent contractors have wrongfully used or disclosed confidential information of third parties or that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.

We employ and utilize the services of individuals who were previously employed or provided services to universities or other biotechnology or pharmaceutical companies. Although we try to ensure that our employees, consultants, and independent contractors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees, consultants, or independent contractors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information, of any of our employee’s, consultant’s or independent contractor’s former employer or other third parties. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel, which could adversely impact our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

Our reliance on our advisors, employees and third parties requires us to share our intellectual property and trade secrets, which increases the possibility that a competitor will discover them or that our intellectual property will be misappropriated or disclosed.

Because we rely on our advisors, employees and third-party contractors and consultants to research and develop and to manufacture our commercial products and drug product candidates, we must, at times, share our intellectual property with them. We seek to protect our intellectual property and other proprietary technology in part by entering into confidentiality agreements and, if applicable, material transfer agreements, consulting agreements or other similar agreements with our advisors, employees, third-party contractors and consultants prior to beginning research or disclosing proprietary information. These agreements typically limit the rights of these advisors, employees and third parties to use or disclose our confidential information, including our intellectual property and trade secrets. Despite the contractual provisions employed when working with these advisors, employees and third parties, the need to share intellectual property and other confidential information increases the risk that such confidential information becomes known by our competitors, are inadvertently incorporated into the product development of others or are disclosed or used in violation of these agreements. Given that our proprietary position is based, in part, on our know-how, intellectual property and trade secrets, a competitor’s discovery of our intellectual property or trade secrets or other unauthorized use or disclosure would impair our competitive position and may have a material adverse effect on our business.

In addition, these agreements typically restrict the ability of our advisors, employees, third-party contractors and consultants to publish data potentially relating to our intellectual property, although our agreements may contain certain limited publication rights. For example, any academic institution that we may collaborate with in the future may expect to be granted rights to publish data arising out of such collaboration, provided that we are notified in advance and given the opportunity to delay publication for a limited time period in order for us to secure patent protection of intellectual property rights arising from the collaboration, in addition to the opportunity to remove confidential or trade secret information from any such publication. In the future, we may also conduct joint research and development programs that may require us to share intellectual property under the terms of our research and development or similar agreements. Despite our efforts to protect our intellectual property, our competitors may discover our trade secrets or know how, either through breach of our agreements with third parties, independent development or publication of information by any of our third-party collaborators. A competitor’s discovery of our intellectual property would impair our competitive position and have an adverse impact on our business.

We may be subject to claims challenging the inventorship of our patents and other intellectual property.

We may be subject to claims that former employees, collaborators or other third parties have an interest in our patents or other intellectual property as an inventor or co-inventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developing our drug product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship or our ownership of our patents or other intellectual property. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

We may not be able to protect our intellectual property rights throughout the world.

Filing, prosecuting, and defending patents in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. As part of ordinary course prosecution and maintenance activities, we determine whether to seek patent protection outside the U.S. and in which countries. This also applies to patents we have acquired or in-licensed from third parties. In some cases this means that we, or our predecessors in interest or licensors of patents within our portfolio, have sought patent protection in a limited number of countries for patents covering our product candidates. Competitors may use our technologies in jurisdictions where we have not obtained or are unable to adequately enforce patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our products and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets, and other intellectual property protection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement of our patents, the reproduction of our manufacturing or other know-how or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions, whether or not successful, could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

In Europe, a new unitary patent system, which takes effect on June 1, 2023, may significantly impact European patents, including those granted before the introduction of the new system. Under the new system, Applicants can, upon grant of a patent, opt for that patent to become a Unitary Patent which will be subject to the jurisdiction of a new Unitary Patent Court (UPC). Patents granted before the implementation of the new system can be opted out of UPC jurisdiction, remaining as national patents in the UPC countries. Patents that remain under the jurisdiction of the UPC may be challenged in a single UPC-based revocation proceeding that, if successful, could invalidate the patent in all countries who are signatories to the UPC.  Further, because the UPC is a new court system and there is no precedent for the court’s laws, there is increased uncertainty regarding the outcome of any patent litigation. We are unable to predict what impact the new patent regime may have on our ability to exclude competitors in the European market. In addition to changes in patent laws, geopolitical dynamics, including Russia’s recent incursion into Ukraine, may also impact our ability to obtain and enforce patents in particular jurisdictions. If we are unable to obtain and enforce patents as needed in particular markets, our ability to exclude competitors in those markets may be reduced.

Risks Related to Employee Matters and Managing Growth

Our future growth and ability to compete depends on retaining our key personnel and recruiting additional qualified personnel.

Our success depends upon the continued contributions of our key management, scientific and technical personnel, many of whom have substantial experience with or been instrumental for us and our projects. Key management includes our executive officers Thomas Meyer, our founder, Chairman and Chief Executive Officer, Covadonga Pañeda, Chief Operating Officer for our RNA delivery activities, and Marcel Gremaud, our Chief Financial Officer, who constitute the Executive Management Committee. Since January 2023, we have received the contributions of Samuel Wickline, Trasir’s founder and our Chief Scientific Adviser for RNA delivery technology on a part-time consulting basis (from June 2021 to December 2022 he served as Chief Scientific Officer).

All our staff are engaged in project management or general management, and we do not have any inhouse laboratories or manufacturing facilities.

During the COVID-19 pandemic, all our staff worked for several time periods remotely in accordance with Swiss public health regulations or by voluntary Company decision. Overall, the remote work did not have any significant impact on our ability to manage projects or processes effectively.

The loss of key managers, senior scientists or advisors could delay our research and development activities. Laws and regulations on executive compensation, including legislation in Switzerland, may restrict our ability to attract, motivate and retain the required level of qualified personnel. In addition, the competition for qualified personnel in the biopharmaceutical and pharmaceutical field is intense, and our future success depends upon our ability to attract, retain and motivate highly skilled scientific, technical and managerial employees. We face competition for personnel from other companies, universities, public and private research institutions and other organizations. If our recruitment and retention efforts are unsuccessful in the future, it may be difficult for us to implement our business strategy, which could have a material adverse effect on our business.

We expect to expand our drug development, regulatory and business development capabilities, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.

We expect to experience significant growth in the number of our employees and the scope of our operations, particularly in the areas of drug development, regulatory affairs and business development. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Due to our limited financial resources, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The expansion of our operations may lead to significant costs and may divert our management and business development resources. Any inability to manage growth could delay the execution of our business plans or disrupt our operations.

Risks Related to Our Common Shares

The price of our common shares may continue to be volatile and may fluctuate due to factors beyond our control.

The share price of publicly traded emerging biopharmaceutical and drug discovery and development companies has been highly volatile and is likely to remain highly volatile in the future. For example, during the last year, our common shares have traded as high as $43 in April 2022 and as low as $3.95 in December 2022. The market price of our common shares may fluctuate significantly in the future due to a variety of factors, including:

Additionally, these factors may affect the liquidity of our common shares, which may hurt your ability to sell our common shares in the future. In addition, the stock market in general has recently experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of individual companies. Broad market and industry factors may materially affect the market price of companies’ stock, including ours, regardless of actual operating performance.

Our common shares may be involuntarily delisted from trading on The Nasdaq Capital Market if we fail to comply with the continued listing requirements. A delisting of our common shares is likely to reduce the liquidity of our common shares and may inhibit or preclude our ability to raise additional financing.

We are required to comply with certain Nasdaq continued listing requirements, including a series of financial tests relating to shareholder equity, market value of listed securities and number of market makers and shareholders. If we fail to maintain compliance with any of those requirements, our common shares could be delisted from The Nasdaq Capital Market.

In 2017, 2019, 2020 and 2022, we failed to maintain compliance with the minimum bid price requirement. To address that non-compliance, on March 13, 2018, we effected the Merger, pursuant to which we effected a “reverse share split” at a ratio of 10-for-1, and on each of May 1, 2019 and October 25, 2022, we effected a “reverse share split” at a ratio of 20-for-1. In 2020, we regained compliance as our share price increased. Additionally, on January 11, 2018, we received a letter from Nasdaq indicating that we were not in compliance with Nasdaq’s market value of listed securities requirement. As a result of the July 2018 Registered Offering, we resolved the non-compliance with the market value of listed securities requirement by complying with Nasdaq’s minimum equity standard. However, there can be no assurance that we will be able to successfully maintain compliance with the several Nasdaq continued listing requirements.

If, for any reason, Nasdaq should delist our common shares from trading on its exchange and we are unable to obtain listing on another national securities exchange or take action to restore our compliance with the Nasdaq continued listing requirements, a reduction in some or all of the following may occur, each of which could have a material adverse effect on our shareholders:

Moreover, delisting may make unavailable a tax election that could affect the U.S. federal income tax treatment of holding, and disposing of, our common shares. See “Taxation—Material U.S. Federal Income Tax Considerations for U.S. Holders” below.

In the event that our common shares are delisted from Nasdaq, U.S. broker-dealers may be discouraged from effecting transactions in our common shares because they may be considered penny stocks and thus be subject to the penny stock rules.

The SEC has adopted a number of rules to regulate “penny stock” that restrict transactions involving stock which is deemed to be penny stock. Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities Exchange Act of 1934 (the “Exchange Act”). These rules may have the effect of reducing the liquidity of penny stocks. “Penny stocks” generally are equity securities with a price of less than $5.00 per share (other than securities registered on certain national securities exchanges or quoted on the Nasdaq Stock Market if current price and volume information with respect to transactions in such securities is provided by the exchange or system). Our common shares have in the past constituted, and may again in the future constitute, “penny stock” within the meaning of the rules. The additional sales practice and disclosure requirements imposed upon U.S. broker-dealers may discourage such broker-dealers from effecting transactions in our common shares, which could severely limit the market liquidity of such common shares and impede their sale in the secondary market.

A U.S. broker-dealer selling penny stock to anyone other than an established customer or “accredited investor” (generally, an individual with net worth in excess of $1,000,000 or an annual income exceeding $200,000, or $300,000 together with his or her spouse) must make a special suitability determination for the purchaser and must receive the purchaser’s written consent to the transaction prior to sale, unless the broker-dealer or the transaction is otherwise exempt. In addition, the “penny stock” regulations require the U.S. broker-dealer to deliver, prior to any transaction involving a “penny stock”, a disclosure schedule prepared in accordance with SEC standards relating to the “penny stock” market, unless the broker-dealer or the transaction is otherwise exempt. A U.S. broker-dealer is also required to disclose commissions payable to the U.S. broker-dealer and the registered representative and current quotations for the securities. Finally, a U.S. broker-dealer is required to submit monthly statements disclosing recent price information with respect to the “penny stock” held in a customer’s account and information with respect to the limited market in “penny stocks.”

Shareholders should be aware that, according to the SEC, the market for “penny stocks” has suffered in recent years from patterns of fraud and abuse. Such patterns include (i) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (ii) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (iii) “boiler room” practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (iv) excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and (v) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, resulting in investor losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities.

Future sales, or the possibility of future sales, of a substantial number of our common shares could adversely affect the price of our common shares.

Future sales of a substantial number of our common shares, or the perception that such sales will occur, could cause a decline in the market price of our common shares. Additionally, as of the date of this Annual Report we have warrants outstanding, which are exercisable for an aggregate of 99,171 common shares at a weighted average exercise price of $53.45 per share, an equity commitment to sell up to $10.0 million of additional common shares to Lincoln Park Capital Fund, LLC (“LPC”) pursuant to the commitment purchase agreement we entered into on December 5, 2022 with LPC (the “2022 LPC Purchase Agreement”), less an aggregate of $854,475.00 of common shares that have been sold through April 12, 2023 under such agreement, and an at-the-market offering program pursuant to the sales agreement we entered into with A.G.P./Alliance Global Partners (“A.G.P.”) on November 30, 2018, as amended on April 5, 2019 (the “A.G.P. Sales Agreement”) for sales of up to $12.9 million of additional common shares (subject to the volume limitations under Instruction I.B.5 of Form F-3). We have also filed registration statements to register the resale of the common shares underlying the warrants that we have offered and sold in unregistered transactions, the common shares that are sold to LPC and the common shares and other equity securities that we have issued under our prior equity incentive plans or may issue under our new omnibus equity compensation plan. These common shares may be freely sold in the public market upon issuance, subject to certain limitations applicable to affiliates. In addition, we have filed a registration statement covering the issuance and sale by us of up to $79 million of common shares, debt securities, warrants, purchase contracts, units and common shares, including shares sold and which may be sold under the A.G.P. Sales Agreement. We may issue such securities, including our common shares and warrants to purchase common shares, at any time and from time to time subject to the limitations set forth in General Instruction I.B.5 of Form F-3. If a large number of our common shares and/or warrants to purchase common shares are sold in the public market, the sales could reduce the trading price of our common shares and impede our ability to raise future capital. 

We do not expect to pay dividends in the foreseeable future.

We have not paid any dividends since our incorporation. Even if future operations lead to significant levels of distributable profits, we currently intend that any earnings will be reinvested in our business and that dividends will not be paid until we have an established revenue stream to support continuing dividends. The proposal to pay future dividends to shareholders will in addition effectively be at the discretion of our board of directors after taking into account various factors including our business prospects, cash requirements, financial performance and new product development. In addition, payment of future dividends is subject to certain limitations pursuant to Bermuda law or by our Bye-laws. We are subject to Bermuda law restrictions on the payment of dividends including that no dividends may be declared by our board of directors or paid by the Company if there are reasonable grounds for believing that: (i) we are, or would after the payment be, unable to pay our liabilities as they become due; or (ii) that the realizable value of our assets would thereby be less than our liabilities. Accordingly, investors cannot rely on dividend income from our common shares and any returns on an investment in our common shares will likely depend entirely upon any future appreciation in the price of our common shares.

If we are or become classified as a passive foreign investment company (“PFIC”), our U.S. shareholders may suffer adverse tax consequences as a result.

A non-U.S. corporation, such as our Company, will be considered a PFIC for any taxable year if either (i) at least 75% of its gross income is passive income or (ii) at least 50% of the value of its assets (based on an average of the quarterly values of the assets during a taxable year) is attributable to assets that produce or are held for the production of passive income.

Based upon our current and projected income and assets, and projections as to the value of our assets, we do not anticipate that we will be a PFIC for the 2023 taxable year or the foreseeable future. However, no assurance can be given in this regard because the determination of whether we will be or become a PFIC is a factual determination made annually that will depend, in part, upon the composition of our income and assets, and we have not and will not obtain an opinion of counsel regarding our classification as a PFIC. Fluctuations in the market price of our common shares may cause us to be classified as a PFIC in any taxable year because the value of our assets for purposes of the asset test, including the value of our goodwill and unbooked intangibles, may be determined by reference to the market price of our common shares from time to time (which may be volatile). If our market capitalization subsequently declines, we may be or become classified as a PFIC for the 2023 taxable year or future taxable years. Furthermore, the composition of our income and assets may also be affected by how, and how quickly, we use our liquid assets and any future fundraising activity. Under circumstances where our revenues from activities that produce passive income significantly increases relative to our revenues from activities that produce non-passive income, or where we determine not to deploy significant amounts of cash for active purposes, our risk of becoming classified as a PFIC may substantially increase. It is also possible that the Internal Revenue Service (the “IRS”) may challenge the classification or valuation of our Company’s assets, including its goodwill and other unbooked intangibles, or the classification of certain amounts received by our Company, which may result in our Company being, or becoming classified as, a PFIC for the 2023 taxable year or future taxable years. Accordingly, there can be no assurance that we will not be a PFIC in the current or for any future taxable year and U.S. investors should invest in our common shares only if they are willing to bear the U.S. federal income tax consequences associated with investments in PFICs.

If we were a PFIC for any taxable year during which a U.S. investor held our common shares, certain adverse U.S. federal income tax consequences could apply to the U.S. Holder. See “Taxation—Material U.S. Federal Income Tax Considerations for U.S. Holders.”

We are a holding company with no material direct operations.

We are a holding company with no material direct operations. As a result, we would be dependent on dividends, other payments or loans from our subsidiaries in order to pay a dividend. Our subsidiaries are subject to legal requirements of their respective jurisdictions of organization that may restrict their paying dividends or other payments, or making loans, to us, such as the potential for double taxation across jurisdictions.

We are a foreign private issuer and, as a result, we are not subject to U.S. proxy rules and are subject to Exchange Act reporting obligations that, to some extent, are more lenient and less frequent than those of a U.S. domestic public company.

We report under the Exchange Act, as a non-U.S. company with foreign private issuer status. Because we qualify as a foreign private issuer under the Exchange Act and although we are subject to Bermuda laws and regulations with regard to such matters and furnish semiannual financial information to the SEC, we are exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including (i) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; (ii) the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and (iii) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K, upon the occurrence of specified significant events. In addition, foreign private issuers are not required to file their annual report on Form 20-F until four months after the end of each financial year, while U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10-K within 75 days after the end of each fiscal year. Foreign private issuers are also exempt from the Regulation Fair Disclosure, aimed at preventing issuers from making selective disclosures of material information. As a result of the above, you may not have the same protections afforded to shareholders of companies that are not foreign private issuers.

As a foreign private issuer and as permitted by the listing requirements of Nasdaq, we follow certain home country governance practices rather than the corporate governance requirements of Nasdaq.

We are a foreign private issuer. As a result, in accordance with Nasdaq Listing Rule 5615(a)(3), we comply with home country governance requirements and certain exemptions thereunder rather than complying with certain of the corporate governance requirements of Nasdaq.

Bermuda law does not require that a majority of our board of directors consists of independent directors. Our board of directors therefore may include fewer independent directors than would be required if we were subject to Nasdaq Listing Rule 5605(b)(1). In addition, we are not subject to Nasdaq Listing Rule 5605(b)(2), which requires that independent directors regularly have scheduled meetings at which only independent directors are present.

Bermuda law does not require that we disclose information regarding third-party compensation of our directors or director nominee. As a result, our practice varies from the third-party compensation disclosure requirements of Nasdaq Listing Rule 5250(b)(3). We follow the requirements of Bermuda law with respect to our compensation committee, disclosure of compensation of our directors and executive officers and information regarding third-party compensation of our directors or director nominee, each of which differ from the requirements of the Nasdaq Listing Rules.

In addition, as permitted by Bermuda law, we have opted not to implement a standalone nominating committee. To this extent, our practice varies from the independent director oversight of director nominations requirements of Nasdaq Listing Rule 5605(e).

The quorum for a general meeting of shareholders is as set out in our Bye-laws, which provides for a quorum of two or more persons present at the start of the meeting and representing in person or by proxy issued and outstanding voting shares in the company. Our practice thus varies from the requirement of Nasdaq Listing Rule 5620(c), which requires an issuer to provide in its bylaws for a generally applicable quorum, and that such quorum may not be less than one-third of the outstanding voting stock. We must provide shareholders with an agenda and other relevant documents for the general meeting of shareholders. However, Bermuda law has no regulatory regime for the solicitation of proxies, thus our practice varies from the requirement of Nasdaq Listing Rule 5620(b), which sets forth certain requirements regarding the solicitation of proxies. In addition, we have opted out of shareholder approval requirements for the issuance of securities in connection with certain events such as the acquisition of stock or assets of another company, the establishment of or amendments to equity-based compensation plans for employees, a change of control of us and certain private placements. To this extent, our practice varies from the requirements of Nasdaq Listing Rule 5635, which generally requires an issuer to obtain shareholder approval for the issuance of securities in connection with such events.

As a result of the above, you may not have the same protections afforded to shareholders of companies that are not foreign private issuers.

We may lose our foreign private issuer status, which would then require us to comply with the Exchange Act’s domestic reporting regime and cause us to incur significant legal, accounting and other expenses.

We are a foreign private issuer and therefore we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act applicable to U.S. domestic issuers. In order to maintain our current status as a foreign private issuer, either (a) a majority of our common shares must be either directly or indirectly owned of record by non-residents of the United States or (b)(i) a majority of our executive officers or directors may not be United States citizens or residents, (ii) more than 50 percent of our assets cannot be located in the United States and (iii) our business must be administered principally outside the United States. These criteria are tested on the last business day of our second fiscal quarter, each year. If we lost this status, we would be required to comply with the Exchange Act reporting and other requirements applicable to U.S. domestic issuers, which are more detailed and extensive than the requirements for foreign private issuers. We may also be required to make changes in our corporate governance practices in accordance with various SEC and stock exchange rules. The regulatory and compliance costs to us under U.S. securities laws if we are required to comply with the reporting requirements applicable to a U.S. domestic issuer may be significantly higher than the cost we would incur as a foreign private issuer. As a result, we expect that a loss of foreign private issuer status would increase our legal and financial compliance costs and would make some activities highly time-consuming and costly. We also expect that if we were required to comply with the rules and regulations applicable to U.S. domestic issuers, it would make it more difficult and expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These rules and regulations could also make it more difficult for us to attract and retain qualified members of our board of directors.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, shareholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our common shares.

Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404 of the Sarbanes-Oxley Act of 2002, or any subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. Inferior internal controls could also subject us to regulatory scrutiny and sanctions, impair our ability to raise revenue and cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common shares.

Management concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2022, due to material weaknesses identified in Item 15, “Controls and Procedures,” of this Annual Report. The Company did not maintain controls to execute the criteria established in the COSO Framework for the control environment, risk assessment, control activities, information and communication, and monitoring components, which resulted in control deficiencies that constitute material weaknesses, either individually or in the aggregate, within each component of the COSO Framework. This was due to the lack of sufficient resources to execute control activities which contributed to the potential for there to have been material errors in our financial statements in addition to the material misstatement that occurred in our interim reporting for the period ended June 30, 2022.

Management is continuing to evaluate the material weaknesses and is in the process of implementing plans to remediate these material weaknesses. We expect our remediation plan to include the following, amongst others:

We cannot assure you that the measures we have taken to date, and are continuing to implement, will be sufficient to remediate the material weaknesses we have identified or avoid potential future material weaknesses. The material weaknesses cannot be considered remediated until applicable controls have operated for a sufficient period and management has concluded, through testing, that these controls are operating effectively. Accordingly, we will continue to monitor and evaluate the effectiveness of our internal control over financial reporting. See Item 15. “Controls and Procedures” for more information.

We are required to disclose changes made in our internal controls and procedures, and our management is required to assess the effectiveness of these controls annually. However, for as long as we are a “non-accelerated filer” under Securities and Exchange Commission rules, our independent registered public accounting firm is not required to attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404. An independent assessment of the effectiveness of our internal controls could detect problems that our management’s assessment might not. Undetected material weaknesses in our internal controls could lead to further financial statement restatements and require us to incur the expense of remediation.

If our remedial measures are insufficient to address the material weaknesses we have identified, these will continue to be disclosed as a material weaknesses. Additionally, if there is a change in conditions, or the degree of compliance with policies or procedure deteriorates, internal review of our internal control over financial reporting or the subsequent testing by our independent registered public accounting firm may reveal other deficiencies in our internal controls over financial reporting that are deemed material weaknesses. If this occurs, our consolidated financial statements or disclosures may contain material misstatements and we could be required to restate our financial results. In addition, if we are unable to successfully remediate any of these material weaknesses, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting or our independent registered public accounting firm may not in future issue an unqualified opinion, each of which could lead to investors losing confidence in our reported financial information, which could have a material adverse effect on the trading price of our common shares, and we may be unable to maintain compliance with applicable stock exchange listing requirements.

If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, the price of our common shares and our trading volume could decline.

The trading market for our common shares depends in part on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts. We cannot assure you that analysts will cover us or provide favorable coverage. If one or more of the analysts who cover us downgrade our common shares or publish inaccurate or unfavorable research about our business, the price of our common shares would likely decline. If one or more of these analysts cease coverage of the Company or fail to publish reports on us regularly, demand for our common shares could decrease, which might cause the price of our common shares and trading volume to decline.

As a Bermuda company, it may be difficult for you to enforce judgments against us or our directors and executive officers.

We are a Bermuda exempted company. As a result, the rights of holders of our common shares are governed by Bermuda law and our memorandum of continuance (the “Memorandum of Continuance”) and Bye-laws. The rights of shareholders under Bermuda law may differ from the rights of shareholders of companies incorporated in other jurisdictions. All of our executive officers and all but one of our directors referred to in this Annual Report are not residents of the United States, and a substantial portion of our assets are located outside the United States. As a result, it may be difficult for investors to effect service of process on those persons in the United States or to enforce in the United States judgments obtained in U.S. courts against us or those persons based on the civil liability provisions of the U.S. securities laws. It is doubtful whether courts in Bermuda will enforce judgments obtained in other jurisdictions, including the United States, against us or our directors or officers under the securities laws of those jurisdictions or entertain actions in Bermuda against us or our directors or officers under the securities laws of other jurisdictions.

Bermuda law differs from the laws in effect in the United States and may afford less protection to holders of our common shares.

We are subject to the laws of Bermuda. As a result, our corporate affairs are governed by the Companies Act 1981 of Bermuda (the “Companies Act”), which differs in some material respects from laws typically applicable to U.S. corporations and shareholders, including the provisions relating to interested directors, amalgamations, mergers and acquisitions, takeovers, shareholder lawsuits and indemnification of directors. Generally, the duties of directors and officers of a Bermuda company are owed to the company only. Shareholders of Bermuda companies typically do not have rights to take action against directors or officers of the company and may only do so in limited circumstances. Class actions are not available under Bermuda law. The circumstances in which derivative actions may be available under Bermuda law are substantially more proscribed and less clear than they would be to shareholders of U.S. corporations. The Bermuda courts, however, would ordinarily be expected to permit a shareholder to commence an action in the name of a company to remedy a wrong to the company where the act complained of is alleged to be beyond the corporate power of the company or illegal, or would result in the violation of the company’s memorandum of association (or memorandum of continuance) or bye-laws. Furthermore, consideration would be given by a Bermuda court to acts that are alleged to constitute a fraud against the minority shareholders or, for instance, where an act requires the approval of a greater percentage of the company’s shareholders than that which actually approved it.

When the affairs of a company are being conducted in a manner that is oppressive or prejudicial to the interests of some shareholders, one or more shareholders may apply to the Supreme Court of Bermuda, which may make such order as it sees fit, including an order regulating the conduct of the company’s affairs in the future or ordering the purchase of the shares of any shareholders by other shareholders or by the company. Additionally, under our Bye-laws and as permitted by Bermuda law, each shareholder has waived any claim or right of action against our directors or officers for any action taken by directors or officers in the performance of their duties, except for actions involving fraud or dishonesty. In addition, the rights of holders of our common shares and the fiduciary responsibilities of our directors under Bermuda law are not as clearly established as under statutes or judicial precedent in existence in jurisdictions in the United States, particularly the State of Delaware. Therefore, holders of our common shares may have more difficulty protecting their interests than would shareholders of a corporation incorporated in a jurisdiction within the United States.

Our Bye-laws restrict shareholders from bringing legal action against our officers and directors.

Our Bye-laws contain a broad waiver by our shareholders of any claim or right of action, both individually and on our behalf, against any of our officers or directors. The waiver applies to any action taken by an officer or director, or the failure of an officer or director to take any action, in the performance of his or her duties, except with respect to any matter involving any fraud or dishonesty on the part of the officer or director. This waiver limits the right of shareholders to assert claims against our officers and directors unless the act or failure to act involves fraud or dishonesty.

We have anti-takeover provisions in our Bye-laws that may discourage a change of control.

Our Bye-laws contain provisions that could make it more difficult for a third party to acquire us without the consent of our board of directors. These provisions provide for:

These provisions could make it more difficult for a third party to acquire us, even if the third party’s offer may be considered beneficial by many shareholders. As a result, shareholders may be limited in their ability to obtain a premium for their shares.

Legislation enacted in Bermuda as to economic substance may affect our operations.

Pursuant to the Economic Substance Act 2018 (as amended) of Bermuda (the “ES Act”) that came into force on January 1, 2019, a registered entity other than an entity which is resident for tax purposes in certain jurisdictions outside Bermuda (“non-resident entity”) that carries on as a business any one or more of the “relevant activities” referred to in the ES Act must comply with economic substance requirements. The ES Act may require in-scope Bermuda entities which are engaged in such “relevant activities” to be directed and managed in Bermuda, have an adequate level of qualified employees in Bermuda, incur an adequate level of annual expenditure in Bermuda, maintain physical offices and premises in Bermuda or perform core income-generating activities in Bermuda. The list of “relevant activities” includes carrying on any one or more of the following activities: banking, insurance, fund management, financing, leasing, headquarters, shipping, distribution and service center, intellectual property and holding entities. We are carrying on relevant activities for the purposes of the ES Act and are required to comply with such economic substance requirements. Our compliance with the ES Act could affect the manner in which the Company operates its business or result in additional costs, which could adversely affect its business, financial condition and results of operations.

ITEM 4. INFORMATION ON THE COMPANY

We are a clinical-and commercial-stage biopharmaceutical company developing therapeutics that address important unmet medical needs. We are currently active in two areas: the development of RNA delivery technology and therapeutics for extrahepatic targets (OligoPhore™ / SemaPhore™ platforms; AM-401 for the treatment of KRAS driven cancer, AM-411 for the treatment of rheumatoid arthritis; preclinical), and nasal sprays for protection against airborne allergens, and where approved, viruses (Bentrio®; commercial) or the treatment of vertigo (AM-125; Phase 2). We have announced our intention to reposition the Company around RNA delivery technology while exploring strategic options to either divest our non-RNA traditional businesses or partner them with one or several other companies. In particular, we have announced that we are in active discussions for the partnering of Bentrio® for North America, Europe and other key markets and have been active in the process of selling our inner ear therapeutics assets.

OligoPhore™ / SemaPhore™ platforms

Through the acquisition of Trasir in June 2021 we entered the field of RNA delivery technology. Trasir’s core technology is the proprietary peptide polyplex platform OligoPhore™ and its equivalent SemaPhore™ that can engage any type of short interfering RNA (siRNA) or messenger RNA (mRNA), respectively, in rapid self-assembly. The technology is designed to allow for systemic or local delivery of RNA payloads with efficient cellular uptake and extensive endosomal release. Importantly, it enables delivery to target tissues outside the liver, creating the potential for developing RNA-based therapies for a range of indications with substantial unmet need. In various murine models of disease, OligoPhore™ and SemaPhore™ have been shown to protect the RNA payload (siRNA and/or mRNA) from degradation in the circulation, while enabling pH-dependent nucleotide endosomal escape and cytoplasmic delivery.

AM-401

In July 2021 we announced the selection of KRAS-driven cancer as the first therapeutic indication for our OligoPhore™ oligonucleotide delivery platform. The therapeutic objective for AM-401 is to slow down KRAS driven tumor cell proliferation or to stop it altogether by delivering siRNA specifically inside tumor cells for gene knock down. The siRNA is targeting different KRAS mutations. We aim to advance the AM-401 program through preclinical studies with the objective of filing for an IND in 2024.

AM-411

In July 2022 we announced the initiation of AM-411, our second development project for an RNA therapeutic based on the OligoPhore™ delivery platform. AM-411 seeks to treat rheumatoid arthritis (RA) by targeting siRNA at p65, one of the main transcriptional regulators of the NF-kB pathway and a key checkpoint in RA inflammation. We aim to advance the AM-411 program through preclinical studies with the objective of filing for an IND in 2024.

AM-125

We have been developing AM-125 for the intranasal treatment of acute vestibular syndrome (AVS). In February 2017 we entered into an asset purchase agreement with Otifex, pursuant to which we have purchased various assets related to betahistine dihydrochloride in a spray formulation. The assets included preclinical and clinical data as well as certain intellectual property rights. In a Phase 1 clinical trial conducted by Otifex in 40 healthy volunteers intranasal betahistine showed good tolerability and significantly higher betahistine concentrations in blood plasma than reported for oral betahistine administration.

In 2018, we conducted a second Phase 1 clinical trial with AM-125 in 72 healthy volunteers. The randomized double blind placebo controlled trial demonstrated superior bioavailability over a range of four intranasal betahistine doses compared to oral betahistine, with plasma exposure being 5 to 29 times higher (unadjusted for dose; p-value between 0.056 and p < 0.0001). Further, it showed that the treatment was well tolerated when administered three times daily for three days. Single doses were escalated up to 60 mg, and repeated doses up to 40 mg. For the latter, the maximum tolerated dose based on local tolerability was determined at 40 mg.

In June 2022, we announced top-line data from our Phase 2 TRAVERS trial with AM-125 in AVS. The randomized, double-blind, placebo-controlled TRAVERS trial enrolled at more than ten study sites across Europe a total of 124 patients who suffered from acute vertigo following surgery for the removal of a tumor. Patients were randomized to receive either AM-125 at up to 20 mg or a placebo three times daily for four weeks, which was followed by a two-week treatment-free observation period. In addition, all trial participants followed a standardized course of vestibular rehabilitation therapy. Improvement in the “Tandem Romberg” test, which measures how long patients manage to maintain balance with their two feet aligned one after the other while they have their eyes closed, served as the primary efficacy outcome. For reference, the trial also included 16 patients who received ‘open label’ oral betahistine at 16 mg three times daily (the approved dose in most countries worldwide).

The TRAVERS trial demonstrated good tolerability of AM-125. Further, administration of AM-125 resulted in a dose- and time-dependent improvement in balance and signs and symptoms of vestibular dysfunction. At treatment period end, patients treated with AM-125 20 mg on average managed to maintain balance for 12.5 seconds vs. 7.5 seconds for placebo treated patients, which is a statistically significant improvement (p=0.0242; least square means in repeated-measure ANCOVA model, per protocol population). This was corroborated by higher frequency of complete spontaneous nystagmus resolution (34.5 vs. 20.0% of patients).

We have discussed the regulatory requirements for AM-125 during a pre-Investigational New Drug meeting with the FDA and in the context of scientific advice meetings with the EMA and two European national health authorities to further define the development program. We have designed additional trials with AM-125 and in May 2023 submitted an application for an IND to the FDA. As part of our strategic repositioning, we expect to either divest the AM-125 program or out-license it and currently do not intend to continue development of the program on our own.

Under product code AM-201, we evaluated intranasal betahistine also for its potential use in the prevention of antipsychotic induced weight gain and drowsiness. In 2019, we initiated a Phase 1b trial in Europe to evaluate AM-201’s safety and therapeutic effects in this indication. Participants received either AM-201 (1, 2.5, 5, 10, 20 or 30 mg) or placebo in parallel with oral olanzapine (10 mg) once a day for four weeks. In May 2020, we announced that at AM-201 30 mg, the mean weight gain from baseline to the end of the treatment period was 2.8 kg compared against 3.7 kg in control subjects; the primary efficacy endpoint of mean reduction in weight gain was 0.9 kg and statistically significant (p<0.02; n=81 with pre-specified Bayesian augmented controls). In the context of our strategic repositioning, we have decided to deprioritize project AM-201 and suspended all development work.

Bentrio® (AM-301)

In September 2020 we announced the launch of the development of Bentrio® (AM-301), a drug-free nasal spray for protection against airborne viruses and allergens through a newly created subsidiary, Altamira Medica Ltd. Bentrio®, which is now being commercialized in Germany and other European countries under the CE mark as an “over the counter” product under the brand name Bentrio®, is a gel emulsion which works by forming a protective layer on the nasal mucosa that acts as a mechanical barrier against airborne viruses allergens. The barrier consists of two elements: (1) a mucoadhesive film lining the nasal cavity and preventing contact of airborne viruses or allergens with the nasal mucosa to reduce the risk of viral infection or allergic reactions; (2) the trapping / binding of such viruses or allergens, allowing for their removal e.g. through mucociliary clearance. In addition, the product helps to humidify and thus maintain the nasal mucosa’s function in clearing viruses and allergens from the nasal cavity. The key component of Bentrio® is bentonite, a naturally occurring clay.

We have shown that Bentrio® can provide help to people suffering from allergic rhinitis by reducing their exposure to airborne allergen particles e.g. from pollens, house dust or animal hair. In 2021, we conducted an open-label randomized cross-over study with AM-301 that enrolled 36 patients with allergic rhinitis caused by grass pollen. Study participants were administered a single dose of Bentrio® nasal spray or hydroxypropylmethylcellulose, a comparator product, prior to controlled pollen exposure for four hours in an allergen challenge chamber. The challenge was repeated with the alternate treatment following a wash-out period. The study demonstrated a rapid onset and long durability of Bentrio’s protective effect, established 510(k) substantial equivalence to the marketed comparator with superior efficacy ratings by patients and clinicians, and showed good tolerability.

In May 2022, we announced the results from a clinical trial with Bentrio® in house dust mite (HDM) allergic rhinitis. The trial enrolled a total of 37 patients with a history of perennial allergic rhinitis (“PAR”) caused by HDM exposure. Study participants were randomized under an open label, three-period crossover design to receive either Bentrio® in a single or double dose, or no treatment, prior to controlled allergen exposure in an environmental exposure chamber for three hours. Bentrio® treatment reduced the increase in mean total nasal symptoms score (TNSS) by 1.1 points (-1.87 to -0.28 in the 95% confidence interval; p<0.01) vs. no treatment. There was no meaningful difference in outcomes between a single or double puff per nostril. Bentrio® treatment was well tolerated.

In December 2022 we completed enrollment into a randomized controlled clinical trial (the “NASAR” trial) with Bentrio® in seasonal allergic rhinitis (SAR) in Australia. NASAR enrolled 100 SAR patients that were randomized at a 1:1 ratio to either receive Bentrio® or saline spray via self-administration three times per day, or as needed, for two weeks. Saline nasal sprays are currently the most frequently used type of drug-free treatment for SAR. The primary endpoint will be the comparison of the reflective Total Nasal Symptom Score (rTNSS) under treatment with Bentrio® against saline spray. In January 2023, we announced the results of an interim analysis based on data from the first 53 participants in the NASAR trial. The interim analysis showed a decrease of the rTNSS in the Bentrio® group from 6.7 points in the pre-treatment period to 5.1 points over the 14-day treatment period, while the saline spray group showed a decrease from 7.6 to 7.1 points. The difference of 1.55 points in favor of Bentrio® was statistically significant in the ANCOVA model (LSmeans; p = 0.015; 95% confidence interval -2.78 to -0.32). The interim analysis further showed good tolerability both for Bentrio® and the comparator.

We believe that AM-301 could help to reduce the risks of exposure from airborne transmission of certain virus particles. We tested Bentrio® in vitro in a series of experiments using reconstituted human nasal epithelia infected with SARS-CoV-2 or H1N1 influenza virus. Daily treatment with AM-301, beginning right before inoculation or 24-30 hours thereafter showed significant reductions of the viral titer compared to saline treated controls. In case of SARS-CoV-2, a protective effect was observed with the original virus, the Delta variant as well as the Omicron variant. In January 2023 we announced top-line data from a clinical trial in acute COVID-19 (“COVAMID”). The trial enrolled a total of 160 subjects in Bulgaria and North Macedonia who were randomized within 3 days from symptom onset at a 2:1:1 ratio to receive for 10 days either Bentrio®, modified (Bentrio® (lacking one mineral component), or no treatment, followed by a 10-day observation phase. The primary efficacy endpoint was the change in PCR cycle threshold (CT). The trial showed a mean increase in the CT value from baseline to Day 11 of 15.3 for the Bentrio® group, 14.1 for the modified Bentrio® group and 13.7 for the untreated control group. The difference in the mean change of CT of the Bentrio® group vs. the untreated and the modified Bentrio® groups to Day 11 failed to reach statistical significance (LSmeans 0.8 and 0.64; p = 0.319 and 0.427; 95% CI -0.78 to 2.38 and -0.95 to 2.23, respectively). More Bentrio® and modified-Bentrio® treated patients achieved full resolution of COVID-19 signs and symptoms by Day 11 than untreated patients (93.7 and 92.5 vs. 85.0%) and more of them were uninfected or asymptomatic at that time point (59.5 and 65.0 vs. 45.0%). The treatment was well tolerated. The incidence of adverse events in the Bentrio® group was 2.4% (mild cases only), 9.5% in the modified-Bentrio® group, and 14.0% in the untreated group (including two cases of unwitnessed sudden death after Day 11). We believe that, based on the mode of action of Bentrio®, the product is used most effectively prophylactically.

Since Bentrio® does not contain any active substance, it is regulated and marketed as an “over-the-counter” medical device. In May 2021 we completed the conformity assessment procedure for marketing the product in the member states of the European Union (EU), and in September 2021 we filed a 510(k) premarket notification with the FDA, for premarket clearance of Bentrio® as a Class II device for the intended use of promoting alleviation of mild allergic symptoms triggered by the inhalation of various airborne allergens. On June 24, 2022 we received 510(k) clearance for Bentrio®.

We intend to market Bentrio® primarily through third parties. We already have entered into marketing and distribution agreements with several collaboration partners in Asia and Europe and intend to cover further markets in particular in Europe and North America.

Keyzilen®

We have been developing Keyzilen®, Esketamine gel for injection, for the treatment of acute inner ear tinnitus. Esketamine is a potent, small molecule non-competitive NMDA receptor antagonist. Keyzilen® is formulated in a biocompatible gel and delivered via intratympanic injection. It demonstrated a favorable safety profile and positive effect on PROs associated with tinnitus in two Phase 2 clinical trials. In two Phase 3 clinical trials (TACTT2 and TACTT3), we were unable to confirm the efficacy of Keyzilen® as both of them did not meet their primary efficacy endpoints. We believe we have identified two principal sources for the negative outcomes from the TACTT trials: (i) the high frequency of tinnitus loudness ratings over an extended period of time and (ii) an unexpectedly high level of variability in outcomes among study sites. A survey among a number of TACTT3 participants revealed that the daily capture of tinnitus loudness and annoyance caused a number of patients to excessively focus on their tinnitus symptoms. In addition, it was observed that a non-negligible number of study participants presumably became tired of the daily ratings after some time and stopped providing actual values. With respect to variability, our analysis subsequent to the unblinding of the trial data has shown positive outcomes at numerous sites, including many of the high enrolling study centers, but inconclusive or contradictory outcomes at other sites.

In April 2019, we announced that we had completed the design of a pivotal Phase 2/3 trial for Keyzilen®. The trial shall, in two stages, reaffirm the compound’s efficacy in the treatment of acute tinnitus and provide confirmatory efficacy data to support a filing for marketing authorization. In September 2019, we announced that we have obtained advice on the development plan and regulatory pathway from the U.S. Food and Drug Administration (“FDA”) in the context of a Type C meeting and from the European Medicines Agency (“EMA”) in the context of a Scientific Advice procedure for Keyzilen®. In the context of our strategic repositioning, we aim to divest or partner the Keyzilen® program.

Sonsuvi®

We also have been developing Sonsuvi® for acute inner ear hearing loss. In a Phase 2 clinical trial, AM-111 showed a favorable safety profile. Furthermore, in patients with severe to profound ASNHL, we observed a clinically relevant improvement in hearing threshold, speech discrimination and a higher rate of complete tinnitus remission compared with placebo. In November 2017, we announced that the HEALOS Phase 3 clinical trial that investigated Sonsuvi® in the treatment of acute inner ear hearing loss did not meet the primary efficacy endpoint. However, a post-hoc analysis of the subpopulation with profound acute hearing loss (PTA ≥ 90 dB at baseline in accordance with a commonly used classification of hearing loss severity) revealed a clinically meaningful and nominally significant improvement in the Sonsuvi® 0.4 mg/mL treatment group.

Based on the HEALOS results, we submitted the design of a new pivotal trial with AM-111 0.4 mg/mL in patients suffering from acute profound hearing loss to the EMA and subsequently also to the FDA for review. Through a Protocol Assistance procedure the EMA endorsed the proposed trial design, choice of efficacy and safety endpoints, as well as the statistical methodology. In a Type C meeting with written responses, the proposed choice of primary and secondary efficacy endpoints, the safety endpoints, as well as the planned sample size and statistical methodology were also endorsed by the FDA. In the context of our strategic repositioning, we aim to divest or partner the Sonsuvi® program.

Trasir Acquisition

On June 1, 2021, the Company, Auris Medical Inc., an Illinois corporation and wholly owned subsidiary of the Company (“Subco”), Trasir Therapeutics, Inc., a Delaware corporation (“Trasir”), and each of the stockholders of Trasir (the “Trasir Stockholders”) entered into an Agreement and Plan of Merger (the “Merger Agreement”). Pursuant to the Merger Agreement, the Company acquired Trasir through the merger of Subco with and into Trasir (the “Merger”), with Trasir surviving the merger as the surviving entity (the “Surviving Corporation”). The Merger closed on June 1, 2021. As a result of the Merger, the shares of common stock of Trasir immediately prior to the effective time of the Merger converted into the right to receive: (i) the applicable pro rata share of an aggregate of 764,370 common shares, calculated based on a value of $2,500,000 divided by the average closing price of the common shares on the 15 trading days preceding the closing date; (ii) contingent on the occurrence of positive results from a subsequent post-closing scientific study led by Trasir (“Positive Results”), the applicable pro rata share of $1,500,000 of common shares, to be calculated based on the average closing price of the common shares on the 15 trading days preceding the occurrence of Positive Results; and (iii) $210,000 for expenses (the “Trasir Stockholder Expenses”) incurred in connection with the execution, delivery and performance of the Merger Agreement by certain Trasir Stockholders, paid partially in cash and partially in common shares based on the average closing price of the common shares on the 15 trading days preceding the closing date. In connection with the Merger, the Company also entered into an employment agreement with Dr. Samuel Wickline. Effective June 1, 2021, Dr. Wickline became the Chief Scientific Officer of the Company. He stepped down as CSO, Chief Scientific Officer, by the end of 2022 and has been serving on a part-time consulting basis as Chief Scientific Adviser since January 1, 2023.

Capital expenditure and divestitures

Our actual capital expenditures for the years ended December 31, 2022, 2021 and 2020 amounted to CHF 2.1 million, CHF 6.7 million and CHF 2.3 million, respectively. Our capital expenditures primarily consist of intangible assets (capitalized expenditures) related to AM-125 (mainly in Switzerland and Australia) and the upfront and milestone payments related to the acquisition of Trasir.

Corporate information

We are an exempted company organized under the laws of Bermuda. We began our current operations in 2003. On April 22, 2014, we changed our name from Auris Medical AG to Auris Medical Holding AG and transferred our operational business to our newly incorporated subsidiary Auris Medical AG, which is now our main operating subsidiary. On March 13, 2018, we effected a corporate reorganization through the Merger into a newly formed holding company for the purpose of effecting the equivalent of a 10-1 “reverse share split.” Following shareholder approval at an extraordinary general meeting of shareholders held on March 8, 2019 and upon the issuance of a certificate of continuance by the Registrar of Companies in Bermuda on March 18, 2019, the Company discontinued as a Swiss company and, pursuant to Article 163 of the Swiss Federal Act on Private International Law and pursuant to Section 132C of the Companies Act 1981 of Bermuda (the “Companies Act”), continued existence under the Companies Act as a Bermuda company with the name “Auris Medical Holding Ltd.” (the “Redomestication”). By resolution of a Special General Meeting of Shareholders held on July 21, 2021 we adopted the new company name Altamira Therapeutics Ltd. Our registered office is located at Clarendon House, 2 Church Street, Hamilton HM11, Bermuda, telephone number +1 (441) 295 5950. We maintain a website at www.altamiratherapeutics.com where general information about us is available. Investors can obtain copies of our filings with the SEC from this site free of charge, as well as from the SEC website at www.sec.gov. We are not incorporating the contents of our website into this Annual Report.

Our goal is to become a leading biomedical company focused on developing and commercializing RNA delivery technology. We believe that the use of RNA therapeutics – be it siRNA, mRNA or other types – to control the expression of disease-relevant genes holds great promise. By engaging targets that are otherwise ‘undruggable’ by small molecules and proteins, whole new avenues are expected to open up with RNA therapeutics for treating intractable diseases. However, delivering RNA therapeutics into the right cell of the right tissue has been one of the key challenges preventing their more widespread adoption so far.

So far, most RNA therapeutics have been directed at the liver using delivery platforms based on lipid nanoparticles or GalNAc, an amino sugar derivative of galactose. In contrast, delivery to non-liver (that is extrahepatic) tissues has been largely elusive so far. Our proprietary peptide polyplex platform OligoPhore™ and its equivalent SemaPhore™ can engage any type of short interfering RNA (siRNA) or messenger RNA (mRNA), respectively, in rapid self-assembly. The technology is designed to allow for systemic or local delivery of RNA payloads with efficient cellular uptake and extensive endosomal release. Importantly, it enables delivery to target tissues outside the liver, creating the potential for developing RNA-based therapies for a range of indications with substantial unmet need.

The key elements of our strategy are:

Delivering RNA therapeutics to extrahepatic tissues

OligoPhore™ / SemaPhore™ is a versatile platform for delivery of oligonucleotides such as siRNA (small interfering ribonucleic acid) or mRNA (messenger RNA) into target cells. Using the same technology, OligoPhore™ designates the platform for oligonucleotides, whereas SemaPhore™ designates the platform for mRNA. It is based on a proprietary 21 amino acid peptide that can engage any type of RNA in rapid self-assembly into a polyplex. The polyplex has a size, charge, and other physical features that allow it to escape hepatic clearance and thus to reach other target tissues than the liver. OligoPhore™ / SemaPhore™ protects the RNA payload from degradation in the circulation and allows for rapid cellular uptake, while enabling pH-dependent nucleotide full endosomal escape and cytoplasmic delivery.

Effective delivery and positive treatment outcomes have been demonstrated with OligoPhore™ in more than 10 diverse murine models of disease for cancer, cardiovascular, and rheumatological targets in the NF-κB family, various members of the ETS transcription factor family, and targets in the JNK and TAM pathways. With SemaPhore™, positive results have been demonstrated so far in three different murine disease models in osteoarthritis, atherosclerosis and aortic aneurysm with WNT 16, p27^Kip1 and SOD2 as targets. All of these results have been published in peer-reviewed journals.

The preparation of the polyplex formulations is relatively straightforward. The peptide carrier rapidly condenses nucleotides within minutes by mixing at a pre-defined ratio. The interaction between RNA sequence and peptide is initially electrostatic, but importantly an exothermic process of strong hydrogen bonding takes place between the histidines and nucleic acids to markedly stabilize the polyplex. A thin coating of albumin or hyaluronic acid is used to further stabilize the system. Once the polyplex is formed it can be injected intravenously or intraperitoneally, or by any other route that reaches the circulation. The polyplex readily escapes the leaky vasculature of various pathologies and is taken up avidly by cells that are capable of macropinocytosis such as cancer cells or macrophages. However, we also have transfected endothelium, smooth muscle, and other cell types. Once in the endosome, the natural process of acidification breaks strong bonds between the RNA and the peptide to disassemble the polyplex. The released peptide interacts with the endosomal membrane to permeabilize it and release the RNA into the cytoplasm. The peptide is then diluted quickly and broken down, causing no unintended damage to the cell membrane itself.

In July 2021 we announced the selection of KRAS-driven cancer as the first and in July 2022 the selection of rheumatoid arthritis as the second therapeutic indication for our OligoPhore™ oligonucleotide delivery platform (AM-401 and AM-411). We aim to advance the AM-401 and AM-411 programs through preclinical studies with the objective of filing for an IND in 2023 and 2024, respectively. In parallel, we will seek to leverage the OligoPhore™ / SemaPhore™ through collaborations with other biopharmaceutical companies and the out-licensing of technology for specific indications.

Market for RNA therapeutics

RNA therapeutics is a rapidly emerging field of human medicine that has the potential to change the standard of care for many diseases and target previously undruggable pathways. Traditional small molecule drugs target active sites of proteins so as to inhibit or alter their function; however, only ∼1.5% of the human genome encodes proteins (Damase et al., 2021), and only 10–14% of proteins have active binding sites that are “druggable” targets for small molecules (Hopkins and Groom, 2002). Thus the “druggable” targets for small molecule therapies is limited. This limitation was addressed in part by recombinant protein technology which has become a significant share of the pharmaceutical market (Damase et al., 2021). However, recombinant proteins have limitations as drugs, particularly due to size and stability issues. By contrast, nucleic-acid based strategies avoid many of these limitations as they make use of the translational machinery of the human cell.

RNA therapeutics comprise four broad categories: aptamers, antisense oligonucleotides (ASOs), RNA interference (RNAi) and messenger RNA (mRNA). Aptamers are oligonucleotide or peptide molecules that bind to a specific target molecule to inhibit signal transduction. ASOs bind to mRNA, rendering it inactive, whereas RNAi (short interfering RNA or siRNA and micro RNA or miRNA) promote the degradation of specific mRNA molecules. Rather than silencing defective genes as ASOs and RNAi do, mRNA promotes protein expression to compensate for a defective gene/protein. Regardless of the type of RNA therapeutic, delivery into target cells and tissues has proved to be a major challenge as RNA is inherently unstable and tends to show poor cellular uptake. Various delivery technologies have been developed to address these challenges, including the use of nanocarriers or bioconjugates for targeted delivery. While there has been substantial progress with delivery of RNA therapeutics to the liver, other target tissues and organs have remained difficult to reach.

In 2016, the FDA approved the first two ASO based therapeutics and in 2018 the first siRNA therapeutic. Further approvals have followed, and there is a growing number of RNA therapeutics in clinical development. With the rapid development of vaccines against COVID-19, which use mRNA to instruct muscle cells to produce the non-infectious SARS-CoV-2 spike protein to induce specific neutralizing antibodies, some key advantages of RNA-based therapeutics such as rapid design and scale-up in manufacturing have been highlighted. According to a recent report published by Allied Market Research the global market for RNA therapeutics (RNAi and ASOs) reached $4.9 billion in 2021 and is expected to grow to $25.1 billion in 2030. In another recent report by Research and Markets, it is estimated that the global market for mRNA therapeutics should grow from $46.7 billion in 2021 to $101.3 billion by 2026.

Protection against airborne viruses and allergens

With our Bentrio® nasal spray, we are aiming to provide protection against airborne viruses and allergens. The nose is the first organ of the respiratory system. Its main function is breathing, bringing warm humidified air into the lungs. Filtering of the air by nasal hair in the nostrils prevents large particles from entering the lungs. The interior of the nose, which is called the nasal cavity, is lined by the nasal mucosa, one of the anatomical structures which form the physical barriers of the body’s immune system. These barriers provide mechanical protection from the invasion of infectious and allergenic pathogens. Sneezing is a reflex to expel unwanted particles from the nose that irritate the mucosal lining.

Through the intake of air, the nasal cavity and nasal mucosa are exposed to a variety of airborne pathogens such as viruses and bacteria and allergens such as pollen, house dust mites or animal hair. Unless they are neutralized by the immune system, these pathogens may cause infections. In case of allergens, the body may develop sensitivity to them, resulting in an inflammatory reaction including the release of certain chemicals such as histamine affecting the nasal mucosa. This inflammatory condition is called allergic rhinitis. Its main symptoms include nasal itching and sneezing, runny nose, and nasal congestion.

Market for allergic rhinitis and viral infection treatments

Allergic rhinitis is a very frequent condition. According to results from the National Health Interview Survey published in 2010 by Schiller and colleagues, roughly 7.8% of people 18 and over in the U.S. have hay fever. In 2010, 11.1 million visits to physician offices resulted with a primary diagnosis of allergic rhinitis, as shown by the National Ambulatory Medical Care Survey. Besides de-sensitization (allergen-specific immunotherapy), there is no cure for allergic rhinitis. In most cases treatment aims to relieve symptoms. Antihistamines relieve symptoms of allergic rhinitis by blocking or reducing the action of histamines, which the body releases when under attack from allergens. However, antihistamines can sometimes cause drowsiness. The most effective and safest way to prevent or decrease the allergic symptoms is to avoid, remove, or protect against exposure to airborne allergens. For 2023, the market size for “over the counter” allergy medicines in the U.S. is estimated by Ibis World to reach $3.9 billion.

Infections from airborne viruses are very common. Viruses known to spread by airborne transmission (and also other routes) include rhinoviruses (cause common cold symptoms), influenza viruses (type A, type B, H1N1), varicella viruses (cause chickenpox), measles virus, mumps virus, enterovirus, norovirus, coronaviruses among others. Worldwide and nearly year-round, human rhinovirus (HRV) is the most common cause of upper respiratory tract infection and is responsible for more than one-half of cold-like illnesses. The treatment of HRV infection remains primarily supportive, including over-the-counter products aimed at symptom relief. Revenues in the U.S. for cold and cough remedies such as antihistamines, antibiotics, decongestants, expectorants and bronchodilators are expected to exceed $10.8 billion in 2023. According to the U.S. Centers for Disease Control and Prevention (CDC), influenza resulted in 9-41 million illnesses, 140,000-710,000 hospitalizations and 12,000-52,000 deaths annually from 2010-2020. Protection against influenza may be achieved by seasonal vaccination (“flu shots”); in case of infection, there are a number of approved antiviral drugs available such as oseltamivir, zanamivir, peramivir or baloxavir marboxil.

The current COVID-19 pandemic has highlighted the large impact that viral infections can have on health, quality of life and economic activity. Since the outbreak began, more than 675 million people have been reported as infected and more than 6.87 million deaths have been counted globally. Thanks to massive and urgent efforts by public and private entities, vaccines could be developed in record time; in addition, the first oral antiviral treatments were approved, and dozens of other potential treatments have been under development. Although most of the population has been vaccinated in industrialized countries, a substantial number of people remain unvaccinated with even lower vaccination rates in most developing countries. It is uncertain at this point when and to what extent the COVID-19 pandemic can be ended or significantly mitigated in its effects as vaccine roll-outs take time and mutations of SARS-CoV-2 have developed which appear to reduce the protective effects of the newly developed vaccines.

Treatment of neurotologic conditions

The three most frequent neurotologic disorders are vertigo / dizziness, hearing loss and tinnitus. With AM-125, we are aiming to treat acute vestibular syndrome (AVS), which is described as sudden onset of continuous vertigo lasting days to weeks and associated with nausea, head motion intolerance, and unstable balance. The vestibular system is responsible for the sensations of balance and motion. For this, the brain receives, integrates, and analyzes information it receives from the left and right inner ear on the altitude, rotation, and linear motion of the head, visual input from the eyes and input from joint and muscle receptors (the propriosensory system). When vestibular input from each inner ear is equal, the system is in balance, and there is no sense of movement. When inputs are unequal, the brain interprets this as movement. As a result, compensatory eye movements and postural adjustments occur to maintain balance. However, when some pathology (e.g., inflammation or trauma) disrupts signaling unilaterally, the result is an imbalance in vestibular input that can lead to vertigo.

Betahistine, the active substance of AM-125, has been used for decades for the treatment of vertigo. However, when administered orally, only small quantities of the drug actually reach the blood stream and can be distributed to the inner ear and the brain due to rapid and pronounced first pass metabolism. As a consequence of the low bioavailability, there has been significant variability in therapeutic outcomes. With AM-125, we are using intranasal delivery of betahistine.

The nasal cavity is highly vascularized and provides a large surface area for drug absorption. In addition, the nasal route allows for avoiding hepatic first-pass metabolism and degradation of a drug in the gastrointestinal tract when taken orally since the active substance will be absorbed directly into the blood circulation. Further, intranasal delivery is convenient, non-invasive and suitable for self-administration.

For our projects Keyzilen® (AM-101) and Sonsuvi® (AM-111), we are targeting specifically the cochlea, which together with the vestibule and the semicircular canals of the peripheral vestibular system forms the inner ear. The snail-shaped cochlea is the sensory organ at the periphery of the auditory system, which transmits sound along the auditory pathway up to the brain for hearing. Acute insults to the cochlea from a variety of sources – for example, loud noise, infection or insufficient blood supply – may lead to excessive levels of glutamate, the principal neurotransmitter in the cochlea as well as other pathological processes. This in turn may damage cochlear hair cells, which tune and amplify sound inside the cochlea or convert mechanical movement into neural signals, as well as cochlear neurons. Such damage may result in the symptoms of inner ear hearing loss and/or inner ear tinnitus that can be transitory as natural repair mechanisms set in or that become permanent when hair cells or neurons die or are permanently injured.

Because the cochlea is located deep inside the head and because it is separated from the middle ear by a combination of bone and membranes, the interior of the cochlea is a challenging location for drug delivery. We have chosen to deliver certain of our products via intratympanic injection across the ear drum (also known as the tympanic membrane) into the middle ear cavity. By formulating our products with biocompatible gels, we facilitate the diffusion of active substances across the round window membrane into the cochlea at clinically meaningful concentrations.

Market for neurotologic treatments

Inner ear disorders, including hearing loss, tinnitus, and vertigo, are common and often inter-related conditions. Chronic inner ear disorders such as tinnitus and hearing loss are highly prevalent. According to the National Institute on Deafness and Other Communication Disorders, or NIDCD, more than four out of ten Americans, at some point in their lives, experience an episode of dizziness significant enough to see a doctor. According to research by Saber Tehrani and colleagues published in the journal Academic Emergency Medicine in 2013 there were almost four million emergency room visits in 2011 in the U.S. for problems of dizziness or vertigo. According to data from the National Health and Nutrition Examination Survey published by Agrawal and colleagues in the journal Archives of Internal Medicine in 2013, 35.4% of the U.S. population aged 40 years and older suffered from vestibular dysfunction (i.e. failing the “Standing on Foam” test) from 2001-2004.

Also according to the NIDCD, approximately 10% of the U.S. adult population, or about 25 million Americans, have experienced tinnitus lasting at least five minutes in the past year. Additionally, according to a 2016 publication by Bhatt et al. in the journal JAMA Otolaryngology—Head and Neck Surgery, 21.4 million (9.6%) U.S. adults experienced tinnitus in the preceding 12 months. The NIDCD also reports that 37.5 million Americans, or 15% of the adult U.S. population, report having some trouble hearing. Epidemiological studies reveal comparable prevalence rates for Europe. Additionally, according to a 2016 publication by Hoffman et al. in the journal JAMA Otolaryngology—Head and Neck Surgery, the annual prevalence of speech-frequency hearing loss among adults aged 20 to 69 years was 14.1% (27.7 million) in the 2011-2012 period.

As reported by Singh & Singh in a 2012 publication in the journal of Otorhinolaryngology Clinics, there are several drugs available for the treatment of vertigo, however they were all introduced several decades ago and have only limited clinical utility. In the US, diphenhydramine, meclizine, promethazine and benzodiazepines are frequently used as vestibular suppressants; they act centrally and have a sedating effect which may impose a serious limitation when the activities of the subject require alertness. Outside the US, betahistine is frequently used as a non-sedating treatment for vertigo; it was also introduced several decades ago. As for the treatment of tinnitus or hearing loss, to our knowledge, there is currently no FDA or EMA approved drug therapy on the market.

Our Products and Product Candidates

AM-401 in KRAS driven cancers

KRAS driven cancers

The KRAS gene encodes the Ras protein which controls – like an “on / off switch” – cell growth, cell maturation, and cell death. Through mutations, the Ras proteins can be rendered persistently active, causing cancer cells to grow and spread in the body. Mutations of KRAS are associated with poor prognosis in several cancers, and there is a substantial body of evidence supporting the role of KRAS in the initiation and maintenance of cancer. As described by Herdeis and colleagues in a 2021 publication in the journal Current Opinion in Structural Biology, mutated forms of KRAS are found in one-fifth of all human cancers, including 32% of non-small-cell lung cancers (NSCLCs), 40% of colorectal cancers (CRCs) and 85–90% of pancreatic cancers. According to the American Cancer Society, overall, almost 150,000 new cases of KRAS mutated tumors are diagnosed in the United States alone across these three tumor types each year. It has been estimated that mutations in KRAS alone account for approximately one million deaths per year worldwide (Simanshu et al., 2017).

Since the original discovery of KRAS as an oncogene in 1982, there have been intense efforts to develop a targeted therapeutic for KRAS mutant cancers. Although the role of KRAS mutations in cancer has been known for decades, they have remained a challenging target for therapeutic interventions. KRAS was long considered undruggable, in part because its surface lacked obvious binding sites. Only recently did the FDA approve with sotorasib the first ever treatment for KRAS driven cancer. Sotorasib, a small molecule, received accelerated approval as second-line treatment for KRAS G12C-mutated NSCLC.

Our solution – AM-401

We are applying our OligoPhore™ technology to KRAS driven cancers for first clinical proof of concept. Our unique approach utilizes a custom-designed 21 amino acid peptide that rapidly condenses peptide and nucleotide components into a polyplex with a size, charge, and other physical features that allow it to escape hepatic clearance. The technology has the following features:

The therapeutic objective for AM-401 is to slow down KRAS driven tumor cell growth and proliferation or to stop it altogether by delivering siRNA specifically inside tumor cells for gene knock down. As described by Strand and colleagues in a 2019 issue of the scientific journal Oncotarget, in vitro and in vivo experiments demonstrated efficient uptake of OligoPhore™ (then known as p5RHHH) nanoparticles with KRAS-targeted siRNA in colorectal and pancreatic cancer cells, strong inhibition of KRAS expression, reduced viability of tumor cells and significant reduction in tumor growth and volume. Importantly, a murine model demonstrated the capacity of the OligoPhore™ platform to drive targeted delivery of the nanoparticles specifically to tumor cells.

Based on these outcomes, we started in silico and in vitro work to screen and select the most effective siRNA sequences and to optimize their properties. Our polyKRAS^mut siRNA approach allows to target different KRAS mutations and is thus polyvalent. The process of sequence selection and optimization will be followed by further in vivo testing. Meanwhile, we have been working on the scale up in the synthesis of the peptide base of OligoPhore™ and process development for the manufacture of the nanoparticles. We intend to review and discuss our plans for IND-enabling preclinical studies with the FDA in the context of a Pre-IND meeting. Subject to the opening of an IND (or equivalent clearance by another regulatory agency), we expect to conduct a Phase 1 clinical trial in patients with KRAS driven cancer.

AM-411 in rheumatoid arthritis

Rheumatoid arthritis

Rheumatoid arthritis (RA) is a chronic inflammatory condition causing joint swelling and pain which may also affect other areas, including the skin, eyes, brain, and cardiovascular system. In the US in 2014, approximately 1.3 million adults suffered from RA, as described by Hunter and colleagues in a 2017 issue of Rheumatology International. According to the World Health Organization (WHO), the autoimmune disease affects globally up to 18 million people. A study by Crowson and colleagues which was published in 2012 in the journal Arthritis and Rheumatism showed that RA affects 1 in 28 women and 1 in 59 men during their lifetime. There is no cure for RA; current treatments seek to manage RA with biologic and non-biologic immunosuppressants, corticosteroids and non-steroidal anti-inflammatory drugs (NSAIDs). While useful, drug resistance occurs in up to 50% of patients and systemic adverse reactions are frequent, including rash, hair loss, altered liver function, low blood cell counts, nausea, increased infections and neuropathy. New biologics targeting JAK/interleukins have been issued black box warnings by the FDA. According to a market research study by Allied Market Research, the global anti-rheumatics market is expected to grow from $57.9 billion in 2019 to $62.9 billion in 2027, representing the second largest therapeutic area after oncology. Adalimumab, a biologic blocking TNF which is marketed as Humira®, was #1 among RA therapeutics in 2021 and also the world’s largest selling drug outside of Pfizer’s COVID-19 vaccine.

Our solution - AM-411

AM-411 is a polyplex nanoparticle delivering siRNA to inflamed tissues to target the NF-κB signaling pathway, a critical regulator of immune and inflammatory responses. Like AM-401, the drug product is based on our OligoPhore technology which allows for delivery of RNA payloads specifically to inflamed tissues with extensive endosomal release once inside cells, generating a new class of precision medicines with potentially increased local efficacy and reduced systemic side effects. AM-411 comprises an optimized siRNA targeting p65, one of the main transcriptional regulators of the NF-kB pathway and a key checkpoint in RA inflammation that has generated high interest as a target. However, given NF-kB’s ubiquitous functions, the key challenge is to induce contextual, tissue specific effects, which is not possible with classic small molecule or biologic approaches. AM-411 reduces local inflammation without affecting the NF-κB pathway elsewhere and is less likely to generate resistance because it reduces synthesis of p65 rather than blocking the protein.

AM-411’s therapeutic potential in RA has already been demonstrated in a study using a collagen antibody–induced arthritis model in mice. As described by Zhou and colleagues in a 2014 issue of the Journal of Clinical Investigation OligoPhore nanoparticles with siRNA targeting NF-κB (p65) potently suppressed early inflammatory arthritis. The treatment effectively reduced the expression of inflammatory cytokines and cellular influx into the joints, protected against bone erosions and preserved cartilage integrity. Importantly, the treatment did not affect p65 expression in off-target organs or elicit a humoral response after serial injections.

Based on these outcomes, we started in silico and in vitro work to screen and select the most effective siRNA sequences and to optimize their properties. This will be followed by further in vivo testing. The AM-411 program will benefit from extensive synergies with the AM-401 program and vice versa.

Bentrio® (AM-301) in the protection against airborne allergens and viruses

Allergic rhinitis and upper respiratory airway infections

Through the intake of air, the mucosa-lined nasal cavity as the uppermost part of the respiratory system is exposed to a variety of airborne pathogens such as viruses and bacteria. Unless they are neutralized by the immune system, these pathogens may cause infections. Viruses known to spread by airborne transmission (and also other routes) include rhinoviruses (cause common cold symptoms), influenza viruses (type A, type B, H1N1), varicella viruses (cause chickenpox), measles virus, mumps virus, enterovirus, norovirus, coronaviruses among others.

Further, the nasal cavity is exposed to allergens such as pollen, house dust mites or animal hair. The body may develop sensitivity to such allergens, resulting in an inflammatory reaction (allergic rhinitis), including the release of certain chemicals such as histamine which affect the nasal mucosa. The main symptoms of allergic rhinitis include nasal itching and sneezing, runny nose, and nasal congestion.

The nasal mucosa is one of the anatomical structures which form the physical barriers of the body’s immune system. The mucosal lining of the nasal cavity represents the outer surface of the body to the ambient air and its contents and is prepared for it as the first line of defense. These barriers provide mechanical protection from the invasion of infectious and allergenic pathogens. Nasal mucociliary clearance provides another defense mechanism: mucus secreted by the nasal mucosa traps inhaled allergens, pathogens and other particles and is then transported with the trapped matter by the ciliated cells of the respiratory epithelium to the pharynx, where it is swallowed.

Proper humidification helps to maintain the nasal mucosa’s function in clearing viruses and allergens from the nasal cavity. Further protection may be achieved by wearing face masks or avoidance of exposure to potential sources of infection or allergens.

Our solution – Bentrio®

In September 2020 we announced the launch of the development of AM-301, a drug-free nasal spray for protection against airborne viruses and allergens through a newly created subsidiary, Altamira Medica Ltd. AM-301 is a gel emulsion which works by forming a protective layer on the nasal mucosa that acts as a mechanical barrier against airborne viruses allergens. The barrier consists of two elements: (1) a mucoadhesive film lining the nasal cavity and preventing contact of airborne viruses or allergens with the nasal mucosa to reduce the risk of viral infection or allergic reactions; (2) the trapping / binding of such viruses or allergens, allowing for their removal e.g. through mucociliary clearance. In addition, the product helps to humidify and thus maintain the nasal mucosa’s function in clearing viruses and allergens from the nasal cavity. The key component of AM-301 is bentonite, a naturally occurring clay.

We have shown that Bentrio® could provide help to people suffering from allergic rhinitis by reducing their exposure to airborne allergen particles e.g. from pollens, house dust or animal hair. In 2021 we conducted an open-label randomized cross-over study with AM-301 that enrolled 36 patients with allergic rhinitis caused by grass pollen. Study participants were administered a single dose of Bentrio® nasal spray or hydroxypropylmethylcellulose, a comparator product, prior to controlled pollen exposure for four hours in an allergen challenge chamber. The challenge was repeated with the alternate treatment following a wash-out period. The study demonstrated a rapid onset and long durability of Bentrio’s protective effect, established substantial equivalence to the marketed comparator with superior efficacy ratings by patients and clinicians, and showed good tolerability.

In May 2022, we announced the results from a clinical trial with Bentrio® in house dust mite (HDM) allergic rhinitis. The trial enrolled a total of 37 patients with a history of perennial allergic rhinitis (“PAR”) caused by HDM exposure. Study participants were randomized under an open label, three-period crossover design to receive either Bentrio® in a single or double dose, or no treatment, prior to controlled allergen exposure in an environmental exposure chamber for three hours. Bentrio® treatment reduced the increase in mean total nasal symptoms score (TNSS) by 1.1 points (-1.87 to -0.28 in the 95% confidence interval; p<0.01) vs. no treatment. There was no meaningful difference in outcomes between a single or double puff per nostril. Bentrio® treatment was well tolerated.

In December 2022 we completed enrollment into a randomized controlled clinical trial (the “NASAR” trial) with Bentrio® in seasonal allergic rhinitis (SAR) in Australia. NASAR enrolled 100 SAR patients that were randomized at a 1:1 ratio to either receive Bentrio® or saline spray via self-administration three times per day, or as needed, for two weeks. Saline nasal sprays are currently the most frequently used type of drug-free treatment for SAR. The primary endpoint will be the comparison of the reflective Total Nasal Symptom Score (rTNSS) under treatment with Bentrio® against saline spray. In January 2023, we announced the results of an interim analysis based on data from the first 53 participants in the NASAR trial. The interim analysis showed a decrease of the rTNSS in the Bentrio® group from 6.7 points in the pre-treatment period to 5.1 points over the 14-day treatment period, while the saline spray group showed a decrease from 7.6 to 7.1 points. The difference of 1.55 points in favor of Bentrio® was statistically significant in the ANCOVA model (LSmeans; p = 0.015; 95% confidence interval -2.78 to -0.32). The interim analysis further showed good tolerability both for Bentrio® and the comparator.

We believe that AM-301 could help to reduce the risks of exposure from airborne transmission of certain virus particles. We tested Bentrio® in vitro in a series of experiments using reconstituted human nasal epithelia infected with SARS-CoV-2 or H1N1 influenza virus. Daily treatment with AM-301, beginning right before inoculation or 24-30 hours thereafter showed significant reductions of the viral titer compared to saline treated controls. In case of SARS-CoV-2, a protective effect was observed with the original virus, the Delta variant as well as the Omicron variant.

In January 2023 we announced top-line data from a clinical trial in acute COVID-19 (“COVAMID”). The trial enrolled a total of 160 subjects in Bulgaria and North Macedonia who were randomized within 3 days from symptom onset at a 2:1:1 ratio to receive for 10 days either Bentrio®, modified (Bentrio® (lacking one mineral component), or no treatment, followed by a 10-day observation phase. The primary efficacy endpoint was the change in PCR cycle threshold (CT). The trial showed a mean increase in the CT value from baseline to Day 11 of 15.3 for the Bentrio® group, 14.1 for the modified Bentrio® group and 13.7 for the untreated control group. The difference in the mean change of CT of the Bentrio® group vs. the untreated and the modified Bentrio® groups to Day 11 failed to reach statistical significance (LSmeans 0.8 and 0.64; p = 0.319 and 0.427; 95% CI -0.78 to 2.38 and -0.95 to 2.23, respectively). More Bentrio® and modified-Bentrio® treated patients achieved full resolution of COVID-19 signs and symptoms by Day 11 than untreated patients (93.7 and 92.5 vs. 85.0%) and more of them were uninfected or asymptomatic at that time point (59.5 and 65.0 vs. 45.0%). The treatment was well tolerated. The incidence of adverse events in the Bentrio® group was 2.4% (mild cases only), 9.5% in the modified-Bentrio® group, and 14.0% in the untreated group (including two cases of unwitnessed sudden death after Day 11). We believe that, based on the mode of action of Bentrio®, the product is used most effectively prophylactically.

Since Bentrio® does not contain any active substance, it is regulated and marketed as an “over-the-counter” medical device. In May 2021 we completed the conformity assessment procedure for marketing the product in the member states of the European Union (EU), and in September 2021 we filed a 510(k) premarket notification with the FDA for premarket clearance of Bentrio® as a Class II device for the intended use of promoting alleviation of mild allergic symptoms triggered by the inhalation of various airborne allergens. On June 24, 2022 we received 510(k) clearance for Bentrio®. In order to obtain regulatory clearance for Bentrio® in viral infection in those countries which require supportive clinical data (which includes the US and the EU, among others), additional clinical research will have to be conducted. We currently have no plans to conduct such research on our own.

AM-125 in Vestibular Disorders

Vestibular Disorders

Balance disorders are medical conditions that evoke the sensation of unsteadiness, dizziness or vertigo. Patients suffering from balance disorders are often profoundly impacted in their daily activities. Balance problems can be caused by many different health conditions, medications or anything that affects certain areas of the brain or the inner ear labyrinth. Balance disorders originating from the inner ear labyrinth include benign paroxysmal positional vertigo, or positional vertigo, labyrinthitis, vestibular neuronitis and Meniere’s disease, a chronic condition characterized by severe episodic vertigo, tinnitus, and fluctuating hearing loss.

In case of vertigo, patients experience a false sensation of movement of oneself or the environment. This can be a spinning or wheeling sensation, or they simply feel pulled to one side. This may lead to imbalance, nausea or vomiting. The cause of vertigo can be an imbalance between the left and right vestibular systems in signaling position and acceleration to the brain. The symptom of vertigo may partially or fully resolve thanks to spontaneous recovery of the peripheral vestibular function and / or through compensation of the imbalance at the brain level, which is known as vestibular compensation.

The imbalance between the left and right vestibular systems and thus the sensation of vertigo may be reduced by dampening the vestibular function in the unaffected, opposite inner ear through pharmacotherapy. This minimizes the extent of the imbalance falsely interpreted as movement. Most existing therapies rely on this strategy to minimize vertigo symptoms, but also have unintended sedative effects. Examples include meclizine, benzodiazepines, dimenhydrinate or amitriptyline.

Betahistine is widely used around the world for the treatment of vestibular disorders, notably Meniere’s disease and vertigo. Its development goes back to the use of intravenous histamine, which provided symptomatic relief for these disorders. Betahistine is a structural analog of histamine. It acts as a partial histamine H1-receptor agonist and, more powerfully, as a histamine H3-receptor antagonist. Betahistine has been shown to increase cochlear, vestibular and cerebral blood flow, facilitate vestibular compensation and inhibit neuronal firing in the vestibular nuclei. Unlike other drugs, it has no sedating effect. Betahistine is typically taken orally with a recommended daily dose of 24 to 48 mg, divided in 2 or 3 single doses.

Betahistine is generally recognized as a safe drug and there exists a large body of data on the pharmacology, pharmacokinetics and toxicology of the compound. It is approved in about 115 countries world-wide for the treatment of Meniere’s disease and vestibular vertigo, but not in the United States. In 1970, the Commissioner of FDA withdrew approval of the NDA after the discovery that the submission contained unsubstantiated information about some patients in the efficacy studies upon which approval was based. Today, betahistine is available in the United States only from compounding pharmacies or through importation. Despite limited availability, a survey by Clyde and colleagues published in Otology & Neurotology in 2017 revealed that 56% of U.S. neurotologists and 16% of generalists use betahistine and 20-30% of neurotologists use it often or always when treating patients with Meniere’s disease.

Various studies and meta-analyses have demonstrated therapeutic benefits of betahistine in both the treatment of vertigo as well as in supporting vestibular rehabilitation. However, the evidence for therapeutic benefits is variable, and it has been suggested that efficacy could be increased with higher doses and / or longer treatment periods. It is well known that orally administered betahistine is rapidly and almost completely metabolized into 2-pyridylacetic acid, also known as 2-PAA, which lacks pharmacological activity. As a consequence, the bioavailability of oral betahistine is estimated to be very low.

Our Solution—AM-125

In February 2017 we entered into an asset purchase agreement with Otifex Therapeutics, pursuant to which we have purchased various assets related to betahistine dihydrochloride in a spray formulation, which we have been developing for intranasal treatment of vertigo under the product code AM-125. The assets include preclinical and clinical data as well as certain intellectual property rights. In a Phase 1 clinical trial conducted by Otifex in 40 healthy volunteers intranasal betahistine showed good tolerability and significantly higher betahistine concentrations in blood plasma than reported for oral betahistine administration.

Therapeutic rationale for AM-125 in vertigo

We are aiming to address the currently limited therapeutic utility of betahistine arising from its low oral bioavailability by avoiding first pass metabolism by monoamine oxidase. Intranasal administration of betahistine provides substantially higher bioavailability than oral administration as there is only very little monoamine oxidase activity known to occur in the nose, allowing higher quantities of betahistine to be absorbed into the blood stream and reach target histamine receptors in the inner ear and brain. As preclinical and clinical data suggest that betahistine’s therapeutic effects increase with higher systemic exposure, we expect AM-125’s higher bioavailability to translate into more pronounced therapeutic benefits.

Vertigo endpoints

Vertigo cannot be measured directly. Therapy typically aims to a) reduce the symptoms of vestibular dysfunction underlying vertigo and / or b) accelerate vestibular compensation and recovery. Status and therapeutic outcomes are usually assessed by a battery of tests, addressing static and dynamic deficits, balance impairment, functional performance and disability, using both objective and subjective measures.

Loss of postural control affects essentially all patients suffering from acute vertigo and has a substantial impact on day-to-day functioning. It is assessed relatively easily through a number of widely used balance and functional tests such as the Tandem Romberg, standing on foam or single-leg stance tests for static conditions or the tandem gait, timed “up and go” or ten meter walking tests for dynamic conditions.

Other outcome measures target the interaction between inner ear and ocular sensory input. Nystagmography measures the velocity and direction of involuntary eye movements (nystagmus) triggered by vestibular imbalance and the head-impulse test measures to which extent the reflex is disturbed that triggers eye movement as a response to a movement of the head. Further, there are clinician or patient reported clinical outcomes that subjectively capture the illusion of movement, the duration of the illusion, motion intolerance, neurovegetative signs, and instability. Examples include the Dizziness Handicap Inventory (DHI) questionnaire, the Vestibular Rehabilitation Benefits Questionnaire (VRBQ) or the European Evaluation of Vertigo (EEV) questionnaire.

Clinical development of AM-125

In 2018, we conducted a second Phase 1 clinical trial with AM-125 in 72 healthy volunteers. The randomized double-blind placebo-controlled trial demonstrated superior bioavailability over a range of four intranasal betahistine doses compared to oral betahistine, with plasma exposure being 5 to 29 times higher (unadjusted for dose; p-value between 0.056 and p < 0.0001). Further, it showed that the treatment was well tolerated when administered three times daily for three days. Single doses were escalated up to 60 mg, and repeated doses up to 40 mg. For the latter, the maximum tolerated dose based on local tolerability was determined at 40 mg.

On June 13, 2022, we announced positive top-line data from our Phase 2 TRAVERS trial with AM-125 (intranasal betahistine) in acute vertigo (acute vestibular syndrome, AVS). The randomized, double-blind, placebo-controlled TRAVERS trial enrolled at more than ten study sites across Europe a total of 124 patients who suffered from acute vertigo following surgery for the removal of a tumor. Patients were randomized to receive either AM-125 at up to 20 mg or a placebo three times daily for four weeks, which was followed by a two-week treatment-free observation period. In addition, all trial participants followed a standardized course of vestibular rehabilitation therapy. Improvement in the “Tandem Romberg” test, which measures how long patients manage to maintain balance with their two feet aligned one after the other while they have their eyes closed, served as the primary efficacy outcome. For reference, the trial also included 16 patients who received ‘open label’ oral betahistine at 16 mg three times daily (the approved dose in most countries worldwide).

The TRAVERS trial demonstrated good tolerability of AM-125. Further, administration of AM-125 resulted in a dose- and time-dependent improvement in balance and signs and symptoms of vestibular dysfunction. At treatment period end, patients treated with AM-125 20 mg on average managed to maintain balance for 12.5 seconds vs. 7.5 seconds for placebo treated patients, which is a statistically significant improvement (p=0.0242; least square means in repeated-measure ANCOVA model, per protocol population). This was corroborated by higher frequency of complete spontaneous nystagmus resolution (34.5 vs. 20.0% of patients).

We have discussed the regulatory requirements for AM-125 during a pre-Investigational New Drug meeting with the FDA and in the context of scientific advice meetings with the EMA and two European national health authorities to further define the development program. We have been preparing a Phase 2 clinical study with AM-125 in benign paroxysmal positional vertigo, for which we submitted an IND to the FDA in May 2023. As we aim to focus on the RNA delivery business, we do not intend to fund any further clinical trial with AM-125 on our own, but rather seek to out-license or divest the program to a partner or acquirer. We believe that, if approved, AM-125 could become the first betahistine product for the treatment of AVS in the United States.

Development of AM-201

In May 2018, we initiated project AM-201 to evaluate intranasal betahistine also for the prevention of antipsychotic-induced weight gain and somnolence. Betahistine is thought to counteract the effects of antipsychotics such as olanzapine and to relieve the inhibitory effect on the H1 receptor by binding to and activating the H1 receptor to normalize/reduce the food take and consequently lead to reduced weight gain and somnolence. We believe the weight-attenuating effect is intensified by betahistine’s property as antagonist at the H3 receptor.

In 2019, we initiated a Phase 1b trial in Europe to evaluate AM-201’s safety and therapeutic effects in this indication. Participants received either AM-201 (1, 2.5, 5, 10, 20 or 30 mg) or placebo in parallel with oral olanzapine (10 mg) once a day for four weeks. In May 2020, we announced that at AM-201 30 mg, the mean weight gain from baseline to the end of the treatment period was 2.8 kg compared against 3.7 kg in control subjects; the primary efficacy endpoint of mean reduction in weight gain was 0.9 kg and statistically significant (p<0.02; n=81 with pre-specified Bayesian augmented controls). As expected, intranasal delivery of betahistine allowed for substantially higher concentrations in blood plasma compared with levels previously reported for oral betahistine. In the context of our strategic repositioning, we have decided to deprioritize project AM-201 and suspended all development work.

Keyzilen^® in Tinnitus

Tinnitus, frequently perceived as a ringing in the ears, is the perception of sound when no external sound is present. Similar to pain, it is an unwanted, unpleasant and thus distressing sensation. Tinnitus may result in further symptoms such as inability to concentrate, irritability, anxiety, insomnia, and clinical depression. In many cases, tinnitus significantly impairs quality of life and affects normal day-to-day activities. According to the American Tinnitus Association, approximately 16 million persons in the United States have tinnitus symptoms severe enough to seek medical attention and about two million persons cannot function on a normal day-to-day basis. In addition, tinnitus is now the number one service-connected disability for all veterans, before hearing loss. According to the website military.com, over 167,000 veterans were diagnosed with tinnitus in 2021 and over 2.5 million veterans are currently receiving disability benefits for it.

Acoustic trauma and other insults to the inner ear may trigger increased levels of extra-cellular glutamate, which in turn cause excessive activation of cochlear NMDA receptors. This process results in damage or killing of sensory cells and is thought to be responsible for abnormal spontaneous “firing” of auditory nerve fibers, which may be perceived as tinnitus. Under normal circumstances, the NMDA receptors are thought to play no role in the auditory nerve’s transmission of nerve pulses that carry sound information. In case of a trauma such as excessive sound exposure these receptors may become pathologically active, and thus tinnitus is triggered.

We have been developing Keyzilen®, Esketamine gel for injection, for the treatment of acute inner ear tinnitus. Esketamine is a potent, small molecule non-competitive NMDA receptor antagonist. Keyzilen® is formulated in a biocompatible gel and delivered via intratympanic injection. It demonstrated good tolerability and positive effect on PROs associated with tinnitus in two Phase 2 clinical trials. In two Phase 3 clinical trials (TACTT2 and TACTT3), we were unable to confirm the efficacy of Keyzilen™ as both of them did not meet their primary efficacy endpoints. We believe we have identified two principal sources for the negative outcomes from the TACTT trials: (i) the high frequency of tinnitus loudness ratings over an extended period of time and (ii) an unexpectedly high level of variability in outcomes among study sites. A survey among a number of TACTT3 participants revealed that the daily capture of tinnitus loudness and annoyance caused a number of patients to excessively focus on their tinnitus symptoms. In addition, it was observed that a non-negligible number of study participants presumably became tired of the daily ratings after some time and stopped providing actual values. With respect to variability, our analysis subsequent to the unblinding of the trial data has shown positive outcomes at numerous sites, including many of the high enrolling study centers, but inconclusive or contradictory outcomes at other sites.

In April 2019, we announced that we had completed the design of a pivotal Phase 2/3 trial for Keyzilen®. The trial shall, in two stages, reaffirm the compound’s efficacy in the treatment of acute tinnitus and provide confirmatory efficacy data to support a filing for marketing authorization. In September 2019, we announced that we have obtained advice on the development plan and regulatory pathway from the U.S. Food and Drug Administration (“FDA”) in the context of a Type C meeting and from the European Medicines Agency (“EMA”) in the context of a Scientific Advice procedure for Keyzilen®. In the context of our strategic repositioning, we aim to divest or partner the Keyzilen® program.

Sonsuvi® (AM-111) in Hearing Loss

Sonsuvi® is being developed for the treatment of acute sensorineural hearing loss (ASNHL), where there is damage to the sensory cells of the inner ear. ASNHL may be triggered by a variety of insults, such as exposure to excessively loud sound, infection, inflammation or certain ototoxic drugs. These insults may also result in tinnitus. According to an article by Alexander and Harris published in Otology & Neurotology in 2013, the average annual incidence of sudden deafness is 66,954 new cases among the U.S. insured population. There are no currently approved treatments for this patient population.

Sonsuvi® contains a synthetic D-form peptide (Brimapitide or D-JNKI-1) that protects sensorineural structures in the inner ear from stress-induced damage. Sonsuvi® has been granted orphan drug status by both EMA and FDA and has been granted fast track designation by the FDA for the treatment of sudden sensorineural hearing loss.

We have been developing Sonsuvi® for acute inner ear hearing loss. In our Phase 2 clinical trial, AM-111 showed good tolerability. Furthermore, in patients with severe to profound ASNHL, we observed a clinically relevant improvement in hearing threshold, speech discrimination and a higher rate of complete tinnitus remission compared with placebo. In November 2017, we announced that the HEALOS Phase 3 clinical trial that investigated Sonsuvi® in the treatment of acute inner ear hearing loss did not meet the primary efficacy endpoint. However, a post-hoc analysis of the subpopulation with profound acute hearing loss (PTA ≥ 90 dB at baseline in accordance with a commonly used classification of hearing loss severity) revealed a clinically meaningful and nominally significant improvement in the Sonsuvi® 0.4 mg/mL treatment group.

Based on the HEALOS results, we submitted the design of a new pivotal trial with AM-111 0.4 mg/mL in patients suffering from acute profound hearing loss to the EMA and subsequently also to the FDA for review. Through a Protocol Assistance procedure the EMA endorsed the proposed trial design, choice of efficacy and safety endpoints, as well as the statistical methodology. In a Type C meeting with written responses, the proposed choice of primary and secondary efficacy endpoints, the safety endpoints, as well as the planned sample size and statistical methodology were also endorsed by the FDA. In the context of our strategic repositioning, we aim to divest or partner the Sonsuvi® program.

Competition

We face or may face competition from different sources with respect to our commercial product Bentrio® and our drug product candidates AM-125, AM-401, AM-411 and our other pipeline products or any product candidates that we may seek to develop or commercialize in the future. Any product candidates that we successfully develop and commercialize will compete with existing therapies, even if they are not licensed specifically for use in our target therapeutic indications or if they lack clear proof of efficacy.

Possible competitors may be biotechnology, pharmaceutical and medical device companies as well as academic institutions, government agencies and private and public research institutions, which may in the future develop products to treat KRAS driven cancer, rheumatoid arthritis, vertigo, allergic rhinitis or viral infections. Bentrio® and any drug product candidates that we successfully develop and commercialize will compete with new therapies that may become available in the future. We believe that the key competitive factors affecting the success of our product candidates, if approved, are likely to be efficacy, safety, convenience, price, tolerability and the availability of reimbursement from government and other third-party payors.

RNA delivery technologies

There are several companies offering commercial- or developmental-stage technologies for delivering RNA payloads to hepatic or extrahepatic cells. These include Acuitas Therapeutics Inc., Dicerna Pharmaceuticals, Inc., Genevant Sciences Corp., Entrada Therapeutics Inc., Sirnaomics Ltd., Ovensa Inc., or Feldan Bio Inc. Although we consider that our OligoPhore™ / SemaPhore™ platform offers unique advantages over current delivery approaches such as lipid nanoparticles, GalNAc or vector conjugates through the ability to use of systemic administration, delivery to extrahepatic tissues, efficient cellular uptake and high levels of endosomal release, it may take time to raise awareness and interest among potential customers within the biopharmaceutical industry, resulting in its successful adoption.

KRAS driven cancers

There are several companies marketing or developing treatments for KRAS driven cancers. Amgen and Mirati Therapeutics obtained an accelerated approval by the FDA for the KRAS G12C small molecule inhibitors sotorasib and adagrasib as second-line treatment in NSCLC with G12C mutated KRAS (that is a glycine-to-cysteine substitution at codon 12 of KRAS). G12C mutations are also the targets for small molecule inhibitors under development by Novartis (IDQ443), Genentech (GDC-6036), Eli Lilly (LY3537982), and Boehringer Ingelheim (BI 1823911) with target indications in NSCLC, colorectal cancer (CRC), pancreatic cancer and other solid tumors carrying the KRAS G12C mutation. Merck and Moderna are in early stage clinical development with a patient-specific mRNA-based vaccine encoding KRAS neoantigens (mRNA-5671). Revolution Medicines has several small molecule inhibitors under development, which target G12C (RMC-6291), G12D (RMC-9805), G13C (RMC-8839) or all RAS cancer mutations (RAS^Multi (On)). There are also programs using RNAi such as NBF-006 by Nitto Denko, which seeks to inhibit the expression of glutathione-S-transferase P and uses lipid nanoparticles for delivery, or siG12D LODER by Silenseed Ltd., which releases siRNA targeting the KRAS G12D mutation from in implanted biodegradable bio polymeric matrix.

The aforementioned developments have the potential to compete with AM-401. In addition, there exist various treatment paradigms for key targets such as NSCLC, CRC and pancreatic cancers, including resection, chemotherapy, treatment with biologics and combinations thereof, and various lines of therapy. The relative positioning within current or future lines of therapy and thus the most relevant competition to AM-401 are uncertain at this point of development.

Rheumatoid arthritis

The market for RA therapeutics is highly competitive and currently dominated by several large pharma companies. They are marketing primarily biologics targeting TNF-α, e.g. adalimumab (Abbvie), infliximab (Johnson & Johnson), or etanercept (Amgen), or other targets such as B cells (rituximab, Roche), T cells, (abatacept, BMS), or IL-6 (tocilizumab, Genentech). As the patent and other market access protection has lapsed for several of these biologics, biosimilars have been developed and introduced to the market by competitors. A biosimilar is a biologic that is highly similar to and has no clinically meaningful differences from an existing approved biologic. Further, large companies are marketing various small molecule JAK inhibitors such as upadacitinib (AbbVie), tofacitinib (Pfizer) or baricitinib (Lilly). In addition, there are various older drugs on the market, such as glucocorticoids, non-steroidal anti-inflammatory drugs (NSAIDs) or disease modifying antirheumatic drugs (DMARDs), including methotrexate, hydroxychloroquine and sulfasalazine.

Allergic rhinitis and upper respiratory airway infections

We believe that our main competitors for Bentrio® are Marinomed Biotech AG or Marinomed, SaNOtize Research and Development Corp. or Sanotize, Nasaleze Ltd. or Nasaleze, Nasus Pharma Ltd. or Nasus Pharma, and larger companies such as Haleon, Bayer, Sanofi, Procter & Gamble, Reckitt Benckiser, and Johnson & Johnson. These companies already market a variety of OTC drug or drug-free products for the management of allergic rhinitis and/or protection against certain viruses. E.g. Nasaleze and Nasus Pharma market nasal sprays based on hydroxypropylmethylcellulose (HPMC) powder which serves to establish a barrier on the nasal mucosa. Marinomed is marketing through various licensees a nasal spray based on carrageenan, a sulfated polymer from red seaweed, for protection against certain respiratory viral infections. Sanotize is marketing a nasal spray drug that uses nitric oxide to kill viruses. Other marketed products include nasal sprays, tablets or lozenges (e.g. based on corticosteroids or antihistamines). Some of the aforementioned drugs or medicinal products are marketed globally, whereas others are marketed only regionally. We believe that we will be able to differentiate AM-301 against competing products based on its triple mode of action devoid of any active substance, its extended nasal residence time, and utility in protecting against deleterious effects of both airborne allergens and viruses.

Vestibular Disorders

There are a number of product candidates in clinical development by third parties that aim to prevent or treat vertigo. Based on publicly available information, we have identified the following drug product candidates that are currently in clinical development:

The aforementioned developments have the potential to compete with AM-125. Likewise, AM-125, if approved, will compete with products that are licensed or used off-label for the treatment of vestibular disorders and Meniere’s disease, including steroids, diuretics, anti-emetics or anti-nausea medications as well as oral betahistine, the standard of care for treatment of Meniere’s disease and vestibular vertigo in many countries outside the United States. Although we expect that AM-125 will offer benefits over oral betahistine due to the ability to bypass the strong first-pass metabolism associated with oral intake and provide for a higher bioavailability and avoid gastric side effects, it may take time to change prescribing and usage patterns in favor of the newer product.

Acute inner ear tinnitus

There are a number of products in pre-clinical research and clinical development by third parties to treat tinnitus in the broader sense. Most of them are aiming to provide symptomatic relief (without treating the underlying cause) and targeting chronic rather than acute tinnitus. Examples include TRT or tinnitus maskers as well as more recent approaches like transcranial magnetic stimulation, vagus nerve stimulation, or customized sound therapy.

Acute inner ear hearing loss

There are a number of product candidates in pre-clinical research and clinical development by third parties that aim to prevent or treat acute inner ear hearing loss. Based on publicly available information, we have identified the following drug product candidate that is currently in clinical development:

We believe that Sonsuvi^® is the only product candidate administered after an incidence of acute hearing loss that so far has demonstrated in a randomized, placebo controlled clinical trial a clinically relevant and significant improvement in hearing. To the extent that other drug developers demonstrate clinical efficacy for their product candidates in the prevention and treatment of permanent hearing loss from ASNHL, our competitive position may be weakened, and the market exclusivity under the orphan drug designation may be circumvented.

Intellectual Property

Patents

We seek regulatory approval for our products in disease areas with high unmet medical need, great market potential and where we have a proprietary position through patents covering various aspects of our products, e.g., composition, dosage, formulation, and use, etc. Our success depends on an intellectual property portfolio that supports our future revenue streams as well as erects barriers to our competitors. For example, we have broad disclosures in our patent applications and can pursue patent claims directed to our own leading product candidates as well as claims directed to certain potentially competing products. In addition, our earlier filed patent applications are prior art to others including certain of our competitors who filed their patent applications later than ours. We are maintaining and building our patent portfolio through: filing new patent applications; prosecuting existing applications and licensing and acquiring new patents and patent applications.

Despite these measures, any of our intellectual property and proprietary rights could be challenged, invalidated, circumvented, infringed or misappropriated, or such intellectual property and proprietary rights may not be sufficient to permit us to take advantage of current market trends or otherwise to provide competitive advantages.

As of December 31, 2022, we owned ten issued U.S. patents and five pending U.S. patent applications along with foreign counterparts of particular patents and applications in various jurisdictions. We co-own four of our issued U.S. patents along with their foreign counterparts, pursuant to the terms of our co-ownership and exploitation agreement with INSERM.

With respect to our issued patents in the United States, we may also be entitled to obtain a patent term extension to extend the patent expiration date. For example, in the United States, we can apply for a patent term extension of up to 5 years for one of the patents covering a product once the product is approved by the FDA. The exact duration of the extension depends on the time we spend in clinical trials as well as getting a new drug application approval from the FDA.

Bentrio®

In September 2021, we converted four provisional U.S. patent filings into a non-provisional U.S. patent application relating to the formulation and use of Bentrio®. The pending patent application’s claims are directed towards aqueous compositions comprising a mucoadhesive polymer and clay particles. U.S. patent prosecution is ongoing. In addition, we filed an international Patent Cooperation Treaty (PCT) patent application.

Intranasal Betahistine

We have acquired from Otifex a patent application on the composition and use of intranasal betahistine, which issued on October 29, 2019, as a US patent covering the composition and use of intranasal betahistine. Further, we acquired in 2018 two U.S. patents relating to the use of betahistine for the prevention and treatment of olanzapine induced weight gain, and we acquired in 2019 two U.S. patents relating to the use of betahistine for the treatment of attention deficit/hyperactivity disorder and atypical depression.

AM-401 and AM-411

We are the exclusive licensee under our agreement with Washington University of a portfolio of patents and patent applications that relate to peptide based polyplexes for RNA delivery. The portfolio includes two issued US patents along with their foreign counterparts in various jurisdictions that cover the composition of matter or method of use of the peptide based polyplexes. These licensed patents and patent applications relating to AM-401, AM-411 and potential further applications of the technology are expected to expire between 2034 and 2037, prior to any patent term extensions to which we may be entitled under applicable laws. In February 2023 we filed a provisional patent application with the USPTO describing novel nanoparticle compositions based on OligoPhore™ or derivatives thereof in combination with siRNA sequences designed to silence different types rather than one specific type of mutated KRAS (polyKRAS^mut). If granted, the new patent would be expected to expire in 2043.

Keyzilen®

We are the owner or co-owner of patents and patent applications relating to Ketamine or its use in inner ear tinnitus. In particular, we have an agreement entitled “Co-Ownership/Exploitation Agreement” with INSERM with respect to its Ketamine patent portfolio. We have rights to four issued U.S. patents and corresponding patents and applications in other jurisdictions covering formulation and use of Ketamine. Our issued patents relating to Keyzilen® are expected to expire between 2024 and 2028.

Sonsuvi®

We are the exclusive licensee under our agreement with Xigen of a portfolio of patents that relate, among other things, to JNK ligand peptides or their use in hearing loss. This portfolio includes seven issued U.S. patents along with their foreign counterparts in various jurisdictions that cover the composition of matter or method of use of the JNK ligand peptides. These licensed patents and patent applications relating to Sonsuvi® are expected to expire between 2023 and 2027, prior to any patent term extensions to which we may be entitled under applicable laws.

Proprietary Rights

In addition to patent protection, we intend to use other means to protect our proprietary rights. We may pursue marketing exclusivity periods that are available under regulatory provisions in certain countries, including the US, Europe and Japan. For example, if we are the first to obtain market approval of a small molecule product in the United States, we would expect to receive 5 years of market exclusivity in the U.S.

Furthermore, orphan drug exclusivity has been or may be sought where available. Such exclusivity has a term of 7 years in the United States and 10 years in Europe. We have obtained orphan drug designation for Sonsuvi® for the treatment of ASNHL in the United States and Europe. Orphan drug protection has been or may be sought where available if such protection also grants 7 years of market exclusivity. In addition, we have acquired a U.S. orphan drug designation for betahistine for the treatment of obesity associated with Prader-Willi syndrome.

We have obtained U.S. trademark registrations for Altamira, Auris Medical Cochlear Therapies (and Design), Keyzilen® and Sonsuvi®. Further, we have obtained several U.S. trademark registrations for betahistine.

In addition, we rely upon unpatented trade secrets, know-how, and continuing technological innovation to develop and maintain our competitive position. We seek to protect our ownership of know-how and trade secrets through an active program of legal mechanism including assignments, confidentiality agreements, material transfer agreements, research collaborations and licenses.

Collaboration and License Agreements

Washington University

On December 11, 2020, we entered into an Exclusive License Agreement with Washington University (WU), which Exclusive License Agreement was subsequently amended and restated in June 2021 (as so amended and restated, the “Agreement”), with effect as of December 11, 2020. Pursuant to the Agreement, WU granted us an exclusive, worldwide, royalty-bearing license (with the right to sublicense) during the term of the Agreement under certain patent rights owned or controlled by WU to research, develop, make, have made, sell, offer for sale, use and import pharmaceutical products covered under such patent rights for all fields of use. Such licensed products may include “silencing RNA” (siRNAs) pharmaceutical preparations formulated in combination with our proprietary delivery technologies. In consideration for such worldwide, exclusive license, we will be obligated to pay WU: annual license maintenance fees in the low five figures through first commercial sale; pre-clinical and clinical regulatory milestones; sales milestones; and a low single digit royalty based on annual net sales of licensed products worldwide for at least the applicable patent term or period of marketing exclusivity, whichever is longer, but in no case less than a minimum royalty term of 12 years; and a percentage share (in the double digits) of sublicensing revenues received by the Company in connection with licensed products. Such regulatory and sales milestones may total up to an aggregate of $4,375,000. In the event the Company fails to meet certain regulatory diligence milestones, WU will have the right to terminate the license.

In particular, we are required to use commercially reasonable efforts to meet the following development milestones: a) to file an IND (or regulatory equivalent in foreign jurisdiction) June 30, 2023, b) to complete a Phase 1 clinical trial 3.5 years after achieving the first milestone, and c) to complete a Phase 2 clinical trial four years after achieving the second milestone. We may elect to extend each of these milestones once by a period of 12 months, and second time by a period of an additional 12 months, by paying WU a nonrefundable fee in the amount of $50,000 for the first extension and $100,000 for the second extension.

INSERM

In 2006, we entered into a co-ownership/exploitation agreement with the INSERM, a publicly funded government science and technology agency in France. Pursuant to the terms of the agreement, we were granted the exclusive right to exploit any products derived from patents that resulted from our joint research program with INSERM that was conducted in 2003 to 2005 and led to the development of Keyzilen®. Pursuant to the terms of the co-ownership/exploitation agreement, we are given the exclusive right to exploit the patents issuing from the filed patent applications for all claimed applications, including the treatment of tinnitus, in order to develop, promote, manufacture, cause to be manufactured, use, sell and distribute any products,

processes or services deriving from such patents, including Keyzilen®, in any country in which these patent applications have been filed during the term of the agreement. INSERM is entitled to use the inventions covered by the patents and applications for its own research purposes, free of charge, but may not generate any direct or indirect profits from such use. Pursuant to the terms of our agreement with INSERM, we are required to finance research and development work towards achieving certain specified marketing authorizations, and to use best efforts in so far as commercially and financially feasible to develop, market, and obtain regulatory authorization for products covered by such patents.

As consideration for the exclusive rights granted to us under the agreement, we have agreed to pay INSERM a two tiered low single digit royalty (where the higher rate is due on any net sales above a certain threshold) on the net sales of any product covered by the patents (including the use of

Keyzilen® in the treatment of tinnitus triggered by cochlear glutamate excitotoxicity) earned in each country in which these patent applications have been filed during the term of the agreement. We have also agreed to pay INSERM a low double digit fee on any sums of any nature (except royalties and certain costs) collected by us in respect of the granting of licenses to third parties.

The agreement will remain in force until the last of the patents covered by the agreement expires or becomes invalid. The patent covered by the agreement with the latest expiration date expires in 2028. The agreement will be terminated if we cease operations or are liquidated, may be terminated by either party in case of non-performance by the other party and may be terminated by INSERM in the absence of sales of a product deriving from the patents for a period from when it first marketed and if such a product is not marketed for a period from the date when marketing authorization is obtained.

Xigen

In October 2003, we entered into a collaboration and license agreement with Xigen, pursuant to which Xigen granted us an exclusive worldwide license to use specified compounds to develop, manufacture and commercialize “pharmaceutical products as well as drug delivery devices and formulations for local administration of therapeutic substances to the inner ear for the treatment of ear disorders” (the Area). We also have a right of first refusal to license certain additional compounds developed by Xigen which may be used for the Area, specifically any cell permeable inhibitors to effectively block certain signal pathways in apoptotic processes.

Under this agreement, we made an upfront payment to Xigen of CHF 200,000 and we are obligated to make development milestone payments on an indication-by-indication basis of up to CHF 1.5 million and regulatory milestone payments on a product-by-product basis of up to CHF 2.5 million, subject to a mid-twenties percentage reduction for smaller indications, e.g., those qualifying for orphan drug status. To date, we have paid CHF 1.325 million to Xigen under the agreement. We will be required to pay Xigen a mid-single digit percentage royalty on net sales of each licensed product that uses a compound licensed under the agreement, which royalty for a given indication shall be partially offset by milestone payments we have paid for such indication, until the later of 10 years after the first commercial sale of any licensed product using such licensed compound in any country, and the first expiration of a patent owned by or exclusively licensed to Xigen that covers the use of such licensed compound in any country, subject to our obligation to enter into good faith negotiations with Xigen, upon expiration of the relevant patent on a licensed compound, about the conditions of our further use of such licensed compound.

Under this agreement we and Xigen grant each other access to non-clinical or clinical data relating to the compounds licensed under the agreement free of charge for use in the other party’s proprietary development programs. We have also agreed, upon Xigen’s request, to offer third parties access to our non-clinical and clinical data relating to compounds licensed under the agreement for use outside the field of our license, provided that with respect to third party access, we are compensated for a portion of our costs in obtaining such data.

Xigen is responsible for maintaining the patents licensed to us under our agreement. New patents filed by us for specific inner ear indications or formulations of compounds licensed under our agreement are jointly owned by us and Xigen, and exclusively licensed to us in our field. We retain all know-how and other results from our development of compounds licensed under the agreement.

Our agreement with Xigen remains in effect until terminated. In August 2019 Xigen was acquired by Kuste Biopharma SAS, or Kuste, a French company. In February 2021, we were notified by Kuste of its decision to terminate the agreement effective May 10, 2021 due to the alleged lack of any development work since August 2018. We consider that the purported termination is without effect and that the agreement continues to be in full force and effect in accordance with its terms. We have retained legal counsel and intend to defend our interests, as appropriate and necessary. In any case, we do not view the agreement with Xigen as material to the Company and its operations.

Manufacturing

We currently rely on and expect to continue to rely on third parties for the manufacture of Bentrio® and the supply of raw materials and to manufacture supplies for clinical trials of our drug product candidates, including AM-125, AM-401, AM-411 and any other drug product candidate. For the foreseeable future, we expect to continue to rely on such third parties for the manufacture of any of our products or drug product candidates on a clinical or commercial scale. Reliance on third-party providers may expose us to more risk than if we were to manufacture product candidates ourselves. The facilities used by our contract manufacturers to manufacture our product candidates must be approved by the FDA or other regulatory authorities pursuant to inspections that will be conducted after we submit our NDA or comparable marketing application to the FDA or other regulatory authority. We do not have control over a supplier’s or manufacturer’s compliance with these laws, regulations and applicable cGMP standards and other laws and regulations, such as those related to environmental health and safety matters. If our contract manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or others, they will not be able to secure and/or maintain regulatory approval for their manufacturing facilities. In addition, we have no control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or a comparable foreign regulatory authority does not approve these facilities for the FDA or a comparable foreign regulatory authority does not approve these facilities for the manufacture of our products or drug product candidates or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market our products or drug product candidates, if approved. Any failure to achieve and maintain compliance with these laws, regulations and standards could subject us to the risk that we may have to suspend the manufacturing of our products or drug product candidates or that obtained approvals could be revoked, which would adversely affect our business and reputation. Furthermore, third-party providers may breach agreements they have with us because of factors beyond our control. They may also terminate or refuse to renew their agreements because of their own financial difficulties or business priorities, potentially at a time that is costly or otherwise inconvenient for us. If we were unable to find adequate replacement or another acceptable solution in time, our clinical trials could be delayed or our commercial activities could be harmed.

In addition, the fact that we are dependent on our suppliers and other third parties for the manufacture, storage and distribution of our products and drug product candidates means that we are subject to the risk that the products may have manufacturing defects that we have limited ability to prevent or control. The sale of products containing such defects could result in recalls or regulatory enforcement action that could adversely affect our business, financial condition and results of operations.

Growth in the costs and expenses of components or raw materials may also adversely influence our business, financial condition and results of operations. Supply sources could be interrupted from time to time and, if interrupted, it is not assured that supplies could be resumed (whether in part or in whole) within a reasonable timeframe and at an acceptable cost or at all.

Commercialization Strategy

Given our current stage of product development, we currently have only a limited commercialization infrastructure. For the commercialization of Bentrio®, which we initiated in July 2021 in selected European countries, we rely primarily on distributors. In addition, we have already concluded distribution and marketing agreements with companies such as Wellesta, Nuance and Avernus for Asian and Middle Eastern countries and continue to seek further commercial partners, in particular for Europe and North America. However, we may be unable to secure appropriate or timely support and as a result experience a delay of the product launch or product sales below our expectations. Further, as an “OTC” product, the purchase of Bentrio® by consumers is unlikely to be eligible for reimbursement by health insurance plans and will therefore have to be purchased out of their own pocket. We expect the lack of reimbursement coverage to reduce the pool of potential buyers.

For our activities in RNA delivery technology, we are not seeking to commercialize any drug products on our own but rather licensing out the technology to partners in the biopharmaceutical industry.

Government Regulation

Product Approval Process

The clinical testing, manufacturing, labeling, storage, distribution, record keeping, advertising, promotion, import, export and marketing, among other things, of our product candidates are subject to extensive regulation by governmental authorities in the United States and other countries. The FDA, under the Federal Food, Drug, and Cosmetic Act, regulates pharmaceutical products and medical devices in the United States.

The steps required before a drug may be approved for marketing in the United States generally include:

The testing and approval process requires substantial time, effort and financial resources, and the receipt and timing of any approval is uncertain.

Pre-clinical studies include laboratory evaluations of the product candidate, as well as animal studies to assess the potential safety and efficacy of the product candidate. The results of the pre-clinical studies, together with manufacturing information and analytical data, are submitted to the FDA as part of the IND, which must become effective before clinical trials may be commenced. The IND will become effective automatically 30 days after receipt by the FDA, unless the FDA raises concerns or questions about the conduct of the trials as outlined in the IND prior to that time. In this case, the IND sponsor and the FDA must resolve any outstanding concerns before clinical trials can proceed.

Clinical trials involve the administration of the drug product candidates to healthy volunteers or patients with the disease to be treated under the supervision of a qualified principal investigator. Clinical trials are conducted under protocols detailing, among other things, the objectives of the study, the parameters to be used in monitoring safety, and the efficacy criteria to be evaluated. A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. Further, each clinical trial must be reviewed and approved by an independent Institutional Review Board, or IRB, either centrally or individually at each institution at which the clinical trial will be conducted. The IRB will consider, among other things, ethical factors, the safety of human subjects and the possible liability of the institution. There are also requirements governing the reporting of ongoing clinical trials and clinical trial results to public registries. The FDA, the IRB or the clinical trial sponsor may suspend or terminate clinical trials at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk. Additionally, some clinical trials are overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board or committee. This group provides authorization for whether or not a trial may move forward at designated check points based on access to certain data from the study. We may also suspend or terminate a clinical trial based on evolving business objectives and/or competitive climate.

Clinical trials are typically conducted in three sequential phases prior to approval, but the phases may overlap. These phases generally include the following:

Phase 4 clinical trials are conducted after approval to gain additional experience from the treatment of patients in the intended therapeutic indication and to document a clinical benefit in the case of drugs approved under accelerated approval regulations, or when otherwise requested by the FDA in the form of post-market requirements or commitments. Failure to promptly conduct any required Phase 4 clinical trials could result in withdrawal of approval.

The results of pre-clinical studies and clinical trials, including negative or ambiguous results as well as positive findings, together with detailed information on the manufacture, composition and quality of the product, are submitted to the FDA in the form of an NDA requesting approval to market the product. The NDA must be accompanied by a significant user fee payment. The FDA has substantial discretion in the approval process and may refuse to accept any application or decide that the data is insufficient for approval and require additional pre-clinical, clinical or other studies.

In addition, under the Pediatric Research Equity Act, or PREA, an NDA or supplement to an NDA must contain data to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may grant deferrals for submission of data or full or partial waivers. Unless otherwise required by regulation, PREA does not apply to any drug for an indication for which orphan designation has been granted. However, if only one indication for a product has orphan designation, a pediatric assessment may still be required for any applications to market that same product for the non-orphan indication(s).

Once the NDA submission has been submitted, the FDA has 60 days after submission of the NDA to conduct an initial review to determine whether it is sufficient to accept for filing. Under the Prescription Drug User Fee Act, the FDA sets a goal date by which it plans to complete its review. The current goal is 10 months from the date of submission of the NDA application. The review process is often extended by FDA requests for additional information or clarification. Before approving an NDA, the FDA will inspect the facilities at which the product is manufactured and will not approve the product unless the manufacturing facility complies with cGMPs and may also inspect clinical trial sites for integrity of data supporting safety and efficacy. The FDA may also convene an advisory committee of external experts to provide input on certain review issues relating to risk, benefit and interpretation of clinical trial data. The FDA is not bound by the recommendations of an advisory committee, but generally follows such recommendations in making its decisions. The FDA may delay approval of an NDA if applicable regulatory criteria are not satisfied and/or the FDA requires additional testing or information. The FDA may require post-marketing testing and surveillance to monitor safety or efficacy of a product.

After the FDA evaluates the NDA and conducts inspections of manufacturing facilities where the drug product and/or its API will be produced, it may issue an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. A Complete Response Letter indicates that the review cycle of the application is complete and the application is not ready for approval. A Complete Response Letter may require additional clinical data and/or an additional pivotal Phase 3 clinical trial(s), and/or other significant, expensive and time-consuming requirements related to clinical trials, pre-clinical studies or manufacturing. Even if such additional information is submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. The FDA could also approve the NDA with a Risk Evaluation and Mitigation Strategy, or REMS, plan to mitigate risks, which could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. The FDA also may condition approval on, among other things, changes to proposed labeling, development of adequate controls and specifications, or a commitment to conduct one or more post-market studies or clinical trials. Such post-market testing may include Phase 4 clinical trials and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization.

Device Approval Process

Unless an exemption applies, any medical device that is to be marketed in the U.S. must first receive from the FDA either 510(k) clearance, by filing a 510(k) premarket notification, or PMA approval, after submitting a PMA. Alternatively, the device may be cleared through the de novo classification process by the FDA. Bentrio® has been considered a Class II device by FDA and cleared under the 510(k) pathway for the product’s intended use of promoting alleviation of mild allergic symptoms triggered by the inhalation of various airborne allergens.

To obtain 510(k) clearance, a company must submit a premarket notification demonstrating substantial equivalence between the proposed device and a legally marketed “predicate” device, which is defined as a legally marketed device, that (i) was legally marketed prior to May 28, 1976, for which the FDA has not yet called for submission of a PMA application; (ii) has been reclassified from Class III to Class II or Class I; (iii) has been cleared through the 510(k) premarket notification process; or (iv) has been previously determined to be exempt from the 510(k) process. Substantial equivalence means that the proposed device has the same intended use and the same technological characteristics as the predicate device, or, if the new device has different technological characteristics, that the device is as safe and effective as the predicate device and does not raise different questions of safety and effectiveness.

Bentrio® was also developed for use in the reduction of the intranasal infectious viral load following inspiration of airborne viruses such as SARS-CoV-2. The FDA did not accept that this proposed intended use could proceed on the medical device pathway. The rationale provided is that it makes a drug-like claim that would require a drug approval. Feedback received from FDA in 2021, prior to the Bentrio® 510(k) clearance, suggested that the regulatory pathway for this intended use and interpretation of mechanism of action would result in the product being regulated as a drug rather than a medical device. That interpretation by FDA is arguable, especially in light of the subsequent 510(k) clearance for allergens. For future indications beyond the currently cleared Bentrio® intended use, additional work and engagement with FDA is needed to finalize the device vs drug regulation pathway and associated nonclinical and clinical evidence requirements. If the device pathway is deemed appropriate, we may have to submit a de novo request to the FDA since there may be no valid 510(k) predicate device available for this intended use. Under the de novo pathway, we would have to prove that AM-301 does not present substantial risk to the patient rather than just demonstrating substantial equivalence with the safety of the relevant predicate device(s), which may require additional testing. The review by the FDA in the de novo process is longer than the review process for 510(k) submissions and requires higher fees. Any device that has been classified through the de novo process may be marketed and used as predicate for future 510(k) submissions.

Many foreign countries in which we intend to market Bentrio® have regulatory bodies and restrictions similar to those of the FDA. International sales are subject to foreign government regulation, the requirements of which vary substantially from country to country. The time required to obtain approval by a foreign country may be longer or shorter than that required for FDA clearance and the requirements may differ.

In particular, Bentrio® may be marketed in the European Union (EU) subject to compliance with the Medical Devices Directive 93/92/EEC (MDD), pursuant to which a medical device may be placed on the market within the EU only if it conforms to certain “essential requirements” and bears the CE Mark. The most fundamental and essential requirement is that a medical device must be designed and manufactured in such a way that it will not compromise the clinical condition or safety of patients, or the safety and health of users and others. In addition, the device must achieve the essential performance(s) intended by the manufacturer and be designed, manufactured and packaged in a suitable manner. In May 2017, the EU adopted a new Medical Devices Regulation (EU) 2017/745 (MDR), which repealed and replaced the MDD with effect from May 26, 2021. The MDR clearly envisages, among other things, stricter controls of medical devices, including strengthening of the conformity assessment procedures, increased expectations with respect to clinical data for devices and pre-market regulatory review of high-risk devices. The MDR also envisages greater control over notified bodies and their standards, increased transparency, more robust device vigilance requirements and clarification of the rules for clinical investigations. Under transitional provisions, medical devices with notified body certificates issued under the MDD prior to May 26, 2021 may continue to be placed on the market for the remaining validity of the certificate, until May 27, 2024 at the latest. On February 16, 2023, the Council of the European Union and the European Parliament approved an extension of the MDR transition periods; for Class I medical devices (such as Bentrio®) an extension to May 26, 2028 was approved. After the expiry of any applicable transitional period, only devices that have been CE marked under the MDR may be placed on the market in the EU.

Manufacturers must demonstrate that their devices conform to the relevant essential requirements through a conformity assessment procedure. The nature of the assessment depends upon the classification of the device. The classification rules are mainly based on three criteria: the length of time the device is in contact with the body, the degree of invasiveness and the extent to which the device affects the anatomy. Conformity assessment procedures for all but the lowest risk classification of device involve a notified body. Notified bodies are often private entities and are authorized or licensed to perform such assessments by government authorities. Manufacturers usually have some flexibility to select a notified body for the conformity assessment procedures for a particular class of device and to reflect their circumstances, e.g., the likelihood that the manufacturer will make frequent modifications to its products. Conformity assessment procedures require an assessment of available clinical evidence, literature data for the product and post-market experience in respect of similar products already marketed. Notified bodies also may review the manufacturer’s quality systems. If satisfied that the product conforms to the relevant essential requirements, the notified body issues a certificate of conformity, which the manufacturer uses as a basis for its own declaration of conformity and application of the CE Mark. Application of the CE Mark allows the general commercializing of a product in the EU. The product can also be subjected to local registration requirements depending on the country. We maintain CE Marking on all of our products that require such markings as well as local registrations as required.

Pharmaceutical Coverage, Pricing and Reimbursement

In both domestic and foreign markets, our sales of any approved drug products will depend in part on the availability of coverage and adequate reimbursement from third-party payors. Third-party payors include government authorities, managed care providers, private health insurers and other organizations. Patients who are prescribed treatments for their conditions and providers performing the prescribed services generally rely on third-party payors to reimburse all or part of the associated healthcare costs. Patients are unlikely to use our products, if approved, unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our products. Sales of our products will therefore depend substantially, both domestically and abroad, on the extent to which the costs of our products will be paid by third-party payors. These third-party payors are increasingly focused on containing healthcare costs by challenging the price and examining the cost-effectiveness of medical products and services.

In addition, significant uncertainty exists as to the coverage and reimbursement status of newly approved healthcare product candidates. The market for our product candidates for which we may receive regulatory approval will depend significantly on access to third-party payors’ drug formularies, or lists of medications for which third-party payors provide coverage and reimbursement. The industry competition to be included in such formularies often leads to downward pricing pressures on pharmaceutical companies. Also, third-party payors may refuse to include a particular branded drug in their formularies or otherwise restrict patient access to a branded drug when a less costly generic equivalent or another alternative is available. Furthermore, third-party payor reimbursement to providers for our product candidates may be subject to a bundled payment that also includes the procedure administering our products. To the extent there is no separate payment for our product candidates, there may be further uncertainty as to the adequacy of reimbursement amounts.

Because each third-party payor individually approves coverage and reimbursement levels, obtaining coverage and adequate reimbursement is a time-consuming, costly and sometimes unpredictable process. We may be required to provide scientific and clinical support for the use of any product to each third-party payor separately with no assurance that approval would be obtained, and we may need to conduct expensive pharmacoeconomic studies in order to demonstrate the cost-effectiveness of our products. This process could delay the market acceptance of any product and could have a negative effect on our future revenues and operating results. We cannot be certain that our product candidates will be considered cost-effective. Because coverage and reimbursement determinations are made on a payor-by-payor basis, obtaining acceptable coverage and reimbursement from one payor does not guarantee the Company will obtain similar acceptable coverage or reimbursement from another payor. If we are unable to obtain coverage of, and adequate reimbursement and payment levels for, our product candidates from third-party payors, physicians may limit how much or under what circumstances they will prescribe or administer them and patients may decline to purchase them. This in turn could affect our ability to successfully commercialize our products and impact our profitability, results of operations, financial condition and future success.

Furthermore, in many foreign countries, particularly the countries of the European Union, the pricing of prescription drugs is subject to government control. In some non-U.S. jurisdictions, the proposed pricing for a drug must be approved before it may be lawfully marketed. The requirements governing drug pricing vary widely from country to country. For example, the European Union provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. A member state may approve a specific price for the medicinal product or it may instead adopt a system of direct or indirect controls on the profitability of the Company placing the medicinal product on the market. We may face competition for our product candidates from lower-priced products in foreign countries that have placed price controls on pharmaceutical products. In addition, there may be importation of foreign products that compete with our own products, which could negatively impact our profitability.

Healthcare Reform

In the United States and foreign jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory changes to the healthcare system that could affect our future results of operations as we begin to directly commercialize our products.

In particular, there have been and continue to be a number of initiatives at the U.S. federal and state level that seek to reduce healthcare costs. Initiatives to reduce the federal deficit and to reform healthcare delivery are increasing cost-containment efforts. We anticipate that Congress, state legislatures and the private sector will continue to review and assess alternative benefits, controls on healthcare spending through limitations on the growth of private health insurance premiums and Medicare and Medicaid spending, the creation of large insurance purchasing groups, price controls on pharmaceuticals and other fundamental changes to the healthcare delivery system. Any proposed or actual changes could limit or eliminate our spending on development projects and affect our ultimate profitability.

In the future, there may continue to be additional proposals relating to the reform of the United States healthcare system, some of which could further limit the prices we are able to charge for our products candidates, or the amounts of reimbursement available for our product candidates. If future legislation were to impose direct governmental price controls and access restrictions, it could have a significant adverse impact on our business. Managed care organizations, as well as Medicaid and other government agencies, continue to seek price discounts. Some states have implemented, and other states are considering, price controls or patient access constraints under the Medicaid program, and some states are considering price-control regimes that would apply to broader segments of their populations that are not Medicaid-eligible. Due to the volatility in the current economic and market dynamics, we are unable to predict the impact of any unforeseen or unknown legislative, regulatory, payor or policy actions, which may include cost containment and healthcare reform measures. Such policy actions could have a material adverse impact on our profitability.

The federal Drug Supply Chain Security Act imposes obligations on manufacturers of pharmaceutical products, among others, related to product tracking and tracing. Manufacturers will be required to provide certain information regarding the drug product to individuals and entities to which product ownership is transferred, label drug product with a product identifier, and keep certain records regarding the drug product. Further, under this new legislation, manufacturers will have drug product investigation, quarantine, disposition, and notification responsibilities related to counterfeit, diverted, stolen, and intentionally adulterated products, as well as products that are the subject of fraudulent transactions or which are otherwise unfit for distribution such that they would be reasonably likely to result in serious health consequences or death.

Other Regulatory Requirements

Maintaining substantial compliance with appropriate federal, state and local statutes and regulations requires the expenditure of substantial time and financial resources. Drug and device manufacturers are required to register their establishments with the FDA and certain state agencies, and after approval, the FDA and these state agencies conduct periodic unannounced inspections to ensure continued compliance with ongoing regulatory requirements, including cGMPs and QSR. In addition, after approval, some types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further FDA review and approval.

The FDA may require post-approval testing and surveillance programs to monitor safety and the effectiveness of approved products that have been commercialized. Any drug or device products manufactured or distributed by us pursuant to FDA approvals are subject to continuing regulation by the FDA, including:

In addition, the FDA strictly regulates labeling, advertising, promotion and other types of information on products that are placed on the market. There are numerous regulations and policies that govern various means for disseminating information to health-care professionals as well as consumers, including to industry sponsored scientific and educational activities, information provided to the media and information provided over the Internet. Drugs may be promoted only for the approved indications and in accordance with the provisions of the approved label.

The FDA has very broad enforcement authority and the failure to comply with applicable regulatory requirements can result in administrative or judicial sanctions being imposed on us or on the manufacturers and distributors of our approved products, including warning letters, refusals of government contracts, clinical holds, civil penalties, injunctions, restitution and disgorgement of profits, recall or seizure of products, total or partial suspension of production or distribution, withdrawal of approvals, refusal to approve pending applications, and criminal prosecution resulting in fines and incarceration. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability. In addition, even after regulatory approval is obtained, later discovery of previously unknown problems with a product may result in restrictions on the product or even complete withdrawal of the product from the market.

Other Healthcare Laws

Because of our current and future arrangements with healthcare professionals, principal investigators, consultants, customers and third-party payors, we will also be subject to healthcare regulation and enforcement by the federal government and the states and foreign governments in which we will conduct our business, including our clinical research, proposed sales, marketing and educational programs. Failure to comply with these laws, where applicable, can result in the imposition of significant civil penalties, criminal penalties, or both. The U.S. laws that may affect our ability to operate, among others, include: the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, which governs the conduct of certain electronic healthcare transactions and protects the security and privacy of protected health information; certain state laws governing the privacy and security of health information in certain circumstances, some of which are more stringent than HIPAA and many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts; the federal healthcare programs’ Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal healthcare programs such as the Medicare and Medicaid programs; federal false claims laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payors that are false or fraudulent; federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters; the Physician Payments Sunshine Act, which requires manufacturers of drugs, devices, biologics, and medical supplies to report annually to the U.S. Department of Health and Human Services information related to payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, and ownership and investment interests held by physicians and their immediate family members; and state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers.

In addition, many states have similar laws and regulations, such as anti-kickback and false claims laws that may be broader in scope and may apply regardless of payor, in addition to items and services reimbursed under Medicaid and other state programs. Additionally, to the extent that our products are sold in a foreign country, we may be subject to similar foreign laws.

The registrant corporation, Altamira Therapeutics Ltd., had seven wholly-owned subsidiaries as of December 31, 2022, which are each listed in Exhibit 8.1 filed hereto. We primarily operate our business out of our operating subsidiary Auris Medical AG.

Our registered office is in Hamilton, Bermuda. We also lease approximately 4,700 square feet of office space in Basel, Switzerland. This property serves as the corporate headquarters of our principal operating subsidiary.

ITEM 4A. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

You should read the following discussion and analysis of our financial condition and results of operations together with our audited consolidated financial statements, including the notes thereto, included in this Annual Report. The following discussion is based on our financial information prepared in accordance with IFRS as issued by the IASB, which might differ in material respects from generally accepted accounting principles in other jurisdictions. The following discussion includes forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those described under “Item 3. Key Information—D. Risk factors” and elsewhere in this Annual Report.

We are a clinical-and commercial-stage biopharmaceutical company developing therapeutics that address important unmet medical needs. We are currently active in two areas: the development of RNA delivery technology and therapeutics for extrahepatic therapeutic targets (OligoPhore™ / SemaPhore™ platforms; AM-401 for the treatment of KRAS driven cancer, AM-411 for the treatment of rheumatoid arthritis; preclinical), and nasal sprays for protection against airborne allergens, and where approved, viruses (Bentrio®; commercial) or the treatment of vertigo (AM-125; Phase 2). We have announced our intention to reposition the Company around RNA delivery technology while exploring strategic options to either divest or partner our non-RNA traditional businesses.

To date, we have financed our operations through public offerings of our common shares, private placements of equity securities, and short- and long-term loans. As of December 31, 2022, we had cash and cash equivalents of CHF 15 thousand and an accumulated deficit of CHF 201.4 million. Based on our current plans, we expect to continue incurring losses as we continue our pre-clinical and clinical and development programs and build business development and alliance management activities to support the licensing out or partnering of our RNA delivery technology. We do not expect to generate licensing or royalty or product revenues sufficient to fund our operations unless and until we achieve substantially higher royalty or product revenues from the commercialization of Bentrio®, and / or from out-licensing or other partnering transactions related to AM-125 or our OligoPhore™ or SemaPhore™ platforms. This situation raises substantial doubt about the Company’s ability to continue as a going concern.

Collaboration and License Agreements

Washington University

In 2020, we entered into an Exclusive License Agreement with Washington University located in St. Louis, Missouri (“WU”), which Exclusive License Agreement was subsequently amended and restated in June 2021, with effect as of December 11, 2020. Pursuant to the agreement, WU granted us an exclusive, worldwide, royalty-bearing license (with the right to sublicense) during the term of the agreement under certain patent rights owned or controlled by WU to research, develop, make, have made, sell, offer for sale, use and import pharmaceutical products covered under such patent rights for all fields of use. Such licensed products may include drug products formulated as nanoparticles, comprising a peptide for delivery as well as a therapeutic nucleotide, for intracellular delivery. In consideration for such worldwide, exclusive license, we will be obligated to pay WU: annual license maintenance fees in the low five figures through first commercial sale; pre-clinical and clinical regulatory milestones; sales milestones; and a low single digit royalty based on annual net sales of licensed products worldwide for at least the applicable patent term or period of marketing exclusivity, whichever is longer, but in no case less than a minimum royalty term of 12 years; and a percentage share (in the double digits) of sublicensing revenues received by us in connection with licensed products. Such regulatory and sales milestones may total up to an aggregate of $4,375,000. In the event we fail to meet certain regulatory diligence milestones, WU will have the right to terminate the license.

INSERM

In 2006, we entered into a co-ownership/exploitation agreement with the INSERM, a publicly funded government science and technology agency in France. Pursuant to the terms of the agreement, we were granted the exclusive right to exploit any products derived from patents that resulted from our joint research program with INSERM that was conducted in 2003 to 2005 and led to the development of Keyzilen®. Pursuant to the terms of the co-ownership/exploitation agreement, we were given the exclusive right to exploit the patents issuing from the filed patent applications for all claimed applications, including the treatment of tinnitus, in order to develop, promote, manufacture, cause to be manufactured, use, sell and distribute any products, processes or services deriving from such patents, including Keyzilen®, in any country in which these patent applications have been filed during the term of the agreement.

As consideration for the exclusive rights granted to us under the agreement, we agreed to pay INSERM a two tiered low single digit percentage royalty (where the higher rate is due on any net sales above a certain threshold) on the net sales of any product covered by the patents (including the use of Keyzilen® in the treatment of tinnitus triggered by cochlear glutamate excitotoxicity) earned in each country in which these patent applications have been filed during the term of the agreement. We have also agreed to pay INSERM a low double-digit fee on any sums of any nature (except royalties and certain costs) collected by us in respect of the granting of licenses to third parties.

Xigen

In October 2003, we entered into a collaboration and license agreement with Xigen, pursuant to which Xigen granted us an exclusive worldwide license to use specified compounds to develop, manufacture and commercialize “pharmaceutical products as well as drug delivery devices and formulations for local administration of therapeutic substances to the inner ear for the treatment of ear disorders” (the Area). We also have a right of first refusal to license certain additional compounds developed by Xigen which may be used for the Area, specifically any cell permeable inhibitors to effectively block certain signal pathways in apoptotic processes.

Under this agreement, we made an upfront payment to Xigen of CHF 200,000 and we are obligated to make development milestone payments on an indication-by-indication basis of up to CHF 1.5 million and regulatory milestone payments on a product-by-product basis of up to CHF 2.5 million, subject to a mid-twenties percentage reduction for smaller indications, e.g., those qualifying for orphan drug status. To date, we have paid CHF 1.325 million to Xigen under the agreement. We will be required to pay Xigen a mid-single digit percentage royalty on net sales of each licensed product that uses a compound licensed under the agreement, which royalty for a given indication shall be partially offset by milestone payments we have paid for such indication, until the later of 10 years after the first commercial sale of any licensed product using such licensed compound in any country, and the first expiration of a patent owned by or exclusively licensed to Xigen that covers the use of such licensed compound in any country, subject to our obligation to enter into good faith negotiations with Xigen, upon expiration of the relevant patent on a licensed compound, about the conditions of our further use of such licensed compound.

Otifex

On February 2, 2017, we entered into an asset purchase agreement with Otifex Therapeutics Pty Ltd (“Otifex”), pursuant to which we agreed to purchase and Otifex agreed to sell us certain pre-clinical and clinical assets related to a formulation for the intranasal application of betahistine, which we refer to as AM-125, as well as associated intellectual property rights. We are developing the formulation for the treatment of AVS. The Otifex transaction closed in July 2017.

Financial Operations Overview

We expect our regular total additional funding requirements for operations and financial obligations in 2023 to be in the range of CHF 15 to 17 million.

Research and development expense

Research and development expense consists principally of:

Our research and development expense mainly relates to the following key programs:

Other research and development expenses mainly relate to the maintenance of our late-stage projects Sonsuvi® (AM-111) and Keyzilen® (AM-101) and pre-clinical studies of AM-102 (second generation tinnitus treatment).

For the years ended December 31, 2022 and 2021, we spent CHF 0.6 million and CHF 0.2 million on research and development expenses related to our RNA programs with AM-401 and AM-411. For the years ended December 31, 2022, 2021 and 2020, we spent CHF 2.1 million, CHF 2.8 million and CHF 2.7 million, respectively, on research and development expenses related to our intranasal betahistine program (before capitalization of expenses related to AM-125). For the years ended December 31, 2022, 2021 and 2020, we spent CHF 3.9 million, CHF 4.2 million and CHF 0.8 million on research and development expenses related to AM-301. In addition, we incurred low levels of research and development expenses related to our Keyzilen® and Sonsuvi® programs, which were mainly for maintenance and regulatory work.

In 2023, the level of research and development expenses related to our AM-401 and AM-411 programs is expected to increase as we will conduct more in vitro studies, initiate in vivo studies and expand formulation and process development work. On the other hand, the level of research and development expenses related to AM-301 and AM-125 is expected to decrease in 2023 as development projects will complete, and as we aim to divest or partner these legacy assets. At this time, we cannot reasonably estimate the nature, timing and estimated costs of the efforts that will be necessary to complete the development of, or the period, if any, in which material net cash inflows may commence from any of our product candidates. This is due to numerous risks and uncertainties associated with developing drugs, including the uncertainty of:

A change in the outcome of any of these variables with respect to the development of AM-401, AM-411 or any other product candidate that we may develop could mean a significant change in the costs and timing associated with the development of such product candidate. For example, if the FDA or other regulatory authority were to require us to conduct pre-clinical and clinical studies beyond those which we currently anticipate will be required for the submission of the IND filings or if we experience significant delays in obtaining study slots with contract research organizations or sourcing appropriate animals for such studies, we could be required to expend significant additional financial resources and time on the completion of the IND enabling studies.

In the context of our strategic repositioning, we have decided to deprioritize the development of Sonsuvi® (AM-111), Keyzilen® (AM-101) and AM-201 and to seek their divestiture. We therefore do not expect to incur any or any meaningful research and development expenses for these programs in 2023.

Sales and marketing expense

Our sales and marketing expense is related to Bentrio®, our sole commercial stage product, and consists principally of:

Sales and marketing expense decreased in 2022 over 2021 as there were fewer launch activities for sales in Europe and due to a temporary recall of Bentrio® in Europe as we had to limit the product’s labelling to the allergy indication only.

General and administrative expense

Our general and administrative expense consists principally of:

Interest income

Our policy is to invest funds in low risk investments including interest bearing deposits. Saving and deposit accounts generate a small amount of interest income.

Interest expense

In 2022 and 2021, our interest expense consisted principally of interest due on the two convertible loans provided by FiveT.

Revaluation loss/gain from derivative financial instruments

Expenses related to fair value measurement of derivatives embedded in the FiveT convertible loan of CHF 416,003 were recorded as financial expenses in profit or loss.

On February 21, 2017, we issued 500,000 (pre-merger) warrants in connection with a registered offering of 500,000 common shares (the “February 2017 Registered Offering”), each warrant entitling its holder to purchase 0.70 of a common share at an exercise price von $ 24.00 (pre-merger). Additionally, the underwriter was granted a 30-day option to purchase up to 75,000 (pre-merger) additional common shares and/or 75,000 (pre-merger) additional warrants. On February 15, 2017, the underwriter partially exercised its option for 67,500 (pre-merger) warrants. Revaluation gain/(loss) show the changes in fair value of the warrant issued in connection with this offering. As of December 31, 2021, the outstanding warrants issued in the February 2017 offering were exercisable for up to 1,986 common shares at an exercise price of $4,800.00 per common share. As of December 31, 2021, the fair value of the warrants amounted to CHF 0. The revaluation loss of the derivative for the twelve months ended December 31, 2021 amounted to CHF 0 (2020: CHF 0). Since its initial recognition on February 21, 2017, the fair value decreased by CHF 5,091,817, resulting in a gain in the corresponding amount (fair value as of February 21, 2017: CHF 5,091,817).

On January 30, 2018 we issued warrants in connection with a direct offering of 3,125 common shares, each warrant entitling its holder to purchase 0.6 common share at an exercise price of $2,000.00 per common share. As of December 31, 2021, the warrants were exercisable for an aggregate of 1,875 of our common shares (assuming we decide to round up fractional common shares to the next whole common share), at an exercise price of $2,000.00 per common share. Revaluation gain/(loss) show the changes in fair value of the warrant issued in connection with this offering. As of December 31, 2021, the fair value of the warrants amounted CHF 1,233. The revaluation gain of the derivative for the twelve months ended December 31, 2021 amounted to CHF 5,085, compared to 2020 where there was a revaluation loss of CHF 1,965. Since its initial recognition on January 30, 2018, the fair value of the warrants has decreased by CHF 2,482,514 resulting in a gain in the corresponding amount (fair value as of January 30, 2018: CHF 2,483,747).

On July 17, 2018, the Company issued Series A warrants each entitling its holder to purchase 0.35 of a common share for an aggregate of 15,705 common shares, and Series B warrants entitling its holder to purchase 0.25 of a common share for an aggregate of 11,218 common shares in connection with the July 2018 Registered Offering of 44,872 common shares. The original exercise price was CHF 156.00 per common share. Revaluation gain/(loss) show the changes in fair value of the outstanding Series B warrant issued in connection with this offering. As of December 31, 2019, 7,261 Series A warrants were exercised for an aggregate amount of CHF 1,132,762 and 7,161 Series B warrants were exercised for an aggregate amount of CHF 1,117,125.

As of December 31, 2019, 7,161 Series B exercised warrants were subject to revaluation at the time that they were exercised and the fair value amounted to CHF 3,005,348 (2018: CHF 3,005,348). Since its initial recognition on July 17, 2018 the fair value of the warrants has increased by CHF 2,433,099, resulting in a loss in the corresponding amounts (fair value as of July 17, 2018: CHF 572,249).

As of December 31, 2019, the number of Series B warrants outstanding subject to revaluation were 1,727 and the fair value amounted to CHF 0.00. On June 18, 2020, the outstanding warrants expired without further warrants being exercised. As a result, no further revaluation gain or loss was recognized for the year ended December 31, 2020 (fair value as of July 17, 2018: CHF 137,987).

Foreign currency exchange gain/(loss), net

Our foreign currency exchange gain/(loss), net, consists primarily of unrealized gains or losses on our USD and EUR denominated cash and cash equivalents. We do not hedge our investments by currency borrowings or other hedging instruments.

Transaction costs

Transaction costs are shown as costs if they are not directly attributable to the equity transaction. Transaction costs amounted to CHF 1,137 in the year ended December 31, 2022, compared to zero in the previous year.

Other comprehensive loss

Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized in other comprehensive loss.

Assets and liabilities of our subsidiaries with functional currency other than CHF are included in our consolidated financial statements by translating the assets and liabilities into CHF at the exchange rates applicable at the end of the reporting period. Income and expenses for each consolidated statement of profit or loss and other comprehensive income are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transaction).

Foreign currency differences arising from translating the financial statements of our subsidiaries from currencies other than CHF are recognized in other comprehensive income and presented in the foreign currency translation reserve under equity in the statement of financial position. When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal.

Results of Operations

The numbers below have been derived from our consolidated financial statements included elsewhere herein. The discussion below should be read along with these consolidated financial statements and it is qualified in its entirety by reference to them.

Comparison of the years ended December 31, 2022 and 2021

Revenue and cost of goods sold

Revenue includes product sales of Bentrio®. Cost of goods sold of comprised the relevant manufacturing costs for Bentrio® incurred through our contract manufacturer, expenses for storage and shipments, as well as inventory write-offs. The latter concerned products in inventory with only short remaining shelf life and amounted to CHF 0.9 million in 2022 and CHF 2.0 million in 2021. The amount of the write down was expensed to the income statement under Cost of Sales.

In the Unaudited Condensed Consolidated Interim Financial Statements of the Company as of June 30, 2022 and for the six months ended June 30, 2022 furnished with the Securities and Exchange Commission on November 30, 2022, an upfront payment of $1 million (CHF 0.9 million) related to the exclusive licensing and distribution agreement with Nuance for Bentrio® was incorrectly recorded as revenue. In the financial statements as of December 31, 2022, the upfront payment is recorded as deferred income; please refer to “Adjustment of June 30, 2022 Revenue” below. 

Other income

Other income increased 231% from CHF 0.2 million in 2021 to CHF 0.7 million in 2022 primarily due to higher development tax credits related to clinical projects.

Research and development expense

Research and development expense increased by 135% from CHF 8.4 million in 2021 to CHF 19.7 million in 2022 mainly due to the non-cash write-off (impairment) of previously capitalized internal development costs related to the AM-125 project. In general, our research and development expense is dependent on the development phases of our research projects and may therefore fluctuate significantly from year to year. The variances in expense between 2021 and 2022 are mainly due to the following factors:

Sales and marketing expense increased by 59% in the year ended December 31, 2022 to CHF 2.4 million primarily due to increased marketing and sales activities.