Aethlon Medical(AEMD) - 2021 Q4 - Annual Report

Hemopurifier Device - The Hemopurifier is a clinical-stage immunotherapeutic device designed to combat cancer and life-threatening viral infections, with FDA designation as a "Breakthrough Device" for two indications[12]. - The company is conducting a clinical trial for the Hemopurifier in patients with advanced and metastatic head and neck cancer, with a primary endpoint focused on safety and secondary endpoints including exosome clearance and survival rates[15]. - The FDA approved a New Feasibility Study for the Hemopurifier in COVID-19 patients, aiming to enroll up to 40 subjects across 20 centers in the U.S., with endpoints including reduction in circulating virus and clinical outcomes[17]. - The Hemopurifier has shown efficacy in capturing various viruses, including HIV, hepatitis C, and Ebola, with significant viral load reductions reported in clinical cases[24]. - The Hemopurifier is designed for use with existing dialysis infrastructure, potentially allowing for broader application in hospitals and clinics worldwide[23]. - The Hemopurifier device is positioned as a first-in-class therapeutic candidate, with no known competing devices cleared for the single-use removal of circulating viruses or tumor-derived exosomes[65]. - The Hemopurifier is expected to be classified as a Class III device, requiring a pre-market approval (PMA) submission and approval from the FDA[68]. - The Hemopurifier has been approved for testing in patients with SARS-CoV-2/COVID-19, with a plan to enroll up to 40 subjects at 20 centers in the U.S.[146]. - The company has a limited supply of Hemopurifiers, which restricts its use in the pandemic to a very small number of patients[147]. Clinical Trials and Research - The company has treated two critically ill COVID-19 patients with the Hemopurifier, demonstrating significant removal of exosomes and improvement in one patient's condition[29]. - Twelve HCV-infected individuals were treated with Hemopurifier therapy, with ten completing the treatment protocol, resulting in an 80% sustained virologic response rate[33]. - The Hemopurifier treatment for HIV resulted in a 93% reduction in viral load after 12 treatments over one month[34]. - An EFS study for the Hemopurifier in head and neck cancer is underway, enrolling 10 to 12 subjects, with safety as the primary endpoint[35]. - The company is currently conducting an Early Feasibility trial involving 10 to 12 patients with head and neck cancer and a study in Covid-19 patients, which are critical for obtaining regulatory approvals[117]. - Delays in clinical trials due to slow patient enrollment or adverse events could jeopardize the ability to obtain regulatory approval and harm financial results[118]. - The results of clinical trials may not support product candidate claims or may reveal adverse side effects, potentially delaying commercialization[149]. Regulatory and Compliance - The company faces significant regulatory challenges, primarily from the FDA, which oversees the development and approval of the Hemopurifier as a medical device[66]. - The PMA application process is more demanding than the 510(k) pre-market notification process, requiring extensive data to demonstrate safety and effectiveness[69]. - The FDA has 45 days to determine if a PMA application is complete and 180 days for the review, although the process can take several years[70]. - The FDA may issue an approvable letter indicating additional information is needed or a not approvable letter outlining steps required for approval[72]. - Emergency Use Authorizations (EUAs) allow device use during public health emergencies but do not replace the need for PMA approval[74]. - Ongoing regulation by the FDA includes compliance with Quality System Regulation (QSR) and medical device reporting regulations[76]. - Changes to an approved PMA device may require submission of a new PMA or PMA supplement for FDA approval[77]. - Regulatory actions due to non-compliance could significantly impact the company's ability to market and sell its product candidates[135]. - The Hemopurifier is an investigational device that has not yet received FDA approval for any indication, and its approval process may take many years and substantial resources[141]. - The FDA's PMA process, which is required for class III devices like the Hemopurifier, can take from one to three years or longer, and involves proving safety and effectiveness[142]. Financial Performance and Funding - The company generated revenues of $659,104 and $650,187 for the fiscal years ended March 31, 2021, and March 31, 2020, respectively, primarily from contracts with the NIH[94]. - The company has incurred significant losses and expects to continue incurring losses for the foreseeable future, indicating a lack of profitability[94]. - The company will require significant additional financing to sustain operations and fund future clinical trials and research activities[95]. - The company may need to raise additional funds through debt or equity financings, which could dilute existing stockholders' ownership[96]. - The approval and commercialization of products like the Hemopurifier depend on third-party reimbursement, which may not be available or sufficient[167]. - The process for obtaining coverage and reimbursement from payors, including CMS, is lengthy and expensive, impacting product adoption[168]. - Adverse changes in reimbursement policies could significantly affect the company's ability to market and sell its products[169]. Intellectual Property and Competition - The company holds over 50 issued patents and pending applications worldwide, including five issued U.S. patents and 35 issued patents in other countries[51]. - The company holds a total of 8 issued patents in the United States related to the extracorporeal removal of microvesicular particles and virus removal from blood, with expiration dates ranging from 2024 to 2029[57][60]. - The company has 5 pending patent applications in the United States, focusing on various diagnostic and therapeutic methods, including brain-specific exosome diagnostics and virus removal techniques[58][62]. - The company has secured foreign patents in multiple countries, including Denmark, France, Germany, and the UK, for its brain-specific exosome diagnostics, with expiration dates set for 2036[60]. - The company has entered into confidentiality agreements with employees and advisors to protect intellectual property, but enforcement may be challenging[200]. - The company may face claims of patent infringement from third parties, which could result in costly litigation and hinder product development[207]. - Competitors may develop superior products that could reduce demand for the company's offerings, impacting market position[202]. Operational Risks - The company relies on critical components for its Hemopurifier from limited suppliers, which poses a risk to manufacturing if any supplier faces a business interruption[88]. - The company has identified issues with a critical supplier's component, which could limit the ability to meet demand for the Hemopurifier and delay clinical trials[126]. - Outsourcing of manufacturing and clinical development is essential for the company, and any failure by third-party vendors could adversely affect product development timelines[137]. - The company does not have the required financial and human resources to conduct all development in-house, making reliance on third parties critical for success[137]. - The company is subject to risks from the COVID-19 pandemic, which may disrupt clinical trials and supply chains[179]. - Potential delays in clinical trials and manufacturing could arise from COVID-19-related restrictions and resource diversions[180]. - The company relies on specialty suppliers for raw materials, which may limit access to necessary materials for product manufacturing[183]. Cybersecurity and Data Protection - The company is facing increasing threats from cyberattacks, including sophisticated nation-state actors and various forms of malicious activity[163]. - Significant resources may be required to protect against security breaches, which could fundamentally change business operations and practices[164]. - The company may not have adequate insurance coverage to mitigate liabilities arising from security breaches, which could have a material adverse impact[166]. - Compliance with data protection laws, such as the CCPA and GDPR, is critical, as violations could lead to fines and operational disruptions[159][160]. - Security breaches involving sensitive information could result in material adverse impacts on the company's operations and financial results[162].