AVENIR WELLNESS SOLUTIONS, INC. The following discussion and analysis should be read in conjunction with our
unaudited Condensed Consolidated Financial Statements and notes thereto included
in this Quarterly Report, as well as the audited consolidated financial
statements and the notes thereto, and the discussion under "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business" included in our Annual Report on Form 10-K for the fiscal year ended
Overview
Subsequent to
Our technology platform includes oral thin film ("OTF"), and encapsulation systems ("microCURE") compatible with OTF, chews, oral solutions, topical and transdermal dose forms. We apply our technology to pharmaceutical drugs and dietary supplements for the wellness market. OTF products are about the size of a postage stamp and composed of excipients such as polymers, stabilizers, lipids and surfactants which are all generally recognized as safe. They can be designed to deliver active ingredients to the gastrointestinal, or GI, tract when placed on the tongue and swallowed, or directly to the blood stream when placed under the tongue (sublingual) or on the inner lining of the cheek and lip (buccal).
We mainly sell wellness products through
Our pharmaceutical drug program includes:
CUREfilm Blue
A 25mg and 50mg sildenafil OTF for the treatment of erectile dysfunction. We
have completed our pre-IND meeting with the
CUREfilm Canna
We are developing several cannabinoid products with optimized pharmacokinetic profiles using microCURE and CUREfilm technology.
CUREfilm Anti-Viral
We are developing an orally bio-available anti-viral of an existing therapeutic leveraging existing pre-clinical/clinical safety and toxicity data.
CUREfilm Central Nervous System
We are developing a novel dosage form of a difficult to treat disease states utilizing our proprietary CUREfilm dosage form. These could include but are not limited to mental health disorders such as depression, PTSD, addiction disorders, obsessive compulsive disorder, and anxiety.
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The pharmaceutical industry is facing ever-growing R&D expenditures and fewer new drug approvals as a result of increasing regulation, a failure to predict safety problems or a lack of efficacy early in a drug's development, and high investment in new technologies to improve the speed and accuracy of drug development. Researching and developing new molecular entities (NMEs) is risky as measured by an ever-increasing R&D spend (13.4% average increase per year), low clinical trial success rate (10%) and sluggish NME drug approvals - with 50 NMEs approved in 2021, down from 53 in 2020. Faced with these challenges, drug developers are looking toward alternative dosage forms, for which R&D investments far surpass those of NMEs. Alternative dosage forms can address safety and efficacy limitations observed during clinical development of an NME using conventional formulations, by improving its pharmacokinetic profile.
In addition to these challenges, many marketed drugs are coming off-patent, creating a need to fill revenue gaps. Novel dosage forms can offer strategies for surviving patent cliffs by extending market exclusivity when they address a bona fide unmet need.
The pharmaceutical industry is also challenged by the many patients who do not adhere to a regime of prescription drugs because of side effects, difficulty in administration or the taste of a drug. Medication adherence and the patient experience can be improved with strategies such as replacing an injectable drug with a sublingual drug, simplifying the dosing schedule with a sustained release dosage form and reducing toxicities by avoiding the GI tract (e.g. through transdermal or transmucosal delivery).
Improved formulations can address these many challenges by cutting down development costs, reducing the time to market, extending product patent protection, improving patient compliance and increasing drug efficacy. For example, reformulation can enable drug repositioning, the process of finding new uses for failed drugs, such as those abandoned for lack of efficacy or excessive toxicity after Phase II trials, or marketed drugs for which new uses will extend patent life and, therefore, profitability.
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Our Strategy
Our commercial strategy is designed to mitigate risk by pursuing a diversified model in the following categories:
Pharmaceuticals
We partner with companies that are responsible for marketing and distribution of the products we develop and manufacture. On a case-by-case basis, we may be responsible for clinical development and regulatory approval with the FDA and/or other regulatory bodies. Deal terms may include upfront licensing fees, development costs, milestone payments, royalties and exclusive manufacturing rights. Within this category, we are pursuing products with 505(b)(2) approval pathways such as our Sildenafil OTF - CUREfilm Blue. While we currently manufacture nutraceutical products in our state-of-the-art cGMP oral dissolving film manufacturing facility, we are undertaking steps to manufacture pharmaceutical products for commercial use.
Cannabinoids and Other Schedule 1 Drugs
We are specifically investing in pharmaceutical-grade cannabinoid products, such as tetrahydrocannabinol (THC) and cannabidiol (CBD). The oral bioavailability of cannabinoids is very low due to extensive "first-pass" metabolism. Consequently, potency and release times are unpredictable and inconsistent. Moreover, cannabinoids do not readily dissolve in water which adds to dosing difficulties and discrepancies. In addition to improving bioavailability, CUREfilm enables the loading of combinations of cannabinoids and botanical extracts which may provide maximum therapeutic benefit.
We are sponsoring preclinical cannabinoid research at the
Wellness and Beauty
We focus on evidence-based wellness products that are differentiated by using proprietary and/or proven active ingredients that we formulate for greater stability, overall quality and increased bioavailability. Wellness and Beauty products can be cosmetics, over-the-counter or dietary supplements which do not require FDA approval but do require following all good manufacturing practices (GMPs). Thus, they are less costly and faster to launch in the marketplace. We sell white labeled and private labeled wellness products which we produce in our state-of-the-art cGMP manufacturing facility. While manufacturing fees for such products have lower margins than prescription drugs, they provide us with short term revenue opportunities.
In
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Our Technology
As a drug delivery company, we seek to grow our technological capabilities
through internal innovation and acquisitions. In
Our expanded formulation and delivery platform, CUREformTM combines the right formulation with the right dosage form. In addition to novel chewable dosage forms, the acquisition gives us advanced encapsulation capabilities (microCURE) that serve to:
· Protect molecules from degradation during the manufacturing process and
throughout shelf life
· Protect molecules from degradation in the body (e.g. stomach acids); and
· Increase a drug's bioavailability and optimize its release kinetics
through:
· Increased solubility in water and therefore bodily fluids
· Enhanced permeability and retention in target tissue
CUREfilmTM Technology
The founders of
OTFs have significant advantages compared to other dosage forms (e.g., tablets and capsules), including:
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Safety and Efficacy
· Potential for rapid onset of action which can be especially useful for
indications such as motion sickness, erectile dysfunction, seizures,
allergic attack or coughing, bronchitis or asthma.
· Potential to extend a drug's half-life and consequently extending dosage
intervals.
· Transmucosal delivery can improve a drug's safety profile of therapy such
as reduced gastric irritation.
· Transmucosal delivery can improve a drug's efficacy in patients with GI
absorption issues.
· Accuracy in the administered dose can be better assured for each film.
Patient Experience and Medication Adherence
· Difficulty swallowing tablets and capsules can be a problem for many
individuals and can lead to a variety of adverse events and patient
noncompliance with treatment regimens. OTFs can readily be taken without
the need to swallow or use of water or other beverages.
· Upon administration, there is a relatively low risk of the patient choking
which can be most beneficial for patients suffering from motion sickness,
dysphagia and repeated emesis.
· Easily administered to bedridden and non-cooperative patients (e.g.,
geriatric, pediatric, and psychiatric).
· Configured with physical dimensions such that it is relatively easy and
convenient to store and carry. Patients can conveniently carry multiple
dissolvable films in his or her pocket or wallet. A single dose of strip
can be carried individually without requiring the secondary container.
· OTFs are flexible with a pleasant mouth feel unlike oral dissolvable
tablets which are brittle.
Manufacturing and logistics
· The pouches or sachets offer larger printable 2D areas which traditional
drug product formats do not. This allows the manufacturer to adapt to
rapidly evolving labeling and regulatory requirements for information and
anti-counterfeiting, such as product serialization.
· The manufacturing process has a low carbon footprint, with lower use of
water for component preparation and sterilization as compared with other
dosage forms.
· Each dose unit is packed individually avoiding contact with other units.
· Tensile strength and plasticity of OTF allow for handling single,
individual dose units without damage to the dosage form.
· Multiple SKUs can be produced by simply modifying the length of the OTF.
· Enables anti-counterfeit management and dose management.
· Adaptable for use with dispensing devices for pharmacy preparation or
self-administration.
· Can be easily and conveniently handled, stored, and transported at room
temperature.
The CUREfilm platform is a scalable and versatile formulation and drug delivery system for both oral (OTF) and transdermal (skin) delivery. We believe that CUREfilm formulations can improve or match the pharmacokinetics of drugs in accordance with the desired outcome. The platform is compatible with a broad spectrum of molecules, for the formulation of both investigational and marketed prescription drugs and nutraceutical products.
The specific advantages below are present with multiple CUREfilm products and platform technologies. The advantages listed below are expressly described in CURE's patent documents. Other advantages are present in specific products and platform technologies but not outlined in the patent documents and kept as trade secrets and proprietary equipment designs. Additional advantages are described in pending and unpublished patent documents, including, but not limited to the following:
· loading of multiple active ingredients on one dose unit;
· ability to accommodate high drug load per dose unit (e.g. > 200 mg);
· quickly dissolving/disintegrating (e.g. < 2 minutes);
· potential for low moisture level (e.g. < 10 wt.% water);
· ability to achieve desired performance characteristics while maintaining
pleasant feeling in the mouth (e.g. soft, plush feeling with pliable
film);
· ability to achieve desired performance characteristics while formulating
active ingredients susceptible to degradation from low pH environments,
light, heat, moisture, and oxygen; and
· multiple and unique ways to mask the bitter, metallic or salty taste of an
active ingredient.
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Intellectual Property
The competitive advantages of the CUREformTM platform and products are protected by issued and ending patents, as well as trade secrets such as proprietary equipment design and manufacturing processes which allow us to produce CUREform products at commercial scale in a cGMP environment. We will be able to protect our technology and products from unauthorized use by third parties only to the extent it is covered by valid and enforceable claims of our patents or is effectively maintained as trade secrets. Patents and other proprietary rights are thus an essential element of our business.
Our success will depend in part on our ability to obtain and maintain
proprietary protection for our product candidates, technology, and know-how, to
operate without infringing on the proprietary rights of others, and to prevent
others from infringing it proprietary rights. Our policy is to seek to protect
our proprietary position by, among other methods, filing
We own or have exclusive rights to fourteen (14) issued
· a method and apparatus for minimizing heat, moisture, and shear damage to
medicant incorporated into an edible film;
· edible films for administration of medicaments to animals;
· methods for modulating dissolution, bioavailability, bioequivalence;
· pharmaceutical composition and method of manufacturing;
· pharmaceutical composition with ionically crosslinked polymer
encapsulation of active ingredient;
· multi-layered high dosage dissolvable film for oral administration;
· thin films with high load of active ingredient;
· high dosage dissolvable films for oral administration;
· methods and composition for improving sleep;
· oral dissolvable film that includes plant extracts and controlled
substances;
· rapidly disintegrating film matrix for moisture sensitive compounds;
· protein-polysaccharide macromolecular complexes encapsulating ethyl
alcohol;
· self-emulsifying oral thin film compositions; and
· topical preparation.
Granted
We have five (5) registered trade and logomarks, and one pending trademark registration for which the opposition periods have expired without any opposition being filed.
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Competition
We face competition from pharmaceutical companies, generic drug companies,
wellness and nutraceutical companies, as well as organizations developing
advanced drug delivery platforms such as Lonza, Aquestive Therapeutics,
Environmental Compliance
Our research and development activities involve the controlled use of hazardous
materials and chemicals. We are subject to federal, state and local laws and
regulations governing the use, storage, handling and disposal of these materials
and specific waste products. We are also subject to numerous environmental,
health and workplace safety laws and regulations, including those governing
laboratory procedures, exposure to blood-borne pathogens and the handling of
bio-hazardous materials. The cost of compliance with these laws and regulations
could be significant and may adversely affect capital expenditures to the extent
we are required to procure expensive capital equipment to meet regulatory
requirements. As of the closing of the Asset Sale, we believe that we were in
compliance with environmental regulations applicable to our research and
development and manufacturing facility located in
Employees
As of the date of this filing, we have 12 full-time employees after giving effect to the elimination of certain operations in connection with the Asset Sale. None of our employees are covered by collective bargaining agreements. We consider our relations with our employees to be good.
RESULTS OF OPERATIONS
The following discussion for our results of operations does not include the loss
from our discontinued operations which was
Revenues for the Three and Six Months Ended
Revenues for the three and six months ended
Cost of Goods Sold
Cost of goods sold was
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Research and Development Expenses
For the three and six months ended
Selling, General and Administrative Expenses
Our expenses for the three and six months endedJune 30, 2022 are summarized as follows in comparison to our expenses for the three and six months endedJune 30, 2021 (in thousands). Three Months Ended Six Months Ended June 30, June 30, June 30, June 30, 2022 2021 2022 2021 Consulting$ 189 $ 114 $ 243 $ 392 Salaries and wages 491 696 660 1,365 Selling, general and administrative 1,552 2,694 3,319 4,905 Professional services and investor relations 497 353 801 1,797 Non-cash compensation 391 608 846 1,507 Total selling, general and administrative expenses$ 3,120 $ 4,465 $ 5,869 $ 9,966 Consulting
Consulting expense increased by
Salaries and Wages
Salaries and wages expense decreased by approximately
Selling, General and Administrative
Selling, general and administrative expense decreased by approximately
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Professional Services and Investor Relations
Professional services and investor relations expenses increased by approximately
Non-cash Compensation
Non-cash compensation expense decreased by approximately
Change in Fair Value Contingent Stock Consideration
The change in fair value contingent stock consideration increased by
approximately
Impairment of Intangibles
Impairment losses amounted to
Other Income/ (Expense)
For the Three Months Ended For the Six Months Ended
June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021
(in thousands)
Interest
income $ 1 $ - $ 3 $ 2
Gain from
settlement - 2,434 82 2,434
Gain on
extinguishment
of debt 40 335 40 734
Loss on sale
of property,
plant and
equipment - - - (41 )
Change in fair
value of
convertible
promissory
notes (27 ) (692 ) (307 ) 340
Interest
expense (191 ) (135 ) (387 ) (199 )
Other income 26 - 26 -
Total other
income
(expense), net $ (151 ) $ 1,942 $ (543 ) $ 3,270 Other income/(expense) decreased by approximately
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LIQUIDITY AND CAPITAL RESOURCES
As of
Working Capital Deficit (in thousands)
June 30, December 31,
2022 2021
Current assets $ 20,178 $ 1,781
Current liabilities (26,319 ) (24,261 )
Working capital (deficiency)
Working capital deficit as of
As of
Net Cash (in thousands) For the Six Months Ended June 30, June 30, 2022 2021 Net cash used in operating activities$ (3,570 ) $ (656 ) Net cash provided by (used in) investing activities - (99 ) Net cash provided by financing activities 3,605 731 Net increase (decrease) in cash $ 35$ (24 )
Net cash used in Operating Activities
Net cash used in operating activities was approximately
Comparatively, net cash used in operating activities was approximately
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Net cash used in Investing Activities
Net cash used in investing activities of approximately
Net cash provided by Financing Activities
Net cash provided by financing activities of approximately
On
In the event that such working capital is insufficient, we may need to raise additional operating capital in calendar year 2022 in order to maintain our operations and to realize our strategic plan. Without additional sources of cash and/or the deferral, reduction, or elimination of significant planned expenditures, we may not have the cash resources to continue as a going concern thereafter.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with GAAP requires
estimates and assumptions that affect the reported amounts of assets and
liabilities, revenues and expenses, and related disclosures of contingent assets
and liabilities in the financial statements and accompanying notes. The
Our 2021 Annual Report, contains additional information regarding the critical accounting policies that affect our more significant estimates and judgments used in the preparation of our condensed consolidated financial statements included in this Quarterly Report. There have been no material changes to these policies reported in our 2021 Annual Report. Please refer to "Note 2 - Summary of Significant Accounting Policies" of the notes to condensed consolidated financial statements included in this Quarterly Report for information regarding recently adopted accounting standards.
OFF-BALANCE SHEET ARRANGEMENTS
As of the date of this Quarterly Report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
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