Overview
We are a biopharmaceutical company focused on the discovery and clinical development of innovative, small molecule drugs that address
underserved medical needs in neuropsychiatric and neurological disorders by targeting intracellular signaling mechanisms within the central nervous system, or CNS. Lumateperone (also known as
ITI-007)
is our
lead product candidate with mechanisms of action that, we believe, may represent an effective treatment across multiple therapeutic indications. In our
pre-clinical
and clinical trials to date, lumateperone
combines potent serotonin
5-HT2A
receptor antagonism, dopamine receptor phosphoprotein modulation, or DPPM, glutamatergic modulation, and serotonin reuptake inhibition into a single drug candidate for the
treatment of acute and residual schizophrenia and for the treatment of bipolar disorder, including bipolar depression. At dopamine D2 receptors, lumateperone has been demonstrated to have dual properties and to act as both a
pre-synaptic
partial agonist and a post-synaptic antagonist. Lumateperone has also been demonstrated to have affinity for dopamine D1 receptors and indirectly stimulate phosphorylation of glutamatergic NMDA GluN2B
receptors in a mesolimbic specific manner. We believe that this regional selectivity in brain areas thought to mediate the efficacy of antipsychotic drugs, together with serotonergic, glutamatergic, and dopaminergic interactions, may result in
efficacy for a broad array of symptoms associated with schizophrenia and bipolar disorder with improved psychosocial function. The serotonin reuptake inhibition potentially allows for antidepressant activity in the treatment of schizoaffective
disorder, other disorders with
co-morbid
depression, and/or as a stand-alone treatment for major depressive disorder. We believe lumateperone may also be useful for the treatment of other psychiatric and
neurodegenerative disorders, particularly behavioral disturbances associated with dementia, autism, and other CNS diseases. Lumateperone is in Phase 3 clinical development as a novel treatment for schizophrenia, bipolar depression and agitation
associated with dementia, including Alzheimers disease, or AD.
Lumateperone for the Treatment of Schizophrenia
In September 2015, we announced
top-line
clinical results from our first Phase 3 clinical trial of
lumateperone for the treatment of patients with schizophrenia. This randomized, double-blind, placebo-controlled Phase 3 clinical trial was conducted at 12 sites in the United States with 450 patients randomized (1:1:1) to receive either 60 mg
of
ITI-007,
40 mg of
ITI-007
or placebo once daily in the morning for 28 days. The
pre-specified
primary efficacy measure was
change from baseline versus placebo at study endpoint (4 weeks) on the centrally rated Positive and Negative Syndrome Scale, or PANSS, total score. In this trial, the once-daily dose of 60 mg of
ITI-007
met
the primary endpoint and demonstrated antipsychotic efficacy with statistically significant superiority over placebo at week 4 (study endpoint) with additional improvements observed in social function. Moreover, the 60 mg dose of
ITI-007
showed significant antipsychotic efficacy as early as week 1, which was maintained at every time point throughout the entire study.
ITI-007
showed a dose-related
improvement in symptoms of schizophrenia with the 40 mg dose approximating the trajectory of improvement seen with the 60 mg dose, but the effect with 40 mg did not reach statistical significance on the primary endpoint. In addition, the 60 mg dose
of
ITI-007
met the key secondary endpoint of statistically significant improvement on the Clinical Global Impression Scale for Severity of Illness, or
CGI-S.
The 40 mg
dose of
ITI-007
also demonstrated a statistically significant improvement versus placebo on the
CGI-S,
though not formally tested against placebo as a key secondary
endpoint since it did not separate on the primary endpoint. A high treatment completion rate was observed with
ITI-007
(87% of patients completed treatment on
ITI-007
60
mg, 82% completed on
ITI-007
40 mg, and 75% completed on placebo). Patients randomized to
ITI-007
60 mg demonstrated a statistically significant longer time to treatment
discontinuation due to
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any reason compared to placebo (p=0.006) and a statistically significant longer time to treatment discontinuation due to lack of efficacy (p=0.01). Consistent with previous studies, lumateperone
had a favorable safety and tolerability profile as evidenced by motoric, metabolic, and cardiovascular characteristics similar to placebo, and no clinically significant changes in akathisia, extrapyramidal symptoms, prolactin, body weight, glucose,
insulin, or lipids. The number of patients who discontinued treatment in this study due to an adverse event was low and the time to treatment discontinuation due to an adverse event was not statistically significantly different from placebo for
either dose of lumateperone.
In September 2015, we also announced
top-line
data from an
open-label positron emission tomography, or PET, study of lumateperone examining brain occupancy of striatal D2 receptors. This study was conducted in patients diagnosed with schizophrenia who were otherwise healthy and stable with respect to their
psychosis. After washout from their previous antipsychotic medication for at least two weeks, PET was used to determine target occupancy in brain regions at baseline (drug-free) and again after two weeks of once daily lumateperone oral
administration. In this trial, the 60 mg dose of
ITI-007
was associated with a mean of approximately 40% striatal dopamine D2 receptor occupancy. As predicted by preclinical and earlier clinical data,
lumateperone demonstrated antipsychotic effect at relatively low striatal D2 receptor occupancy, lower than the occupancy range required by most other antipsychotic drugs. Unlike any existing schizophrenia treatment, this dopamine receptor
phosphoprotein modulator, or DPPM, acts as a
pre-synaptic
partial agonist and post-synaptic antagonist at D2 receptors. We believe this mechanism likely contributes to the favorable safety profile of
lumateperone, with reduced risk for hyperprolactinemia, akathisia, extrapyramidal symptoms, and other motoric side effects.
The
top-line
results from our first Phase 3 clinical trial of lumateperone confirm the earlier Phase 2 results that we announced in December 2013, in which lumateperone exhibited antipsychotic efficacy in a randomized,
double-blind, placebo and active controlled clinical trial in patients with schizophrenia. In this Phase 2 trial
(ITI-007-005),
335 patients were randomized to receive
one of four treatments: 60 mg of
ITI-007,
120 mg of
ITI-007,
4 mg of risperidone (active control) or placebo in a 1:1:1:1 ratio, orally once daily for 28 days. The
primary endpoint for this clinical trial was change from baseline to Day 28 on the PANSS total score. In this study, lumateperone met the trials
pre-specified
primary endpoint, improving symptoms
associated with schizophrenia as measured by a statistically significant and clinically meaningful decrease in the PANSS total score. The trial also met key secondary outcome measures related to efficacy on PANSS subscales and safety.
In September 2016, we announced
top-line
results from the second Phase 3 clinical trial
(ITI-007-302)
of lumateperone for the treatment of patients with schizophrenia. In this trial, neither dose of lumateperone separated from placebo on the primary endpoint,
change from baseline on the PANSS total score, in the
pre-defined
patient population. The active control, risperidone, did separate from placebo. In this trial, lumateperone was statistically significantly
better than risperidone on key safety and tolerability parameters and exhibited a safety profile similar to placebo. This replicates the safety and tolerability findings of our Phase 2 study
(ITI-007-005)
in which the efficacy of
ITI-007
60 mg and risperidone, the active control, were similar. We believe lumateperone did not separate from placebo on the
pre-specified
primary endpoint in the
ITI-007-302
study in part due to an unusually high placebo response at certain sites which
disproportionately affected the trial results and contributed to the efficacy outcome of this study compared to our two previous positive efficacy studies. In addition, we believe other confounding factors may have played a role in the efficacy
outcome of
ITI-007-302,
including an expectation bias and the potential for functional unblinding. We believe the lumateperone late-stage clinical development program, including two large, well-controlled
positive studies and supportive evidence from this second Phase 3 study, collectively provide evidence of the efficacy and safety of lumateperone for the treatment of schizophrenia. Across all three of our efficacy trials,
ITI-007
60 mg improved symptoms of schizophrenia with the same trajectory and magnitude of change from baseline in the primary endpoint, the PANSS total score.
We have a meeting scheduled with the Division of Psychiatry Products of the U.S. Food and Drug Administration, or FDA, in late March 2017 to
discuss the submission of a new drug application, or NDA, for lumateperone in schizophrenia. We expect to provide an update on the status of our discussions with the FDA following this meeting.
We will need to complete other development, manufacturing and
pre-commercialization
activities
necessary to support the submission of a planned NDA for lumateperone in schizophrenia.
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Lumateperone for the Treatment of Depressive Episodes Associated with Bipolar Disorder
(Bipolar Depression)
Our bipolar depression program consists of two Phase 3 multi-center, randomized, double-blind, placebo-controlled
clinical trials: one to evaluate lumateperone as a monotherapy and the other to evaluate lumateperone as an adjunctive therapy with lithium or valproate. In each trial, patients with a clinical diagnosis of Bipolar I or Bipolar II disorder and who
are experiencing a current major depressive episode are randomized to receive one of three treatments: 60 mg
ITI-007,
40 mg
ITI-007,
or placebo in a 1:1:1 ratio orally
once daily for 6 weeks. In the
ITI-007-401
trial, patients receive lumateperone or placebo as a monotherapy. In the
ITI-007-402
trial, patients receive lumateperone or placebo adjunctive to their existing mood stabilizer lithium or valproate. In both trials, we are employing a number of strategies designed to ensure we
recruit appropriately diagnosed patients in an effort to reduce the risk of a high placebo response. Patient enrollment in the
ITI-007-401
trial, is expected to complete
in the first half of 2018. Patient enrollment in the
ITI-007-402
trial, is expected to complete in the second half of 2018. One of our strategies to optimize potential
success in this program is to initiate a third trial in bipolar depression conducted globally. We anticipate completing patient enrollment in our global study by the end of 2018.
The primary endpoint for both clinical trials is change from baseline at Day 42 on the Montgomery-Åsberg Depression Rating Scale, or
MADRS, total score versus placebo. The MADRS is a well-validated
10-item
checklist that measures the ability of a drug to reduce overall severity of depressive symptoms. Individual items are rated by an expert
clinician on a scale of 0 to 6 in which a score of 6 represents the most depressed evaluation for each item assessed. The total score ranges from 0 to 60. Secondary endpoints include measures of social function and quality of life that may
illustrate the differentiated clinical profile of lumateperone. Safety and tolerability are also assessed in both clinical trials.
Lumateperone for the Treatment of Behavioral Disturbances Associated with Dementia, Including Alzheimers Disease
In the fourth quarter of 2014, we announced the
top-line
data from
ITI-007-200,
a Phase 1/2 clinical trial designed to evaluate the safety, tolerability and pharmacokinetics of low doses of lumateperone in healthy geriatric subjects and in patients with dementia,
including AD. The completion of this study marks an important milestone in our strategy to develop low doses of lumateperone for the treatment of behavioral disturbances associated with dementia and related disorders. The
ITI-007-200
trial results indicate that lumateperone is safe and well-tolerated across a range of low doses, has linear- and dose-related pharmacokinetics and improves
cognition in the elderly. The most frequent adverse event was mild sedation at the higher doses. We believe these results further position lumateperone as a development candidate for the treatment of behavioral disturbances in patients with dementia
and other neuropsychiatric and neurological conditions.
In the second quarter of 2016, we initiated Phase 3 development of lumateperone
for the treatment of agitation in patients with dementia, including AD. Our
ITI-007-201
trial is a Phase 3 multi-center, randomized, double-blind, placebo-controlled
clinical trial in patients with a clinical diagnosis of probable AD and clinically significant symptoms of agitation. In this trial, approximately 360 patients are planned to be randomized to receive 9 mg
ITI-007
or placebo in a 1:1 ratio orally once daily for four weeks. This study includes a single interim analysis reviewed by an independent data monitoring committee, which will be used to assess the
assumptions of variability and effect size. The primary efficacy measure is the Cohen-Mansfield Agitation InventoryCommunity version, or
CMAI-C. The
CMAI-C
is
a well-validated
37-item
scale that measures the ability of a drug to reduce overall frequency of agitation symptoms, including aggressive behaviors. Individual items are rated by an expert clinician on a
scale of 1 to 7 in which a score of 7 represents the most frequent for each item assessed. The key secondary efficacy measure is a Clinical Global Impression scale for Severity, or
CGI-S,
of illness. Other
exploratory secondary endpoints include measures of other behavioral disturbances associated with dementia. Safety and tolerability are also assessed in the trial.
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Other Indications for Lumateperone
We are also pursuing clinical development of lumateperone for the treatment of additional CNS diseases and disorders. At the lowest doses,
lumateperone has been demonstrated to act primarily as a potent
5-HT2A
serotonin receptor antagonist. As the dose is increased, additional benefits are derived from the engagement of additional drug targets,
including modest dopamine receptor modulation and modest inhibition of serotonin transporters. We believe that combined interactions at these receptors may provide additional benefits above and beyond selective
5-HT2A
antagonism for treating agitation, aggression and sleep disturbances in diseases that include dementia, AD, Huntingtons disease and autism spectrum disorders, while avoiding many of the side
effects associated with more robust dopamine receptor antagonism. As the dose of lumateperone is further increased, leading to moderate dopamine receptor modulation, inhibition of serotonin transporters, and indirect glutamate modulation, these
actions complement the complete blockade of
5-HT2A
serotonin receptors. At a dose of 60 mg,
ITI-007
has been shown effective in treating the symptoms associated with
schizophrenia, and we believe this higher dose range will be useful for the treatment of bipolar disorder, depressive disorders and other neuropsychiatric diseases. Within the
ITI-007
portfolio, we are also
developing a long-acting injectable formulation to provide more treatment options to patients suffering from mental illness. Given the encouraging tolerability data to date with oral lumateperone, we believe that a long-acting injectable option, in
particular, may lend itself to being an important formulation choice for patients.
Given the potential utility for lumateperone and
follow-on
compounds to treat these additional indications, we may investigate, either on our own or with a partner, agitation, aggression and sleep disturbances in additional diseases that include autism spectrum
disorders, depressive disorder, intermittent explosive disorder,
non-motor
symptoms and motor complications associated with Parkinsons disease, and posttraumatic stress disorder. We hold exclusive,
worldwide commercialization rights to lumateperone and a family of compounds from Bristol-Myers Squibb Company pursuant to an exclusive license.
Other Product Candidates
We have a second major program called
ITI-002
that has yielded a portfolio of compounds that
selectively inhibits the enzyme phosphodiesterase type 1, or PDE1. We believe PDE1 helps regulate brain activity related to cognition, memory processes and movement/coordination. On February 25, 2011, we (through our wholly owned operating
subsidiary, ITI) and Takeda Pharmaceutical Company Limited, or Takeda, entered into a license and collaboration agreement, or the Takeda License Agreement, under which we agreed to collaborate to research, develop and commercialize our proprietary
compound
ITI-214
and other selected compounds that selectively inhibit PDE1 for use in the prevention and treatment of human diseases. On October 31, 2014, we entered into an agreement with Takeda
terminating the Takeda License Agreement, or the Termination Agreement, pursuant to which all rights granted under the Takeda License Agreement were returned to us. On September 15, 2015, Takeda completed the transfer of the Investigational New
Drug application, or IND, for
ITI-214
to us.
ITI-214
is the first compound in its class to successfully advance into Phase 1 clinical trials. We intend to pursue the
development of our PDE program, including
ITI-214,
for the treatment of several CNS and
non-CNS
conditions, including cardiovascular disease. Following the positive
safety and tolerability results in our Phase 1 program, in the first half of 2017 we expect to initiate a Phase 1/2 clinical trial with ITI-214 in patients with Parkinsons disease to evaluate safety and tolerability in this patient population,
as well as motor and non-motor exploratory endpoints.
Our pipeline also includes
pre-clinical
programs that are focused on advancing drugs for the treatment of schizophrenia, Parkinsons disease, AD and other neuropsychiatric and neurodegenerative disorders. We are also investigating the development of treatments for disease
modification of neurodegenerative disorders and
non-CNS
diseases.
We have assembled a management
team with significant industry experience to lead the discovery and development of our product candidates. We complement our management team with a group of scientific and
7
clinical advisors that includes recognized experts in the fields of schizophrenia and other CNS disorders, including Nobel laureate, Dr. Paul Greengard, one of our
co-founders.
We were originally incorporated in the State of Delaware in August 2012 under the name
Oneida Resources Corp. Prior to a reverse merger that occurred on August 29, 2013, or the Merger, Oneida Resources Corp. was a shell company registered under the Securities Exchange Act of 1934, or the Exchange Act, with
no specific business plan or purpose until it began operating the business of ITI, Inc., or ITI, through the Merger transaction on August 29, 2013. ITI was incorporated in Delaware in May 2001 to focus primarily on the development of novel
drugs for the treatment of neuropsychiatric and neurologic diseases and other disorders of the CNS. Effective upon the Merger, a wholly-owned subsidiary of the Company merged with and into ITI, and ITI continues as the operating subsidiary of the
Company and ITIs business continues as the business of the Company. As used herein, the words the Company, we, us, and our refer to the current Delaware Corporation and its wholly owned
subsidiaries, ITI, Inc. and ITI Limited.
Our corporate headquarters and laboratory are located at 430 East 29th Street, New York, New
York 10016, and our telephone number is
(646) 440-9333.
We also have an office in Towson, Maryland. We maintain a website at www.intracellulartherapies.com, to which we regularly post copies of our press
releases as well as additional information about us. Our filings with the SEC will be available free of charge through the Investor Relations section of our website as soon as reasonably practicable after being electronically filed with or furnished
to the SEC. Information contained in our website does not constitute a part of this report or our other filings with the SEC.
Our Strategy
Our goal is to discover and develop novel small molecule therapeutics for the treatment of CNS diseases in order to improve the lives of people
suffering from such illnesses. Using our key understanding of intracellular signaling, we seek to accomplish our goal, using our
in-house
expert drug discovery and clinical development teams, in two ways:
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we seek to have the capability to develop
first-in-class
medications with novel mechanisms that have the potential to treat CNS diseases
for which there are no previously marketed drugs; and
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we seek to develop drugs that either can differentiate themselves in competitive markets by addressing aspects of CNS disease which are not treated by currently marketed drugs or can be effective with fewer side
effects.
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The key elements of our strategy are to:
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complete the development of lumateperone for its lead indication, treatment of schizophrenia, and for additional neuropsychiatric indications, such as bipolar disorder, behavioral disturbances in dementia, including AD
and residual symptoms in schizophrenia;
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expand the commercial potential of lumateperone by investigating its usefulness in additional neurological areas, such as autism spectrum disorder, and in additional neuropsychiatric indications, such as sleep disorders
associated with neuropsychiatric and neurological disorders and major depressive disorder;
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continue to develop PDE inhibitor compounds, such as
ITI-214,
for the treatment of CNS and other disorders; and
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advance earlier stage product candidates in our pipeline.
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Our Drug Discovery Platform and Capabilities
Based on the pioneering efforts of our
co-founder
and Nobel laureate, Dr. Paul Greengard,
we have developed a detailed understanding of intracellular signaling pathways and intracellular targets. We have used
8
that knowledge to develop several state of the art technology platforms, including one called CNSProfile
TM
. This technology monitors the
phosphoprotein changes elicited by major psychotropic drug classes and subclasses, and generates a unique molecular signature for drug compounds. By monitoring how the levels of these phosphoproteins change
in vivo
, we identify intracellular
signaling pathways through which several major drug classes operate. Along with what we believe to be state of the art drug discovery efforts, we have used, and may continue to use, this information as a tool to validate our selection of preclinical
candidate molecules.
During the years ended December 31, 2016 and 2015, we incurred approximately $93.8 million and
$87.7 million in research and development expenses, respectively.
Given the nature of our research and development and business
activities, we do not expect that compliance with federal, state and local environmental laws will result in material costs or have a significant negative effect on our operations.
Disease and Market Overview
Our programs
for small molecule therapeutics are designed to address various CNS diseases that we believe are underserved or unmet by currently available therapies and that represent large potential commercial market opportunities for us. Background information
on the CNS diseases and related commercial markets that may be addressed by our programs is set forth below.
Schizophrenia
Schizophrenia is a disabling and chronic mental illness that is characterized by multiple symptoms during an acute phase of the disorder that
can include
so-called
positive symptoms, such as hallucinations, hearing voices, grandiose beliefs and suspiciousness or paranoia. These symptoms can be accompanied by additional, harder to treat
symptoms, such as social withdrawal, blunted emotional response and speech deficits, collectively referred to as negative symptoms, difficulty concentrating and disorganized thoughts, or cognitive impairment, depression and insomnia.
Such residual symptoms often persist even after the acute positive symptoms subside, and contribute substantially to the social and employment disability associated with schizophrenia. Current antipsychotic medications provide some relief for the
symptoms associated with the acute phase of the disorder, but they do not effectively treat the residual phase symptoms associated with chronic schizophrenia. Currently available medications used to treat acute schizophrenia are limited in their use
due to side effects that can include movement disorders, weight gain, metabolic disturbances, and cardiovascular disorders. Indeed, the side effects associated with current antipsychotic medications often make some of the residual phase symptoms,
such as negative symptoms and social function, worse. There is an unmet medical need for new therapies that have improved side effect and efficacy profiles.
According to the National Institute of Mental Health, over 1% of the worlds population suffers from schizophrenia, and more than
2.5 million Americans suffer from the illness in any given year. Worldwide sales of antipsychotic drugs exceeded $20 billion in 2015. These drugs have been increasingly used by physicians to address a range of disorders in addition to
schizophrenia, including bipolar disorder and a variety of psychoses and related conditions in elderly patients. Despite their commercial success, current antipsychotic drugs have substantial limitations, including inadequate efficacy and severe
side effects.
The first-generation, or typical, antipsychotics that were introduced in the late-1950s block dopamine receptors. While
typical antipsychotics are effective against positive symptoms of schizophrenia in many patients, these drugs often induce disabling motor disturbances, and they fail to address or worsen most of the negative symptoms and cognitive disturbances
associated with schizophrenia.
Most schizophrenia patients in the United States are treated today with second-generation, or atypical,
antipsychotics, which induce fewer motor disturbances than typical antipsychotics, but still fail to address most
9
of the negative symptoms of schizophrenia and other symptoms associated with social function impairment. Many patients with schizophrenia have deficits in social function. Social function is the
ability to recognize, understand, process and use external cues to solve problems, maintain work performance, and conduct interpersonal relationships. Deficits in social function often remain after positive symptoms, such as hallucinations and
delusions, have resolved in these patients. In addition, currently prescribed treatments do not effectively address or may exacerbate cognitive disturbances associated with schizophrenia. It is believed that the efficacy of atypical antipsychotics
is due to their interactions with dopamine and
5-HT2A
receptors. The side effects induced by the atypical agents may include weight gain,
non-insulin
dependent (type II)
diabetes, cardiovascular side effects, sleep disturbances, and motor disturbances. We believe that these side effects generally arise either from
non-essential
receptor interactions or from excessive dopamine
blockade.
The limitations of currently available antipsychotics result in poor patient compliance. A landmark study funded by the
National Institute of Mental Health, the Clinical Antipsychotic Trials of Intervention Effectiveness, also referred to as CATIE, which was published in The New England Journal of Medicine in September 2005, found that 74% of patients taking typical
or atypical antipsychotics discontinued treatment within 18 months because of side effects or lack of efficacy. We believe there is a large underserved medical need for new therapies that have improved side effect and efficacy profiles.
Bipolar Disorder
Bipolar
disorder, sometimes referred to as manic-depressive illness, is characterized by extreme shifts in mood. Individuals with bipolar disorder may experience intense feelings of over-excitement, irritability, and impulsivity with grandiose beliefs and
racing thoughts, referred to as a manic episode. Symptoms of depression may include feeling tired, hopeless and sad, with difficulty concentrating and thoughts of suicide. Some people experience both types of symptoms in the same mixed
episode. Severe symptoms of bipolar disorder can be associated with hallucinations or delusions, otherwise referred to as psychosis.
Bipolar disorder affects approximately 5.7 million adults in the United States in any given year, or about 2.6 percent of the adult
U.S. population. In 2012, therapeutics used to treat bipolar disorder had global sales of approximately $6 billion.
Bipolar disorder
is often treated with antipsychotic medications alone or in combination with mood stabilizers. The side effects and safety risks associated with antipsychotic drugs in patients with bipolar disorder are similar to those experienced by patients with
schizophrenia. Moreover, a large national research program conducted from 1998 to 2005 called the Systematic Treatment Enhancement Program for Bipolar Disorder, or
STEP-BD,
followed 4,360 patients with bipolar
disorder long term and showed that about half of patients who were treated for bipolar disorder still experienced lingering and recurrent symptoms, indicating a clear need for improved treatments.
Behavioral Disturbances in Dementia, Including Alzheimers Disease
It has been estimated that 44.4 million people worldwide were living with dementia in 2013, including over 5.2 million patients with
AD in the United States. This number is expected to increase to 75.6 million by 2030 and to increase to 135.5 million by 2050. While the diagnostic criteria for AD and other dementias mostly focus on the related cognitive deficits, it is
often the behavioral and psychiatric symptoms that are most troublesome for caregivers and lead to poor quality of life for patients. Several behavioral symptoms are quite prevalent in patients with dementia, including patients with AD. In view of
the potential multiple effects of lumateperone on aggression, agitation, sleep disorders and depression, and its safety profile to date, we believe that lumateperone may provide a novel therapy for treating the behavioral disturbances accompanying
dementia, including AD.
The FDA has not approved any drug to treat the behavioral symptoms of dementia, including AD. As symptoms
progress and become more severe, physicians often resort to
off-label
use of antipsychotic
10
medications in these patients. Current antipsychotic drugs are associated with a number of side effects, which can be problematic for elderly patients with dementia. In addition, antipsychotic
drugs may exacerbate the cognitive disturbances associated with dementia. We believe there is a large unmet medical need for a safe and effective therapy to treat the behavioral symptoms in patients with dementia, including AD.
Alzheimers Disease
AD is a
progressive neurodegenerative disorder that slowly destroys memory and thinking skills, and eventually even the ability to carry out simple tasks. Its symptoms include cognitive dysfunction, memory abnormalities, progressive impairment in activities
of daily living, and a host of behavioral and neuropsychiatric symptoms. AD primarily affects older people and, in most cases, symptoms first appear after age 60. AD gets worse over time and is fatal.
The market for AD therapeutics is categorized into two segments: acetylcholinesterase inhibitors and NMDA receptor antagonists, which include
Aricept
®
, Namenda
®
, Exelon
®
and Ebixa
®
. These two segments had total sales of $4.9 billion in 2013.
According to the
Alzheimers Association, 5.2 million people in the United States are living with AD, and it is currently the fifth leading cause of death for people age 65 and older. It has been estimated that 44.4 million people worldwide were
living with dementia in 2013. This number is expected to increase to 75.6 million by 2030 and to increase to 135.5 million by 2050. While the diagnostic criteria for AD mostly focus on the related cognitive deficits, it is often the
behavioral and psychiatric symptoms that are most troublesome for caregivers and lead to poor quality of life for patients. These symptoms include agitation, aggressive behaviors, depression, sleep disorders, and psychosis. Studies have suggested
that approximately 60% of patients with AD experience agitation/aggression, up to 87% of patients experience depression, approximately 60% of patients experience sleep disturbances, particularly as an increased likelihood of
day-night
reversal, and approximately 20% to 51% of AD patients may develop psychosis at some point in the disease process, commonly consisting of hallucinations and delusions. The diagnosis of AD psychosis is
associated with more rapid cognitive and functional decline and institutionalization. Sleep disturbances increase the likelihood of
day-night
reversal, increased agitation and increased caregiver stress that
strongly influences decisions for nursing home placement.
The FDA has not approved any drug to treat the behavioral symptoms of AD. As
symptoms progress and become more severe, physicians often resort to
off-label
use of antipsychotic medications in these patients. Current antipsychotic drugs are associated with a number of side effects,
which can be problematic for elderly patients with AD. In addition, antipsychotic drugs may exacerbate the cognitive disturbances associated with AD. Current antipsychotic drugs also have a boxed warning for use in elderly patients with
dementia-related psychosis due to increased mortality and morbidity. There is a large unmet medical need for a safe and effective therapy to treat the behavioral symptoms in patients with AD.
Parkinsons Disease
Parkinsons disease is a chronic and progressive neurodegenerative disorder that involves malfunction and death of neurons in a region of
the brain that controls movement. This neurodegeneration creates a shortage of an important brain signaling chemical, or neurotransmitter, known as dopamine, thereby rendering patients unable to direct or control their movements in a normal manner.
Parkinsons disease is characterized by well-known motor symptoms, including tremors, limb stiffness, slowness of movements, and difficulties with posture and balance, as well as by
non-motor
symptoms,
which include sleep disturbances, mood disorders, cognitive impairment and psychosis. Parkinsons disease progresses slowly in most people and the severity of symptoms tends to worsen over time.
Parkinsons disease is the second most common neurodegenerative disorder after AD. According to the National Parkinson Foundation, about
1 million people in the United States and from approximately 4 to
11
6 million people worldwide suffer from this disease. Parkinsons disease is more common in people over 60 years of age, and the prevalence of this disease is expected to increase
significantly as the average age of the population increases. Parkinsons disease patients are commonly treated with dopamine replacement therapies, such as levodopa, commonly referred to as
L-DOPA,
which
is metabolized to dopamine, and dopamine agonists, which are molecules that mimic the action of dopamine. Sales of therapeutics such as
L-DOPA
and dopamine agonists used to treat the motor symptoms of the
disease reached $2.3 billion in 2013.
Non-motor
symptoms can be particularly distressing and
even more troublesome to patients with Parkinsons disease than the primary motor disturbances.
Non-motor
symptoms substantially contribute to the burden of Parkinsons disease and deeply affect the
quality of life of patients and their caregivers.
Non-motor
symptoms of Parkinsons disease are associated with increased caregiver stress and burden, nursing home placement, and increased morbidity and
mortality.
Treatment of
non-motor
symptoms associated with Parkinsons disease poses a
challenge to physicians. Current dopamine replacement drugs used to treat the motor symptoms of Parkinsons disease do not help, and sometimes worsen, the
non-motor
symptoms. No drugs are currently
approved by the FDA for treating the broad
non-motor
symptoms associated with Parkinsons disease, and this remains a large unmet medical need.
Depression
Major depressive
disorder, or MDD, is a brain disorder that can be associated with symptoms of sadness, hopelessness, helplessness, feelings of guilt, irritability, loss of interest in formerly pleasurable activities, cognitive impairment, disturbed sleep patterns,
and suicide ideation or behavior. Different people may experience different symptoms, but everyone with major depression experiences symptoms that are severe enough to interfere with everyday functioning, such as the ability to concentrate at work
or school, social interactions, eating and sleeping. Sometimes the depressive episode can be so severe it is accompanied by psychosis (hallucinations and delusions). According to the National Institute of Mental Health, approximately 3% of teenagers
and approximately 7% of adults experience MDD each year. Worldwide sales of antidepressant drugs reached $9.3 billion in 2013. The antidepressant market is primarily composed of selective serotonin reuptake inhibitors such as Lexapro
®
(marketed by Forest Laboratories and Lundbeck) and selective norepinephrine reuptake inhibitors, or SNRIs, such as Cymbalta
®
(marketed by
Eli Lilly). Antipsychotics such as Seroquel
®
(marketed by Astrazeneca) and Abilify
®
(marketed jointly by Bristol-Myers Squibb and
Otsuka Pharmaceutical) are also used as adjunctive treatments with antidepressant treatment. The National Institute of Mental Health-funded Sequenced Treatment Alternatives to Relieve Depression, or STAR*D, study showed that only
one-third
of treated patients experience complete remission of depressive symptoms. Nearly
two-thirds
of patients were considered treatment-resistant.
12
Our Clinical Programs
Our pipeline includes two product candidates in clinical development and two product candidates in advanced
pre-clinical
testing. We believe that our product candidates offer innovative therapeutic approaches and may provide significant advantages relative to current therapies. The following table summarizes our
product candidates and programs:
OUR THERAPEUTIC PIPELINE
Lumateperone Program
Our lead product candidate, lumateperone, possesses mechanisms of action that we believe may represent an effective treatment across multiple
therapeutic indications. In the third quarter of 2016, we completed the second Phase 3 trial for the treatment of schizophrenia. In our
pre-clinical
and clinical trials to date, we have demonstrated that
lumateperone combines potent serotonin
5-HT2A
receptor antagonism, dopamine receptor phosphoprotein modulation, or DPPM, glutamatergic modulation and serotonin reuptake inhibition into a single drug candidate
for the treatment of acute and residual schizophrenia. At dopamine D2 receptors, lumateperone has been demonstrated to have dual properties and to act as both a
pre-synaptic
partial agonist and a
post-synaptic antagonist. Lumateperone has also been demonstrated to have affinity for dopamine D1 receptors and indirectly stimulate phosphorylation of glutamatergic NMDA NR2B, or GluN2B, receptors in a mesolimbic specific manner. We
believe that this regional selectivity in brain areas thought to mediate the efficacy of antipsychotic drugs, together with serotonergic, glutamatergic, and dopaminergic interactions, may result in antipsychotic efficacy for positive, negative,
affective and cognitive symptoms associated with schizophrenia. The serotonin reuptake inhibition could allow for antidepressant activity for the treatment of schizoaffective disorder, other disorders with
co-morbid
depression, and/or as a stand-alone treatment for major depressive disorder. We believe lumateperone may also be useful for the treatment of bipolar disorder and other psychiatric and
neurodegenerative disorders, particularly behavioral disturbances associated with dementia, autism and other CNS diseases.
13
We believe these features of lumateperone may be able to improve the quality of life of patients
with schizophrenia and enhance social function to allow them to integrate more fully into their families and their workplaces. In addition, lumateperone may be shown to treat disorders at either
low-doses
(
e.g.,
sleep, aggression and agitation) or high-doses (
e.g.
, acute exacerbated and residual schizophrenia, bipolar disorders, and mood disorders).
Lumateperone for the treatment of exacerbated and residual schizophrenia
In multiple clinical trials of lumateperone in patients with schizophrenia, the drug candidate has demonstrated clinical signals consistent
with reductions in psychosis, depression and insomnia. Reductions in psychosis are consistent with the potential to treat acute schizophrenia, whereas reductions in depression and insomnia are consistent with the potential to treat residual phase
schizophrenia. Lumateperone has been shown to be safe and well-tolerated across a wide range of doses in these studies. Further, at doses that have demonstrated clinical activity, lumateperone has caused fewer adverse effects than those typically
associated with antipsychotic drug treatment, such as impaired motor function. These adverse side effects can be a major cause of patient noncompliance with current antipsychotic therapies and can lead to poorer social function.
Phase 2 Clinical Trial
(ITI-007-005)
Lumateperone exhibited antipsychotic efficacy in
ITI-007-005,
a
randomized, double-blind, placebo and active controlled Phase 2 clinical trial in patients with an acutely exacerbated episode of schizophrenia. In December 2013, we announced the clinical results from this Phase 2 trial. In this Phase 2 trial,
335 patients were randomized to receive one of four treatments: 60 mg of
ITI-007,
120 mg of
ITI-007,
4 mg of risperidone (active control) or placebo in a 1:1:1:1 ratio.
Patients received study treatment orally once daily in the morning for 28 days. Of those randomized, 311 patients were included in the
intent-to-treat
primary
analysis. Subject participation lasted approximately 7 to 8 weeks, including a one week screening period, a four week treatment period followed by stabilization on standard of care, and a safety follow up visit approximately two weeks after
stabilization. The primary endpoint for this clinical trial was change from baseline to Day 28 on the PANSS total score. The PANSS is a well-validated
30-item
rating scale that measures the ability of a drug
to reduce schizophrenia symptom severity. The PANSS measures positive symptoms, such as delusions, suspiciousness, and hallucinations; negative symptoms, such as blunted affect, social and emotional withdrawal, and stereotyped thinking; and general
psychopathology, such as anxiety, tension, depression, and active social avoidance.
Secondary endpoints in this trial included weekly
assessments of the PANSS total score as well as its subscales (Positive Symptom Subscale, Negative Symptom Subscale, and General Psychopathology Subscale) and the Negative Symptom Factor (based on a subset of PANSS questions), individual item
response on the PANSS, and the Calgary Depression Scale for Schizophrenia. Safety and tolerability were also assessed.
In December 2013,
we announced that topline results from the
ITI-007-005
study indicated that lumateperone met the trials
pre-specified
primary endpoint, improving symptoms associated with schizophrenia as measured by a statistically significant and clinically meaningful decrease in the PANSS total score. The trial also met key secondary outcome measures related to efficacy on PANSS
subscales and safety.
Many patients with schizophrenia have deficits in social function. Social function is the ability to recognize,
understand, process and use external cues to solve problems, maintain work performance and conduct interpersonal relationships. Deficits in social function often remain after positive symptoms, such as hallucinations and delusions, have resolved in
these patients. In the Phase 2 trial, lumateperone exhibited a differentiating response profile across a broad range of symptoms that we believe is consistent with improvements in these social functioning deficits. The study also showed that
lumateperone was well-tolerated at the tested doses. Lumateperone demonstrated a favorable safety profile in the study without characteristic antipsychotic drug side effects or any serious adverse events.
14
ITI-007
at a dose of 60 mg demonstrated a statistically
significant improvement in psychosis (p = 0.017) on the trials
pre-specified
primary endpoint, which was change from baseline on the PANSS total score, compared to placebo. The primary statistical
analysis was
pre-specified
and used a Mixed-Effect Model Repeated Measure method for handling missing data in the
intent-to-treat,
or ITT, study population and a Bonferroni procedure to correct for multiple
two-sided
comparisons (each dose of
ITI-007
compared to placebo). The trials
pre-specified
sensitivity analysis on the primary endpoint used the analysis of covariance, or ANCOVA, model and last
observation carried forward, or LOCF, method for handling missing data for the ITT population and confirmed the positive outcome with statistically significant improvements compared to placebo in patients receiving the 60 mg dose of
ITI-007
(p = 0.011).
ITI-007
at a dose of 60 mg also significantly improved the positive symptom subscale (p < 0.05) and the general psychopathology subscale (p < 0.05)
on the PANSS after 28 days of treatment using the ANCOVA-LOCF on the ITT population.
The improvement in the PANSS total score in the 120
mg dose group did not reach statistical significance. We believe that it is possible that sedation, the most frequent side effect in the 120 mg dose group, interfered with the ability to detect an efficacy signal at this dose administered once daily
in the morning. Approximately 32.5% of subjects randomized to 120 mg of
ITI-007
experienced sedation/somnolence, compared to 21% of subjects randomized to risperidone, 17% of subjects randomized to 60 mg of
ITI-007,
and 13% randomized to placebo. We believe that nighttime administration may be more appropriate for testing the effectiveness of the 120 mg dose of
ITI-007
in this
patient population. In the trial, the 60 mg dose of
ITI-007
was effective when administered once daily in the morning.
Consistent with preliminary indications from the interim analysis and with the drug candidates pharmacological profile,
ITI-007
at a dose of 60 mg significantly improved certain items on the negative symptom and general psychopathology subscales consistent with improved social function. The study was statistically powered only on the
primary endpoint. Lumateperone did significantly improve many secondary endpoints, although the study was not designed for significance on secondary endpoints and was not powered to detect statistical differences in subgroup analyses.
A high percentage (74%) of randomized subjects completed trial participation. Only 19% of subjects discontinued from study treatment
during the 28 day study treatment period, and an additional 7% of subjects completed study treatment but were lost to follow up.
In the
Phase 2 trial, lumateperone was well-tolerated. The most frequent AE was sedation, as described above. There were no serious adverse events related to lumateperone. There were no clinically meaningful changes in safety measures with lumateperone.
Notably, lumateperone demonstrated a favorable metabolic profile with no increase of blood levels of glucose, insulin, cholesterol or triglycerides over a four week treatment period. Moreover, in contrast to risperidone, 60 mg of
ITI-007
was effective with no difference from placebo on weight change parameters, prolactin levels, extrapyramidal symptoms (EPS) or akathisia. lumateperone was not associated with EPS as measured by the
Simpson-Angus Scale, Barnes Akathisia Rating Scale, or Abnormal Involuntary Movement Scale. There was no increase in suicidal ideation or behavior with lumateperone.
Phase 3 Clinical Trials and Regulatory Plans
Lumateperone for the treatment of schizophrenia is currently in Phase 3 development. We have conducted two randomized, double-blind,
placebo-controlled Phase 3 clinical trials of lumateperone in patients with acutely exacerbated schizophrenia. In September 2015, we announced
top-line
clinical results from our first Phase 3 clinical trial of
Lumateperone for the treatment of patients with schizophrenia. This randomized, double-blind, placebo-controlled Phase 3 clinical trial was conducted at 12 sites in the United States with 450 patients randomized (1:1:1) to receive either 60 mg
of
ITI-007,
40 mg of
ITI-007
or placebo once daily in the morning for 28 days. The
pre-specified
primary efficacy measure was
change from baseline versus placebo at study endpoint (4 weeks) on the centrally rated Positive and Negative Syndrome Scale, or PANSS, total score. In this trial, the
15
once-daily dose of 60 mg of
ITI-007
met the primary endpoint and demonstrated antipsychotic efficacy with statistically significant superiority over
placebo at week 4 (study endpoint) with additional improvements observed in social function. Moreover, the 60 mg dose of
ITI-007
showed significant antipsychotic efficacy as early as week 1, which was
maintained at every time point throughout the entire study.
ITI-007
showed a dose-related improvement in symptoms of schizophrenia with the 40 mg dose approximating the trajectory of improvement seen with the
60 mg dose, but the effect with 40 mg did not reach statistical significance on the primary endpoint. In addition, the 60 mg dose of
ITI-007
met the key secondary endpoint of statistically significant
improvement on the Clinical Global Impression Scale for Severity of Illness, or
CGI-S.
The 40 mg dose of
ITI-007
also demonstrated a statistically significant
improvement versus placebo on the
CGI-S,
though not formally tested against placebo since it did not separate on the primary endpoint. Consistent with previous studies, lumateperone had a favorable safety and
tolerability profile as evidenced by motoric, metabolic, and cardiovascular characteristics similar to placebo, and no clinically significant changes in akathisia, extrapyramidal symptoms, prolactin, body weight, glucose, insulin, or lipids. In
September 2016, we announced
top-line
results from the second Phase 3 clinical trial
(ITI-007-302)
of lumateperone for the
treatment of patients with schizophrenia. In this trial, neither dose of
ITI-007
separated from placebo on the primary endpoint, change from baseline on the PANSS total score, in the
pre-defined
patient population. The active control, risperidone, did separate from placebo. In this trial, lumateperone was statistically significantly better than risperidone on key safety and tolerability
parameters and exhibited a safety profile similar to placebo. This replicates the safety and tolerability findings of our Phase 2 study
(ITI-007-005)
in which the
efficacy of
ITI-007
60 mg and risperidone, the active control, were similar. We believe lumateperone did not separate from placebo on the
pre-specified
primary endpoint
in the
ITI-007-302
study in part due to an unusually high placebo response at certain sites which disproportionately affected the trial results and contributed to the
efficacy outcome of this study compared to our two previous positive efficacy studies. In addition, we believe other confounding factors may have played a role in the efficacy outcome of ITI-007-302, including an expectation bias and the potential
for functional unblinding. We believe the lumateperone late-stage clinical development program, including two large, well-controlled positive studies and supportive evidence from this second Phase 3 study, collectively provide evidence of the
efficacy and safety of lumateperone for the treatment of schizophrenia. Across all three of our efficacy trials,
ITI-007
60 mg improved symptoms of schizophrenia with the same trajectory and magnitude of
change from baseline in the primary endpoint, the PANSS total score.
We have a meeting scheduled with the FDA in late March of 2017 to
discuss the submission of an NDA for lumateperone in schizophrenia. We expect to provide an update on the status of our discussions with the FDA following this meeting.
We will need to complete other development, manufacturing and
pre-commercialization
activities
necessary to support the submission of a planned NDA for lumateperone in schizophrenia. In addition to the meeting we have scheduled in late March of 2017 with the FDA, additional meetings with the FDA may be requested, as needed, to discuss in
greater detail our plans for schizophrenia, and other elements of our regulatory strategy, including additional therapeutic indications, as the program progresses. Our clinical plans may change based on any discussions with the FDA, the relative
success and cost of our research, preclinical and clinical development programs, whether we are able to enter into future collaborations, and any unforeseen delays or cash needs. If the FDA does not agree with our clinical development plans for
lumateperone, our development of lumateperone may be delayed and the costs of our development of lumateperone could increase, which would have a material adverse effect on our business, financial condition and results of operations.
We are also developing long acting injectable formulations of
ITI-007
for the treatment of
schizophrenia. This is a
pre-clinical
stage development program and we expect to commence clinical development in 2018.
PET study of lumateperone in patients with stable schizophrenia
On September 16, 2015, we announced
top-line
data from an open-label PET study of lumateperone
examining brain occupancy of striatal D2 receptors. This study was conducted in patients diagnosed with
16
schizophrenia who were otherwise healthy and stable with respect to their psychosis. After washout from their previous antipsychotic medication for at least two weeks, PET was used to determine
target occupancy in brain regions at baseline (drug-free) and again after two weeks of once daily lumateperone oral administration. In this trial, the 60 mg dose of
ITI-007
was associated with a mean of
approximately 40% striatal dopamine D2 receptor occupancy. As predicted by preclinical and earlier clinical data, lumateperone demonstrated antipsychotic effect at relatively low striatal D
2
receptor occupancy, lower than the occupancy range required by most other antipsychotic drugs. Unlike any existing schizophrenia treatment, this dopamine receptor phosphoprotein modulator, or DPPM, acts as a
pre-synaptic
partial agonist and post-synaptic antagonist at D2 receptors. We believe this mechanism likely contributes to the favorable safety profile of lumateperone, with reduced risk for
hyperprolactinemia, akathisia, extrapyramidal symptoms, and other motoric side effects.
Lumateperone for the treatment of depressive
episodes associated with bipolar disorder (bipolar depression)
The pharmacological profile of lumateperone offers the potential to
treat bipolar mania, depression, and mixed symptoms at doses similar to those targeted for the treatment of schizophrenia. We believe that lumateperone may be effective alone or in combination with mood stabilizers. Given that many patients with
bipolar disorder also experience disturbed sleep and cognitive impairment similar to that observed in schizophrenia, we believe that lumateperone may treat a wide array of symptoms in patients with bipolar disorder, including improvement of
cognition and sleep.
Our bipolar depression program consists of two Phase 3 multi-center, randomized, double-blind, placebo-controlled
clinical trials: one to evaluate lumateperone as a monotherapy and the other to evaluate lumateperone as an adjunctive therapy with lithium or valproate. In each trial, patients with a clinical diagnosis of Bipolar I or Bipolar II disorder and who
are experiencing a current major depressive episode are randomized to receive one of three treatments: 60 mg
ITI-007,
40 mg
ITI-007,
or placebo in a 1:1:1 ratio orally
once daily for 6 weeks. In the
ITI-007-401
trial, patients receive lumateperone or placebo as a monotherapy. In the
ITI-007-402
trial, patients receive lumateperone or placebo adjunctive to their existing mood stabilizer lithium or valproate. In both trials, we are employing a number of strategies designed to ensure we
recruit appropriately diagnosed patients in an effort to reduce the risk of a high placebo response. Patient enrollment in the
ITI-007-401
trial, is expected to complete
in the first half of 2018. Patient enrollment in the
ITI-007-402
trial, is expected to complete in the second half of 2018. One of our strategies to optimize potential success in this program is to initiate a
third trial in bipolar depression conducted globally. We anticipate completing patient enrollment in our global study by the end of 2018.
The primary endpoint for both clinical trials is change from baseline at Day 42 on the Montgomery-Åsberg Depression Rating Scale (MADRS)
total score versus placebo. The MADRS is a well-validated
10-item
checklist that measures the ability of a drug to reduce overall severity of depressive symptoms. Individual items are rated by an expert
clinician on a scale of 0 to 6 in which a score of 6 represents the most depressed evaluation for each item assessed. The total score ranges from 0 to 60. Secondary endpoints include measures of social function and quality of life that may
illustrate the differentiated clinical profile of lumateperone. Safety and tolerability are also assessed in both clinical trials.
Lumateperone for the treatment of behavioral disturbances associated with dementia, including Alzheimers disease
Behavioral disturbances are common in dementia and AD. These disturbances are a major component of the burden to caregivers, and often lead to
institutionalization. Although currently available treatments for patients with dementia mainly address cognitive disturbances, behavioral disturbances are considerably more problematic and likely more amenable to drug treatment. Several behavioral
symptoms are quite prevalent in patients with dementia, including patients with AD. In the fourth quarter of 2014, we announced the
top-line
data from
ITI-007-200,
a Phase 1/2 clinical trial designed to evaluate the safety, tolerability and pharmacokinetics of low doses of lumateperone in healthy geriatric subjects and in patients with dementia, including
AD. The
ITI-007-200
17
clinical trial was conducted in two parts. Part 1 was a randomized, double-blind, placebo-controlled multiple ascending dose evaluation of lumateperone in healthy geriatric subjects. In each of
three cohorts in Part 1, approximately 10 subjects were randomized to receive lumateperone (N=8) or placebo (N=2) orally once daily in the morning for seven days. Doses of
ITI-007
up to and including 30 mg
were evaluated in three cohorts in Part 1. In Part 2, eight patients with dementia were randomized to receive 9 mg
ITI-007
(N=5) or placebo (N=3) orally once a day in the evening for seven days. The primary
objectives of the study were to evaluate the safety, tolerability and pharmacokinetics of lumateperone in the elderly and in the target dementia patient population. Secondary measures were included to explore the effects of lumateperone on cognition
and agitation. The Hopkins Verbal Learning
Test-R,
or
HVLT-R,
was used to assess cognition in healthy geriatric subjects and dementia patients. The results demonstrated
impaired verbal learning and memory (recall and recognition memory) by dementia patients relative to healthy geriatric subjects. Moreover, the data indicated that healthy geriatric subjects treated with lumateperone for approximately one week
experienced an improvement in verbal learning and memory relative to placebo-treated subjects. Dementia patients treated with lumateperone showed enhanced recognition memory, making fewer false positive errors (i.e., responding yes to
non-target
words) than patients treated with placebo. Other secondary endpoints in the
ITI-007-200
clinical trial included the
assessment of agitation. However, none of the study participants experienced agitation at baseline or during the study, and therefore no signals on this behavioral endpoint could be assessed. The completion of this study marks an important milestone
in our strategy to develop low doses of lumateperone for the treatment of behavioral disturbances associated with dementia and related disorders. The
ITI-007-200
trial
results indicate that lumateperone is safe and well-tolerated across a range of low doses, has linear- and dose-related pharmacokinetics and improves cognition in the elderly. The most frequent adverse event was mild sedation at the higher doses. We
believe these results further position lumateperone as a development candidate for the treatment of behavioral disturbances in patients with dementia and other neuropsychiatric and neurological conditions.
In the second quarter of 2016, we initiated Phase 3 development of lumateperone for the treatment of agitation in patients with dementia,
including AD. Our
ITI-007-201
trial is a Phase 3 multi-center, randomized, double-blind, placebo-controlled clinical trial in patients with a clinical diagnosis of
probable AD and clinically significant symptoms of agitation. In this trial, approximately 360 patients are planned to be randomized to receive 9 mg
ITI-007
or placebo in a 1:1 ratio orally once daily for four
weeks. This study includes a single interim analysis reviewed by an independent data monitoring committee, which will be used to assess the assumptions of variability and effect size. The primary efficacy measure is the Cohen-Mansfield Agitation
InventoryCommunity version, or
CMAI-C. The
CMAI-C
is a well-validated
37-item
scale that measures the ability of a
drug to reduce overall frequency of agitation symptoms, including aggressive behaviors. Individual items are rated by an expert clinician on a scale of 1 to 7 in which a score of 7 represents the most frequent for each item assessed. The key
secondary efficacy measure is a Clinical Global Impression scale for Severity, or
CGI-S,
of illness. Other exploratory secondary endpoints include measures of other behavioral disturbances associated with
dementia. Safety and tolerability are also assessed in the trial.
Lumateperone for the treatment of sleep disturbances associated with
neurologic and psychiatric disorders
A Phase 2 double-blind, placebo controlled cross-over clinical trial conducted in 19 patients
with primary insomnia with disturbed sleep maintenance at low doses of lumateperone was completed in 2008 in Europe. The primary outcome measure was slow wave sleep as determined by polysomnography. Lumateperone demonstrated a dose-related
statistically significant increase in slow wave sleep. Secondary measures were consistent with improvement of sleep maintenance in patients with primary insomnia, indicated by decreased waking after sleep onset, increased total sleep time, and no
increase in latency to sleep onset. At these low doses lumateperone did not induce sleep, but rather helped maintain sleep once sleep had been initiated. In addition, lumateperone was not associated with next day cognitive impairment, or
hang-over effects. We believe that lumateperone may be particularly useful in the treatment of sleep disorders that accompany neuropsychiatric and neurologic disorders, including schizophrenia, autism spectrum disorder, or ASD,
Parkinsons disease and dementia. Previous work has suggested that selective
5-HT2A
receptor antagonists increase deep, slow wave sleep in both humans and
18
animals. We believe, however, that other neuropharmacological mechanisms, in addition to
5-HT2A
receptor antagonism, such as engaging some dopamine
modulation, may be beneficial for the successful treatment of sleep maintenance insomnia, or SMI, in humans. We believe that lumateperone represents a new approach to the treatment of sleep maintenance insomnia because of its unique pharmacology and
neuropharmacological interactions beyond selective
5-HT2A
receptor antagonism. We believe that lumateperone offers a potentially new approach to the treatment of sleep maintenance disorders, particularly in
those disorders that accompany neuropsychiatric and neurologic disorders. Many of these disorders are accompanied by profound sleep deficits, which impair daytime functioning including cognition, exacerbate disease symptoms and increase the cost of
care. We are presently exploring clinical designs to incorporate the examination of sleep disturbances in one or more of these indications. There is no assurance that any such design would be sufficient for an FDA approval for this indication.
Lumateperone for the treatment of sleep and behavioral disturbances associated with autism spectrum disorder
Sleep problems are common in patients with ASD and are not adequately treated by currently available interventions. Approximately two thirds of
children and adolescents with ASD experience sleep problems, higher than the rate of sleep problems in
age-matched
developmentally typical children. Moreover, individuals with ASD suffer from behavioral
disturbances, including aggression, irritability, anxiety and depression. With its multiple pathway mechanism of action, we believe that lumateperone could address the multi-faceted behavioral symptoms associated with ASD.
5-HT2A
receptor antagonism is predicted to increase slow wave sleep, improve sleep maintenance and reduce aggression. D2 receptor modulation is predicted to improve sleep maintenance and reduce irritability and
aggression. Serotonin reuptake inhibition is predicted to reduce anxiety and depression. Accordingly, we believe that lumateperone could improve sleep maintenance, reduce behavioral disturbances and enhance social interaction in patients with ASD.
We believe that our completed Phase 1 studies support advancing lumateperone into Phase 2 trials in this patient population, and we are presently exploring the feasibility of such trials.
Lumateperone for the treatment of depression and other mood disorders
As a potent
5-HT2A
receptor antagonist and serotonin reuptake inhibitor, we believe that lumateperone
could improve symptoms of depression with fewer side effects than selective serotonin reuptake inhibitors, or SSRIs. Dopamine modulation by lumateperone may reduce irritability and aggression that can accompany many mood disorders. As such,
lumateperone may be effective for the treatment of mood disorders including MDD, posttraumatic stress disorder and intermittent explosive disorder. We are presently exploring the feasibility of clinical studies in these indications.
ITI-002
(PDE1) Program
We have a second major program called
ITI-002
that has yielded a portfolio of compounds that
selectively inhibits the enzyme phosphodiesterase type 1, or PDE1. We believe PDE1 helps regulate brain activity related to cognition, memory processes and movement/coordination. In addition, PDE1 inhibitors may have utility in treating
non-CNS
disorders. On February 25, 2011, we (through our wholly owned operating subsidiary, ITI) and Takeda Pharmaceutical Company Limited, or Takeda, entered into a license and collaboration agreement, or the
Takeda License Agreement, under which we agreed to collaborate to research, develop and commercialize our proprietary compound
ITI-214
and other selected compounds that selectively inhibit PDE1 for use in the
prevention and treatment of human diseases. Takeda conducted four Phase 1 studies. A single rising dose study was conducted in the U.S. in healthy male and female, Japanese and
non-Japanese
volunteers. In a
second U.S. study,
ITI-214
was administered once daily over 14 days to healthy volunteers and patients with stable schizophrenia. In a third study, conducted in Japan,
ITI-214
was administered for seven days at multiple rising oral doses in both male and female healthy volunteers. A fourth study compared the relative bioavailability of oral formulations of
ITI-214
used in all previous studies to an immediate-release tablet, either with or without food in healthy volunteers. In these studies,
ITI-214
demonstrated a favorable
safety profile and was generally
19
well-tolerated across a broad range of doses both in healthy volunteers and in patients with schizophrenia with a pharmacokinetic profile that supports once daily dosing.
ITI-214
is the first compound in its class to successfully advance into Phase 1 clinical trials. On October 31, 2014, we entered into an agreement with Takeda terminating the Takeda License Agreement, or the
Termination Agreement, pursuant to which all rights granted under the Takeda License Agreement were returned to us. On September 15, 2015, Takeda completed the transfer of the IND for
ITI-214
to us. We
intend to pursue the development of our PDE program, including
ITI-214,
for the treatment of several CNS and
non-CNS
conditions, including cardiovascular disease.
Following the positive safety and tolerability results in our Phase 1 program, in the first half of 2017 we expect to initiate a Phase 1/2 clinical trial with ITI-214 in patients with Parkinsons disease to evaluate safety and tolerability in
this patient population, as well as motor and non-motor exploratory endpoints. Other compounds in the PDE portfolio are also being advanced for the treatment of various indications.
Additional PDE Programs
There are
multiple forms and isoforms of PDE with distinct roles in intracellular signaling. We have developed strong internal expertise in the design and synthesis of inhibitors specific for individual PDE isoforms. Based on our understanding of
the expression and functions of these isoforms in the CNS, we have identified PDE2 and PDE9 as compelling targets for drug discovery. We believe that inhibitors of these PDEs may be useful in treating neurodegeneration and bioenergetic failure in a
variety of CNS diseases.
Intellectual Property
Our Patent Portfolio
As of
February 1, 2017, we owned or controlled approximately 80 patent families filed in the United States and other major markets worldwide, including approximately 67 issued or allowed U.S. patents, 33 pending U.S. patent applications, 271 issued
or allowed foreign patents and 207 pending foreign patent applications, directed to novel compounds, formulations, methods of treatment, synthetic methods, and platform technologies.
Our
ITI-007
program on novel compounds for neuropsychiatric and neurodegenerative diseases includes
patents exclusively
in-licensed
from Bristol-Myers Squibb on families of compounds, including the
ITI-007
lead molecule. We have extensively characterized this lead
and filed additional patent applications on polymorphs, pharmaceutical formulations, new indications, improved methods of manufacture, metabolites, derivatives, and structurally related novel compounds. As of February 1, 2017, our
ITI-007
program consisted of approximately 26 patent families that we own or control, filed in the United States and other major markets, including 21 issued or allowed U.S. patents, 19 pending U.S. patent
applications, 100 issued foreign patents and 93 pending foreign patent applications. Patent protection for
ITI-007
thus includes:
|
|
|
|
|
Summary Description of Patent
or Patent Application
|
|
United States or Foreign
Jurisdiction
|
|
Expiration Date
|
Base ITI-007 Patent
|
|
Granted:
United States, JP, EP (AT, BE, CH, DE, ES, FR, GB, IE, IT, LU, MC)
|
|
June 15, 2025
(including regulatory extensions; additional Orange Book-listable protection to 2034; does not include expected 6 month extension in US for
pediatric studies)
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|
|
|
Supplemental ITI-007 Patent
|
|
Granted:
US, EP (AT, BE, BG, CH, CZ, DE, DK, EE, ES, FI, FR, GB, GR, HR, HU, IE, IT, LT, LU, LV, NL, NO, PL, PT, RO, SE, SI, SK, TR), AU, CN, JP and MX;
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June 24, 2029 (US);
March 12, 2029
(ex-US)
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Pending in CA, IL, IN
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Summary Description of Patent
or Patent Application
|
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United States or Foreign
Jurisdiction
|
|
Expiration Date
|
ITI-007 Dosage Patents
|
|
Granted:
US, AU, CN, MX
Pending: US
(continuation, allowed), AU, CA, EP, IN, JP, KR, MX (divisional)
|
|
December 28, 2029 (US);
May 27, 2029
(ex-US)
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Patents for Additional Indications
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Pending in US, EP, JP, and other countries
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2033-2034
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Our program on PDE1 inhibitors for cognition and dopamine-mediated disorders, such as Parkinsons
disease, includes patent protection for the lead molecule,
ITI-214,
as well as a wide range of filings on other proprietary compounds and indications. The
ITI-214
lead
molecule has composition of matter protection to 2029, with possible extensions and additional Orange Book-listable protection to 2034. Additionally, we expect to have data exclusivity in the European Union for up to 11 years from commercial launch.
We are also evaluating potential
follow-on
compounds for
ITI-214
which would have patent protection beyond 2030.
We have also filed patent applications on novel proprietary targets and lead compounds for AD, which would provide compound protection beyond
2028 or beyond 2034, depending on which compound is ultimately selected for development.
License Agreement
The Bristol-Myers Squibb License Agreement
On May 31, 2005, we entered into a worldwide, exclusive License Agreement with Bristol-Myers Squibb Company, or BMS, pursuant to which we
hold a license to certain patents and
know-how
of BMS relating to lumateperone and other specified compounds. The agreement was amended on November 3, 2010. The licensed rights are exclusive, except BMS
retains rights in specified compounds in the fields of obesity, diabetes, metabolic syndrome and cardiovascular disease. However, BMS has no right to use, develop or commercialize lumateperone and other specified compounds in any field of use. We
have the right to grant sublicenses of the rights conveyed by BMS. We are obliged under the license to use commercially reasonable efforts to develop and commercialize the licensed technology. We are also prohibited from engaging in the clinical
development or commercialization of specified competitive compounds.
Under the agreement, we made an upfront payment of $1.0 million
to BMS, a milestone payment of $1.25 million in December 2013, and a milestone payment of $1.5 million in December 2014 following the initiation of our first Phase 3 clinical trial for lumateperone for patients with exacerbated
schizophrenia. Possible milestone payments remaining total $12.0 million. Under the agreement, we may be obliged to make other milestone payments to BMS for each licensed product of up to an aggregate of approximately $14.75 million. We
are also obliged to make tiered single digit percentage royalty payments on sales of licensed products. We are obliged to pay to BMS a percentage of
non-royalty
payments made in consideration of any
sublicense.
The agreement extends, and royalties are payable, on a
country-by-country
and
product-by-product
basis, through the later of ten years after
first commercial sale of a licensed product in such country, expiration of the last licensed patent covering a licensed product, its method of manufacture or use, or the expiration of other government grants providing market exclusivity, subject to
certain rights of the parties to terminate the agreement on the occurrence of certain events. On termination of the agreement, we may be obliged to convey to BMS rights in developments relating to a licensed compound or licensed product, including
regulatory filings, research results and other intellectual property rights.
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Collaboration Agreement
The Takeda Pharmaceutical License and Collaboration Agreement and Termination Agreement
On February 25, 2011, we entered into a license and collaboration agreement with Takeda Pharmaceutical Company Limited under which we
agreed to collaborate to research, develop and commercialize our proprietary compound
ITI-214
and other selected compounds that selectively inhibit PDE1 for use in the prevention and treatment of human
diseases. As part of the agreement, we assigned to Takeda certain patents owned by us that claim
ITI-214
and granted Takeda an exclusive license to develop and commercialize compounds identified in the conduct
of the research program that satisfy specified criteria. However, we retained rights to all compounds that do not meet the specified criteria and we continue to develop PDE1 inhibitors outside the scope of the agreement. Upon execution of the
agreement, Takeda made a nonrefundable payment to us.
Under the terms of the agreement, we conducted a research program with an initial
term of three years to identify and characterize compounds that meet certain specified criteria sufficient for further development by Takeda. This research program ended in February 2014. We were responsible for our expenses incurred in the conduct
of certain research activities specified in the research plan. Takeda agreed to reimburse us for expenses we incurred in conducting additional research activities.
On October 31, 2014, we entered into an agreement with Takeda terminating the Takeda License Agreement, pursuant to which all rights
granted under the Takeda License Agreement were returned to us. On September 15, 2015, Takeda completed the transfer of the IND for
ITI-214
to us.
ITI-214
is the
first compound in its class to successfully advance into Phase 1 clinical trials. We intend to pursue the development of our PDE program, including
ITI-214
for the treatment of several CNS and
non-CNS
conditions, including cardiovascular disease. Following the positive safety and tolerability results in our Phase 1 program, in the first half of 2017 we expect to initiate a Phase 1/2 clinical trial with
ITI-214
in patients with Parkinsons disease to evaluate safety and tolerability in this patient population, as well as motor and non-motor exploratory endpoints. Other compounds in the PDE portfolio are also
being advanced for the treatment of various indications.
Manufacturing
We do not own or operate manufacturing facilities for the production of any of our product candidates, nor do we have plans to develop our own
manufacturing operations in the foreseeable future. We currently rely on third-party contract manufacturers for all of our required raw materials, active pharmaceutical ingredient, or API, and finished product for our preclinical research and
clinical trials, including the Phase 3 trials for lumateperone for the treatment of schizophrenia and the treatment of bipolar depression. We believe that we would be able to contract with other third-party contract manufacturers to obtain API if
our existing sources of API were no longer available, but there is no assurance that API would be available from other third-party manufacturers on acceptable terms, on the timeframe that our business would require, or at all.
On January 4, 2017, we entered into a supply agreement, or the Siegfried Agreement, with Siegfried Evionnaz SA, or Siegfried. Under the
Siegfried Agreement, Siegfried has agreed to manufacture and supply the API for lumateperone in commercial quantities. Each month, we will provide Siegfried with a rolling forecast of our anticipated requirements for supply of the API, with the
first 12 months of each forecast being binding on us. Under the agreement, our purchase prices for supply of the API from Siegfried are specified prices based on the volume of API produced. The term of the Siegfried Agreement extends for five years.
Either party may terminate the agreement prior to its expiration upon an uncured material breach by the other party, the liquidation or dissolution of the other party, the commencement of insolvency procedures or other bankruptcy-related proceedings
that are not dismissed within a certain period of time, the appointment of any receiver, trustee or assignee to take possession of the properties of the other party, the cessation of all or substantially all of the other partys business
operations, a continuing force majeure event affecting the other party, or the debarment or certain other events involving the other partys employees, affiliates or agents. Under the Siegfried Agreement, we have the right to and may purchase
the API for lumateperone from other suppliers, including if Siegfried cannot fulfill our requirements.
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Development and commercial quantities of any products that we develop will need to be
manufactured in facilities, and by processes, that comply with the requirements of the FDA and the regulatory agencies of other jurisdictions in which we are seeking approval. We currently employ internal resources to manage our manufacturing
contractors.
Sales and Marketing
We
currently have no marketing, sales or distribution capabilities. In order to commercialize any of our product candidates, we must develop these capabilities internally or through collaboration with third parties. In selected therapeutic areas where
we feel that our product candidates can be commercialized by a specialty sales force that calls on a limited and focused group of physicians, we may plan to participate in the commercialization of our product candidates in the United States. In
therapeutic areas that require a large sales force selling to a large and diverse prescribing population, we may elect to commercialize through, or in collaboration with, strategic partners. We may choose to commercialize our products in markets
outside of the United States by establishing one or more strategic alliances in the future.
Competition
We face, and will continue to face, intense competition from pharmaceutical and biotechnology companies, as well as numerous academic and
research institutions and governmental agencies, both in the United States and abroad. We compete, or will compete, with existing and new products being developed by our competitors. Some of these competitors are pursuing the development of
pharmaceuticals that target the same diseases and conditions that our research and development programs target.
Even if we are successful
in developing our product candidates, the resulting products would compete with a variety of established drugs in the areas of our targeted CNS therapeutic indications. Our potential products for the treatment of schizophrenia and bipolar disorder
would compete with, among other branded products, Abilify
®
, marketed jointly by Bristol-Myers Squibb and Otsuka Pharmaceutical;
Fanapt
®
, marketed by Novartis Pharmaceuticals; Seroquel XR
®
, marketed by AstraZeneca; Invega
®
, marketed by Janssen; VRAYLAR
®
, marketed by Allergan, Rexulti
®
marketed by Otsuka
Pharmaceutical and Latuda
®
, marketed by Sunovion. In addition, our product candidates, if approved, will compete with, among other generic antipsychotic products, haloperidol, risperidone,
quetiapine, olanzapine and clozapine.
In addition, the companies described above and other competitors may have a variety of drugs in
development or awaiting FDA approval that could reach the market and become established before we have a product to sell. Our competitors may also develop alternative therapies that could further limit the market for any drugs that we may develop.
Many of our competitors are using technologies or methods different or similar to ours to identify and validate drug targets and to discover novel small molecule drugs. Many of our competitors and their collaborators have significantly greater
experience than we do in the following:
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identifying and validating targets;
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screening compounds against targets;
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preclinical and clinical trials of potential pharmaceutical products; and
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obtaining FDA and other regulatory clearances.
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In addition, many of our competitors and their
collaborators have substantially greater advantages in the following areas:
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research and development resources;
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manufacturing capabilities; and
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Smaller companies also may prove to be significant competitors, particularly through proprietary
research discoveries and collaborative arrangements with large pharmaceutical and established biotechnology companies. Many of our competitors have products that have been approved by the FDA or are in advanced development. We face competition from
other companies, academic institutions, governmental agencies and other public and private research organizations for collaborative arrangements with pharmaceutical and biotechnology companies, in recruiting and retaining highly qualified scientific
and management personnel and for licenses to additional technologies. Our competitors, either alone or with their collaborators, may succeed in developing technologies or drugs that are more effective, safer, and more affordable or more easily
administered than ours and may achieve patent protection or commercialize drugs sooner than us. Developments by others may render our product candidates or our technologies obsolete. Our failure to compete effectively could have a material adverse
effect on our business.
Government Regulation
United StatesFDA Process
The
research, development, testing, manufacture, labeling, promotion, advertising, import and export, distribution and marketing, among other things, of drug products are extensively regulated by governmental authorities in the United States and other
countries. In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or the FDCA, and its implementing regulations. Failure to comply with the applicable U.S. requirements may subject us to administrative or
judicial sanctions, such as FDA refusal to approve pending NDAs, warning letters, fines, civil penalties, product recalls, product seizures, total or partial suspension of production or distribution, injunctions and/or criminal prosecution.
Drug Approval Process.
None of our drug product candidates may be marketed in the United States until the drug has received FDA
approval. Such approval can take many years to obtain and may be rejected by the FDA at a number of steps. The steps required before a drug may be marketed in the United States generally include the following:
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completion of extensive
pre-clinical
laboratory tests, animal studies, and formulation studies in accordance with the FDAs Good Laboratory Practice, or GLP, regulations;
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submission to the FDA of an IND for human clinical testing, which must become effective before human clinical trials may begin;
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performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the drug for each proposed indication;
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submission to the FDA of an NDA after completion of all clinical trials;
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satisfactory completion of an FDA
pre-approval
inspection of the manufacturing facility or facilities at which the API and finished drug product are produced and tested to assess
compliance with current Good Manufacturing Practices, or cGMPs;
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satisfactory completion of FDA inspections of clinical trial sites to assure that data supporting the safety and effectiveness of product candidates has been generated in compliance with Good Clinical Practices; and
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FDA review and approval of the NDA prior to any commercial marketing or sale of the drug in the United States.
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Pre-clinical
tests include laboratory evaluation of product chemistry, toxicity and formulation, as
well as animal studies. The conduct of the
pre-clinical
tests and formulation of the compounds for testing must comply with federal regulations and requirements. The results of the
pre-clinical
tests, together with manufacturing information and analytical data, are submitted to the FDA as part of an IND, which must become effective before human clinical trials may begin. An IND will
automatically become effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions about the conduct of the trial, such as whether human research subjects will be exposed to an unreasonable health risk. In
such a case, the IND sponsor and the
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FDA must resolve any outstanding FDA concerns or questions before clinical trials can proceed. The FDA, sponsor or an Institutional Review Board, or IRB, may place a study on hold at any time
during development.
Clinical trials involve administration of the investigational drug to human subjects under the supervision of
qualified investigators. Clinical trials are conducted under protocols detailing the objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. Each protocol must be provided to the FDA as
part of a separate submission to the IND. Further, an IRB, for each medical center proposing to conduct the clinical trial must review and approve the study protocol and informed consent information for study subjects for any clinical trial before
it commences at that center, and the IRB must monitor the study until it is completed. There are also requirements governing reporting of
on-going
clinical trials and clinical trial results to public
registries. Study subjects must sign an informed consent form before participating in a clinical trial.
Clinical trials necessary for
product approval typically are conducted in three sequential phases, but the phases may overlap.
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Phase 1 usually involves the initial introduction of the investigational drug into a limited population, typically healthy humans, to evaluate its short-term safety, dosage tolerance, metabolism, pharmacokinetics and
pharmacologic actions, and, if possible, to gain an early indication of its effectiveness.
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Phase 2 usually involves trials in a limited patient population to (i) evaluate dosage tolerance and appropriate dosage; (ii) identify possible adverse effects and safety risks; and (iii) evaluate
preliminarily the efficacy of the drug for specific targeted indications. Multiple Phase 2 clinical trials may be conducted by the sponsor to obtain information prior to beginning larger and more expensive Phase 3 clinical trials.
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Phase 3 trials, commonly referred to as pivotal studies, are undertaken in an expanded patient population at multiple, geographically dispersed clinical trial centers to further evaluate clinical efficacy and test
further for safety by using the drug in its final form.
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The FDA or an IRB may suspend clinical trials at any time on
various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk. The FDA may approve an NDA for a product candidate, but require that the sponsor conduct additional clinical trials to further
assess the drug after NDA approval under a post-approval commitment. Post-approval trials are typically referred to as Phase 4 clinical trials.
During the development of a new drug, sponsors are given an opportunity to meet with the FDA at certain points. These points may be prior to
submission of an IND, at the end of Phase 2, and before an NDA is submitted. Meetings at other times may be requested. These meetings can provide an opportunity for the sponsor to share information about the data gathered to date, for the FDA to
provide advice, and for the sponsor and the FDA to reach an agreement on the next phase of development. Sponsors typically use the end of Phase 2 meeting to discuss their Phase 2 clinical results and present their plans for the pivotal Phase 3
clinical trial that they believe will support approval of the new drug. A sponsor may request a Special Protocol Assessment, or SPA, to reach an agreement with the FDA that the protocol design, clinical endpoints, and statistical analyses are
acceptable to support regulatory approval of the product candidate with respect to effectiveness in the indication studied. If such an agreement is reached, it will be documented and made part of the administrative record, and it will be binding on
the FDA except in limited circumstances, such as if the FDA identifies a substantial scientific issue essential to determining the safety or effectiveness of the product after clinical studies begin, or if the sponsor fails to follow the protocol
that was agreed upon with the FDA. There is no guarantee that a study will ultimately be adequate to support an approval even if the study is subject to an SPA.
Concurrent with clinical trials, companies usually complete additional animal safety studies and must also develop additional information
about the chemistry and physical characteristics of the drug and finalize a process for manufacturing the product in accordance with cGMP requirements. The manufacturing process must be
25
capable of consistently producing quality batches of the drug candidate and the manufacturer must develop methods for testing the quality, purity and potency of the final drugs. Additionally,
appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the drug candidate does not undergo unacceptable deterioration over its shelf life.
Assuming successful completion of the required clinical testing, the results of
pre-clinical
studies
and of clinical studies, together with other detailed information, including information on the manufacture and composition of the drug, are submitted to the FDA in the form of an NDA requesting approval to market the product for one or more
indications. An NDA must be accompanied by a significant user fee, which is waived for the first NDA submitted by a qualifying small business. The NDA is subject to a sixty day acceptance period, and if sufficiently complete to permit substantive
review, will be filed by FDA at the end of that period. For NDAs assigned a standard review designation, the FDAs goal is to complete its review 12 months from submission and for priority review NDAs, 8 months from submission. These goals can
be extended by the FDA through requests for additional information from the sponsor.
The testing and approval process requires
substantial time, effort and financial resources. The FDA will review the NDA and may deem it to be inadequate to support approval, and we cannot be sure that any approval will be granted on a timely basis, if at all. The FDA may also refer the
application to the appropriate advisory committee, typically a panel of clinicians, for review, evaluation and a recommendation as to whether the application should be approved. The FDA is not bound by the recommendations of the advisory committee,
but it typically follows such recommendations.
Before approving an NDA, the FDA inspects the facility or the facilities at which the drug
and/or its active pharmaceutical ingredient is manufactured and will not approve the product unless the manufacturing is in compliance with cGMPs. If the FDA evaluates the NDA and the manufacturing facilities are deemed acceptable, the FDA may issue
an approval letter, or in some cases a Complete Response Letter. The approval letter authorizes commercial marketing of the drug for specific indications. As a condition of NDA approval, the FDA may require post-marketing testing and surveillance to
monitor the drugs safety or efficacy, or impose other conditions. A Complete Response Letter indicates that the review cycle of the application is complete and the application is not ready for approval. A Complete Response Letter may require
additional clinical data and/or additional clinical trial(s), and/or other significant, expensive and time-consuming requirements related to clinical trials,
pre-clinical
studies or manufacturing. Even if such
additional information is submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. Data from clinical trials is not always conclusive and the FDA may interpret data differently than we or our collaborators
interpret data. Alternatively, the FDA could also approve the NDA with a Risk Evaluation and Mitigation Strategy to mitigate risks of the drug, which could include medication guides, physician communication plans, or elements to assure safe use,
such as restricted distribution methods, patient registries or other risk minimization tools. Once the FDA approves a drug, the FDA may withdraw product approval if
on-going
regulatory requirements are not met
or if safety problems occur after the product reaches the market. In addition, the FDA may require testing, including Phase 4 clinical trials, and surveillance programs to monitor the safety effects of approved products that have been
commercialized, and the FDA has the power to prevent or limit further marketing of a product based on the results of these post-marketing programs or other information.
Post-Approval Requirements.
After a drug has been approved by the FDA for sale, the FDA may require that certain post-approval
requirements be satisfied, including the conduct of additional clinical studies. In addition, certain changes to an approved product, such as adding new indications, making certain manufacturing changes, or making certain additional labeling claims,
are subject to further FDA review and approval. Before a company can market products for additional indications, it must obtain additional approvals from the FDA, typically a new NDA. Obtaining approval for a new indication generally requires that
additional clinical studies be conducted. A company cannot be sure that any additional approval for new indications for any product candidate will be approved on a timely basis, or at all.
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If post-approval conditions are not satisfied, the FDA may withdraw its approval of the drug. In
addition, holders of an approved NDA are required to (i) report certain adverse reactions to the FDA and maintain pharmacovigilance programs to proactively look for these adverse events; (ii) comply with certain requirements concerning
advertising and promotional labeling for their products; and (iii) continue to have quality control and manufacturing procedures conform to cGMPs after approval. The FDA periodically inspects the sponsors records related to safety
reporting and/or manufacturing facilities, which includes assessment of
on-going
compliance with cGMPs. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and
quality control to maintain cGMP compliance. We intend to use third-party manufacturers to produce our products in clinical and commercial quantities, and future FDA inspections may identify compliance issues at the facilities of our contract
manufacturers that may disrupt production or distribution, or require substantial resources to correct. In addition, discovery of problems with a product after approval may result in restrictions on a product, manufacturer or holder of an approved
NDA, including recall of the product from the market or withdrawal of approval of the NDA for that drug.
Patent Term Restoration and
Marketing Exclusivity.
Depending upon the timing, duration and specifics of FDA approval of the use of our drugs, some of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term
Restoration Act of 1984, referred to as the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent restoration term of up to five years as compensation for patent term lost during product development and the FDA regulatory review
process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the products approval date. The patent term restoration period is generally
one-half
the time between the effective date of an IND and the submission date of an NDA, plus the time between the submission date of an NDA and the approval of that application. Only one patent applicable to an approved drug is eligible for the extension
and the extension must be requested prior to expiration of the patent. The USPTO, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In the future, we intend to apply for restorations of
patent term for some of our currently owned or licensed patents to add patent life beyond their current expiration date, depending on the expected length of clinical trials and other factors involved in the submission of the relevant NDA.
Data and market exclusivity provisions under the FDCA also can delay the submission or the approval of certain applications. The FDCA provides
a five-year period of
non-patent
data exclusivity within the United States to the first applicant to gain approval of an NDA for a new chemical entity. A drug is a new chemical entity if the FDA has not
previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance. During the exclusivity period, the FDA may not accept for review an abbreviated new drug
application, or ANDA, or a 505(b)(2) NDA submitted by another company for another version of such drug where the applicant does not own or have a legal right of reference to all the data required for approval. However, an application may be
submitted after four years if it contains a certification of patent invalidity or
non-infringement.
The FDCA also provides three years of marketing exclusivity for an NDA, 505(b)(2) NDA or supplement to an
existing NDA if new clinical investigations, other than bioavailability studies, conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example, for new indications, dosages or strengths
of an existing drug. This three-year exclusivity covers only the conditions associated with the new clinical investigations and does not prohibit the FDA from approving ANDAs or 505(b)(2) NDAs for drugs containing the original active agent.
Five-year and three-year exclusivity will not delay the submission or approval of a full NDA; however, an applicant submitting a full NDA would be required to conduct, or obtain a right of reference to all of the
pre-clinical
studies, adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness.
Foreign Regulation
In addition to
regulations in the United States, we will be subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution of our products. Whether or not we obtain FDA approval for a product, we must obtain approval by
the comparable regulatory authorities of foreign countries before we can commence clinical trials and approval of foreign countries or economic areas, such as the European Union, before we may market products in those countries or areas. The
approval process and
27
requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from place to place, and the time may be longer or shorter than that required for
FDA approval.
Pricing and Reimbursement
In the United States and internationally, sales of products that we market in the future, and our ability to generate revenues on such sales,
are dependent, in significant part, on the availability of adequate coverage and reimbursement from third-party payors, such as state and federal governments, managed care providers and private insurance plans. Private insurers, such as health
maintenance organizations and managed care providers, have implemented cost-cutting and reimbursement initiatives and likely will continue to do so in the future. These include establishing formularies that govern the drugs and biologics that will
be offered and the
out-of-pocket
obligations of member patients for such products. We may need to conduct pharmacoeconomic studies to demonstrate the cost-effectiveness
of our products for formulary coverage and reimbursement. Even with such studies, our products may be considered less safe, less effective or less cost-effective than existing products, and third-party payors may not provide coverage and
reimbursement for our product candidates, in whole or in part.
In addition, particularly in the United States and increasingly in other
countries, we are required to provide discounts and pay rebates to state and federal governments and agencies in connection with purchases of our products that are reimbursed by such entities. It is possible that future legislation in the United
States and other jurisdictions could be enacted to potentially impact reimbursement rates for the products we are developing and may develop in the future and could further impact the levels of discounts and rebates paid to federal and state
government entities. Any legislation that impacts these areas could impact, in a significant way, our ability to generate revenues from sales of products that, if successfully developed, we bring to market.
Political, economic and regulatory influences are subjecting the health care industry in the United States to fundamental changes. There have
been, and we expect there will continue to be, legislative and regulatory proposals to change the health care system in ways that could significantly affect our future business. For example, the Patient Protection and Affordable Care Act, as amended
by the Health Care and Education Affordability Reconciliation Act, or collectively, the ACA, enacted in March 2010, substantially changed the way health care is financed by both governmental and private insurers. 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. 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. We expect that healthcare reform measures that may be adopted
in the future may result in more rigorous coverage criteria and lower reimbursement, and in additional downward pressure on the price that may be charged for any of our product candidates, if approved.
Sales and Marketing
The FDA
regulates all advertising and promotion activities for products under its jurisdiction prior to and after approval, including standards and regulations for
direct-to-consumer
advertising, dissemination of
off-label
information, industry-sponsored scientific and educational activities
and promotional activities involving the Internet. Drugs may be marketed only for the approved indications and in accordance with the provisions of the approved label. Further, if there are any modifications to the drug, including changes in
indications, labeling, or manufacturing processes or facilities, we may be required to submit and obtain FDA approval of a new or supplemental NDA, which may require us to collect additional data or conduct additional
pre-clinical
studies and clinical trials. Failure to comply with applicable FDA requirements may subject a company to adverse publicity, enforcement action by the FDA, corrective advertising, consent decrees
and the full range of civil and criminal penalties available to the FDA.
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Physicians may prescribe legally available drugs for uses that are not described in the
drugs labeling and that differ from those tested by us and approved by the FDA. Such
off-label
uses are common across medical specialties, and often reflect a physicians belief that the
off-label
use is the best treatment for the patient. The FDA does not regulate the behavior of physicians in their choice of treatments, but FDA regulations do impose stringent restrictions on manufacturers
communications regarding
off-label
uses. Failure to comply with applicable FDA requirements may subject a company to adverse publicity, enforcement action by the FDA, corrective advertising, consent decrees
and the full range of civil and criminal penalties available to the FDA.
Outside the United States, our ability to market a product is
contingent upon obtaining marketing authorization from the appropriate regulatory authorities. The requirements governing marketing authorization, pricing and reimbursement vary widely from country to country.
We may also be subject to various federal and state laws pertaining to health care fraud and abuse, including anti-kickback laws
and false claims laws. Anti-kickback laws make it illegal for a prescription drug manufacturer to solicit, offer, receive, or pay any remuneration in exchange for, or to induce, the referral of business, including the purchase or prescription of a
particular drug. Due to the breadth of the statutory provisions, the absence of guidance in the form of regulations, and very few court decisions addressing industry practices, it is possible that our practices might be challenged under
anti-kickback or similar laws. False claims laws prohibit anyone from knowingly and willingly presenting, or causing to be presented, for payment to third-party payors (including Medicare and Medicaid) claims for reimbursed drugs or services that
are false or fraudulent, claims for items or services not provided as claimed, or claims for medically unnecessary items or services.
Violations of fraud and abuse laws may be punishable by criminal and/or civil sanctions, including fines and civil monetary penalties, the
possibility of exclusion from federal health care programs (including Medicare and Medicaid) and corporate integrity agreements, which impose, among other things, rigorous operational and monitoring requirements on companies. Similar sanctions and
penalties also may be imposed upon executive officers and employees, including criminal sanctions against executive officers under the
so-called
responsible corporate officer doctrine, even in
situations where the executive officer did not intend to violate the law and was unaware of any wrongdoing. Given the penalties that may be imposed on companies and individuals if convicted, allegations of such violations often result in settlements
even if the company or individual being investigated admits no wrongdoing. Settlements often include significant civil sanctions, including fines and civil monetary penalties, and corporate integrity agreements. If the government was to allege or
convict us or our executive officers of violating these laws, our business could be harmed. In addition, private individuals have the ability to bring similar actions. Our activities could be subject to challenge for the reasons discussed above and
due to the broad scope of these laws and the increasing attention being given to them by law enforcement authorities. Further, federal and state laws that require manufacturers to make reports on pricing and marketing information could subject us to
penalty provisions.
Description of the Merger
Pursuant to an Agreement and Plan of Merger dated August 23, 2013, or the Merger Agreement, by and among Oneida Resources Corp., which we
refer to as the Company, we, our and us; ITI, Inc., a Delaware corporation and wholly-owned subsidiary of the Company, or Merger Sub; and Intra-Cellular Therapies, Inc., a Delaware corporation, which we refer to as ITI; Merger Sub merged with and
into ITI, with ITI remaining as the surviving entity and a wholly-owned operating subsidiary of the Company. This transaction is referred to throughout this report as the Merger. The Merger was effective on August 29, 2013, upon the
filing of a Certificate of Merger with the Secretary of State of the State of Delaware. In connection with the Merger, ITI changed its name to ITI, Inc. and Oneida Resources Corp. assumed the name Intra-Cellular Therapies, Inc. The Merger was
accounted for as a capital transaction. Upon the effectiveness of the Merger, the Companys business became the operation of ITI and its business.
At the effective time of the Merger, or the Effective Time, the legal existence of Merger Sub ceased and each share of ITI common stock and
each share of ITI preferred stock that was issued and outstanding
29
immediately prior to the Effective Time was automatically exchanged for 0.5 shares of our common stock, which we refer to as the Exchange. Immediately following the Effective Time, we completed
the closing of a redemption of 5,000,000 shares of our common stock, or the Redemption, from our then-current sole stockholder, which constituted all of the issued and outstanding shares of our capital stock, on a fully-diluted basis, immediately
prior to the Merger. Upon completion of the Merger and the Redemption, the former stockholders of ITI held 100% of the outstanding shares of our capital stock. Unless otherwise indicated in this report, all share and per share figures reflect the
exchange of each share of ITI common stock and each share of ITI preferred stock then outstanding for 0.5 shares of our common stock at the Effective Time.
Employees
As of February 15, 2017,
we employed 42 employees, 41 of whom were full-time. We consider our relations with our employees to be good. To successfully develop our drug candidates, we must be able to attract and retain highly skilled personnel. We anticipate hiring
additional employees for research and development, clinical and regulatory affairs, general and administrative and commercial related activities over the next few years. In addition, we intend to use clinical research organizations and third parties
to perform our clinical studies and manufacturing.
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Except for the historical information contained herein, this report
contains forward-looking statements that involve risks and uncertainties. These statements include projections about our finances, plans and objectives for the future, future operating and economic performance and other statements regarding future
performance. These statements are not guarantees of future performance or events. Our actual results could differ materially from those discussed in this report. Factors that could cause or contribute to these differences include, but are not
limited to, those discussed in the following section, as well as those discussed in Part II, Item 7 entitled Managements Discussion and Analysis of Financial Condition and Results of Operations and elsewhere throughout this
report.
You should consider carefully the following risk factors, together with all of the other information included or
incorporated by reference in this report. If any of the following risks, either alone or taken together, or other risks not presently known to us or that we currently believe to not be significant, develop into actual events, then our business,
financial condition, results of operations or prospects could be materially adversely affected. If that happens, the market price of our common stock could decline, and stockholders may lose all or part of their investment.
Risks Related to Our Business
We
currently do not have, and may never have, any products that generate significant revenues.
We have a limited operating history on
which to evaluate our business and prospects. To date, we have not generated any product revenues from our product candidates currently in development. We cannot guarantee that any of our product candidates currently in development will ever become
marketable products.
We must demonstrate that our drug candidates satisfy rigorous standards of safety and efficacy for their intended
uses before the FDA and other regulatory authorities in the European Union and elsewhere will approve them for commercialization. Significant additional research, preclinical testing and clinical testing is required before we can file applications
with the FDA or other regulatory authorities for premarket approval of our drug candidates. In addition, to compete effectively, our drugs must be easy to administer, cost-effective and economical to manufacture on a commercial scale. We may not
achieve any of these objectives. Our lead product candidate, lumateperone, is in Phase 3 clinical development as a novel treatment for schizophrenia, bipolar depression and agitation associated with dementia, including AD. In September 2016, we
announced
top-line
results from the second Phase 3 clinical trial
(ITI-007-302)
of lumateperone for the treatment of patients
with schizophrenia. In this trial, neither dose of lumateperone separated from placebo on the primary endpoint, change from baseline on the PANSS total score, in the
pre-defined
patient population, but we
believe the lumateperone late-stage clinical development program, including two large, well-controlled positive studies and supportive evidence from this second Phase 3 study, collectively provide evidence of the efficacy and safety of lumateperone
for the treatment of schizophrenia. We have a meeting scheduled with the FDA in late March of 2017 to discuss the submission of an NDA for lumateperone in schizophrenia. We expect to provide an update on the status of our discussions with the FDA
following this meeting. In addition, we initiated Phase 3 development for the treatment of bipolar depression in the third quarter of 2015 and Phase 3 development for the treatment of agitation in patients with dementia, including AD, in the second
quarter of 2016. In addition, all rights with respect to
ITI-214,
which has advanced into Phase 1 clinical trials, that we previously granted to Takeda were returned to us in connection with the
termination of the Takeda License Agreement. On September 15, 2015, Takeda completed the transfer of the IND for
ITI-214
to us. We intend to pursue the development of our PDE program, including
ITI-214,
for the treatment of several CNS and
non-CNS
conditions, including cardiovascular disease. We cannot be certain that the clinical development of these or any other
drug candidates in preclinical testing or clinical development will be successful, that we will receive the regulatory approvals required to commercialize them or that any of our other research and drug discovery programs will yield a drug candidate
suitable for investigation through clinical trials. Our commercial revenues from our product candidates currently in development, if any, will be derived from sales of drugs that will not become marketable until at least 2018, if at all.
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There is no guarantee that our planned clinical trials for lumateperone will be successful.
In our Phase 1 and Phase 2 clinical trials, our lead product candidate, lumateperone, has demonstrated improved sleep maintenance,
antipsychotic efficacy, and clinical signals consistent with reduction in negative symptoms associated with schizophrenia, depression and anxiety, and other symptoms associated with impaired social function. In September 2015, we announced
top-line
clinical results from our first randomized, double-blind, placebo-controlled Phase 3 clinical trial in patients with an acutely exacerbated episode of schizophrenia. In this trial, a once-daily 60 mg dose
of
ITI-007
met the primary endpoint and demonstrated antipsychotic efficacy with statistically significant superiority over placebo at week 4 (study endpoint). In addition, the 60 mg dose of
ITI-007
met the key secondary endpoint of statistically significant improvement on the
CGI-S.
In September 2016, we announced
top-line
results from the second Phase 3 clinical trial of lumateperone for the treatment of patients with schizophrenia. In this trial, neither dose of lumateperone separated from placebo on the primary endpoint, change from baseline on the PANSS total
score, in the
pre-defined
patient population. The active control, risperidone, did separate from placebo. In this trial, lumateperone was statistically significantly better than risperidone on key safety and
tolerability parameters and exhibited a safety profile similar to placebo. This replicates the safety and tolerability findings of our Phase 2 study in which the efficacy of
ITI-007
60 mg and risperidone, the
active control, were similar. We believe lumateperone did not separate from placebo on the
pre-specified
primary endpoint in the
ITI-007-302
study in part due to an unusually high placebo response at certain sites which disproportionately affected the trial results and contributed to the efficacy
outcome of this study compared to our two previous positive efficacy studies. In addition, we believe other confounding factors may have played a role in the efficacy outcome of ITI-007-302, including an expectation bias and the potential for
functional unblinding. We believe the lumateperone late-stage clinical development program, including two large, well-controlled positive studies and supportive evidence from this second Phase 3 study, collectively provide evidence of the efficacy
and safety of lumateperone for the treatment of schizophrenia. Across all three of our efficacy trials,
ITI-007
60 mg improved symptoms of schizophrenia with the same magnitude of change from baseline in the
primary endpoint, the PANSS total score.
We have a meeting scheduled with the FDA in late March of 2017 to discuss the submission of an
NDA for
ITI-007
in schizophrenia. We expect to provide an update on the status of our discussions with the FDA following this meeting. In addition, we initiated Phase 3 development for the treatment of bipolar
depression in the third quarter of 2015 and Phase 3 development for the treatment of agitation in patients with dementia, including AD, in the second quarter of 2016.
The historical rate of failures for product candidates in clinical development and late-stage clinical trials is high. While we may be
required to conduct further clinical trials in patients with schizophrenia and we plan to conduct further clinical trials in other indications, there is no guarantee that we will have the same level of success in these trials as we have had in
certain of our earlier clinical trials, or be successful at all.
In addition, although we believe that lumateperone and
follow-on
compounds may also have clinical utility in indications other than schizophrenia, such as behavioral disturbances in dementia, bipolar disorder, intermittent explosive disorder,
non-motor
disorders associated with Parkinsons disease, obsessive compulsive disorder and anxiety disorders and post-traumatic stress disorder, we have never tested lumateperone in Phase 2 clinical trials in
the patient population for these other indications, except for
ITI-007-200,
a Phase 1/2 clinical trial designed to evaluate the safety, tolerability and
pharmacokinetics of low doses of lumateperone in healthy geriatric subjects and in patients with dementia, including AD, for which we announced
top-line
data in the fourth quarter of 2014.
If we do not successfully complete clinical development of lumateperone, we will be unable to market and sell products derived from it and to
generate product revenues. Even though we have successfully completed certain clinical trials for lumateperone in patients with schizophrenia, those results are not necessarily predictive of results of future pivotal trials that may be needed before
we may submit an NDA to the FDA for the initial or other future indications. Of the vast number of drugs in development, only a small percentage result in the submission of an NDA to the FDA, and even less result in the NDA ultimately being approved
by the FDA for commercialization.
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We recently completed our second Phase 3 clinical trial of lumateperone for the treatment of schizophrenia.
Although we previously discussed our clinical development plans with the FDA, the agency may ultimately determine that our Phase 3 clinical trials and
non-clinical
studies, even if certain of the trials are
successfully completed, are not sufficient for regulatory approval. If we are required to conduct additional clinical trials and
non-clinical
studies, our development of lumateperone for schizophrenia will be
more time-consuming and costly than we presently anticipate, which would have a material adverse effect on our business, results of operations and financial condition.
In June 2014, we held our
end-of-Phase
2 meeting with the FDA
to discuss our plans for initiating Phase 3 clinical trials of lumateperone in schizophrenia. Following this meeting, we proceeded with our Phase 3 development program, in which we recently completed the second of two randomized, double-blind,
placebo-controlled Phase 3 clinical trials of lumateperone in patients with acutely exacerbated schizophrenia, with 450 patients enrolled in the first Phase 3 clinical trial and 696 patients enrolled in the second Phase 3 clinical trial. We
completed enrollment of the first Phase 3 clinical trial in schizophrenia in the second quarter of 2015 and completed enrollment of the second Phase 3 clinical trial in schizophrenia in the second quarter of 2016. In the first Phase 3 trial, we
randomized patients to two doses of
ITI-007
(60mg or 40mg) or placebo over a
4-week
treatment duration, and the primary outcome measure is change from baseline to Day 28
on the PANSS total score. In the second Phase 3 trial, we randomized patients to receive one of four treatments: 60 mg
ITI-007,
20 mg
ITI-007,
4 mg risperidone (active
control) or placebo in a 1:1:1:1 ratio. The second Phase 3 trial was conducted for a
6-week
treatment duration. We announced
top-line
results of the first Phase 3
clinical trial of lumateperone in patients with schizophrenia in September 2015 and
top-line
results of the second Phase 3 clinical trial in September 2016. In the second Phase 3 clinical trial, neither dose
of
ITI-007
separated from placebo on the primary endpoint, change from baseline on the PANSS total score, in the
pre-defined
patient population. The active control,
risperidone, did separate from placebo. In this trial, lumateperone was statistically significantly better than risperidone on key safety and tolerability parameters and exhibited a safety profile similar to placebo. This replicates the safety and
tolerability findings of our Phase 2 study in which the efficacy of
ITI-007
60 mg and risperidone, the active control, were similar. We believe lumateperone did not separate from placebo on the
pre-specified
primary endpoint in the
ITI-007-302
study in part due to an unusually high placebo response at certain sites which
disproportionately affected the trial results and contributed to the efficacy outcome of this study compared to our two previous positive efficacy studies. In addition, we believe other confounding factors may have played a role in the efficacy
outcome of ITI-007-302, including an expectation bias and the potential for functional unblinding. Even though we believe that our recently completed Phase 3 trials and ongoing and planned clinical and
non-clinical
studies for lumateperone in schizophrenia, if successful, will be sufficient to support our NDA, the FDA may not agree with our belief that the lumateperone late-stage clinical development
program, including two large, well-controlled positive studies and supportive evidence from this second Phase 3 study, collectively provide evidence of the efficacy and safety of lumateperone for the treatment of schizophrenia. In addition, the FDA
may not agree with one or more aspects of our clinical trial designs, including the duration of the trials, clinical endpoints, controls, dose ranges, collection of safety data, or adequacy of our
non-clinical
studies. If we submit an NDA and the FDA does not agree with our clinical and
non-clinical
designs, our development of lumateperone in schizophrenia and other indications may be delayed, and we may incur
additional costs and devote additional resources to address any concerns the FDA may have with our trial designs. In addition, we may be required to conduct additional clinical trials or studies, which could result in additional delays and costs.
There is no assurance that we will complete the other clinical and
non-clinical
studies within the timeframes and the costs that we currently expect, or at all, or in a manner that is acceptable to the FDA.
Any delays or unplanned costs resulting from our Phase 3 clinical trials of lumateperone in schizophrenia may have a material adverse effect on our business, results of operations and financial condition. Even if we eventually submit an NDA and
receive approval of lumateperone, the FDA may grant approval contingent on the performance of costly additional post-approval clinical trials. The FDA may also approve lumateperone for a more limited indication or a narrower patient population than
we originally requested, and the FDA may not approve the labeling that we believe is necessary or desirable for the successful commercialization of lumateperone or our other product candidates. Any delay in obtaining, or inability to obtain,
applicable regulatory approval for lumateperone would delay or prevent commercialization of lumateperone and would materially adversely impact our business, results of operations and financial condition.
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We expect our net losses to continue for at least several years and are unable to predict the extent of
future losses or when we will become profitable, if ever.
We have experienced significant net losses since our inception. As of
December 31, 2016, we had an accumulated deficit of approximately $309.5 million. We expect to incur net losses over the next several years as we advance our programs and incur significant clinical development costs. We have not received,
and do not expect to receive for until at least 2018, any revenues from the commercialization of our product candidates. Substantially all of our revenues to date were from our license and collaboration agreement with Takeda and our agreements with
various U.S. governmental agencies and other parties, including our research and development grants. In October 2014, we entered into the Takeda Termination Agreement, which terminated our license and collaboration agreement with Takeda, pursuant to
which all rights with respect to
ITI-214
that we previously granted to Takeda were returned to us. We will not, therefore, receive any further milestone payments from Takeda and we cannot be certain that we
will enter into additional collaboration agreements. To obtain revenues from our product candidates, we must succeed, either alone or with others, in developing, obtaining regulatory approval for, and manufacturing and marketing drugs with
significant market potential. We may never succeed in these activities, and may never generate revenues that are significant enough to achieve profitability.
We will require substantial additional funding, which may not be available to us on acceptable terms, or at all, and, if not so available, may require
us to delay, limit, reduce or cease our operations.
We have consumed substantial amounts of capital since our inception. Our cash,
cash equivalents and investment securities totaled $384.1 million at December 31, 2016, which includes net proceeds of approximately $121.8 million from the public offering of shares of our common stock in March 2015 and approximately
$327.4 million from the public offering of shares of our common stock in September 2015. We believe that our existing cash, cash equivalents and investment securities, together with interest on cash balances, will be sufficient to fund our
operating expenses and capital expenditure requirements through the end of 2018 , the amount and timing of our actual expenditures will depend upon numerous factors, including the ongoing status of our planned NDA submission for lumateperone in
patients with schizophrenia and the meeting that we have scheduled with the FDA in late March 2017 regarding the submission of This NDA; the ongoing status of our Phase 3 clinical trials of lumateperone in patients with bipolar depression and
dementia, including AD; the continued development of our PDE program, including
ITI-214
for the treatment of several CNS and
non-CNS
conditions; and our other planned
clinical and
non-clinical
trials. We may require additional funds to obtain regulatory approval for lumateperone for patients with bipolar disorder. Furthermore, we anticipate that we will need to secure
additional funding to obtain regulatory approval for lumateperone in patients with dementia, including AD, for further development of lumateperone in other programs including in patients with depressive disorders and other indications, and for
development of our other product candidates. If the FDA requires that we perform additional preclinical studies or clinical trials, or we experience delays or other setbacks in our clinical trials, our expenses would further increase beyond
what we currently expect and the anticipated timing of any potential NDA would likely be delayed.
With the remaining proceeds from our
public offerings in February 2014, March 2015 and September 2015, we intend to fund the following: the initiation of other planned clinical and
non-clinical
trials, including manufacturing, needed for
anticipated regulatory approval of lumateperone in patients with acute exacerbated schizophrenia and other potential additional indications;
pre-launch
activities for lumateperone for the treatment of
schizophrenia and, if it receives regulatory approval, to fund our initial commercialization efforts; the completion of our clinical trials of lumateperone in bipolar disorder as a monotherapy and as an adjunctive therapy with lithium or valproate,
a program we initiated in the third quarter of 2015; clinical trials of lumateperone for the treatment of behavioral disturbances in dementia, including AD, a program we initiated in the second quarter of 2016;
pre-clinical
and clinical development of our
ITI-007
long acting injectable development program; other clinical trials of lumateperone; the continued clinical
development of our PDE1 program, including
ITI-214;
and research and preclinical development of our other product candidates and the continuation of manufacturing activities in connection with the development
of lumateperone. The remaining
34
proceeds, if any, will be used to fund new and ongoing research and development activities, new business opportunities, general corporate purposes, including general and administrative expenses,
capital expenditures and working capital. Accordingly, we will continue to require substantial additional capital beyond the net proceeds from these offerings to continue our clinical development and commercialization activities. Because successful
development of our product candidates is uncertain, we are unable to estimate the actual funds we will require to complete research and development and commercialize our products under development.
Our future capital requirements will depend on, and could increase significantly as a result of, many factors, including:
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the results of the meeting in late March of 2017 that we have with the FDA regarding the submission of an NDA for lumateperone in schizophrenia;
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the progress in, and the costs of, our preclinical studies and clinical trials and other research and development programs;
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the scope, prioritization and number of our research and development programs;
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the ability of any future collaborators and us to reach the milestones, and other events or developments, triggering payments under any future collaboration agreements or to otherwise make payments under such
agreements;
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our ability to enter into new, and to maintain any existing, collaboration and license agreements;
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the extent to which any future collaborators are obligated to reimburse us for clinical trial costs under any future collaboration agreements;
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the costs involved in filing, prosecuting, enforcing and defending patent claims and other intellectual property rights;
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the costs of securing manufacturing arrangements for clinical or commercial production;
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the costs of preparing applications for regulatory approvals for our product candidates;
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the costs of preparing for and establishing, or contracting for, sales and marketing capabilities if we obtain regulatory clearances to market our product candidates; and
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the costs associated with litigation.
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Until we can generate significant continuing revenues,
we expect to satisfy our future cash needs through our existing cash, cash equivalents and investment securities, strategic collaborations, private or public sales of our securities, debt financings, grant funding, or by licensing all or a portion
of our product candidates or technology. Turmoil and volatility in the financial markets have adversely affected the market capitalizations of many biotechnology companies, and generally made equity and debt financing more difficult to obtain. This,
coupled with other factors, may limit our access to additional financing. This could have a material adverse effect on our ability to access sufficient funding. We cannot be certain that additional funding will be available to us on acceptable
terms, or at all. If we do obtain additional funding through equity offerings, the ownership of our existing stockholders and purchasers of shares of our common stock in any such offering will be diluted, and the terms of any financing may adversely
affect the rights of our stockholders. In addition, the issuance of additional shares by us, or the possibility of such issuance, may cause the market price of our shares to decline. If funds are not available, we will be required to delay, reduce
the scope of, or eliminate one or more of our research or development programs or our commercialization efforts. We also could be required to seek funds through arrangements with collaboration partners or otherwise that may require us to relinquish
rights to some of our technologies or product candidates or otherwise agree to terms unfavorable to us.
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Our management has broad discretion over the use of our cash and we may not use our cash effectively, which
could adversely affect our results of operations.
Our management has significant flexibility in applying our cash resources,
including the net proceeds from our public offerings completed in February 2014, March 2015 and September 2015, and could use these resources for corporate purposes that do not increase our market value, or in ways with which our stockholders
may not agree. We may use our cash resources for corporate purposes that do not yield a significant return or any return at all for our stockholders, which could adversely affect our future growth prospects.
Our lead product candidate, lumateperone, is only part way through the clinical trials we anticipate needing to complete before we may be able to submit
an NDA to the FDA. Clinical trials are long, expensive and unpredictable, and there is a high risk of failure.
Preclinical testing
and clinical trials are long, expensive and unpredictable processes that can be subject to delays. It may take several years to complete the preclinical testing and clinical development necessary to commercialize a drug, and delays or failure can
occur at any stage. Interim results of clinical trials do not necessarily predict final results, and success in preclinical testing and early clinical trials does not ensure that later clinical trials will be successful. A number of companies in the
pharmaceutical and biotechnology industries have suffered significant setbacks in advanced clinical trials, even after promising results in earlier trials.
In connection with clinical trials, we face risks that a product candidate may not prove to be efficacious; patients may die or suffer other
adverse effects for reasons that may or may not be related to the product candidate being tested; the results may not confirm the positive results of our earlier preclinical studies and clinical trials; and the results may not meet the level of
statistical significance required by the FDA or other regulatory agencies. If we do not successfully complete preclinical and clinical development, we will be unable to market and sell products derived from our product candidates and to generate
product revenues. Even if we do successfully complete clinical trials, those results are not necessarily predictive of results of additional trials that may be needed before an NDA may be submitted to the FDA or the FDA may approve the NDA.
In September 2016, we announced
top-line
results from the second Phase 3 clinical trial
(ITI-007-302)
of lumateperone for the treatment of patients with schizophrenia. In this trial, neither dose of lumateperone separated from placebo on the primary endpoint,
change from baseline on the PANSS total score, in the
pre-defined
patient population. The active control, risperidone, did separate from placebo. In this trial, lumateperone was statistically significantly
better than risperidone on key safety and tolerability parameters and exhibited a safety profile similar to placebo. This replicates the safety and tolerability findings of our Phase 2 study
(ITI-007-005)
in which the efficacy of
ITI-007
60 mg and risperidone, the active control, were similar. We believe lumateperone did not separate from placebo on the
pre-specified
primary endpoint in the
ITI-007-302
study in part due to an unusually high placebo response at certain sites which
disproportionately affected the trial results and contributed to the efficacy outcome of this study compared to our two previous positive efficacy studies. In addition, we believe other confounding factors may have played a role in the efficacy
outcome of
ITI-007-302,
including an expectation bias and the potential for functional unblinding.
We believe the lumateperone late-stage clinical development program, including two large, well-controlled positive studies and supportive
evidence from this second Phase 3 study, collectively provide evidence of the efficacy and safety of lumateperone for the treatment of schizophrenia. Across all three of our efficacy trials,
ITI-007
60 mg
improved symptoms of schizophrenia with the same trajectory and magnitude of change from baseline in the primary endpoint, the PANSS total score. Even though we believe that our recently completed Phase 3 trials and ongoing and planned clinical and
non-clinical
studies for lumateperone in schizophrenia, if successful, will be sufficient to support our NDA, the FDA may not agree with our belief that the lumateperone late-stage clinical development program,
including two large, well-controlled positive studies and supportive evidence from this second Phase 3 study, collectively provide evidence of the efficacy and safety of lumateperone for the treatment of schizophrenia, which may require us to
conduct additional trials, which would
36
be expensive and time-consuming, would delay our ability to file an NDA with the FDA, and may have a material adverse effect on our business and financial condition.
Delays, suspensions and terminations in our clinical trials could result in increased costs to us, delay our ability to generate product revenues and
therefore may have a material adverse effect on our business, results of operations and future growth prospects.
The commencement
of clinical trials can be delayed for a variety of reasons, including delays in: demonstrating sufficient safety and efficacy to obtain regulatory approval to commence a clinical trial; reaching agreement on acceptable terms with prospective
contract research organizations and clinical trial sites; manufacturing sufficient quantities of a product candidate; obtaining clearance from the FDA to commence clinical trials pursuant to an IND; obtaining institutional review board approval to
conduct a clinical trial at a prospective clinical trial site; and patient enrollment, which is a function of many factors, including the size of the patient population, the nature of the protocol, the proximity of patients to clinical trial sites,
the availability of effective treatments for the relevant disease and the eligibility criteria for the clinical trial.
Once a clinical
trial has begun, it may be delayed, suspended or terminated due to a number of factors, including: ongoing discussions with regulatory authorities regarding the scope or design of our clinical trials or requests by them for supplemental information
with respect to our clinical trial results; failure to conduct clinical trials in accordance with regulatory requirements; lower than anticipated screening or retention rates of patients in clinical trials; serious adverse events or side effects
experienced by participants; and insufficient supply or deficient quality of product candidates or other materials necessary for the conduct of our clinical trials.
Many of these factors may also ultimately lead to denial of regulatory approval of a current or potential product candidate. If we experience
delays, suspensions or terminations in a clinical trial, our costs will increase, the commercial prospects for the related product candidate will be harmed, and our ability to generate product revenues will be delayed.
Safety issues with our product candidates, or with product candidates or approved products of third parties that are similar to our product candidates,
could give rise to delays in the regulatory approval process, restrictions on labeling or product withdrawal after approval.
Problems with product candidates or approved products marketed by third parties that utilize the same therapeutic target or that belong to the
same therapeutic class as our product candidates could adversely affect the development, regulatory approval and commercialization of our product candidates. In 2012, the FDA released draft guidance recommending that prospective suicidality
assessments be performed in clinical trials of any drug being developed for a psychiatric indication. Our development programs are focused on psychiatric indications. Our PDE program is a novel target and may have unexpected safety effects that do
not appear until late in clinical development or after commercial approval. To date, none of our product candidates have experienced any serious and unexpected suspected adverse reactions that resulted in the submission of an IND safety report to
the FDA; however, some approved products marketed by third parties for psychiatric indications that utilize different therapeutic targets or are in a different therapeutic class have experienced significant safety issues. As we continue the
development and clinical trials of our product candidates, there can be no assurance that our product candidates will not experience significant safety issues.
Discovery of previously unknown class effect problems may prevent or delay clinical development and commercial approval of product candidates
or result in restrictions on permissible uses after their approval, including withdrawal of the medicine from the market. Many drugs acting on the CNS include boxed warnings and precautions related to suicidal behavior or ideation, driving
impairment, somnolence/sedation and dizziness, discontinuation, weight gain,
non-insulin
dependent (type II) diabetes, cardiovascular side effects, sleep disturbances, and motor disturbances. If we or others
later identify undesirable side effects caused by the mechanisms of action or classes of our product candidates or specific product candidates:
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we may be required to conduct additional clinical trials or implement a Risk Evaluation and Mitigation Strategies program prior to or following approval;
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regulatory authorities may not approve our product candidates or, as a condition of approval, may require specific warnings and contraindications;
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regulatory authorities may withdraw their approval of the product and require us to take our drug off the market;
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we may have limitations on how we promote our drugs;
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sales of products may decrease significantly;
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we may be subject to litigation or product liability claims; and
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our reputation may suffer.
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Any of these events could prevent us from achieving or maintaining
market acceptance of the affected product or could substantially increase our commercialization costs and expenses, which, in turn, could delay or prevent us from generating significant revenues from its sale.
Finally, if the FDA determines that a drug may present a risk of substance abuse, it can recommend to the Drug Enforcement Administration that
the drug be scheduled under the Controlled Substances Act. Any failure or delay in commencing or completing clinical trials or obtaining regulatory approvals for our product candidates would delay commercialization of our product candidates, and
severely harm our business and financial condition.
If we seek to enter into strategic alliances for our drug candidates, but fail to enter into
and maintain successful strategic alliances, we may have to reduce or delay our drug candidate development or increase our expenditures.
An important element of a biotechnology companys strategy for developing, manufacturing and commercializing its drug candidates may be to
enter into strategic alliances with pharmaceutical companies or other industry participants to advance its programs and enable it to maintain its financial and operational capacity. We may face significant competition in seeking appropriate
alliances. If we seek such alliances, we may not be able to negotiate alliances on acceptable terms, if at all. In addition, these alliances may be unsuccessful. On October 31, 2014, we entered into the Termination Agreement with Takeda, which
terminated the Takeda License Agreement, pursuant to which all rights granted under the Takeda License Agreement were returned to us. If we seek such alliances and then fail to create and maintain suitable alliances, we may have to limit the size or
scope of, or delay, one or more of our drug development or research programs. If we elect to fund drug development or research programs on our own, we will have to increase our expenditures and will need to obtain additional funding, which may be
unavailable or available only on unfavorable terms.
To the extent we are able to enter into collaborative arrangements or strategic alliances, we
will be exposed to risks related to those collaborations and alliances.
Biotechnology companies at our stage of development
sometimes become dependent upon collaborative arrangements or strategic alliances to complete the development and commercialization of drug candidates, particularly after the Phase 2 stage of clinical testing. If we elect to enter into collaborative
arrangements or strategic alliances, these arrangements may place the development of our drug candidates outside our control, may require us to relinquish important rights or may otherwise be on terms unfavorable to us.
Dependence on collaborative arrangements or strategic alliances would subject us to a number of risks, including the risk that:
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we may not be able to control the amount and timing of resources that our collaborators may devote to the drug candidates;
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our collaborators may experience financial difficulties;
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we may be required to relinquish important rights, such as marketing and distribution rights;
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business combinations or significant changes in a collaborators business strategy may also adversely affect a collaborators willingness or ability to complete its obligations under any arrangement;
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a collaborator could independently move forward with a competing drug candidate developed either independently or in collaboration with others, including our competitors; and
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collaborative arrangements are often terminated or allowed to expire, which would delay the development and may increase the cost of developing our drug candidates.
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Preliminary and interim data from our clinical studies that we may announce or publish from time to time may change as more patient data become
available.
From time to time, we may announce or publish preliminary or interim data from our clinical studies. Preliminary and
interim results of a clinical trial are not necessarily predictive of final results. Preliminary and interim data are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more
patient data become available. As a result, preliminary and interim data should be viewed with caution until the final data are available. Material adverse changes in the final data compared to the interim data could significantly harm our business
prospects.
We rely on third parties to conduct our clinical trials and perform data collection and analysis, which may result in costs and delays
that prevent us from successfully commercializing our product candidates.
Although we design and manage our current preclinical
studies and clinical trials, we do not now have the ability to conduct clinical trials for our product candidates on our own. In addition to our collaborators, we rely on contract research organizations, medical institutions, clinical investigators,
and contract laboratories to perform data collection and analysis and other aspects of our clinical trials. In addition, we also rely on third parties to assist with our preclinical studies, including studies regarding biological activity, safety,
absorption, metabolism, and excretion of product candidates.
Our preclinical activities or clinical trials may be delayed, suspended, or
terminated if: the quality or accuracy of the data obtained by the third parties on whom we rely is compromised due to their failure to adhere to our clinical protocols or regulatory requirements or if for other reasons, these third parties do not
successfully carry out their contractual duties or fail to meet regulatory obligations or expected deadlines, or these third parties need to be replaced.
If the third parties on whom we rely fail to perform, our development costs may increase, our ability to obtain regulatory approval, and
consequently, to commercialize our product candidates may be delayed or prevented altogether. We currently use several contract research organizations to perform services for our preclinical studies and clinical trials. While we believe that there
are numerous alternative sources to provide these services, in the event that we seek such alternative sources, we may not be able to enter into replacement arrangements without delays or incurring additional expenses.
Even if we successfully complete the clinical trials of one or more of our product candidates, the product candidates may fail for other reasons.
Even if we successfully complete the clinical trials for one or more of our product candidates, the product candidates may fail
for other reasons, including the possibility that the product candidates will:
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fail to receive the regulatory approvals required to market them as drugs;
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be subject to proprietary rights held by others requiring the negotiation of a license agreement prior to marketing;
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be difficult or expensive to manufacture on a commercial scale;
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have adverse side effects that make their use less desirable; or
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fail to compete with product candidates or other treatments commercialized by our competitors.
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If we are unable to receive the required regulatory approvals, secure our intellectual property rights, minimize the incidence of any adverse
side effects or fail to compete with our competitors products, our business, financial condition, and results of operations could be materially and adversely affected.
Following regulatory approval of any of our drug candidates, we will be subject to ongoing regulatory obligations and restrictions, which may result in
significant expense and limit our ability to commercialize our potential products.
With regard to our drug candidates, if any,
approved by the FDA or by another regulatory authority, we are held to extensive regulatory requirements over product manufacturing, labeling, packaging, adverse event reporting, storage, advertising, promotion and record keeping. Regulatory
approvals may also be subject to significant limitations on the indicated uses or marketing of the drug candidates. Potentially costly
follow-up
or post-marketing clinical studies may be required as a
condition of approval to further substantiate safety or efficacy, or to investigate specific issues of interest to the regulatory authority. Previously unknown problems with the drug candidate, including adverse events of unanticipated severity or
frequency, may result in restrictions on the marketing of the drug, and could include withdrawal of the drug from the market.
In
addition, the law or regulatory policies governing pharmaceuticals may change. New statutory requirements or additional regulations may be enacted that could prevent or delay regulatory approval of our drug candidates. We cannot predict the
likelihood, nature or extent of adverse government regulation that may arise from future legislation or administrative action, either in the United States or elsewhere. If we are not able to maintain regulatory compliance, we might not be permitted
to market our drugs and our business could suffer.
Our product candidates may not gain acceptance among physicians, patients, or the medical
community, thereby limiting our potential to generate revenues, which will undermine our future growth prospects.
Even if our
product candidates are approved for commercial sale by the FDA or other regulatory authorities, the degree of market acceptance of any approved product candidate by physicians, health care professionals and third-party payors, and our profitability
and growth will depend on a number of factors, including:
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our ability to provide acceptable evidence of safety and efficacy;
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pricing and cost effectiveness, which may be subject to regulatory control;
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our ability to obtain sufficient third-party insurance coverage or reimbursement;
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effectiveness of our or our collaborators sales and marketing strategy;
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relative convenience and ease of administration;
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prevalence and severity of any adverse side effects; and
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availability of alternative treatments.
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If any product candidate that we develop does not
provide a treatment regimen that is at least as beneficial as the current standard of care or otherwise does not provide some additional patient benefit over the current standard of care, that product will not achieve market acceptance and we will
not generate sufficient revenues to achieve profitability.
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The failure to attract and retain skilled personnel and key relationships could impair our drug development
and commercialization efforts.
We are highly dependent on our senior management and key clinical development, scientific and
technical personnel. Competition for these types of personnel is intense. The loss of the services of any member of our senior management, clinical development, scientific or technical staff may significantly delay or prevent the achievement of drug
development and other business objectives and could have a material adverse effect on our business, operating results and financial condition. We also rely on consultants and advisors to assist us in formulating our strategy. All of our consultants
and advisors are either self-employed or employed by other organizations, and they may have conflicts of interest or other commitments, such as consulting or advisory contracts with other organizations, that may affect their ability to contribute to
us. We intend to expand and develop new drug candidates, and will need additional funding to grow our business. We will need to hire additional employees in order to continue our research and clinical trials and to market our drugs when approved.
This strategy will require us to recruit additional executive management and clinical development, regulatory, scientific, technical and sales and marketing personnel. There is currently intense competition for skilled executives and employees with
relevant clinical development, scientific, technical and sales and marketing expertise, and this competition is likely to continue. The inability to attract and retain sufficient clinical development, scientific, technical and managerial personnel,
due to intense competition and our limited resources, would limit or delay our product development efforts, which would adversely affect the development of our drug candidates and commercialization of our potential drugs and growth of our business.
We may not be able to continue or fully exploit our partnerships with outside scientific and clinical advisors, which could impair the progress of
our clinical trials and our research and development efforts.
We work with scientific and clinical advisors at academic and other
institutions who are experts in the field of CNS disorders. They advise us with respect to our clinical trials. These advisors are not our employees and may have other commitments that would limit their future availability to us. If a conflict of
interest arises between their work for us and their work for another entity, we may lose their services, which may impair our reputation in the industry and delay the development or commercialization of our product candidates.
Our product candidates have never been manufactured on a commercial scale, and there are risks associated with scaling up manufacturing to commercial
scale. In particular, we will need to develop a larger scale manufacturing process that is more efficient and cost-effective to commercialize
lumateperone
and other product candidates, which may not be successful, and we plan
to transfer our production to one or more other third-party manufacturers in addition to our current third-party manufacturer, potentially delaying regulatory approval and commercialization.
Our product candidates have never been manufactured on a commercial scale, and there are risks associated with scaling up manufacturing to
commercial scale including, among others, cost overruns, potential problems with process
scale-up,
process reproducibility, stability issues, lot consistency and timely availability of raw materials. On
January 4, 2017, we entered into a supply agreement with Siegfried. Under the Siegfried Agreement, Siegfried has agreed to manufacture and supply the API for lumateperone in commercial quantities. There is no assurance that Siegfried or other
manufacturers will be successful in establishing a larger-scale commercial manufacturing process for lumateperone which achieves our objectives for manufacturing capacity and cost of goods. Even if we could otherwise obtain regulatory approval for
any product candidate, there is no assurance that our manufacturers will be able to manufacture the approved product to specifications acceptable to the FDA or other regulatory authorities, to produce it in sufficient quantities to meet the
requirements for the potential launch of the product or to meet potential future demand. If our manufacturers are unable to produce sufficient quantities of the approved product for commercialization, our commercialization efforts would be impaired,
which would have an adverse effect on our business, financial condition, results of operations and growth prospects.
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We rely on third-party manufacturers to manufacture and supply our product candidates for us. If one of our
suppliers or manufacturers fails to perform adequately or fulfill our needs, we may be required to incur significant costs and devote significant efforts to find new suppliers or manufacturers. We may also face significant delays in our clinical
trials, regulatory approvals and product introductions and commercialization.
We have no manufacturing facilities and have limited
experience in the manufacturing of drugs or in designing drug-manufacturing processes. We have contracted with third-party manufacturers to produce, in collaboration with us, our product candidates, including lumateperone, for clinical trials. For
example, on January 4, 2017, we entered into a supply agreement with Siegfried under which Siegfried has agreed to manufacture and supply the API for lumateperone in commercial quantities. Each month, we will provide Siegfried with a rolling
forecast of our anticipated requirements for supply of the API, with the first 12 months of each forecast being binding on us. Under the Siegfried Agreement, we have the right to and may purchase the API for lumateperone from other suppliers,
including if Siegfried cannot fulfill our requirements. In addition, we expect to have an additional third party source of supply of the API for lumateperone in commercial quantities. While we believe that there are alternative sources available to
manufacture our product candidates, in the event that we seek such alternative sources, we may not be able to enter into replacement arrangements without delays or additional expenditures. We cannot estimate these delays or costs with certainty but,
if they were to occur, they could cause a delay in our development and commercialization efforts. If our existing or planned third party manufacturing arrangements are terminated or if the sources of supply from such arrangements are inadequate and
we must seek supply agreements from alternative sources, we may be unable to enter into such agreements or do so on commercially reasonable terms, which could delay a product launch or subject our commercialization efforts to significant supply
risk.
Manufacturers of our product candidates are obliged to operate in accordance with
FDA-mandated
current good manufacturing practices, or cGMPs. The manufacture of pharmaceutical products in compliance with the cGMPs requires significant expertise and capital investment, including the
development of advanced manufacturing techniques and process controls. Manufacturers of pharmaceutical products often encounter difficulties in production, including difficulties with production costs and yields, quality control, including stability
of the product candidate and quality assurance testing, shortages of qualified personnel, as well as compliance with strictly enforced cGMP requirements, other federal and state regulatory requirements and foreign regulations. If our manufacturers
were to encounter any of these difficulties or otherwise fail to comply with their obligations to us or under applicable regulations, our ability to provide product candidates in our clinical trials would be jeopardized. Any delay or interruption in
the supply of clinical trial materials could delay the completion of our clinical trials, increase the costs associated with maintaining our clinical trial programs and, depending upon the period of delay, require us to commence new clinical trials
at significant additional expense or terminate the clinical trials completely.
In addition, the facilities used by our contract
manufacturers or other third party manufacturers to manufacture our product candidates must be approved by the FDA pursuant to inspections that will be conducted after we request regulatory approval from the FDA. These requirements include, among
other things, quality control, quality assurance and the maintenance of records and documentation. Manufacturers of our product candidates may be unable to comply with these cGMP requirements and with other FDA, state and foreign regulatory
requirements. The FDA or similar foreign regulatory agencies may also implement new standards at any time, or change their interpretation and enforcement of existing standards for manufacture, packaging or testing of products. We have little control
over our manufacturers compliance with these regulations and standards. A failure of any of our current or future contract manufacturers to establish and follow cGMPs and to document their adherence to such practices may lead to significant
delays in clinical trials or in obtaining regulatory approval of product candidates or the ultimate launch of products based on our product candidates into the market. Failure by our current or future third-party manufacturers or us to comply with
applicable regulations could result in sanctions being imposed on us, including fines, injunctions, civil penalties, failure of the government to grant
pre-market
approval of drugs, delays, suspension or
withdrawal of approvals, seizures or recalls of products, operating restrictions, and criminal prosecutions. If the safety of any product supplied is
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compromised due to our manufacturers failure to adhere to applicable laws or for other reasons, we may not be able to obtain regulatory approval for or successfully commercialize our
products and we may be held liable for any injuries sustained as a result. Any of these factors could cause a delay of clinical studies, regulatory submissions, approvals or commercialization of our product candidates, entail higher costs or impair
our reputation.
We will need to continue to manage our organization and we may encounter difficulties with our staffing and any future transitions,
which could adversely affect our results of operations.
We will need to manage our operations and facilities effectively in order
to advance our drug development programs (including lumateperone and
ITI-214),
facilitate any future collaborations, and pursue other development activities. It is possible that our infrastructure may be
inadequate to support our future efforts and growth. In particular, we may have to develop internal sales, marketing, and distribution capabilities if we decide to market any drug that we may successfully develop. We may not successfully manage our
operations and, accordingly, may not achieve our research, development, and commercialization goals.
Our ability to generate product revenues will
be diminished if our products do not receive coverage from payors or sell for inadequate prices, or if patients are unable to obtain adequate levels of reimbursement.
Patients who are prescribed medicine for the treatment of their conditions generally rely on third-party payors to reimburse all or part of the
costs associated with their prescription drugs. Adequate coverage and reimbursement from governmental health care programs, such as Medicare and Medicaid, and commercial payors is critical to new product acceptance. Coverage decisions may depend
upon clinical and economic standards that disfavor new drug products when more established or lower cost therapeutic alternatives are already available or subsequently become available. Even if we obtain coverage for any approved products, the
resulting reimbursement payment rates might not be adequate or may require
co-payments
that patients find unacceptably high. Patients are unlikely to use any products we may market unless coverage is provided
and reimbursement is adequate to cover a significant portion of the cost of those products.
In addition, the market for any products for
which we may receive regulatory approval will depend significantly on access to third-party payors drug formularies, or lists of medications for which third-party payors provide coverage and reimbursement. The industry competition to be
included in such formularies often leads to downward pricing pressures on pharmaceutical companies. Also, third-party payors may refuse to include a particular branded drug in their formularies or otherwise restrict patient access to a branded drug
when a less costly generic equivalent or other alternative is available.
Third-party payors, whether foreign or domestic, governmental or
commercial, are developing increasingly sophisticated methods of controlling health care costs. In addition, in the United States, no uniform policy of coverage and reimbursement for drug products exists among third-party payors. Therefore, coverage
and reimbursement for drug products can differ significantly from payor to payor. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the
use of our product candidates to each payor separately, with no assurance that coverage will be obtained. If we are unable to obtain coverage of, and adequate payment levels for, our products from third-party payors, physicians may limit how much or
under what circumstances they will prescribe or administer them and patients may decline to purchase them. This in turn could affect our ability to successfully commercialize any approved products and thereby adversely impact our profitability,
results of operations, financial condition, and future success.
In the future, if we have products that are approved, health care legislation may
make it more difficult to receive revenues from those products.
In both the United States and certain foreign jurisdictions, there
have been a number of legislative and regulatory proposals in recent years to change the health care system in ways that could impact our ability to sell
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our products profitably. In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, or collectively, ACA, became
law in the United States. The ACA substantially changed the way health care is financed by both governmental and private insurers and significantly affects the health care industry. Among the provisions of ACA of importance to our potential
product candidates are the following:
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imposition of an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents, apportioned among these entities according to their market share in certain
government health care programs;
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an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program, retroactive to January 1, 2010, to 23% and 13% of the average manufacturer price for most branded and
generic drugs, respectively;
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expansion of health care fraud and abuse laws, including the False Claims Act and the Anti-Kickback Statute, new government investigative powers, and enhanced penalties for noncompliance;
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a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50%
point-of-sale
discounts off negotiated
prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturers outpatient drugs to be covered under Medicare Part D;
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extension of manufacturers Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;
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expansion of eligibility criteria for Medicaid programs;
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expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program;
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requirements to report certain financial arrangements with physicians and teaching hospitals, including reporting any payments or transfers of value made or distributed to prescribers, teaching hospitals and
other health care providers and reporting any ownership and investment interests held by physicians and their immediate family members and applicable group purchasing organizations during the preceding calendar year;
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a requirement to annually report drug samples that manufacturers and distributors provide to physicians; and
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a Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.
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Many of the details regarding the implementation of the ACA are yet to be determined and, at this time, it remains unclear what the full
effect that the ACA will have on our business. 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.
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. We expect that healthcare reform measures that may be adopted in the future may result in more rigorous coverage criteria and lower reimbursement, and in additional downward pressure on the price that may be charged for any of
our product candidates, if approved.
In addition, in many foreign countries, particularly the countries of the European Union, the
pricing of prescription drugs is subject to government control. In some
non-U.S.
jurisdictions, the proposed pricing for a drug must be approved before it may be lawfully marketed. The requirements governing
drug pricing vary widely
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from country to country. For example, the European Union provides options for its member states to restrict the range of medicinal products for which their national health insurance systems
provide reimbursement and to control the prices of medicinal products for human use. A member state may approve a specific price for the medicinal product or it may instead adopt a system of direct or indirect controls on the profitability of the
company placing the medicinal product on the market. We may face competition from lower-priced products in foreign countries that have placed price controls on pharmaceutical products. In addition, there may be importation of foreign products that
compete with any products we may market, which could negatively impact our profitability.
We expect that the ACA, as well as other health
care 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 may 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 health care reforms may prevent us from being able to generate revenue, attain profitability, or
commercialize any products for which we receive regulatory approval.
If we are unable to establish sales and marketing capabilities or enter into
agreements with third parties to sell and market any products we may develop, we may not be able to generate product revenue.
We
do not currently have an organization for the sales, marketing or distribution of pharmaceutical products. In order to market any products that may be approved by the FDA, we must build our sales, marketing, managerial, and related capabilities or
make arrangements with third parties to perform these critical commercial services. There are risks involved with both establishing our own sales, marketing, managerial and related capabilities and entering into arrangements with third parties to
perform these services. For example, recruiting and training a sales force is expensive and time-consuming and could delay any product launch. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing
capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and
marketing personnel.
We also may not be successful entering into arrangements with third parties to sell and market our product
candidates or may be unable to do so on terms that are favorable to us. We likely will have little 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,
which could damage our reputation. If we do not establish adequate sales, marketing, and distribution capabilities, whether independently or in collaboration with third parties, we will not be successful in commercializing our product candidates,
may not be able to generate product revenue and may not become profitable.
There are possible limitations on our use of net operating losses.
As of December 31, 2016, we had net operating loss carryforwards, or NOLs, of approximately $121.0 million to reduce any
future federal and state taxable income through 2035. Since we had NOLs as of December 31, 2016, 2015 and 2014, no excess tax benefits for the tax deductions related to share-based awards were recognized in the statements of operations. The
NOLs of approximately $121.0 million as of December 31, 2016 will begin to expire in the year 2033 if unused. The use of our NOLs may be restricted due to changes in our ownership, including as a result of our public offerings in March
2015 and September 2015.
Under Section 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, substantial
changes in our ownership may limit the amount of NOLs and tax credit carryforwards that could be utilized annually in the future to offset taxable income.
For the year ended December 31, 2015 we performed a Section 382 ownership analysis and determined that an ownership change occurred
(within the meaning of Section 382 of the Code) in 2015. Based on the analysis
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performed, however, we do not believe that the Section 382 annual limitation will impact our ability to utilize the tax attributes that existed as of the date of the ownership change in a
material manner. If we experience an ownership change in the future, the tax benefits related to the NOLs and tax credit carryforwards may be further limited or lost.
In September 2016, we licensed certain intellectual property rights to our wholly-owned subsidiary, ITI Limited, which was formed in the third
quarter of 2016. The costs to develop, test, manufacture and perform other activities related to the
ITI-007
program will be the responsibility of ITI Limited and will be incurred outside of the United States.
Therefore, the majority of expected losses that we incur during the next several years will not result in additional NOLs in the U.S. to be carried forward and used against future net income.
Security breaches, loss of data and other disruptions could compromise sensitive information related to our business, prevent us from accessing critical
information or expose us to liability, which could adversely affect our business and our reputation.
In the ordinary course of our
business, we, our clinical research organizations and other third parties on which we rely collect and store sensitive data, including legally protected patient health information, personally identifiable information about our employees,
intellectual property, and proprietary business information. We manage and maintain our applications and data utilizing
on-site
systems. These applications and data encompass a wide variety of business
critical information including research and development information and business and financial information.
The secure processing,
storage, maintenance and transmission of this critical information is vital to our operations and business strategy, and we devote significant resources to protecting such information. Although we take measures to protect sensitive information from
unauthorized access or disclosure, our information technology and infrastructure may be vulnerable to attacks by hackers, viruses, breaches, interruptions due to employee error, malfeasance or other disruptions, lapses in compliance with privacy and
security mandates, or damage from natural disasters, terrorism, war and telecommunication and electrical failures. Any such event could compromise our networks and the information stored there could be accessed by unauthorized parties, publicly
disclosed, lost or stolen. We have measures in place that are designed to detect and respond to such security incidents and breaches of privacy and security mandates. Any such access, disclosure or other loss of information could result in legal
claims or proceedings, liability under laws that protect the privacy of personal information, such as the Health Insurance Portability and Accountability Act of 1996, government enforcement actions and regulatory penalties. Unauthorized access, loss
or dissemination could also disrupt our operations, including our ability to conduct research and development activities, process and prepare company financial information, manage various general and administrative aspects of our business and damage
our reputation, any of which could adversely affect our business. For example, the loss of clinical trial data from completed or ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase
our costs to recover or reproduce the data. In addition, there can be no assurance that we will promptly detect any such disruption or security breach, if at all. To the extent that any disruption or security breach were to result in a loss of or
damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development of our product candidates could be delayed.
Risks Related to Our Intellectual Property
Our ability to compete may be undermined if we do not adequately protect our proprietary rights.
Our commercial success depends on obtaining and maintaining proprietary rights to our product candidates and technologies and their uses, as
well as successfully defending these rights against third-party challenges. We will only be able to protect our product candidates, proprietary technologies, and their uses from unauthorized use by third parties to the extent that valid and
enforceable patents, or effectively protected trade secrets, cover
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them. We have patent rights under issued patents in many cases covering our lumateperone and
ITI-002
development programs. Nonetheless, the issued patents
and patent applications covering our primary technology programs remain subject to uncertainty and continuous monitoring and action by us due to a number of factors, including:
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we may not have been the first to make the inventions covered by our pending patent applications or issued patents;
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we may not have been the first to file patent applications for our product candidates or the technologies we rely upon;
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others may independently develop similar or alternative technologies or duplicate any of our technologies;
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our disclosures in patent applications may not be sufficient to meet the statutory requirements for patentability;
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any or all of our pending patent applications may not result in issued patents;
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we may not seek or obtain patent protection in all countries that will eventually provide a significant business opportunity;
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any patents issued to us or our collaborators may not provide a basis for commercially viable products, may not provide us with any competitive advantages or may be challenged by third parties;
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our proprietary technologies may not be patentable;
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others may design around our patent claims to produce competitive products which fall outside of the scope of our patents;
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others may identify prior art which could invalidate our patents; and
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changes to patent laws may limit the exclusivity rights of patent holders.
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Even if we have or
obtain patents covering our product candidates or technologies, we may still be barred from making, using and selling our product candidates or technologies because of the patent rights of others. Others have or may have filed, and in the future are
likely to file, patent applications covering compounds, assays, genes, gene products and therapeutic products that are similar or identical to ours. There are many issued U.S. and foreign patents relating to genes, nucleic acids, polypeptides,
chemical compounds or therapeutic products, and some of these may encompass reagents utilized in the identification of candidate drug compounds or compounds that we desire to commercialize. Numerous U.S. and foreign issued patents and pending patent
applications owned by others exist in the area of central nervous system disorders and the other fields in which we are developing products. These could materially affect our ability to develop our product candidates or sell our products. Because
patent applications can take many years to issue, there may be currently pending applications, unknown to us, that may later result in issued patents that our product candidates or technologies may infringe. These patent applications may have
priority over patent applications filed by us.
We regularly conduct searches to identify patents or patent applications that may prevent
us from obtaining patent protection for our proprietary compounds or that could limit the rights we have claimed in our patents and patent applications. Disputes may arise regarding the ownership or inventorship of our inventions. It is difficult to
determine how such disputes would be resolved. Others may challenge the validity of our patents. If our patents are found to be invalid, we will lose the ability to exclude others from making, using or selling the inventions claimed in our patents.
Some of our academic institutional licensors, research collaborators and scientific advisors have rights to publish data and information
to which we have rights. If we cannot maintain the confidentiality of our technology and other confidential information in connection with our collaborations, then our ability to receive patent
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protection or protect our proprietary information will be impaired. Additionally, any employee whose employment with us terminates, whether voluntarily by the employee or by us in connection with
restructurings or otherwise, may seek future employment with our competitors. Although each of our employees is required to sign a confidentiality agreement with us at the time of hire, we cannot guarantee that the confidential nature of our
proprietary information will be maintained in the course of such future employment. In addition, technology that we may
license-in
may become important to some aspects of our business. We generally will not
control the patent prosecution, maintenance or enforcement of
in-licensed
technology.
Confidentiality
agreements with employees and others may not adequately prevent disclosure of our trade secrets and other proprietary information and may not adequately protect our intellectual property, which could limit our ability to compete.
Because we operate in the highly technical field of drug discovery and development of small molecule drugs, we rely in part on trade secret
protection in order to protect our proprietary technology and processes. However, trade secrets are difficult to protect. We enter into confidentiality and intellectual property assignment agreements with our corporate partners, employees,
consultants, outside scientific collaborators, sponsored researchers, and other advisors. These agreements generally require that the other party keep confidential and not disclose to third parties any confidential information developed by the party
or made known to the party by us during the course of the partys relationship with us. These agreements also generally provide that inventions conceived by the party in the course of rendering services to us will be our exclusive property.
However, these agreements may not be honored and may not effectively assign intellectual property rights to us. 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. The failure to obtain or maintain trade secret protection could adversely affect our competitive position.
A dispute concerning the infringement or misappropriation of our proprietary rights or the proprietary rights of others could be time consuming and
costly, and an unfavorable outcome could harm our business.
There is significant litigation in our industry regarding patent and
other intellectual property rights. While we are not currently subject to any pending intellectual property litigation, and are not aware of any such threatened litigation, we may be exposed to future litigation by third parties based on claims that
our product candidates, technologies or activities infringe the intellectual property rights of others. If our drug development activities are found to infringe any such patents, we may have to pay significant damages or seek licenses to such
patents. We may need to resort to litigation to enforce a patent issued to us, protect our trade secrets or determine the scope and validity of third-party proprietary rights. From time to time, we may hire scientific personnel formerly employed by
other companies involved in one or more areas similar to the activities conducted by us. Either we or these individuals may be subject to allegations of trade secret misappropriation or other similar claims as a result of their prior affiliations.
If we become involved in litigation, it could consume a substantial portion of our managerial and financial resources, regardless of whether we win or lose. We also may not be able to afford the costs of litigation.
The patent applications of pharmaceutical and biotechnology companies involve highly complex legal and factual questions, which, if determined adversely
to us, could negatively impact our patent position.
The patent positions of pharmaceutical and biotechnology companies can be
highly uncertain and involve complex legal and factual questions. The U.S. Patent and Trademark Offices, or USPTOs, standards are uncertain and could change in the future. Consequently, the issuance and scope of patents cannot be
predicted with certainty. Patents, if issued, may be challenged, invalidated or circumvented. U.S. patents and patent applications may also be subject to interference proceedings, and U.S. patents may be subject to reexamination proceedings in the
USPTO (and foreign patents may be subject to opposition or comparable proceedings in the corresponding foreign patent office), which proceedings could result in either loss of the patent or denial of the patent application or loss or reduction in
the scope of one or more of the claims of the patent or patent
48
application. Similarly, opposition or invalidity proceedings could result in loss of rights or reduction in the scope of one or more claims of a patent in foreign jurisdictions. In addition, such
interference, reexamination and opposition proceedings may be costly. Accordingly, rights under any issued patents may not provide us with sufficient protection against competitive products or processes.
In addition, changes in or different interpretations of patent laws in the United States and foreign countries may permit others to use our
discoveries or to develop and commercialize our technology and products without providing any compensation to us or may limit the number of patents or claims we can obtain. In particular, there have been proposals to shorten the exclusivity periods
available under U.S. patent law that, if adopted, could substantially harm our business. The product candidates that we are developing are protected by intellectual property rights, including patents and patent applications. If any of our product
candidates becomes a marketable product, we will rely on our exclusivity under patents to sell the compound and recoup our investments in the research and development of the compound. If the exclusivity period for patents is shortened, then our
ability to generate revenues without competition will be reduced and our business could be materially adversely impacted. The laws of some countries do not protect intellectual property rights to the same extent as U.S. laws, and those countries may
lack adequate rules and procedures for defending our intellectual property rights. For example, some countries, including many in Europe, do not grant patent claims directed to methods of treating humans and, in these countries, patent protection
may not be available at all to protect our product candidates. In addition, U.S. patent laws may change, which could prevent or limit us from filing patent applications or patent claims to protect our products and/or technologies or limit the
exclusivity periods that are available to patent holders. For example, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was recently signed into law and includes a number of significant changes to U.S. patent law. These include changes
to transition from a
first-to-invent
system to a
first-to-file
system and to the way issued patents are challenged. These changes may favor larger and more established companies that have more resources to devote to patent application filing and prosecution. The USPTO has been in the process of implementing
regulations and procedures to administer the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act may affect our ability to obtain, enforce or defend our patents. Accordingly, it is not clear what,
if any, impact the Leahy-Smith Act will ultimately have on the cost of prosecuting our patent applications, our ability to obtain patents based on our discoveries and our ability to enforce or defend our issued patents.
If we fail to obtain and maintain patent protection and trade secret protection of our product candidates, proprietary technologies and their
uses, we could lose our competitive advantage and competition we face would increase, reducing our potential revenues and adversely affecting our ability to attain or maintain profitability.
Risks Relating to the Transfer of Certain Intellectual Property Rights to our Foreign Subsidiary
We may need to utilize all of our available net operating losses, and we may be subject to additional income taxes or an alternative minimum tax, in
connection with our transfer of certain intellectual property rights to our foreign subsidiary.
In September 2016, the Company
licensed certain intellectual property rights to our wholly-owned subsidiary, ITI Limited for $125 million and other consideration. The fair value of the intellectual property rights were determined by an independent third party. The proceeds
from this license represent a current year gain for U.S. tax purposes and will be offset partially by current year losses. However, the Internal Revenue Service, or the IRS, could challenge the valuation of the intellectual property rights and
assess a greater valuation, which would require us to utilize a portion, or all, of our available NOLs in the future. If an IRS valuation exceeds our available NOLs, we could incur additional income taxes in the future. Our ability to use our NOLs
is subject to the limitations of IRS Section 382, as well as expiration of federal and state net operating loss carryforwards. Additionally, in the event our NOLs were sufficient to offset the regular income taxes associated with an IRS
revaluation of the intellectual property transferred to our Bermuda subsidiary, we may be subject to alternative minimum tax.
49
Risks Related to Our Industry
We will be subject to stringent regulation in connection with the marketing of any products derived from our product candidates, which could delay the
development and commercialization of our products.
The pharmaceutical industry is subject to stringent regulation by the FDA and
other regulatory agencies in the United States and by comparable authorities in other countries. Neither we nor our collaborators can market a pharmaceutical product in the United States until it has completed rigorous preclinical testing and
clinical trials and an extensive regulatory clearance process implemented by the FDA. Satisfaction of regulatory requirements typically takes many years, depends upon the type, complexity and novelty of the product, and requires substantial
resources. Even if regulatory approval is obtained, it may impose significant restrictions on the indicated uses, conditions for use, labeling, advertising, promotion, and/or marketing of such products, and requirements for post-approval studies,
including additional research and development and clinical trials. These limitations may limit the size of the market for the product or result in the incurrence of additional costs. Any delay or failure in obtaining required approvals could have a
material adverse effect on our ability to generate revenues and continue our business.
Outside the United States, the ability to market a
product is contingent upon receiving approval from the appropriate regulatory authorities. The requirements governing the conduct of clinical trials, marketing authorization, pricing, and reimbursement vary widely from country to country. Only after
the appropriate regulatory authority is satisfied that adequate evidence of safety, quality, and efficacy has been presented will it grant a marketing authorization. Approval by the FDA does not automatically lead to the approval by regulatory
authorities outside the United States and, similarly, approval by regulatory authorities outside the United States will not automatically lead to FDA approval.
Many of our competitors have greater resources and capital than us, putting us at a competitive disadvantage. If our competitors develop and market
products that are more effective than our product candidates, they may reduce or eliminate our commercial opportunity.
Competition
in the pharmaceutical and biotechnology industries is intense and increasing. We face competition from pharmaceutical and biotechnology companies, as well as numerous academic and research institutions and governmental agencies, both in the United
States and abroad. Some of these competitors have products or are pursuing the development of drugs that target the same diseases and conditions that are the focus of our drug development programs.
For example, our potential products for the treatment of schizophrenia would compete with, among other branded products, Abilify
®
, marketed jointly by Bristol-Myers Squibb and Otsuka Pharmaceutical, Fanapt
®
, marketed by Novartis Pharmaceuticals, Seroquel XR
®
, marketed by AstraZeneca, Invega
®
, marketed by Janssen, VRAYLAR
®
, marketed by
Allergan, Rexulti
®
marketed by Otsuka Pharmaceutical and Latuda
®
, marketed by Sunovion. In addition, our product candidates, if
approved, will compete with, among other generic antipsychotic drugs, haloperidol, risperidone, quetiapine, olanzapine and clozapine.
Many of our competitors and their collaborators have significantly greater experience than we do in the following:
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identifying and validating targets;
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screening compounds against targets;
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preclinical studies and clinical trials of potential pharmaceutical products; and
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obtaining FDA and other regulatory approvals.
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In addition, many of our competitors and their
collaborators have substantially greater capital and research and development resources, manufacturing, sales and marketing capabilities, and production facilities. Smaller
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companies also may prove to be significant competitors, particularly through proprietary research discoveries and collaboration arrangements with large pharmaceutical and established
biotechnology companies. Many of our competitors have products that have been approved or are in advanced development and may develop superior technologies or methods to identify and validate drug targets and to discover novel small molecule drugs.
Our competitors, either alone or with their collaborators, may succeed in developing drugs that are more effective, safer, more affordable, or more easily administered than ours and may achieve patent protection or commercialize drugs sooner than
us. Our competitors may also develop alternative therapies that could further limit the market for any drugs that we may develop. Our failure to compete effectively could have a material adverse effect on our business.
Any claims relating to improper handling, storage, or disposal of biological, hazardous, and radioactive materials used in our business could be costly
and delay our research and development efforts.
Our research and development activities involve the controlled use of potentially
harmful hazardous materials, including volatile solvents, biological materials such as blood from patients that have the potential to transmit disease, chemicals that cause cancer, and various radioactive compounds. Our operations also produce
hazardous waste products. We face the risk of contamination or injury from the use, storage, handling or disposal of these materials. We are subject to federal, state and local laws and regulations governing the use, storage, handling, and disposal
of these materials and specified waste products. The cost of compliance with these laws and regulations could be significant, and current or future environmental regulations may impair our research, development, or production efforts. If one of our
employees were accidentally injured from the use, storage, handling, or disposal of these materials, the medical costs related to his or her treatment would be covered by our workers compensation insurance policy. However, we do not carry
specific biological or hazardous waste insurance coverage and our general liability insurance policy specifically excludes coverage for damages and fines arising from biological or hazardous waste exposure or contamination. Accordingly, in the event
of contamination or injury, we could be subject to criminal sanctions or fines or be held liable for damages, our operating licenses could be revoked, and we could be required to suspend or modify our operations and our research and development
efforts.
Consumers may sue us for product liability, which could result in substantial liabilities that exceed our available resources and damage
our reputation.
Researching, developing, and commercializing drug products entail significant product liability risks. Liability
claims may arise from our and our collaborators use of products in clinical trials and the commercial sale of those products. Consumers may make these claims directly and our collaborators or others selling these products may seek contribution
from us if they receive claims from consumers. We have obtained limited product liability insurance coverage for our clinical trials. Our product liability insurance coverage for clinical trials is currently limited to an aggregate of
$30 million. As such, our insurance coverage may not reimburse us or may not be sufficient to reimburse us for any expenses or losses we may suffer. Although we currently have product liability insurance that covers our clinical trials, we will
need to increase and expand this coverage if our product candidates are approved for commercial sale. This insurance may be prohibitively expensive or may not fully cover our potential liabilities. Inability to obtain sufficient insurance coverage
at an acceptable cost or otherwise to protect against potential product liability claims could prevent or inhibit the commercialization of products that we or our collaborators develop. Product liability claims could have a material adverse effect
on our business and results of operations. Our liability could exceed our total assets if we do not prevail in a lawsuit from any injury caused by our drug products.
Risks Related to Owning Our Common Stock
Numerous factors could result in substantial volatility in the trading price of our stock.
During the year ended December 31, 2016, the price per share of our common stock on the NASDAQ Global Select Market has ranged from a high
of $55.35 to a low of $10.80. We have several stockholders,
51
including affiliated stockholders, who hold substantial blocks of our stock. Sales of large numbers of shares by any of our large stockholders could adversely affect our trading price. If
stockholders holding shares of our common stock sell, indicate an intention to sell, or if it is perceived that they will sell, substantial amounts of their common stock in the public market, the trading price of our common stock could decline.
In addition, the trading price of our common stock may be highly volatile and could be subject to wide fluctuations in response to various
factors, some of which are beyond our control. These factors include:
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timing and announcement of regulatory developments and approvals or preliminary, interim or final results of clinical trials;
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actual or anticipated quarterly variation in our results of operations or the results of our competitors;
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announcements of medical innovations or new products by our competitors;
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issuance of new or changed securities analysts reports or recommendations for our stock;
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developments or disputes concerning our intellectual property or other proprietary rights;
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commencement of, or our involvement in, litigation;
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market conditions in the biopharmaceutical industry;
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any future sales of our common stock or other securities in connection with raising additional capital or otherwise;
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any major change to the composition of our board of directors or management; and
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general economic conditions and slow or negative growth of our markets.
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The stock market in
general, and market prices for the securities of biotechnology companies like ours in particular, have from time to time experienced volatility that often has been unrelated to the operating performance of the underlying companies. These broad
market and industry fluctuations may adversely affect the market price of our common stock, regardless of our operating performance. In several recent situations where the market price of a stock has been volatile, holders of that stock have
instituted securities class action litigation against the company that issued the stock. If any of our stockholders were to bring a lawsuit against us, the defense and disposition of the lawsuit could be costly and divert the time and attention of
our management and harm our operating results.
Raising additional capital may cause dilution to existing stockholders, restrict our operations or
require us to relinquish rights.
We will need to satisfy our future cash needs through public or private sales of our equity
securities, sales of debt securities, the incurrence of debt from commercial lenders, strategic collaborations, licensing a portion or all of our product candidates and technology and, to a lesser extent, grant funding. We filed a universal shelf
registration statement on Form
S-3
with the SEC, which was declared effective on September 14, 2016, on which we registered for sale up to $350 million of any combination of our common stock,
preferred stock, debt securities, warrants, rights, purchase contracts and/or units from time to time and at prices and on terms that we may determine. To the extent that we raise additional capital through the sale of equity or convertible debt
securities, the ownership interest of our existing stockholders will be diluted, and the terms may include liquidation or other preferences that adversely affect the rights of our stockholders. Debt financing, if available, may involve agreements
that include covenants limiting or restricting our ability to take specific actions, such as incurring debt, making capital expenditures or declaring dividends. If we raise additional funds through collaboration and licensing arrangements with third
parties, we may have to relinquish valuable rights to our technologies or grant licenses on terms that are not favorable to us.
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The price of our common stock could be subject to volatility related or unrelated to our operations.
The market price of our common stock could fluctuate substantially due to a variety of factors, including market perception of our
ability to meet our growth projections and expectations, quarterly operating results of other companies in the same industry, trading volume in our common stock, changes in general conditions in the economy and the financial markets or other
developments affecting our business and the business of others in our industry. In addition, the stock market itself is subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities
issued by many companies for reasons related and unrelated to their operating performance and could have the same effect on our common stock.
We
will incur increased costs and demands upon management as a result of complying with the laws and regulations affecting public companies, which could harm our operating results.
As a public company, we have incurred and will incur significant legal, accounting and other expenses, including costs associated with public
company reporting requirements. We also have incurred and will incur costs associated with current corporate governance requirements, including requirements under Section 404 and other provisions of the Sarbanes-Oxley Act, as well as rules
implemented by the SEC or the NASDAQ Global Select Market or any other stock exchange or inter-dealer quotations system on which our common stock may be listed in the future. The expenses incurred by public companies for reporting and corporate
governance purposes have increased dramatically in recent years.
If we fail to maintain proper and effective internal controls, our ability to
produce accurate and timely financial statements could be impaired, which could harm our operating results, our ability to operate our business and investors views of us.
We are required to comply with Section 404 of the Sarbanes-Oxley Act. Section 404 of the Sarbanes-Oxley Act requires public companies
to maintain effective internal control over financial reporting. In particular, we must perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our
internal control over financial reporting. In addition, we are required to have our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting. Ensuring that we have adequate internal
financial and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort that will need to be evaluated frequently. We currently do not have an internal
audit group, and we may need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge. If we fail to maintain the effectiveness of our internal controls or fail to comply in a
timely manner with the requirements of the Sarbanes-Oxley Act, or if we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, this could
have a material adverse effect on our business. We could lose investor confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on the price of our common stock and we could be subject to sanctions or
investigations by NASDAQ, the SEC or other regulatory authorities, which would require additional financial and management resources. In addition, if our efforts to comply with new or changed laws, regulations, and standards differ from the
activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us and our business may be harmed.
Our ability to successfully implement our business plan and comply with Section 404 requires us to be able to prepare timely and accurate
financial statements. We expect that we will need to continue to improve existing, and implement new operational and financial systems, procedures and controls to manage our business effectively. Any delay in the implementation of, or disruption in
the transition to, new or enhanced systems, procedures or controls, may cause our operations to suffer and we may be unable to conclude that our internal control over financial reporting is effective and to obtain an unqualified report on internal
controls from our independent registered public accounting firm as required under Section 404 of the Sarbanes-Oxley Act. This, in turn, could have an adverse impact on trading prices for our common stock, and could adversely affect our ability
to access the capital markets.
53
If securities or industry analysts do not publish, or cease publishing, research or reports about us, our
business or our market, or if they change their recommendations regarding our stock adversely, our stock price and trading volume could decline.
The trading market for our common stock is and will be influenced by whether industry or securities analysts publish or continue to publish
research and reports about us, our business, our market or our competitors and, to the extent analysts do publish such reports, what they publish in those reports. We may not continue to have or to obtain analyst coverage in the future. Any analysts
that do cover us may make adverse recommendations regarding our stock, adversely change their recommendations from time to time, and/or provide more favorable relative recommendations about our competitors. If any analyst who covers us or may cover
us in the future were to cease coverage of us or fail to regularly publish reports on us, or if analysts fail to cover us or publish reports about us at all, we could lose, or never gain, visibility in the financial markets, which in turn could
cause our stock price or trading volume to decline.
Provisions of the Delaware law, our restated certificate of incorporation and our restated
bylaws may delay or prevent a takeover which may not be in the best interests of our stockholders.
The provisions of Delaware law
and our restated certificate of incorporation and restated bylaws could discourage or make it more difficult to accomplish a proxy contest or other change in our management or the acquisition of control by a holder of a substantial amount of our
voting stock. It is possible that these provisions could make it more difficult to accomplish, or could deter, transactions that stockholders may otherwise consider to be in their best interests or in our best interests. These provisions are
intended to enhance the likelihood of continuity and stability in the composition of our board of directors and in the policies formulated by the board of directors and to discourage certain types of transactions that may involve an actual or
threatened change of our control. These provisions are designed to reduce our vulnerability to an unsolicited acquisition proposal and to discourage certain tactics that may be used in proxy fights. Such provisions also may have the effect of
preventing changes in our management.
We do not anticipate paying cash dividends in the foreseeable future.
We currently intend to retain any future earnings for funding growth. We do not anticipate paying any dividends in the foreseeable future. As a
result, you should not rely on an investment in our securities if you require dividend income. Capital appreciation, if any, of our shares may be your sole source of gain for the foreseeable future. Moreover, you may not be able to
re-sell
your shares at or above the price you paid for them.
54
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This report includes forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act that relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ
materially from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Words such as, but not limited to, believe, expect, anticipate,
estimate, intend, may, plan, potential, predict, project, targets, likely, will, would, could,
should, continue, and similar expressions or phrases, or the negative of those expressions or phrases, are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying
words. Although we believe that we have a reasonable basis for each forward-looking statement contained in this report, we caution you that these statements are based on our projections of the future that are subject to known and unknown risks and
uncertainties and other factors that may cause our actual results, level of activity, performance or achievements expressed or implied by these forward-looking statements, to differ. The description of our Business set forth in Item 1, the Risk
Factors set forth in this Item 1A and our Managements Discussion and Analysis of Financial Condition and Results of Operations set forth in Item 7 as well as other sections in this report, discuss some of the factors that could
contribute to these differences. These forward-looking statements include, among other things, statements about:
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the accuracy of our estimates regarding expenses, future revenues, uses of cash, capital requirements and the need for additional financing;
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the initiation, cost, timing, progress and results of our development activities, preclinical studies and clinical trials;
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the timing of and our ability to obtain and maintain regulatory approval of our existing product candidates, any product candidates that we may develop, and any related restrictions, limitations, and/or warnings in the
label of any approved product candidates;
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the results of the meeting scheduled with the FDA to discuss the submission of an NDA for
ITI-007
in schizophrenia and the timing of our expected update on such discussions;
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our plans to research, develop and commercialize our current and future product candidates;
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our collaborators election to pursue research, development and commercialization activities;
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our ability to obtain future reimbursement and/or milestone payments from our collaborators;
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our ability to attract collaborators with development, regulatory and commercialization expertise;
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our ability to obtain and maintain intellectual property protection for our product candidates;
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our ability to successfully commercialize our product candidates;
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the size and growth of the markets for our product candidates and our ability to serve those markets;
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the rate and degree of market acceptance of any future products;
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the success of competing drugs that are or become available;
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regulatory developments in the United States and other countries;
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the performance of our third-party suppliers and manufacturers and our ability to obtain alternative sources of raw materials;
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our ability to obtain additional financing;
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our use of the proceeds from our securities offerings;
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any restrictions on our ability to use our net operating loss carryforwards;
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our exposure to investment risk, interest rate risk and capital market risk; and
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our ability to attract and retain key scientific or management personnel.
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We may not actually
achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and
expectations disclosed in the forward-looking statements we make. We have included important cautionary statements in this report, particularly in the Risk Factors set forth in Item 1A of this Annual Report on Form
10-K,
that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future
acquisitions, mergers, dispositions, joint ventures or investments we may make.
You should read this report and the documents that we
reference in this report and have filed as exhibits to this report completely and with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements contained in this report are made
as of the date of this report, and we do not assume, and specifically disclaim, any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.