Overview
We were originally incorporated in California in January 1992 and were reincorporated in Delaware in May 1996.
We discover and develop innovative and life-changing pharmaceuticals, in diseases with
high unmet medical needs, through our novel R&D platform, focused on neurological and endocrine based diseases and disorders. Our three lead late-stage clinical programs are INGREZZA
TM
(valbenazine), a vesicular monoamine transporter 2 (VMAT2) inhibitor for the treatment of movement disorders,
elagolix, a gonadotropin-releasing hormone (GnRH) antagonist for womens health that is partnered with AbbVie Inc. (AbbVie), and opicapone, a highly-selective catechol-O-methyltransferase inhibitor (COMT inhibitor) that is an adjunct therapy to
preparations of levodopa/DOPA decarboxylase inhibitors for adult patients with Parkinsons disease and was inlicensed from BIAL Portela & CA, S.A. (BIAL). We intend to commercialize INGREZZA in the United States subject to U.S. Food
and Drug Administration (FDA) approval of our pending New Drug Application (NDA) that is under review for tardive dyskinesia (TD).
We are pursuing TD as our lead indication for INGREZZA. In August 2016, we submitted an NDA to the FDA, which was accepted for priority review by the FDA with a Prescription Drug User Fee Act (PDUFA)
target action date of April 11, 2017. If approved, we intend to commercialize INGREZZA for TD in the United States by establishing a specialty sales force focused primarily on physicians who treat TD patients, including psychiatrists and
neurologists.
We believe that INGREZZA has the potential to address important unmet medical needs in
neurological and psychiatric disorders beyond TD and we plan to continue to study the use of INGREZZA in other disease states. We are currently investigating the utilization of INGREZZA in Tourette syndrome. We have completed two
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clinical trials in Tourettes patients and a third study is currently ongoing. We intend to utilize the results of these three studies to discuss with the FDA a plan for a pivotal Phase III
program for INGREZZA in Tourette syndrome patients.
Our partner AbbVie has successfully completed the
placebo-controlled portion of two Phase III studies of elagolix in women with endometriosis. Based on the positive results of these studies, AbbVie intends to submit an NDA to the FDA for elagolix to treat women with endometriosis during the third
quarter of 2017. In addition, AbbVie is also assessing elagolix in women with uterine fibroids. The Phase III program began in early 2016 with two replicate studies of women with heavy uterine bleeding associated with uterine fibroids. AbbVie
expects initial top-line efficacy data from the Phase III uterine fibroids program to be available in late 2017.
On February 9, 2017, we entered into an exclusive licensing agreement with BIAL for the development and commercialization of opicapone in the United States and Canada. Opicapone is a once-daily,
peripherally-acting, highly-selective COMT inhibitor that was approved in June 2016 by the European Commission as an adjunct therapy to preparations of levodopa/DOPA decarboxylase inhibitors for adult patients with Parkinsons disease and
end-of-dose motor fluctuations who cannot be stabilized on those combinations. We intend to meet with the FDA to discuss a potential New Drug Application submission.
Our Product Pipeline
The following table summarizes our
most advanced product candidates currently in clinical development and those currently in research and is followed by detailed descriptions of each program:
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Program
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Target Indication(s)
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Status
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Rights
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Product candidates in clinical development:
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INGREZZA (valbenazine)
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Tardive Dyskinesia
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Registration
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Neurocrine/Mitsubishi Tanabe
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elagolix
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Endometriosis
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Phase III
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AbbVie
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elagolix
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Uterine Fibroids
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Phase III
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AbbVie
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opicapone
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Parkinsons Disease
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Phase III
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Neurocrine/BIAL
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INGREZZA (valbenazine)
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Tourette Syndrome
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Phase II
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Neurocrine/Mitsubishi Tanabe
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NBI-640756
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Essential Tremor
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Phase I
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Neurocrine
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NBI-74788
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Classic Congenital
Adrenal Hyperplasia
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Phase I
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Neurocrine
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Research programs:
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Neurological/Neuropsychiatric (e.g. VMAT2 Inhibitors)
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Movement Disorders,
Bipolar Disorder and
Schizophrenia
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Research
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Neurocrine
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CNS Disorders (Targeted by G Protein-Coupled Receptors and Ion Channels)
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Epilepsy, Essential Tremor, Pain, Other Indications
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Research
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Neurocrine
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Registration indicates that we have submitted an NDA to the FDA for regulatory approval of the product candidate, for the specified target indication.
Phase III indicates that our collaborators are conducting large-scale, multicenter comparative clinical trials on patients
afflicted with a target disease in order to provide substantial evidence for efficacy and safety of the product candidate.
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Phase II indicates that we are conducting clinical trials on groups of patients
afflicted with a specific disease in order to determine preliminary efficacy, optimal dosages and expanded evidence of safety of the product candidate.
Phase I indicates that we are conducting or initiating clinical trials with a smaller number of subjects to determine early safety profile, maximally tolerated dose and pharmacological
properties of the product candidate in human volunteers.
Research indicates identification and evaluation of compound(s) in
laboratory and preclinical models.
Product Candidates In Clinical Development
INGREZZA (valbenazine) Vesicular Monoamine Transporter 2 Inhibitor (VMAT2)
VMAT2 is a protein concentrated in the human brain that is essential for the transmission of nerve impulses between
neurons. VMAT2 is primarily responsible for packaging and transporting monoamines (dopamine, norepinephrine, serotonin, and histamine) in neurons. Specifically, dopamine enables neurotransmission among nerve cells that are involved in voluntary and
involuntary motor control. Disease states such as TD, Tourette syndrome, Huntingtons chorea, schizophrenia, and tardive dystonia are characterized in part by a hyperdopaminergic state in the brain, and modulation of neuronal dopamine levels
may provide symptomatic benefits for patients with these conditions, among others.
Tardive dyskinesia
. TD is defined by hyperkinetic involuntary movements which arise after
months or years of treatment with dopamine receptor blocking agents, e.g. antipsychotics used for treating schizophrenia, bipolar disorder, and depression, and Reglan
®
(metoclopramide) for nausea and vomiting and gastric emptying in patients with gastroparesis. Features of TD may include grimacing, tongue protrusion, lip smacking,
puckering and pursing of the lips, and rapid eye blinking. Rapid movements of the extremities may also occur. The impact on daily function and the quality of life for individuals suffering from TD can be substantial. While the prevalence rates of TD
can vary greatly in accordance with the population being studied, it is estimated that approximately 500,000 individuals are affected by TD in the United States alone (Kantar Health).
To address the unmet medical needs of patients suffering from TD, we are developing INGREZZA (valbenazine). INGREZZA
causes reversible reduction of dopamine release at the nerve terminal by selectively inhibiting the pre-synaptic VMAT2. In vitro, INGREZZA is a highly selective inhibitor of human VMAT2 showing little or no affinity for VMAT1, other receptors, such
as dopamine D2 receptors, other transporters or ion channels. We have designed this novel compound to provide sustained plasma and brain concentrations of the active drug to allow for once daily dosing. INGREZZA has been evaluated in multiple
clinical studies to assess its safety, tolerability and efficacy. We believe that the potential efficacy and safety profile of INGREZZA will address many of the shortcomings of current off-label treatments for TD. Finally, INGREZZA may be useful in
the treatment of other disorders, such as Huntingtons chorea, schizophrenia, Tourette syndrome and tardive dystonia.
In 2012, we began our INGREZZA late stage clinical TD program. The initial Phase IIb study (Kinect 1 Study) was a randomized, parallel, double-blind, placebo-controlled, clinical trial utilizing the
capsule formulation of INGREZZA in moderate to severe TD patients with underlying schizophrenia or schizoaffective disorder. The impact on the dyskinesia was assessed utilizing the Abnormal Involuntary Movement Scale (AIMS). This 109 subject study
assessed two doses of once daily INGREZZA over a six-week placebo-controlled dosing period. Approximately half of the randomized subjects received placebo and half received one of two doses of INGREZZA. The two INGREZZA dosing groups consisted of a
50mg group for six weeks and a group that began at 100mg for the initial two weeks and then converted to 50mg for the final four weeks of placebo-controlled dosing period. Subsequent to the placebo-controlled dosing, all subjects were eligible to
enter a six-week open label safety extension, during which 50mg of INGREZZA was administered once daily with additional AIMS assessments. The primary endpoint of the study was a comparison of placebo versus active scores utilizing the AIMS at the
end of week six as assessed by the on-site AIMS assessors. The 50mg dose of INGREZZA did not reach statistical significance for the primary endpoint at week six.
5
INGREZZA was generally well tolerated during the twelve weeks of the Kinect
1 Study. During the
six-week
placebo-controlled treatment period the frequency of treatment-emergent adverse events was 37% for placebo and 26% for INGREZZA. There were no drug-related serious adverse events.
The most common treatment emergent adverse event was mild and transient somnolence during the placebo-controlled portion of the study.
Participants in the Kinect 1 Study were assessed utilizing the Barnes Akathisia Ratings Scale (BARS) for akathisia and the Simpson-Angus Scale (SAS) for Parkinsonism. Both of these scales documented
minimal symptoms at baseline and were measured as stable to improved during the twelve weeks of treatment. Subjects were also assessed using various safety scales including the Positive and Negative Syndrome Scale (PANSS) for Schizophrenia, the
Calgary Depression Scale for Schizophrenia and the Columbia-Suicide Severity Rating Scale (C-SSRS); all of these scores were measured as stable to improved from baseline. Clinical hematology, chemistry and ECG monitoring indicated no emergent safety
signals. There were no apparent drug-drug interactions identified in subjects who were utilizing a range of psychotropic and other concomitant medications.
In November 2013, we convened a Scientific Advisory Board (SAB) to review the results of the Kinect 1 Study. The SAB was formed to specifically focus on the dose levels and the AIMS assessment tool. Based
on the results of the Kinect 1 Study and the advice from the SAB, the protocol for the second Phase IIb study (Kinect 2 Study) was amended to change the primary endpoint from on-site AIMS assessments to a blinded central video assessment
conducted by two movement disorder specialists who would review the AIMS videos in a scrambled fashion and concur on a final AIMS score for each video.
The Kinect 2 Study was a randomized, parallel, double-blind, placebo-controlled, clinical trial utilizing the capsule formulation of INGREZZA in moderate to severe TD patients with underlying mood
disorders, schizophrenia and schizoaffective disorders, and gastrointestinal disorders. This study randomized 102 patients into a six-week placebo-controlled dosing period where half of the subjects received placebo and half received INGREZZA. The
study began with all subjects on once daily 25mg of INGREZZA, or placebo. The treating physician was then permitted to escalate the dose at two-week intervals, at the end of week two and at the end of week four, to a maximum dose of once daily 75mg.
The dose escalation was determined by the treating physician based on week two and week four on-site AIMS assessments coupled with safety and tolerability assessments at these same time points. By week six, approximately 70% of the ITT subjects,
randomized to INGREZZA, were titrated to the 75 mg dose, approximately 20% were titrated to the 50mg dose and the remaining subjects received 25 mg of INGREZZA. The primary endpoint of the study was a comparison of placebo versus active scores
utilizing the AIMS at the end of week six as assessed by scrambled blinded central video assessment conducted by two movement disorder specialists. The mean baseline AIMS score for the placebo group was 7.9 compared to 8.0 for the INGREZZA
group.
At week six, AIMS scores, as assessed by blinded central video raters, were reduced by 2.6 points in
the INGREZZA intention-to-treat (ITT) group (n=45) compared to a reduction of 0.2 points in the placebo arm (n=44) (p<0.001). Additionally, the responder rate (>= 50% improvement from baseline) was 49% in the INGREZZA ITT group compared to 18%
in placebo (p=0.002). In the per-protocol (PP) group (n=78) (the PP group excludes subjects whose plasma concentrations of INGREZZA were below the lower limit of quantitation and it was determined that these subjects had not ingested the study
drug) AIMS scores were reduced by 3.3 points for those subjects taking INGREZZA (p<0.001), with a corresponding responder rate of 59% (p<0.001). The improvement in week six AIMS was also corroborated by on-site treating physicians utilizing
the Clinical Global ImpressionTardive Dyskinesia (CGI-TD) scale scores. Treating clinicians determined that approximately 67% of the subjects taking INGREZZA were much improved or very much improved at week six compared
to only 16% of the placebo subjects (p<0.001) in this pre-specified key secondary efficacy endpoint.
In
the Kinect 2 Study INGREZZA was generally safe and well tolerated. During the six-week treatment period the frequency of treatment-emergent adverse events was 33% for placebo and 43% for INGREZZA. There were no drug related serious adverse events.
The most common treatment emergent adverse events were fatigue
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in five subjects (9.8%) randomized to INGREZZA versus two subjects (4.1%) in the placebo group, and headache reported by four subjects (7.8%) on INGREZZA versus two subjects
(4.1%) on placebo. Discontinuation rates were similar in both the INGREZZA and placebo treatment groups with five per study arm (none of which were study drug related).
Participants in the Kinect 2 Study were assessed utilizing the BARS for akathisia and the SAS for Parkinsonism. Both of
these scales documented minimal symptoms at baseline and there was no worsening during the six weeks of treatment. Clinical hematology, chemistry and ECG monitoring indicated no emergent safety signals. There were no drug-drug interactions
identified in subjects who were utilizing a range of psychotropic and other concomitant medications.
Subsequent to completion of the Kinect 2 Study, in a post-hoc analysis, the Kinect 1 Study videos were evaluated by
performing the same comparison of placebo versus active scores employed in the Kinect 2 Study. We engaged two movement disorder specialists, both of whom were not involved with the Kinect 1 Study, to assess the Kinect 1 Study baseline and week six
videos utilizing AIMS in a randomized blinded central video assessment. These raters scored the mean baseline AIMS of 8.0 for the Kinect 1 Study. After six weeks of treatment, these raters scored the placebo group in the Kinect 1 Study with a mean
reduction from baseline of 0.1 points while the INGREZZA group was scored with a mean reduction from baseline of 1.3 points.
The data from the Kinect 1 and Kinect 2 studies, along with the other Phase I and Phase II clinical studies, preclinical work, and drug manufacturing data formed the basis for an end of Phase II meeting
that was held with the FDA in June of 2014. During this meeting, the FDA reviewed the current data package and overall clinical development plan for INGREZZA including the proposed Phase III development to support the registration of INGREZZA in the
United States as a treatment for TD. Based on the results of this meeting and the related minutes, we conducted a single placebo-controlled Phase III study of INGREZZA, the Kinect 3 Study.
The Kinect 3 Study was initiated during the fourth quarter of 2014. The Kinect 3 Study was a randomized, parallel-group,
double-blind, placebo-controlled clinical trial utilizing the capsule formulation of INGREZZA in moderate to severe TD subjects with an underlying diagnosis of mood disorder, schizophrenia or schizoaffective disorder. The primary endpoint in the
Kinect 3 Study was the mean change from baseline in the AIMS as assessed by blinded central raters. The Kinect 3 Study randomized approximately 230 subjects to either placebo, once daily 40mg of INGREZZA or once daily 80mg of INGREZZA for 6 weeks of
placebo-controlled dosing followed by an extension of active dosing through week 48.
The AIMS ratings at week
6 for the 80mg once-daily INGREZZA ITT population was reduced 3.1 points (Least-Squares Mean) more than placebo (p<0.0001). In addition to the primary efficacy endpoint, the AIMS rating for the 40mg once-daily dose and the CGI-TD for both doses
were also evaluated. The table below summarizes the results of the AIMS ratings and CGI-TD at week 6 for both the ITT population and a preliminary pre-specified per-protocol (PP) population, which excludes subjects whose plasma concentrations of
INGREZZA were below the lower limit of quantitation and it was determined that these subjects had not ingested the study drug.
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Week 6
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40mg qd
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p-value*
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80mg qd
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p-value*
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AIMS Difference from Placebo
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Least-Squares Mean (ITT population)
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-1.8
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0.0021
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-3.1
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<0.0001
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Least-Squares Mean (PP population)
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-2.1
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0.0009
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-3.6
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<0.0001
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CGI-TD Difference from Placebo
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Least-Squares Mean (ITT population)
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-0.3
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0.0742
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-0.3
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0.0560
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Least-Squares Mean (PP population)
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-0.4
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0.0097
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-0.4
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0.0122
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Assessment of the significance of p-values based on pre-specified, fixed-sequence testing procedure
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During the six-week placebo-controlled treatment period INGREZZA was
generally well tolerated. The frequency of adverse events was similar among all treatment groups and treatment emergent adverse effects were consistent with those of prior studies. Clinical hematology, chemistry and ECG monitoring indicated no
emergent safety signals. There were no drug-drug interactions identified in subjects who were utilizing a wide range of psychotropic and other concomitant medications.
The Kinect 3 Study included a blinded extension phase with an additional 42 weeks of INGREZZA administration of either
40mg or 80mg once daily. Adverse events and the effects on AIMS were assessed during the 42-weeks of post placebo-controlled dosing and at Week 52 following cessation of INGREZZA. AIMS scores showed sustained improvement during this 42-week period,
and adverse events were consistent with the placebo-controlled period of the trial.
In addition to the Kinect
3 Study, we are also conducting a separate one-year open-label safety study of 40mg once daily and 80mg once daily INGREZZA (the Kinect 4 Study) as well as a roll-over study for those patients who complete the one year of dosing in either the Kinect
3 or Kinect 4 studies. This roll-over study is designed to permit open-label access to INGREZZA for up to an additional 72 weeks of treatment.
In October 2014, the FDA granted us breakthrough therapy designation for INGREZZA, for the treatment of TD. Breakthrough therapy designation is granted for a drug that is intended to treat a serious or
life-threatening disease or condition and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement on clinically significant endpoints over available therapies. This designation also allows intensive discussions
with the FDA which are intended to expedite the development and review process of eligible drugs.
On
August 11, 2016, we submitted an NDA for INGREZZA for the treatment of TD to the FDA. The NDA was accepted for Priority Review by the FDA and given a PDUFA target action date of April 11, 2017.
In preparation for a planned commercial launch of INGREZZA, we have an ongoing TD disease education and awareness
campaign that includes educational programs with health care professionals, a TD educational website and a strong presence at neurology and psychiatric medical meetings. We have also established our core commercial team that is comprised of
experienced professionals in marketing, access and reimbursement, managed markets, marketing research, commercial operations, and sales force planning and management. We are preparing to build a specialty sales force in the United States of
approximately 140 experienced sales professionals who will primarily interact with neurologists and psychiatrists.
Tourette syndrome.
Tourette syndrome is a neurological disorder that consists of rapid, non-rhythmic stereotyped motor and vocal tics. Motor tics are typically characterized by facial grimacing,
head jerks, extremity movements and other dystonic movements. Vocal tics typically include grunting, throat clearing, and repeating words and phrases. The average age of onset for Tourette syndrome is approximately six years, with symptoms reaching
their peak severity at approximately age ten. Tourette syndrome is more commonly diagnosed in males than females and may also be associated with attention deficit hyperactivity disorder and obsessive compulsive disorder. We believe there are
approximately 400,000 people with Tourette syndrome in the United States.
We have completed juvenile rodent
preclinical studies of INGREZZA and based on the results of these preclinical studies, we initiated the T-Force Study in children and adolescents with Tourette syndrome in early 2015. The T-Force Study was an open-label, multiple ascending dose,
pharmacokinetic and pharmacodynamic study to evaluate the safety, tolerability and exposure-response of INGREZZA in children and adolescents with Tourette syndrome. A total of 28 patients were evaluated over 14 days of once daily dosing followed by
7 days off-drug at 10 study centers in the United States. The study was divided into two dosing groups consisting of children (ages 6-11) and adolescents (ages 12-18), and each age group was further divided into three dosing cohorts. Subsequent dose
escalations for children and adolescents were based, in part, on the pharmacokinetic and safety data from the previous cohort in each age group. The Yale Global Tic Severity Scale was also assessed and after two weeks of treatment showed a mean
reduction of 31% from baseline scores, with over half of the subjects considered clinical responders. Based on the results of the T-Force study, we initiated the Phase II program in Tourette syndrome.
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The T-Forward study was a randomized, double-blind, placebo-controlled,
multi-dose, parallel group, study that enrolled 124 adults with moderate to severe Tourette syndrome. Two once-daily fixed doses of INGREZZA were evaluated versus placebo in a 1:1:1 randomization. The three-arm study included eight weeks of dosing
followed by two weeks off-drug at 32 study centers in the United States to assess the safety, tolerability and efficacy of INGREZZA in Tourette patients. The primary endpoint of this study was a change from baseline of placebo versus active scores
utilizing the Yale Global Tic Severity Scale at the end of week 8. Tourette symptoms were also be evaluated via the Premonitory Urge for Tics Scale as well as Clinical Global Impression of Change scales, among others. While the T-Forward study
showed a significant improvement in overall symptoms of Tourette syndrome as evidenced by the Clinical Global Impression of Change (p=0.015), the pre-specified primary endpoint, the change-from-baseline in the Yale Global Tic Severity Scale at week
8 was not met (p=0.18). Adverse events were dose dependent and consistent with earlier clinical studies.
The
T-Force GREEN study is a multicenter, randomized, double-blind, placebo-controlled, multi-dose, parallel group, Phase II study to evaluate the safety, tolerability and efficacy of INGREZZA in up to 90 pediatric patients with moderate to severe
Tourette syndrome. Once-daily fixed doses of INGREZZA will be evaluated versus placebo in a 1:1:1 randomization. The three-arm study will evaluate up to approximately 45 children and 45 adolescents over six weeks of dosing followed by two weeks
off-drug at approximately 40 study centers in the United States. The primary endpoint of this study is the change from baseline of the Yale Global Tic Severity Scale between placebo and active treatment groups at the end of week six. Tourette
symptoms will also be evaluated via the Rush Video-Based Tic Rating Scale, Premonitory Urge for Tics Scale as well as Clinical Global Impression scales, among others. Top-line data from the T-Force GREEN study is expected in the second quarter of
2017.
The T-Fusion study is an open-label extension study for subjects (pediatric and adult) who have
completed the T-Forward study or the T-Force GREEN study and who elect to continue receiving INGREZZA for an additional 24 weeks of treatment. Safety and efficacy assessments are conducted as outlined in the preceding studies. This study commenced
in July 2016 and the last subject is expected to complete treatment during 2017.
We plan to utilize the
results of these initial Tourette studies to design a Phase III program for INGREZZA in Tourette syndrome.
elagolix
Gonadotropin-Releasing Hormone (GnRH) Antagonist
GnRH is a peptide that
stimulates the secretion of the pituitary hormones that are responsible for sex steroid production and normal reproductive function. Researchers have found that chronic administration of GnRH agonists, after initial stimulation, reversibly shuts
down this transmitter pathway and is clinically useful in treating hormone-dependent diseases such as endometriosis and uterine fibroids. Several companies have developed peptide GnRH agonists on this principle, such as Lupron
®
and Zoladex
®
. However, since these molecules are peptides, they must be injected via a depot formulation rather than the preferred oral route of administration. In addition, GnRH
agonists can take up to several weeks to exert their desired effect once the initial stimulation has occurred, a factor not seen with the use of GnRH antagonists. Upon administration, GnRH agonists have shown a tendency to exacerbate the condition
via a hormonal flare. More importantly the profound suppression effect observed with GnRH agonists is similar to that seen after menopause and can be associated with hot flushes and the loss of bone mineral density.
Orally active, nonpeptide GnRH antagonists potentially offer several advantages over injectable GnRH peptide drugs,
including rapid onset of hormone suppression without hormonal flare. Also, injection site reactions commonly observed in peptide depots are avoided and dosing can be rapidly discontinued if necessary a clinical management option not
available with long-acting depot injections. Additionally, by using GnRH antagonists, it may be possible to alter the level of pituitary GnRH suppression thereby titrating circulating hormone levels.
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In June 2010, we entered into an exclusive worldwide collaboration with
AbbVie to develop and commercialize elagolix and all next-generation non-peptide GnRH antagonists (collectively, GnRH Compounds) for womens and mens health indications. Under the terms of the agreement, AbbVie is responsible for all
development, marketing and commercialization costs and has primary responsibility for all regulatory interactions with the FDA related to elagolix and other GnRH Compounds covered by the collaboration. AbbVie is currently in Phase III evaluation of
elagolix in two indications, endometriosis and uterine fibroids.
Endometriosis.
Endometriosis is
associated with a multitude of symptoms, some of the most common of which include pain related both to menstruation (dysmenorrhea) and sexual intercourse (dyspareunia) as well as chronic pelvic pain throughout the menstrual cycle, infertility, and
menorrhagia, among many others. The wide range of symptoms associated with endometriosis serves to complicate and delay diagnosis due to the significant overlap of symptoms with the disease profiles of other conditions. The World Endometriosis
Research Foundation estimates that there are over 170 million women worldwide who suffer from endometriosis, including approximately 7.5 million women in the United States alone. We believe that the availability of an oral treatment,
lacking the side effect profile of the currently available peptide GnRH agonists, may be a desirable alternative to current pharmaceutical therapies and ultimately encourage a significantly higher treatment rate.
The endometriosis Phase III program evaluated two separate doses of elagolix (150mg once daily and 200mg twice daily)
over a 24-week treatment period. The initial randomized, parallel, double-blind, placebo-controlled pivotal trial (Violet PETAL) enrolled 872 women in approximately 160 clinical sites throughout the United States, Canada and Puerto Rico. The
co-primary endpoints were a comparison of the daily non-menstrual pelvic pain and daily dysmenorrhea scores during the third month of treatment to the respective daily baseline scores utilizing a responder analysis. Maintenance of response at month
six was also assessed utilizing the same daily scales.
In January 2015, AbbVie announced the top-line
results of the initial six months of placebo-controlled dosing of the Violet PETAL study. After six months of continuous treatment, both doses of elagolix (150mg once daily and 200mg twice daily) met the studys co-primary endpoints
(p<0.001) of reducing scores of non-menstrual pelvic pain and dysmenorrhea associated with endometriosis, at month three, as well as at month six.
The observed safety profile of elagolix in the Violet PETAL study was consistent with observations from earlier clinical studies. Among the most common adverse events were hot flush, headache, nausea and
fatigue. While most adverse events were similar across treatment groups, some, such as hot flush and bone mineral density loss, were dose-dependent. Overall discontinuation rates were similar across treatment groups and discontinuations specifically
due to adverse events were 5.9%, 6.4%, and 9.7% for placebo, 150 mg once daily and 200 mg twice daily, respectively.
Additional efficacy and safety endpoints for the patients enrolled in the Violet PETAL study were measured through one year of continuous dosing as well as for a period of time after the final dose. The
one-year dosing portion of this study concluded in mid-2015. In July 2015, AbbVie announced that the efficacy and safety data at one year was consistent with the data witnessed at six months.
In February 2016, AbbVie announced the top-line results from the second of the two Phase III elagolix endometriosis
clinical trials, the Solstice Study, a multinational study designed to evaluate the efficacy and safety of elagolix in 815 premenopausal women with endometriosis. The top-line results from this trial were consistent with those of the Violet PETAL
Study; after six months of treatment, both doses of elagolix (150 mg once daily and 200 mg twice daily) met the Solstice Studys co-primary endpoints of reducing scores of non-menstrual pelvic pain and menstrual pain (or dysmenorrhea)
associated with endometriosis at month three, as well as month six. The observed safety profile of elagolix in the Solstice Study was consistent with observations from prior studies. Among the most common adverse events were hot flush, headache, and
nausea. While most adverse events were similar across treatment groups some, such as hot flush and bone mineral density loss, were dose-dependent. Overall discontinuation rates were similar across treatment groups (25.3%, 21.2%, and 19.7% for
placebo, 150 mg once daily and 200 mg twice daily, respectively); discontinuations specifically due to treatment
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emergent adverse events were 6.1%, 4.4%, and 10.0% for placebo, 150 mg once daily and 200 mg twice daily, respectively. Patients in the Solstice Study were eligible to continue on in either
post-treatment follow-up or a blinded extension study for an additional six-month safety and efficacy evaluation of elagolix.
AbbVie is targeting a third quarter of 2017 NDA submission to the FDA for elagolix in the treatment of endometriosis.
Uterine Fibroids.
Uterine fibroids are benign hormonally responsive tumors that form in the wall of the uterus.
They are the most common solid tumor in women with a prevalence rate of at least 25% (American College of Obstetricians and Gynecologists). While many women do not have symptoms, depending on the size, location and number, uterine fibroids can cause
symptoms such as: longer, more frequent, or heavy menstrual bleeding, menstrual pain, vaginal bleeding at time other than menstruation, pain in the abdomen or lower back, pain during sex, difficulty urinating, frequent urination, constipation or
rectal pain. Due to the severity of symptoms, treatment sometimes requires surgery, including the removal of the uterus. In fact, uterine fibroids is a leading indication for hysterectomy in the United States, with approximately 250,000
hysterectomies performed each year related to uterine fibroids (Whiteman
et al AJOG
2008,
198,
e1). We believe that a safe and effective oral therapy would be a preferred treatment regimen rather than surgical intervention.
AbbVie conducted a Phase IIb clinical trial that enrolled approximately 570 women with heavy uterine bleeding due to
uterine fibroids at approximately 100 sites in the United States, Canada, Puerto Rico, Chile and the United Kingdom. The trial was a 24-week, randomized, double-blind, multicenter, placebo-controlled, two cohort design study that evaluated the
safety and efficacy of two different elagolix treatment regimens (300mg twice daily and 600mg once daily) alone and in combination with two different strengths of hormonal add-back therapy (estradiol/norethindrone acetate). The primary endpoint of
the study was an assessment of uterine blood loss after six months of treatment. Secondary efficacy endpoints included change in uterine volume, fibroid volume, and menstrual patterns. Safety assessments of bone mineral density, comparing baseline
to month six, were performed via DXA scan. Patients were also followed off drug for up to six months.
Results
from this Phase IIb study show elagolix reduced heavy menstrual bleeding in all treatment arms. The studys primary endpoint, a composite design where subjects had to achieve a menstrual blood loss (MBL) volume of less than 80 mL as well
as a 50 percent or greater reduction in MBL volume from baseline at the final study month, was met for all dosing regimens (p<0.001) as assessed utilizing a quantitative measure of reduction in uterine blood flow, the alkaline hematin method.
Among the most common adverse events were hot flush, headache, nausea, and vomiting. Some adverse events such
as hot flush were more frequent in the elagolix only treatment arms versus the placebo and elagolix with add back therapy treatment arms. Reduction in bone mineral density associated with elagolix alone was attenuated when elagolix was
co-administered with hormonal add-back therapy.
AbbVie initiated Phase III studies of elagolix in patients
with uterine fibroids in early 2016. The Phase III program includes two replicate, pivotal, six-month efficacy and safety studies followed by a six-month safety and efficacy extension study. AbbVie is evaluating 300mg of elagolix dosed twice daily
both alone and in combination with hormonal add-back therapy (estradiol/norethindrone acetate). The primary endpoint in these Phase III studies will be the same as that employed in the Phase IIb study: percent of subjects with reduction in uterine
blood flow as measured by the alkaline hematin method. Initial top-line data from this Phase III program is expected in late 2017.
opicapone, Catechol-O-methyltransferase inhibitor
COMT inhibitors are utilized to prolong the duration of effect of levodopa which is utilized as a primary treatment option
for Parkinsons disease patients. Administration of levodopa often results in adequate control of Parkinsons symptoms, also referred to as on-time, however, there are periods of the day where the effects of levodopa wear off
and motor symptoms worsen, these are considered off-time. Opicapone is a novel, once-
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daily, peripherally-acting, highly-selective COMT inhibitor utilized as adjunct therapy to levodopa in Parkinsons patients. Opicapone works through decreasing the conversion rate of
levodopa into 3-O-methyldopa, thereby reducing the off-time period of Parkinsons and extending the on-time period.
In February 2017, we entered into an exclusive license agreement with BIAL for the development and commercialization of opicapone for the treatment of human diseases and conditions, including
Parkinsons disease, in the United States and Canada. Under the terms of the agreement, we will be responsible for the development and commercialization of opicapone in the United States and Canada.
Parkinsons Disease
. Parkinsons disease is a chronic and progressive movement disorder that affects
approximately one million people in the United States. The disease is characterized by a loss of neurons in the substantia nigra, the area of the brain where dopamine is produced. Dopamine production and synthesis is necessary for coordination and
movement. As Parkinsons progresses, dopamine production steadily decreases resulting in tremor, slowed movement (bradykinesia), impaired posture and balance, and speech and writing problems. There is no present cure for Parkinsons;
disease and management consists of controlling the motor symptoms primarily through administration of levodopa therapies. While this improves the control of Parkinsons symptoms, the disease progresses and the beneficial effects of levodopa
begin to wear off, symptoms worsen and patients experience end-of-dose motor fluctuations. These end of dose motor fluctuations are improved with the addition of a COMT inhibitor to levodopa.
In June 2016, the European Commission authorized ONGENTYS
®
(opicapone) as an adjunct therapy to preparations of levodopa/DOPA decarboxylase inhibitors (DDCIs) in adult
patients with Parkinsons disease and end-of-dose motor fluctuations who cannot be stabilized on those combinations. This approval was based on data from a clinical development program that included 28 clinical studies of more than 900 patients
treated with opicapone in 30 countries worldwide.
The two pivotal Phase III studies utilized for European
approval, BIPARK-I and BIPARK-II, demonstrated that opicapone once-daily achieved a statistically significant decrease in off-time periods for Parkinsons patients compared to placebo. The BIPARK-I study was a placebo-controlled study of
approximately 600 patients that also included entacapone as an active comparator. The results of this study also showed that once-daily opicapone was non-inferior to entacapone which is dosed multiple times per day. The BIPARK-II study was a
placebo-controlled study of approximately 400 patients that also showed a significant decrease in off-time periods for Parkinsons patients. In both studies, opicapone was associated with significant improvements in both patient and clinician
global assessments of change. The data from these two Phase III trials also demonstrated that opicapone improved motor fluctuations in levodopa-treated patients regardless of concomitant dopamine agonist or monoamine oxidase type B inhibitors used.
Opicapone was generally well tolerated and was not associated with relevant electrocardiographic or hepatic adverse events.
Both of the BIPARK Phase III trials included a one-year open-label extension where opicapone sustained the decrease in off-time and increase in on-time periods that was demonstrated during the
double-blind placebo-controlled portion of the studies.
We intend to meet with the FDA during 2017 to discuss
a potential NDA submission for opicapone. We also intend to commercialize opicapone in the United States upon FDA approval.
NBI-640756, Essential Tremor
Essential Tremor.
Essential tremor is one of the most common neurological disorders in adults, impacting an estimated 10 million individuals in the United States (International Essential
Tremor Foundation). The disorder is characterized by involuntary, rhythmic, oscillatory movements that most often affect the upper limbs. As the disease progresses, tremor severity often increases and spreads to other parts of the body. Essential
tremor has a significant impact on the activities of daily living often resulting in functional disability as the disease progresses and is associated with a high comorbidity rate of social phobia, depression and anxiety. Current pharmacological
therapies utilized in the treatment of essential tremor include propranolol and primidone. Deep
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brain stimulation, an invasive procedure involving the implantation of electrodes within certain areas of the brain, is sometimes utilized for severe essential tremor.
NBI-640756 is a novel molecule which was discovered in our laboratories. We have successfully completed a single site,
randomized, double-blind, placebo-controlled sequential dose-escalation, Phase I safety and pharmacokinetics study exploring a once-daily dose of NBI-640756 in approximately 32 healthy volunteers. The study was conducted in multiple sequential
cohorts of eight subjects per cohort. Based on the positive results of this initial Phase I study, we initiated a multiple ascending dose study of NBI-640756.
This second Phase I study is a single site, randomized, double-blind, placebo-controlled, multiple-dose, sequential dose-escalation study to evaluate the safety, tolerability and pharmacokinetics of
NBI-640756 in up to 30 healthy volunteers over a week of continuous dosing. This study is also being conducted in multiple sequential cohorts of ten subjects per cohort; data from this second Phase I study is expected in 2017.
The data from both of these Phase I studies, as well as preclinical data will be evaluated and utilized in the design of
the anticipated Phase II program for NBI-640756 in subjects with essential tremor.
Corticotropin-Releasing Factor (CRF) Receptor
1
Antagonist (NBI-74788)
CRF is a hypothalamic hormone released directly into the hypophyseal portal vasculature which acts on specific CRF
1
receptors on corticotropes in the anterior pituitary to stimulate the release of adrenocorticotropin hormone (ACTH). The
primary role of ACTH is the stimulation of the synthesis and release of adrenal steroids including cortisol. Cortisol from the adrenals have a negative feedback role at the level of the hypothalamus that decreases CRF release as well as at the level
of the pituitary to inhibit the release of ACTH. This tight control loop is known as the hypothalamic-pituitary-adrenal (HPA) axis. Blockade of CRF receptors at the pituitary has been shown to decrease the release of ACTH and subsequently attenuate
the production and release of adrenal steroids.
Classic congenital adrenal hyperplasia.
Classic
congenital adrenal hyperplasia (classic CAH) is a group of autosomal recessive genetic disorders that affects approximately 20,000-30,000 people in the United States and results in an enzyme deficiency altering the production of adrenal steroids.
Because of this deficiency, the adrenal glands have little to no cortisol biosynthesis resulting in a potentially life-threatening condition. If left untreated, classic CAH can result in salt wasting, dehydration and eventually death. Even with
cortisol replacement, persistent elevation of ACTH from the pituitary gland results in excessive androgen levels leading to virilization of females including precocious puberty, menstrual irregularity, short stature, hirsutism, acne and fertility
problems.
Corticosteroids are the current standard of care for classic CAH and are used chronically to both
correct the endogenous cortisol deficiency and to reduce the excessive ACTH levels and androgen excess. However, the dose and duration of steroid use required to suppress ACTH is well above the normal physiological level of cortisol; resulting in
metabolic syndrome, bone loss, growth impairment, and Cushings syndrome as common and serious side effects.
NBI-74788 is a potent, selective, orally-active, non-peptide CRF receptor antagonist as demonstrated in a range of in vitro and in vivo assays. Blockade of CRF receptors at the pituitary has been
shown to decrease the release of ACTH, which in turn decreases the production of adrenal steroids including androgens, and potentially the symptoms associated with classic CAH. Lower ACTH levels would also reduce the amount of exogenous
corticosteroid necessary for classic CAH patients to thrive avoiding the side-effects currently associated with excessive steroid therapy.
We plan to conduct a Phase I single ascending dose study of NBI-74788 in healthy volunteers in 2017. If the pharmacokinetic, safety and tolerability data are favorable, we then plan to conduct a pilot
clinical trial of NBI-74788 in adult patients with refractory classic CAH. This pilot study is designed to be a blinded, single-site,
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pharmacokinetic/pharmacodynamic study assessing two single, ascending doses of NBI-74788 in up to twelve study participants. Key pharmacodynamic biomarker measurements include ACTH,
17-hydroxyprogesterone (17-OHP), androgen, and cortisol levels collected the morning following bedtime dosing.
We intend to apply for orphan drug designation for NBI-74788 in the treatment of congenital adrenal hyperplasia. Orphan
drug designation is granted by the FDA to medicines intended for the treatment, diagnosis or prevention of rare diseases or disorders that affect fewer than 200,000 people in the United States and provides sponsors with development and commercial
incentives for such designated compounds and medicines.
Research Programs
Our research and development focus is on addressing diseases and disorders of the central nervous and endocrine systems,
which include therapeutic categories ranging from HPA disorders to stress-related disorders and neurological/neuropsychiatric diseases. Central nervous system and endocrinology drug therapies are among the largest therapeutic categories, accounting
for over $150 billion in worldwide drug sales according to GlobalData (2014).
Neurological/Neuropsychiatric: VMAT2
Inhibitors
VMAT2 inhibition results in the modulation of dopamine pathways which may also be useful
for patients suffering from schizophrenia. Approximately 2.2 million people in the Unites States suffer from schizophrenia at an estimated annual cost of $62 billion. Our discovery efforts around VMAT2 inhibitors also focus on developing novel
therapies for schizophrenia sufferers.
CNS Disorders (Targeted by G Protein-Coupled Receptors and Ion Channels)
G Protein-Coupled Receptors (GPCRs) are the largest known gene superfamily of the human genome.
Greater than thirty percent of all marketed prescription drugs act on GPCRs; which makes this class of proteins historically the most successful therapeutic target family. However, only a small fraction of the GPCR gene superfamily has been
exploited. Ion channels appear to be represented by approximately 400 genes in the human genome and are currently the targets for approximately seven percent of the current marketed drugs. Next generation therapies derived from targeting GPCRs and
ion channels will be discovered through the understanding of the complex relationships of drug/receptor interactions and their subsequent impact on efficacy, downstream signaling networks and regulation.
Our GPCR research platform has met this requirement by integrating drug discovery research efforts with a suite of assays
and assay systems and automated analytical techniques. This process, now also applied to ion channels, provides an unbiased profile of pharmacological protein/ligand interactions coupled with in vivo efficacy using discrete animal models allowing
for rapid discovery of initial leads and advancement into preclinical and clinical development. Importantly, this design cycle is not limited to GPCRs or ion channel targets, but can be utilized for other recently identified proteins that play a
role in human disease where current treatments or therapies are either inadequate or nonexistent.
Our Business Strategy
Our goal is to become the leading biopharmaceutical company focused on neurological and endocrine-related diseases and
disorders. The following are the key elements of our business strategy:
Continuing to Advance and Build
Our Product Portfolio Focused on Neurological and Endocrine-Related Diseases and Disorders.
We believe that by continuing to advance and extend our product pipeline, we can mitigate some of the clinical development risks associated with
drug development. We currently have multiple
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programs in various stages of research and development. Our three lead late-stage clinical programs are elagolix, a GnRH antagonist in Phase III development for endometriosis and uterine fibroids
that is partnered with AbbVie, INGEREZZA (valbenazine) our VMAT2 inhibitor for the treatment of movement disorders for which an NDA is under review by the FDA for TD and which is also in Phase II development for Tourette syndrome, and opicapone, a
highly-selective COMT inhibitor that is an adjunct therapy to preparations of levodopa/DOPA decarboxylase inhibitors for adult patients with Parkinsons disease and was inlicensed from BIAL. We take a portfolio approach to managing our pipeline
that balances the size of the market opportunities with clear and defined clinical and regulatory paths to approval. By doing so, we focus our internal development resources on innovative therapies with improved probabilities of technical and
commercial success.
Maintaining Certain Commercial Rights to Our Product Portfolio to Evolve into a
Fully-Integrated Pharmaceutical Company.
We intend to retain commercial rights to certain products, including INGREZZA, that we can effectively and efficiently develop, secure regulatory approval and commercialize. These include products with a
concentrated prescriber base and well-defined patient population that can be accessed with an efficient patient and prescriber outreach program.
Selectively Establishing Corporate Collaborations with Global Pharmaceutical Companies to Assist in the Development of Our Products and Mitigate Financial Risk while Retaining Significant Commercial
Upside.
We leverage the development, regulatory and commercialization expertise of our corporate collaborators to accelerate the development of certain of our potential products, while typically retaining co-promotional rights, and at times
commercial rights, in North America. We intend to further leverage our resources by selectively entering into additional strategic alliances to enhance our internal development and commercialization capabilities by licensing our technology.
Identifying Novel Drugs to Address Unmet Market Opportunities.
We seek to identify and validate
novel drugs on characterized targets for internal development or collaboration. For example, GnRH antagonists, compounds designed to reduce the secretions of sex steroids, may represent the first novel non-peptide, non-injectable means of treatment
of endometriosis. We believe the creativity and productivity of our discovery research group will continue to be a critical component for our continued success. Research and development costs were $94.3 million, $81.5 million and $46.4 million
for the years ended December 31, 2016, 2015 and 2014, respectively.
Acquiring Rights to Complementary
Drug Candidates and Technologies.
We plan to continue to selectively acquire rights to products in various stages of development to take advantage of our drug development capabilities. For example, in February 2017, we entered into an
exclusive license agreement with BIAL for the development and commercialization of opicapone for the treatment of human diseases and conditions, including Parkinsons disease, in the United States and Canada. Under the terms of the agreement,
we will be responsible for the development and commercialization of opicapone in the United States and Canada.
Our Corporate
Collaborations and Strategic Alliances
One of our business strategies is to utilize strategic alliances to
enhance our development and commercialization capabilities. The following is a summary of our significant collaborations/alliances:
AbbVie Inc. (AbbVie)
. In June 2010, we announced an exclusive worldwide collaboration with AbbVie to develop and commercialize elagolix and all next-generation GnRH antagonists (collectively, GnRH
Compounds) for womens and mens health. AbbVie made an upfront payment of $75 million and has agreed to make additional development and regulatory event based payments of up to $480 million and up to an additional $50 million in
commercial event based payments. Under the terms of the agreement, AbbVie is responsible for all development, marketing and commercialization costs. We received funding for certain internal collaboration expenses which included reimbursement from
AbbVie for internal and external expenses related to the GnRH Compounds and personnel funding through the end of 2012. We will be entitled to a percentage of worldwide
15
sales of GnRH Compounds for the longer of ten years or the life of the related patent rights. Under the terms of our agreement with AbbVie, the collaborative development effort between the
parties to advance GnRH compounds towards commercialization was governed by a joint development committee with representatives from both us and AbbVie. The collaborative development portion of the agreement concluded, as scheduled, on
December 31, 2012. AbbVie may terminate the collaboration at its discretion upon 180 days written notice to us. In such event, we would be entitled to specified payments for ongoing clinical development and related activities and all GnRH
Compound product rights would revert to us. Since the inception of the agreement, we have recorded revenues of $75.0 million related to the amortization of up-front license fees, $45.0 million in milestone revenue, and $37.0 million of sponsored
development revenue.
Mitsubishi Tanabe Pharma Corporation (Mitsubishi Tanabe).
In March 2015, we
entered into a collaboration and license agreement with Mitsubishi Tanabe for the development and commercialization of INGREZZA for movement disorders in Japan and other select Asian markets. Mitsubishi Tanabe made an up-front license fee payment of
$30 million and has agreed to make additional development and commercialization event-based payments totaling up to $85 million, payments for the manufacture of pharmaceutical products, and royalties on product sales in select territories in Asia.
Under the terms of the agreement, Mitsubishi Tanabe is responsible for all third-party development, marketing and commercialization costs in Japan and other select Asian markets with the exception of a single Huntingtons chorea clinical trial
to be performed by us, at an estimated cost of approximately $12 million, should Mitsubishi Tanabe request the clinical trial. We will be entitled to a percentage of sales of INGREZZA in Japan and other select Asian markets for the longer of ten
years or the life of the related patent rights. Mitsubishi Tanabe may terminate the agreement at its discretion upon 180 days written notice to us. In such event, all INGREZZA product rights for Japan and other select Asian markets would
revert to us.
BIAL Portela & Ca, S.A. (BIAL)
. In February 2017, we entered into an
exclusive license agreement with BIAL for the development and commercialization of opicapone for the treatment of human diseases and conditions, including Parkinsons disease, in the United States and Canada. Under the terms of the agreement,
we are responsible for the management and cost of all opicapone development and commercialization activities in the United States and Canada. Under the terms of the agreement, we will pay BIAL an upfront license fee of $30 million, and we may also
be required to pay up to an additional $115 million in milestone payments associated with the regulatory approval and net sales of products containing opicapone. In addition, we will pay BIAL a percentage of net sales in exchange for the manufacture
and supply of opicapone drug product.
Upon commercialization, BIAL and us will agree on annual sales
forecasts. If we fail to meet the minimum sales requirements for a particular year, we will be required to pay BIAL an amount corresponding to the difference between the actual net sales and the minimum sales requirements for such year, and if we
fail to meet the minimum sales requirements for any two years, BIAL may terminate the agreement. The agreement also contemplates that we will purchase, and BIAL will supply, all drug product and investigation medicinal product for our development
and commercialization activities. BIAL has the right to co-promote opicapone within the United States and Canada during certain periods of time. If BIAL exercises its option to co-promote the licensed products, we will enter into a co-promotion
agreement with BIAL at a future time.
The agreement, unless terminated earlier, will continue on a licensed
product by licensed product and country by country basis until a generic product in respect of such licensed product under the agreement is sold in a country and sales of such generic product are greater than a specified percentage of total sales of
such licensed product in such country. Either party may terminate the agreement earlier if the other party materially breaches the agreement and does not cure the breach within a specified notice period, or upon the other partys insolvency.
BIAL may terminate the agreement if we fail to use commercially reasonable efforts or fail to file an NDA for a licensed product by a specified date or under certain circumstances involving a change of control. In certain circumstances where BIAL
elects to terminate the agreement in connection with our change of control, BIAL shall pay us a termination fee. We can terminate the agreement at any time for any reason upon six months written notice to BIAL if prior to the first NDA approval in
the United States, and upon nine months written
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notice to BIAL if such notice is given after the first NDA approval in the United States. If our termination request occurs prior to the first NDA approval in the United States, we will have to
pay BIAL a termination fee except under certain conditions specified in the agreement.
Intellectual Property
We seek to protect our lead compounds, compound libraries, expressed proteins, synthetic organic processes, formulations,
assays, cloned targets, screening technology and other technologies by filing, or by causing to be filed on our behalf, patent applications in the United States and abroad. Additionally, we have licensed from institutions the rights to issued United
States patents, pending United States patent applications, and issued and pending foreign filings. We face the risk that one or more of the above patent applications may be denied. We also face the risk that issued patents that we own or license may
be challenged or circumvented or may otherwise not provide protection for any commercially viable products we develop.
The technologies we use in our research, as well as the drug targets we select, may infringe the patents or violate the proprietary rights of third parties. If this occurs, we may be required to obtain
licenses to patents or proprietary rights of others in order to continue with the commercialization of our products.
In addition to the granted and potential patent protection, the United States, the European Union and Japan all provide data and marketing exclusivity for new medicinal compounds. If this protection is
available, no competitor may use the original applicants data as the basis of a generic marketing application during the period of data and marketing exclusivity. This period of exclusivity is generally five years in the United States, six
years in Japan and ten years in the European Union, measured from the date of FDA, or corresponding foreign, approval.
Elagolix, our small molecule GnRH antagonist currently in clinical trials for the treatment of endometriosis and uterine fibroids, is covered by six issued U.S. patents relating to composition of matter,
pharmaceutical compositions, and methods of use. U.S. Patent Nos. 6,872,728, 7,179,815 and 7,462,625 are due to expire in 2021 (not including potential patent term extensions of up to five years) while U.S. Patent Nos. 7,056,927, 7,176,211 and
7,419,983 are due to expire in 2024 (not including potential patent term extensions of up to five years).
INGREZZA (valbenazine), our highly selective VMAT2 inhibitor, currently in clinical trials for the treatment of TD and
Tourette syndrome, is covered by U.S. Patent No. 8,039,627 which expires in 2029 and U.S. Patent No. 8,357,697 which expires in 2027 (not including a potential patent term extension of up to five years). INGREZZA is also covered by
European Patent No. 2,081,929 which expires in 2027.
Opicapone, a highly selective COMT inhibitor for
Parkinsons disease is covered by U.S. Patent No. 8,168,793, among others, which expires in 2029 (not including a potential patent term extension of up to five years).
Manufacturing and Distribution
We currently rely on, and
expect to continue to rely on, contract manufacturers to produce sufficient quantities of our product candidates for use in our preclinical and clinical trials. In addition, we intend to rely on third parties to manufacture any products that we may
commercialize in the future. We believe this manufacturing strategy will enable us to direct our financial resources to our commercialization efforts without devoting the resources and capital required to build manufacturing facilities.
We have established an internal pharmaceutical development group to develop manufacturing methods for our product
candidates, to optimize manufacturing processes, and to select and transfer these manufacturing technologies to our suppliers. In anticipation of the intended commercialization of INGREZZA, we have also established an internal commercial supply team
to manage all aspects related to the INGREZZA commercial supply chain. We contract with multiple manufacturers to ensure adequate product supply and to mitigate risk.
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There currently are a limited number of these manufacturers. Furthermore,
some of the contract manufacturers that we have identified to date only have limited experience at manufacturing, formulating, analyzing and packaging our product candidates in quantities sufficient for conducting clinical trials or for
commercialization.
Additionally, in anticipation of the intended commercialization of INGREZZA, we have
retained third-party service providers to perform a variety of functions related to the distribution of INGREZZA, including shipping, warehousing, customer service, order-taking and processing, invoicing, collections, and other distribution related
activities.
Marketing and Sales
We currently have limited experience in marketing or selling pharmaceutical products.
We have established our core commercial team that is preparing for the planned future launch of INGREZZA. This commercial team is comprised of experienced professionals in marketing, access and
reimbursement, managed markets, marketing research, commercial operations, and sales force planning and management. During 2016, we hired a portion of our sales leadership team, including national and regional sales managers and health plan payor
account managers. We have also hired our internal marketing, market research and commercial operations teams in anticipation of the INGREZZA launch.
We are preparing to build a specialty sales force in the United States of approximately 140 experienced sales professionals. If INGREZZA is approved for commercialization for the treatment of TD, this
specialty sales force will focus on promotion to physicians who treat TD patients, primarily neurologists and psychiatrists.
In preparation for a planned commercial launch of INGREZZA, we have an ongoing TD disease education and awareness campaign that includes educational programs with health care professionals, a TD
educational website and a strong presence at neurology and psychiatric medical meetings. We have also conducted foundational access and reimbursement research with formulary decision makers for health plan payors.
Government Regulation
Regulation by government authorities in the United States and foreign countries is a significant factor in the development, manufacture, distribution, marketing and sale of our proposed products and in
our ongoing research and product development activities. All of our products will require regulatory approval by government agencies prior to commercialization. In particular, human therapeutic products are subject to rigorous preclinical studies
and clinical trials and other approval procedures of the FDA and similar regulatory authorities in foreign countries. The process of obtaining these approvals and the subsequent compliance with appropriate federal and state statutes and regulations
require the expenditure of substantial time and financial resources. In the United States, various federal and state statutes and regulation also govern or influence testing, manufacturing, safety, labeling, storage, and record-keeping of human
therapeutic products and their marketing. Recent federal legislation imposes additional obligations on pharmaceutical manufacturers regarding product tracking and tracing.
In addition, federal and state healthcare laws restrict business practices in the pharmaceutical industry. These laws
include, without limitation, federal and state fraud and abuse laws, false claims laws, data privacy and security laws, as well as transparency laws regarding payments or other items of value provided to healthcare providers.
The federal Anti-Kickback Statute makes it illegal for any person or entity, including a prescription drug manufacturer
(or a party acting on its behalf) to knowingly and willfully, directly or indirectly, solicit, receive, offer, or pay any remuneration that is intended to induce the referral of business, including the purchase, order, lease of any good, facility,
item or service for which payment may be made under a federal healthcare program, such as Medicare or Medicaid. The term remuneration has been broadly interpreted to include anything of value.
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Federal civil and criminal false claims laws, including the federal civil
False Claims Act, and the federal civil monetary penalties law, which prohibit among other things, any person or entity from knowingly presenting, or causing to be presented, for payment to, or approval by, federal programs, including Medicare and
Medicaid, claims for items or services, including drugs, that are false or fraudulent or not provided as claimed and knowingly making, or causing to be made, a false record or statement material to a false or fraudulent claim to avoid, decrease or
conceal an obligation to pay money to the federal government.
The federal Health Insurance Portability and
Accountability Act of 1996 (HIPAA) created additional federal criminal statutes that prohibit among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private
third-party payors, knowingly and willfully stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or
making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.
Also, many states have similar fraud and abuse statutes or regulations that may be broader in scope and may apply regardless of payor, in addition to items and services reimbursed under Medicaid and other
state programs. Additionally, to the extent that our product is sold in a foreign country, we may be subject to similar foreign laws.
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and their implementing regulations, requires certain types of individuals and entities to abide by standards
relating to the privacy and security of individually identifiable health information, including the adoption of administrative, physical and technical safeguards to protect such information. In addition, certain state laws govern the privacy and
security of health information in certain circumstances, some of which are more stringent than HIPAA and many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.
The federal Physician Payments Sunshine Act requires certain manufacturers of drugs, devices, biologics and medical
supplies for which payment is available under Medicare, Medicaid or the Childrens Health Insurance Program, with specific exceptions, to report annually to the Centers for Medicare & Medicaid Services (CMS) information related to
payments or other transfers of value made to physicians and teaching hospitals, and applicable manufacturers and applicable group purchasing organizations to report annually to CMS ownership and investment interests held by the physicians and their
immediate family members.
Failure to comply with these laws, where applicable, can result in significant
penalties, including the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, disgorgement, individual imprisonment, possible exclusion from participation in Medicare, Medicaid and other federal healthcare
programs, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, contractual damages, reputational harm, diminished
profits and future earnings, and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations.
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Preclinical studies generally are conducted in laboratory animals to
evaluate the potential safety and efficacy of a product. Drug developers submit the results of preclinical studies to the FDA as a part of an IND application before clinical trials can begin in humans. Typically, clinical evaluation involves a time
consuming and costly three-phase process.
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Phase I
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Clinical trials are conducted with a small number of subjects to determine the early safety profile, maximum tolerated dose and pharmacological properties of
the product in human volunteers.
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Phase II
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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.
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Phase III
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Large-scale, multi-center, comparative clinical trials are conducted with patients afflicted with a specific disease in order to determine safety and efficacy
as primary support for regulatory approval by the FDA to market a product candidate for a specific disease.
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The FDA closely monitors the progress of each of the three phases of clinical trials that
are conducted in the United States and may, at its discretion, re-evaluate, alter, suspend or terminate the testing based upon the data accumulated to that point and the FDAs assessment of the risk/benefit ratio to the patient. To date, we
have also conducted some of our clinical trials in Europe, Canada, Oceania and South Africa. Clinical trials conducted in foreign countries are also subject to oversight by regulatory authorities in those countries.
Once Phase III trials are completed, drug developers submit the results of preclinical studies and clinical trials
to the FDA in the form of an NDA or a biologics license application for approval to commence commercial sales. In most cases, the submission of an NDA is subject to a substantial application user fee. Under the PDUFA guidelines that are currently in
effect, the FDA has a goal of ten months from the date of filing of a standard NDA for a new molecular entity to review and act on the submission. This review typically takes twelve months from the date the NDA is submitted to FDA because the FDA
has approximately two months to make a filing decision.
In addition, under the Pediatric Research
Equity Act of 2003 (PREA) as amended and reauthorized, certain NDAs or supplements to an NDA must contain data that are adequate to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations,
and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric
data until after approval of the product for use in adults or full or partial waivers from the pediatric data requirements.
The FDA also may require submission of a risk evaluation and mitigation strategy (REMS) plan to ensure that the benefits of the drug outweigh its risks. The REMS plan could include medication guides,
physician communication plans, assessment plans, and/or elements to assure safe use, such as restricted distribution methods, patient registries, or other risk minimization tools.
The FDA conducts a preliminary review of all NDAs within the first 60 days after submission, before accepting them for
filing, to determine whether they are sufficiently complete to permit substantive review. The FDA may request additional information rather than accept an NDA for filing. In this event, the application must be resubmitted with the additional
information. The resubmitted application is also subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review. The FDA reviews an NDA to determine, among other
things, whether the drug is safe and effective and whether the facility in which it is manufactured, processed, packaged or held meets standards designed to assure the products continued safety, quality and purity.
The FDA may refer an application for a novel drug to an advisory committee. An advisory committee is a panel of
independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of
an advisory committee, but it considers such recommendations carefully when making decisions.
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Before approving an NDA, the FDA typically will inspect the facility or
facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with current Good Manufacturing Practice requirements and adequate to assure
consistent production of the product within required specifications. Additionally, before approving an NDA, the FDA may inspect one or more clinical trial sites to assure compliance with Good Clinical Practice requirements.
After evaluating the NDA and all related information, including the advisory committee recommendation, if any, and
inspection reports regarding the manufacturing facilities and clinical trial sites, the FDA may issue an approval letter, or, in some cases, a complete response letter. A complete response letter generally contains a statement of specific conditions
that must be met in order to secure final approval of the NDA and may require additional clinical or preclinical testing in order for FDA to reconsider the application. Even with submission of this additional information, the FDA ultimately may
decide that the application does not satisfy the regulatory criteria for approval. If and when those conditions have been met to the FDAs satisfaction, the FDA will typically issue an approval letter. An approval letter authorizes commercial
marketing of the drug with specific prescribing information for specific indications.
Even if the FDA
approves a product, it may limit the approved indications for use of the product, require that contraindications, warnings or precautions be included in the product labeling, require that post-approval studies, including Phase IV clinical trials, be
conducted to further assess a drugs safety after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution and use restrictions or other risk
management mechanisms under a REMS, which can materially affect the potential market and profitability of the product. The FDA may prevent or limit further marketing of a product based on the results of post-marketing studies or surveillance
programs. After approval, some types of changes to the approved product, such as adding new indications, manufacturing changes, and additional labeling claims, are subject to further testing requirements and FDA review and approval.
We will also have to complete an approval process similar to that in the United States in virtually every foreign target
market for our products in order to commercialize our product candidates in those countries. The approval procedure and the time required for approval vary from country to country and may involve additional testing. Foreign approvals may not be
granted on a timely basis, or at all. In addition, regulatory approval of prices is required in most countries other than the United States. The resulting prices may not be sufficient to generate an acceptable return to us or our corporate
collaborators.
Special FDA Expedited Review and Approval Programs
The FDA has various programs, including fast track designation, accelerated approval, priority review, and breakthrough
therapy designation, which are intended to expedite or simplify the process for the development and FDA review of drugs that are intended for the treatment of serious or life threatening diseases or conditions and demonstrate the potential to
address unmet medical needs. The purpose of these programs is to provide important new drugs to patients earlier than under standard FDA review procedures.
To be eligible for a fast track designation, the FDA must determine, based on the request of a sponsor, that a product is intended to treat a serious or life-threatening disease or condition and
demonstrates the potential to address an unmet medical need. The FDA will determine that a product will fill an unmet medical need if it will provide a therapy where none exists or provide a therapy that may be potentially superior to existing
therapy based on efficacy or safety factors. The FDA may review sections of the NDA for a fast track product on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of
the NDA, the FDA agrees to accept sections of the NDA and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the NDA.
The FDA may give a priority review designation to drugs that offer major advances in treatment, or provide a treatment
where no adequate therapy exists. A priority review means that the goal for the FDA to review an application is six months, rather than the standard review of ten months under current PDUFA guidelines. These
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six and ten month review periods are measured from the filing date rather than the receipt date for NDAs for new molecular entities, which typically adds approximately two months to the timeline
for review and decision from the date of submission. Most products that are eligible for fast track designation are also likely to be considered appropriate to receive a priority review.
In addition, products studied for their safety and effectiveness in treating serious or life-threatening illnesses and
that provide meaningful therapeutic benefit over existing treatments may be eligible for accelerated approval and may be approved on the basis of adequate and well-controlled clinical trials establishing that the drug product has an effect on a
surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or
mortality or other clinical benefit, taking into account the severity, rarity or prevalence of the condition and the availability or lack of alternative treatments. As a condition of approval, the FDA may require a sponsor of a drug receiving
accelerated approval to perform post-marketing studies to verify and describe the predicted effect on irreversible morbidity or mortality or other clinical endpoint, and the drug may be subject to accelerated withdrawal procedures.
A breakthrough therapy is defined as a drug that is intended, alone or in combination with one or more other drugs, to
treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial
treatment effects observed early in clinical development. Drugs designated as breakthrough therapies are also eligible for accelerated approval. The FDA must take certain actions, such as holding timely meetings and providing advice, intended to
expedite the development and review of an application for approval of a breakthrough therapy.
Even if a
product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or decide that the time period for FDA review or approval will not be shortened.
Post-Approval Requirements
Drugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to recordkeeping, periodic
reporting, product sampling and distribution, advertising and promotion and reporting of adverse experiences with the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims are subject
to prior FDA review and approval. There also are continuing, annual user fee requirements for any marketed products and the establishments at which such products are manufactured, as well as new application fees for supplemental applications with
clinical data.
The FDA may impose a number of post-approval requirements as a condition of approval of an
NDA. For example, the FDA may require post-marketing testing, including Phase IV clinical trials, and surveillance to further assess and monitor the products safety and effectiveness after commercialization.
In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are
required to register their establishments with the FDA and state agencies, and are subject to periodic unannounced inspections by the FDA and these state agencies for compliance with current Good Manufacturing Practices (cGMP) requirements. Changes
to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP requirements and impose reporting and
documentation requirements upon the sponsor and any third-party manufacturers that the sponsor may decide to use. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain
cGMP compliance.
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Once an approval is granted, the FDA may withdraw the approval if compliance
with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency,
or with manufacturing processes, or failure to comply with regulatory requirements, may result in mandatory revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety
risks; or imposition of distribution or other restrictions under a REMS program. Other potential consequences include, among other things:
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restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls;
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fines, warning letters or holds on post-approval clinical trials;
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refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of product approvals;
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product seizure or detention, or refusal to permit the import or export of products; or
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injunctions or the imposition of civil or criminal penalties.
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The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market.
Drugs may be promoted only for the approved indications and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that
is found to have improperly promoted off-label uses may be subject to significant liability.
Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of any product candidates for which we obtain
regulatory approval, including for INGREZZA. In the United States and markets in other countries, sales of any products for which we receive regulatory approval will depend, in part, on the extent to which third-party payors provide coverage and
establish adequate reimbursement levels for such drug products.
In the United States, third-party payors
include federal and state healthcare programs, government authorities, private managed care providers, private health insurers and other organizations. Third-party payors are increasingly challenging the price, examining the medical necessity and
reviewing the cost-effectiveness of medical drug products and medical services, in addition to questioning their safety and efficacy. Such payors may limit coverage to specific drug products on an approved list, also known as a formulary, which
might not include all of the FDA-approved drugs for a particular indication. We may need to conduct expensive pharmaco-economic studies in order to demonstrate the medical necessity and cost-effectiveness of our products, in addition to the
costs required to obtain the FDA approvals. Nonetheless, our product candidates, including INGREZZA, may not be considered medically necessary or cost-effective.
Moreover, the process for determining whether a third-party payor will provide coverage for a drug product may be
separate from the process for setting the price of a drug product or for establishing the reimbursement rate that such a payor will pay for the drug product. A payors decision to provide coverage for a drug product does not imply that an
adequate reimbursement rate will be approved. Further, one payors determination to provide coverage for a drug product does not assure that other payors will also provide coverage for the drug product. Adequate third-party reimbursement may
not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development.
The marketability of any product candidates for which we or our collaborators receive regulatory approval for commercial sale, including INGREZZA, may suffer if the government and third-party payors fail
to provide adequate coverage and reimbursement. In addition, emphasis on managed care in the United States has increased and we expect will continue to increase the pressure on pharmaceutical pricing. Coverage policies and third-party
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reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable
coverage policies and reimbursement rates may be implemented in the future.
Healthcare Reform
The United States and some foreign jurisdictions are considering or have enacted a number of legislative and regulatory
proposals to change the healthcare system in ways that could affect our ability to sell our products profitably. Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare
systems with the stated goals of containing healthcare costs, improving quality or expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major
legislative initiatives.
By way of example, in March 2010, the Patient Protection and Affordable Care
Act, as amended by the Health Care and Education Reconciliation Act of 2010, collectively the ACA, was signed into law, which intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies
against fraud and abuse, add transparency requirements for the healthcare and health insurance industries, impose taxes and fees on the health industry and impose additional health policy reforms. Among the provisions of the ACA of importance to our
potential drug candidates are:
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an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents, apportioned among
these entities according to their market share in certain government healthcare programs;
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an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13.0% of the average
manufacturer price for branded and generic drugs, respectively;
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a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused,
instilled, implanted or injected;
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extension of a manufacturers Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care
organizations;
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expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to certain individuals
with income at or below 133% of the federal poverty level, thereby potentially increasing a manufacturers Medicaid rebate liability;
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a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts off negotiated
prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for a manufacturers outpatient drugs to be covered under Medicare Part D;
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expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program; and
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a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research,
along with funding for such research.
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We expect that the ACA, as well as other healthcare
reform measures that may be adopted in the future, may result in more rigorous coverage criteria and lower reimbursement, and in additional downward pressure on the price that we receive for any approved product. Any reduction in reimbursement from
Medicare or other government-funded programs may result in a similar reduction in payments from private payor.
Some of the provisions of the ACA have yet to be fully implemented, while certain provisions have been subject to
judicial and Congressional challenges, which we expect to continue in light of the change in administrations following the 2016 U.S. presidential election. Recently, the U.S. House of Representatives and
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Senate passed legislation, which, if signed into law, would repeal certain aspects of the ACA. Further, on January 20, 2017, President Trump signed an Executive Order directing federal
agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal or regulatory burden on states, individuals, healthcare
providers, health insurers, or manufacturers of pharmaceuticals or medical devices. Congress also could consider subsequent legislation to replace elements of the ACA that are repealed. Thus, the full impact of the ACA on our business remains
unclear.
Other legislative changes have been proposed and adopted since the ACA was enacted. These changes
include aggregate reductions to Medicare payments to providers of up to 2% per fiscal year pursuant to the Budget Control Act of 2011, which began in 2013 and will remain in effect through 2025 unless additional Congressional action is taken.
The American Taxpayer Relief Act of 2012, among other things, further reduced Medicare payments to several providers, including hospitals and cancer treatment centers, increased the statute of limitations period for the government to recover
overpayments to providers from three to five years.
Additional changes that may affect our business include
the expansion of new programs such as Medicare payment for performance initiatives for physicians under the Medicare Access and CHIP Reauthorization Act of 2015, or MACRA, which will be fully implemented in 2019. At this time it is unclear how the
introduction of the Medicare quality payment program will impact overall physician reimbursement. Also, there has been heightened governmental scrutiny recently over the manner in which drug manufacturers set prices for their marketed products,
which have resulted in several Congressional inquiries and proposed bills designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government
program reimbursement methodologies for drug products.
Competition
The biotechnology and pharmaceutical industries are subject to rapid and intense technological change. We face, and will
continue to face, competition in the development and marketing of our product candidates from biotechnology and pharmaceutical companies, research institutions, government agencies and academic institutions. Competition may also arise from, among
other things:
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other drug development technologies;
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methods of preventing or reducing the incidence of disease, including vaccines; and
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new small molecule or other classes of therapeutic agents.
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Developments by others may render our product candidates or technologies obsolete or noncompetitive. We are performing
research on or developing products for the treatment of several disorders including endometriosis, TD, uterine fibroids, Tourette syndrome, classic congenital adrenal hyperplasia, essential tremor, pain, and other neurological and endocrine-related
diseases and disorders.
An NDA for our VMAT2 inhibitor, INGREZZA (valbenazine), has been
filed with the FDA for TD and is also currently in Phase II development for Tourette syndrome. At present there are no approved drug therapies for TD; however, off-label treatment regimens consist of utilizing various atypical antipsychotic
medications (e.g., clozapine), benzodiazepines (off-label) or botulinum toxin injections to treat the movements associated with TD. Generic neuroleptic medications (pimozide and haloperidol) as well as Abilify
®
(apriprizole) are approved by the FDA to control the tics associated with Tourette syndrome. Additionally, Teva
Pharmaceuticals, Inc. is investigating a deuterium labeled VMAT2 inhibitor SD-809 (deutetrabenazine) for the treatment of TD and Tourette syndrome as well as for the chorea associated with Huntingtons disease. Other potential indications for
our VMAT2 inhibitor include the chorea associated with Huntingtons disease, schizophrenia and tardive dystonia. Currently, Xenazine
®
(tetrabenazine), marketed by Lundbeck, as well as its generic alternatives, are approved for the chorea associated with Huntingtons disease.
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We, in conjunction with our partner AbbVie, are
developing elagolix for the treatment of heavy menstrual bleeding associated with uterine fibroids. There are no current pharmaceutical therapies approved in the United States for the chronic treatment of uterine fibroids. Lupron Depot
®
is approved for short-term use to improve the outcome of uterine fibroid surgery. However, approximately 250,000
hysterectomies are performed annually in the United States as a direct result of uterine fibroids, as well as myomectomies (surgery) to remove the fibroids. Our oral small molecule pharmaceutical agent, elagolix, would compete directly with these
current invasive standards of care. Additionally, Esmya
®
(ulipristal) by Allergan Pharmaceuticals, Inc. is being
evaluated in Phase III clinical trials for potential use in the treatment of heavy menstrual bleeding associated with uterine fibroids with a planned NDA filing in 2017. Obseva has initiated a Phase IIb endometriosis study with its GnRH receptor
antagonist OBE2109 and also intends to explore treating uterine fibroids patients with the same molecule. Myovant Sciences, Inc. has stated that it will be investigating its GnRH receptor antagonist, relugolix, in Phase III trials of endometriosis,
uterine fibroids and prostate cancer patients.
Lupron Depot
®
, marketed by AbbVie, and Synarel
®
and depo-subQ provera104
®
,
marketed by Pfizer, are products that have been approved for the treatment of endometriosis, infertility, and central precocious puberty. These drugs, and any generic alternatives, may compete with any small molecule non-peptide GnRH antagonists we,
in conjunction with our collaborative partner AbbVie, develop for these indications. Approximately 130,000 hysterectomies are performed annually in the United States as a direct result of endometriosis, as well as a significant number of
laparoscopic procedures to ablate endometrial explants. Our oral small molecule pharmaceutical agent, elagolix, would also compete directly with these current invasive standards of care.
Opicapone is a COMT inhibitor to be utilized as an adjunct therapy in the treatment of Parkinsons disease. COMT
inhibitors prolong the duration of effect of levodopa which is the primary treatment option for Parkinsons disease patients. There are currently two FDA approved COMT inhibitors, COMTAN® (entacapone) originally developed by Orion Pharma
and TASMAR® (tolcapone) originally developed by Hoffman-LaRoche Inc. Opicapone would compete directly with these two drugs and their generic equivalents.
NBI-640756 is currently in clinical trials for the treatment of essential tremor. Current pharmacological therapies utilized in the treatment of essential tremor include propranolol and primidone. Deep
brain stimulation, an invasive procedure involving the implantation of electrodes within certain areas of the brain, is sometimes utilized for severe essential tremor. Additionally, Sage Therapeutics is conducting clinical trials for its GABA
modulator SAGE-547 for essential tremor.
NBI-74788 is currently being investigated for the treatment of
classic CAH, for which there are limited therapies. High doses of corticosteroids are the current standard of care to both correct the endogenous cortisol deficiency as well as reduce the excessive ACTH levels. However, the level of dose as well as
the duration of steroid use required to suppress ACTH is well above the normal physiological level of cortisol; resulting in metabolic syndrome, bone loss, growth impairment, and Cushings syndrome as common and serious side effects.
Additionally, Millendo Therapeutics is conducting clinical trials with its ACAT1 inhibitor ATR-101 for classic CAH.
If one or more of these competitive products or programs are successful, it may reduce or eliminate the market for our products.
Compared to us, many of our competitors and potential competitors have substantially greater:
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research and development resources, including personnel and technology;
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preclinical study and clinical testing experience;
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manufacturing and marketing experience; and
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Any of these competitive factors could harm our business, prospects, financial condition and results of operations, which could negatively affect our stock price.
Employees
As of December 31, 2016, we had 196 full-time employees. Of these full-time employees, 106 were engaged in, or
directly support, research and development activities, 58 were primarily responsible for INGREZZA pre-commercialization activities and 32 were in general and administrative positions. None of our employees are represented by a collective bargaining
arrangement, and we believe our relationship with our employees is good. In addition, we rely on a number of consultants to assist us.
Insurance
We maintain product liability insurance for our clinical trials. We intend to expand our insurance coverage to include the
sale of commercial products if marketing approval is obtained for products in development. However, insurance coverage is becoming increasingly expensive, and we may not be able to maintain insurance coverage at a reasonable cost or in sufficient
amounts to protect us against losses due to liability. In addition, we may not be able to obtain commercially reasonable product liability insurance for any products approved for marketing.
Available Information
Our Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge on our
website at
www.neurocrine.com
, as soon as reasonably practicable after such reports are available on the Securities and Exchange Commission website at
www.sec.gov
.
Additionally, copies of our Annual Report will be made available, free of charge, upon written request.
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The following information sets forth risk factors that could cause our actual results to differ materially from those contained in forward-looking statements we have made in this Annual Report on
Form 10-K and those we may make from time to time. If any of the following risks actually occur, our business, operating results, prospects or financial condition could be harmed. Additional risks not presently known to us, or that we currently
deem immaterial, may also affect our business operations.
Risks Related to Our Company
We have never obtained regulatory approval for a drug and we may be unable to obtain, or may be delayed in obtaining, regulatory
approval for INGREZZA or any of our other product candidates.
We have never obtained regulatory
approval for a drug. Securing U.S. Food and Drug Administration (FDA) approval requires the submission of extensive preclinical and clinical data and supporting information to the FDA for each indication to establish the product candidates
safety and efficacy. It is possible that the FDA or foreign regulatory authorities may refuse to accept our New Drug Application (NDA) (or corresponding application) for substantive review or may conclude after review of our data that our
application is insufficient to obtain regulatory approval of INGREZZA or any of our other product candidates. The process of obtaining these approvals and the subsequent compliance with federal and state statutes and regulations require spending
substantial time and financial resources.
The FDA may choose not to approve our NDA for INGREZZA and instead
issue a Complete Response Letter for any of a variety of reasons, including a decision related to the safety or efficacy data for INGREZZA or for any other issues that they may identify related to our development of INGREZZA for the treatment of TD.
Even if we receive regulatory approval for any of our product candidates, we will be subject to ongoing obligations and
continued regulatory review, which may result in significant additional expense. Additionally, our product candidates, if approved, could be subject to labeling and other restrictions and market withdrawal and we may be subject to penalties if we
fail to comply with regulatory requirements or experience unanticipated problems with our products.
Any regulatory approvals that we receive for INGREZZA or any of our other product candidates may also be subject to
limitations on the approved indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase IV clinical trials, and surveillance to
monitor the safety and efficacy of the product candidate. In addition, if the FDA or a comparable foreign regulatory authority approves any of our product candidates, the manufacturing processes, labeling, packaging, distribution, adverse event
reporting, storage, advertising, promotion and recordkeeping for the product will be subject to extensive and ongoing regulatory requirements. These requirements include submissions of safety and other post-marketing information and reports,
registration, as well as continued compliance with current Good Manufacturing Practices for any clinical trials that we conduct post-approval. Later discovery of previously unknown problems with a product, including adverse events of unanticipated
severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in, among other things:
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restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market, or voluntary or mandatory product recalls;
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fines, warning letters or holds on clinical trials;
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refusal by the FDA to approve pending applications or supplements to approved applications filed by us, or suspension or revocation of product
license approvals;
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product seizure or detention, or refusal to permit the import or export of products; and
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product injunctions or the imposition of civil or criminal penalties.
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The FDAs policies may change and additional government regulations may
be enacted that could prevent, limit or delay regulatory approval of INGREZZA or any of our other product candidates. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are
not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained, which would adversely affect our business, prospects and ability to achieve or sustain profitability.
Our clinical trials may fail to demonstrate the safety and efficacy of our product candidates, which could prevent or significantly
delay their regulatory approval.
Before obtaining regulatory approval for the sale of any of our
potential products, we must subject these product candidates to extensive preclinical and clinical testing to demonstrate their safety and efficacy for humans. Clinical trials are expensive, time-consuming and may take years to complete.
In connection with the clinical trials of our product candidates, we face the risks that:
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the FDA or similar foreign regulatory authority may not approve an Investigational New Drug (IND) Application or foreign equivalent filings required
to initiate human clinical studies for our drug candidates or the FDA may require additional preclinical or clinical studies as a condition of the initiation of Phase I clinical studies, progression from Phase I to Phase II, or
Phase II to Phase III, or for NDA approval;
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the product candidate may not prove to be effective or as effective as other competing product candidates;
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we may discover that a product candidate may cause harmful side effects or results of required toxicology studies may not be acceptable to the FDA;
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the results may not replicate the results of earlier, smaller trials;
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the FDA or similar foreign regulatory authorities may require use of new or experimental endpoints that may prove insensitive to treatment effects;
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we or the FDA or similar foreign regulatory authorities may suspend the trials;
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the results may not be statistically significant;
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patient recruitment may be slower than expected;
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patients may drop out of the trials; and
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regulatory requirements may change.
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These risks and uncertainties impact all of our clinical programs. Specifically, our VMAT2 inhibitor program will be impacted if any of the events above lead to delayed timelines for the enrollment in, or
completion of, clinical trials of INGREZZA for tardive dyskinesia or Tourette syndrome. Similarly, with respect to our gonadotropin-releasing hormone (GnRH) program with AbbVie Inc. (AbbVie), any of the clinical, regulatory or operational events
described above could delay timelines for the completion of the Phase III endometriosis program or the Phase III uterine fibroids program. Additionally, any of these events described above could result in suspension of a program and/or obviate any
filings for necessary regulatory approvals.
In addition, late stage clinical trials are often conducted with
patients having the most advanced stages of disease. During the course of treatment, these patients can die or suffer other adverse medical effects for reasons that may not be related to the pharmaceutical agent being tested but which can
nevertheless adversely affect clinical trial results. Any failure or substantial delay in completing clinical trials for our product candidates may severely harm our business.
Even if the clinical trials are successfully completed, we cannot guarantee that the FDA or foreign regulatory
authorities will interpret the results as we do, and more trials could be required before we submit our
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product candidates for approval. To the extent that the results of the trials are not satisfactory to the FDA or foreign regulatory authorities for support of a marketing application, approval of
our product candidates may be significantly delayed, or we may be required to expend significant additional resources, which may not be available to us, to conduct additional trials in support of potential approval of our product candidates.
If we receive regulatory approval from the FDA for INGREZZA, we will depend on a single source supplier for each of the
production of INGREZZA and its active pharmaceutical ingredients. The loss of either of these suppliers, or delays or problems in the supply of INGREZZA, could materially and adversely affect our ability to successfully commercialize INGREZZA.
The manufacture of pharmaceutical products requires significant expertise and capital investment,
including the development of process controls required to consistently produce the active pharmaceutical ingredients and the finished product in sufficient quantities while meeting detailed product specifications on a repeated basis. Manufacturers
of pharmaceutical products may encounter difficulties in production, including difficulties with production costs and yields, process controls, quality control and quality assurance, including testing of stability, impurities and impurity levels and
other product specifications by validated test methods, and compliance with strictly enforced U.S., state and non-U.S. regulations. If we receive regulatory approval from the FDA for INGREZZA, and our third party suppliers for INGREZZA encounter
these or any other manufacturing, quality or compliance difficulties, we may be unable to meet commercial demand for INGREZZA, which could materially and adversely affect our ability to successfully commercialize INGREZZA.
In addition, if we receive regulatory approval from the FDA for INGREZZA and our suppliers fail or refuse to supply us
with INGREZZA or its active pharmaceutical ingredient for any reason; it would take a significant amount of time and expense to qualify a new supplier. The FDA and similar international regulatory bodies must approve manufacturers of the active and
inactive pharmaceutical ingredients and certain packaging materials used in pharmaceutical products. The loss of a supplier could require us to obtain regulatory clearance and to incur validation and other costs associated with the transfer of the
active pharmaceutical ingredients or product manufacturing processes. If there are delays in qualifying new suppliers or facilities or a new supplier is unable to meet FDA or similar international regulatory bodys requirements for approval,
there could be a shortage of INGREZZA.
We have limited marketing experience and no sales force, and have only recently
begun establishing our distribution and reimbursement capabilities, and if our products are approved, we may not be able to commercialize them successfully.
Although we do not currently have any marketable products, our ability to produce revenues ultimately depends on our
ability to sell our products and secure adequate third-party reimbursement if and when they are approved by the FDA. We currently have limited experience in marketing and selling pharmaceutical products, have no sales force established to sell
pharmaceutical products and have only recently begun establishing our distribution and reimbursement capabilities, all of which will be necessary to successfully commercialize any product candidate approved by the FDA. While we have recently hired
personnel and engaged consultants with experience marketing and selling pharmaceutical products, there can be no guarantee that we will be able to establish the personnel, systems, arrangements and capabilities necessary to successfully
commercialize any product candidate approved by the FDA. If we fail to establish successful marketing, sales and reimbursement capabilities or fail to enter into successful marketing arrangements with third parties, our product revenues may suffer.
We have no manufacturing capabilities. If third-party manufacturers of our product candidates fail to devote sufficient
time and resources to our concerns, or if their performance is substandard, our clinical trials and product introductions may be delayed and our costs may rise.
We have in the past utilized, and intend to continue to utilize, third-party manufacturers to produce the drug compounds
we use in our clinical trials and for the potential commercialization of our future products, including
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INGREZZA. We have limited experience in manufacturing products for commercial purposes and do not currently have any manufacturing facilities. Consequently, we depend on, and will continue to
depend on, several contract manufacturers for all production of products for development and commercial purposes. If we are unable to obtain or retain third-party manufacturers, we will not be able to develop or commercialize our products. The
manufacture of our products for clinical trials and commercial purposes is subject to specific FDA regulations, including current Good Manufacturing Practice regulations. Our third-party manufacturers might not comply with FDA regulations relating
to manufacturing our products for clinical trials and commercial purposes or other regulatory requirements now or in the future. Our reliance on contract manufacturers also exposes us to the following risks:
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contract manufacturers may encounter difficulties in achieving volume production, quality control and quality assurance, and also may experience
shortages in qualified personnel. As a result, our contract manufacturers might not be able to meet our clinical schedules or adequately manufacture our products in commercial quantities when required;
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switching manufacturers may be difficult because the number of potential manufacturers is limited. It may be difficult or impossible for us to find
a replacement manufacturer quickly on acceptable terms, or at all;
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our contract manufacturers may not perform as agreed or may not remain in the contract manufacturing business for the time required to successfully
produce, store or distribute our products; and
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drug manufacturers are subject to ongoing periodic unannounced inspection by the FDA, the U.S. Drug Enforcement Administration, and other agencies
to ensure strict compliance with current Good Manufacturing Practices and other government regulations and corresponding foreign standards. We do not have control over third-party manufacturers compliance with these regulations and standards.
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Our current dependence upon third parties for the manufacture of our products may reduce
our profit margin, if any, on the sale of our future products and our ability to develop and deliver products on a timely and competitive basis.
We depend on our current collaborators for the development and commercialization of our product candidates that we out-license and in-license, and may need to enter into future collaborations to
develop and commercialize certain of our product candidates.
Our strategy for fully developing and
commercializing elagolix is dependent upon maintaining our current collaboration agreement with AbbVie. This collaboration agreement provides for significant future payments should certain development, regulatory and commercial milestones be
achieved, and royalties on future sales of elagolix. Under this agreement, AbbVie is responsible for, among other things, conducting clinical trials and obtaining required regulatory approvals for elagolix; as well as manufacturing and
commercialization of elagolix in the event it receives regulatory approval.
Because of our reliance on
AbbVie, the development and commercialization of elagolix could be substantially delayed, and our ability to receive future funding could be substantially impaired, if AbbVie:
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failed to gain the requisite regulatory approval of elagolix;
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did not successfully launch and commercialize elagolix;
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did not conduct its collaborative activities in a timely manner;
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did not devote sufficient time and resources to our partnered program;
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terminated its agreement with us;
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developed, either alone or with others, products that may compete with elagolix;
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disputed our respective allocations of rights to any products or technology developed during our collaboration; or
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merged with a third party that wants to terminate our agreement.
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In March 2015, we entered into a collaboration and license agreement with Mitsubishi Tanabe to develop and commercialize
INGREZZA in Japan and other select Asian markets. We will rely on Mitsubishi Tanabe to achieve certain development, regulatory and commercial milestones which, if achieved, could generate significant future revenue for us. Our collaboration with
Mitsubishi Tanabe is subject to risks and uncertainties similar to those described above. In addition, we may need to enter into other out-licensing collaborations to assist in the development and commercialization of other product candidates we are
developing now or may develop in the future, and any such future collaborations would be subject to similar risks and uncertainties.
In February 2017, we entered into a license agreement with BIAL for the development and commercialization of opicapone for the treatment of human diseases and conditions, including Parkinsons
disease, in the United States and Canada. Under the terms of the agreement, we are responsible for the management of all opicapone development and commercialization activities; however, we will depend on BIAL to supply all drug product and
investigation medicinal product for our development and commercialization activities. In addition, pursuant to the license agreement, the parties have established a joint steering committee with overall coordination and strategic oversight over
activities under the agreement and to provide a forum for regular exchange of information, and BIAL has the right to co-promote licensed products during certain periods of time and to engage in certain marketing-related activities in cooperation
with us. Accordingly, our strategy for developing and commercializing opicapone is dependent upon maintaining our current collaboration with BIAL. Because of our reliance on BIAL for certain aspects related to the development and commercialization
of opicapone, any disagreement with BIAL, or BIALs decision to not devote sufficient time and resources to our collaboration or to not conduct activities in a timely manner, could substantially delay and/or prohibit our ability to develop and
commercialize opicapone.
These issues and possible disagreements with AbbVie, Mitsubishi Tanabe, BIAL or any
future corporate collaborators could lead to delays in the collaborative research, development or commercialization of our product candidates. Furthermore, disagreements with these parties could require or result in litigation or arbitration, which
would be time-consuming and expensive. If any of these issues arise, it may delay the development and commercialization of drug candidates and, ultimately, our generation of product revenues.
Because the development of our product candidates is subject to a substantial degree of technological uncertainty, we may not
succeed in developing any of our product candidates.
All of our product candidates are currently in
research or clinical development with the exception of INGREZZA which is also in registration for TD. Only a small number of research and development programs ultimately result in commercially successful drugs. Potential products that appear to be
promising at early stages of development may not reach the market for a number of reasons. These reasons include the possibilities that the potential products may:
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be found ineffective or cause harmful side effects during preclinical studies or clinical trials;
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fail to receive necessary regulatory approvals on a timely basis or at all;
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be precluded from commercialization by proprietary rights of third parties;
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be difficult to manufacture on a large scale; or
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be uneconomical to commercialize or fail to achieve market acceptance.
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If any of our products encounters any of these potential problems, we may never successfully market that product.
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We do not and will not have access to all information regarding the product candidates
we licensed to AbbVie.
We do not and will not have access to all information regarding the products
being developed and potentially commercialized by AbbVie, including potentially material information about clinical trial design and execution, safety reports from clinical trials, spontaneous safety reports if a product candidate is later approved
and marketed, regulatory affairs, process development, manufacturing, marketing and other areas known by AbbVie. In addition, we have confidentiality obligations under our agreement with AbbVie. Thus, our ability to keep our shareholders informed
about the status of product candidates under our collaboration with AbbVie will be limited by the degree to which AbbVie keeps us informed and allows us to disclose such information to the public. If AbbVie fails to keep us informed about the
clinical development and regulatory approval of our collaboration and product candidates licensed to it, we may make operational and investment decisions that we would not have made had we been fully informed, which may materially and adversely
affect our business and operations.
We have a history of losses and expect to incur negative operating cash flows for
the foreseeable future, and we may never achieve sustained profitability.
Since our inception, we have
incurred significant net losses and negative cash flow from operations. As a result of historical operating losses, we had an accumulated deficit of approximately $1.1 billion as of December 31, 2016. We do not expect to be profitable, or
generate positive cash flows from operations, for the year ending December 31, 2017.
We have not yet
obtained regulatory approvals of any products and, consequently, have not generated revenues from the sale of products. Even if we succeed in developing and commercializing one or more of our drugs, we may not be profitable. We also expect to
continue to incur significant operating and capital expenditures as we:
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seek regulatory approvals for our product candidates;
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develop, formulate, manufacture and commercialize our product candidates;
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in-license or acquire new product development opportunities;
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implement additional internal systems and infrastructure; and
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hire additional clinical, scientific, sales and marketing personnel.
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We expect to experience negative cash flow in the coming years as we fund our operations, in-licensing or acquisition
opportunities, and capital expenditures. We will need to generate significant revenues to achieve and maintain profitability and positive cash flow on an annual basis. We may not be able to generate these revenues, and we may never achieve
profitability on an annual basis in the future. Our failure to achieve or maintain profitability on an annual basis could negatively impact the market price of our common stock. Even if we become profitable on an annual basis, we cannot assure you
that we would be able to sustain or increase profitability on an annual basis.
The price of our common stock is
volatile.
The market prices for securities of biotechnology and pharmaceutical companies historically
have been highly volatile, and the market for these securities has from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. Over the course of the last 12
months, the price of our common stock has ranged from approximately $31.00 per share to approximately $56.00 per share. The market price of our common stock may fluctuate in response to many factors, including:
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the results of the FDAs review of our INGREZZA NDA for tardive dyskinesia;
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the results of our clinical trials;
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developments concerning new and existing collaboration agreements;
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announcements of technological innovations or new therapeutic products by us or others;
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general economic and market conditions, including economic and market conditions affecting the biotechnology industry;
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developments in patent or other proprietary rights;
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developments related to the FDA;
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future sales of our common stock by us or our stockholders;
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comments by securities analysts;
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fluctuations in our operating results;
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developments related to on-going litigation;
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health care reimbursement;
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failure of any of our product candidates, if approved, to achieve commercial success; and
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public concern as to the safety of our drugs.
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Because our operating results may vary significantly in future periods, our stock price may decline.
Our quarterly revenues, expenses and operating results have fluctuated in the past and are likely to fluctuate significantly in the future. Our revenues are unpredictable and may fluctuate, among other
reasons, due to our achievement of product development objectives and milestones, clinical trial enrollment and expenses, research and development expenses and the timing and nature of contract manufacturing and contract research payments. In
addition, if we receive regulatory approval from the FDA for INGREZZA or any of our other product candidates, our revenues will fluctuate depending on our ability to sell our products and secure adequate third-party reimbursement. A high portion of
our costs are predetermined on an annual basis, due in part to our significant research and development costs. Thus, small declines in revenue could disproportionately affect operating results in a quarter. Because of these factors, our operating
results in one or more future quarters may fail to meet the expectations of securities analysts or investors, which could cause our stock price to decline.
We license some of our core technologies and drug candidates from third parties. If we default on any of our obligations under those licenses, or violate the terms of these licenses, we could lose
our rights to those technologies and drug candidates or be forced to pay damages.
We are dependent on
licenses from third parties for some of our key technologies. These licenses typically subject us to various commercialization, reporting and other obligations. If we fail to comply with these obligations, we could lose important rights. If we were
to default on our obligations under any of our licenses, we could lose some or all of our rights to develop, market and sell products covered by these licenses. For example, BIAL may terminate our license agreement, pursuant to which we have rights
to develop and commercialize opicapone, if we fail to use commercially reasonable efforts, fail to file an NDA for a licensed product by a specified date, or otherwise breach the license agreement. In addition, if we were to violate any of the terms
of our licenses, we could become subject to damages. For example, on December 1, 2015, The Mount Sinai School of Medicine of the City University of New York (Mount Sinai) filed a complaint against us, seeking unspecified monetary damages,
future sublicensing fees and attorneys fees, alleging that we violated the terms of our license with Mount Sinai by inappropriately sublicensing Mount Sinai technology to AbbVie. While we believe that we have meritorious defenses to the claims
made in the complaint and intend to vigorously defend ourselves against such claims, we are not able to predict the ultimate outcome of this action. Likewise, if we were to lose our rights under a license to use proprietary research tools, it could
adversely affect our existing collaborations or adversely
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affect our ability to form new collaborations. We also face the risk that our licensors could, for a number of reasons, lose patent protection or lose their rights to the technologies we have
licensed, thereby impairing or extinguishing our rights under our licenses with them.
The independent clinical
investigators and contract research organizations that we rely upon to conduct our clinical trials may not be diligent, careful or timely, and may make mistakes, in the conduct of our trials.
We depend on independent clinical investigators and contract research organizations (CROs) to conduct our clinical trials
under their agreements with us. The investigators are not our employees, and we cannot control the amount or timing of resources that they devote to our programs. If our independent investigators fail to devote sufficient time and resources to our
drug development programs, or if their performance is substandard, or not in compliance with Good Clinical Practices, it may delay or prevent the approval of our FDA applications and our introduction of new drugs. The CROs we contract with for
execution of our clinical trials play a significant role in the conduct of the trials and the subsequent collection and analysis of data. Failure of the CROs to meet their obligations could adversely affect clinical development of our products.
Moreover, these independent investigators and CROs may also have relationships with other commercial entities, some of which may compete with us. If independent investigators and CROs assist our competitors at our expense, it could harm our
competitive position.
If we cannot raise additional funding, we may be unable to complete development of our product
candidates or establish commercial capabilities in the future.
We may require additional funding to
continue our research and product development programs, to conduct preclinical studies and clinical trials, for operating expenses and to pursue regulatory approvals for product candidates, for the costs involved in filing and prosecuting patent
applications and enforcing or defending patent claims, if any, product in-licensing and any possible acquisitions, and we may require additional funding to establish manufacturing, marketing and commercialization capabilities in the future. We
believe that our existing capital resources, together with investment income, and future payments due under our strategic alliances, will be sufficient to satisfy our current and projected funding requirements for at least the next 12 months.
However, these resources might be insufficient to conduct research and development programs to the full extent currently planned. If we cannot obtain adequate funds, we may be required to curtail significantly one or more of our research and
development programs or obtain funds through additional arrangements with corporate collaborators or others that may require us to relinquish rights to some of our technologies or product candidates.
Our future capital requirements will depend on many factors, including:
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continued scientific progress in our research and development programs;
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the magnitude and complexity of our research and development programs;
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progress with preclinical testing and clinical trials;
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the time and costs involved in obtaining regulatory approvals;
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the costs involved in filing and pursuing patent applications, enforcing patent claims, or engaging in interference proceedings or other patent
litigation;
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competing technological and market developments;
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the establishment of additional strategic alliances;
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developments related to on-going litigation;
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the cost of commercialization activities and arrangements, including manufacturing of our product candidates; and
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the cost of product in-licensing and any possible acquisitions.
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We intend to seek additional funding through strategic alliances, and may
seek additional funding through public or private sales of our securities, including equity securities. For example, for so long as we continue to satisfy the requirements to be deemed a well-known seasoned issuer, we can file a shelf registration
statement with the Securities and Exchange Commission (SEC), which will become automatically effective and will allow us to issue an unlimited number of shares of our common stock from time to time. In addition, we have previously financed capital
purchases and may continue to pursue opportunities to obtain additional debt financing in the future. Additional equity or debt financing might not be available on reasonable terms, if at all. Any additional equity financings will be dilutive to our
stockholders and any additional debt financings may involve operating covenants that restrict our business.
If we are
unable to retain and recruit qualified scientists or if any of our key senior executives discontinues his or her employment with us, it may delay our development efforts or our preparations for the commercialization of INGREZZA or any other product
candidate approved by the FDA.
We are highly dependent on the principal members of our management and
scientific staff. The loss of any of these people could impede the achievement of our objectives, including the successful commercialization of INGREZZA or any other product candidate approved by the FDA. Furthermore, recruiting and retaining
qualified scientific personnel to perform research and development work in the future, along with personnel with experience marketing and selling pharmaceutical products, is critical to our success. We may be unable to attract and retain personnel
on acceptable terms given the competition among biotechnology, pharmaceutical and health care companies, universities and non-profit research institutions for experienced scientists and individuals with experience marketing and selling
pharmaceutical products. In addition, we rely on a significant number of consultants to assist us in formulating our research and development strategy and our commercialization strategy. Our consultants may have commitments to, or advisory or
consulting agreements with, other entities that may limit their availability to us.
We may be subject to claims that we
or our employees have wrongfully used or disclosed alleged trade secrets of their former employers.
As
is commonplace in the biotechnology industry, we employ individuals who were previously employed at other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although no claims against us are currently
pending, we may be subject to claims that these employees or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims.
Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management.
Governmental and third-party payors may impose sales and pharmaceutical pricing controls on our products or limit coverage and/or reimbursement for our products that could limit our product revenues
and delay sustained profitability.
Our ability to commercialize any products successfully, including
INGREZZA, will depend in part on the extent to which coverage and adequate reimbursement for these products and related treatments will be available. The continuing efforts of government and third-party payors to contain or reduce the costs of
health care through various means may reduce our potential revenues. These payors efforts could decrease the price that we receive for any products we may develop and sell in the future.
Assuming we obtain coverage for a given product by a third-party payor, the resulting reimbursement payment rates may not
be adequate or may require co-payments that patients find unacceptably high. Patients who are prescribed medications for the treatment of their conditions, and their prescribing physicians, generally rely on third-party payors to reimburse all or
part of the costs associated with their prescription drugs. Patients are unlikely to use our products unless coverage is provided and reimbursement is adequate to cover all or a significant portion of the cost of our products. Coverage decisions may
depend upon clinical and economic standards that disfavor new
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drug products when more established or lower cost therapeutic alternatives are already available or subsequently become available regardless of whether they are approved by the FDA for that
particular use.
Government authorities and other third-party payors are developing increasingly sophisticated
methods of controlling healthcare costs, such as by limiting coverage and the amount of reimbursement for particular medications. Further, no uniform policy requirement for coverage and reimbursement for drug products exists among third-party payors
in the United States. Therefore, coverage and reimbursement for drug products can differ significantly from payor to payor. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide
scientific and clinical support for the use of our products to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance. In addition, communications from
government officials regarding health care costs and pharmaceutical pricing could have a negative impact on our stock price, even if such communications do not ultimately impact coverage or reimbursement decisions for our products.
There may also be significant delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may
be more limited than the purposes for which the drug is approved by the FDA or comparable foreign regulatory authorities. Moreover, eligibility for coverage and reimbursement does not imply that a drug will be paid for in all cases or at a rate that
covers our costs, including research, development, manufacture, sale and distribution. If coverage and reimbursement are not available or reimbursement is available only to limited levels, we may not successfully commercialize any product candidate
for which we obtain marketing approval. Our inability to promptly obtain coverage and profitable reimbursement rates from both government-funded and private payors for any approved products that we develop could have a material adverse effect on our
operating results, our ability to raise capital needed to commercialize products and our overall financial condition.
If physicians and patients do not accept INGREZZA or any of our other products, we may not recover our investment.
The commercial success of INGREZZA or any of our other products, if they are approved for marketing,
will depend upon the acceptance of those products as safe and effective by the medical community and patients.
The market acceptance of INGREZZA or any of our other products could be affected by a number of factors, including:
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the timing of receipt of marketing approvals;
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the safety and efficacy of the products;
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the availability of coverage and adequate reimbursement for the products;
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the success of existing products addressing our target markets or the emergence of equivalent or superior products; and
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the cost-effectiveness of the products.
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In addition, market acceptance depends on the effectiveness of our marketing strategy, and, to date, we have very limited sales and marketing experience or capabilities. If the medical community and
patients do not ultimately accept our products as being safe, effective, superior and/or cost-effective, we may not recover our investment.
If we receive regulatory approval from the FDA for INGREZZA or any of our other product candidates, we could face liability if a regulatory authority determines that we are promoting any such
product for off-label uses.
A company may not promote off-label uses for its
drug products. An off-label use is the use of a product for an indication that is not described in the products FDA-approved label in the United States or for uses in
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other jurisdictions that differ from those approved by the applicable regulatory agencies. Physicians, on the other hand, may prescribe products for off-label uses. Although the FDA and other
regulatory agencies do not regulate a physicians choice of drug treatment made in the physicians independent medical judgment, they do restrict promotional communications from companies or their sales force with respect to off-label uses
of products for which marketing clearance has not been issued. A company that is found to have promoted off-label use of its product, including INGREZZA, may be subject to significant liability, including civil and criminal sanctions. If we begin
marketing any of our product candidates, we intend to comply with the requirements and restrictions of the FDA and other regulatory agencies with respect to our promotion of our products, but we cannot be sure that the FDA or other regulatory
agencies will agree that we have not violated their restrictions. As a result, we may be subject to criminal and civil liability. In addition, our managements attention could be diverted to handle any such alleged violations. A significant
number of companies have been the target of inquiries and investigations by various U.S. federal and state regulatory, investigative, prosecutorial and administrative entities in connection with the promotion of products for unapproved uses and
other sales practices, including the Department of Justice and various U.S. Attorneys Offices, the Office of Inspector General of the Department of Health and Human Services, the FDA, the Federal Trade Commission and various state Attorneys
General offices. These investigations have alleged violations of various U.S. federal and state laws and regulations, including claims asserting antitrust violations, violations of the federal False Claims Act, the Prescription Drug Marketing Act,
anti-kickback laws, and other alleged violations in connection with the promotion of products for unapproved uses, pricing and Medicare and/or Medicaid reimbursement. If the FDA or any other governmental agency initiates an enforcement action
against us or if we are the subject of a
qui tam
suit and it is determined that we violated prohibitions relating to the promotion of products for unapproved uses, we could be subject to substantial civil or criminal fines or damage awards
and other sanctions such as consent decrees and corporate integrity agreements pursuant to which our activities would be subject to ongoing scrutiny and monitoring to ensure compliance with applicable laws and regulations. Any such fines, awards or
other sanctions would have an adverse effect on our revenue, business, financial prospects, and reputation.
Compliance
with changing regulation of corporate governance and public disclosure may result in additional expenses.
Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act,
new SEC regulations and NASDAQ rules, are creating uncertainty for companies such as ours. These laws, regulations and standards are subject to varying interpretations in some cases due to their lack of specificity, and as a result, their
application in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure
and governance practices. We are committed to maintaining high standards of corporate governance and public disclosure. As a result, our efforts to comply with evolving laws, regulations and standards have resulted in, and are likely to continue to
result in, increased general and administrative expenses and management time related to compliance activities. If we fail to comply with these laws, regulations and standards, our reputation may be harmed and we might be subject to sanctions or
investigation by regulatory authorities, such as the SEC. Any such action could adversely affect our financial results and the market price of our common stock.
Risks Related to Our Industry
Health care reform measures and other
recent legislative initiatives could adversely affect our business.
The business and financial
condition of pharmaceutical and biotechnology companies are affected by the efforts of governmental and third-party payors to contain or reduce the costs of health care. In the United States, comprehensive health care reform legislation was enacted
by the Federal government and we expect that there will continue to be a number of federal and state proposals to implement government control over the pricing of prescription pharmaceuticals. In addition, increasing emphasis on reducing the cost of
health care in the
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United States will continue to put pressure on the rate of adoption and pricing of prescription pharmaceuticals. Moreover, in some foreign jurisdictions, pricing of prescription
pharmaceuticals is already subject to government control. Additionally, other recent federal and state legislation imposes new obligations on manufacturers of pharmaceutical products, among others, related to product tracking and tracing. Among the
requirements of this new legislation, manufacturers are required to provide certain information regarding the drug product to individuals and entities to which product ownership is transferred, label drug product with a product identifier, and keep
certain records regarding distribution of the drug product. Further, under this new legislation, manufacturers will have drug product investigation, quarantine, disposition, notification and purchaser license verification responsibilities related to
counterfeit, diverted, stolen, and intentionally adulterated products, as well as products that are the subject of fraudulent transactions or which are otherwise unfit for distribution such that they would be reasonably likely to result in serious
health consequences or death.
Additionally, in March 2010, the ACA was signed into law, which was intended to
broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add transparency requirements for the healthcare and health insurance industries, impose taxes and fees on the
health industry and impose additional health policy reforms. Among the provisions of the ACA of importance to our potential drug candidates are:
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an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents, apportioned among
these entities according to their market share in certain government healthcare programs;
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an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13.0% of the average
manufacturer price for branded and generic drugs, respectively;
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a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused,
instilled, implanted or injected;
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extension of a manufacturers Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care
organizations;
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expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to certain individuals
with income at or below 133% of the federal poverty level, thereby potentially increasing a manufacturers Medicaid rebate liability;
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a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts off negotiated
prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for a manufacturers outpatient drugs to be covered under Medicare Part D;
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expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program; and
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a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research,
along with funding for such research.
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Some of the provisions of the ACA have yet to be
fully implemented, while certain provisions have been subject to judicial and Congressional challenges, which we expect to continue in light of the pending change in administrations following the 2016 U.S. presidential election. Recently, the U.S.
House of Representatives and Senate passed legislation, which, if signed into law, would repeal certain aspects of the ACA. Further, on January 20, 2017, President Trump signed an Executive Order directing federal agencies with authorities and
responsibilities under the ACA to waive, defer, grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, or
manufacturers of pharmaceuticals or medical devices. Congress also could consider subsequent legislation to replace elements of the ACA that are repealed. Thus, the full impact of the ACA on our business remains unclear.
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Other legislative changes have been proposed and adopted since the ACA was
enacted. These changes include aggregate reductions to Medicare payments to providers of up to 2% per fiscal year pursuant to the Budget Control Act of 2011, which began in 2013 and will remain in effect through 2025 unless additional
Congressional action is taken. The American Taxpayer Relief Act of 2012, among other things, further reduced Medicare payments to several providers, including hospitals and cancer treatment centers, increased the statute of limitations period for
the government to recover overpayments to providers from three to five years.
Additional changes that may
affect our business include the expansion of new programs such as Medicare payment for performance initiatives for physicians under the Medicare Access and CHIP Reauthorization Act of 2015, or MACRA, which will be fully implemented in 2019. At this
time it is unclear how the introduction of the Medicare quality payment program will impact overall physician reimbursement. Also, there has been heightened governmental scrutiny recently over the manner in which drug manufacturers set prices for
their marketed products, which have resulted in several Congressional inquiries and proposed bills designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient
programs, and reform government program reimbursement methodologies for drug products.
We expect that the
ACA, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and lower reimbursement, and in additional downward pressure on the price that we receive for any approved product. Any
reduction in reimbursement from Medicare or other government-funded programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being
able to generate revenue, attain profitability or commercialize our drugs.
We are currently unable to predict
what additional legislation or regulation, if any, relating to the health care industry may be enacted in the future or what effect recently enacted Federal legislation or any such additional legislation or regulation would have on our business. The
pendency or approval of such proposals or reforms could result in a decrease in our stock price or limit our ability to raise capital or to enter into collaboration agreements for the further development and commercialization of our programs and
products.
We face intense competition, and if we are unable to compete effectively, the demand for our products, if
any, may be reduced.
The biotechnology and pharmaceutical industries are subject to rapid and intense
technological change. We face, and will continue to face, competition in the development and marketing of our product candidates from academic institutions, government agencies, research institutions and biotechnology and pharmaceutical companies.
Competition may also arise from, among other things:
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other drug development technologies;
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methods of preventing or reducing the incidence of disease, including vaccines; and
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new small molecule or other classes of therapeutic agents.
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Developments by others may render our product candidates or technologies obsolete or noncompetitive.
We are performing research on or developing products for the treatment of several disorders including endometriosis,
tardive dyskinesia, uterine fibroids, Tourette syndrome, essential tremor, classic congenital adrenal hyperplasia, pain, and other neurological and endocrine-related diseases and disorders, and there are a number of competitors to products in our
research pipeline. If one or more of our competitors products or programs are successful, the market for our products may be reduced or eliminated.
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Compared to us, many of our competitors and potential competitors have
substantially greater:
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research and development resources, including personnel and technology;
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preclinical study and clinical testing experience;
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manufacturing, marketing and distribution experience; and
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If we are unable to protect our intellectual property, our competitors could develop and market products based on our discoveries, which may reduce demand for our products.
Our success will depend on our ability to, among other things:
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obtain patent protection for our products;
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preserve our trade secrets;
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prevent third parties from infringing upon our proprietary rights; and
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operate without infringing upon the proprietary rights of others, both in the United States and internationally.
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Because of the substantial length of time and expense associated with bringing new products through the development and
regulatory approval processes in order to reach the marketplace, the pharmaceutical industry places considerable importance on obtaining patent and trade secret protection for new technologies, products and processes. Accordingly, we intend to seek
patent protection for our proprietary technology and compounds. However, we face the risk that we may not obtain any of these patents and that the breadth of claims we obtain, if any, may not provide adequate protection of our proprietary technology
or compounds.
We also rely upon unpatented trade secrets and improvements, unpatented know-how and continuing
technological innovation to develop and maintain our competitive position, which we seek to protect, in part, through confidentiality agreements with our commercial collaborators, employees and consultants. We also have invention or patent
assignment agreements with our employees and some, but not all, of our commercial collaborators and consultants. However, if our employees, commercial collaborators or consultants breach these agreements, we may not have adequate remedies for any
such breach, and our trade secrets may otherwise become known or independently discovered by our competitors.
In addition, although we own a number of patents, the issuance of a patent is not conclusive as to its validity or
enforceability, and third parties may challenge the validity or enforceability of our patents. We cannot assure you how much protection, if any, will be given to our patents if we attempt to enforce them and they are challenged in court or in other
proceedings. It is possible that a competitor may successfully challenge our patents or that challenges will result in limitations of their coverage. Moreover, competitors may infringe our patents or successfully avoid them through design
innovation. To prevent infringement or unauthorized use, we may need to file infringement claims, which are expensive and time-consuming. In addition, in an infringement proceeding a court may decide that a patent of ours is not valid or is
unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover its technology. Interference proceedings declared by the United States Patent and Trademark Office may be necessary
to determine the priority of inventions with respect to our patent applications or those of our licensors. Litigation or interference proceedings may fail and, even if successful, may result in substantial costs and be a distraction to management.
We cannot assure you that we will be able to prevent misappropriation of our proprietary rights, particularly in countries where the laws may not protect such rights as fully as in the United States.
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The technologies we use in our research as well as the drug targets we select may
infringe the patents or violate the proprietary rights of third parties.
We cannot assure you
that third parties will not assert patent or other intellectual property infringement claims against us or our collaborators with respect to technologies used in potential products. If a patent infringement suit were brought against us or our
collaborators, we or our collaborators could be forced to stop or delay developing, manufacturing or selling potential products that are claimed to infringe a third partys intellectual property unless that party grants us or our collaborators
rights to use its intellectual property. In such cases, we could be required to obtain licenses to patents or proprietary rights of others in order to continue to commercialize our products. However, we may not be able to obtain any licenses
required under any patents or proprietary rights of third parties on acceptable terms, or at all. Even if our collaborators or we were able to obtain rights to the third partys intellectual property, these rights may be non-exclusive, thereby
giving our competitors access to the same intellectual property. Ultimately, we may be unable to commercialize some of our potential products or may have to cease some of our business operations as a result of patent infringement claims, which could
severely harm our business.
Our employees, independent contractors, principal investigators, consultants, commercial
partners and vendors may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements.
We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees and independent contractors, such as principal investigators, consultants, commercial partners and vendors, or by
employees of our commercial partners could include failures to comply with FDA regulations, to provide accurate information to the FDA, to comply with manufacturing standards we have established, to comply with federal and state healthcare fraud and
abuse laws, to report financial information or data accurately, to maintain the confidentiality of our trade secrets or the trade secrets of our commercial partners, or to disclose unauthorized activities to us. In particular, sales, marketing and
other business arrangements in the healthcare industry are subject to extensive laws intended to prevent fraud, kickbacks, self-dealing and other abusive practices. Employee and independent contractor misconduct could also involve the improper use
of individually identifiable information, including, without limitation, information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation.
Any relationships with healthcare professionals, principal investigators, consultants, customers (actual and potential) and
third-party payors in connection with our current and future business activities are and will continue to be subject, directly or indirectly, to federal and state healthcare laws. If we are unable to comply, or have not fully complied, with such
laws, we could face penalties, contractual damages, reputational harm, diminished profits and future earnings and curtailment or restructuring of our operations.
Our business operations and activities may be directly, or indirectly, subject to various federal and state healthcare
laws, including without limitation, fraud and abuse laws, false claims laws, data privacy and security laws, as well as transparency laws regarding payments or other items of value provided to healthcare providers. These laws may restrict or
prohibit a wide range of business activities, including, but not limited to, research, manufacturing, distribution, pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. These
laws may impact, among other things, our current activities with principal investigators and research subjects, as well as proposed and future sales, marketing and education programs.
Such laws include:
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the federal Anti-Kickback Statute which prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering,
receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may
be made under a federal healthcare program such as Medicare and Medicaid;
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the federal civil and criminal false claims, including the civil False Claims Act, and civil monetary penalties laws, which impose criminal and
civil penalties against individuals or entities for, among other things, knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or
conceal an obligation to pay money to the federal government;
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the federal Health Insurance Portability and Accountability Act of 1996 (HIPAA) which imposes criminal and civil liability for, among other things,
executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;
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HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, which also imposes
obligations, including mandatory contractual terms, on certain types of individuals and entities, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;
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the federal Physician Payments Sunshine Act, which requires certain manufacturers of drugs, devices, biologics and medical supplies for which
payment is available under Medicare, Medicaid or the Childrens Health Insurance Program, with specific exceptions, to report annually to CMS information related to payments or other transfers of value made to physicians and teaching hospitals,
and applicable manufacturers and applicable group purchasing organizations to report annually to CMS ownership and investment interests held by the physicians and their immediate family members; and
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analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to sales or marketing
arrangements and claims involving healthcare items or services reimbursed by non-governmental third party payors, including private insurers; state laws that require pharmaceutical companies to comply with the pharmaceutical industrys
voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government; state laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other
healthcare providers or marketing expenditures; and state and foreign laws governing the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA,
thus complicating compliance efforts.
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Efforts to ensure that our business arrangements will
comply with applicable healthcare laws may involve substantial costs. It is possible that governmental and enforcement authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law
interpreting applicable fraud and abuse or other healthcare laws. If our operations or activities are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to, without
limitation, civil, criminal and administrative penalties, damages, monetary fines, disgorgement, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, additional reporting requirements and oversight if we
become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, contractual damages, reputational harm, diminished profits and future earnings and curtailment or restructuring of our
operations, any of which could adversely affect our ability to operate.
In addition, any sales of our product
candidates once commercialized outside the United States will also likely subject us to foreign equivalents of the healthcare laws mentioned above, among other foreign laws.
We face potential product liability exposure far in excess of our limited insurance coverage.
The use of any of our potential products in clinical trials, and the sale of any approved products, may expose us to liability claims. These claims might be made directly by consumers, health care
providers, pharmaceutical companies or others selling our products. We have obtained limited product liability insurance coverage for our clinical trials in the amount of $10 million per occurrence and $10 million in the aggregate. However, our
insurance may not reimburse us or may not be sufficient to reimburse us for any expenses or losses we may
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suffer. Moreover, insurance coverage is becoming increasingly expensive, and we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against
losses due to liability. We intend to expand our insurance coverage to include the sale of commercial products if we obtain marketing approval for product candidates in development, but we may be unable to obtain commercially reasonable product
liability insurance for any products approved for marketing. On occasion, juries have awarded large judgments in class action lawsuits based on drugs that had unanticipated side effects. A successful product liability claim or series of claims
brought against us would decrease our cash reserves and could cause our stock price to fall.
Our activities involve
hazardous materials, and we may be liable for any resulting contamination or injuries.
Our research
activities involve the controlled use of hazardous materials. We cannot eliminate the risk of accidental contamination or injury from these materials. If an accident occurs, a court may hold us liable for any resulting damages, which may harm our
results of operations and cause us to use a substantial portion of our cash reserves, which would force us to seek additional financing.
Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.
In the ordinary course of our business, we collect and store confidential and sensitive information on our networks and in
our data centers. This information includes, among other things, our intellectual property and proprietary information, the confidential information of our collaborators and licensees, and the personally identifiable information of our
employees. It is important to our operations and business strategy that this information remains secure and is perceived to be secure. Despite security measures, however, our information technology and network infrastructure may be vulnerable
to attacks by hackers or breached due to employee error, malfeasance, or other disruptions. Any such attack or breach could compromise our networks and data centers and the information stored there could be accessed, publicly disclosed, lost, or
stolen. Any such access, disclosure, or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, delays and impediments to our discovery and development efforts,
and damage to our reputation.
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