NVUS 2018 Annual Report

In January 2016, Otodyne completed transfer of all technology, including the active investigational new drug application (IND), to Novus. Novus is obligated to pay up to $42.1 million in development and regulatory milestones if OP0201 is approved for three indications in the U.S., two in Europe, and two in Japan. Novus is also obligated to pay up to $36.0 million in sales-based milestones, beginning with sales exceeding $1.0 billion in a calendar year. Novus is also obligated to pay a tiered royalty for a period up to eight years, on a country-by-country basis. The royalty ranges from low- single to mid-single percent of net sales. Government Regulation Government authorities in the U.S., including federal, state, and local authorities, and in other countries, extensively regulate, among other things, the manufacturing, research and clinical development, marketing, labeling and packaging, storage, distribution, post-approval monitoring and reporting, advertising and promotion, and export and import of pharmaceutical and biological products, such as those we are developing. Pricing of such products is also subject to regulation in many countries. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources. U.S. Government Regulation The FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act (FDCA) and its implementing regulations, and biologics under the FDCA and the Public Health Service Act (PHSA) and its implementing regulations. FDA approval is required before any new unapproved drug or biologic or dosage form, including a new use of a previously approved drug, can be marketed in the U.S. Drugs and biologics are also subject to other federal, state, and local statutes and regulations. If we fail to comply with applicable FDA or other requirements at any time during the product development process, clinical testing, approval process or after approval, we may become subject to administrative or judicial sanctions. These sanctions FRXOG LQFOXGH WKH )'$¶V UHIXVDO WR DSSURYH SHQGLQJ DSSOLFDWLRQV OLFHQVH VXVSHQVLRQ RU UHYRFDWLRQ ZLWKGUDZDO RI DQ approval, untitled or warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties or criminal prosecution. Any FDA enforcement action could have a material adverse effect on us. The process required by the FDA before product candidates may be marketed in the U.S. generally involves the following: x completion of extensive preclinical laboratory tests and preclinical animal studies, all performed in accordance with the Good Laboratory Practices (GLP) regulations; x submission to the FDA of an investigational new drug application (IND) which must become effective before human clinical trials may begin and must be updated annually; x approval by an independent institutional review board (IRB) or ethics committee representing each clinical site before each clinical trial may be initiated; x performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the product candidate for each proposed indication; x preparation of and submission to the FDA of a biologics license application (BLA) or a new drug application, or NDA, after completion of all pivotal clinical trials; x potential review of the product application by a FDA advisory committee, where appropriate and if applicable; x a determination by the FDA within 60 days of its receipt of a BLA or NDA to file the application for review; x satisfactory completion of a FDA pre-approval inspection of the manufacturing facilities where the proposed product is produced to assess compliance with current Good Manufacturing Practices (cGMP) regulations; x potential FDA audit of the clinical trial sites that generated the data in support of the BLA or NDA; and x FDA review and approval of a BLA or NDA prior to any commercial marketing or sale of the product. The preclinical and clinical testing and approval process requires substantial time, effort, and financial resources, and we cannot be certain that any approvals for our product candidates will be granted on a timely basis, if at all.

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