Overview
We are a science-driven, patient-focused biopharmaceutical company seeking to leverage our believed strengths across the continuum from
discovery through commercialization by discovering and developing small molecule therapeutics to meet the needs of patients with infectious and complement-mediated diseases.
Our current focus is on our complement inhibitor platform, directed at advancing small molecule compounds that have the potential to be used in the treatment of immune-related diseases associated with the
alternative pathway of the complement system. The complement system is a part of the human innate immune system and is believed to comprise three pathways, the alternative pathway, the lectin pathway and the classical pathway. We are advancing novel
small molecules from this platform which will initially target complement factor D, an essential protein within the amplification loop of the alternative pathway. The alternative pathway is thought to play a critical role in a number of disease
conditions including rare orphan conditions such as paroxysmal nocturnal hemoglobinuria, or PNH, a blood disorder, and C3 glomerulopathy, or C3G, a kidney disease, as well as more prevalent indications such as dry age-related macular degeneration,
or dry AMD, an ophthalmologic disease.
We have generated a platform of potent and specific orally-administered compounds
that, in preclinical studies, bind to factor D with high affinity, resulting in alternative pathway inhibition. Our lead drug candidate has demonstrated complete suppression of alternative pathway complement activity after oral dosing in healthy
volunteers in a phase I clinical trial. We believe that our alternative pathway factor D inhibitor compounds may have a pharmacological advantage in addressing extravascular hemolysis, or red blood cell destruction outside of blood vessels, that
affects patients with PNH, including those whose intravascular hemolysis, or red blood cell
1
destruction within blood vessels, is successfully treated with currently approved treatments. In addition, we believe we may be able to treat the proportion of patients with PNH who have
suboptimal response to, or who fail to respond to, currently approved treatments for PNH. Further, because C3G is a disease resulting from alternative pathway over-activation, we believe our factor D inhibitors may be effective in treating patients
with C3G. In addition, we are advancing other small molecule compounds with characteristics that have the potential to be appropriate for treatment of dry AMD. We may also seek to advance other factor D inhibitors for oral systemic administration to
treat PNH, C3G, or other diseases.
We also have a collaboration with Janssen Pharmaceuticals, Inc., or Janssen, the
pharmaceutical subsidiary of Johnson & Johnson Inc., under which we have granted to Janssen exclusive worldwide rights to develop and commercialize a portfolio of antiviral drug candidates we discovered and developed for the treatment of
chronic hepatitis C virus, or HCV, infection in exchange for specified milestone payments, future royalties, if any, and an equity investment in us.
We also intend to continue to leverage our extensive expertise in structural biology and synthetic chemistry to discover and develop additional small molecule compounds to meet other significant unmet
medical needs. We believe our drug discovery capabilities will allow us to further expand our drug candidate portfolio, providing us with strong growth potential and, over time, reducing our reliance on the success of any single drug candidate. Our
research team has successfully discovered and advanced multiple compounds into clinical development including sovaprevir, odalasvir, and ACH-3422 in our HCV program, all of which we have licensed to Janssen, and ACH-4471, a first-generation
complement factor D inhibitor from our broad alternative pathway complement inhibitor platform.
We were incorporated on
August 17, 1998 in Delaware. Since our inception, we have spent substantial research and development funds to develop our drug candidate pipeline and expect to continue to do so for the foreseeable future. We have incurred losses of $503.6
million from inception through December 31, 2016 and had an accumulated deficit of $517.4 million as of December 31, 2016, which includes preferred stock dividends recognized until our initial public offering in 2006. Our net losses were
$61.7 million, $5.0 million, and $69.0 million for the years ended December 31, 2016, 2015, and 2014, respectively.
Collaboration with Janssen Pharmaceuticals, Inc.
In May 2015, we entered into an exclusive collaboration and license agreement with Janssen, and its affiliate, JJDC, which we refer to as the Janssen Agreement. Under the Janssen Agreement, we
granted Janssen exclusive worldwide rights to develop and commercialize products that contain one or more of our drug candidates for the treatment of HCV, namely odalasvir, a second-generation NS5A inhibitor, ACH-3422, a NS5B HCV polymerase
inhibitor, and sovaprevir, a NS3/4A HCV protease inhibitor. We completed the transfer of our portfolio of drug candidates for the treatment of chronic HCV to Janssen in December 2015.
Under the terms of the Janssen Agreement, we are eligible to receive (1) up to $115.0 million of milestone payments based upon
achievement of clinical enrollment and dosing in specified studies, substantially all of which is related to dosing in one study, (2) up to an additional $290.0 million of milestone payments based upon regulatory approvals and first commercial
sale in specified territories, the majority of which relates to regulatory approval and the first commercial sale in the U.S., and (3) up to an additional $500.0 million of milestone payments based upon achieving worldwide sales targets. We
recognized revenue of $15.0 million in December 2016 related to the achievement of a clinical enrollment milestone under the Janssen Agreement.
We are also eligible to receive royalties on worldwide annual net sales of licensed products, if any, at tiered royalty rate percentages beginning in the mid-teens and rising to the low-twenties, subject
to customary reductions. The royalty term is determined on a licensed-product-by-licensed-product and country-by-country basis and begins on the first commercial sale of a licensed product in a country and ends on the expiration of the last to
expire of specified patents or regulatory exclusivity covering such licensed product in such country or,
2
with a customary royalty reduction, ten years after such first commercial sale if there is no such exclusivity. Janssen will bear the future costs of worldwide development and commercialization
of licensed products.
In addition, effective on July 1, 2015, we entered into a stock purchase agreement with JJDC,
which we refer to as the JJDC Stock Purchase Agreement. Pursuant to the JJDC Stock Purchase Agreement, we issued 18,367,346 shares of common stock to JJDC at a price of $12.25 per share for an aggregate purchase price of $225.0 million.
Our Strategy
Our
objective is to become the leading biopharmaceutical company focused on discovering, developing and commercializing small molecule therapies that specifically target the alternative pathway of the human complement system, while continuing our
interests in HCV through collaboration with our partner, Janssen. Specifically, our near-term strategy includes the following efforts:
|
|
|
Become the leading pharmaceutical company focused on the complement alternative pathway by:
|
|
|
|
Advancing the first alternative pathway factor D inhibitor in clinical development for PNH and C3G.
We believe ACH-4471 is the first
small molecule alternative pathway factor D inhibitor to be tested in humans. We began clinical development with this compound in February 2016 and we have completed a single-ascending dose trial and have completed dosing of four cohorts in a
multiple-ascending dose trial designed to understand the safety, pharmacokinetics and pharmacodynamics of the drug candidate after oral administration for which final data analysis is ongoing. We have initiated screening in a phase II clinical trial
in patients with PNH and anticipate providing an update on the status of the program in the first half of 2017. In addition, we anticipate initiating a clinical trial in patients with C3G in the second half of 2017.
|
|
|
|
Advancing next-generation compounds for PNH and C3G
.
Our highly skilled discovery team has designed and advanced a robust
portfolio of compounds with a goal of improving the efficacy, pharmacokinetic and safety profiles of our first factor D inhibitors. In addition to advancing
ACH-4471,
our objective is to design improved
next-generation compounds that move into
IND-enabling
preclinical studies, as well as another set of compounds that move into late-stage preclinical characterization. We anticipate initiating phase I clinical
trials with a second alternative pathway factor D inhibitor before year-end 2017.
|
|
|
|
Advancing other compounds for treatment of ophthalmologic conditions where over activation of the alternative pathway is implicated.
Excessive activation of alternative pathway in the complement system has been implicated in multiple therapeutic areas outside of rare diseases including dry AMD. We have designed, discovered and begun preclinical testing of a number of
compounds for potential clinical development for dry AMD and its advanced form, geographic atrophy.
|
|
|
|
Advancing our understanding of the role of alternative pathway factor D inhibition in human disease.
We have established research
collaborations with a number of academic institutions and scientific and clinical leaders to better elucidate the role of the alternative pathway and factor D in causing human disease. These collaborations have served to advance our understanding of
the implications of inhibiting the alternative pathway. We believe our understanding of the biology underlying complement-mediated disease is highly valuable and provides us with a competitive advantage.
|
|
|
|
Collaborating with Janssen in HCV.
|
In order to access the worldwide development and commercialization expertise of a major pharmaceutical organization to facilitate the advancement of our HCV drug candidate portfolio, we entered into a
collaboration with Janssen in June 2015. Despite the fact that Janssen has the deciding vote on collaborative matters we will seek to maximize the value of this collaboration by leveraging our participation in the joint steering committee,
3
or JSC, with Janssen management to support the clinical development of a safe, effective, short-duration combination regimen to treat chronic HCV infection. Janssen is currently conducting
OMEGA-1, a phase IIb clinical study of JNJ-4178, a once daily oral regimen of odalasvir, AL-335, and simeprevir, in patients with genotypes 1, 2, 4, 5 and 6 HCV, including both treatment-naïve and treatment-experienced patients.
Our Programs
Our
expertise in structural biology and synthetic chemistry, coupled with our work in antimicrobial discovery research, led us to consider how the immune system plays a part in inhibiting pathogens in the body. This research led to the development of
our platform focused on complement system inhibition.
The first clinical compound from our complement inhibitor platform is
ACH-4471, which entered phase I clinical development in healthy volunteers in February 2016. ACH-4471 is designed to target and inhibit complement factor D, a critical protein in the amplification loop within the alternative pathway of the
complement system.
ACH-4471.
ACH-4471 is a potent and specific inhibitor of factor D which demonstrated
complete inhibition of the complement alternative pathway in human healthy volunteers in a phase I clinical trial. Further, the compound has demonstrated dose-proportional
in vitro
suppression of red blood cell destruction, or hemolysis, in
plasma samples from PNH patients and similar suppression of cell killing in serum from patients with atypical hemolytic uremic syndrome, or aHUS. ACH-4471 has exhibited the following characteristics in preclinical studies and clinical trials:
|
|
|
Potency
. ACH-4471 is highly specific for inhibition of factor D, a protein critical to the amplification of the complement system. In oral
administration of ACH-4471 in non-human primates at a dose of 200mg/kg, we noted complete and sustained suppression of alternate pathway activity. In phase I clinical trials in healthy human volunteers, we noted similar complete suppression of
alternative pathway activity to 24 hours post-dosing. The compound has been shown
in vitro
to efficiently block the alternative pathway of the complement system in both PNH and aHUS, patient blood samples.
|
|
|
|
Pharmacokinetics and Metabolism
. Pharmacokinetic results and activity in preclinical studies suggest that ACH-4471 should be explored in
clinical development for potential oral dosing twice or three times daily. Controlled release formulation systems are being developed for ACH-4471 with the objective of once daily dosing.
|
|
|
|
Safety
. We have completed fourteen day and twenty eight day toxicology studies in rats and dogs, respectively, in which ACH-4471 demonstrated
high safety margins with minimal dose-related effects even at high drug exposures. Three month toxicology studies testing the effects of ACH-4471 in both rats and dogs are completed and support progression of ACH-4471. In single-ascending and
multi-ascending dose phase I clinical trials in healthy volunteers, ACH-4471 has been generally well tolerated with no treatment-related serious adverse events reported. Two cases of self-limited, alanine aminotransferase, or ALT, elevations (Grade
3 and 4) were observed post-treatment at doses of 500mg and 800mg twice daily, respectively, with neither subject exhibiting signs or symptoms of hepatic decompensation. Both subjects ALT levels normalized without intervention during follow
up. Further, no treatment-associated fever or infections were observed.
|
Next Generation Factor D
Inhibitors for Oral Administration.
Our research team has synthesized almost 2,000 factor D inhibitor compounds from which we have selected several to advance into further development. The most advanced of these is currently in IND-enabling
studies. Other compounds are in late screening and we anticipate selecting additional compounds to advance into IND-enabling studies in 2017.
Next Generation Factor D Inhibitors for Intravitreal Administration.
Our research team has selected several compounds from our library for the pharmacophysical properties that may be
advantageous for delivery
4
to the back of the eye. We are advancing a number of these compounds in preclinical studies and anticipate selecting one or more lead compounds later in 2017.
The Complement System
The complement system is part of the bodys immune system. The immune system protects the body by recognizing and eliminating
bacteria, viruses and other infectious agents, referred to as pathogens, and abnormal cells such as cancer cells. The activities of the immune system are undertaken by its two components, the innate immune system and the adaptive immune system. The
role of the innate immune system is to provide a rapid nonspecific response to pathogens or abnormal cells in the body and to activate the adaptive immune system. The role of the adaptive immune system is to provide a specific response to pathogens
or abnormal cells. Once a pathogen or abnormal cell has been recognized, the adaptive immune system generates immune cells and antibodies that specifically attack that pathogen or abnormal cell.
Complement is activated via three pathways: the alternative pathway, lectin pathway and the classical pathway. At sites of infection, the
complement system activates and triggers a series of potent inflammatory responses. There are also many regulatory mechanisms to prevent uncontrolled complement over-activation.
The complement system consists of over 30 small proteins and protein fragments found in the blood, generally synthesized by the liver,
and normally circulating in an inactive state. Complement proteins account for about 5% of the globulin portion of blood serum. A number of complement proteins are proteases. When stimulated by one of several triggers, proteases in the system cleave
specific proteins and initiate an amplifying cascade of further cleavages. The end-result of this activation cascade is amplification of the response and activation of the pathogen- and cell-killing membrane attack complex, or MAC.
The alternative pathway is one of three complement pathways that opsonize, or prepare a pathogen for destruction, and kill pathogens. The
alternative pathway is initiated by the spontaneous hydrolysis, or breaking of protein C3 chemical bonds through the introduction of water. This is sometimes referred to as tickover and is the initiation of alternative pathway. Many
inflammatory, autoimmune, neurodegenerative and age-related diseases are associated with inefficient complement regulation or excessive activity of the complement system and are believed to be specifically related to the alternative pathway.
Current therapies, including those in development, to treat PNH target other complement proteins such as C5 or C3 that
are active downstream of factor D within the protein activation cascade of the complement system.
The PNH Market
PNH is a life-threatening, ultra-rare genetic blood disorder defined by chronic uncontrolled
complement activation leading to the destruction of red blood cells, or hemolysis, which can take place both inside, or intravascularly, and outside, or extravascularly, of the circulatory system. Based on internal research, we estimate that PNH
affects approximately 10,000 people in North America and Western Europe. The chronic hemolysis in patients with PNH may be associated with life-threatening thrombotic events, recurrent pain, kidney disease, disabling fatigue, severe anemia,
pulmonary hypertension, shortness of breath and intermittent episodes of dark-colored urine or hemoglobinuria. The only currently approved therapy for PNH patients is eculizumab, or Soliris
®
, which originally was approved in 2007 and is currently approved in the United States, Europe, Japan and in several other territories. Sales of Soliris
®
were reported to be $2.8 billion in 2016.
We estimate that approximately 25% of patients currently treated with eculizumab, the current standard of care for patients with PNH, have suboptimal response in the form of symptomatic extravascular
hemolysis due to the accumulation of C3 protein fragments on red blood cells, or due to genetic mutations that prevent binding of eculizumab to C5, the protein target of eculizumab. Patients who respond sub-optimally to eculizumab through
extravascular hemolysis often require dosing at higher than recommended levels or greater dosing frequency.
5
The C3G Market
C3G is a life-threatening, ultra-rare disorder characterized by over-activation of the alternative pathway. The condition includes both dense deposit disease, or DDD, and C3 glomerulonephritis, and is
typically characterized by abnormalities in complement protein levels which results in deposits of complement protein C3 fragments within the glomeruli of the kidney, thereby inhibiting proper filtration of the blood, tissue scarring, and
ultimately impaired kidney function. The overall prognosis for patients with C3G is poor, with approximately 50% of C3G patients progressing to end-stage renal disease, or ESRD, within 10 years of diagnosis. Dialysis and renal transplantation are
options available for patients who reach ESKD; however, disease recurrence is frequent after transplantation, occurring in more than 50% of patients. Only about 50% of patients have a functioning graft 5 years after transplantation. Based on
internal research, we estimate that C3G affects approximately 6,000 people in North America and Western Europe. Other than dialysis and renal transplantation, there are no approved treatments for patients with C3G.
The Dry AMD Market
Age-related macular degeneration, or AMD, is the leading cause of irreversible blindness in elderly people, and we estimate that there are
more than 10 million intermediate and advanced stage patients with AMD worldwide. AMD may reach epidemic levels in the next decade as the population in developed markets ages. Dry AMD is one of two advanced stages of AMD that, according to
internal research, affects approximately 1.5 million patients. There are no currently approved therapies for patients with dry AMD, including its advanced form, geographic atrophy. One therapy currently being evaluated in a phase III clinical
trial uses a monoclonal antibody for injection every 4-6 weeks. Due to their lower molecule weight and greater relative potency, we believe our small molecule factor D inhibitors, while leveraging the same mechanism of action as the phase III
monoclonal antibody, may have the potential for dosing to the eye at frequencies of every three months or longer.
Benefits of Our Approach
We believe that compounds advanced from our complement inhibitor platform have distinct potential advantages over
currently available therapies.
Focus on the Alternative Pathway
Many complement-mediated diseases are the direct result of dysregulation of the alternative pathway. While other complement treatments
marketed or in development focus on inhibiting the classical, lectin or terminal pathways (the terminal pathway being the final stage of all three complement pathways), these treatments do not affect the complement system at the root of
dysregulation. For example, C3G results from overproduction of C3 fragments that ultimately deposit in the kidney, impairing renal function. This overproduction of C3 fragments stems from dysregulation of the fluid phase of the alternative
pathway. Factor D inhibitors can potentially block or suppress over activation of the alternative pathway, limiting or eliminating C3 fragment deposition in the kidney. Conversely, other complement inhibitors, such as C3 and C5 inhibitors, do not
specifically inhibit the alternative pathway.
Targeting Factor D
In blood serum, factor D has one of the lowest concentration of all the complement proteins, including targets of other therapies
including C5 and C3. It is therefore limited and has the potential to provide a highly specific target for drug intervention while, we believe, limiting off-target effects and potentially leading to lower doses. Our expertise in synthetic chemistry
has allowed our scientists to utilize crystal structures with high resolution to synthesize compounds that bind specifically to factor D. Further, because factor D is rate-limiting in activation of the alternative pathway, targeting factor D
effectively shuts down the amplification loop that can lead to indiscriminant activation of the complement system.
6
Small Molecule Inhibitors
All our complement factor D inhibitor compounds for the potential treatment of rare diseases are orally-available small molecule
compounds. This is in contrast to biologic compounds that require intravenous or subcutaneous dosing. The current therapy for PNH is dosed intravenously, requiring routine hospital visits. We believe that oral dosing could provide a more convenient
regimen for patients and their care-givers. Additional small molecule compounds stemming from our alternative pathway factor D inhibitor platform, are also being optimized for ophthalmic administration. These compounds may have dosing advantages in
ophthalmological complement-mediated diseases such as dry AMD, with the goal of dosing intervals of every three months or longer. We also believe that our factor D inhibitor compounds have the potential to treat C3G, a disease for which there are no
approved therapies, by preventing or reducing the accumulation of C3 fragments.
Our Collaboration with Janssen Pharmaceuticals, Inc.
In May 2015, we entered into parallel transactions with Janssen and its affiliate, JJDC, Inc., consisting of
(i) an exclusive collaboration and license agreement with Janssen, which we refer to as the Janssen Agreement, pursuant to which we granted Janssen exclusive worldwide rights to develop and commercialize products that contain one or more of our
drug candidates for the treatment of HCV, namely odalasvir, a second-generation NS5A inhibitor, ACH-3422, a NS5B HCV polymerase inhibitor, and sovaprevir, a NS3/4A HCV protease inhibitor, and (ii) a stock purchase agreement, which we refer to
as the JJDC Stock Purchase Agreement, pursuant to JJDC purchased 18,367,346 shares of our common stock at a price of $12.25 per share, for an aggregate purchase price of $225.0 million. The Janssen Agreement became effective on June 29, 2015
upon the early termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. The JJDC Stock Purchase Agreement became effective July 1, 2015. In connection with the closing of the
transactions contemplated by the JJDC Stock Purchase Agreement, we and JJDC entered into an investor agreement on July 1, 2015, which we refer to as the Investor Agreement, governing specified rights and obligations of JJDC with respect to its
ownership of shares of our common stock.
Under the terms of the Janssen Agreement, we are eligible to receive (1) up to
$115.0 million of milestone payments based upon achievement of clinical enrollment and dosing in specified studies, substantially all of which is related to dosing in one study, (2) up to an additional $290.0 million of milestone payments based
upon regulatory approvals and first commercial sale in specified territories, the majority of which relates to regulatory approval and the first commercial sale in the U.S., and (3) up to an additional $500.0 million of milestone payments based
upon achieving worldwide sales targets. We recognized revenue of $15.0 million in December 2016 related to the achievement of a clinical enrollment milestone under the Janssen Agreement.
We are also eligible to receive royalties on worldwide annual net sales of licensed products, if any, at tiered royalty rate percentages
beginning in the mid-teens and rising to the low-twenties, subject to customary reductions. The royalty term is determined on a licensed-product-by-licensed-product and country-by-country basis and begins on the first commercial sale of a licensed
product in a country and ends on the expiration of the last to expire of specified patents or regulatory exclusivity covering such licensed product in such country or, with a customary royalty reduction, ten years after such first commercial sale if
there is no such exclusivity. Janssen will bear the future costs of worldwide development and commercialization of licensed products.
Under the Janssen Agreement, Janssen has agreed to use commercially reasonable efforts to develop a specified licensed product toward regulatory approval in several specified major market countries and,
if such development is successful, to seek regulatory approval in such countries. Following regulatory approval (and pricing and reimbursement approvals, as applicable) of any licensed product in any of the major market countries, Janssen will use
commercially reasonable efforts during the applicable royalty term to commercialize such licensed product in each major market country where it has been approved.
The term of the Janssen Agreement will continue, unless earlier terminated, until expiration of the royalty term for licensed products or all payment obligations under the Janssen Agreement. Janssen may
terminate the
7
Janssen Agreement upon 60 days written notice to us at any time prior to submission of the first application for marketing approval for a licensed product in any of the specified major market
countries. Janssen may also terminate the Janssen Agreement under specified circumstances relating to the safety or regulatory approvability of a licensed product. Either we or Janssen may terminate the Janssen Agreement if the other party is in
material breach of the agreement and fails to cure such breach within specified cure periods. Either we or Janssen may terminate the Janssen Agreement in the event of specified insolvency events involving the other party. Upon any early termination,
rights to our licensed drug candidates will revert to us.
In connection with the closing of the transactions contemplated by
the JJDC Stock Purchase Agreement, we and JJDC entered into an Investor Agreement on July 1, 2015, which we refer to as the Investor Agreement. Pursuant to the terms of the Investor Agreement the shares of common stock that we issued and sold
to JJDC were subject to lock-up restrictions and voting arrangements which have since expired. In addition, there are specified limitations on JJDCs ability to acquire additional shares of our common stock. We have also agreed to provide JJDC
with certain piggyback registration rights such that for the seven year period following the expiration of the lock-up, June 29, 2016, subject to specified conditions, whenever we propose to register shares of our common stock for
our own account, JJDC will have the right to include some or all of the shares it acquired from us pursuant to the JJDC Stock Purchase Agreement in such registration. In addition, JJDC has the right to compel us to file a registration statement to
register shares acquired from us pursuant to the JJDC Stock Purchase Agreement.
Pursuant to the Janssen Agreement, the JSC
consisting of three members from each of Janssen and our company will provide strategic guidance for the joint HCV program. If the JSC fails to reach a unanimous decision on a matter within its authority, the matter shall be referred to the
applicable executive officers of Janssen and our company who shall attempt to reach a mutual decision. If the executive officers cannot reach a mutual decision, then Janssen has the deciding vote with regard to such matter.
We established our HCV drug candidate pipeline entirely through our internal discovery capabilities. Through these efforts, we identified
and developed a portfolio of drug candidates including odalasvir, ACH-3422 and sovaprevir. Prior to entering into the Janssen Agreement, we were focused on the development of the following HCV drug candidates:
|
|
|
Odalasvir, a NS5A Inhibitor.
We completed three phase IIa clinical trials with odalasvir including the -007 trial with sovaprevir, the
-005 study, which examined the use of odalasvir with ribavirin alone, and the Proxy Doublet study which examined the use of odalasvir in combination with sofosbuvir, a nucleotide NS5B polymerase inhibitor marketed by Gilead Sciences, Inc., or
Gilead, under the brand name Sovaldi
®
. HCV patients treated for both eight weeks and six weeks with the
combination of odalasvir and sofosbuvir achieved 100% SVR24, or sustained viral response 24 weeks after cessation of therapy, demonstrating the differentiation of odalasvir within the NS5A class.
|
|
|
|
ACH-3422, a NS5B Nucleotide Polymerase Inhibitor.
ACH-3422 has demonstrated excellent potency and was well-tolerated in a phase Ib proof
of concept study in which HCV patients receiving a once-daily 700mg dose of ACH-3422 for 14 days demonstrated mean maximal viral load reduction of 4.6 log
10
.
|
|
|
|
Sovaprevir, a NS3 Protease Inhibitor.
We completed a phase II clinical trial that evaluated 12 weeks of treatment consisting of
sovaprevir and our NS5A inhibitor, odalasvir, with ribavirin for the treatment of genotype 1 HCV (the -007 trial). In this trial, genotype 1b patients achieved 100% SVR24; however, in genotype 1a patients, the combination regimen results were
suboptimal.
|
ACH-3422 and sovaprevir are not currently in clinical development under the Janssen Agreement.
In September 2016, we announced clinical trial results from the first triple combination regimen under the
collaboration. Initiated in October 2015, the phase IIa clinical trial tested a combination regimen consisting of
8
Olysio
®
(simeprevir), a protease inhibitor marketed by
Janssen, AL-335, a nucleotide polymerase inhibitor in clinical development by Janssen, and odalasvir. This study was designed to determine the safety, pharmacokinetics, and efficacy of different dosing regimens containing odalasvir and AL-335, with
or without simeprevir, in treatment-naïve patients with genotype 1 HCV infection for treatment durations of eight or six weeks.
Of patients who received the triple combination of odalasvir, AL-335, and simeprevir, the combination now denoted as JNJ-4178, 100% had undetectable levels of HCV infection at SVR12 and all patients in
cohort 1 achieved SVR24 (i.e., cohorts 1, 3, and 4; N=60,20/cohort). Cohort 1 evaluated the triple combination of odalasvir (50mg QD), AL-335 (400 mg QD) and simeprevir (100mg QD) for eight weeks, while cohorts 3 and 4 assessed odalasvir (50 mg
QOD), AL-335 (800 mg QD), and simeprevir (75 mg QD) for eight and six weeks, respectively. In cohort 2, which assessed the dual combination of odalasvir (50 mg QOD) and AL-335 (800 mg QD) for eight weeks, 90% of patients achieved SVR12 (N=20). In
all of these cohorts, the dosing regimens were generally well-tolerated. The majority of adverse events were mild and the most commonly reported events were headache, fatigue, and upper respiratory tract infection. There was also one serious adverse
event in cohort 1 that resulted in premature discontinuation of all study drugs. This consisted of a Mobitz Type 1 2nd degree atrioventricular block and was deemed probably related to odalasvir and possibly related to AL-335 and simeprevir. The
event was not associated with clinical or echocardiographic abnormalities, did not require any therapeutic intervention, resolved following treatment discontinuation, and the patient went on to achieve SVR24. Other than the one serious adverse
event, no clinically significant laboratory, echocardiography, or ECG abnormalities were reported.
In November 2016, we
announced that Janssen had initiated OMEGA-1, a phase IIb clinical trial of
JNJ-4178
in patients with genotypes 1, 2, 4, 5 and 6 HCV, including both treatment-naïve and treatment-experienced patients.
Genotype 3 patients and patients with cirrhosis may be added to OMEGA-1 after those patient populations are studied in additional arms of the on-going phase IIa clinical trial, now designated study 604. This study is ongoing.
The HCV Market
The
hepatitis-C virus is a common cause of viral hepatitis, which leads to inflammation of the liver. HCV infection is contracted by transmission through the blood of an infected person. Hepatitis due to HCV can result in an acute process in which a
person is affected for only several months and then the virus is cleared from the body. However, the Department of Health and Human Services Centers for Disease Control, or CDC, estimates that 70% to 85% of newly infected individuals become
chronically infected following exposure. HCV disease progression then occurs over a period of 20 to 30 years during which patients are generally asymptomatic, meaning they exhibit no symptoms of the disease, until they experience late-stage disease.
Chronic hepatitis can lead to permanent liver damage, which can result in the development of liver cancer, liver failure or death. Estimates by the World Health Organization in July 2016 indicated that approximately 130 million to
150 million individuals worldwide are chronically infected with HCV.
The HCV market has seen
significant change in recent years, notably with the 2011-2013 introductions of the first directly acting antivirals (DAAs)protease inhibitors boceprevir (Victrelis
®
), telaprevir (Incivek
®
),
simeprevir (Olysio
®
), and nucleotide polymerase inhibitor, sofosbuvir (Sovaldi
®
). These were first approved for treatment of patients with HCV genotype 1 in combination with pegylated interferon
and ribavirin. Sofosbuvir was also approved for use with ribavirin alone for use in treatment of patients with HCV genotype 2. In 2014, all-oral combination regimens entered the market including the combination of sofosbuvir and ledipasvir (Harvoni
®
) and the ombitasvir/paritaprevir/ritonavir/dasabuvir/ribavirin combination (Viekira Pak). In 2016, the oral
combination of elbasvir/grazoprevir (Zepatier) also entered the HCV market. These treatment regimens for HCV offer improved SVR rates for patients of the appropriate genotype, who do not have base-line resistant viral variants, and who can tolerate
the combination therapy. According to public filings, sales for marketed HCV regimens were reported to be approximately $19 billion in 2016 , including sales of boceprevir (Victrelis
®
),
9
telaprevir (Incivek
®
) sofosbuvir (Sovaldi
®
) and sofosbuvir/ledipasvir (Harvoni) by Gilead and Viekira Pak by AbbVie, Inc. Even though the number of
patients treated for HCV is anticipated to peak in 2016 through 2020, and competitive pricing may result from the introduction of all-oral combination regimens with broad genotypic coverage in 2015 and beyond, the HCV DAA market is expected to be a
multi-billion dollar market for the next several years in the combined markets of the United States, the European Union and Japan according to Citi Research in February 2017.
Despite recent improvements in the treatment landscape for HCV infected patients, there remains a goal for a new HCV therapy that addresses the needs of a broader range of HCV patients, both across the
spectrum of HCV genotypes 16, and across varying stages of liver disease, and that shortens the duration of treatment. We believe our collaboration with Janssen can provide a combination regimen that contains our NS5A inhibitor, odalasvir, in
combination with other agents that may be able to address these goals.
Our Drug Discovery Programs and Capabilities
To date we have successfully advanced eight drug candidates into human clinical trials, with two additional drug candidates that we
advanced into late-stage preclinical studies. We discovered nine of these ten drug candidates in house by applying our expertise in biology and synthetic chemistry. We intend to continue to capitalize on our internal drug discovery and development
capabilities to expand our drug candidate portfolio.
From early lead identification through clinical candidate selection, we
have coupled our knowledge base in genomic replication targets with an integrated drug discovery infrastructure to aid in the advancement of our discovery programs.
Target Selection and Assay Development
We are focused on addressing
unmet medical needs with an emphasis on inhibiting essential proteins or enzymes with small molecule inhibitors. We select targets for our drug discovery programs based upon the relevance of the target to key steps within the biological system, our
ability to develop appropriate assays for early assessment of potency, selectivity and safety and our ability to identify small molecules that can be optimized within a reasonable time period to become drug candidates.
Compound Synthesis, Hit Identification and Lead Optimization
Our focused compound library contains a diverse set of molecules that have been synthesized for specific biological targets. We have
developed the following tools that enable us to manage our compounds efficiently and advance our programs:
|
|
|
AACP (Achillion Automated Chemistry Platform) is a proprietary software that facilitates synthesis of thousands of small molecules in parallel by
automating several cumbersome steps involved;
|
|
|
|
CART (Compound Acquisition and Repository Tracking) streamlines our scientists ability to select and acquire compounds for lead identification
and optimization;
|
|
|
|
CHEM-ACH is a data mining software that allows analysis of our proprietary compounds and their biological activities. Such analysis helps in studying
the structure-activity relationships and designing and synthesizing compounds for lead optimization;
|
|
|
|
CIDM (Competitive Intelligence & Data Mining) is a web application. It analyzes publicly available information to display competitive
information including clinical and preclinical development activities, intellectual property and scientific literature;
|
|
|
|
ComplementWiki is an in-house database of ongoing and completed complement- related drug development and clinical trial designs and results. It also
has an in-house developed, user friendly interface for accessing and analyzing this data;
|
10
|
|
|
HCVWiki is an in-house database of ongoing and completed HCV therapy clinical trial designs and results. It also has an in-house developed, user
friendly interface for accessing and analyzing this data; and
|
|
|
|
PSTS (Preclinical Study Tracking System) is a web interface which is used for accessing the details of our preclinical studies. It allows scientists to
enter, modify, and query preclinical study documents.
|
Preclinical Candidate Selection
A cornerstone of our approach to drug discovery and development is the early assessment of the drug-like properties
associated with optimized lead compounds. Potency and activity against a given target are necessary but not sufficient predictors of eventual successful clinical development of a new drug. In order to perform an early assessment of the potential for
successful development, prior to progression of a compound into late-stage preclinical studies in support of clinical trials, we rigorously evaluate compounds in numerous tests relating to safety, metabolism, pharmacokinetic properties and physical
properties associated with the feasibility for an oral formulation.
Competition
The development and commercialization of new drug products is highly competitive. We expect that we, our collaborators and future
collaborators, if any, will face significant competition from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide with respect to any of our drug candidates that we, or they, may seek to develop
or commercialize. There are a number of pharmaceutical and biotechnology companies that currently market and sell products or are pursuing the development of drug candidates for the treatment of the key complement-mediated disease indications such
as those from Alexion Pharmaceuticals, Inc. and other potential therapies in development by Akari Therapeutics, PLC, Alnylam Pharmaceuticals, Inc., Amyndas Pharmaceuticals, S.A., Apellis Pharmaceuticals, Inc., BioCryst Pharmaceuticals, Inc.,
ChemoCentryx, Inc., Genentech, Inc., Omeros Corporation, Ra Pharmaceuticals, Inc. and True North Therapeutics, Inc. Additionally, Novartis AG also has intellectual property rights in the complement area.
In the HCV market, there are a number of pharmaceutical companies that currently market and sell products for HCV or are pursuing the
development of drug candidates for HCV including AbbVie Inc., Enanta Pharmaceuticals, Inc., Gilead, Merck & Co., Inc. and Regulus Therapeutics Inc.
Our competitors may succeed in developing, acquiring or licensing technologies and drug products that are more effective, have fewer or more tolerable side effects or are less costly than any drug
candidates that we are currently developing or that we may develop, which could render our drug candidates obsolete and noncompetitive.
Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient
or are less expensive than any products that we, or any current or future collaborators, may develop. In addition to currently approved products, our competitors also may obtain additional FDA or other marketing approvals for their products before
we or any current or future collaborators, are able to obtain approval for ours, which could result in our competitors establishing a strong market position before we, or any current or future collaborators, are able to enter the market.
Many of our existing and potential future competitors have significantly greater financial resources and expertise in research and
development, manufacturing, preclinical testing, conducting clinical trials, obtaining marketing approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even
more resources being concentrated among a
11
smaller number of our competitors. Smaller or early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established
companies. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies
complementary to, or necessary for, our programs.
Intellectual Property
Our strategy is to pursue patents, developed internally and licensed from third parties, and other means to protect our technology,
inventions and improvements that are commercially important to the development of our business. We also rely on trade secrets that may be important to the development of our business.
Our success will depend significantly on our ability to:
|
|
|
obtain and maintain patent and other proprietary protection for the technology, inventions, improvements and know-how we consider important to our
business;
|
|
|
|
defend and enforce our patents;
|
|
|
|
preserve the confidentiality of our trade secrets; and
|
|
|
|
operate without infringing the valid and enforceable patents and proprietary rights of third parties.
|
We hold issued patents and pending patent applications in the United States, and in foreign countries we deem appropriate, covering
intellectual property developed as part of our research and development programs.
Our complement inhibitor patent portfolio
currently includes a large number of pending U.S. applications, international applications filed under the Patent Cooperation Treaty, referred to as the PCT, and applications that have been entered into the national phase of prosecution in foreign
countries. These patents and patent applications, if issued, will expire in 2035 or 2036, without regard to possible patent term extensions to account for regulatory delay to market our drugs. These applications include claims directed to
composition of matter, pharmaceutical composition and their methods of use to treat complement factor D related disorders, including PNH, macular age degeneration, and C3G. The applications include specific claims directed to our lead drug
candidate, ACH-4471 and its medical use, as well as other compounds and their medical uses.
Our first family of complement
inhibitor patent filings, which consists of eight subfamilies, are based on a priority provisional application filed in February 2014. These applications were entered into the international phase with PCT applications in February 2015 and were
entered into the national phase of prosecution in foreign countries in August 2016. In addition to the United States, five of the applications were filed in 14 foreign countries (including the major market countries of China, Australia, Brazil,
Canada, Japan and South Korea) and four regional patent offices (European Patent Office (EPO), African Regional Patent Office (ARIPO), Eurasian Patent Office (EAPO) and Gulf Cooperation Council (GCC)). One application was filed in the United States,
6 foreign countries (including the major market countries of China, Australia, India, Canada, Japan and South Korea) and one region (European Patent Office (EPO). Two applications were filed in the United States and Europe.
Our second family of complement inhibitor patent filings, which consists of nine subfamilies, are based on priority provisional
applications filed in August 2015. These applications were entered into the international phase with PCT applications in August 2016 and five of the subfamilies were also filed in Argentina and Taiwan. Our third family of complement inhibitor patent
filings, which also consists of nine subfamilies, are also based on priority provisional applications filed in August 2015. These applications were entered into the international phase with PCT applications in August 2016.
In 2015, we entered into the Janssen Agreement. Under the Janssen Agreement, we granted Janssen exclusive worldwide rights to develop and
commercialize products that contain one or more of our drug
12
candidates for the treatment of HCV, namely: odalasvir, a second-generation NS5A inhibitor; ACH-3422, a NS5B HCV polymerase inhibitor; and sovaprevir, a NS3/4A HCV protease inhibitor. Under the
Janssen Agreement, we have granted Janssen an exclusive, worldwide license to our intellectual property related to these compounds. Janssen is in Phase IIb development with a three drug combination for the treatment of HCV,
JNJ-4178,
which includes one of the HCV drug candidates we licensed to Janssen, odalasvir. The other two drug candidates licensed to Janssen, ACH-3422 and sovaprevir, are not currently in clinical development. Our
patent portfolio on odalasvir is comprised of (i) U.S. Patent Nos. 8,809,313 and 9,474,742, and an allowed U.S. application, with claims covering the composition of matter of odalasvir, methods to use odalasvir to treat HCV, and pharmaceutical
compositions including odalasvir, and (ii) U.S. Patent No. 9,468,629, with claims covering methods of manufacture of odalasvir as well as compositions of matter claims covering intermediates in its synthesis. These U.S. Patents will expire
in 2032, without regard to any patent term extension that may be available to compensate for the delay to market caused by regulatory review by the U.S. FDA. In addition, we co-own with our partner Janssen two pending unpublished U.S. patent
applications covering aspects of odalasvir and its methods of use and compositions thereof, and an international Patent Cooperation Treaty application, which if granted, will expire in 2037. We have granted patents on odalasvir in the major market
foreign jurisdictions of Europe and China, and we have pending patent applications on odalasvir in the additional significant market countries of Australia, Brazil, Canada, Eurasia, India, Japan and South Korea, which will expire in 2032, unless the
patent term is extended by a countrys law that allows further protection for the time required to obtain regulatory approval, such as a Supplementary Protection Certificate in Europe.
We rely on trade secrets to protect our technology, especially where we do not believe patent protection is appropriate or obtainable.
However, trade secrets are difficult to protect. In order to protect our proprietary technology and processes, we also rely in part on confidentiality and intellectual property assignment agreements with our corporate partners, employees,
consultants, outside scientific collaborators and sponsored researchers and other advisors.
Manufacturing and Supply
We currently rely on contract manufacturers to produce drug substances and drug products required for our clinical trials under current
good manufacturing practices (cGMP), with oversight by our internal managers. We plan to continue to rely upon contract manufacturers and collaboration partners to manufacture commercial quantities of our drug candidates if and when approved for
marketing by the FDA. We currently rely on a limited number of manufacturers for the preclinical or clinical supplies of each of our drug candidates we are developing and do not currently have relationships for redundant supply or a second source
for any of these drug candidates. We believe that there are alternate sources of supply that can satisfy our clinical trial requirements without significant delay or material additional costs.
Sales and Marketing
We
intend to establish our own sales and marketing capabilities if and when we obtain regulatory approval of our drug candidates. In North America and Western Europe, patients in the markets for our drug candidates are largely managed by medical
specialists in the areas of immunology, nephrology, and hematology. Historically, companies have experienced substantial commercial success through the deployment of specialized sales forces which can address a majority of key prescribers.
Therefore, we expect to utilize a specialized sales force in North America for the sales and marketing of drug candidates that we may successfully develop. We currently have no marketing, sales or distribution capabilities. In order to participate
in the commercialization of any of our drugs, we must develop these capabilities on our own or in collaboration with third parties. We may also choose to hire a third party to provide sales personnel instead of developing our own staff.
Outside of North America, and in situations or markets where a more favorable return may be realized through licensing commercial rights
to a third party, we may license a portion or all of our commercial rights in a territory to a third party in exchange for one or more of the following: up-front payments, research funding, development funding, milestone payments and royalties on
drug sales.
13
Under the Janssen Agreement, we granted Janssen exclusive worldwide rights to develop and
commercialize products that contain one or more of our drug candidates for the treatment of HCV, namely odalasvir, a second-generation NS5A inhibitor, ACH-3422, a NS5B HCV polymerase inhibitor, and sovaprevir, a NS3/4A HCV protease inhibitor.
ACH-3422 and sovaprevir are not currently in clinical development under the Janssen Agreement.
Regulatory Matters
Government Regulation and Product Approval
Government authorities in the United States, at the federal, state and local level, and in other countries and jurisdictions, including the European Union, extensively regulate, among other things, the
research, development, testing, manufacture, quality control, approval, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, sales, post-approval monitoring and reporting, and import and export of
pharmaceutical products. The processes for obtaining regulatory approvals in the United States and in foreign countries and jurisdictions, along with subsequent compliance with applicable statutes and regulations, require the expenditure of
substantial time and financial resources.
Review and Approval of Drugs in the United States
In the United States, the FDA approves and regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and implementing
regulations. The failure to comply with requirements under the FDCA and other applicable laws at any time during the product development process, approval process or after approval may subject an applicant and/or sponsor to a variety of
administrative or judicial sanctions, including refusal by the FDA to approve pending applications, withdrawal of an approval, imposition of a clinical hold, issuance of warning letters and other types of letters, product recalls, product seizures,
total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement of profits, or civil or criminal investigations and penalties brought by the FDA and the Department of Justice
or other governmental entities.
A drug product candidate must be approved by the FDA through the new drug application, or
NDA. An applicant seeking approval to market and distribute a new drug product in the United States must typically undertake the following:
|
|
|
completion of preclinical laboratory tests, animal studies and formulation studies in compliance with the FDAs good laboratory practice, or GLP,
regulations;
|
|
|
|
submission to the FDA of an IND, which must take effect before human clinical trials may begin in the U.S.;
|
|
|
|
approval by an independent institutional review board, or IRB, representing each clinical site before each clinical trial may be initiated;
|
|
|
|
performance of adequate and well-controlled human clinical trials in accordance with good clinical practices, or GCP, to establish the safety and
efficacy of the proposed drug product for each indication;
|
|
|
|
preparation and submission to the FDA of a new drug application, or NDA, requesting marketing for one or more proposed indications;
|
|
|
|
review by an FDA advisory committee, if requested by the FDA;
|
|
|
|
satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which the product, or components thereof, are
produced to assess compliance with current Good Manufacturing Practices, or cGMP, requirements and to assure that the facilities, methods and controls are adequate to preserve the products identity, strength, quality and purity;
|
14
|
|
|
satisfactory completion of FDA audits of clinical trial sites to assure compliance with GCPs and the integrity of the clinical data;
|
|
|
|
payment of user fees and securing FDA approval of the NDA; and
|
|
|
|
compliance with any post-approval requirements, including the potential requirement to implement a Risk Evaluation and Mitigation Strategy, or REMS,
and potentially post-market requirement, or PMR, and commitment, or PMC, studies.
|
Preclinical Studies
Before an applicant begins testing a compound with potential therapeutic value in humans, the drug candidate enters the
preclinical testing stage. Preclinical studies include laboratory evaluation of the purity and stability of the manufactured drug substance or active pharmaceutical ingredient and the formulated drug or drug product, as well as in vitro and animal
studies to assess the safety and activity of the drug for initial testing in humans and to establish a rationale for therapeutic use. The conduct of preclinical studies is subject to federal regulations and requirements, including GLP regulations.
The results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and plans for clinical studies, among other things, are submitted to the FDA as part of an IND. Some long-term
preclinical testing, such as animal tests of reproductive adverse events and carcinogenicity, and long term toxicity studies, may continue after the IND is submitted.
The IND and IRB Processes
An IND is an exemption from the FDCA that allows
an unapproved drug to be shipped in interstate commerce for use in an investigational clinical trial and a request for FDA authorization to administer an investigational drug to humans. Such authorization must be secured prior to interstate shipment
and administration of any new drug that is not the subject of an approved NDA. In support of the IND application, applicants must submit a protocol for each clinical trial and any subsequent protocol amendments. In addition, the results of the
preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and plans for clinical trials, among other things, are submitted to the FDA as part of an IND. The FDA requires a 30-day waiting
period after the submission of each IND before clinical trials may begin. This waiting period is designed to allow the FDA to review the IND to determine whether human research subjects will be exposed to unreasonable health risks. At any time
during this 30-day period, or thereafter, the FDA may raise concerns or questions about the conduct of the trials as outlined in the IND and impose a clinical hold or partial clinical hold. In this case, the IND sponsor and the FDA must resolve any
outstanding concerns before clinical trials can begin (or resume if the clinical trial had been ongoing at the time a clinical hold was imposed).
In addition to the foregoing IND requirements, an IRB/ethics committee representing each institution participating in the clinical trial must review and approve the plan for any clinical trial before it
commences at that institution, and the IRB must conduct continuing review and reapprove the study at least annually. The IRB must review and approve, among other things, the study protocol and informed consent information to be provided to study
subjects. An IRB must operate in compliance with FDA regulations. Information about certain clinical trials must be submitted within specific timeframes to the National Institutes of Health, or NIH, for public dissemination on its ClinicalTrials.gov
website. An IRB can suspend or terminate approval of a clinical trial at its institution, or an institution it represents, if the clinical trial is not being conducted in accordance with the IRBs requirements or if the drug has been associated
with unexpected serious harm to patients.
Human Clinical Studies in Support of an NDA
Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified
investigators in accordance with GCP requirements, which include, among other things, the requirement that all research subjects provide their informed consent in writing before their participation in
15
any clinical trial. Clinical trials are conducted under written study protocols detailing, among other things, the inclusion and exclusion criteria, the objectives of the study, the parameters to
be used in monitoring safety and the effectiveness criteria to be evaluated.
Human clinical trials are typically conducted in
four sequential phases, which may overlap or be combined:
|
|
|
Phase 1.
The drug is initially introduced into a small number of healthy human subjects or, in certain indications such as cancer,
patients with the target disease or condition (e.g., cancer) and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an early indication of its effectiveness and to determine optimal dosage.
|
|
|
|
Phase 2.
The drug is administered to a limited patient population to identify possible adverse effects and safety risks, to preliminarily
evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.
|
|
|
|
Phase 3.
These clinical trials are commonly referred to as pivotal studies, which denote a study that presents the data that
the FDA or other relevant regulatory agency will use to determine whether or not to approve a drug. The drug is administered to an expanded patient population, generally at geographically dispersed clinical trial sites, in well-controlled clinical
trials to generate enough data to statistically evaluate the efficacy and safety of the product for approval, identify adverse effects, establish the overall risk-benefit profile of the product and to provide adequate information for the labeling of
the product.
|
|
|
|
Phase 4
.
Post-approval studies may be conducted after initial marketing approval. These studies are used to gain additional
experience from the treatment of patients in the intended therapeutic indication.
|
Progress reports
detailing the results of the clinical trials conducted under the IND must be submitted at least annually to the FDA. In addition, IND safety reports must be submitted to the FDA for any of the following: serious and unexpected suspected adverse
reactions; findings from other studies or animal or
in vitro
testing that suggest a significant risk in humans exposed to the drug; and any clinically important increase in the case of a serious suspected adverse reaction over that listed in
the protocol or investigator brochure. The FDA or the sponsor or the data monitoring committee may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects are being exposed to an
unacceptable health risk. The FDA will typically inspect one or more clinical sites to assure compliance with GCP and the integrity of the clinical data submitted.
Section 505(b)(2) NDAs
NDAs for most new drug products are based on
two full clinical studies which must contain substantial evidence of the safety and efficacy of the proposed new product for the proposed use. These applications are submitted under Section 505(b)(1) of the FDCA. The FDA is, however, authorized
to approve an alternative type of NDA under Section 505(b)(2) of the FDCA. This type of application allows the applicant to rely, in part, on the FDAs previous findings of safety and efficacy for a similar product, or published
literature. Specifically, Section 505(b)(2) applies to NDAs for a drug for which the investigations made to show whether or not the drug is safe for use and effective in use and relied upon by the applicant for approval of the application
were not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use from the person by or for whom the investigations were conducted.
Thus, Section 505(b)(2) authorizes the FDA to approve an NDA based on safety and effectiveness data that were not developed by the
applicant. NDAs filed under Section 505(b)(2) may provide an alternate and potentially more expeditious pathway to FDA approval for new or improved formulations or new uses of previously approved products. If the 505(b)(2) applicant can
establish that reliance on the FDAs previous approval is scientifically appropriate, the applicant may eliminate the need to conduct certain preclinical or clinical studies of the new product. The FDA may also require companies to perform
additional studies or
16
measurements to support the change from the approved product. The FDA may then approve the new drug candidate for all or some of the label indications for which the referenced product has been
approved, as well as for any new indication sought by the Section 505(b)(2) applicant.
Review of an NDA by the FDA
If clinical trials are successful, the next step in the drug development process is the preparation and submission to the
FDA of a NDA. The NDA is the vehicle through which drug applicants formally propose that the FDA approve a new drug for marketing and sale in the United States for one or more indications. The NDA must contain a description of the manufacturing
process and quality control methods, as well as results of preclinical tests, toxicology studies, clinical trials and proposed labeling, among other things. Every new drug must be the subject of an approved NDA before it may be commercialized in the
United States. Under federal law, the submission of most NDAs is subject to an application user fee, currently exceeding $2.0 million, and the sponsor of an approved NDA is also subject to annual product and establishment user fees, currently
exceeding $98,000 per product and $512,000 per establishment. These fees are typically increased annually. Certain exceptions and waivers are available for some of these fees, such as an exception from the application fee for drugs with orphan
designation and a waiver for certain small businesses, an exception from the establishment fee when the establishment does not engage in manufacturing the drug during a particular fiscal year, and an exception from the product fee for a drug that is
the same as another drug approved under an abbreviated pathway.
Following submission of an NDA, the FDA conducts a
preliminary review of an NDA within 60 calendar days of its receipt and strives to inform the sponsor by the 74th day after the FDAs receipt of the submission to determine whether the application is 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 has agreed to specified performance goals in the review process of NDAs. Under that agreement, 90% of applications seeking approval of
New Molecular Entities, or NMEs, are meant to be reviewed within ten months from the date on which FDA accepts the NDA for filing, and 90% of applications for NMEs that have been designated for priority review are meant to be reviewed
within six months of the filing date. For applications seeking approval of drugs that are not NMEs, the ten-month and six-month review periods run from the date that FDA receives the application. The review process and the Prescription Drug User Fee
Act goal date may be extended by the FDA for three additional months (denoted as a major amendment) to consider new information or clarification provided by the applicant to address an outstanding deficiency identified by the FDA following the
original submission.
Before approving an NDA, the FDA typically will inspect the facility or facilities where the product is
or will be manufactured. These pre-approval inspections may cover all facilities associated with an NDA submission, including drug component manufacturing (e.g., active pharmaceutical ingredients), finished drug product manufacturing, and control
testing laboratories. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required
specifications. Additionally, before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP. In addition, as a condition of approval, the FDA may require an applicant to develop a REMS. REMS use
risk minimization strategies beyond the professional labeling to ensure that the benefits of the product outweigh the potential risks. To determine whether a REMS is needed, the FDA will consider the size of the population likely to use the product,
seriousness of the disease, expected benefit of the product, expected duration of treatment, seriousness of known or potential adverse events, and whether the product is a new molecular entity.
The FDA is required to refer an application for a novel drug to an advisory committee or explain why such referral was not made.
Typically, an advisory committee is a panel of independent experts, including clinicians
17
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.
Fast
Track, Breakthrough Therapy and Priority Review Designations
The FDA is authorized to designate certain products for
expedited review if they are intended to address an unmet medical need in the treatment of a serious or life-threatening disease or condition. These programs are fast track designation, breakthrough therapy designation and priority review
designation.
Specifically, the FDA may designate a product for fast track review if it is intended, whether alone or in
combination with one or more other drugs, for the treatment of a serious or life-threatening disease or condition, and it demonstrates the potential to address unmet medical needs for such a disease or condition. For fast track products, sponsors
may have greater interactions with the FDA and the FDA may initiate review of sections of a fast track products NDA before the application is complete. This rolling review may be available if the FDA determines, after preliminary evaluation of
clinical data submitted by the sponsor, that a fast track product may be effective. The sponsor must also provide, and the FDA must approve, a schedule for the submission of the remaining information and the sponsor must pay applicable user fees.
However, the FDAs time period goal for reviewing a fast track application does not begin until the last section of the NDA is submitted. In addition, the fast track designation may be withdrawn by the FDA if the FDA believes that the
designation is no longer supported by data emerging in the clinical trial process.
Second, in 2012, Congress enacted the Food
and Drug Administration Safety and Improvement Act. This law established a new regulatory scheme allowing for expedited review of products designated as breakthrough therapies. A product may be designated as a breakthrough therapy if it
is intended, either 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 product may demonstrate substantial improvement over existing
therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The FDA may take certain actions with respect to breakthrough therapies, including holding meetings with the
sponsor throughout the development process; providing timely advice to the product sponsor regarding development and approval; involving more senior staff in the review process; assigning a cross-disciplinary project lead for the review team; and
taking other steps to design the clinical trials in an efficient manner.
Third, the FDA may designate a product for priority
review if it is a drug that treats a serious condition and, if approved, would provide a significant improvement in safety or effectiveness. The FDA determines, on a case-by-case basis, whether the proposed drug represents a significant improvement
when compared with other available therapies. Significant improvement may be illustrated by evidence of increased effectiveness in the treatment of a condition, elimination or substantial reduction of a treatment-limiting drug reaction, documented
enhancement of patient compliance that may lead to improvement in serious outcomes, and evidence of safety and effectiveness in a new subpopulation. A priority designation is intended to direct overall attention and resources to the evaluation of
such applications, and to shorten the FDAs review clock goal for taking action on a marketing application from ten months to six months. For new chemical entities, or NCEs, the review clock starts after the NDA is filed with a total clock of
twelve and eight months, respectively.
Accelerated Approval Pathway
The FDA may grant accelerated approval to a drug for a serious or life-threatening condition that provides meaningful therapeutic
advantage to patients over existing treatments based upon a determination that the drug has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit. The FDA may also grant accelerated approval for such a condition
when the product has an effect on an intermediate clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality, or IMM, and that is reasonably
18
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. Drugs granted accelerated approval must meet the same statutory standards for safety and effectiveness as those granted traditional approval.
For the purposes of accelerated approval, a surrogate endpoint is a marker, such as a laboratory measurement, radiographic image, physical sign, or other measure that is thought to predict clinical
benefit, but is not itself a measure of clinical benefit. Surrogate endpoints can often be measured more easily or more rapidly than clinical endpoints. An intermediate clinical endpoint is a measurement of a therapeutic effect that is considered
reasonably likely to predict the clinical benefit of a drug, such as an effect on IMM. The FDA has limited experience with accelerated approvals based on intermediate clinical endpoints, but has indicated that such endpoints generally may support
accelerated approval where the therapeutic effect measured by the endpoint is not itself a clinical benefit and basis for traditional approval, if there is a basis for concluding that the therapeutic effect is reasonably likely to predict the
ultimate clinical benefit of a drug.
The accelerated approval pathway is most often used in settings in which the course of a
disease is long and an extended period of time is required to measure the intended clinical benefit of a drug, even if the effect on the surrogate or intermediate clinical endpoint occurs rapidly. Thus, accelerated approval has been used extensively
in the development and approval of drugs for treatment of a variety of cancers in which the goal of therapy is generally to improve survival or decrease morbidity and the duration of the typical disease course requires lengthy and sometimes large
trials to demonstrate a clinical or survival benefit.
The accelerated approval pathway is usually contingent on a
sponsors agreement to conduct, in a diligent manner, additional post-approval confirmatory studies to verify and describe the drugs clinical benefit. As a result, a drug candidate approved on this basis is subject to rigorous
post-marketing compliance requirements, including the completion of Phase 4 or post-approval clinical trials to confirm the effect on the clinical endpoint. Failure to conduct required post-approval studies, or confirm a clinical benefit during
post-marketing studies, would allow the FDA to withdraw the drug from the market on an expedited basis. All promotional materials for drug candidates approved under accelerated regulations are subject to prior review by the FDA.
The FDAs Decision on an NDA
On the basis of the FDAs evaluation of the NDA and accompanying information, including the results of the inspection of the manufacturing facilities, the FDA may issue an approval letter or a
complete response letter. An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications. A complete response letter generally outlines the deficiencies in the submission and may
require substantial additional testing or information in order for the FDA to reconsider the application. If and when those deficiencies have been addressed to the FDAs satisfaction in a resubmission of the NDA, the FDA will issue an approval
letter. The FDA has committed to reviewing such resubmissions in two or six months depending on the type of information included. Even with submission of this additional information, the FDA ultimately may decide that the application does not
satisfy the regulatory criteria for approval.
If the FDA approves a product, it may limit the approved indications for use
for the product, require that contraindications, warnings or precautions be included in the product labeling, require that post-approval studies, including Phase 4 clinical trials, be conducted to further assess the drugs safety after
approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution restrictions or other risk management mechanisms, including 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-market studies or surveillance programs. After approval, many 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.
19
Post-Approval Requirements
If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications
for use may otherwise be limited, which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings or precautions be included in the product labeling. In addition, condition of NDA
approval may include sponsor agreement to PMR or PMC studies, which are designed to further assess drug safety and effectiveness and may require testing and surveillance programs to monitor the safety of approved products that have been
commercialized.
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.
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 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 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.
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 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:
|
|
|
restrictions on the marketing or manufacturing of the product, suspension of the approval, or complete withdrawal of the product from the market or
product recalls;
|
|
|
|
fines, warning letters or holds on post-approval clinical trials;
|
|
|
|
refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of product license approvals;
|
|
|
|
product seizure or detention, or refusal to permit the import or export of products; or
|
|
|
|
injunctions or the imposition of civil or criminal penalties.
|
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.
In addition, the distribution of
prescription pharmaceutical products is subject to the Prescription Drug Marketing Act, or PDMA, and its implementing regulations, as well as the Drug Supply Chain Security Act, or DSCA, which regulate the distribution and tracing of prescription
drugs and prescription drug samples at the
20
federal level, and set minimum standards for the regulation of drug distributors by the states. The PDMA, its implementing regulations and state laws limit the distribution of prescription
pharmaceutical product samples, and the DSCA imposes requirements to ensure accountability in distribution and to identify and remove counterfeit and other illegitimate products from the market.
Abbreviated New Drug Applications for Generic Drugs
In 1984, with passage of the Hatch-Waxman Amendments to the FDCA, Congress established an abbreviated regulatory scheme authorizing the FDA to approve generic drugs that are shown to contain the same
active ingredients as, and to be bioequivalent to, drugs previously approved by the FDA pursuant to NDAs. To obtain approval of a generic drug, an applicant must submit an abbreviated new drug application, or ANDA, to the agency. An ANDA is a
comprehensive submission that contains, among other things, data and information pertaining to the active pharmaceutical ingredient, bioequivalence, drug product formulation, specifications and stability of the generic drug, as well as analytical
methods, manufacturing process validation data and quality control procedures. ANDAs are abbreviated because they generally do not include preclinical and clinical data to demonstrate safety and effectiveness. Instead, in support of such
applications, a generic manufacturer may rely on the preclinical and clinical testing previously conducted for a drug product previously approved under an NDA, known as the reference-listed drug, or RLD.
Specifically, in order for an ANDA to be approved, the FDA must find that the generic version is identical to the RLD with respect to the
active ingredients, the route of administration, the dosage form, the strength of the drug and the conditions of use of the drug. At the same time, the FDA must also determine that the generic drug is bioequivalent to the innovator drug.
Under the statute, a generic drug is bioequivalent to a RLD if the rate and extent of absorption of the drug do not show a significant difference from the rate and extent of absorption of the listed drug. Upon approval of an ANDA, the
FDA indicates whether the generic product is therapeutically equivalent to the RLD in its publication Approved Drug Products with Therapeutic Equivalence Evaluations, also referred to as the Orange Book.
Physicians and pharmacists consider a therapeutic equivalent generic drug to be fully substitutable for the RLD. In addition, by operation of certain state laws and numerous health insurance programs, the FDAs designation of therapeutic
equivalence often results in substitution of the generic drug without the knowledge or consent of either the prescribing physician or patient.
Under the Hatch-Waxman Amendments, the FDA may not approve an ANDA until any applicable period of non-patent exclusivity for the RLD has expired. The FDCA provides a period of five years of non-patent
data exclusivity for a new drug containing a new chemical entity. For the purposes of this provision, a new chemical entity, or NCE, is a drug that contains no active moiety that has previously been approved by the FDA in any other NDA. An active
moiety is the molecule or ion responsible for the physiological or pharmacological action of the drug substance. In cases where such NCE exclusivity has been granted, an ANDA may not be filed with the FDA until the expiration of five years unless
the submission is accompanied by a Paragraph IV certification, in which case the applicant may submit its application four years following the original product approval. The FDCA also provides for a period of three years of exclusivity if the NDA
includes reports of one or more new clinical investigations, other than bioavailability or bioequivalence studies, that were conducted by or for the applicant and are essential to the approval of the application.
Orphan Drug Designation and Exclusivity
Under the Orphan Drug Act, the FDA may designate a drug product as an orphan drug if it is intended to treat a rare disease or condition, generally meaning that it affects fewer than 200,000
individuals in the United States, or more in cases in which there is no reasonable expectation that the cost of developing and making a drug product available in the United States for treatment of the disease or condition will be recovered from
sales of the product. A company must request orphan drug designation before submitting an NDA for the drug and rare disease or condition. If the request is granted, the FDA will disclose the identity of the therapeutic agent and its potential use.
Orphan drug designation does not shorten the PDUFA goal dates for the regulatory
21
review and approval process, although it does convey certain advantages such as tax benefits and exemption from the PDUFA application fee.
If a product with orphan designation receives the first FDA approval for the disease or condition for which it has such designation or
for a select indication or use within the rare disease or condition for which it was designated, the product generally will receive orphan drug exclusivity. Orphan drug exclusivity means that the FDA may not approve another sponsors marketing
application for the same drug for the same indication for seven years, except in certain limited circumstances. Orphan exclusivity does not block the approval of a different drug for the same rare disease or condition, nor does it block the approval
of the same drug for different indications. If a drug designated as an orphan drug ultimately receives marketing approval for an indication broader than what was designated in its orphan drug application, it may not be entitled to exclusivity.
Orphan exclusivity will not bar approval of another product under certain circumstances, including if a subsequent product with the same drug for the same indication is shown to be clinically superior to the approved product on the basis of greater
efficacy or safety, or providing a major contribution to patient care, or if the company with orphan drug exclusivity is not able to meet market demand.
Pediatric Studies and Exclusivity
In the US, there are two regulations
that govern the requirements and incentives to conduct pediatric drug trials: the Pediatric Research Equity Act, or PREA, and Best Pharmaceuticals for Children Act, or BPCA.
Under the PREA, an NDA or supplement thereto must contain data that are adequate to assess the safety and effectiveness of the drug product 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. With enactment of the Food and Drug Safety and Innovation Act, or the FDASIA, in 2012, sponsors must also submit
pediatric study plans within sixty days of the end-of-phase II meeting, unless the product has received orphan drug designation, which exempts that drug for that indication from the PREA requirements. Those plans must contain an outline of the
proposed pediatric study or studies the applicant plans to conduct, including study objectives and design, any deferral or waiver requests, and any other information required by regulation. The applicant, the FDA, and the FDAs internal review
committee must then review the information submitted, consult with each other, and agree upon a final plan. The FDA or the applicant may request an amendment to the plan at any time.
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. Additional requirements and procedures relating to deferral requests and requests for extension of deferrals are contained in FDASIA.
Unless and until FDA promulgates a regulation stating otherwise, the pediatric data requirements do not apply to products with orphan designation.
Pediatric exclusivity under BPCA is another type of non-patent marketing exclusivity in the United States and, if granted, provides for the attachment of an additional six months of marketing protection
to the term of any existing regulatory exclusivity, including the non-patent and orphan exclusivity. In order to obtain pediatric exclusivity, a sponsor and the FDA have to agree on a Written Request which details the studies that need to be
conducted in order for the product to obtain pediatric exclusivity. The data from these studies does not need to show the product is effective in the pediatric population studied. If reports of the studies outlined in the Written Request are
submitted to and accepted by the FDA within the statutory time limits, whatever statutory or regulatory periods of exclusivity or patent protection cover the product are extended by six months. This is not a patent term extension, but it effectively
extends the regulatory period during which the FDA cannot approve another application. With regard to patents, the six-month pediatric exclusivity period will not attach to any patents for which an ANDA or 505(b)(2) applicant submitted a paragraph
IV patent certification, unless the NDA sponsor or patent owner first obtains a court determination that the patent is valid and infringed by the proposed product.
22
The 21
st
Century Cures Act
On December 13,
2016, President Obama signed the 21st Century Cures Act, or Cures Act, into law. The Cures Act is designed to modernize and personalize healthcare, spur innovation and research, and streamline the discovery and development of new therapies
through increased federal funding of particular programs. It authorizes increased funding for the FDA to spend on innovation projects. The new law also amends the Public Health Service Act to reauthorize and expand funding for the National
Institutes of Health. The Act establishes the NIH Innovation Fund to pay for the cost of development and implementation of a strategic plan, early stage investigators and research. It also charges NIH with leading and coordinating expanded
pediatric research. Further, the Cures Act directs the Centers for Disease Control and Prevention to expand surveillance of neurological diseases.
With amendments to the FDCA and the Public Health Service Act, or PHSA, Title III of the Cures Act seeks to accelerate the discovery, development, and delivery of new medicines and medical
technologies. To that end, and among other provisions, the Cures Act reauthorizes the existing priority review voucher program for certain drugs intended to treat rare pediatric diseases until 2020; creates a new priority review voucher program
for drug applications determined to be material national security threat medical countermeasure applications; revises the FDCA to streamline review of combination product applications; requires FDA to evaluate the potential use of real world
evidence to help support approval of new indications for approved drugs; provides a new limited population approval pathway for antibiotic and antifungal drugs intended to treat serious or life-threatening infections; and
authorizes FDA to designate a drug as a regenerative advanced therapy, thereby making it eligible for certain expedited review and approval designations.
Review and Approval of Drug Products Outside the United States
In
order to market any product outside of the United States, a company must also comply with numerous and varying regulatory requirements of other countries and jurisdictions regarding quality, safety and efficacy and governing, among other things,
clinical trials, marketing authorization, commercial sales and distribution of drug products. Whether or not it obtains FDA approval for a product, the company would need to obtain the necessary approvals by the comparable foreign regulatory
authorities before it can commence clinical trials or marketing of the product in those countries or jurisdictions. The approval process ultimately varies between countries and jurisdictions and can involve additional product testing and additional
administrative review periods. The time required to obtain approval in other countries and jurisdictions might differ from and be longer than that required to obtain FDA approval. Regulatory approval in one country or jurisdiction does not ensure
regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country or jurisdiction may negatively impact the regulatory process in others.
Clinical Trial Approval in the EU
Pursuant to the currently applicable
Clinical Trials Directive 2001/20/EC and the Directive 2005/28/EC on Good Clinical Practice, or GCP, an applicant must obtain approval from the competent national authority of the EU Member State in which the clinical trial is to be conducted. If
the clinical trial is conducted in different EU Member States, the competent authorities in each of these EU Member States must provide their approval for the conduct of the clinical trial. Furthermore, the applicant may only start a clinical trial
at a specific study site after the competent ethics committee has issued a favorable opinion.
In April 2014, the EU adopted a
new Clinical Trials Regulation (EU) No 536/2014, which is set to replace the current Clinical Trials Directive 2001/20/EC. The new Clinical Trials Regulation will be directly applicable to and binding in all 28 EU Member States without the need for
any national implementing legislation. The new Clinical Trials Regulation (EU) No 536/2014 will become applicable in 2018. It will overhaul the current system of approvals for clinical trials in the EU. Specifically, the new legislation aims at
simplifying and streamlining the approval of clinical trials in the EU. Under the new coordinated procedure for the approval of clinical trials, the sponsor of a clinical trial will be required to submit a single application for approval of a
clinical trial to a
23
reporting EU Member State (RMS) through an EU Portal. The submission procedure will be the same irrespective of whether the clinical trial is to be conducted in a single EU Member State or in
more than one EU Member State. The Clinical Trials Regulation also aims to streamline and simplify the rules on safety reporting for clinical trials.
Marketing Authorization
In the EU, marketing authorizations for medicinal
products may be obtained through several different procedures founded on the same basic regulatory process.
The centralized
procedure provides for the grant of a single marketing authorization that is valid for all EU Member States. The centralized procedure is compulsory for medicinal products produced by certain biotechnological processes, products designated as orphan
medicinal products, and products with a new active substance indicated for the treatment of certain diseases. It is optional for those products that are highly innovative or for which a centralized process is in the interest of patients. Under the
centralized procedure in the EU, the maximum timeframe for the evaluation of a marketing authorization application, or MAA, is 210 days, excluding clock stops, when additional written or oral information is to be provided by the applicant in
response to questions asked by the Committee for Medicinal Products for Human use or CHMP. Accelerated evaluation may be granted by the CHMP in exceptional cases. These are defined as circumstances in which a medicinal product is expected to be of a
major public health interest. Three cumulative criteria must be fulfilled in such circumstances: the seriousness of the disease, such as severely disabling or life-threatening diseases, to be treated; the absence or insufficiency of an
appropriate alternative therapeutic approach; and anticipation of high therapeutic benefit. In these circumstances, the EMA ensures that the opinion of the CHMP is given within 150 days.
The decentralized procedure provides for approval by one or more other concerned EU Member States of an assessment of an application for
marketing authorization conducted by one EU Member State, known as the reference EU Member State. In accordance with this procedure, an applicant submits an application for marketing authorization to the reference EU Member State and the concerned
EU Member States. This application is identical to the application that would be submitted to the EMA for authorization through the centralized procedure. The reference EU Member State prepares a draft assessment and drafts of the related materials
within 120 days after receipt of a valid application. The resulting assessment report is submitted to the concerned EU Member States which, within 90 days of receipt, must decide whether to approve the assessment report and related materials. If a
concerned EU Member State cannot approve the assessment report and related materials due to concerns relating to a potential serious risk to public health, disputed elements may be referred to the European Commission, whose decision is binding on
all EU Member States. In accordance with the mutual recognition procedure, the sponsor applies for national marketing authorization in one EU Member State. Upon receipt of this authorization the sponsor can then seek the recognition of this
authorization by other EU Member States. Authorization in accordance with either of these procedures will result in authorization of the medicinal product only in the reference EU Member State and in the other concerned EU Member States.
A marketing authorization may be granted only to an applicant established in the EU. Regulation No. 1901/2006 provides that, prior
to validating a marketing authorization in the EU, an applicant must demonstrate compliance with all measures included in a Pediatric Investigation Plan, or PIP, approved by the Pediatric Committee of the EMA, covering all subsets of the pediatric
population, unless the EMA has granted a product-specific waiver, class waiver, or a deferral for one or more of the measures included in the PIP.
Orphan Drug Designation and Exclusivity in the EU
Regulation (EC) No
141/2000 and Regulation (EC) No. 847/2000 provide that a product can be designated as an orphan medicinal product by the European Commission if its sponsor can establish that the product is intended for the diagnosis, prevention or treatment
of: (1) a life-threatening or chronically debilitating condition affecting not more than five in ten thousand persons in the EU when the application is made, or (2) a life-
24
threatening, seriously debilitating or serious and chronic condition in the EU and that without incentives the medicinal product is unlikely to be developed. For either of these conditions, the
applicant must demonstrate that there exists no satisfactory method of diagnosis, prevention or treatment of the condition in question that has been authorized in the EU or, if such method exists, the medicinal product will be of significant benefit
to those affected by that condition. The criteria required to obtain orphan status will be reevaluated at the time of MAA review and must still be met in order to retain orphan status.
Once authorized, orphan medicinal products are entitled to ten years of market exclusivity in all EU Member States and, in addition, a
range of other benefits during the development and regulatory review process, including scientific assistance for study protocols, authorization through the centralized marketing authorization procedure covering all member countries and a reduction
or elimination of registration and marketing authorization fees. However, marketing authorization may be granted to a similar medicinal product with the same orphan indication during the ten year period with the consent of the marketing
authorization holder for the original orphan medicinal product or if the manufacturer of the original orphan medicinal product is unable to supply sufficient quantities. Marketing authorization may also be granted to a similar medicinal product with
the same orphan indication if the product is safer, more effective or otherwise clinically superior to the original orphan medicinal product. The period of market exclusivity may, in addition, be reduced to six years if it can be demonstrated on the
basis of available evidence that the original orphan medicinal product is sufficiently profitable not to justify maintenance of market exclusivity.
Pharmaceutical Coverage, Pricing and Reimbursement
In the United
States and markets in other countries, patients who are prescribed treatments for their conditions and providers performing the prescribed services generally rely on third-party payors to reimburse all or part of the associated healthcare costs.
Significant uncertainty exists as to the coverage and reimbursement status of products approved by the FDA and other government authorities. Thus, even if a product candidate is approved, sales of the product will depend, in part, on the extent to
which third-party payors, including government health programs in the United States such as Medicare and Medicaid, commercial health insurers and managed care organizations, provide coverage, and establish adequate reimbursement levels for, the
product. The process for determining whether a payor will provide coverage for a product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the product once coverage is approved. Third-party
payors are increasingly challenging the prices charged, examining the medical necessity, and reviewing the cost-effectiveness of medical products and services and imposing controls to manage costs. Third-party payors may limit coverage to specific
products on an approved list, also known as a formulary, which might not include all of the approved products for a particular indication.
In order to secure coverage and reimbursement for any product that might be approved for sale, a company may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical
necessity and cost-effectiveness of the product, in addition to the costs required to obtain FDA or other comparable marketing approvals. Nonetheless, product candidates may not be considered medically necessary or cost effective. A decision by a
third-party payor not to cover a product candidate could reduce physician utilization once the product is approved and have a material adverse effect on sales, results of operations and financial condition. Additionally, a payors decision to
provide coverage for a 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 and
reimbursement for the product, and the level of coverage and reimbursement can differ significantly from payor to payor.
The
containment of healthcare costs also has become a priority of federal, state and foreign governments and the prices of drugs have been a focus in this effort. Governments have shown significant interest in implementing cost-containment programs,
including price controls, restrictions on reimbursement and requirements for substitution of generic products. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing
controls and measures, could further limit a
25
companys revenue generated from the sale of any approved products. Coverage policies and third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement
status is attained for one or more products for which a company or its collaborators receive marketing approval, less favorable coverage policies and reimbursement rates may be implemented in the future.
Outside the United States, ensuring adequate coverage and payment for a product also involves challenges. Pricing of prescription
pharmaceuticals is subject to governmental control in many countries. Pricing negotiations with governmental authorities can extend well beyond the receipt of regulatory marketing approval for a product and may require a clinical trial that compares
the cost effectiveness of a product to other available therapies. The conduct of such a clinical trial could be expensive and result in delays in commercialization.
In the European Union, pricing and reimbursement schemes vary widely from country to country. Some countries provide that products may be marketed only after a reimbursement price has been agreed. Some
countries may require the completion of additional studies that compare the cost-effectiveness of a particular drug candidate to currently available therapies or so called health technology assessments, in order to obtain reimbursement or pricing
approval. For example, the European Union provides options for its member states to restrict the range of products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use.
European Union member states may approve a specific price for a product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the product on the market. Other member states allow companies to fix
their own prices for products, but monitor and control prescription volumes and issue guidance to physicians to limit prescriptions. Recently, many countries in the European Union have increased the amount of discounts required on pharmaceuticals
and these efforts could continue as countries attempt to manage healthcare expenditures, especially in light of the severe fiscal and debt crises experienced by many countries in the European Union. The downward pressure on health care costs in
general, particularly prescription drugs, has become intense. As a result, increasingly high barriers are being erected to the entry of new products. Political, economic and regulatory developments may further complicate pricing negotiations, and
pricing negotiations may continue after reimbursement has been obtained. Reference pricing used by various European Union member states, and parallel trade, i.e., arbitrage between low-priced and high-priced member states, can further reduce prices.
There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any products, if approved in those countries.
Healthcare Law and Regulation
Healthcare providers and third-party payors play a primary role in the recommendation and prescription of drug products that are granted marketing approval. Arrangements with providers, consultants,
third-party payors and customers are subject to broadly applicable fraud and abuse, anti-kickback, false claims laws, reporting of payments to physicians and teaching physicians, patient privacy laws and regulations, and other healthcare laws and
regulations that may constrain business and/or financial arrangements. Restrictions under applicable federal and state healthcare laws and regulations include the following:
|
|
|
the federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, paying,
receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made, in whole
or in part, under a federal healthcare program such as Medicare and Medicaid;
|
|
|
|
the federal civil and criminal false claims laws, including the civil False Claims Act, and civil monetary penalties laws, which prohibit individuals
or entities from, among other things, knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false, fictitious or fraudulent or knowingly making, using or causing to be made or used a false record or
statement to avoid, decrease or conceal an obligation to pay money to the federal government.
|
26
|
|
|
the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created additional federal criminal laws that prohibit, among
other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;
|
|
|
|
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and their respective implementing regulations, including
the Final Omnibus Rule published in January 2013, which impose obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;
|
|
|
|
the federal false statements statute, which prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any
materially false statement in connection with the delivery of or payment for healthcare benefits, items or services;
|
|
|
|
the federal transparency requirements known as the federal Physician Payments Sunshine Act, under the Patient Protection and Affordable Care Act, as
amended by the Health Care Education Reconciliation Act, or the Affordable Care Act, which requires certain manufacturers of drugs, devices, biologics and medical supplies to report annually to the Centers for Medicare & Medicaid Services,
or CMS, within the United States Department of Health and Human Services, information related to payments and other transfers of value made by that entity to physicians and teaching hospitals, as well as ownership and investment interests held by
physicians and their immediate family members; and
|
|
|
|
analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws and transparency statutes, which may apply to
healthcare items or services that are reimbursed by third-party payors, including private insurers.
|
Some
state laws require pharmaceutical companies to comply with the pharmaceutical industrys voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring drug manufacturers to
report information related to payments and transfers of value to other health care providers and health care entities, or marketing expenditures. State and foreign laws also govern 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.
Healthcare Reform
A primary trend in the United States healthcare
industry and elsewhere is cost containment. There have been a number of federal and state proposals during the last few years regarding the pricing of pharmaceutical and biopharmaceutical products, limiting coverage and reimbursement for drugs and
other medical products, government control and other changes to the healthcare system in the United States.
By way of
example, the United States and state governments continue to propose and pass legislation designed to reduce the cost of healthcare. In March 2010, the United States Congress enacted the Affordable Care Act, or ACA, which, among other things,
includes changes to the coverage and payment for products under government health care programs. In January 2017, Congress voted to adopt a budget resolution for fiscal year 2017, or the Budget Resolution, that authorizes the implementation of
legislation that would repeal portions of the ACA. The Budget Resolution is not a law, however, it is widely viewed as the first step toward the passage of legislation that 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.
Other legislative changes have been proposed and adopted in the United States since the ACA was enacted. For example, in
August 2011, the Budget Control Act of 2011, among other things, created measures for
27
spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2012 through 2021,
was unable to reach required goals, thereby triggering the legislations automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providers of up to 2% per fiscal year, which went into
effect in April 2013 and will remain in effect through 2024 unless additional Congressional action is taken. In January 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, further reduced
Medicare payments to several providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.
With the new Administration and Congress, there will likely be additional legislative changes, including repeal and replacement of
certain provisions of the ACA. It remains to be seen, however, precisely what the new legislation will provide, when it will be enacted and what impact it will have on the availability of healthcare and containing or lowering the cost of healthcare.
Such reforms could have an adverse effect on anticipated revenue from product candidates that we may successfully develop and for which we may obtain marketing approval and may affect our overall financial condition and ability to develop product
candidates.
Segment Reporting
We are engaged solely in the discovery and development of innovative small molecule drug therapies for infectious diseases and immune system disorders. Accordingly, we have determined that we operate in
one operating segment.
Employees
As of February 20, 2017, we had 81 full-time employees, 33 of whom hold doctoral degrees. Approximately 60 of our employees are engaged in research and development, with the remainder engaged in
administration, finance and business development functions. None of our employees is represented by a labor union or covered by collective bargaining agreements. We believe our relations with our employees are good.
Information Available on the Internet
Our Internet address is www.achillion.com. We are not including the information contained in our website as part of, or incorporating it by reference into, this Annual Report on Form 10-K. We make
available free of charge through our website our Annual Reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended, or the Exchange Act, as soon as reasonably practicable after we electronically file such materials with the Securities and Exchange Commission, or the SEC. We also make available on our website our corporate
governance guidelines, the charters for our audit committee, nominating and corporate governance committee, compensation committee, and strategy committee, and our code of business conduct and ethics, which applies to our directors, officers and
employees, and such information is available in print and free of charge to any of our stockholders who requests it. In addition, we intend to disclose on our website any amendments to, or waivers from, our code of business conduct and ethics that
are required to be publicly disclosed pursuant to rules of the SEC.
28
Executive Officers of the Registrant
|
|
|
|
|
|
|
Name
|
|
Age
|
|
|
Position
|
Milind S. Deshpande, Ph.D.
|
|
|
60
|
|
|
President and Chief Executive Officer, Director
|
Mary Kay Fenton
|
|
|
52
|
|
|
Executive Vice President and Chief Financial Officer
|
David Apelian, M.D., Ph.D.
|
|
|
51
|
|
|
Executive Vice President and Chief Medical Officer
|
Joel Barrish, Ph.D.
|
|
|
59
|
|
|
Executive Vice President and Chief Scientific Officer
|
Martha Manning, Esq.
|
|
|
62
|
|
|
Executive Vice President, General Counsel and Corporate Secretary
|
Joseph Truitt
|
|
|
52
|
|
|
Executive Vice President and Chief Commercial Officer
|
Milind S. Deshpande, Ph.D., President and Chief Executive Officer.
Dr. Deshpande was
appointed our President and Chief Executive Officer in May 2013, at which time he was also elected to our board of directors. Prior to that, he was our President of Research and Development and Chief Scientific Officer. Prior to joining Achillion in
September 2001, Dr. Deshpande was Associate Director of Lead Discovery and Early Discovery Chemistry at the Pharmaceutical Research Institute at Bristol-Myers Squibb, a pharmaceutical company, from 1991 to 2001, where he managed the
identification of new clinical candidates to treat infectious and neurological diseases. From 1988 to 1991, he held a faculty position at Boston University Medical School. Dr. Deshpande is on the board of directors of Spero Therapeutics, a
biotechnology company. Dr. Deshpande received his Ph.D. in Organic Chemistry from Ohio University, following his undergraduate education in India.
Mary Kay Fenton, Executive Vice President and Chief Financial Officer.
Prior to joining Achillion in October 2000, Ms. Fenton, a certified public accountant, held various positions within the
Technology Industry Group at PricewaterhouseCoopers LLP, an independent registered public accounting firm, from 1991 to 2000, most recently as Senior Manager responsible for the life sciences practice in Connecticut. Prior to 1991, Ms. Fenton
was an economic development associate in the nonprofit sector. Ms. Fenton is on the Executive Committee of the board of directors of Connecticut Business and Industry Association, a representative business organization. Ms. Fenton holds an
M.B.A. in Finance from the Graduate School of Business at the University of Connecticut and an A.B. in Economics from the College of the Holy Cross.
David Apelian, M.D, Ph.D., Executive Vice President and Chief Medical Officer.
Prior to Joining Achillion in May 2013, Dr. Apelian was Senior Vice President and Chief Medical Officer at
GlobeImmune, a biopharmaceutical company, from 2005 to 2013, where he was responsible for clinical development, regulatory affairs, clinical immunology, development of companion diagnostics, as well as target discovery and preclinical research.
Prior to GlobeImmune, Dr. Apelian was Clinical Director in the Infectious Diseases Group at
Bristol-Myers
Squibb, or BMS, a pharmaceutical company, serving as medical co-lead for the clinical development
and NDA submission of entecavir for chronic hepatitis B viral infection. Prior to BMS, Dr. Apelian served as Clinical Director in the Department of Hepatology/Gastroenterology at Schering Plough, a pharmaceutical company, coordinating a
supplemental NDA filing for interferon alpha-2b and ribavirin for the treatment of pediatric patients with chronic hepatitis C viral infection. Dr. Apelian completed his residency training in Pediatrics at New York Hospital, Cornell Medical
Center. He received his M.D. from the University of Medicine and Dentistry of New Jersey, and his Ph.D. in Biochemistry and B.A. from Rutgers University. He also holds an M.B.A. from Quinnipiac University.
Joel Barrish. Ph.D. Executive Vice President and Chief Scientific Officer.
Prior to joining Achillion in
January 2016, Dr. Barrish was Vice President and Head of Discovery Chemistry at Bristol-Myers Squibb, a pharmaceutical company, from December 2010 to December 2015, leading chemical research on small molecules and other modalities across all
therapeutic areas and sites. Prior to that role, from January 1990 to December 2010, he was responsible for teams at BMS that advanced more than 20 compounds into clinical development including
SPRYCEL
®
(dasatinib), a marketed kinase inhibitor used for the treatment of chronic myelogenous leukemia, which
he co-invented. He and his co-inventors received the 2008 Thomas Alva Edison Patent Award for its discovery. Dr. Barrish has co-authored over 120 peer-reviewed publications, is a co-inventor on more than 35 issued U.S. patents, and has been
invited to give more than 40 lectures at international
29
conferences and universities. In 2010, Dr. Barrish was elected to the Executive Committee of the American Chemical Society Medicinal Chemistry Division and served as its Chair in 2013. He
was named an American Chemical Society Fellow in 2012. Dr. Barrish is also a Scientific Advisory Board member for the chemistry departments at the University of Pennsylvania. Dr. Barrish graduated summa cum laude in Chemistry from the
University of Pennsylvania and received a doctorate in Organic Chemistry from Columbia University.
Martha Manning, Esq.,
Executive Vice President, General Counsel and Corporate Secretary.
Prior to joining Achillion in February 2016, Ms. Manning was General Counsel of iCeutica Inc., a drug development company from 2013 to 2016. She served as Chief Legal
Officer of OraPharma, Inc., a pharmaceutical company, from 2011 to 2012 when the company was acquired by Valeant Pharmaceuticals, Inc. She joined OraPharma from Sandoz Inc., the generic pharmaceutical division of Novartis AG, where she served as
Vice President and General Counsel from 2008 to 2011. Prior to Sandoz, she served as Senior Vice President, General Counsel and Secretary for Adolor Corporation, a publicly traded biopharmaceutical company from 2002 to 2008. Ms. Manning began
her legal career with the law firm of Morgan, Lewis & Bockius. She received her J.D. from the University of Pennsylvania School of Law and her Bachelor of Business Administration from the University of Massachusetts.
Joseph Truitt, Executive Vice President and Chief Commercial Officer.
Prior to joining Achillion in January 2009, Mr. Truitt
was Vice President of Business Development and Product Strategy for Lev Pharmaceuticals, Inc., a biotechnology company, from October 2007 to December 2008. From July 2006 through September 2007, he served as Levs Vice President of Sales and
Marketing and led the build out of the commercial team and infrastructure in preparation for product launch. From February 2002 to July 2006, Mr. Truitt was Vice President of Sales and Operations at Johnson & Johnson, a pharmaceutical
company, where he directed commercial operations at the companys OraPharma subsidiary. From 2000 to 2002, Mr. Truitt was Vice President of Sales and Operations of OraPharma, Inc., a pharmaceutical company, prior to its acquisition by
Johnson & Johnson. Mr. Truitt holds an M.B.A. from St. Josephs University, Philadelphia and a B.S. in Marketing from LaSalle University, Philadelphia.
30
The
following risk factors and other information included in this Annual Report on Form 10-K should be carefully considered. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently
known to us or that we presently deem less significant may also impair our business operations. Please see page 1 of this Annual Report on Form 10-K for a discussion of some of the forward-looking statements that are qualified by these risk factors.
If any of the following risks occur, our business, financial condition, results of operations and future growth prospects could be materially and adversely affected.
Risks Related to the Discovery and Development of Our Drug Candidates
Our approach to
the discovery and development of drug candidates that target complement alternative pathway factor D inhibition is unproven, and we do not know whether we will be able to develop any products of commercial value.
We are focused on the research and development of our complement inhibitor platform, pursuant to which we are initially targeting
complement factor D, an essential protein of the complement alternative pathway that is a part of the human innate immune system. Our complement inhibitor platform is focused on advancing small molecule compounds that inhibit the alternative
pathway, and have the potential to be used in the treatment of immune-related diseases where the complement pathway plays a critical role. We anticipate that our complement inhibitor platform may play a role in addressing needs of patients with
paroxysmal nocturnal hemoglobinuria, or PNH, including patients who have suboptimal response to, or who fail to respond to, currently approved treatments for PNH, and C3 glomerulopathy, or C3G, as well as the needs of patients with other
complement-mediated diseases where the alternative pathway plays a significant role, such as dry age-related macular degeneration, or dry AMD.
Our approach to the discovery and development of drug candidates that target the alternative pathway is unproven. While complement factor D is a clinically validated target in certain ophthalmic diseases,
it is unproven in demonstrating efficacy in systemic diseases. We are currently only in the early clinical testing stages for our most advanced drug candidate under this program with other drug candidates in the discovery and preclinical phases. We
may not successfully develop any medicines that target alternative pathway inhibition, and even if we are successful in early development, any medicines that we develop may not effectively inhibit the alternative pathway, or provide a clinical
benefit. Even if we are able to develop a product candidate that effectively inhibits complement factor D in preclinical studies, we may not succeed in demonstrating safety and efficacy of the product candidate in human clinical trials. Our focus on
using our proprietary technology to identify drug candidates targeting the alternative pathway may not result in the discovery and development of commercially viable medicines to treat human disease.
If we are unable to develop, obtain marketing approval for or successfully commercialize drug candidates, either alone or through a collaboration, or
if we experience significant delays in doing so, our business could be materially harmed.
We currently have no products
approved for sale and are investing substantially all of our efforts and financial resources on the development of our complement inhibitor platform. Moreover, under the Janssen Agreement, we granted Janssen exclusive worldwide rights to develop and
commercialize our portfolio of HCV product candidates. Our prospects are substantially dependent on our ability, or that of any collaborator, including Janssen, to develop, obtain marketing approval for, and successfully commercialize at least one
drug candidate in one or more disease indications based upon our programs.
The success of our complement inhibitor platform
as well as our HCV program in collaboration with Janssen, will depend on several factors, including the following:
|
|
|
initiation, successful enrollment and completion of clinical trials;
|
31
|
|
|
safety, tolerability and efficacy profiles that are satisfactory to the U.S. Food and Drug Administration, or FDA, or any comparable foreign regulatory
authority for marketing approval;
|
|
|
|
timely receipt of marketing approvals from applicable regulatory authorities;
|
|
|
|
the performance of our collaborators;
|
|
|
|
the extent of any required post-marketing approval commitments to applicable regulatory authorities;
|
|
|
|
establishment of supply arrangements with third party raw materials suppliers and manufacturers;
|
|
|
|
establishment of arrangements with third party manufacturers to obtain finished drug products that are appropriately packaged for sale;
|
|
|
|
obtaining and maintaining patent, trade secret protection and regulatory exclusivity, both in the United States and internationally;
|
|
|
|
protection of our rights in our intellectual property portfolio;
|
|
|
|
successful commercial launch following any marketing approval;
|
|
|
|
a continued acceptable safety profile following any marketing approval; and
|
|
|
|
commercial acceptance of our products or those of our collaborators, if and when approved, by patients, the medical community and third party payors;
|
The success of our complement inhibitor platform also depends on our ability to compete with other marketed
therapies for complement-mediated disease such as those from Alexion Pharmaceuticals, Inc., and other potential therapies in development by Akari Therapeutics PLC, Alnylam Pharmaceuticals, Inc., Amyndas Pharmaceuticals S.A., Apellis Pharmaceuticals,
Inc., BioCryst Pharmaceuticals, Inc., ChemoCentryx, Inc., Genentech, Inc., Omeros Corporation, Ra Pharmaceuticals Inc. and True North Therapeutics, Inc. Additionally, Novartis AG also has intellectual property rights in the complement area.
Under the terms of our collaboration, Janssen has significant discretion in determining the efforts and resources that they
will apply to development and any future commercialization of the drug candidates in our HCV program. For example, development plans and strategies are conducted in accordance with a plan and budget approved by a joint committee as to which Janssen
generally has final decision-making authority, and, subject to specified diligence requirements, Janssen has full discretion over commercialization plans and strategies. Currently, Janssen is only pursuing clinical development of one of the three
HCV compounds we licensed to Janssen under the collaboration.
Many of the factors on which our success is dependent are
beyond our control, including clinical development, the regulatory submission process, potential threats to our intellectual property rights and the manufacturing, marketing and sales efforts of our current and any future collaborators. If we or our
collaborators are unable to develop, receive marketing approval for and successfully commercialize products based on our technologies, or experience delays as a result of any of these factors or otherwise, our business could be substantially harmed.
Results of preclinical studies and early clinical trials may not be predictive of results of future clinical trials.
The outcome of preclinical studies and early clinical trials may not be predictive of the success of later clinical trials, and interim
results of clinical trials do not necessarily predict success in future clinical trials. Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials after achieving positive
results in earlier development, and we cannot be certain that we will not face similar setbacks. The design of a clinical trial can determine whether its results will support approval of a product and flaws in the design of a clinical trial may not
become apparent until the clinical trial is well advanced. We have limited
32
experience in designing clinical trials and may be unable to design and execute a clinical trial to support marketing approval. In addition, preclinical and clinical data are often susceptible to
varying interpretations and analyses. Many companies that believed their drug candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval for the drug candidates. Even if we, or
any current or future collaborators, believe that the results of clinical trials for our drug candidates warrant marketing approval, the FDA or comparable foreign regulatory authorities may disagree and may not grant marketing approval of our drug
candidates.
In some instances, there can be significant variability in safety or efficacy results between different clinical
trials of the same drug candidate due to numerous factors, including changes in trial procedures set forth in protocols, differences in the size and type of the patient populations, variability of the disease being studied, changes in and adherence
to the dosing regimen and other clinical trial protocols and the rate of dropout among clinical trial participants. If we fail to receive positive results in clinical trials of our drug candidates, the development timeline and regulatory approval
and commercialization prospects for our most advanced drug candidates, and, correspondingly, our business and financial prospects would be negatively impacted.
We may expend our resources to pursue a particular drug candidate or indication and fail to capitalize on drug candidates or indications that may be more profitable or for which there is a greater
likelihood of success.
Our resource allocation decisions may cause us to fail to capitalize on viable commercial products
or profitable market opportunities. Our spending on current and future research and development programs and drug candidates for specific indications may not yield any commercially viable drug candidates. If we do not accurately evaluate the
commercial potential or target market for a particular drug candidate, we may relinquish valuable rights to that drug candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for
us to retain sole development and commercialization rights to the drug candidate.
Clinical drug development involves a lengthy and
expensive process with an uncertain outcome.
Clinical testing is expensive, time-consuming and uncertain as to outcome. We
cannot guarantee that any clinical trials will be conducted as planned or completed on schedule, if at all. The clinical development of our drug candidates is susceptible to the risk of failure inherent at any stage of drug development, including
failure to demonstrate efficacy in a clinical trial or across a broad population of patients, the occurrence of adverse events that are severe or medically or commercially unacceptable, failure to comply with protocols or applicable regulatory
requirements and determination by the FDA or any comparable foreign regulatory authority that a drug candidate may not continue development or is not approvable. It is possible that even if one or more of our drug candidates has a beneficial effect,
that effect will not be detected during clinical evaluation as a result of one or more of a variety of factors, including the size, duration, design, measurements, conduct or analysis of any clinical trials. Conversely, as a result of the same
factors, any clinical trials may indicate an apparent positive effect of a drug candidate that is greater than the actual positive effect, if any. Similarly, in any clinical trials we may fail to detect toxicity of or intolerability caused by our
drug candidates, or mistakenly believe that our drug candidates are toxic or not well tolerated when that is not in fact the case.
Additional factors that may negatively impact our clinical development efforts include:
|
|
|
delay or failure in obtaining approval by institutional review board or similar reviewing entities to conduct a clinical trial at each site;
|
|
|
|
delay or failure in reaching agreement on acceptable terms with prospective contract research organizations, and clinical trial sites, the terms of
which can be subject to extensive negotiation and may vary significantly among different contract research organizations and trial sites;
|
33
|
|
|
clinical sites and investigators deviating from trial protocol, failing to conduct the trial in accordance with regulatory requirements, or dropping
out of a trial;
|
|
|
|
slow patient enrollment, particularly in rare diseases being studied;
|
|
|
|
delay or failure in having patients complete a trial or return for post-treatment follow-up;
|
|
|
|
disruption of clinical supply or clinical operations at our clinical trial sites;
|
|
|
|
adverse medical events or side effects in treated patients, and the threat of legal claims and litigation alleging injuries;
|
|
|
|
lack of effectiveness or safety of the product candidate being tested; and
|
|
|
|
decisions by regulatory authorities, the institutional review board, ethics committee, or us, or recommendation by a data safety monitoring board, to
suspend or terminate clinical trials at any time for safety issues or for any other reason.
|
Our failure to
successfully initiate and complete clinical trials of our drug candidates and to demonstrate the efficacy and safety necessary to obtain regulatory approval to market any of our drug candidates would significantly harm our business.
If clinical trials of our drug candidates fail to satisfactorily demonstrate safety and efficacy to the FDA and other regulators, we, or any current
or future collaborators, may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of these drug candidates.
We, and any current or future collaborators, are not permitted to commercialize, market, promote or sell any drug candidate in the United
States without obtaining marketing approval from the FDA. Foreign regulatory authorities, such as the European Medicines Agency, or the EMA, impose similar requirements. We, and any current or future collaborators, may never receive such approvals.
We, and any current or future collaborators, must complete extensive preclinical development and clinical trials to demonstrate the safety and efficacy of our drug candidates in humans before we, or they, will be able to obtain these approvals.
Clinical testing is expensive, difficult to design and implement, can take many years to complete and is inherently uncertain
as to outcome. In addition, our interest in developing potential therapies for rare diseases for which there is no currently available treatment, such as C3G, makes the difficulty in study design and outcome more challenging, as the appropriate
endpoints for obtaining approval from regulatory authorities have not been previously defined. Additionally, the clinical course of C3G is highly variable and it may be difficult to identify appropriate patients for clinical studies. PNH and C3G are
chronic conditions and regulatory authorities may require clinical trials for longer periods than anticipated by us. Any inability to successfully complete preclinical and clinical development could result in additional costs to us, or any current
or future collaborators, and impair our ability to generate revenues from product sales, regulatory and commercialization milestones and royalties. Moreover, if (1) we, or any current or future collaborators, are required to conduct additional
clinical trials or other testing of our drug candidates beyond the trials and testing that we, or they contemplate, (2) we, or any current or future collaborators, are unable to successfully complete clinical trials of our drug candidates or
other testing, (3) the results of these trials or tests are unfavorable, uncertain or are only modestly favorable, or (4) there are unacceptable safety concerns associated with our drug candidates, we, or any current or future
collaborators, in addition to incurring additional costs, may:
|
|
|
be delayed in obtaining marketing approval for our drug candidates;
|
|
|
|
not obtain marketing approval at all;
|
|
|
|
obtain approval for indications or patient populations that are not as broad as intended or desired;
|
|
|
|
obtain approval with labeling that includes significant use or distribution restrictions or significant safety warnings, including boxed warnings;
|
34
|
|
|
be subject to additional post-marketing testing or other requirements; or
|
|
|
|
be required to remove the product from the market after obtaining marketing approval.
|
Adverse events or undesirable side effects caused by, or other unexpected properties of, any of our drug candidates may be identified during
development that could delay or prevent their marketing approval or limit their use.
Adverse events or undesirable side
effects caused by, or other unexpected properties of, our drug candidates could cause us, any current or future collaborators, an institutional review board or regulatory authorities to interrupt, delay or halt clinical trials of one or more of our
drug candidates and could result in a more restrictive label or FDA requirement for a risk evaluation and mitigation strategy, or REMS, or the delay or denial of marketing approval by the FDA or comparable foreign regulatory authorities. For
example, treatment with complement inhibitors like our factor D inhibitor ACH-4471 may decrease the bodys ability to fend off infection by certain types of pathogens. Treatment with the marketed complement C5 inhibitor, Soliris, is associated
with increased risk for certain types of infection, including meningococcal infection. For this reason, patients treated with complement inhibitors, including patients treated in our future clinical trials, may be vaccinated for pathogens known to
have increased risk of infection with complement deficiency or inhibition and may also be treated with prophylactic antibiotics in an effort to reduce the risk of an adverse event resulting from an infection. However, there is a risk that
vaccination and/or prophylactic antibiotics will not prevent or reduce the risk of infections, including meningococcal infection.
Other adverse events may occur. In our ongoing phase I multiple ascending does study of ACH-4471 in healthy volunteers, two cases of self-limited, ALT elevations (Grade 3 and 4) were observed
post-treatment in the two highest dose groups, with neither subject exhibiting signs or symptoms of liver decompensation. Both subjects ALT levels normalized without intervention during follow up. Further, no treatment-associated fever or
infections were observed. ALT is a liver enzyme measure to see whether a liver is damaged or diseased. There is a risk that increases in ALT will be seen in other healthy subjects or patients dosed with ACH-4471. In addition, in Janssens phase
IIa clinical trial of a triple combination regimen consisting of Olysio (simeprevir), AL-335, and odalasvir for HCV, one trial participant experienced a Mobitz Type 1 2nd degree atrioventricular block that was deemed a serious adverse event and
probably related to odalasvir and possibly related to AL-335 and simeprevir. The event was not associated with clinical or echocardiographic abnormalities, did not require any therapeutic intervention, resolved following treatment discontinuation,
and the patient went on to achieve a sustained viral response 24 weeks after cessation of therapy.
If any of our drug
candidates is associated with adverse events or undesirable side effects or has properties that are unexpected, we, or any current or future collaborators, may need to abandon development or limit development of that drug candidate to certain uses
or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. Many compounds that initially showed promise in clinical or earlier stage testing
have later been found to cause undesirable or unexpected side effects that prevented further development of the compound.
If we, or any
current or future collaborators, experience any of a number of possible unforeseen events in connection with clinical trials of our drug candidates, potential marketing approval or commercialization of our drug candidates could be delayed or
prevented.
We, or any current or future collaborators, may experience numerous unforeseen events during, or as a result
of, clinical trials that could delay or prevent marketing approval or commercialization of our drug candidates, including:
|
|
|
clinical trials of our drug candidates may produce unfavorable or inconclusive results;
|
|
|
|
we, or any current or future collaborators, may decide, or regulators may require us or them, to conduct additional clinical trials or abandon product
development programs;
|
35
|
|
|
the number of patients required for clinical trials of our drug candidates may be larger than we, or any current or future collaborators, anticipate,
patient enrollment in these clinical trials may be slower than we, or any current or future collaborators, anticipate or participants may drop out of these clinical trials at a higher rate than we, or any current or future collaborators, anticipate;
|
|
|
|
the cost of planned clinical trials of our drug candidates may be greater than we anticipate;
|
|
|
|
our third party contractors or those of any current or future collaborators, including those manufacturing our drug candidates or components or
ingredients thereof or conducting clinical trials on our behalf or on behalf of any current or future collaborators, may fail to comply with regulatory requirements or meet their contractual obligations to us or any current or future collaborators
in a timely manner or at all;
|
|
|
|
regulators or institutional review boards may not authorize us, any current or future collaborators or our or their investigators to commence a
clinical trial or conduct a clinical trial at a prospective trial site;
|
|
|
|
we, or any current or future collaborators, may have delays in reaching or fail to reach agreement on acceptable clinical trial contracts or clinical
trial protocols with prospective trial sites;
|
|
|
|
patients that enroll in a clinical trial may misrepresent their eligibility to do so or may otherwise not comply with the clinical trial protocol,
resulting in the need to drop the patients from the clinical trial, increase the needed enrollment size for the clinical trial or extend the clinical trials duration;
|
|
|
|
we, or any current or future collaborators, may have to delay, suspend or terminate clinical trials of our drug candidates for various reasons,
including a finding that the participants are being exposed to unacceptable health risks, undesirable side effects or other unexpected characteristics of the drug candidate;
|
|
|
|
regulators or institutional review boards may require that we, or any current or future collaborators, or our or their investigators suspend or
terminate clinical research for various reasons, including noncompliance with regulatory requirements or their standards of conduct, a finding that the participants are being exposed to unacceptable health risks, undesirable side effects or other
unexpected characteristics of the drug candidate or findings of undesirable effects caused by a chemically or mechanistically similar drug or drug candidate;
|
|
|
|
the FDA or comparable foreign regulatory authorities may disagree with our, or any current or future collaborators, clinical trial designs or our
or their interpretation of data from preclinical studies and clinical trials;
|
|
|
|
the FDA or comparable foreign regulatory authorities may fail to approve or subsequently find fault with the manufacturing processes or facilities of
third party manufacturers with which we, or any current or future collaborators, enter into agreements for clinical and commercial supplies;
|
|
|
|
the supply or quality of raw materials or manufactured drug candidates or other materials necessary to conduct clinical trials of our drug candidates
may be insufficient, inadequate or not available at an acceptable cost, or we may experience interruptions in supply; and
|
|
|
|
the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our
clinical data insufficient to obtain marketing approval.
|
Product development costs for us, or any current
or future collaborators, will increase if we, or they, experience delays in testing or pursuing marketing approvals and we, or they, may be required to obtain additional funds to complete clinical trials and prepare for possible commercialization of
our drug candidates. We do not know whether any preclinical tests or clinical trials will begin as planned, will need to be restructured, or will be completed on schedule or at all. Significant preclinical or clinical trial delays also could shorten
any periods during which we, or any current or future collaborators, may have the exclusive right to commercialize our drug candidates or allow our competitors, or the competitors of any current or future collaborators, to bring
36
products to market before we, or any current or future collaborators, do and impair our ability, or the ability of any current or future collaborators, to successfully commercialize our drug
candidates and may harm our business and results of operations. In addition, many of the factors that lead to clinical trial delays may ultimately lead to the denial of marketing approval of any of our drug candidates.
If we, or any current or future collaborators, experience delays or difficulties in the enrollment of patients in clinical trials, our or their
receipt of necessary regulatory approvals could be delayed or prevented.
We, or any current or future collaborators, may
not be able to initiate or continue clinical trials for any of our drug candidates if we, or they, are unable to locate and enroll a sufficient number of eligible patients to participate in clinical trials. Patient enrollment is a significant factor
in the timing of clinical trials, and is affected by many factors, including:
|
|
|
the size and nature of the patient population, particularly for rare diseases such as PNH and C3G;
|
|
|
|
the severity of the disease under investigation;
|
|
|
|
the proximity of patients to clinical sites;
|
|
|
|
the eligibility criteria for the trial;
|
|
|
|
the design of the clinical trial;
|
|
|
|
efforts to facilitate timely enrollment;
|
|
|
|
competing clinical trials; and
|
|
|
|
clinicians and patients perceptions as to the potential advantages and risks of the drug being studied in relation to other available
therapies, including any new drugs that may be approved for the indications we are investigating.
|
Our
inability, or the inability of any current or future collaborators, to enroll a sufficient number of patients for our, or their, clinical trials could result in significant delays or may require us or them to abandon one or more clinical trials
altogether. Enrollment delays in our, or their, clinical trials may result in increased development costs for our drug candidates, delay or halt the development of and approval processes for our drug candidates and jeopardize our, or any current or
future collaborators, ability to commence sales of and generate revenues from our drug candidates, which could cause the value of our company to decline and limit our ability to obtain additional financing, if needed.
If any of our drug candidates receives marketing approval and we, or others, later discover that the drug is less effective than previously believed
or causes undesirable side effects that were not previously identified, our ability, or that of any current or future collaborators, to market the drug could be compromised.
Clinical trials of our drug candidates are expected to be conducted in carefully defined subsets of patients who have agreed to enter into
clinical trials. Consequently, it is possible that our clinical trials, or those of any current or future collaborator, may indicate an apparent positive effect of a drug candidate that is greater than the actual positive effect, if any, or
alternatively fail to identify undesirable side effects. If, following approval of a drug candidate, we, or others, discover that the drug is less effective than previously believed or causes undesirable side effects that were not previously
identified, any of the following adverse events could occur:
|
|
|
regulatory authorities may withdraw their approval of the drug;
|
|
|
|
we, or any current or future collaborators, may be required to recall the drug, change the way the drug is administered or conduct additional clinical
trials;
|
|
|
|
additional restrictions may be imposed on the marketing of, or the manufacturing processes for, the particular drug;
|
37
|
|
|
we may be subject to fines, injunctions or the imposition of civil or criminal penalties;
|
|
|
|
regulatory authorities may require the addition of labeling statements, such as a black box warning or a contraindication;
|
|
|
|
we, or any current or future collaborators, may be required to create a Medication Guide outlining the risks of the previously unidentified side
effects for distribution to patients;
|
|
|
|
we, or any current or future collaborators, could be sued and held liable for harm caused to patients;
|
|
|
|
the drug may become less competitive; and
|
|
|
|
our reputation may suffer.
|
Any of these events could have a material and adverse effect on our operations and business and could adversely impact our stock price.
Even if one of our drug candidates receives marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients, third party payors and others in the medical community
necessary for commercial success and the market opportunity for the drug candidate may be smaller than we estimate.
We
have never commercialized a product. Even if one of our drug candidates is approved by the appropriate regulatory authorities for marketing and sale, it may nonetheless fail to gain sufficient, or even any, market acceptance by physicians, patients,
third party payors, health authorities and others in the medical community. For example, physicians are often reluctant to switch their patients from existing therapies even when new and potentially more effective or convenient treatments enter the
market. Further, patients often acclimate to the therapy that they are currently taking and do not want to switch unless their physicians recommend switching products or they are required to switch therapies due to lack of reimbursement for existing
therapies.
Efforts to educate the medical community and third party payors on the benefits of our drug candidates may require
significant resources and may not be successful. If any of our drug candidates is approved but does not achieve an adequate level of market acceptance, we may not generate significant revenues and we may not become profitable. The degree of market
acceptance of our drug candidates, if approved for commercial sale, will depend on a number of factors, including:
|
|
|
the efficacy and safety of the product;
|
|
|
|
the potential advantages of the product compared to alternative treatments;
|
|
|
|
the prevalence and severity of any side effects;
|
|
|
|
the clinical indications for which the product is approved;
|
|
|
|
whether the product is designated under physician treatment guidelines as a first-line therapy or as a second- or third-line therapy;
|
|
|
|
limitations or warnings, including distribution or use restrictions, contained in the products approved labeling;
|
|
|
|
our ability, or the ability of any current or future collaborators, to offer the product for sale at competitive prices;
|
|
|
|
the products convenience and ease of administration compared to alternative treatments;
|
|
|
|
the willingness of the target patient population to try, and of physicians to prescribe, the product;
|
|
|
|
the strength of sales, marketing and distribution support;
|
|
|
|
the approval of other products for the same indications;
|
38
|
|
|
changes in the standard of care for the targeted indications for the product;
|
|
|
|
the timing of market introduction of our approved products as well as competitive products;
|
|
|
|
availability and amount of reimbursement from government payors, managed care plans and other third party payors;
|
|
|
|
adverse publicity about the product or favorable publicity about competitive products; and
|
|
|
|
potential product liability claims.
|
If we are unable to establish sales, marketing and distribution capabilities or enter into sales, marketing and distribution arrangements with third parties, we may not be successful in commercializing
any drug candidates that we develop if and when those drug candidates are approved.
We do not have a sales, marketing or
distribution infrastructure and have no experience in the sale, marketing or distribution of pharmaceutical products. To achieve commercial success for any approved product, we must either develop a sales and marketing organization or outsource
these functions to third parties. We plan to use a combination of focused in-house sales and marketing capabilities and third party collaboration, licensing and distribution arrangements to sell any of our products that receive marketing approval.
We generally plan to seek to retain full commercialization rights in the United States for products that we can commercialize
with a small specialized sales force in certain rare diseases. The development of sales, marketing and distribution capabilities will require substantial resources, will be time-consuming and could delay any product launch. If the commercial launch
of a drug candidate for which we recruit a sales force and establish marketing and distribution capabilities is delayed or does not occur for any reason, we could have prematurely or unnecessarily incurred these commercialization costs. This may be
costly, and our investment could be lost if we cannot retain or reposition our sales and marketing personnel. In addition, we may not be able to hire or retain a sales force in the United States that is sufficient in size or has adequate expertise
in the medical markets that we plan to target. If we are unable to establish or retain a sales force and marketing and distribution capabilities, our operating results may be adversely affected. If a potential partner has development or
commercialization expertise that we believe is particularly relevant to one of our products, then we may seek to collaborate with that potential partner even if we believe we could otherwise develop and commercialize the product independently.
We generally plan to collaborate with third parties for commercialization in the United States of any products that we cannot
commercialize with a small sales force and that require a large sales, marketing and product distribution infrastructure. We also plan to commercialize our drug candidates outside the United States through collaboration, licensing and distribution
arrangements with third parties. As a result of entering into arrangements with third parties to perform sales, marketing and distribution services, our product revenues or the profitability of these product revenues may be lower, perhaps
substantially lower, than if we were to directly market and sell products in those markets. Furthermore, we may be unsuccessful in entering into the necessary arrangements with third parties or may be unable to do so on terms that are favorable to
us. In addition, we may have little or no control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our products effectively.
If we do not establish sales, marketing and distribution capabilities, either on our own or in collaboration with third parties, we will
not be successful in commercializing any of our drug candidates that receive marketing approval.
We face substantial competition from
other pharmaceutical and biotechnology companies, and our operating results may suffer if we fail to compete effectively.
The development and commercialization of new drug products is highly competitive. We expect that we, our current collaborator and future
collaborators, if any, will face significant competition from major
39
pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide with respect to any of our drug candidates that we, or they, may seek to develop or
commercialize in the future. There are a number of pharmaceutical companies that currently market and sell products for HCV or are pursuing the development of additional drug candidates for HCV including AbbVie Inc., Enanta Pharmaceuticals, Inc.,
Gilead Sciences, Inc., Merck & Co., Inc. and Regulus Therapeutics Inc. Some of these marketed products have demonstrated good efficacy rates and safety profiles. We and our collaborator, Janssen, would have to demonstrate similar efficacy
and safety profiles in order to be competitive, which cannot be assured. In addition, while the market for HCV therapies remains very large, reaching $19 billion in sales in 2016 according to public filings, the market is anticipated to decrease in
size as more existing patients are cured and the number of newly infected patients, while rising, is fewer on an annual basis than those cured. This decrease in market size may heighten competitive pressures among market participants.
In addition, there are also a number of pharmaceutical and biotechnology companies that currently market and sell
products or are pursuing the development of drug candidates for the treatment of the key complement-mediated disease indications. For example, Alexion Pharmaceuticals, Inc.s eculizumab
(Soliris
®
) is a marketed therapy for the treatment of PNH and atypical hemolytic uremic syndrome, or aHUS. Akari
Therapeutics PLC, Alnylam Pharmaceuticals, Inc., Amyndas Pharmaceuticals S.A., Apellis Pharmaceuticals, Inc., BioCryst Pharmaceuticals, Inc., ChemoCentryx, Inc., Genentech, Inc., Omeros Corporation, Ra Pharmaceuticals Inc. and True North
Therapeutics, Inc. have complement inhibitor therapies in development for other hematologic diseases. Additionally, Novartis AG also has intellectual property rights in the complement area.
Our competitors may succeed in developing, acquiring or licensing technologies and drug products that are more effective, have fewer or
more tolerable side effects or are less costly than any drug candidates that we are currently developing or that we may develop, which could render our drug candidates obsolete and noncompetitive.
Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more
effective, have fewer or less severe side effects, are more convenient or are less expensive than any products that we, or any current or future collaborators, may develop. Our competitors also may obtain FDA or other marketing approval for their
products before we, or any current or future collaborators, are able to obtain approval for ours, which could result in our competitors establishing a strong market position before we, or any current or future collaborators, are able to enter the
market.
Many of our existing and potential future competitors have significantly greater financial resources and expertise in
research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining marketing approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may
result in even more resources being concentrated among a smaller number of our competitors. Smaller or early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established
companies. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies
complementary to, or necessary for, our programs.
If the FDA or comparable foreign regulatory authorities approve generic versions of any
of our products that receive marketing approval, or such authorities do not grant our products appropriate periods of data exclusivity before approving generic versions of our products, the sales of our products could be adversely affected.
Once a new drug application, or NDA, is approved, the product covered thereby becomes a reference-listed drug
in the FDAs publication, Approved Drug Products with Therapeutic Equivalence Evaluations. Manufacturers may seek approval of generic versions of reference-listed drugs through submission of abbreviated new drug applications, or
ANDAs, in the United States. In support of an ANDA, a generic
40
manufacturer need not conduct clinical studies. Rather, the applicant generally must show that its product has the same active ingredient(s), dosage form, strength, route of administration and
conditions of use or labeling as the reference-listed drug and that the generic version is bioequivalent to the reference-listed drug, meaning it is absorbed in the body at the same rate and to the same extent. Generic products may be significantly
less costly to bring to market than the reference-listed drug and companies that produce generic products are generally able to offer them at lower prices. Thus, following the introduction of a generic drug, a significant percentage of the sales of
any branded product or reference-listed drug may be typically lost to the generic product.
The FDA may not approve an ANDA
for a generic product until any applicable period of non-patent exclusivity for the reference-listed drug has expired. The Federal Food, Drug, and Cosmetic Act, or FDCA, provides a period of five years of non-patent exclusivity for a new drug
containing a new chemical entity, or NCE. Specifically, in cases where such exclusivity has been granted, an ANDA may not be filed with the FDA until the expiration of five years unless the submission is accompanied by a Paragraph IV certification
that a patent covering the reference-listed drug is either invalid or will not be infringed by the generic product, in which case the applicant may submit its application four years following approval of the reference-listed drug. If any product we
develop does not receive five years of NCE exclusivity, the FDA may approve generic versions of such product three years after its date of approval. Manufacturers may seek to launch these generic products following the expiration of the applicable
marketing exclusivity period, even if we still have patent protection for our product.
Competition that our products may face
from generic versions of our products could materially and adversely impact our future revenue, profitability and cash flows and substantially limit our ability to obtain a return on the investments we have made in those drug candidates.
Even if we, or any current or future collaborators, are able to commercialize any drug candidate that we, or they, develop, the product may become
subject to unfavorable pricing regulations, third party payor reimbursement practices or healthcare reform initiatives that could harm our business.
The commercial success of our drug candidates will depend substantially, both domestically and abroad, on the extent to which the costs of our drug candidates will be paid by third party payors, including
government health administration authorities and private health coverage insurers. If coverage and reimbursement is not available, or reimbursement is available only to limited levels, we, or any current or future collaborators, may not be able to
successfully commercialize our drug candidates. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us, or any current or future collaborators, to establish or maintain pricing sufficient to realize a
sufficient return on our or their investments. In the United States, no uniform policy of coverage and reimbursement for products exists among third party payors and coverage and reimbursement for products can differ significantly from payor to
payor.
There is significant uncertainty related to third party payor coverage and reimbursement of newly approved drugs.
Marketing approvals, pricing and reimbursement for new drug products vary widely from country to country. Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins
after marketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we, or any current or
future collaborators, might obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay commercial launch of the product, possibly for lengthy time periods, which may negatively impact the
revenues we are able to generate from the sale of the product in that country. Adverse pricing limitations may hinder our ability or the ability of any current or future collaborators to recoup our or their investment in one or more drug candidates,
even if our drug candidates obtain marketing approval.
Patients who are provided medical treatment for their conditions
generally rely on third party payors to reimburse all or part of the costs associated with their treatment. Therefore, our ability, and the ability of any
41
current or future collaborators, to commercialize any of our drug candidates will depend in part on the extent to which coverage and reimbursement for these products and related treatments will
be available from third party payors. Third party payors decide which medications they will cover and establish reimbursement levels. The healthcare industry is acutely focused on cost containment, both in the United States and elsewhere. Government
authorities and other third party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications, which could affect our ability or that of any current or future collaborators to sell our drug
candidates profitably. These payors may not view our products, if any, as cost-effective, and coverage and reimbursement may not be available to our customers, or those of any current or future collaborators, or may not be sufficient to allow our
products, if any, to be marketed on a competitive basis. Cost-control initiatives could cause us, or any current or future collaborators, to decrease the price we, or they, might establish for products, which could result in lower than anticipated
product revenues. If the prices for our products, if any, decrease or if governmental and other third party payors do not provide coverage or adequate reimbursement, our prospects for revenue and profitability will suffer.
There may also be delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than the
indications for which the drug is approved by the FDA or comparable foreign regulatory authorities. Moreover, eligibility for reimbursement does not imply that any drug will be paid for in all cases or at a rate that covers our costs, including
research, development, manufacture, sale and distribution. Reimbursement rates may vary, by way of example, according to the use of the drug and the clinical setting in which it is used. Reimbursement rates may also be based on reimbursement levels
already set for lower cost drugs or may be incorporated into existing payments for other services.
In addition, increasingly,
third party payors are requiring higher levels of evidence of the benefits and clinical outcomes of new technologies and are challenging the prices charged. We cannot be sure that coverage will be available for any drug candidate that we, or any
current or future collaborator, commercialize and, if available, that the reimbursement rates will be adequate. Further, the net reimbursement for drug products may be subject to additional reductions if there are changes to laws that presently
restrict imports of drugs from countries where they may be sold at lower prices than in the United States. An inability to promptly obtain coverage and adequate payment rates from both government-funded and private payors for any of our drug
candidates for which we, or any current or future collaborator, obtain marketing approval could significantly harm our operating results, our ability to raise capital needed to commercialize products and our overall financial condition.
Spurred by recent examples of large price increases for certain drugs, political candidates and others have raised media attention to the
issue of pharmaceutical price regulation. For example, recently announced plans have included elements such as patient spending caps, requirements for drug makers to spend a defined portion of their profits on research and development, allowing
Americans to import lower-priced drugs from other countries and addressing specialty pharmaceuticals which tend to have higher prices than other drugs. If greater regulation of pharmaceutical pricing is approved, we may not be able to receive
adequate reimbursement for our drug therapies, or may be forced to accept pricing at levels lower than that which would make us profitable. We cannot predict the political or regulatory climate that may result in enhanced drug pricing regulations.
Product liability lawsuits against us could divert our resources, cause us to incur substantial liabilities and limit commercialization of
any products that we may develop.
We face an inherent risk of product liability claims as a result of the clinical testing
of our drug candidates despite obtaining appropriate informed consents from any clinical trial participants. We will face an even greater risk if we or any current or future collaborators commercially sell any product that we may or they may
develop. For example, we may be sued if any product we develop allegedly causes injury or is found to be otherwise unsuitable during clinical testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of
defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability or a breach of warranties. Claims could also be asserted under state consumer
42
protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our drug
candidates. Regardless of the merits or eventual outcome, liability claims may result in:
|
|
|
decreased demand for our drug candidates or products that we may develop;
|
|
|
|
injury to our reputation and significant negative media attention;
|
|
|
|
withdrawal of clinical trial participants;
|
|
|
|
significant costs to defend resulting litigation;
|
|
|
|
substantial monetary awards to trial participants or patients;
|
|
|
|
reduced resources of our management to pursue our business strategy; and
|
|
|
|
the inability to commercialize any products that we may develop.
|
Although we maintain general liability insurance and clinical trial liability insurance, this insurance may not fully cover potential
liabilities that we may incur. The cost of any product liability litigation or other proceeding, even if resolved in our favor, could be substantial. We will need to increase our insurance coverage if and when we begin selling any drug candidate
that receives marketing approval. In addition, insurance coverage is becoming increasingly expensive. If we are unable to obtain or maintain sufficient insurance coverage at an acceptable cost or to otherwise protect against potential product
liability claims, it could prevent or inhibit the development and commercial production and sale of our drug candidates, which could adversely affect our business, financial condition, results of operations and prospects.
Our business and operations would suffer in the event of system failures or security breaches.
Despite the implementation of security measures, our internal computer systems are vulnerable to damage from computer viruses,
unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. Any system failure, accident or security breach that causes interruptions in our operations could result in a material disruption of our product
development programs. For example, the loss of clinical trial data from completed clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any
disruption or security breach results in a loss or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we may incur liabilities and the further development of our drug candidates may be
delayed.
Risks Related to our Financial Position and Need for Additional Capital
We have incurred significant losses since inception, expect to incur significant and increasing losses for at least the next several years, and we may
never achieve or maintain profitability.
We have incurred significant annual net operating losses since our inception. We
expect to continue to incur significant and increasing net operating losses for at least the next several years. Our net losses were $61.7 million, $5.0 million, and $69.0 million for years ended December 31, 2016, 2015, and 2014,
respectively. As of December 31, 2016, we had an accumulated deficit of $517.4 million. We have not generated any revenues from product sales, have not completed the development of any drug candidate and may never have a drug candidate approved
for commercialization. We are currently only in the early clinical testing stages for our most advanced drug candidate under our complement inhibitor platform and expect that it will be many years, if ever, before we have a drug candidate ready for
commercialization.
We have devoted substantially all of our financial resources and efforts to research and development,
including preclinical studies and our clinical development programs. Our net losses may fluctuate significantly from quarter to quarter and year to year. Net losses and negative cash flows have had, and will continue to have, an adverse effect on
our stockholders (deficit) equity and working capital.
43
We anticipate that our expenses will increase substantially if and as we:
|
|
|
continue research and initiate preclinical and clinical development efforts for our drug candidates, including ACH-4471;
|
|
|
|
seek regulatory and marketing approvals for our drug candidates that successfully complete clinical trials, if any;
|
|
|
|
establish sales, marketing, distribution and other commercial infrastructure to commercialize various products for which we may obtain marketing
approval, if any;
|
|
|
|
contract for the manufacture of larger quantities of drug candidates for clinical development and potentially commercialization;
|
|
|
|
maintain, expand and protect our intellectual property portfolio; and
|
|
|
|
hire and retain additional personnel, such as clinical, quality control and scientific personnel.
|
Our ability to become and remain profitable depends on our ability to generate revenue. We do not expect to generate significant revenue
unless and until we are, or any current or future collaborator is, able to obtain marketing approval for, and successfully commercialize, products based on our programs. This will require success in a range of challenging activities, including
completing clinical trials of our drug candidates, obtaining marketing approval for these drug candidates, manufacturing, marketing and selling those products for which we, or any of our current or current or future collaborators, may obtain
marketing approval, satisfying any post-marketing requirements and obtaining reimbursement for our products from private insurance or government payors. Because of the uncertainties and risks associated with these activities, we are unable to
accurately predict the timing and amount of increased expenses, and if or when we might achieve profitability. We and any current or future collaborators may never succeed in these activities and, even if we do, or any current or future
collaborators do, we may never generate revenues that are large enough for us to achieve profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to
become and remain profitable would decrease the value of our company and adversely impact our stock price and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our pipeline of
drug candidates or continue our operations.
We may need additional funding. If we are unable to raise capital when needed, we could be
forced to delay, reduce or eliminate our product development programs or commercialization efforts.
Developing
pharmaceutical products, including conducting preclinical studies and clinical trials, is a very time-consuming, expensive and uncertain process that takes years to complete. We expect our expenses to increase in connection with our ongoing
activities, particularly as we initiate clinical trials of, initiate new research and preclinical development efforts for and seek marketing approval for, our drug candidates. In addition, if we obtain marketing approval for any of our drug
candidates, we may incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution to the extent that such sales, marketing, manufacturing and distribution are not the responsibility of a current or
future collaborator. Accordingly, we may need to obtain additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we may be forced to delay, reduce or eliminate our
research and development programs or any future commercialization efforts.
We will be required to expend significant funds in
order to advance the development of our complement factor D inhibitor platform. In addition, while we may seek one or more collaborators for future development of our drug candidates, we may not be able to enter into a collaboration for any of our
drug candidates on suitable terms or at all. In any event, our existing cash, cash equivalents and marketable securities will not be sufficient to fund all of the efforts that we plan to undertake or to fund the completion of development of any of
our drug candidates. Accordingly, we will be required to obtain further funding through public or private equity offerings, debt financings, collaborations and licensing arrangements or other sources. We do not have any committed
44
external source of funds. Adequate additional financing may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would have a negative impact on
our financial condition and our ability to pursue our business strategy. Moreover, we are dependent on Janssen for the timing and success of the HCV collaboration and we cannot assure you that we will receive any milestone-based or royalty payments
under that arrangement.
We believe that our existing cash, cash equivalents and marketable securities as of December 31,
2016, will enable us to fund our current projected operating requirements for at least the next 12 months. Our estimate as to how long we expect our existing cash and cash equivalents to be able to continue to fund our operations is based on
assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Further, changing circumstances, some of which may be beyond our control, could cause us to consume capital significantly
faster than we currently anticipate, and we may need to seek additional funds sooner than planned. Our future funding requirements, both short-term and long-term, will depend on many factors, including:
|
|
|
the scope, progress, results and costs of drug discovery, preclinical development, laboratory testing and clinical trials for our drug candidates;
|
|
|
|
our ability to enter into and the terms and timing of any collaborations, licensing or other arrangements that we may establish;
|
|
|
|
the number of future drug candidates that we pursue and their development requirements;
|
|
|
|
the outcome, timing and costs of seeking regulatory approvals;
|
|
|
|
the costs of commercialization activities for any of our drug candidates that receive marketing approval to the extent such costs are not the
responsibility of any current or future collaborators, including the costs and timing of establishing product sales, marketing, distribution and manufacturing capabilities;
|
|
|
|
subject to receipt of marketing approval, revenue, if any, received from commercial sales of our drug candidates;
|
|
|
|
our headcount growth and associated costs as we seek to expand our research and development and establish a commercial infrastructure;
|
|
|
|
the costs involved in preparing, filing, prosecuting, maintaining, enforcing and defending patent and other intellectual property rights and defending
against intellectual property-related claims;
|
|
|
|
the timing and amount of proceeds received from milestones achieved and royalties earned, if any, by us under the Janssen Agreement;
|
|
|
|
our ability to raise debt or equity capital, including any changes in the credit or equity markets that may impact our ability to obtain capital in the
future;
|
|
|
|
the costs associated with, and the outcome of, lawsuits against us, if any;
|
|
|
|
our acquisition and development of new technologies and drug candidates; and
|
|
|
|
competing technological and market developments, including those currently unknown to us.
|
Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or
drug candidates.
We expect that we will need additional capital in the future to continue our planned operations. To the
extent that we raise additional capital through the sale of common stock, convertible securities or other equity securities, the ownership interests of our stockholders may be materially diluted, and the terms of these securities could include
liquidation or other preferences and anti-dilution protections that could adversely affect the rights of a common stockholder. In February 2017, we entered into a sales agreement with Cantor Fitzgerald & Co., or
45
Cantor, pursuant to which, from time to time, we may offer and sell shares of our common stock having an aggregate offering price of up to $75,000,000 through Cantor pursuant to a universal shelf
registration statement that we expect to file in February 2017, after such time as the registration statement is declared effective by the SEC. Sales of our common stock, if any, under the agreement with Cantor may be made in sales deemed to be an
at-the-market offering as defined in Rule 415(a)(4) under the Securities Act of 1933, as amended. Sales of substantial amounts of shares of our common stock or other securities could cause dilution to our stockholders and lower the
market price of our common stock.
In addition, debt financing, if available, would result in fixed payment obligations and
may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures, creating liens, redeeming stock or declaring dividends, that could adversely
impact our ability to conduct our business. In addition, securing financing could require a substantial amount of time and attention from our management and may divert a disproportionate amount of their attention away from day-to-day activities,
which may adversely affect our managements ability to oversee the development of our drug candidates.
If we raise
additional funds through collaborations or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams or drug candidates or grant licenses on terms that
may not be favorable to us. If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market drug
candidates that we would otherwise prefer to develop and market ourselves.
Our ability to use our net operating loss carryforwards and
certain other tax attributes may be limited.
Under Section 382 of the Internal Revenue Code of 1986, as amended, if a
company undergoes an ownership change, generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period, the corporations ability to use its pre-change net operating loss carryforwards and
other pre-change tax attributes (such as research tax credits) to offset its post-change taxable income or taxes may be limited. Changes in our stock ownership, some of which are outside of our control, may have resulted or could in the future
result in an ownership change. For example, we completed a review of our changes in ownership through December 31, 2015, and determined that we had four ownership changes since inception. The changes of ownership will result in net operating
loss and research and development credit carryforwards that we expect to expire unutilized. If additional limitations were to apply, utilization of a portion of our net operating loss and tax credit carryforwards could be further limited in future
periods and a portion of the carryforwards could expire before being available to reduce future income tax liabilities.
If the estimates
we make and the assumptions on which we rely in preparing our financial statements prove inaccurate, our actual results may vary significantly.
Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates
and judgments that affect the reported amounts of our assets, liabilities, revenues and expenses. Such estimates and judgments include revenue recognition, stock-based compensation expense, the valuation of investments, accrued expenses and deferred
tax assets and liabilities. We base our estimates and judgments on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. However, these estimates and judgments, or the assumptions underlying
them, may change over time. Accordingly, our actual financial results may vary significantly from the estimates contained in our financial statements.
46
Risks Related to Our Dependence on Third Parties
We depend on our collaboration with Janssen and may depend on collaborations with additional third parties for the development and commercialization of
our drug candidates. If those collaborations are not successful, we may not be able to capitalize on the market potential of these drug candidates.
We are party to an exclusive collaboration and license agreement with Janssen pursuant to which we granted Janssen exclusive worldwide rights to develop and commercialize products based on certain of our
HCV drug candidates. We may in the future seek other third-party collaborators for the development and commercialization of product candidates based on our complement inhibitor platform. Our likely collaborators for any collaboration arrangements
include large and mid-size pharmaceutical companies, regional and national pharmaceutical companies and biotechnology companies. If we enter into such collaborations, we will have limited control over the amount and timing of resources that our
collaborators will dedicate to the development or commercialization of our drug candidates. Our ability to generate revenues from the collaboration and license agreement with Janssen or any future arrangements will depend on the collaborators
abilities to successfully perform the functions assigned to them in these arrangements. In addition, any collaborators may have the right to abandon research or development projects and terminate applicable agreements, including any funding
obligations, prior to or upon the expiration of the agreed upon terms.
Collaborations involving our drug candidates,
including our collaboration with Janssen, pose a number of risks, including the following:
|
|
|
collaborators have significant discretion in determining the efforts and resources that they will apply to these collaborations. For example, under the
terms of our collaboration with Janssen, development plans and strategies for all licensed products will be conducted in accordance with a plan and budget approved by a joint committee comprised of equal numbers of representatives from each of us
and Janssen, as to which Janssen generally has final decision-making authority, and, subject to specified diligence requirements, Janssen has full discretion over commercialization plans and strategies for all licensed products. Currently, Janssen
is only pursuing clinical development of one of the three HCV compounds we licensed to Janssen under the collaboration;
|
|
|
|
collaborators may not perform their obligations as expected;
|
|
|
|
collaborators may not pursue development and commercialization of our drug candidates or may elect not to continue or renew development or
commercialization programs, based on clinical trial results, changes in the collaborators strategic focus, changes in the competitive environment, available funding or external factors, such as an acquisition, that divert resources or create
competing priorities;
|
|
|
|
collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a drug candidate,
repeat or conduct new clinical trials or require a new formulation of a drug candidate for clinical testing;
|
|
|
|
a collaborator with marketing and distribution rights to one or more products may not commit sufficient resources to the marketing and distribution of
such product or products;
|
|
|
|
disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the preferred course of development,
might cause delays or termination of the research, development or commercialization of drug candidates, might lead to additional responsibilities for us with respect to drug candidates, or might result in litigation or arbitration, any of which
would be time-consuming and expensive;
|
|
|
|
collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite
litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation. For example, under specified circumstances Janssen has the first right to maintain or defend certain of our
intellectual property rights under the terms of our collaboration agreement and, although we may have the right to
|
47
|
assume the maintenance or defense of such intellectual property rights if Janssen does not, our ability to do so may be compromised by Janssens actions;
|
|
|
|
collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability;
|
|
|
|
collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of
the applicable drug candidates. For example, Janssen can terminate its agreement with us in its entirety upon sixty days notice at any time prior to submission of the first application for marketing approval for a licensed product in any
specified major market country, and can terminate the entire agreement with us in connection with any undisputed material breach of the agreement by us that remains uncured for a specified period of time; and
|
|
|
|
collaboration agreements may not lead to development or commercialization of drug candidates in the most efficient manner or at all. If any current or
future collaborator of ours is involved in a business combination, it could decide to delay, diminish or terminate the development or commercialization of any drug candidate licensed to it by us.
|
We may seek to establish additional collaborations and, if we are not able to establish them on commercially reasonable terms, we may have to alter
our development and commercialization plans.
Our drug development programs and the potential commercialization of our drug
candidates will require substantial additional cash to fund expenses. For some of our drug candidates, we may decide to collaborate with additional pharmaceutical and biotechnology companies for the development and potential commercialization of
those drug candidates. We face significant competition in seeking appropriate collaborators. Whether we reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborators resources and
expertise, the terms and conditions of the proposed collaboration and the proposed collaborators evaluation of a number of factors. Those factors may include the potential differentiation of our drug candidate from competing drug candidates,
design or results of clinical trials, the likelihood of approval by the FDA or comparable foreign regulatory authorities and the regulatory pathway for any such approval, the potential market for the drug candidate, the costs and complexities of
manufacturing and delivering the product to patients and the potential of competing products. The collaborator may also consider alternative drug candidates or technologies for similar indications that may be available for collaboration and whether
such a collaboration could be more attractive than the one with us for our drug candidate.
Collaborations are complex and
time-consuming to negotiate and document. Further, there have been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators. In addition, any
collaboration agreements that we enter into in the future may contain, restrictions on our ability to enter into potential collaborations or to otherwise develop specified compounds.
We may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all. If we are unable to do so, we may have
to curtail the development of the drug candidate for which we are seeking to collaborate, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of any
sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to increase our expenditures to fund development or commercialization activities on our own, we may
need to obtain additional capital, which may not be available to us on acceptable terms or at all. If we do not have sufficient funds, we may not be able to further develop our drug candidates or bring them to market and generate product revenue.
48
We have and intend to continue to rely on third parties to conduct any clinical trials. If they do not
perform satisfactorily, our business could be materially harmed.
We have and intend to continue to rely on third parties,
such as contract research organizations, clinical data management organizations, medical institutions and clinical investigators, to conduct clinical trials and expect to rely on these third parties to conduct clinical trials of any drug candidate
that we develop. Any of these third parties may terminate their engagements with us under certain circumstances. We may not be able to enter into alternative arrangements or do so on commercially reasonable terms. In addition, there is a natural
transition period when a new contract research organization begins work. As a result, delays would likely occur, which could materially impact our ability to meet our expected clinical development timelines and harm our business, financial condition
and prospects.
Further, our reliance on these third parties for clinical development activities limits our control over these
activities, but we remain responsible for ensuring that each of our trials is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards. For example, notwithstanding the obligations of a contract research
organization for a trial of one of our drug candidates, we will remain responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial. Moreover, the FDA requires
us to comply with standards, commonly referred to as current Good Clinical Practices, or cGCPs, for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the
rights, integrity and confidentiality of trial participants are protected. The FDA enforces these cGCPs through periodic inspections of trial sponsors, principal investigators, clinical trial sites and institutional review boards. If we or our
third-party contractors fail to comply with applicable cGCPs, the clinical data generated in any clinical trials may be deemed unreliable and the FDA may require us to perform additional clinical trials before approving our drug candidates, which
would delay the marketing approval process. We cannot be certain that, upon inspection, the FDA will determine that any of our clinical trials comply with cGCPs. We are also required to register clinical trials and post the results of completed
clinical trials on a government-sponsored database, ClinicalTrials.gov, within certain timeframes. Failure to do so can result in fines, adverse publicity and civil and criminal sanctions.
Furthermore, the third parties that we intend to engage to conduct clinical trials on our behalf are not our employees, and except for
remedies available to us under agreements with such contractors, we cannot control whether or not they devote sufficient time, skill and resources to our development programs. These contractors may also have relationships with other commercial
entities, including our competitors, for whom they may also be conducting clinical trials or other drug development activities, which could impede their ability to devote appropriate time to our clinical programs. If these third parties do not
successfully carry out their contractual duties, meet expected deadlines or conduct any clinical trials in accordance with regulatory requirements or our stated protocols, we may not be able to obtain, or may be delayed in obtaining, marketing
approvals for our drug candidates. If that occurs, we will not be able to, or may be delayed in our efforts to, successfully commercialize our drug candidates. In such an event, our financial results and the commercial prospects for any drug
candidates that we seek to develop could be harmed, our costs could increase and our ability to generate revenues could be delayed, impaired or foreclosed.
We also intend to rely on other third parties to store and distribute drug supplies for any clinical trials. Any performance failure on the part of our distributors could delay clinical development or
marketing approval of our drug candidates or commercialization of any resulting products, producing additional losses and depriving us of potential product revenue.
49
We have and intend to continue to contract with third parties for the manufacture and distribution of any
drug candidates for clinical trials in connection with our future development and commercialization efforts. This reliance on third parties increases the risk that we will not have sufficient quantities of our drug candidates or such quantities at
an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.
We currently have
no manufacturing facilities and limited personnel with manufacturing experience. We have and intend to continue to rely on contract manufacturers to produce both drug substance and drug product required for any clinical trials. We also intend to
rely upon contract manufacturers, and, potentially collaboration partners, to manufacture commercial quantities of our products, if approved. Reliance on such third party contractors entails risks, including:
|
|
|
manufacturing delays if our third party contractors give greater priority to the supply of other products over our drug candidates or otherwise do not
satisfactorily perform according to the terms of the agreements between us and them;
|
|
|
|
the possible termination or nonrenewal of agreements by our third party contractors at a time that is costly or inconvenient for us;
|
|
|
|
the possible breach by the third party contractors of our agreements with them;
|
|
|
|
the failure of third party contractors to comply with applicable regulatory requirements;
|
|
|
|
the possible mislabeling of clinical supplies, potentially resulting in the wrong dose amounts being supplied or active drug or placebo not being
properly identified;
|
|
|
|
the possibility of clinical supplies not being delivered to clinical sites on time, leading to clinical trial interruptions, or of drug supplies not
being distributed to commercial vendors in a timely manner, resulting in lost sales; and
|
|
|
|
the possible misappropriation of our proprietary information, including our trade secrets and know-how.
|
We currently rely, and expect to continue to rely, on a small number of third party contract manufacturers to supply active
pharmaceutical ingredient and required finished product for our preclinical studies and any clinical trials. We do not have long-term agreements with any of these third parties. If any of our existing manufacturers should become unavailable to us
for any reason, we may incur some delay in identifying or qualifying replacements.
Any manufacturing problem or the loss of a
contract manufacturer could be disruptive to our operations, delay any clinical trials and, if our products are approved for sale, result in lost sales. Additionally, we intend to rely on third parties to supply the raw materials needed to
manufacture any drug candidates. Any reliance on suppliers may involve several risks, including a potential inability to obtain critical materials and reduced control over production costs, delivery schedules, reliability and quality. Any
unanticipated disruption to future contract manufacture caused by problems at suppliers could delay shipment of our drug candidates, increase our cost of goods sold and result in lost sales.
If any of our future drug candidates are approved by any regulatory agency, we plan to enter into agreements with third party contract
manufacturers for the commercial production and distribution of those products. It may be difficult for us to reach agreement with a contract manufacturer on satisfactory terms or in a timely manner. In addition, we may face competition for access
to manufacturing facilities as there are a limited number of contract manufacturers operating under current good manufacturing practices, or cGMPs, that are capable of manufacturing our drug candidates. Consequently, we may not be able to reach
agreement with third party manufacturers on satisfactory terms, which could delay our commercialization efforts.
Third party
manufacturers are required to comply with cGMPs and similar regulatory requirements outside the United States. Facilities used by our third party manufacturers must be approved by the FDA after we submit an NDA and before potential approval of the
drug candidate. Similar regulations apply to manufacturers of our drug candidates for use or sale in foreign countries. We do not control the manufacturing process and are
50
completely dependent on our third party manufacturers for compliance with the applicable regulatory requirements for the manufacture of our drug candidates. If our manufacturers cannot
successfully manufacture material that conforms to our specifications or the strict regulatory requirements of the FDA and any applicable foreign regulatory authority, they will not be able to secure the applicable approval for their manufacturing
facilities. If these facilities are not approved for commercial manufacture, we may need to find alternative manufacturing facilities, which could result in delays in obtaining approval for the applicable drug candidate.
In addition, our manufacturers are subject to ongoing periodic inspections by the FDA and corresponding state and foreign agencies for
compliance with cGMPs and similar regulatory requirements both prior to and following the receipt of marketing approval for any of our drug candidates. Some of these inspections may be unannounced. Failure by any of our manufacturers to comply with
applicable cGMPs or other regulatory requirements could result in sanctions being imposed on us, including fines, injunctions, civil penalties, delays, suspensions or withdrawals of approvals, operating restrictions, interruptions in supply and
criminal prosecutions, any of which could significantly and adversely affect supplies of our drug candidates and have a material adverse impact on our business, financial condition and results of operations.
Our current and anticipated future dependence upon others for the manufacture of our drug candidates may adversely affect our future
profit margins and our ability to commercialize any products that receive marketing approval on a timely and competitive basis.
Risks
Related to Our Intellectual Property
If our patent position does not adequately protect our drug candidates, others could compete
against us more directly, which would harm our business.
We own or hold exclusive licenses to a number of U.S. issued
patents, pending U.S. provisional and non-provisional patent applications, as well as pending PCT applications and associated foreign patents and patent applications. Our success depends in large part on our ability to obtain and maintain patent
protection both in the United States and in other countries for our drug candidates. Our ability to protect our drug candidates from unauthorized or infringing use by third parties depends in substantial part on our ability to obtain and maintain
valid and enforceable patents. Due to evolving legal standards relating to the patentability, validity and enforceability of patents covering pharmaceutical inventions and the scope of claims made under these patents, our ability to maintain, obtain
and enforce patents is uncertain and involves complex legal and factual questions. Accordingly, rights under any issued patents may not provide us with sufficient protection for our drug candidates or provide sufficient protection to afford us a
commercial advantage against competitive products or processes. We cannot guarantee that any patents will issue from any pending or future patent applications owned by or licensed to us.
Patent applications in the United States are maintained in confidence for up to 18 months after their filing. In some cases, however,
patent applications remain confidential in the U.S. Patent and Trademark Office, which we refer to as the U.S. Patent Office, for the entire time prior to issuance as a U.S. patent. Similarly, publication of discoveries in the scientific or patent
literature often lags behind actual discoveries. Consequently, we cannot be certain that we or our licensors or co-owners were the first to invent, or the first to file patent applications on, our drug candidates or their intended uses. Furthermore,
we may not have identified all U.S. and foreign patents or published applications that affect our business either by blocking our ability to commercialize our drugs or by covering similar technologies that affect our drug market or patentability, or
all prior art that could be considered relevant to our patent claims.
The claims of the issued patents that are licensed to
us, and the claims of any patents which have already issued or may issue in the future and are owned by us, may not confer on us significant commercial protection against competing products. Additionally, our patents may be challenged by third
parties, resulting in the patent being deemed invalid, unenforceable or narrowed in scope, or the third party may circumvent any such issued
51
patents. The cost of these procedures could be substantial and it is possible that our efforts would be unsuccessful resulting in a loss of our U.S. patent position. Also, our pending patent
applications may not issue, and we may not receive any additional patents. Our patents might not contain claims that are sufficiently broad to prevent others from utilizing our technologies. For instance, the issued patents relating to our drug
candidates may be limited to a particular molecule or a related group of molecules. Consequently, our competitors may independently develop competing products that do not infringe our patents or other intellectual property. To the extent a
competitor can develop similar products using a different molecule, our patents may not prevent others from directly competing with us.
The Leahy-Smith America Invents Act, or the America Invents Act, was signed into law in September 2011, and many of the substantive changes became effective in March 2013. The America Invents
Act revised United States patent law in part by changing the standard for patent approval from a first to invent standard to a first to file standard and developing a post-grant review system. This legislation changes
United States patent law in a way that may weaken our ability to obtain patent protection in the United States for those applications filed after March 2013. For example, if we are the first to invent a new drug or its use, but another party is
the first to file a patent application on this invention, under the new law the other party may be entitled to the patent rights on the invention.
Further, the America Invents Act created for the first time new procedures to challenge issued patents in the United States, including post-grant review and inter partes review proceedings, which some
third parties have been using to cause the cancellation of selected or all claims of issued patents of competitors. For a patent with a priority date of March 16, 2013 or later, a petition for post-grant review can be filed by a third party in
a nine month window from issuance of the patent. A petition for inter partes review can be filed immediately following the issuance of a patent if the patent was filed prior to March 16, 2013. A petition for inter partes review can be filed
after the nine month period for filing a post-grant review petition has expired for a patent with a priority date of March 16, 2013 or later. Post-grant review proceedings can be brought on any ground of challenge, whereas inter partes review
proceedings can only be brought to raise a challenge based on published prior art. These adversarial actions at the U.S. Patent Office review patent claims without the presumption of validity afforded to U.S. patents in lawsuits in U.S. federal
courts, and use a lower burden of proof than used in litigation in U.S. federal courts. Therefore, it is generally considered easier for a competitor or third party to have a U.S. patent cancelled in a Patent Office post-grant review or inter partes
review proceeding than invalidated in a litigation in a U.S. federal court. If any of our patents are challenged by a third party in such a U.S. patent office proceeding, there is no guarantee that we or our licensors will be successful in defending
the patent, which would result in a loss of the challenged patent right to us.
The laws of some foreign jurisdictions do not
protect intellectual property rights to the same extent as in the United States and many companies have encountered significant difficulties in protecting and defending such rights in foreign jurisdictions. If we encounter such difficulties in
protecting or are otherwise precluded from effectively protecting our intellectual property rights in foreign jurisdictions, our business prospects could be substantially harmed. For example, we could become a party to foreign opposition
proceedings, such as at the European Patent Office, or patent litigation and other proceedings in a foreign court. If so, uncertainties resulting from the initiation and continuation of such proceedings could have a material adverse effect on our
ability to compete in the market place. The cost of foreign adversarial proceedings can also be substantial, and in many foreign jurisdictions, the losing party must pay the attorney fees of the winning party.
Because of the extensive time required for development, testing and regulatory review of a potential product, it is possible that, before
any of our drug candidates can be commercialized, any related patent may expire or remain in force for only a short period following commercialization of our drug candidates, thereby reducing any advantages of the patent. To the extent our drug
candidates based on that technology are not commercialized significantly ahead of the date of any applicable patent, or to the extent we have no other patent protection on such drug candidates, those drug candidates would not be protected by
patents, and we would then rely solely on other forms of exclusivity, such as regulatory exclusivity provided by the FDCA or trade secret protection.
52
As a result of our collaboration with Janssen, Janssen has received certain rights in our HCV patents
which affect how our patents are prosecuted and litigated, and any lack of validity or enforceability of our patents licensed to Janssen, or third party competition, can affect our royalty income.
Under the Janssen Agreement, we have granted Janssen an exclusive, worldwide license to all of our intellectual property pertaining to
odalasvir, sovaprevir and ACH-3422. Janssen is currently conducting a phase IIb clinical trial of a three drug combination for the treatment of HCV, which is denoted as JNJ-4178. Odalasvir, one of the HCV drug candidates we licensed to Janssen, is
included in JNJ-4178. The other two drug candidates licensed to Janssen, ACH-3422 and sovaprevir, are not currently in clinical development. Janssen will pay us royalties on a country by country basis during the later of (i) the term during
which we have a valid claim covering the product or where the market is protected by regulatory data exclusivity or (ii) ten years from first commercialization. If neither of these conditions exist in a country, our royalties will be reduced.
Even if one of these conditions do exist, however, if there is generic competition in a country, Janssen can reduce our royalties in that country until the generic sales are abated. As only one of our licensed compounds, odalasvir, is currently in
JNJ-4178, the determination of whether we have a valid claim covering the product will be based on patent coverage pertaining to odalasvir, its pharmaceutical composition or a method to use odalasvir to treat hepatitis C.
A patent working group which reports to the joint steering committee has been established to coordinate all prosecution and litigation
activities. Under this arrangement, we will continue to prosecute the HCV patents owned by us, at Janssens expense, and Janssen has primary responsibility for patent prosecution of all jointly created patent rights under the Janssen Agreement.
Janssen has the initial right to bring and control any enforcement actions under our and jointly owned patent rights, and
thus we do not have the primary right to enforce our HCV patents. If Janssen declines to enforce a patent, then we have the right to do so at our expense. If Janssen or we do not elect to enforce a patent, our commercial market, and thus our product
revenues, if any, can be negatively affected by third party competition. If the Janssen Agreement is terminated, we and Janssen shall each have the right to use joint patent rights without the consent of the other.
If we infringe or are alleged to infringe intellectual property rights of third parties, our business could be harmed.
Our research, development or commercialization activities, including any drug candidates or products resulting from these activities, may
infringe or be claimed to infringe patents or other proprietary rights owned by third parties and to which we do not hold licenses or other rights. We may not be aware of third party patents that a third party might assert against us. For example,
there may be third party applications that have been filed but not published that, if issued, could be asserted against us. If a patent infringement suit were brought against us, we could be forced to stop or delay research, development,
manufacturing or sales of the drug or drug candidate that is the subject of the suit. Further, if we are found to have infringed a third-party patent, we could be obligated to pay royalties and/or other payments to the third party for the sale of
our product, which may be substantial, or we could be enjoined from selling our product. We could also incur substantial litigation costs.
As the commercializing entity of our HCV candidates odalasvir, sovaprevir and ACH-3422, Janssen will be primarily responsible for handling any issues pertaining to asserted infringement by third parties
of their patents through the development, offer for sale, sale, importation or exportation of these products in the U.S. and other countries. Under our Agreement, Janssen can offset part of the cost of any licenses with third parties required for
commercialization against our royalties.
53
Litigation regarding patents, intellectual property, and other proprietary rights may be expensive and
time consuming. If we are involved in such litigation, it could cause delays in bringing drug candidates to market and harm our ability to operate.
Our success will depend in part on our ability to operate without infringing the proprietary rights of third parties. Although we are not currently aware of any litigation or other proceedings or
third-party claims of intellectual property infringement against us related to our drug candidates, the pharmaceutical industry is characterized by extensive litigation regarding patents and other intellectual property rights. Other parties may
obtain patents in the future and allege that the use of our technologies infringes these patent claims or that we are employing their proprietary technology without authorization. Likewise, third parties may challenge or infringe upon our existing
or future patents. Proceedings involving our patents or patent applications or those of others could result in adverse decisions regarding:
|
|
|
the patentability of our inventions relating to our drug candidates; and/or
|
|
|
|
the enforceability, validity or scope of protection offered by our patents relating to our drug candidates.
|
Even if we are successful in these proceedings, we may incur substantial costs and divert management time and attention in pursuing these
proceedings, which could have a material adverse effect on us. If we are unable to avoid infringing the patent rights of others, we may be required to seek a license, defend an infringement action or challenge the validity of the patents in court.
Patent litigation is costly and time consuming. We may not have sufficient resources to bring these actions to a successful conclusion. In addition, if we do not obtain a license, develop or obtain non-infringing technology, fail to defend an
infringement action successfully or have infringed patents declared invalid, we may:
|
|
|
incur substantial monetary damages;
|
|
|
|
encounter significant delays in bringing our drug candidates to market; and/or
|
|
|
|
be precluded from participating in the manufacture, use or sale of our drug candidates or methods of treatment requiring licenses.
|
Furthermore, because of the substantial amount of discovery required in connection with intellectual
property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. In addition, during the course of this kind of litigation, there could be public announcements of the
results of hearings, motions or other interim proceedings or developments. If investors perceive these results to be negative, the market price for our common stock could be significantly harmed.
We may not be able to enforce our intellectual property rights throughout the world.
Filing, prosecuting and defending patents on our drug candidates in all countries throughout the world would be prohibitively expensive.
The requirements for patentability may differ in certain countries, particularly in developing countries. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further,
may export otherwise infringing products to territories where we may obtain patent protection, but where patent enforcement is not as strong as that in the United States. These products may compete with our products in jurisdictions where we do not
have any issued or licensed patents and any future patent claims or other intellectual property rights may not be effective or sufficient to prevent them from so competing.
Moreover, our ability to protect and enforce our intellectual property rights may be adversely affected by changes in foreign intellectual property laws. Additionally, laws of some countries outside of
the United States and Europe do not afford intellectual property protection to the same extent as the laws of the United States and Europe. Many companies have encountered significant problems in protecting and defending intellectual property rights
in certain foreign jurisdictions. The legal systems of some countries, including India, China and other developing countries, may not favor the enforcement of our patents and other intellectual property rights.
54
This could make it difficult for us to stop the infringement of our patents or the misappropriation of our other intellectual property rights. A number of foreign countries have stated that they
are willing to issue compulsory licenses to patents held by innovator companies on approved drugs to allow the government or one or more third party companies to sell the approved drug without the permission of the innovator patentee where the
foreign government concludes it is in the public interest. India, for example, has used such a procedure to allow domestic companies to make and sell patented drugs without innovator approval. There is no guarantee that patents covering any of our
drugs will not be subject to a compulsory license in a foreign country, or that we will have any influence over if or how such a compulsory license is granted. Further, in at least Brazil, the country allows its regulatory agency ANVISA to
participate in the decision of whether to grant a drug patent in that country, including based not on whether the patent meets the requirements for a patent but whether such a patent is deemed in the countrys interest. In addition, several
other countries have created laws that make it more difficult to enforce drug patents than patents on other kinds of technologies. Further, under the treaty on the Trade-Related Aspects of Intellectual Property (TRIPS) as interpreted by the Doha
Declaration, countries in which drugs are manufactured are required to allow exportation of the drug to a developing country that lacks adequate manufacturing capability. Therefore, our drug markets in the U.S. or foreign countries may be affected
by the influence of current public policy on patent issuance, enforcement or involuntary licensing in the healthcare area.
We rely on our
ability to stop others from competing by enforcing our patents, however some jurisdictions may require us to grant licenses to third parties. Such compulsory licenses could be extended to include some of our drug candidates, which may limit our
potential revenue opportunities.
Many foreign countries have compulsory licensing laws under which a patent owner must
grant licenses to third parties, in certain circumstances. For example, compulsory licensing, or the threat of compulsory licensing, of life-saving products and expensive products is becoming increasingly popular in developing countries, either
through direct legislation or international initiatives. Compulsory licenses could be extended to include some of our drug candidates, if they receive marketing approval, which may limit our potential revenue opportunities. Consequently, we may not
be able to prevent third parties from practicing our inventions in certain countries outside the United States and Europe. Competitors may also use our technologies in jurisdictions where we have not obtained patent protection to develop their own
products and, further, may export otherwise infringing products to territories where we have patent protection, if our ability to enforce our patents to stop infringing activities is inadequate. These products may compete with our products, and our
patents or other intellectual property rights may not be effective or sufficient to prevent them from competing. Proceedings to enforce our patent rights in foreign jurisdictions, whether or not successful, could result in substantial costs and
divert our efforts and resources from other aspects of our business. Furthermore, while we intend to protect our intellectual property rights in major markets for our products, we cannot ensure that we will be able to initiate or maintain similar
efforts in all jurisdictions in which we may wish to market our products. Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate.
In addition, some countries limit the enforceability of patents against government agencies or government contractors. In these
countries, the patent owner may be limited to monetary relief and may be unable to enjoin infringement if a government is the infringer, which could materially diminish the value of the patent.
The rights we rely upon to protect our unpatented trade secrets may be inadequate.
We rely on unpatented trade secrets, know-how and technology, which are difficult to protect, especially in the pharmaceutical industry,
where much of the information about a product must be made public during the regulatory approval process. We seek to protect trade secrets, in part, by entering into confidentiality agreements with employees, consultants and others. These parties
may breach or terminate these agreements, or may refuse to enter into such agreements with us, and we may not have adequate remedies for such breaches. Furthermore, these agreements may not provide meaningful protection for our trade secrets or
other proprietary information or result in the effective assignment to us of intellectual property, and may not provide an adequate remedy in the event of unauthorized use or disclosure of confidential information or other breaches of the
agreements. Despite
55
our efforts to protect our trade secrets, we or our collaboration partners, board members, employees, consultants, contractors or scientific and other advisors may unintentionally or willfully
disclose our proprietary information to competitors.
If we fail to maintain trade secret protection, our competitive position
may be adversely affected. Competitors may also independently discover our trade secrets. Enforcement of claims that a third party has illegally obtained and is using trade secrets is expensive, time consuming and uncertain. If our competitors
independently develop equivalent knowledge, methods and know-how, we would not be able to assert our trade secrets against them and our business could be harmed.
Confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information and may not adequately protect our intellectual property.
We rely on trade secrets to protect our technology, especially where we do not believe patent protection is appropriate or
obtainable. However, trade secrets are difficult to protect. To protect our proprietary technology and processes, we also rely in part on confidentiality and intellectual property assignment agreements with our corporate partners, employees,
consultants, outside scientific collaborators and sponsored researchers and other advisors. These agreements may not effectively prevent disclosure of confidential information nor result in the effective assignment to us of intellectual property,
and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information or other breaches of the agreements. In addition, others may independently discover our trade secrets and proprietary information, and in such
case we could not assert any trade secret rights against such party. Enforcing a claim that a party illegally obtained and is using our trade secrets is difficult, expensive and time consuming, and the outcome is unpredictable. In addition, courts
outside the United States may be less willing to protect trade secrets. Costly and time-consuming litigation could be necessary to seek to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret
protection could adversely affect our competitive business position.
Risks Related to Employee Matters and Managing Growth
If we are not able to attract and retain key management, scientific personnel and advisors, we may not successfully develop our drug candidates or
achieve our other business objectives.
We depend upon our senior management and scientific staff for our business success.
All of our employment agreements with our senior management employees are terminable without notice by the employee. The loss of the service of any of the key members of our senior management may significantly delay or prevent the achievement of
drug development and other business objectives. Our ability to attract and retain qualified personnel, consultants and advisors is critical to our success. We face intense competition for qualified individuals, particularly those experienced in
discovering and developing complement inhibitor drug candidates, from numerous pharmaceutical and biotechnology companies, universities, governmental entities and other research institutions. We may be unable to attract and retain these individuals,
and our failure to do so would adversely affect our business.
If we acquire or license technologies, resources or drug candidates, we will
incur a variety of costs and may never realize benefits from the transaction.
If appropriate opportunities become
available, we may license or acquire technologies, resources, drugs or drug candidates. We may never realize the anticipated benefits of such a transaction. In particular, due to the risks inherent in drug development, we may not successfully
develop or obtain marketing approval for the drug candidates we acquire. Future licenses or acquisitions could result in potentially dilutive issuances of equity securities, the incurrence of debt, the creation of contingent liabilities, material
impairment expenses related to goodwill, and impairment or amortization expenses related to other intangible assets, which could harm our financial condition.
56
We expect to grow our organization, and as a result, we may encounter difficulties in managing our
growth, which could disrupt our operations.
Over time, we expect to experience significant growth in the number of our
employees and the scope of our operations, particularly in the areas of drug manufacturing, regulatory affairs and sales, marketing and distribution. To manage these growth activities, we must continue to implement and improve our managerial,
operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Our management may need to devote a disproportionate amount of its attention to managing these growth activities. We may not
be able to effectively manage the expansion of our operations or identify, recruit and train additional qualified personnel. Our inability to manage the expansion of our operations effectively may result in weaknesses in our infrastructure, give
rise to operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. Our expected growth could also require significant capital expenditures and may divert financial resources from other
projects, such as the development of additional drug candidates. If we are unable to effectively manage our expected growth, our expenses may increase more than expected, our ability to generate revenues could be reduced and we may not be able to
implement our business strategy, including the successful commercialization of our drug candidates.
Risks Related to Regulatory Approval
and Marketing of Our Drug Candidates and Other Legal Compliance Matters
Even if we complete the necessary preclinical studies and
clinical trials, the marketing approval process is expensive, time-consuming and uncertain and may prevent us from obtaining approvals for the commercialization of some or all of our drug candidates. If we or our collaborators are not able to
obtain, or if there are delays in obtaining, required regulatory approvals, we or they will not be able to commercialize our drug candidates, and our ability to generate revenue will be materially impaired.
Our drug candidates and the activities associated with their development and commercialization, including their design, testing,
manufacture, safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, export and import, are subject to comprehensive regulation by the FDA and other regulatory agencies in the United States and by
the European Medicines Agency and comparable regulatory authorities in other countries. Failure to obtain marketing approval for a drug candidate will prevent us from commercializing the drug candidate. We and our collaborators have not received
approval to market any of our drug candidates from regulatory authorities in any jurisdiction. We have only limited experience in filing and supporting the applications necessary to gain marketing approvals and expect to rely on third-party contract
research organizations to assist us in this process.
Securing marketing approval requires the submission of extensive
preclinical and clinical data and supporting information to the various regulatory authorities for each therapeutic indication to establish the drug candidates safety and efficacy. Securing regulatory approval also requires the submission of
information about the product manufacturing process to, and inspection of manufacturing facilities by, the relevant regulatory authority. Our drug candidates may not be effective, may be only moderately effective or may prove to have undesirable or
unintended side effects, toxicities or other characteristics that may preclude our obtaining marketing approval or prevent or limit commercial use.
The process of obtaining marketing approvals, both in the United States and abroad, is expensive, may take many years if additional clinical trials are required, if approval is obtained at all, and can
vary substantially based upon a variety of factors, including the type, complexity and novelty of the drug candidates involved. Changes in marketing approval policies during the development period, changes in or the enactment of additional statutes
or regulations, or changes in regulatory review for each submitted product application, may cause delays in the approval or rejection of an application. The FDA and comparable authorities in other countries have substantial discretion in the
approval process and may refuse to accept any application or may decide that our data is insufficient for approval and require additional preclinical, clinical or other studies. In addition, varying interpretations of the data obtained from
preclinical and clinical testing could delay, limit or prevent marketing
57
approval of a drug candidate. Any marketing approval we or our collaborators ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved
product not commercially viable.
Accordingly, if we or our collaborators experience delays in obtaining approval or if we or
they fail to obtain approval of our drug candidates, the commercial prospects for our drug candidates may be harmed and our ability to generate revenues will be materially impaired.
Failure to obtain marketing approval in foreign jurisdictions would prevent our drug candidates from being marketed in such jurisdictions.
In order to market and sell our medicines in the European Union and many other jurisdictions, we or our third party collaborators must
obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional testing. The time required to obtain approval may differ substantially from
that required to obtain FDA approval. The regulatory approval process outside the United States generally includes all of the risks associated with obtaining FDA approval. In addition, in many countries outside the United States, a product must be
approved for reimbursement before the product can be approved for sale in that country. We or our third party collaborators may not obtain approvals from regulatory authorities outside the United States on a timely basis, if at all. Approval by the
FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one regulatory authority outside the United States does not ensure approval by regulatory authorities in other countries or jurisdictions or
by the FDA. We may not be able to file for marketing approvals and may not receive necessary approvals to commercialize our products in any market.
We, or any future collaborators, may not be able to obtain orphan drug designation or orphan drug exclusivity for our drug candidates in United States, European Union or other markets and, even if we
do, that exclusivity may not prevent the FDA, EMA or other regulatory authorities from approving other competing products.
Regulatory authorities in some jurisdictions, including the United States and Europe, may designate drugs for relatively small patient
populations as orphan drugs. Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is a drug intended to treat a rare disease or condition, which is generally defined as a patient population of fewer than 200,000
individuals annually in the United States. We, or any future collaborators, may seek orphan drug designations for other drug candidates and may be unable to obtain such designations.
Even if we, or any future collaborators, obtain orphan drug designation for a drug candidate, we, or they, may not be able to obtain
orphan drug exclusivity for that drug candidate. Generally, a product with orphan drug designation only becomes entitled to orphan drug exclusivity if it receives the first marketing approval for the indication for which it has such designation, in
which case the FDA or the EMA will be precluded from approving another marketing application for the same drug for that indication for the applicable exclusivity period. The applicable exclusivity period is seven years in the United States and ten
years in Europe. The European exclusivity period can be reduced to six years if a drug no longer meets the criteria for orphan drug designation or if the drug is sufficiently profitable so that market exclusivity is no longer justified.
Additionally, in the European Union, the orphan designation for a drug is reevaluated at the time of request for marketing authorization to verify whether it can maintain its status as an orphan drug and there is a risk that any orphan designation
may not be maintained. Orphan drug exclusivity may be lost if the FDA or the EMA determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the needs of
patients with the rare disease or condition.
Even if we, or any future collaborators, obtain orphan drug exclusivity for a
product, that exclusivity may not effectively protect the product from competition because different drugs can be approved for the same
58
condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if the FDA concludes that the later drug is clinically superior in that it
is shown to be safer, more effective or makes a major contribution to patient care.
Fast track designation by the FDA or other regulatory
acceleration options may not actually lead to a faster development or regulatory review or approval process and does not assure approval.
If a drug is intended for the treatment of a serious or life threatening condition and the drug demonstrates the potential to address unmet medical need for this condition, the drug sponsor may apply for
FDA fast track designation. However, fast track designation does not ensure that the drug sponsor will receive marketing approval or that approval will be granted within any particular timeframe. We may seek fast track designation for one or more of
our drug candidates. If we do seek fast track designation, we may not experience a faster development process, review or approval compared to conventional FDA procedures. In addition, the FDA may withdraw fast track designation if it believes that
the designation is no longer supported by data from our clinical development program. Fast track designation alone does not guarantee qualification for the FDAs priority review procedures.
Priority review designation by the FDA or similar classifications by other regulatory authorities may not lead to a faster regulatory review or
approval process and, in any event, does not assure approval.
If the FDA determines that a drug candidate offers major
advances in treatment or provides a treatment where no adequate therapy exists, the FDA may designate the drug candidate for priority review. For all new molecular entity (NME) new drug applications, a priority review designation means that the goal
for the FDA to act on the NDA is 8 months from the date of submission, rather than the standard 12 months. For subsequent applications (e.g., sNDAs),a priority review designation means that the goal for the FDA to review an application is six
months, rather than the standard review period of ten months. We may request priority review for our drug candidates. The FDA has broad discretion with respect to whether or not to grant priority review status to a drug candidate, so even if we
believe a particular drug candidate is eligible for such designation or status, the FDA may decide not to grant it. Moreover, a priority review designation does not necessarily mean a faster regulatory review process or necessarily confer any
advantage with respect to approval compared to conventional FDA procedures. Receiving priority review from the FDA does not guarantee approval within the eight-month or
six-month
clock or thereafter.
Even if we, or any current or future collaborators, obtain marketing approvals for our drug candidates, the terms of approvals and ongoing
regulation of our products may limit how we, or they, manufacture and market our products, which could materially impair our ability to generate revenue.
Once marketing approval has been granted, an approved product and its manufacturer and marketer are subject to ongoing review and extensive regulation. We, and any current or future collaborators, must
therefore comply with requirements concerning advertising and promotion for any of our drug candidates for which we or they obtain marketing approval. Promotional communications with respect to prescription drugs are subject to a variety of legal
and regulatory restrictions and must be consistent with the information in the products approved labeling. Thus, we and any current or future collaborators will not be able to promote any products we develop for indications or uses for which
they are not approved.
In addition, manufacturers of approved products and those manufacturers facilities are required
to comply with extensive FDA requirements, including ensuring that quality control and manufacturing procedures conform to cGMPs, which include requirements relating to quality control and quality assurance as well as the corresponding maintenance
of records and documentation and reporting requirements. We, our contract manufacturers, any current or future collaborators and their contract manufacturers could be subject to periodic unannounced inspections by the FDA to monitor and ensure
compliance with cGMPs.
59
Accordingly, assuming we, or any current or future collaborators, receive marketing approval
for one or more of our drug candidates, we, and any current or future collaborators, and our and their contract manufacturers will continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production,
product surveillance and quality control.
If we, and any current or future collaborators, are not able to comply with
post-approval regulatory requirements, we, and any current or future collaborators, could have the marketing approvals for our products withdrawn by regulatory authorities and our, or any current or future collaborators, ability to market any
products could be limited, which could adversely affect our ability to achieve or sustain profitability. Further, the cost of compliance with post-approval regulations may have a negative effect on our operating results and financial condition.
Any drug candidate for which we or our collaborators obtain marketing approval could be subject to restrictions or withdrawal from the
market and we may be subject to substantial penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our drug candidates, when and if any of them are approved.
Any drug candidate for which we or our collaborators obtain marketing approval, along with the manufacturing processes, post-approval
clinical data, labeling, advertising and promotional activities for such product, will be subject to continual requirements of and review by the FDA and other regulatory authorities. These requirements include submissions of safety and other
post-marketing information and reports, registration and listing requirements, cGMP requirements relating to quality control and manufacturing, quality assurance and corresponding maintenance of records and documents, and requirements regarding the
distribution of samples to physicians and recordkeeping. Even if marketing approval of a drug candidate is granted, the approval may be subject to limitations on the indicated uses for which the product may be marketed or to the conditions of
approval, or contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the medicine, including the requirement to implement a risk evaluation and mitigation strategy.
The FDA and other agencies, including the Department of Justice, or the DOJ, closely regulate and monitor the post-approval marketing and
promotion of products to ensure that they are marketed and distributed only for the approved indications and in accordance with the provisions of the approved labeling. The FDA and DOJ impose stringent restrictions on manufacturers
communications regarding off-label use and if we do not market our products for their approved indications, we may be subject to enforcement action for off-label marketing. Violations of the Federal Food, Drug, and Cosmetic Act and other statutes,
including the False Claims Act, relating to the promotion and advertising of prescription drugs may lead to investigations and enforcement actions alleging violations of federal and state health care fraud and abuse laws, as well as state consumer
protection laws.
In addition, later discovery of previously unknown adverse events or other problems with our products,
manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may yield various results, including:
|
|
|
restrictions on such products, manufacturers or manufacturing processes;
|
|
|
|
restrictions on the labeling or marketing of a product;
|
|
|
|
restrictions on distribution or use of a product;
|
|
|
|
requirements to conduct post-marketing studies or clinical trials;
|
|
|
|
warning letters or untitled letters;
|
|
|
|
withdrawal of the products from the market;
|
|
|
|
refusal to approve pending applications or supplements to approved applications that we submit;
|
60
|
|
|
damage to relationships with any potential collaborators;
|
|
|
|
unfavorable press coverage and damage to our reputation;
|
|
|
|
fines, restitution or disgorgement of profits or revenues;
|
|
|
|
suspension or withdrawal of marketing approvals;
|
|
|
|
refusal to permit the import or export of our products;
|
|
|
|
injunctions or the imposition of civil or criminal penalties; and
|
|
|
|
litigation involving patients using our products.
|
Non-compliance with U.S. and European Union requirements regarding safety monitoring or pharmacovigilance, and with requirements related to the development of products for the pediatric population, can
also result in significant financial penalties. Similarly, failure to comply with the European Unions requirements regarding the protection of personal information can also lead to significant penalties and sanctions.
Our relationships with healthcare providers, physicians and third party payors will be subject to applicable anti-kickback, fraud and abuse and other
healthcare laws and regulations, which, in the event of a violation, could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.
Healthcare providers, physicians and third party payors will play a primary role in the recommendation and prescription of any drug
candidates for which we obtain marketing approval. Our future arrangements with healthcare providers, physicians and third party payors may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain
the business or financial arrangements and relationships through which we market, sell and distribute any products for which we obtain marketing approval. Restrictions under applicable federal and state healthcare laws and regulations include the
following:
|
|
|
the federal Anti-Kickback Statute prohibits, among other things, persons 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 or arranging of, any good or service, for which payment may be made
under a federal healthcare program such as Medicare and Medicaid;
|
|
|
|
the federal False Claims Act imposes criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or
entities for, among other things, knowingly presenting, or causing to be presented, false or fraudulent claims for payment by a federal healthcare program or making a false statement or record material to payment of a false claim or avoiding,
decreasing or concealing an obligation to pay money to the federal government, with potential liability including mandatory treble damages and significant per-claim penalties, currently set at $10,781 to $21,563 per false claim;
|
|
|
|
the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal and civil liability for executing a scheme to
defraud any healthcare benefit program or making false statements relating to healthcare matters;
|
|
|
|
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, also imposes obligations,
including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;
|
61
|
|
|
the federal Physician Payments Sunshine Act requires applicable manufacturers of covered drugs to annually report to CMS (i) payments and other
transfers of value to physicians and teaching hospitals, and (ii) certain physician ownership or investment interests; and
|
|
|
|
analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws and transparency statutes, may apply to sales or
marketing arrangements and claims involving healthcare items or services reimbursed by third party payors, including private insurers.
|
Some state laws require pharmaceutical companies to comply with the pharmaceutical industrys voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal
government and may require drug manufacturers to report information related to payments and other transfers of value to other healthcare providers and healthcare entities, or marketing expenditures. State and foreign laws also govern 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.
If our operations are found to be in violation of any of the laws described above or any governmental regulations that apply to us, we
may be subject to penalties, including civil and criminal penalties, damages, fines, individual imprisonment, integrity obligations, and the curtailment or restructuring of our operations. Any penalties, damages, fines, individual imprisonment,
integrity obligations, exclusion from funded healthcare programs, or curtailment or restructuring of our operations could adversely affect our financial results. We are developing and implementing a corporate compliance program designed to ensure
that we will market and sell any future products that we successfully develop from our drug candidates in compliance with all applicable laws and regulations, but we cannot guarantee that this program will protect us from governmental investigations
or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us and we are not successful in defending ourselves or asserting our rights, those actions could have
a significant impact on our business, including the imposition of significant fines or other sanctions.
Efforts to ensure
that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with
current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may
apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, individual imprisonment, integrity obligations, exclusion from government funded healthcare programs, such as Medicare and Medicaid, and the
curtailment or restructuring of our operations. If any of the physicians or other healthcare providers or entities with whom we expect to do business is found to be not in compliance with applicable laws, they may be subject to criminal, civil or
administrative sanctions, including exclusion from government funded healthcare programs.
Current and future legislation may increase the
difficulty and cost for us and any collaborators to obtain marketing approval of our other drug candidates and affect the prices we, or they, may obtain.
In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could, among other things,
prevent or delay marketing approval of our other drug candidates, restrict or regulate post-approval activities and affect our ability, or the ability of any collaborators, to profitably sell any products for which we, or they, obtain marketing
approval. We expect that current laws, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we, or any collaborators, may
receive for any approved products.
For example, in March 2010, President Obama signed into law the Patient Protection
and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, or collectively the ACA. In January 2017, Congress voted to adopt a budget resolution for fiscal year 2017, or the Budget Resolution, that
62
authorizes the implementation of legislation that would repeal portions of the ACA. The Budget Resolution is not a law, however, it is widely viewed as the first step toward the passage of
legislation that 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.
Other legislative changes have been
proposed and adopted since the ACA was enacted. These changes include the Budget Control Act of 2011, which, among other things, led to aggregate reductions to Medicare payments to providers of up to 2% per fiscal year that started in 2013 and,
due to subsequent legislation, will continue until 2025. In addition, the American Taxpayer Relief Act of 2012, among other things, reduced Medicare payments to several providers and increased the statute of limitations period for the government to
recover overpayments to providers from three to five years. These new laws may result in additional reductions in Medicare and other healthcare funding and otherwise affect the prices we may obtain for any of our drug candidates for which regulatory
approval is obtained.
We expect that other healthcare reform measures that may be adopted in the future, may result in
additional reductions in Medicare and other healthcare funding, more rigorous coverage criteria, new payment methodologies and in additional downward pressure on the price that we receive for any approved product. Any reduction in reimbursement from
Medicare or other government 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 products.
In addition, with the new Administration and Congress, there will likely be
additional legislative changes, including repeal and replacement of certain provisions of the ACA. It remains to be seen, however, precisely what the new legislation will provide, when it will be enacted and what impact it will have on the
availability of healthcare and containing or lowering the cost of healthcare. Such reforms could have an adverse effect on anticipated revenue from product candidates that we may successfully develop and for which we may obtain marketing approval
and may affect our overall financial condition and ability to develop product candidates.
Moreover, legislative and
regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We cannot be sure whether additional legislative changes will be enacted, or whether the FDA
regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our drug candidates, if any, may be. In addition, increased scrutiny by the United States Congress of the FDAs approval
process may significantly delay or prevent marketing approval, as well as subject us and any collaborators to more stringent product labeling and post-marketing testing and other requirements.
Laws and regulations governing any international operations we may have in the future may preclude us from developing, manufacturing and selling
certain products outside of the United States and require us to develop and implement costly compliance programs.
If we
expand our operations outside of the United States, we must dedicate additional resources to comply with numerous laws and regulations in each jurisdiction in which we plan to operate. The Foreign Corrupt Practices Act, or FCPA, prohibits any U.S.
individual or business from paying, offering, authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign
entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to comply with certain accounting provisions requiring the company to
maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations.
63
Compliance with the FCPA is expensive and difficult, particularly in countries in which
corruption is a recognized problem. In addition, the FCPA presents particular challenges in the pharmaceutical industry, because, in many countries, hospitals are operated by the government, and doctors and other hospital employees are considered
foreign officials. Certain payments to hospitals in connection with clinical trials and other work have been deemed to be improper payments to government officials and have led to FCPA enforcement actions.
Various laws, regulations and executive orders also restrict the use and dissemination outside of the United States, or the sharing
with certain non-U.S. nationals, of information classified for national security purposes, as well as certain products and technical data relating to those products. If we expand our presence outside of the United States, it will require us to
dedicate additional resources to comply with these laws, and these laws may preclude us from developing, manufacturing, or selling certain products and drug candidates outside of the United States, which could limit our growth potential and increase
our development costs.
The failure to comply with laws governing international business practices may result in substantial
civil and criminal penalties and suspension or debarment from government contracting. The Securities and Exchange Commission, or SEC, also may suspend or bar issuers from trading securities on U.S. exchanges for violations of the FCPAs
accounting provisions.
If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines
or penalties or incur costs that could have a material adverse effect on our business.
We are subject to numerous
environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. From time to time and in the future, our operations may
involve the use of hazardous and flammable materials, including chemicals and biological materials, and may also produce hazardous waste products. Even if we contract with third parties for the disposal of these materials and waste products, we
cannot completely eliminate the risk of contamination or injury resulting from these materials. In the event of contamination or injury resulting from the use or disposal of our hazardous materials, we could be held liable for any resulting damages,
and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties for failure to comply with such laws and regulations.
We maintain workers compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees
resulting from the use of hazardous materials, but this insurance may not provide adequate coverage against potential liabilities. However, we do not maintain insurance for environmental liability or toxic tort claims that may be asserted against
us.
In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety
laws and regulations. Current or future environmental laws and regulations may impair our research, development or production efforts, which could adversely affect our business, financial condition, results of operations or prospects. In addition,
failure to comply with these laws and regulations may result in substantial fines, penalties or other sanctions.
Governments outside the
United States tend to impose strict price controls, which may adversely affect our revenues, if any.
In some countries,
such as the countries of the European Union, the pricing of prescription pharmaceuticals is subject to governmental control and access. In these countries, pricing negotiations with governmental authorities can take considerable time after the
receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we, or any current or future collaborators, may be required to conduct a clinical trial that compares the cost-effectiveness of our product
to other available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be materially harmed.
64
Our employees may engage in misconduct or other improper activities, including non-compliance with
regulatory standards and requirements, which could cause significant liability for us and harm our reputation.
We are
exposed to the risk of employee fraud or other misconduct, including intentional failures to comply with FDA regulations or similar regulations of comparable non-U.S. regulatory authorities, provide accurate information to the FDA or comparable
non-U.S. regulatory authorities, comply with manufacturing standards we have established, comply with federal and state healthcare fraud and abuse laws and regulations and similar laws and regulations established and enforced by comparable non-U.S.
regulatory authorities, report financial information or data accurately or disclose unauthorized activities to us. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result
in regulatory sanctions and serious harm to our reputation. It is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged
risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws, standards or regulations. If any such actions are instituted against us, and we are not
successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations, including the imposition of significant fines or other sanctions.
Risks Related to Our Common Stock
Our executive officers, directors and principal stockholders have the ability to control all matters submitted to our stockholders for approval, which
could have the effect of delaying, deferring or preventing a change in control of us and entrenching our management or board of directors.
As of February 20, 2017, our directors, executive officers and stockholders who own more than 5% of our outstanding common stock, together with their affiliates and related persons, beneficially
owned, in the aggregate, greater than approximately 50% of our outstanding common stock. As a result, if these stockholders were to choose to act together, they would be able to control all matters submitted to our stockholders for approval,
including the election and removal of directors and any merger, consolidation, sale of all or substantially all of our assets or similar transaction, as well as our management and affairs. The interests of this group of stockholders may not always
coincide with our corporate interests or the interest of other stockholders, and they may act in a manner with which you may not agree or that may not be in the best interests of other stockholders. This concentration of voting power may have the
effect of delaying, deferring or preventing a change in control of our company on terms that other stockholders may desire and entrenching our management or board or directors.
Our stock price has been and may in the future be volatile, and the market price of our common stock may decline in value in the future.
The market price of our common stock has fluctuated in the past and is likely to fluctuate in the future. During the period from
January 1, 2009 to December 31, 2016, our stock price has ranged from a low of $0.70 to a high of $16.87. Market prices for securities of early stage pharmaceutical, biotechnology and other life sciences companies have historically been
particularly volatile. Some of the factors that may cause the market price of our common stock to fluctuate include:
|
|
|
the results of current and planned clinical trials of our drug candidates including our complement factor D drug candidates and our HCV drug candidates
being developed by Janssen under an exclusive license of our entire HCV program to Janssen;
|
|
|
|
the timing and amount of proceeds received from milestones achieved and royalties earned, if any, by us under the Janssen Agreement;
|
|
|
|
the results of clinical trials conducted by others on drugs that would compete with our drug candidates;
|
65
|
|
|
the announcements of those data, particularly at high profile medical meetings, and the investment communitys perception of and reaction to those
data;
|
|
|
|
the entry into, modification of, or termination of key agreements, or any new collaboration agreement we may enter;
|
|
|
|
market expectations about the timeliness of our entry into, or failure to enter, collaboration arrangements with third parties;
|
|
|
|
the results of regulatory reviews and actions relating to the approval of our drug candidates;
|
|
|
|
our failure to obtain patent protection for any of our drug candidates or the issuance of third-party patents that cover our drug candidates;
|
|
|
|
the initiation of, material developments in, or conclusion of litigation;
|
|
|
|
failure of any of our drug candidates, if approved, to achieve commercial success;
|
|
|
|
general and industry-specific economic conditions that may affect our business, financial condition and operations, including without limitation
research and development expenditures;
|
|
|
|
the launch of drugs by others that would compete with our drug candidates;
|
|
|
|
the failure or discontinuation of any of our research programs;
|
|
|
|
issues in manufacturing our drug candidates or any approved products;
|
|
|
|
the introduction of technological innovations or new commercial products by us or our competitors;
|
|
|
|
changes in estimates or recommendations by securities analysts, if any, who cover our common stock;
|
|
|
|
future sales of our common stock by us, our insiders or other stockholders;
|
|
|
|
changes in the structure of health care payment systems;
|
|
|
|
period-to-period fluctuations in our financial results;
|
|
|
|
low trading volume of our common stock; and
|
|
|
|
the other factors described in this Risk Factors section.
|
In addition, if we fail to reach an important research, development or commercialization milestone or result by a publicly expected
deadline, even if by only a small margin, there could be significant impact on the market price of our common stock. Additionally, as we approach the announcement of important clinical data or other significant information and as we announce such
results and information, we expect the price of our common stock to be particularly volatile, and negative results would have a substantial negative impact on the price of our common stock.
The stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of
individual companies. These broad market fluctuations may adversely affect the trading price of our common stock. In the past, following periods of volatility in the market price of a companys securities, stockholders have often instituted
class action securities litigation against those companies. Such litigation, if instituted, could result in substantial costs and diversion of management attention and resources, which could significantly harm our business operations and reputation.
For example, we, and certain of our current and former officers, were named as defendants in a consolidated class action lawsuit following our announcements regarding the FDAs clinical hold related to sovaprevir, our clinical-stage drug
candidate for the treatment of chronic hepatitis C viral infection. On May 5, 2014, without any settlement payment by us, any individual defendant or any third party on their behalf, the lead plaintiffs in the consolidated class action lawsuit
voluntarily dismissed all of their claims without prejudice.
66
Sales of a substantial number of shares of our common stock in the public market could cause the market
price of our common stock to drop significantly.
Certain stockholders hold a substantial number of shares of our common
stock. If such stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market, the trading price of our common stock could decline. JJDC, which owns, as of February 20, 2017, approximately 13%
of our common stock, has the right, until July 1, 2023, to require us, under specified conditions, to file a registration statement in order to register all or a portion of the shares held by JJDC. We have also agreed to provide JJDC with
certain piggyback registration rights such that at any time prior to July 1, 2023, subject to specified conditions, whenever we propose to register shares of our common stock for our own account, JJDC will have the right to include
some or all of its shares in such registration. Immediately following the filing of this Form 10-K, we anticipate filing a registration statement with the SEC to register all of the shares of our common stock held by JJDC. We have entered into
a lock-up agreement with JJDC pursuant to which JJDC has agreed that, subject to certain exceptions, it will not, and will also cause its affiliates not to, without our prior approval, sell, transfer or otherwise dispose of the shares of our common
stock owned by it until the earlier of (1) January 31, 2018, or (2) such date that is 60 days after the first public announcement of top-line clinical results from Janssens on-going OMEGA-1 phase 2b clinical trial. Any waiver by
us of the restrictions set forth in this lock-up agreement; any sales of our common stock by JJDC after this lock-up agreement lapses; or any other sale of a substantial number of shares of our common stock by any of our other stockholders, none of
whom are subject to a lock-up agreement, could have a material adverse effect on the trading price of our common stock.
Unstable market
and economic conditions may have serious adverse consequences on our business.
Our general business strategy may be
adversely affected by economic downturns and volatile business environments and continued unpredictable and unstable market conditions. If the current equity and credit markets deteriorate further, or do not improve, it may make any necessary debt
or equity financing more difficult, more costly, and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and stock
price and could require us to delay or abandon clinical development plans. In addition, there is a risk that one or more of our current service providers, manufacturers and other partners may not survive these difficult economic times, which would
directly affect our ability to attain our operating goals on schedule and on budget.
Our management is required to devote substantial time
and incur additional expense to comply with public company regulations. Our failure to comply with such regulations could subject us to public investigations, fines, enforcement actions and other sanctions by regulatory agencies and authorities and,
as a result, our stock price could decline in value.
As a public company, the Sarbanes-Oxley Act of 2002 and the related
rules and regulations of the SEC, as well as the rules of the NASDAQ Global Select Market, have required us to implement additional corporate governance practices and adhere to a variety of reporting requirements and complex accounting rules.
Compliance with these public company obligations places significant additional demands on our limited number of finance and accounting staff and on our financial, accounting and information systems.
In particular, as a public company, our management is required to conduct an annual evaluation of our internal controls over financial
reporting and include a report of management on our internal controls in our Annual Reports on Form 10-K. If we are unable to continue to conclude that we have effective internal controls over financial reporting or, if our independent registered
public accounting firm are unable to provide us with an attestation and an unqualified report as to the effectiveness of our internal controls over financial reporting, investors could lose confidence in the reliability of our financial statements,
which could result in a decrease in the value of our common stock.
67
Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future,
capital appreciation, if any, will be stockholders sole source of gain.
We have never declared or paid cash
dividends on our capital stock. We anticipate that we will retain our earnings, if any, for future growth and therefore do not anticipate paying cash dividends in the future. As a result, only appreciation of the price of our common stock will
provide a return to stockholders.
Provisions in our corporate charter documents and under Delaware law could make an acquisition of us,
which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.
Provisions in our corporate charter and our bylaws may discourage, delay or prevent a merger, acquisition or other change in control of us that stockholders may consider favorable, including transactions
in which a stockholder might otherwise receive a premium for his or her shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of
our common stock. In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by
making it more difficult for stockholders to replace members of our board of directors. Among other things, these provisions:
|
|
|
establish a classified board of directors such that all members of the board are not elected at one time;
|
|
|
|
allow the authorized number of our directors to be changed only by resolution of our board of directors;
|
|
|
|
limit the manner in which stockholders can remove directors from the board;
|
|
|
|
establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted on at
stockholder meetings;
|
|
|
|
require that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions by our stockholders by written consent;
|
|
|
|
limit who may call a special meeting of stockholder meetings;
|
|
|
|
authorize our board of directors to issue preferred stock without stockholder approval, which could be used to institute a poison pill that
would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our board of directors; and
|
|
|
|
require the approval of the holders of at least 75% of the votes that all our stockholders would be entitled to cast to amend or repeal certain
provisions of our charter or bylaws.
|
Moreover, because we are incorporated in Delaware, we are governed by
the provisions of Section 203 of the General Corporation Law of the State of Delaware, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the
date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner. This could discourage, delay or prevent someone from acquiring us or merging
with us, whether or not it is desired by, or beneficial to, our stockholders.
68