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| MLPH.PK > SEC Filings for MLPH.PK > Form 10-Q on 30-Oct-2009 | All Recent SEC Filings |
30-Oct-2009
Quarterly Report
THE FOLLOWING ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION OF MOLECULAR USA FOR THE FIRST QUARTER PERIOD ENDED SEPTEMBER 30, 2009 AND SHOULD BE READ IN CONJUNCTION WITH MOLECULAR USA'S FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO CONTAINED ELSEWHERE IN THE FORM 10-Q.
Our consolidated financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.
Overview
We were incorporated in the state of Nevada on May 01, 2002. Up until the fall of 2005, Molecular USA was in the business of mineral exploration and development of a mineral property.
On October 13, 2005, Molecular USA entered into a distribution and supply agreement with Molecular Pharmacology Limited ("MPLA"). MPLA is incorporated under the laws of Australia and at the time was a wholly owned subsidiary company of PharmaNet Group Limited, an Australian company listed on the Australian Stock Exchange. Under the terms of the distribution and supply agreement, Molecular USA received the exclusive distribution rights to distribute, market, promote, detail, advertise and sell certain "Licensed Products", as defined in the agreement, with metallo-polypeptide analgesic as an active ingredient, in the United States (excluding its territories and possessions).
On May 9, 2006, Molecular USA announced that it has acquired 100% of the issued and outstanding share capital of MPLA. The transaction was originally announced by Molecular USA in a press release dated November 29, 2005 and was subsequently approved by a majority of the stockholders of the Company at a stockholders meeting held on April 21, 2006. As a result of the transaction, PharmaNet Group Limited ("PharmaNet"), the former parent company of MPLA, now controls approximately 79% of Molecular USA's issued and outstanding share capital. The transaction between the parties closed in escrow with an effective closing date of May 8, 2006. The business of MPLA is now the business of Molecular USA.
Our Current Business
Molecular USA through its wholly owned subsidiary MPLA is in the business of developing and commercializing a new analgesic and anti-inflammatory molecule known as Tripeptofen. Tripeptofen is likely to appear in a new group of products suitable for the treatment of common every-day pain. As an analgesic and anti-inflammatory drug, Tripeptofen is unusual due to its rapid speed of action and its topical or rub-on application.
The majority of over-the-counter anti-pain and anti-inflammatory products sold for the treatment of acute localised pain are based on non-steroidal anti-inflammatory drugs or NSAIDs. The majority of such products are slow acting and provide only mild pain relief.
The NSAID group has come under additional pressure and increasing medical alarm, as many drugs in this class have been found to set-back the recovery of certain conditions and treatments for which they were marketed. Moreover, NSAIDs are associated with severe gastro-intestinal side-effects. This has left a niche in an industry under-served by new products and ingredients.
MPLA's business strategy is to exploit the fast and locally acting, low side effects, and recovery-enhancing properties of its new drug group and to market this as a new ingredient, enabling pharmaceutical companies to develop and market effective and safer products suited to a broad range of common everyday pain.
Molecular USA has exclusive distribution rights to distribute, market, promote, advertise and sell certain "Licensed Products", with metallo-polypeptide analgesic and anti-inflammatory activity as an active ingredient, in the United States (excluding its territories and possessions) from its wholly owned subsidiary company MPLA.
The Licensed Products include all products in all dosage forms, formulations, line extensions and package configurations using or otherwise incorporating any aspect or production method of metallo-polypeptide analgesic and anti-inflammatory activity as an active ingredient marketed by MPLA or its affiliates under the tradename Tripeptofen or any other trade names or trademarks used by MPLA relating to the product and any improvements to such formulations or dosages as may hereafter be distributed by MPLA or its affiliates in the territory during the term of the distribution and supply agreement between Molecular USA and MPLA for the topical application for human use only, and specifically excludes:
• dermatological or cosmetic use, or tissue repair or tissue regeneration
effect;
• any use or application of the Licensed Product in non-human groups or
species; and
• Thermalife cream, presently owned by PharmaNet, the parent company of
MPLA.
All Licensed Products must first obtain regulatory clearance in the United States before they may be marketed and sold by Molecular USA in that territory. Regulatory approval, commencement of the Master Drug File (MDF) and market approval are the focus of an ongoing program expected to continue over the next 18 to 24 months.
MPLA has an exclusive license from Cambridge Scientific Pty Ltd of Australia. This license is restricted to a "field of use" defined in the license documentation. Cambridge Scientific may grant other licenses to third parties outside the "field of use" the subject of the licenses granted to MPLA.
Patents & Trademarks
Molecular USA and its subsidiary MPLA, regard their intellectual property rights, such as copyrights, trademarks, trade secrets, practices and tools, as important to the success of their company. To protect their intellectual property rights, Molecular USA relies on a combination of patent, trademark and copyright law, trade secret protection, confidentiality agreements and other contractual arrangements with their employees, affiliates, clients, strategic partners, acquisition targets and others. Effective patent, trademark, copyright and trade secret protection may not be available in every country in which the combined company intends to offer its products. The steps taken by Molecular USA and MPLA to protect their intellectual property rights may not be adequate. Third parties may infringe or misappropriate the combined company's intellectual property rights or the combined company may not be able to detect unauthorized use and take appropriate steps to enforce its rights. In addition, other parties may assert infringement claims against the combined company. Such claims, regardless of merit, could result in the expenditure of significant financial and managerial resources. Further, an increasing number of patents are being issued to third parties regarding these processes. Future patents may limit the combined company's ability to use processes covered by such patents or expose the combined company to claims of patent infringement or otherwise require the combined company to seek to obtain related licenses. Such licenses may not be available on acceptable terms. The failure to obtain such licenses on acceptable terms could have a negative effect on the combined company's business.
To protect their intellectual property rights, MPLA relies on a combination of license and patent applications held by Cambridge Scientific Pty Ltd which includes "Analgesic and Anti-Inflammatory Composition" comprising USA patent application in completion plus PCT Provisional Specification having the same name designated as Serial No. 11/059580, Cytokine Mediation Composition PCT/AU2007/000554, Tissue Disruption Treatment And Composition For Use Thereof United States Of America Patent Application No. 11/218382 and International Patent Application No. PCT/AU2006/001288 and COX 2 Inhibitor Application Number WO/2006902207.
Molecular USA plans to market its Licensed Products, when approved, through existing pharmaceutical distributors and by collaborative dealings with major companies active in the United States and Europe.
In addition, Molecular USA plans to explore opportunities for direct sales, out-licensing and the integration of the company's proprietary anti-inflammatory and analgesic components in products already distributed through various international markets.
Molecular USA expects that these activities may even help fund the development costs of the Licensed Products in the United States.
Manufacturing & Supply
Molecular USA and MPLA have no manufacturing facilities. MPLA is required to supply Molecular USA with all Licensed Products under the distribution and supply agreement entered into by the parties in October 2005. It is likely MPLA will enter into arrangements with various certified formulation and manufacturers (GMP) of the Licensed Products for clinical trial and sales purposes. These formulations and the manufacturing facilities must comply with regulations and current good laboratory practices or cGLPs, and current good manufacturing practices or cGMPs, enforced by the Food and Drug Administration ("FDA").
Molecular USA has not entered into any supply agreements.
Competition
Molecular USA and MPLA compete in the segment of the pharmaceutical market that treats pain and inflammation, which is highly competitive. We face significant competition from most pharmaceutical companies as well as biotechnology companies that are also researching and selling products designed to treat pain and inflammation. Many of our competitors have significantly greater financial, manufacturing, marketing and product development resources than we do. Large pharmaceutical companies in particular have extensive experience in clinical testing and in obtaining regulatory approvals for drugs. These companies also have significantly greater research capabilities than we do. In addition, many universities and private and public research institutes are active in neurological research, some in direct competition with us. These companies, as well as academic institutions, governmental agencies and other public and private organizations conducting research, also compete with Molecular USA and MPLA in recruiting and retaining highly qualified scientific personnel and consultants and may establish collaborative arrangements with competitors of Molecular USA.
Molecular USA's competition will be determined in part by the potential indications for which the MPLA's products are developed and ultimately approved by regulatory authorities.
Molecular USA knows of other companies and institutions dedicated to the development of anti-pain and anti-inflammatory pharmaceuticals similar to those being developed by MPLA and licensed to Molecular USA. Many of Molecular USA's competitors, existing or potential, have substantially greater financial and technical resources and therefore may be in a better position to develop, manufacture and market pharmaceutical products. Many of these competitors are also more experienced with regard to preclinical testing, human clinical trials and obtaining regulatory approvals. The current or future existence of competitive products may also adversely affect the marketability of Molecular USA's products.
FDA Regulation. Pharmaceutical products are subject to extensive pre- and post-marketing regulation by the Food and Drug Administration ("FDA"), including regulations that govern the testing, manufacturing, safety, efficacy, labeling, storage, record-keeping, advertising and promotion of the products under the Federal Food, Drug and Cosmetic Act and the Public Health Services Act, and by comparable agencies in most foreign countries. The process required by the FDA before a new drug may be marketed in the U.S. generally involves the following: completion of pre-clinical laboratory and animal testing; submission of an investigational new drug application, or IND, which must become effective before clinical trials may begin; performance of adequate and well controlled human clinical trials to establish the safety and efficacy of the proposed drug's intended use; and approval by the FDA of a New Drug Application, or NDA.
The activities required before a pharmaceutical agent may be marketed in the United States begin with pre-clinical testing. Pre-clinical tests include laboratory evaluation of potential products and animal studies to assess the potential safety and efficacy of the product and its formulations. The results of these studies and other information must be submitted to the FDA as part of an IND application, which must be reviewed and approved by the FDA before proposed clinical testing can begin. Clinical trials involve the administration of the investigational new drug to healthy volunteers or to patients under the supervision of a qualified principal investigator. Clinical trials are conducted in accordance with Good Clinical Practices under protocols that detail the objectives of the study, the parameters to be used to monitor safety and the efficacy criteria to be evaluated. Each protocol must be submitted to the FDA as part of the IND application. Further, each clinical study must be conducted under the auspices of an independent institutional review board. The institutional review board will consider, among other things, ethical factors and the safety of human subjects.
Typically, human clinical trials are conducted in three phases that may overlap. In Phase 1, clinical trials are conducted with a small number of subjects to determine the early safety profile and pharmacology of the new therapy. In Phase 2, clinical trials are conducted with groups of patients afflicted with a specific disease in order to determine preliminary efficacy, optimal dosages and expanded evidence of safety. In Phase 3, large scale, multicenter, comparative clinical trials are conducted with patients afflicted with a target disease in order to provide enough data for the statistical proof of efficacy and safety required by the FDA and others.
The results of the pre-clinical and clinical testing, together with chemistry and manufacturing information, are submitted to the FDA in the form of an NDA for a pharmaceutical product in order to obtain approval to commence commercial sales. In responding to an NDA, the FDA may grant marketing approvals, request additional information or further research, or deny the application if it determines that the application does not satisfy its regulatory approval criteria. Patient-specific therapies may be subject to additional risk with respect to the regulatory review process. FDA approval for a pharmaceutical product may not be granted on a timely basis, if at all, or if granted may not cover all the clinical indications for which approval is sought or may contain significant limitations in the form of warnings, precautions or contraindications with respect to conditions of use.
Satisfaction of FDA premarket approval requirements for new drugs typically takes several years, and the actual time required may vary substantially based upon the type, complexity and novelty of the product or targeted disease. Government regulation may delay or prevent marketing of potential products for a considerable period of time and impose costly procedures upon our activities. Success in early stage clinical trials or with prior versions of products does not assure success in later stage clinical trials. Data obtained from clinical activities are not always conclusive and may be susceptible to varying interpretations that could delay, limit or prevent regulatory approval.
Once approved, the FDA may withdraw the product approval if compliance with pre- and post-marketing regulatory standards is not maintained or if problems occur after the product reaches the marketplace. In addition, the FDA may require post-marketing studies, referred to as Phase 4 studies, to monitor the effect of an approved product, and may limit further marketing of the product based on the results of these post-market studies. The FDA has broad post-market regulatory and enforcement powers, including the ability to levy fines and civil penalties, suspend or delay issuance of approvals, seize or recall products, or withdraw approvals.
With respect to post-market product advertising and promotion, the FDA imposes a number of complex regulations on entities that advertise and promote pharmaceuticals, which include, among other things, standards and regulations relating to direct-to-consumer advertising, off-label promotion, industry sponsored scientific and educational activities, and promotional activities involving the Internet. The FDA has very broad enforcement authority under the Federal Food, Drug and Cosmetic Act, and failure to abide by these regulations can result in penalties including the issuance of a warning letter directing the entity to correct deviations from FDA standards, a requirement that future advertising and promotional materials be pre-cleared by the FDA, and state and federal civil and criminal investigations and prosecutions.
Research facilities are subject to various laws and regulations regarding laboratory practices, the experimental use of animals, and the use and disposal of hazardous or potentially hazardous substances in connection with the research in question. In each of these areas, as above, the government has broad regulatory and enforcement powers, including the ability to levy fines and civil penalties, suspend or delay issuance of approvals, seize or recall products, and withdraw approvals, any one or more of which could have a material adverse effect upon us.
Other Government Regulations. In addition to laws and regulations enforced by the FDA, research of Molecular USA's products in the United States are subject to regulation under National Institutes of Health guidelines, as well as under the Controlled Substances Act, the Occupational Safety and Health Act, the Environmental Protection Act, the Toxic Substances Control Act, the Resource Conservation and Recovery Act and other present and potential future federal, state or local laws and regulations, as research and development of its products involves the controlled use of hazardous materials, chemicals, viruses and various radioactive compounds.
In addition to regulations in the United States, Molecular USA's products are subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution of its Licensed Products. Whether or not Molecular USA obtains FDA approval for a product, Molecular USA or its subsidiaries must obtain approval of a product by the comparable regulatory authorities of foreign countries before it can commence clinical trials or marketing of the product in those countries. The approval process varies from country to country, and the time may be longer or shorter than that required for FDA approval. The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country.
Sarbanes-Oxley Act of 2002. On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002, or the SOA. SOA imposes a wide variety of new requirements on both U.S. and non-U.S. companies, that file or are required to file periodic reports with the Securities and Exchange Commission (the "SEC") under the Securities Exchange Act of 1934. Many of these new requirements will affect Molecular USA and its board of directors. For instance, under SOA Molecular USA is required to:
† form an audit committees in compliance with SOA;
† have Molecular USA's chief executive office and chief financial officer are required to certify its financial statements;
† ensure Molecular USA's directors and senior officers are required to forfeit all bonuses or other incentive-based compensation and profits received from the sale of Molecular USA's securities in the twelve month period following initial publication of any of Molecular USA's financial statements that later require restatement;
† disclose any off-balance sheet transactions as required by SOA;
† prohibit all personal loans to directors and officers;
† adopt a code of ethics and file a Form 8-K when ever there is a change or waiver of this code; and
† insure Molecular USA's auditor is independent as defined by SOA.
SOA has required us to review our current procedures and policies to determine whether they comply with the SOA and the new regulations promulgated thereunder. We will continue to monitor our compliance with all future regulations that are adopted under the SOA and will take whatever actions are necessary to ensure that we are in compliance.
Environmental Compliance
The nature of Molecular USA's and MPLA's business does not require special environmental or local government approval. Molecular USA and MPLA are compliant with all environmental laws. The cost of such compliance is minimal for the company.
Employees
Molecular USA currently has no employees and instead relies on outside contractors.
Immediate Business Plans
The Company, through its subsidiary MPLA, plans to continue to pursue the various levels of the international regulatory approval processes. Applications and product opportunities for Tripeptofen are believed to be broad and cover a range of commercial fields, each with distinct pre-market requirements. The international drug development team, global resources and local know-how will allow MPLA to seek the most time and cost effective regulatory pathways for each product and market sector.
On commercial development, MPLA will focus on consolidating the regulatory pathway work in order to prioritize the path to market. Jeff Edwards will work to set-out the strategies designed to maximize the multi-jurisdictional capabilities of MPLA's development teams.
Results of Operation
For the Quarter ended September 30, 2009.
Revenues
REVENUE - Molecular USA has not generated any revenues for the quarter ended September 30, 2009, or since inception.
COMMON STOCK - Molecular USA has not issued any shares during the most recent quarter. As of the date October 30, 2009, Molecular USA has 111,553,740 common shares issued and outstanding.
Expenses
SUMMARY - Total expenses were $34,457 for the three month period ended September 30, 2009. Expenses had increased during this past quarter as compared to three month period ended September 30, 2008 - $28,552. A total of $1,753,024 in expenses has been incurred by Molecular USA since inception on July 14, 2004 through to September 30, 2009. The increase in costs over this quarter has occurred as the result of Molecular USA's wholly owned subsidiary increasing its consulting fees. The costs can be subdivided into the following categories.
1. Office Expenses and Rent: $10,443 in office expenses (for administrative costs) were incurred for the three month period ended September 30, 2009 as compared to $9,270 for the three month period ended September 30, 2008; while a total of $184,213 was incurred in the period from inception on July 14, 2004 to September 30, 2009. All contributed expenses are reported as contributed costs with a corresponding credit to additional paid-in capital.
2. Consulting and Analysis Costs: Molecular USA relies on consultants and
other third parties to conduct the majority of its research. For the three
month period ended September 30, 2009, $15,354 in consulting and analysis
expenses were incurred as compared to $8,332 during the three month period
ended September 30, 2008. We have incurred a total of $1,144,208 in
consulting and analyst fees since our inception on July 14, 2004 to
September 30, 2009.
3. Advertising and Promotion Fees: Molecular USA has spent no money in this
area this year. During the three month period ended September 30, 2009 we
spent $0 on advertising and public relations and $0 for three month period
ended September 30, 2008. A total of $23,739 has been incurred in this
area during the period from inception on July 14, 2004 to September 30,
2009.
4. Professional Fees: Molecular USA incurred $7,434 in professional fees for
the three month period ended on September 30, 2009 as compared to $8,572
for the three month period ended September 30, 2008. From inception to
September 30, 2009, we have incurred a total of $231,502 professional fees
mainly spent on legal and accounting matters.
5. Travel Costs: Molecular USA incurred $0 in travel costs for the three month
period ended September 30, 2009 as compared to $2,006 for the three month
period ended September 30 , 2008 and $104,249 has been incurred in the
period from inception on July 14, 2004 to September 30, 2009. This
decrease reflects limited travel expense this quarter to our North American
legal counsel in visiting our research facilities in Australia.
6. Salaries and Benefit Costs: Molecular USA and its subsidiary relies
primarily on outside consultants and not salaried employees. As a result,
Molecular USA incurred $0 in salaries and benefits for the three month
period ended September 30, 2009 and $0 in salaries and benefits during the
three month period ended September 30, 2008. For the period July 14, 2004
(inception) through September 30, 2009, Molecular USA has spent a total of
$44,464 on salaries and benefits.
Molecular USA continues to carefully control its expenses and overall costs as it moves forward with the development of its new business plan. Molecular USA does not have any employees and engages personnel through outside consulting contracts or agreements or other such arrangements
Income Tax Provision: We have losses carried forward for income tax purpose to September 30, 2009. There are no current or deferred tax expenses for the period ended September 30, 2009 due to our loss position. We have fully reserved for any benefits of these losses. The deferred tax consequences of temporary differences in reporting items for financial statement and income tax purposes are recognized as appropriate.
Liquidity and Capital Resources
During the three month period ended September 30, 2009, Molecular USA satisfied its working capital needs by borrowing cash from its parent company PharmaNet. As of September 30, 2009, the Company had cash and cash equivalents on hand in the amount of $10,766 ($7,543 - June 30, 2009) and current payable and accrued liabilities of $28,402 ($30,829 - June 30, 2009). As of September 30, 2009, Molecular USA currently owes its parent company PharmaNet, $1,373,345, an additional $51,333 to other related parties, and $28,402 to non-related parties. Given the proposed business activities of Molecular USA and its subsidiary, management does not expect that the current level of cash on hand will be sufficient to fund its operation for the next twelve month period.
To achieve our goals and objectives for the next 12 months, we plan to raise . . .
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