Isosceles Pharmaceuticals

About the offering

The Opioid Crisis Kills One American Every Five Minutes, Costs Our Country $1 Trillion Per Year... And The Problem Is Getting Worse! Death by drug overdose – mainly from opioids like fentanyl – has more than doubled in recent years from about 44,000 in 2013, to over 107,000 in 2021... It is now the #1 cause of death among Americans 18-45 according to the CDC. That's why in February 2022, the FDA published guidance around their current thinking about three specific topics: the development of non-opioid analgesic products for acute pain, labeling claims, and expedited programs as they pertain to this purpose. What does this mean for investors? A potential “open window” to own the next generation of blockbuster non-opioid pain management therapies… And with it, the chance to reduce the impact of the opioid epidemic that costs the American people $1 trillion per year while killing more than 293 people each day (and climbing). However, launching blockbuster drugs can be a long, expensive, and high-risk endeavor. In order to reap the financial rewards, not only does the chemistry need to work… commercialization requires “buy-in” from the FDA, patients, physicians, healthcare providers, and payers (insurance companies). But what if it were possible to create non-opioid pain management therapies that have virtually no side effects, deliver better care at lower prices than opioids, and are potentially non-lethal and non-addictive? Today’s presentation is about the economic opportunity that comes from disrupting the $74 billion (and growing) global pain management drug market by providing more than 100 million Americans who suffer from acute and chronic pain a new hope for relief… And potentially launching a new era of safe, effective, and non-addictive medicine by unlocking the power of one of the most important medical discoveries of the past 30 years. With Two Products In The Pipeline, Isosceles Pharmaceuticals Is Seeking $5 Million For Pre-Clinical Trials And IND Application Isosceles Pharmaceuticals is a preclinical stage pharmaceutical company. They are currently developing intravenous formulations of synthetic Cannabidiol (CBD), one of the many active chemicals in cannabis, as a non-addictive alternative to opium-derived painkillers – like oxycodone, hydrocodone, and fentanyl – for the treatment of postoperative acute pain. They are also attempting to develop a transdermal formulation for an over-the-counter “microneedle patch” to be used in managing chronic pain. Before starting Isosceles Pharmaceuticals, several members of the management team were involved with the invention of delivering Acetaminophen – the primary active ingredient in pain management drugs like Tylenol – intravenously. In 2014, the Acetaminophen drug was acquired for $1.3 billion by Mallinckrodt Pharmaceuticals after the drug successfully cleared the FDA approval process, and prior to any revenue generated. Isosceles Pharmaceuticals is raising $5m in equity capital to fund Pre-Clinical animal trials and IND fillings for new intravenous drug delivery system for cannabinoid-based therapeutics. Management believes the non-opioid pain management industry – specifically using cannabinoid-based therapeutics – is on the verge of “crossing the chasm” into the mass market. This technology adoption model – based on the Diffusion of Innovation (DOI) Theory, developed by E.M. Rogers in 1962 – was popularized by Geoffrey A. Moore in his 1991 book, Crossing the Chasm. According to Moore, in the early stages of the market, new technology is marketed to the “early adopters” – usually technology enthusiasts and visionary leaders who are looking to get out ahead of either an opportunity or a looming problem. In order to move out of a niche market, the business must “cross the chasm” into other markets. To do this, the company must establish a “beachhead” in adjacent market segments (the “Bowling Alley”) where there is overlap with their initial niche market. Prospective customers are attracted to the compelling new benefits, but to get them, many existing systems will have to change. This dynamic creates a battle in the marketplace whose outcome is uncertain. However, in some cases, the technology leaps out of its niche markets into the mainstream (the “Tornado”) and becomes a mass market phenomenon, also as outlined in Crossing The Chasm. According to Moore: "When this occurs, a massive shift in spending accompanies it, with a whole new set of vendors coming out of nowhere to produce [potentially positive] economic returns. This simplifies the issues of creating new standards, building compatible systems, and getting a whole new set of product and service providers up to speed quickly on the new solution set. In short, it may make it easier for the new value chain to form." That is to say, it is not just a new market coming into existence but also a whole new system of commerce to support that market. This period of rapid change is called “hypergrowth,” and it happens only once in the history of any particular market… with one company likely becoming the dominant player – known as the “Gorilla” according to Moore’s framework. While cannabis is still federally illegal, management believes several key barriers preventing mass adoption have been removed, potentially setting the stage for a new “Gorilla” to emerge in cannabinoid-based pain management solutions. Most notably, we’ve seen large structural shifts over the past few years leading to pent-up demand with artificially constrained supply due to policy measures. Cannabis is unique in the fact that there is a well-established “black market” where the commodity has gone through significant adoption already and has only recently seen adoption in the “quasi-legal” medical and recreational markets. However, cannabis is still classified as a Schedule 1 narcotic and is therefore illegal at the federal level. This does present a significant risk: if the federal government decides at some point to begin enforcing its laws on this issue, it may negatively impact this market. Additionally, over the past few years, public sentiment regarding cannabis legalization has reached new highs... In a telephone survey of 4,355 adults, Consumer Reports found that an estimated 64 million Americans have taken CBD – a non-psychoactive component of the Cannabis Sativa L plant – and 63% found it effective. Notably, one in five CBD users stopped taking prescription drugs, and one-third of CBD users stopped taking opioids – America’s number one drug overdose source. Studies in the Journal of the American Medical Association showed that in states where people could legally use marijuana, the number of filled opioid prescriptions dropped significantly, and there were lower rates of opioid overdose and death, compared with states without legal cannabis. However, we still need conclusive evidence regarding efficacy to truly unlock this opportunity. This leads us to the question… How are we going to generate more patient data when cannabis is classified as a Schedule I narcotic? The most logical answer – outside of full federal legalization – is through the FDA approval pathway. According to the FDA’s recent February 2022 draft guidance: “FDA encourages the development of non-opioid analgesic products and novel study designs. Non-opioid analgesic development programs designed to replace or reduce the use of opioid analgesics may be eligible for one or more of FDA’s expedited review programs, as applicable. FDA encourages early discussion of products that could eliminate or reduce opioid analgesic use and may be suitable for expedited reviews.” Management believes this represents a clear signal regarding the FDA's interest in fast-tracking a viable solution. Also according to the FDA: “Products with well established analgesic mechanisms of action may be able to obtain a general acute pain indication when supported by at least two clinical trials, each in a different pain population. For example, a novel nonsteroidal anti-inflammatory drug with two successful clinical trials in postoperative pain, one following bunionectomy and one following herniorrhaphy, may be suitable for a general acute pain indication.” For this reason, the Isosceles Pharmaceuticals team sees an opportunity to create the first blockbuster cannabidiol-based (CBD) pain management drug targeting postoperative pain. A blockbuster drug is defined as any drug that generates at least $1 billion in revenue a year for the pharmaceutical companies that produce them. Examples of blockbuster drugs include Vioxx, Lipitor, and Zoloft. With over 70 million surgeries performed annually in the US, postoperative pain is a highly predictable condition that affects as many as 80% of patients and is often poorly managed. All information in this image should be considered hypothetical. There is no guarantee of FDA approval, commercialization, or positive shareholder returns. Any investment should be considered high risk and speculative in nature. However, should the drug clear the conditions outlined by the FDA to qualify for the “general acute pain” indication, the commercial potential could be substantially increased. With 34 different first-to-file claims submitted as of December 2020, management believes they’ve not only cracked the code on the IV formulation of CBD… Because there is only one FDA-approved cannabidiol-based treatment, management sees an opportunity to be “first to market” for the treatment of pain and secure enough patent protection – along with FDA exclusivity – which may provide the company with the opportunity to become a “Gorilla.” The Path To FDA Approval (And Potential IPO) For investors interested in betting on the next blockbuster drug, getting a new drug to market can be an expensive, lengthy, and high-risk endeavor. Management believes in order to achieve these growth goals, they may benefit from becoming a publicly traded company. Not only would being public potentially provide the company with better access to capital, it may also potentially drive shareholder value and provide liquidity. However, before the company is ready for life in the public markets, management believes it needs to hit a key corporate milestone: The completion of Pre-Clinical Animal Studies and IND Filings, and sufficient capital to perform Phase 1 and Phase 2 trials. All information in this image should be considered hypothetical and speculative in nature. There is no guarantee of FDA approval, commercialization, or positive shareholder returns. Any investment should be considered high risk and speculative. Image source. With that goal in mind, management is seeking $5 million in equity capital to complete nine (9) months of animal studies, three (3) months for filing and approval of IND, as well as employee salaries. In order to begin – and complete – Phase 1 and Phase 2 Clinical Studies, management believes they will need to raise an additional $20-30m (which may happen via Reg-A+, 12-18 months after the close of this current Reg-CF offering). This means investors may see a liquidity event in 18-36 months following the close of this round, assuming management hits corporate milestones on time and within budget, is successful in raising its next round of Pre-IPO financing, and market conditions are favorable. This additional fundraising may present a risk and will likely dilute the value of shares for investors coming into this early round of fundraising, although later investors will likely have to come in at a higher, and less advantageous price. While anyone who qualifies under the Regulation Crowdfunding rules and restrictions is welcome to invest in this round as a passive investor… Management is motivated to develop a retail shareholder base that can help drive brand awareness that may provide increased adoption rates in the marketplace, as well as potentially creating increased liquidity for shareholders in the event of a public offering. The Pain Crisis In America Chronic pain – typically defined as pain lasting for longer than 90 days – costs Americans an estimated $638 billion a year in direct costs and lost productivity. If all chronic pain conditions were lumped together and considered to be a single disease, it would be the most common, disabling, and expensive health problem in the world… And all signs point to this pain crisis getting worse the longer people are in pain and the older they get! By 2030, 73 million baby boomers – one in five Americans – will be 65 or older. Coupled with longer life expectancy, this means more Americans will likely require more surgical procedures and pain management therapies. Chronic pain and high-impact chronic pain (chronic pain that limited life or work activities on most days or every day during the past 6 months) are among the most common reasons adults seek medical care and are associated with decreased quality of life, opioid dependence, and poor mental health However, for many Americans, the pathway to chronic pain – and with it, the potential for opioid use disorder – begins with acute pain originating from injuries like cuts, burns, dental work, broken bones, and surgery. In the US alone, 80% of surgery patients experience postoperative pain, many of whom are prescribed opioids for short-term pain management. For this reason, Isosceles Pharmaceuticals is on a mission to create alternative pain management therapies that may potentially reduce opioid prescriptions for acute and chronic pain. To effectively evaluate the potential impact of this, we must first understand how we arrived at this moment in time. The $74 Billion Pain Management Industry (And How It Fueled The Opioid Epidemic) For thousands of years, the allure of opioids has attracted commerce and crime. However, nothing in modern history can compare with the rapacious profits – and incomparable societal harm – generated by the epidemic of opioid prescribing that began in the 1990s. Source: FDA Analysis of Long-Term Trends in Prescription Opioid Analgesic Products: Quantity, Sales, and Price Trends The retail opioid market grew dramatically over this timeframe; from less than $1 billion in sales in 1992, peaking at $8 billion dollars in 2015. Oxycodone and fentanyl products – which had combined retail sales of less than $150 million in 1992 – accounted for $5 billion dollars in sales and over 70% of the retail opioid market share by 2009. According to Mordor Intelligence, the global opioids market was valued at approximately $19.8 billion in 2020 and is expected to reach $24.4 billion by 2026. All in, the global pain management drug market reached an estimated value of $74 Billion in 2020. However, thanks to the growing opioid epidemic in America – and the realization that opioids are far more addictive than pharmaceutical companies claimed – patients, physicians, payers, and government bodies are searching for something to replace this once-touted “miracle drug.” How The Endocannabinoid System Could Revolutionize Medicine According to BCC Research, the non-opioid pain treatment market reached a total market value of ~$11.7B in 2018. While the non-opioid market is still only a fraction of the size of the opioid market, there’s tremendous room for growth; From 2019-2024, the total non-opioid pain treatment market is predicted to grow at a CAGR of 18.3%, reaching a total market value of $31.8B by 2024. Today, the non-opioid pain treatment market can be divided into five market segments: Nonsteroidal Anti-Inflammatory Drugs (NSAID) Local Anesthetics/Sodium Channel Blockers (i.e. Lidocaine) NMDA Antagonists (i.e. Ketamine) Capsaicin Creams and Patches Cannabinoids Ironically, the “War on Drugs” set into motion by President Richard Nixon in the 1970s – and escalated under President Ronald Regan in the 80s – wound up unintentionally shedding light on the scientific basis of cannabis-based therapeutics. The Reagan administration poured tens of millions of dollars into research they thought would prove once and for all that marijuana damages the brain. What happened instead was the eventual discovery of The Endocannabinoid System (ECS) – a system that actually protects the brain and buffers stress when activated by cannabis components. This major scientific breakthrough would have significant implications for nearly every area of medical science. The ECS is now believed to regulate and control many of our most critical bodily functions such as learning and memory, emotional processing, sleep, temperature control, pain control, inflammatory and immune responses, and eating. Cannabinoids, like the ones found in the plant Cannabis sativa L., mimic the effects of the body’s naturally produced endocannabinoids… And with it, the potential to create a “boom” in non-opioid pain management therapies. The Problem Today: Pain Is Subjective Remember: pain is a subjective experience that doesn’t have a one-size-fits-all solution. There is also no scientific consensus on where pain originates in the body in all circumstances. However, there’s no denying the role the brain plays in interpreting the physical sensation of pain. For this reason, pain management drugs tend to target receptors located in the Central Nervous System (CNS) – which consists of the brain and spinal cord. The central nervous system (CNS) consists of the brain and the spinal cord. It is in the CNS that all of the analysis of information takes place. The peripheral nervous system (PNS), which consists of the neurons and parts of neurons found outside of the CNS, includes sensory neurons and motor neurons. Sensory neurons bring signals into the CNS, and motor neurons carry signals out of the CNS. However, CNS-based therapeutics can cause serious side effects – like hallucinations, lightheadedness, dizziness, fatigue, headache, out-of-body sensation, nightmares, respiratory depression, constipation, nausea, and vomiting. For this reason, cannabinoids – and their interaction with the Endocannabinoid System (ECS) – seem to be a noteworthy exception to some of the major challenges in this category. Originally, scientists thought the body’s endocannabinoid receptors – called CB-1 and CB-2 – could only be found in the nerves and brain. Now they know they exist throughout the entire body. Source: NewLifeHempOil According to The National Academies of Sciences, Engineering, and Medicine (NASEAM), “There is conclusive or substantial evidence that cannabis or cannabinoids are effective for the treatment of chronic pain in adults.” As it turns out, there are more than 100 different cannabinoids inside the plant Cannabis sativa L. The two most well-known are: Tetrahydrocannabinol (THC) – the psychoactive and intoxicating component in cannabis (i.e., the component responsible for the “high” people may experience from using cannabis). Cannabidiol (CBD) – a non-psychoactive component in cannabis commonly associated with pain relief, anti-inflammation, anti-anxiety, and anti-oxidative functions. These compounds can be either naturally occurring or synthetically created in a laboratory, and be used to manufacture FDA-approved drugs. But perhaps the most clinically important aspect of CBD? According to the World Health Organization’s 2018 “CANNABIDIOL (CBD) Critical Review Report”: “In humans, CBD exhibits no effects indicative of any abuse or dependence potential.” To make things better, according to the Federal Drug Administration (FDA): “The FDA supports sound, scientifically-based research into the medicinal uses of drug products containing cannabis or cannabis-derived compounds and will continue to work with companies interested in bringing safe, effective and quality products to market.” With this regulatory “green light” from the FDA, one of the biggest potential risks of investing in cannabinoid-based pharmaceuticals – regulatory stonewalling – may have been mitigated, although until Cannabis is removed from the list of legally controlled substances (see Federal Food, Drug and Cosmetic Act), there is the risk the federal government could reverse its lenient oversight on this substance and begin to regulate it more heavily. For these reasons, if the goal is to create a blockbuster, non-opioid pain management drug that has the potential to be safe, effective, and non-addictive... CBD-based treatments seem to be an obvious choice. But there are major challenges with getting a new CBD-based therapeutic to market. The Long, Hard, And Expensive FDA Approval Process The development of a new pharmaceutical – from target identification through approval for marketing – can take over 12 years and often much longer. Source: National Institute of Health The cost to develop a New Molecular Entity (NME; a small molecule compound) or New Biological Entity (NBE; an antibody, protein, gene therapy, or other biological medicine) is estimated to cost, on average, $2.6 billion. Why is it so expensive? Simply put, the number one reason why most drugs fail is they don’t work, even when the pre-clinical studies look promising. In fact, there’s over 90% failure in the process of the industrial drug discovery business; reasons for failures are 75% to 80% due to issues around efficacy and/or safety. But perhaps the most challenging aspect of attempting to launch a new cannabinoid-based therapeutic? Because cannabis, in all its forms, is still classified as a Schedule I narcotic, getting access to raw materials for research has historically been challenging. Issues With Supply Chain & Product Standardization Since 1968, the only federally approved supplier of cannabis for research purposes in the United States has been a 12-acre farm run by the National Center for Natural Products Research at the University of Mississippi’s School of Pharmacy. That production has been exclusively used for the National Institute on Drug Abuse (NIDA), which maintains control over the production and distribution of research-grade cannabis in the United States. This, in turn, has created increased complexity in any associated drug approval processes, requiring multiple administrative reviews on research proposals. Source: Leafly Recent policy developments suggest this may be changing... August 2016: NIDA announced a policy change intended to support an increase in the number of DEA-registered marijuana (aka Cannabis sativa L) manufacturers. This change was designed to ensure a larger and more diverse supply of marijuana for U.S. Food and Drug Administration (FDA) authorized research purposes. The 2018 Farm Bill: This bill may provide some relief with regard to supply chain issues; the Bill gives sponsors and investigators of clinical studies new options that do not involve the NIDA Drug Supply Program. December 18, 2020: The DEA finalized new regulations pertaining to applications by entities seeking to become registered with the DEA to grow marijuana as bulk manufacturers for research purposes. However, achieving FDA approval and solving supply chain issues is merely table stakes. In order to commercialize the product, it must enter into a regulated distribution channel. Educating Patients, Physicians, Healthcare Providers, And Insurance Payers Unlike other markets where supply can sell directly into demand, pharmaceuticals require patients who want it, physicians who will prescribe it, healthcare providers who will provide it, and insurance companies (called “payers”) to pay for it. Overcoming the resistance in this traditionally conservative ecosystem can present several challenges for market adoption, even if the therapeutic is more effective and more affordable than the status quo. The first major barrier is awareness; payers, physicians, and patients themselves are often challenged by the large and growing number of medication or drug therapy choices. The second major barrier is liability risk; no healthcare system – or insurance company – wants to put itself at risk of a potentially massive lawsuit. This creates a rather awkward “Catch-22” for physicians today… During the initial rise of the opioid epidemic, doctors were afraid to not prescribe opioids as hospitals rolled out aggressive pain management doctrines. The Making Of An Opioid Epidemic The American Pain Society, a body partially funded by pharmaceutical companies, was pushing the concept of pain as the “fifth vital sign”, alongside other measures of health such as heart rate and blood pressure. The APS wanted the practice of checking pain as a vital sign as a matter of routine adopted in American hospitals. The key was to win over the Joint Commission for Accreditation of Healthcare Organizations, which certifies about 20,000 hospitals and clinics in the US. Its stamp of approval is the gateway for medical facilities to tap into the huge pot of federal money paying for healthcare for older, disabled and poor people. Hospitals are careful not to get on the wrong side of the joint commission’s “best practices” or to fail its regular performance reviews. Health insurance companies piled yet more pressure on doctors to follow the path of least resistance. This meant cutting consultation times and payments for more costly forms of pain treatment in favor of the direct approach: drugs. Now, in the face of new opioid prescription guidelines, doctors are increasingly reluctant to prescribe opioids for pain treatment amidst soaring addiction rates and fear of liability. This hasn’t done much to allay the fears doctors already have with prescribing medical marijuana – legal in 33 states, but still federally considered a Schedule I substance However, assuming a CBD-based therapeutic does in fact prove to be effective in treating post-operative pain – and it can overcome all of the obstacles to adoption along the way – the biggest challenge for investors hoping to capitalize on the commercialization of a new therapeutic drug is inevitably… Patent Defense And Exclusivity As previously mentioned, the average cost of bringing a new drug to market is in the billions. To recoup those costs, investors expect an opportunity to realize risk-adjusted returns on what is traditionally a high-risk and speculative investment. For this reason, one of the most important challenges facing all pharmaceutical companies is defending (and extending) their patents and making the most of exclusivity periods. Patents are a property right granted by the United States Patent and Trademark Office anytime during the development of a drug and can encompass wide-ranging claims. Patent terms are set by statute, and are listed in something called the Orange Book. In the U.S., the term of a new patent is 20 years from the date on which a patent application was filed. However, many other factors can affect – or extend – the duration of a patent (i.e. changing the delivery method from oral to intravenous). Exclusivity is a period of time when a brand-name drug is protected from generic drug competition. There are different exclusivities for different situations. Exclusivity is designed to promote a balance between new drug innovation and generic drug competition and lower pricing. Patents and exclusivity apply to drugs in different ways. Patents can be issued – or expire – at any time regardless of the drug’s approval status. Exclusivity attaches upon approval of a drug product if the statutory requirements are met. Patents and exclusivity may or may not run concurrently and may or may not cover the same aspects of the drug product. Some drugs have both patent an exclusivity protection, while others have just one or neither. The State Of The Industry: What Other Pharma Companies Are Trying In 2018, the FDA approved Epidiolex®, which contains a purified form of the drug substance cannabidiol (CBD) for the treatment of seizures associated with two seizure indications, Lennox-Gastaut syndrome and Dravet syndrome in patients aged two years and older. In 2020, Epidiolex was FDA-approved for a third seizure indication, tuberous sclerosis complex, in toddlers aged one year and older. This approved indication – the treatment of seizures – has an interesting precedent in the field of pharmaceuticals: There are a number of anti-seizure drugs that have also been used for pain relief. However, at the time of this publishing, no cannabidiol-based therapeutic has been approved for any pain-related indication. Even if there was, these FDA-approved therapeutics have a major problem… The Bioavailability Problem Up until recently, the only way to deliver cannabinoid-based treatments – like CBD – in a therapeutic setting has been through an oral delivery system. But according to a 2018 report from the World Health Organization on CBD: “Bioavailability from oral delivery was estimated to be 6% due to significant first-pass metabolism.” That means only ~6% of the CBD patients take orally is ever absorbed into the bloodstream! What Is First Pass Metabolism? After a drug is swallowed, it is absorbed by the digestive system and enters the hepatic portal system. It is carried through the portal vein into the liver before it reaches the rest of the body. The liver metabolizes many drugs, sometimes to such an extent that only a small amount of active drug emerges from the liver to the rest of the circulatory system. This first pass through the liver thus may greatly reduce the bioavailability of the drug. Even though CBD is believed to be safe, that doesn’t mean it is completely risk-free When used in a medical setting, high doses are necessary for therapeutic effects In turn, these high dosages may potentially be toxic to the liver (i.e., hepatotoxicity) – a problem well known in other orally administered pain relievers, like acetaminophen (commonly known as Tylenol). Several members of the Isosceles Pharmaceuticals management team have worked with a variety of pain medications and their novel delivery systems. One of those was a new process for delivering acetaminophen – the active ingredient in drugs like Tylenol – intravenously... A feat that other scientists tried – and failed – to accomplish for more than 40 years. That drug is called Ofirmev, and it was designed to fill this need. Not to mention it was a win for investors when it was sold for $1.3 billion to Mallinckrodt Pharmaceuticals after it cleared the FDA approval process, and prior to any revenue generated. Please note, there is no estimation nor guarantee that the proposed therapeutics being tested by Isosceles will develop as far, nor generate as positive of a return for current investors.

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