Cocrystal Pharma, Inc. - Annual Report: 2015 (Form 10-K)

---

---

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

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

Delaware	35-2528215
(State or Other Jurisdiction	(I.R.S. Employer
of Incorporation or Organization)	Identification No.)

1860 Montreal Road, Tucker GA	30084
(Address of Principal Executive Office)	(Zip Code)

 

Large accelerated filer	[  ]	Accelerated filer	[ X ]
Non-accelerated filer	[  ]	Smaller reporting company	[     ]

				Page
Part I.
Item 1.	Business.			1
Item 1A.	Risk Factors.			6
Item 1B.	Unresolved Staff Comments.			25
Item 2.	Properties.			25
Item 3.	Legal Proceedings.			26
Item 4.	Mine Safety Disclosures.			26
Part II.
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.			27
Item 6.	Selected Financial Data.			28
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.			28
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk.			32
Item 8.	Financial Statements and Supplementary Data.			32
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.			32
Item 9A.	Controls and Procedures.			32
Item 9B.	Other Information.			35
Part III.
Item 10.	Directors, Executive Officers and Corporate Governance.			36
Item 11.	Executive Compensation.			36
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.			36
Item 13.	Certain Relationships and Related Transactions, and Director Independence.			36
Item 14.	Principal Accounting Fees and Services.			36
Part IV.
Item 15.	Exhibits, Financial Statement Schedules.			37
SIGNATURES				38

 

(1)	Selection of viral drug targets amenable to broad spectrum antiviral drug development and essential for viral genome replication;

(2)	Proprietary nucleoside chemistry;

(3)	Atomic resolution 3-D structure determination of drug binding pockets;

(4)	In-depth computational analysis of conservation of drug-binding pockets and critical molecular interactions between antiviral inhibitors and amino acid residues of the target molecule’s drug-binding pocket;

(5)	Cocrystal structure determinations to inform hit identification, hit-to-lead, and lead optimization processes;

(6)	Molecular modeling and computer-guided lead discovery to support rational chemical modifications based on structure-activity relationships, or SAR, of candidate inhibitor compounds;

(7)	Knowledge of enzymatic mechanisms to guide the design of drugs with exceptional affinity, specificity, and broad spectrum activity; and

(8)	Platforms for rapid identification of antiviral enzyme inhibitors showing broad spectrum antiviral capability.

(1)	Good safety and tolerability profile;

(2)	Effective against all viral subtypes that cause disease;

(3)	High barrier to viral resistance; and

(4)	Ease of administration, for example, a pill.

 

 

 

 

Based on cash on hand as of December 31, 2015 of $9.3 million and subsequent financing received of $5.0 million, Cocrystal does not have the capital to finance operations for the next 12 months. This raises doubt about our ability to be a going concern.

 

·	identifying and validating new therapeutic strategies;

·	completing our research and preclinical development of pharmaceutical product candidates;

·	initiating and completing clinical trials for pharmaceutical product candidates;

·	seeking and obtaining regulatory marketing approvals for pharmaceutical product candidates that successfully complete clinical trials;

·	establishing and maintaining supply and manufacturing relationships with third parties;

·	launching and commercializing pharmaceutical product candidates for which we obtain regulatory marketing approval, with a partner or, if launched independently, successfully establishing a sales force, marketing and distribution infrastructure;

·	maintaining, protecting, enforcing, defending and expanding our intellectual property portfolio; and

·	attracting, hiring and retaining qualified personnel.

 

·	significantly delay, scale back or discontinue the development or commercialization of any product candidates;

·	seek strategic alliances for research and development programs at an earlier stage than otherwise would be desirable or on terms less favorable than might otherwise be available; or

·	relinquish or license on unfavorable terms, our rights to technologies or any product candidates we otherwise would seek to develop or commercialize ourselves.

·	our research methodology or that of our partners may be unsuccessful in identifying potential product candidates;

·	potential product candidates may have harmful side effects or may have other characteristics that may make the products unmarketable or unlikely to receive marketing approval; and

·	we or our partners may change their development profiles for potential product candidates or abandon a therapeutic area.

 

·	successful completion of preclinical studies and clinical trials;

·	receipt of marketing and pricing approvals from regulatory authorities;

·	obtaining and maintaining patent and trade secret protection for product candidates;

·	establishing and maintaining manufacturing relationships with third parties or establishing our own manufacturing capability; and

·	commercializing our products, if and when approved, whether alone or in collaboration with others.

·	delays in agreeing with the FDA or other regulatory authorities on final clinical trial design;

·	imposition of a clinical hold following an inspection of our clinical trial operations or trial sites by the FDA or other regulatory authorities;

·	delays in agreeing on acceptable terms with prospective contract research organizations, or CROs, and clinical trial sites;

·	delays in obtaining required institutional review board approval at each clinical trial site;

·	delays in recruiting suitable patients to participate in a trial;

·	delays in the testing, validation, manufacturing and delivery of the product candidates to the clinical sites;

·	delays in having patients complete participation in a trial or return for post-treatment follow-up;

·	delays caused by patients dropping out of a trial due to product side effects or disease progression;

·	clinical sites dropping out of a trial to the detriment of enrollment;

·	time required to add new clinical sites; or

·	delays by our contract manufacturers in producing and delivering sufficient supply of clinical trial materials.

 

·	be delayed in obtaining marketing approval for our product candidates;

·	not obtain marketing approval at all;

·	obtain approval for indications or patient populations not as broad as intended or desired;

·	obtain approval with labeling that includes significant use or distribution restrictions or safety warnings;

·	be subject to additional post-marketing testing requirements; or

·	remove the product from the market after obtaining marketing approval.

·	regulatory authorities may withdraw prior approval of the product or impose restrictions on its distribution in the form of a modified risk evaluation and mitigation strategy;

·	we may be required to add labeling statements, such as warnings or contraindications;

·	we may be required to change the way the product is administered or conduct additional clinical trials;

·	we could be sued and held liable for harm caused to patients; and

·	our reputation may suffer.

 

·	issue a warning letter asserting we are in violation of the law;

·	seek an injunction or impose civil or criminal penalties or monetary fines;

·	suspend or withdraw regulatory approval;

·	suspend any ongoing clinical trials;

·	refuse to approve a pending NDA or supplements to an NDA submitted by us;

·	seize product; or

·	refuse to allow us to enter into supply contracts, including government contracts.

 

 

·	a partner may shift its priorities and resources away from our programs due to a change in business strategies, or a merger, acquisition, sale or downsizing of its company or business unit;

·	a partner may cease development in therapeutic areas which are the subject of our strategic alliances;

·	a partner may change the success criteria for a program or product candidate delaying or ceasing development of such program or candidate;

·	a significant delay in initiation of certain development activities by a partner could also delay payment of milestones tied to such activities, impacting our ability to fund our own activities;

·	a partner could develop a product that competes, either directly or indirectly, with an alliance product;

·	a partner with commercialization obligations may not commit sufficient financial or human resources to the marketing, distribution or sale of a product;

·	a partner with manufacturing responsibilities may encounter regulatory, resource or quality issues and be unable to meet demand requirements;

·	a partner may exercise its rights under the agreement to terminate a strategic alliance;

·

a dispute may arise between us and a partner concerning the research, development or commercialization of a program or product candidate resulting in a delay in milestones, royalty payments or termination of a program and possibly resulting in costly litigation or arbitration which may divert management attention and resources; and

·	a partner may use our proprietary information or intellectual property to invite litigation from a third party or fail to maintain or prosecute intellectual property rights possibly jeopardizing our rights in such property.

 

·	the inability to meet any product specifications and quality requirements consistently;

·	a delay or inability to procure or expand sufficient manufacturing capacity;

·	manufacturing and product quality issues related to scale-up of manufacturing;

·	costs and validation of new equipment and facilities required for scale-up;

·	a failure to comply with cGMP and similar foreign standards;

·	the inability to negotiate manufacturing agreements with third parties under commercially reasonable terms;

·	termination or nonrenewal of manufacturing agreements with third parties in a manner or that is costly or damaging to us;

·	the reliance on a few sources, and sometimes, single sources for raw materials, such that if we cannot secure a sufficient supply of these product components, we cannot manufacture and sell product candidates in a timely fashion, in sufficient quantities or under acceptable terms;

·	the lack of qualified backup suppliers for any raw materials currently purchased from a single source supplier;

·	operations of our third-party manufacturers or suppliers could be disrupted by conditions unrelated to our business or operations, including the bankruptcy of the manufacturer or supplier;

·	carrier disruptions or increased costs beyond our control; and

·	failing to deliver products under specified storage conditions and in a timely manner.

 

 

Third-party claims of intellectual property infringement may prevent or delay our development and commercialization efforts.

We may be subject to claims our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties.

·	discover and develop therapeutics superior to other products in the market;

·	attract qualified scientific, product development and commercial personnel;

·	obtain patent and/or other proprietary protection for our technology platform and product candidates;

·	obtain required regulatory approvals; and

·	successfully collaborate with pharmaceutical companies in the discovery, development and commercialization of new therapeutics.

 

 

·	demonstration of clinical safety and efficacy compared to other products;

·	the relative convenience, ease of administration and acceptance by physicians, patients and healthcare payors;

·	the prevalence and severity of any AEs;

·	limitations or warnings in the label approved by FDA and/or foreign regulatory authorities for such products;

·	availability of alternative treatments;

·	pricing and cost-effectiveness;

·	the effectiveness of our or any collaborators’ sales and marketing strategies;

·	our ability to obtain hospital formulary approval; and

·	our ability to obtain and maintain sufficient third-party payor coverage or reimbursement.

If coverage and adequate reimbursement are not available for our product candidates, it could make it difficult for us to sell products profitably.

 

 

·	different regulatory requirements for drug approvals in foreign countries;

·	reduced protection for intellectual property rights;

·	unexpected changes in tariffs, trade barriers and regulatory requirements;

·	economic weakness, including inflation, or political instability in foreign economies and markets;

·	compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;

·	foreign taxes, including withholding of payroll taxes;

·	foreign currency fluctuations, which could cause increased operating expenses and reduced revenues, and other obligations incident to doing business in another country;

·	workforce uncertainty in countries where labor unrest is endemic;

·	production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and

·	business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters including earthquakes, typhoons, floods and fires.

 

·

the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, to induce, or in return for, either the referral of an individual, or the purchase or recommendation of an item or service for which payment may be made under a federal healthcare program, such as the Medicare and Medicaid programs;

·	federal civil and criminal false claims laws and civil monetary penalty 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 payers that are false or fraudulent;

·	the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created new federal criminal statutes that prohibit executing a scheme to defraud any healthcare benefit program and making false statements relating to healthcare matters;

·	HIPAA, as amended by the Health Information Technology and Clinical Health Act of 2009, or HITECH, and its implementing regulations, which imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information; and

·

state and foreign 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 payer, including commercial insurers, and state and foreign laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.

 

·	impairment of our business reputation;

·	withdrawal of clinical trial participants;

·	costs due to related litigation;

·	distraction of management’s attention from our primary business;

·	substantial monetary awards to patients or other claimants;

·	the inability to commercialize our product candidates; and

·	decreased demand for our product candidates, if approved for commercial sale.

 

 

 

 

(i)

we are current in our filings,

(ii)

certain manner of sale provisions, and

(iii)

filing of Form 144.

   

 

 

 

 

		High				Low
Year ended December 31, 2015
January 1, 2015 through March 31, 2015		$	1.53			$	0.40
April 1, 2015 through June 30, 2015		$	1.51			$	0.95
July 1, 2015 through September 30, 2015		$	1.16			$	0.59
October 1, 2015 through December 31, 2015		$	0.89			$	0.52
Year ended December 31, 2014
January 1, 2014 through March 31, 2014		$	0.60			$	0.33
April 1, 2014 through June 30, 2014		$	0.44			$	0.25
July 1, 2014 through September 30, 2014		$	0.60			$	0.27
October 1, 2014 through December 31, 2014		$	0.74			$	0.52

 

 

 

 

 

 

 

 

 

 

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

 

 

Changes in Internal Control over Financial Reporting

COCRYSTAL PHARMA, INC.

	Page
Report of Independent Registered Public Accounting Firm	F-1
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting	F-2
Consolidated Balance Sheets	F-3
Consolidated Statements of Operations and Comprehensive Income (Loss)	F-4
Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)	F-5
Consolidated Statements of Cash Flows	F-6
Notes to  Consolidated Financial Statements	F-7

 

 

 

 

 

 

 

 

 

 

 

 

 

COCRYSTAL PHARMA, INC.

See accompanying notes to consolidated financial statements.

See accompanying notes to consolidated financial statements.

COCRYSTAL PHARMA, INC.