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United States securities and exchange commission logo
June 9, 2023
Robert Cobuzzi, Jr., Ph.D.
President and Chief Executive Officer
Diffusion Pharmaceuticals Inc.
300 East Main Street, Suite 201
Charlottesville, Virginia 22902
Re: Diffusion
Pharmaceuticals Inc.
Registration
Statement on Form S-4
Filed May 11, 2023
File No. 333-271823
Dear Robert Cobuzzi:
We have reviewed your registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by amending your registration
statement and providing the
requested information. If you do not believe our comments apply to your
facts and
circumstances or do not believe an amendment is appropriate, please tell
us why in your
response.
After reviewing any amendment to your registration statement and
the information you
provide in response to these comments, we may have additional comments.
Registration Statement on Form S-4
Questions and Answers About Diffusion's Special Stockholder Meeting And
The Merger
What is the Merger, page 12
1. Please briefly discuss
Diffusion's $12.0 million net cash Merger closing condition and the
potential impact of
this condition on the merger. Additionally, given the Exchange Ratio
is subject to
adjustment based on Diffusion's net cash at the time of the Merger's closing,
please disclose
Diffusion's current amount of net cash, as calculated pursuant to the terms
of the Merger
Agreement.
Robert Cobuzzi, Jr., Ph.D.
FirstName LastNameRobertInc.
Cobuzzi, Jr., Ph.D.
Diffusion Pharmaceuticals
Comapany
June 9, 2023NameDiffusion Pharmaceuticals Inc.
June 9,
Page 2 2023 Page 2
FirstName LastName
As a holder of Diffusion Common Stock, what happens if I do not return a proxy
card or
otherwise provide proxy instructions, as applicable?, page 17
2. Please revise to explain what happens if shareholders of Diffusion
Common Stock do not
return their proxy card. As currently drafted, this Q&A only explains
what happens
if shareholders return a signed proxy card without marking any
selections or do not give
instruction to their brokers.
Risk Factors
Risks Related to Diffusion, page 47
3. Please include a risk factor addressing any material risks associated
with the pending legal
proceeding by Paul Feller, the former Chief Executive Officer of
Diffusion s legal
predecessor, which you mention on page 195. Alternatively, tell us why
you believe risk
factor disclosure is not required.
Background of the Merger, page 106
4. Please revise to more specifically describe the criteria proposed to
assess potential
counterparties. For example, if you were looking for parties with a
candidate that had
achieved a specific stage of development, what stage was that? What
were you looking
for with respect to the depth of the pipeline table? Additionally,
please discuss whether
the criteria and/or the prioritization of the criteria changed over
time. We note that the
counterparty's willingness to commit to continuing to develop TSC
following the
consummation of the transaction is included in the list of criteria,
but we also note your
statement on page 21 that you will continue to look for opportunities
to sell or out-license
TSC in newly diagnosed GMB patients. Please clarify when it was
determined that the
combined company would not continue to develop TSC.
5. Please clarify how you narrowed the 16 companies that submitted
non-binding indications
of interest between November 14, 2022 and November 18, 2022 to the
five companies
that Diffusion's board of directors, members of management,
representatives of CG and
Dechert identified on November 21, 2022. To the extent that you used
the Criteria to
eliminate the other nine, please explain how the Criteria was used in
the selection process.
EIP Reasons for the Merger, page 122
6. Please expand the bullet point indicating that the shares of Diffusion
Common Stock
issued to EIP equity holders will be registered on a Form S-4
registration statement to
clarify that certain stockholders who have agreed to vote all of their
shares of EIP capital
stock in favor of the merger will also not have their shares
registered on the Form S-4.
Robert Cobuzzi, Jr., Ph.D.
FirstName LastNameRobertInc.
Cobuzzi, Jr., Ph.D.
Diffusion Pharmaceuticals
Comapany
June 9, 2023NameDiffusion Pharmaceuticals Inc.
June 9,
Page 3 2023 Page 3
FirstName LastName
The Merger
Opinion of Diffusion's Financial Advisor, page 123
7. We note disclosure on page 124 that, in connection with Canaccord
Genuity's review of
the Merger and developing of its opinion, it reviewed certain
information, "among other
things." Please revise to include all material information reviewed by
Canaccord
Genuity.
Summary of Financial Analyses, page 125
8. Please revise the discussions of the "Diffusion Selected Reverse
Mergers Analysis," "EIP
Selected Public Companies Analysis," and "EIP Selected Initial Public
Offering Precedent
Analysis" to describe the factors CG used in determining they were
"relevant to consider,"
including classifications of industry sector(s) and key product
development stage(s) used.
To the extent CG determined that they shared "similar business
characteristics," describe
these characteristics and any other factors that warranted inclusion
in the analyses. To the
extent there were other companies or transactions that met the
selection criteria that were
not included in the analyses, please disclose this information and
explain why they were
excluded from the analyses.
9. Please explain the statement, "[b]ased on its analysis and other
considerations that CG
deemed relevant in its experience and professional judgement, CG
derived a range of
implied total enterprise values for Diffusion based on the first
quartile and third quartile
enterprise values of the companies in the selected reverse mergers of
($15.8) million and
$2.6 million, respectively." Please explain what other considerations
CG deemed relevant
and how they impacted CG's analysis.
10. For each of the analysis presented, please disclose the values
calculated for each company
or transaction and clarify what value(s) were used to calculate the
implied value for
Diffusion post-merger. For example, did CG use the mean, median, high
or low value
from the calculations of the comparable companies/transactions?
Certain Unaudited Long-Range Financial Projections of EIP, page 131
11. Please revise to:
explain why you chose to use a 14-year time period for the
Financial Projections;
explain how you arrived at the probability of regulatory approval
for neflamapimod;
disclose the date you assumed that neflamapimod will be granted
regulatory
approval;
discuss whether the Financial Projections factored in the
possibility of FDA approval
of new competitive products.
Additionally, confirm that all information that Canaccord Genuity
considered in reaching
its fairness determination, including any of these assumptions, is
disclosed in this filing, or
revise the filing accordingly.
Robert Cobuzzi, Jr., Ph.D.
FirstName LastNameRobertInc.
Cobuzzi, Jr., Ph.D.
Diffusion Pharmaceuticals
Comapany
June 9, 2023NameDiffusion Pharmaceuticals Inc.
June 9,
Page 4 2023 Page 4
FirstName LastName
Diffusion Business, page 177
12. Please clarify that the combined company's business following the
merger will not include
continuing to develop TSC.
TSC's Demonstrated Clinical Safety Profile, page 178
13. Please revise this heading and paragraph to remove any implication
that TSC, which has
not been approved by the FDA, is safe or effective. Safety and
efficacy determinations
are in the exclusive purview of the FDA or other comparable foreign
regulators. In this
regard, please similarly revise your disclosures on this page that
"TSC has been observed
to be safe" and that your clinical trials have demonstrated "TSC's
safety and effects on
oxygenation[.]"
EIP Business
Overview, page 196
14. We note the pipeline table on page 197. Please define the term "WW."
15. Please include a description of the Vertex agreement, including
amounts paid to date,
aggregate potential development milestone payment obligations,
aggregate potential sales
milestone payment obligations, the royalty percentage (or a range no
greater than 10
points), minimum annual expenditures, diligence requirements and when
your royalty
obligation expires.
Our Strengths, page 198
16. Given your phase 2b trial of neflamapimod is still ongoing, your
disclosure that "approval
for neflamapimod could be obtained with the conduct of a single
24-week treatment
duration Phase 3 study involving a few hundred subjects, that would
have to simply
replicate the results of the planned Phase 2b trial" is speculative.
Moreover, it does not
align with your risk factor disclosure on page 73 that there has never
been an approval of a
drug in DLB which "could result in a longer than expected regulatory
review process[.]"
Please revise.
Efficacy Results in Phase 2a Trial of Neflamapimod in DLB, page 203
17. Please expand your discussion to explain how to interpret p-values.
Planned Phase 2b Clinical Study in DLB, page 209
18. We note disclosure on page 210 that EIP was awarded a $21 million
grant from the
National Institutes of Health s National Institute on Aging in
January 2023 that is
estimated to fully fund development costs associated with the planned
Phase 2b trial. We
also note disclosure on page 66 that these funds will be disbursed
over the course of the
trial as costs are incurred and that the grant is "subject to certain
conditions for funding in
Robert Cobuzzi, Jr., Ph.D.
Diffusion Pharmaceuticals Inc.
June 9, 2023
Page 5
subsequent years." Please disclose what portion of these funds have been
disbursed and
any material conditions for future funding. If there is a written
agreement underlying this
grant, please file the agreement as an exhibit pursuant to Item
601(b)(10) of Regulation S-
K.
Principal Stockholders of EIP, page 293
19. Please identify in a footnote to the table all natural persons who have
voting and/or
investment power over the shares held by AI New Holdings 12 LLC. Please
make
a corresponding revision to the footnote to the Principal Stockholders of
the Combined
Company table on page 296, as appropriate.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
Refer to Rules 460 and 461 regarding requests for acceleration. Please
allow adequate
time for us to review any amendment prior to the requested effective date of
the registration
statement.
You may contact Gary Newberry at 202-551-3761 or Lynn Dicker at
202-551-3616 if
you have questions regarding comments on the financial statements and related
matters. Please
contact Dillon Hagius at 202-551-7967 or Suzanne Hayes at 202-551-3675 with any
other
questions.
Sincerely,
FirstName LastNameRobert Cobuzzi, Jr., Ph.D.
Division of
Corporation Finance
Comapany NameDiffusion Pharmaceuticals Inc.
Office of Life
Sciences
June 9, 2023 Page 5
cc: John Alessi
FirstName LastName