The successful development and commercialization of our current drug candidates is highly
uncertain. We cannot reasonably estimate or know the nature, timing, or estimated expenses of the efforts necessary to complete the development of, or the period in which material net cash inflows are expected to commence due to the numerous risks
and uncertainties associated with developing such products, including the uncertainty of:
Our current plans and objectives are based on assumptions relating to the development of our current drug candidates. Although we believe that
our assumptions are reasonable, any of our assumptions could prove inaccurate. The significant uncertainties inherent in the forward-looking statements we have made herein, which reflect our views only as of the date of this report, suggest that you
should not place undue reliance upon such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
Overview
We are a
biopharmaceutical company focused on developing and commercializing innovative therapies for people with rare debilitating diseases. We currently have three drug candidates in development:
Firdapse
®
In October 2012, we licensed the North American rights to Firdapse
®
, a proprietary
form of amifampridine phosphate, or chemically known as
3,4-diaminopyridine
phosphate, from BioMarin Pharmaceutical Inc. (BioMarin). In August 2013, we were granted breakthrough therapy designation
by the U.S. Food & Drug Administration (FDA) for Firdapse
®
for the treatment of patients with Lambert-Eaton Myasthenic Syndrome,
or LEMS, a rare and sometimes fatal autoimmune disease characterized by muscle weakness. In March 2015, we were granted Orphan Drug Designation for Firdapse
®
for the treatment of patients with Congenital Myasthenic Syndromes, or CMS, and in August 2016, we were granted Orphan Drug Designation for
Firdapse
®
for the treatment of patients with Myasthenia Gravis (MG).
The chemical entity, amifampridine
(3,4-diaminopyridine
or
3,4-DAP),
has never been approved by the FDA for any indication. Because Firdapse
®
has been granted
Orphan Drug designation for the treatment of LEMS, CMS and MG by the FDA, the product is also eligible to receive seven years of marketing exclusivity for any or all of these indications. Further, if we are the first pharmaceutical company to obtain
approval for an amifampridine product, of which there can be no assurance, we will be eligible to receive five years of marketing exclusivity with respect to the use of this product for any indication, running concurrently with the seven years of
orphan marketing exclusivity described above (if both exclusivities are granted).
We previously sponsored a multi-center, randomized,
placebo-controlled Phase 3 trial evaluating Firdapse
®
for the treatment of LEMS. The Phase 3 trial, which involved 38 subjects, was
designed as a randomized withdrawal trial in which all patients were treated with Firdapse
®
during a 7 to
91-day
run-in-period
followed by treatment with either Firdapse
®
or placebo over a
two-week
randomization period. The
co-primary
endpoints for this Phase 3 trial were the comparison of
changes in patients randomized to continue Firdapse
®
versus those who transitioned to placebo that occurred in both the Quantitative
Myasthenia Gravis Score (QMG), which measures muscle strength, and subject global impression score (SGI), on which the subjects rate their global impression of the effects of a study treatment during the
two-week
randomization period. In September 2014, we reported positive
top-line
results from this Phase 3 trial.
During 2014, we established an expanded access program (EAP) to make Firdapse
®
available to patients diagnosed with LEMS, CMS, or Downbeat Nystagmus in the United States, who meet the inclusion and exclusion criteria, with
Firdapse
®
being provided to patients for free until sometime after new drug application (NDA) approval, should we receive such approval (of
which there can be no assurance). We are informing neuromuscular physicians on the availability of the Firdapse
®
EAP and working with
various rare disease advocacy organizations to inform patients and physicians about the program.
On December 17, 2015, we announced
completion of the submission of an NDA for Firdapse
®
for the treatment of LEMS and CMS. However, on February 17, 2016, we announced
that we had received a refusal to file (RTF) letter from the FDA regarding our NDA submission. In early April 2016, we met with the FDA to obtain greater clarity regarding what will be required by the FDA to accept the Firdapse
®
NDA for filing. Following the receipt of the formal minutes of that meeting, on April 26, 2016, we issued a press release reporting that
the FDA has advised us that in addition to the results of our previously submitted multi-center, randomized, placebo-controlled Phase 3 trial, we will need to submit positive results from a second adequate and well-controlled study in patients with
LEMS. Additionally, there is a requirement for several more short-term toxicology studies, which are currently in process.
4
In October 2016, we announced that we had reached an agreement with the FDA under a Special
Protocol Assessment (SPA) for the protocol design, clinical endpoints, and statistical analysis approach to be taken in our second Phase 3 study evaluating Firdapse
®
(amifampridine phosphate) for the symptomatic treatment of LEMS. A SPA is a process by which sponsors ask the FDA to evaluate the protocol of a proposed clinical trial to determine whether it
adequately addresses scientific and regulatory requirements for the purpose identified by the sponsor. A SPA agreement indicates FDA concurrence with the adequacy and acceptability of specific critical elements of protocol design, endpoints and
analysis. Additionally, it provides a binding agreement with FDAs review division that a pivotal trial design, conduct, and planned analysis adequately addresses the scientific and regulatory objectives in support of a regulatory submission
for drug approval. However, the FDA may rescind a SPA agreement when the division director determines that a substantial scientific issue essential to determining the safety or efficacy of the product has been identified after the trial has begun.
We are conducting our second Phase 3 trial evaluating Firdapse
®
for the treatment of LEMS (designated as
LMS-003)
at sites in Miami, Florida and Los Angeles, California. This double-blind, placebo-controlled withdrawal trial
will include approximately 28 subjects, and will have the same
co-primary
endpoints as our first Phase 3 trial evaluating Firdapse
®
for the treatment of LEMS. Further, the FDA is allowing us to enroll patients from our expanded access program as study subjects in this second trial. Details of the Phase 3 clinical trial are
available on
www.clinicaltrials.gov
(NCT02970162).
We initiated this trial in December 2016, and we expect to report
top-line
results from this trial during the second half of 2017. Assuming the results of this trial are successful, and our anticipated timeline for the completion of this trial is met, we expect to resubmit an NDA
for Firdapse
®
for the treatment of LEMS in the second half of 2017. There can be no assurance as to the timing or requirements of this
trial, whether this trial, along with the results of our first Phase 3 trial, will be sufficient for the FDA to accept for filing any NDA that we might resubmit in the future for Firdapse
®
, or
whether Firdapse
®
will ever be approved for commercialization.
Our original NDA submission for
Firdapse
®
included data and information (including data from a currently ongoing investigator treatment IND) providing evidence supporting
the benefits of Firdapse
®
for treating certain types of CMS, and requested that CMS be included in our initial label for Firdapse
®
. To provide additional support for our submission of an NDA for Firdapse
®
for the treatment of CMS, in October 2015 we initiated a small blinded clinical trial at four academic centers of up to 10 subjects in the pediatric CMS population, ages 2 to 17. However, after
considering comments from the FDA, we determined to enroll both adult and pediatric subjects with CMS in this trial and to expand the number of subjects to be evaluated in the trial to an aggregate of approximately 20 subjects. We also added a fifth
trial site for this study. Details of this trial are available on
www.clinicaltrials.gov
(NCT02562066).
Based on currently
available information, we expect to report top-line results from this study in the second half of 2017 and if the results of the study are successful, we hope to add the CMS indication to our labeling for Firdapse
®
(either as a part of our NDA resubmission for Firdapse
®
for LEMS or as a supplement to that resubmission). There can be no assurance that any trial we perform for Firdapse
®
for the treatment of CMS will be successful or whether any NDA that we may submit for Firdapse
®
for the treatment of CMS will be filed by the FDA for review and approved.
5
In February 2016, we announced the initiation of an investigator-sponsored, randomized,
double-blind, placebo-controlled, crossover Phase 2/3 clinical trial evaluating the safety, tolerability and potential efficacy of Firdapse
®
as a symptomatic treatment for patients with
anti-MuSK antibody positive MG (MuSK-MG). MuSK-MG, an ultra-rare sub-population of myasthenia gravis (MG) patients, is a debilitating neuromuscular disease, and there are currently no FDA approved therapies for this specific form of MG. Seven
patients participated in this proof-of-concept trial. We provided study drug, placebo and financial support for this study.
On March 15,
2017 we reported top-line results from this trial. Both of the co-primary efficacy endpoints of change from baseline (CFB) in total Quantitative Myasthenia Gravis (QMG) score (p=0.0003) and CFB in total Myasthenia Gravis Activities of Daily Living
(MG-ADL) score (p=0.0006) were statistically and clinically significant in this trial. Several secondary efficacy measures also achieved statistical significance. Amifampridine phosphate was well tolerated in this population of patients.
We intend to discuss with the FDA conducting a registration trial in the United States evaluating Firdapse
®
for the treatment of patients with MuSK-MG. There can be no assurance that future clinical trials that we initiate to evaluate
Firdapse
®
for this indication will be successful, or whether we can obtain the resources available to fund any such registration trial. Further, there can also be no assurance that the
FDA will ever approve Firdapse
®
for this indication.
Finally, we may seek to
evaluate Firdapse
®
for the treatment of other treatment-refractory types of MG or other rare, similar neuromuscular diseases, although we
have not yet begun to develop clinical programs for these indications and all such programs are subject to the availability of funding. There can be no assurance that Firdapse
®
will be an effective treatment for other treatment-refractory types of MG or for any other rare, similar neuromuscular diseases.
Prior to the receipt of the RTF letter, we had been actively taking steps to prepare for the commercialization of Firdapse
®
in the United States. In light of the determination that we will have to complete a second adequate and well controlled study evaluating
Firdapse
®
for the treatment of LEMS, we have placed most of these commercialization activities on hold in order to conserve cash.
Notwithstanding, we are continuing to work with several rare disease advocacy organizations to help increase awareness of LEMS and CMS and to provide awareness and outreach support for the physicians who treat these rare diseases and the patients
they treat.
CPP-115
We are developing
CPP-115,
a GABA aminotransferase inhibitor that, based on our preclinical studies to
date, we believe is a more potent form of vigabatrin, and may have fewer side effects (e.g., visual field defects) than those associated with vigabatrin. We are hoping to develop
CPP-115
for the treatment of
refractory infantile spasms and possibly for the treatment of adult refractory patients with Tourettes Disorder.
CPP-115
has been granted Orphan Drug Designation by the FDA for the treatment of infantile
spasms and Orphan Medicinal Product Designation in the European Union, or E.U., for West syndrome (a form of infantile spasms).
We are
currently refining our development plan for this product. Once the refinement of our development plans is completed, and subject to the then availability of funding, we plan to take the steps to complete the work required to make our drug candidate
Phase 2 ready. We are also working with one or more potential investigators who have expressed an interest in evaluating our product for particular indications (particularly infantile spasms). We are also continuing to seek a partner to work with us
in furthering the development of
CPP-115,
although no agreements have been entered into to date.
There can be no assurance that we will ever successfully commercialize
CPP-115.
6
Generic Sabril
®
During September 2015, we announced the initiation of a project to develop a
generic version of Sabril
®
(vigabatrin). Sabril
®
is marketed by Lundbeck Inc. in the United States for the treatment of infantile spasms and complex partial seizures. There can be no assurance that we will be successful in these efforts or that any
ANDA that we submit for vigabatrin will be accepted for review or approved. Further, while there can be no assurance, we are hopeful that any ANDA submission we make for vigabatrin will be one of the first ANDAs submitted for this product.
Capital Resources
Based
on our current financial condition and forecasts of available cash, we believe that we have sufficient funds to support our operations through at least the next 12 months. However, we will require additional funding to support our operations beyond
that time. There can be no assurance that we will obtain additional funding or that we will ever be in a position to commercialize any of our drug candidates. See Item 7. Managements Discussion and Analysis of Financial Condition and
Results of Operations Liquidity and Capital Resources below for further information on our liquidity and cash flow.
Our
Strategy
Our goal is to develop and commercialize novel prescription drugs targeting rare (orphan) diseases with an initial focus on
neuromuscular and neurological diseases and disorders. Specifically, we intend to:
|
|
|
Pursue approval of Firdapse
®
for LEMS and CMS
. We are continuing our efforts to seek approval to commercialize Firdapse
®
for LEMS. We are also taking steps that we hope will allow us to include CMS in our initial labeling for our product.
|
|
|
|
Seek additional orphan drug indications for
Firdapse
®
. Subject to the availability of funding, we plan to pursue the necessary clinical and
non-clinical
trials and studies to evaluate Firdapse
®
as a treatment for MuSK-MG and possibly for other neuromuscular indications.
|
|
|
|
Continue required clinical and
pre-clinical
work on
CPP-115
. We hope to undertake the clinical and
non-clinical
studies required to make
CPP-115
Phase 2 ready. We hope to develop
CPP-115
for the treatment of infantile spasms and possibly for the treatment of adult refractory patients with Tourettes Disorder.
|
|
|
|
Generic Sabril
®
. We are taking the steps that
we believe are necessary to develop and obtain approval of a generic version of Sabril
®
(vigabatrin tablets and sachets). Because of
our prior experience developing our version of vigabatrin
(CPP-109),
we believe that we are well positioned to make this effort and, if we are successful, we hope to receive approval for one of the first
generic versions of this product.
|
|
|
|
Seek a partner for
CPP-115
or generic Sabril
®
. We may seek a strategic partner to work with us in the development and future commercialization of
CPP-115
and/or generic Sabril
®
. However, no arrangements have been entered into to date.
|
|
|
|
Seek to acquire additional products
. We continue to seek to acquire additional relatively late stage
orphan drug opportunities to add to our product portfolio. However, no agreements have been entered into to date to acquire additional products and any such product acquisitions would be subject to the availability of funding.
|
7
Firdapse
®
Product overview
Firdapse
®
is Catalysts and BioMarins (depending on market region) registered trade name for amifampridine phosphate tablets. Amifampridine
is the WHO (World Health Organization) registered INN (International Nonproprietary Name) and United States Adopted Name (USAN) for the chemical entity,
3,4-diaminopyridine,
often abbreviated as
3,4-DAP.
Firdapse
®
contains the phosphate salt of amifampridine, hence the name amifampridine phosphate. We will refer to our drug by its proposed
trade name in the United States (Firdapse
®
), by the INN/USAN (amifampridine), or by the specific salt in Catalysts product (amifampridine phosphate), throughout this
Form 10-K.
In addition to the positive results we reported from our Phase 3 trial of amifampridine
phosphate described below, clinical efficacy information for the symptomatic treatment of LEMS patients with amifampridine have been derived from five published randomized, double-blind, placebo-controlled studies and one published randomized,
double-blind, active-control study in patients with LEMS. The data from the randomized controlled studies generally show statistically significant improvements across a number of measures of neurological function, including Quantitative Myasthenia
Gravis (QMG) score and compound muscle action potential (CMAP), which have been demonstrated to be clinically relevant in patients with LEMS. Results of these studies suggest that amifampridine is more effective for the symptomatic treatment of LEMS
compared with placebo or active investigational comparator (pyridostigmine). Additionally, data from multiple published uncontrolled investigations and case reports support the long-term benefits of treatment with amifampridine in patients with
LEMS. In some cases, removal of patients from drug can lead to a recurrence of underlying symptoms, but with reintroduction of amifampridine improvement of muscle function is regained. Amifampridine has been recommended as first-line symptomatic
treatment for LEMS by the European Federation of Neurological Societies (now known as the European Academy of Neurology). In December 2009, amifampridine phosphate received marketing approval from the European Commission (with the trade name
Firdapse
®
) for the symptomatic treatment of patients with LEMS.
Safety data from
clinical data published over the last 30 years in patients with LEMS or other neurological disorders treated with amifampridine show that amifampridine is well tolerated at doses
£
80 mg per day.
Among the 1,279 patients or healthy subjects assessed in the literature, the most frequently reported adverse events (AEs) were perioral and peripheral paresthesias (unusual sensations like pins and needles), and gastrointestinal disorders
(abdominal pain, nausea, diarrhea, and epigastralgia (pain around the upper part of the stomach)). These events were typically mild or moderate in severity, and transient, seldom requiring dose reduction or withdrawal from treatment.
Lambert-Eaton Myasthenic Syndrome
Lambert-Eaton Myasthenic Syndrome, or LEMS, is a rare autoimmune neuromuscular disorder characterized primarily by muscle weakness of the
limbs. The disease is caused by an autoimmune reaction where antibodies are formed against voltage-gated calcium channels on nerve endings, which damages the channels. These calcium channels are responsible for the transport of charged calcium atoms
that activate the biochemical machinery responsible for releasing acetylcholine. Acetylcholine is the neurotransmitter responsible for causing muscles to contract and the failure to release enough of this neurotransmitter results in muscle weakness
in LEMS patients. Additionally, LEMS is often associated with an underlying malignancy, most commonly small-cell lung cancer (SCLC), and in some individuals, LEMS is the first symptom of such malignancy.
8
LEMS generally affects the extremities, especially the legs. As LEMS most affects the parts of
limbs closest to the trunk, difficulties with climbing stairs or rising from a sitting position are commonly noted. Physical exercise and high temperatures tend to worsen the symptoms. Other symptoms often seen include weakness of the muscles of the
mouth, throat, and eyes. Individuals affected with LEMS also may have a disruption of the autonomic nervous system, including dry mouth, constipation, blurred vision, impaired sweating, and/or hypotension.
LEMS is managed by treating the symptoms or treating the underlying autoimmune attack on voltage-gated calcium channels. Unapproved treatments
include steroids, azathioprine and intravenous immunoglobulin, which work by suppressing the immune system; and pyridostigmine and amifampridine, which enhance neuromuscular transmission. Plasma exchange has also been used to attempt to remove
antibodies from the body. Firdapse
®
is a symptomatic treatment and does not alter the underlying autoimmune condition. As a voltage-gated
potassium blocker, Firdapse
®
prevents charged potassium particles from leaving the nerve cells, which prolongs the period of depolarization. This allows more charged calcium atoms to enter the
nerves, which enables the nerves to release acetylcholine and causes muscles to contract and to restore lost muscle strength in LEMS patients.
Based on currently available information, we estimate that there are approximately 3,000 LEMS patients in the United States. However, until an
amifampridine product is finally approved by the FDA and awareness of the disease is increased, it is unlikely that the total number of LEMS patients in the United States can be determined with better certainty (as is typical of rare diseases), and
the actual number of patients in the United States with LEMS may be higher or lower than our estimate. Some of the factors that affect the assessment of the size of the population with a rare disease such as LEMS include, without limitation, the
number of patients actually diagnosed with the disease, the number of patients who were misdiagnosed with other diseases before it is determined that they have the disease, and the number of patients who have the disease whose doctors do not become
aware of the availability of a treatment for the disease until after a product is approved or, even if they are aware of the product, are unwilling or unable to prescribe the product until it is approved and generally available in the commercial
marketplace. In this case, we believe that some patients who have LEMS could have been misdiagnosed with another disease (such as MG) and that while there is an antibody test that positively identifies patients with LEMS, we believe that the test is
not particularly well known or utilized at this time by neurologists. Further, we believe that many patients with small cell lung cancer, or SCLC, some of whom also have LEMS, are not being treated for LEMS because many of the oncology medical
professionals who treat SCLC patients are generally not familiar with how to diagnose and treat LEMS. All of these factors are likely to affect the ultimate number of patients, either up or down, who are indicated and in need of treatment with an
amifampridine product.
Congenital Myasthenic Syndromes
Congenital myasthenic syndromes, or CMS, is a rare neuromuscular disorder comprising a spectrum of genetic defects and is characterized by
fatigable weakness of skeletal muscles with onset at or shortly after birth or early childhood; in rare cases symptoms may not manifest themselves until later in childhood. The severity and course of the genetic disease types are variable, ranging
from minor symptoms to progressive disabling weakness; symptoms may be mild, but sudden severe exacerbations of weakness or even sudden episodes of respiratory insufficiency also occur.
Many patients with CMS may respond to unapproved pharmacologic intervention, including esterase inhibitors, amifampridine (i.e.
3,4-DAP),
ephedrine, fluoxetine or quinidine, and albuterol, alone or in combinations. The particular therapy is dictated by the diagnosed CMS type, as drugs beneficial in treating one type of CMS can be
detrimental in patients with another type of CMS.
9
Congenital myasthenic syndrome(s) is rare, estimated at
one-tenth
that of MG, which in itself is rare. Based on currently available information, we estimate that there are between 1,000 and 1,500 CMS patients in the United States but that is subject to the
same factors noted above with respect to LEMS.
Myasthenia Gravis
Myasthenia Gravis is a chronic autoimmune neuromuscular disorder that is characterized by fluctuating weakness of the voluntary muscle groups.
The prevalence of MG in the United States is estimated to be about 20/100,000 population (equating to an estimate of approximately 64,000 patients in the United States). However, MG is probably under diagnosed and the prevalence may be higher. MG
occurs in all races, both genders, and at any age. MG is not thought to be directly inherited nor is it contagious. It does occasionally occur in more than one member of the same family.
The voluntary muscles of the entire body are controlled by nerve impulses that arise in the brain. These nerve impulses travel down the nerves
to the place where the nerves meet the muscle fibers. Nerve fibers do not actually connect with muscle fibers. There is a space between the nerve ending and muscle fiber; this space is called the neuromuscular junction. When the nerve impulse
originating in the brain arrives at the nerve ending, it releases a chemical called acetylcholine. Acetylcholine travels across the space to the muscle fiber side of the neuromuscular junction where it attaches to many receptor sites. The muscle
contracts when enough of the receptor sites have been activated by the acetylcholine. In MG, there can be as much as an 80% reduction in the number of these receptor sites. The reduction in the number of receptor sites is caused by an
antibody that destroys or blocks the receptor site. Antibodies are proteins that play an important role in the immune system. They are normally directed at foreign proteins called antigens that attack the body. Such foreign proteins include bacteria
and viruses. Antibodies help the body to protect itself from these foreign proteins. For reasons not well understood, the immune system of the person with MG makes antibodies against the receptor sites of the neuromuscular junction. Abnormal
antibodies can be measured in the blood of many people with MG. The antibodies destroy the receptor sites more rapidly than the body can replace them. Muscle weakness occurs when acetylcholine cannot activate enough receptor sites at the
neuromuscular junction.
Anti-MuSK antibody positive MG
About 15% of MG patients test negative for the acetylcholine receptor antibody. These patients have seronegative (SN) MG. Approximately
40-50%
of these patients with SNMG (equating to an estimate of approximately 4,500 patients in the United States) test positive for the anti-MuSK antibody. MuSK is a protein that is required for the maintenance of
the neuromuscular junction and patients with the anti-MuSK antibody are identified as having
MuSK-MG.
MuSK-MG
is a clinically distinguishable, more severe form of MG.
The disease is characterized by a predominance in females, a prevalent involvement of cranial and bulbar muscles, high incidence of respiratory crises and a resistance to treatment. Although many patients with
MuSK-MG
are presently treated with anticholinesterase inhibitors or immunosuppressants, such patients do not generally respond adequately to these treatments.
Strategic collaboration with BioMarin for Firdapse
®
On October 26, 2012, we entered into a strategic collaboration with BioMarin for
Firdapse
®
. The key components of the collaboration included our licensing of the exclusive North American rights to Firdapse
®
pursuant to a License Agreement, dated October 26, 2012, between us and BioMarin (the BioMarin License Agreement), and BioMarin making a $5.0 million investment in our common stock to
advance the development of Firdapse
®
. We believe that we remain in compliance with the license agreement.
10
Under the BioMarin License Agreement, we have agreed to make the following royalty payments:
(i) royalty payments to BioMarin for seven years from the first commercial sale equal to: (a) 7% of net sales (as defined in
the license agreement) in North America in any calendar year for sales up to $100 million, and (b) 10% of net sales in North America in any calendar year in excess of $100 million; and
(ii) royalty payments to a third-party licensor of the rights sublicensed to us for seven years from the first commercial sale
equal to 7% of net sales (as defined in the license agreement between BioMarin and the third party licensor) in North America in any calendar year.
Under the BioMarin License Agreement, we have also agreed to make certain milestone payments to such third-party licensor and to the former
stockholders of Huxley Pharmaceuticals, Inc. (Huxley) that BioMarin is obligated to make. With respect to Firdapse
®
, the milestones aggregate approximately $2.6 million upon acceptance of
an NDA for Firdapse
®
by the FDA for the treatment of LEMS, and approximately $7.2 million upon the unconditional approval by the FDA of an NDA for Firdapse
®
for the treatment of LEMS.
Firdapse
®
was approved by European Medicines Agency for the treatment of LEMS in
December 2009, and BioMarin sells the product in the EU. BioMarin is also currently performing or has previously completed certain post-marketing studies of Firdapse
®
that they are required to
conduct to support their continued approval of Firdapse
®
in the EU. We have agreed to pay one half of the costs of these studies. We have also shared the costs of a cardiac safety study and
reproductive toxicity studies that have been completed and are studies that are required for approval of Firdapse
®
by the FDA.
On April 15, 2014, effective as of April 8, 2014, we and BioMarin entered into Amendment No. 1 to the License Agreement,
amending in certain respects the BioMarin License Agreement, dated October 26, 2012. The amendment related to purchases of additional product by us from BioMarin, the sharing of data between the parties with respect to clinical trials and
studies undertaken by each party, and the payment terms for certain joint studies.
Breakthrough therapy designation
Firdapse
®
for LEMS has been granted Breakthrough Therapy Designation by the FDA. A
breakthrough therapy is defined as a drug that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the drug may
demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development.
A Breakthrough Therapy Designation conveys all of the fast track program features, as well as more intensive FDA guidance on an efficient drug
development program. The FDA also has an organizational commitment to involve senior management in such guidance. The Breakthrough Therapy Designation is a distinct status from both accelerated approval and priority review, which can also be granted
to the same drug if relevant criteria are met.
Orphan drug designation
The FDA has granted Orphan Drug Designation for amifampridine phosphate for the treatment of LEMS, CMS and MG, making the drug eligible to be
granted seven-year marketing exclusivity for these indications if we are the first pharmaceutical company to obtain approval of an NDA for a product containing amifampridine as the active moiety for the treatment of LEMS, CMS or MG.
11
In addition, the FDA has also granted Jacobus Pharmaceuticals Orphan Drug Designation request for
3,4-diaminopyridine
for the treatment of LEMS,
which means that if Jacobus Pharmaceuticals were to be the first pharmaceutical company to obtain approval of an NDA for a product containing amifampridine as the active moiety for the treatment of LEMS, we would not be able to obtain FDA approval
for that indication for seven years.
The first Phase 3 clinical trial
As part of our License Agreement with BioMarin, we took over a Phase 3 clinical trial that BioMarin had previously begun in the United States
and Europe evaluating Firdapse
®
for the treatment of LEMS. The trial was designed as a randomized double-blind, placebo-controlled discontinuation trial in approximately 36 LEMS patients.
After patients were treated with amifampridine phosphate for at least 91 days, they were randomly assigned to either continue on amifampridine phosphate or be discontinued to placebo over a
2-week
period. They
were then returned to open label amifampridine phosphate treatment for a
two-year
follow-up
period.
On September 29, 2014, we reported
top-line
results from this trial. A summary of the results is
as follows:
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The primary endpoint of change in quantitative myasthenia gravis score, or QMG, at day 14 reached statistical
significance (p=0.0452), with a worsening of 2.2 points observed in the placebo group and a worsening of 0.4 points observed in the treatment group.
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The primary endpoint of change in subject global impression, or SGI, at day 14 was highly statistically
significant (p=0.0028), with a worsening of 2.6 points observed in the placebo group and a worsening of 0.8 points observed in the treatment group.
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The secondary endpoint for the physicians clinical global impression of improvement, or
CGI-I,
reached statistical significance (p=0.0267), with a worsening at day 14 of 1.1 points between the placebo group and the treatment group.
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The secondary endpoint of change in walking speed at day 14 was not statistically significant.
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Patient tolerance of Firdapse
®
:
|
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Firdapse
®
was generally safe
and well tolerated. During the
91-day
open label
run-in
period, treatment emergent adverse events occurred more frequently in
treatment-naïve
patients than in previously treated patients (approximately 10% of treatment naïve patients withdrew during this part of the study). During the placebo-controlled portion of the
study, side effects occurring more frequently in the Firdapse
®
group were benign and consisted primarily of perioral and digital paresthesia and infections. No patients withdrew during this
period.
|
|
|
|
All subjects who were randomized into the trial elected to continue with Firdapse
®
in the
two-year
safety
follow-up
phase of the trial.
|
The results of the Phase 3 trial were first presented in October 2014 at the 139
th
Annual
Meeting of the American Neurological Association (ANA). They have subsequently been presented at the 2014 and 2015 annual meeting of the American Association of Neuromuscular and Electrodiagnostic Medicine (AANEM) and at the 2015 meeting of the
American Academy of Neurology (AAN), and published in the May 2016 edition of Muscle & Nerve.
12
Expanded access program
We currently operate an expanded access program (EAP) that makes Firdapse
®
available to all patients diagnosed with LEMS, CMS, or Downbeat Nystagmus in the United States who meet the inclusion and exclusion criteria, with
Firdapse
®
being provided to patients at no cost until sometime after FDA approval, should we receive such approval (of which there can be no assurance). We are currently working with various
rare disease advocacy organizations to inform physicians and patients as to the availability of
our EAP.
NDA submission and
Refusal-to-File
Letter
On July 22, 2015, we announced that we had initiated a rolling submission of an NDA for Firdapse
®
for the treatment of LEMS and CMS, and on December 17, 2015, we announced the completion of that submission. On February 17, 2016, we announced that we had received an RTF letter from
the FDA regarding our NDA submission. The RTF letter stated that after a preliminary review, the FDA has found that our application was not sufficiently complete and requests additional supporting information. The letter did not provide comment on
the acceptability of the submitted clinical data, and no judgment was made in the letter on the efficacy or safety of Firdapse
®
.
On April 26, 2016, we announced that we had met with the FDA to discuss the FDAs RTF letter. During that meeting, the FDA advised
us that in addition to the results of our prior Phase 3 trial, we will need to submit positive results from an additional adequate and well-controlled study in patients with LEMS.
Ongoing clinical trials
Second Phase 3 trial evaluating Firdapse
®
for the treatment of LEMS
As required by the FDA, we are now conducting a second Phase 3 trial evaluating
Firdapse
®
for the treatment of LEMS (designated as
LMS-003)
at sites in Miami, Florida and Los
Angeles, California. This double-blind, placebo-controlled withdrawal trial will include approximately 28 subjects, and will have the same
co-primary
endpoints as our first Phase 3 trial evaluating Firdapse
®
for the treatment of LEMS. Further, the FDA is allowing us to enroll patients from our EAP as study subjects in this second trial. Details
of this second Phase 3 clinical trial are available on www.clinicaltrials.gov (NCT02970162).
The protocol design, clinical endpoints, and
statistical analysis approach being taken in our second Phase 3 study evaluating Firdapse
®
(amifampridine phosphate) for the symptomatic
treatment of LEMS are based on the Special Protocol Assessment (SPA) that we received from the FDA and reported on in October 2016. A SPA is a process by which sponsors ask the FDA to evaluate the protocol of a proposed clinical trial to determine
whether it adequately addresses scientific and regulatory requirements for the purpose identified by the sponsor. A SPA agreement indicates concurrence with the adequacy and acceptability of specific critical elements of protocol design, endpoints
and analysis. Additionally, it provides a binding agreement with FDAs review division that a pivotal trial design, conduct, and planned analysis adequately addresses the scientific and regulatory objectives in support of a regulatory
submission for drug approval. However, FDA may rescind an SPA agreement when the division director determines that a substantial scientific issue essential to determining the safety or efficacy of the product has been identified after the trial has
begun.
We initiated this second Phase 3 clinical trial in December 2016, and we expect to report
top-line
results from this trial during the second half of 2017. Assuming the results of this trial are successful, and our anticipated timeline for the completion of this trial is met, we expect to resubmit
an NDA for Firdapse
®
for the treatment of LEMS in the second half of 2017. There can be no assurance as to the timing or requirements of
this trial, whether this trial will be successful, whether this trial, along with the results of our first Phase 3 trial, will be sufficient for the FDA to accept for filing any NDA that we might resubmit in the future for Firdapse
®
, or whether Firdapse
®
will ever be approved for commercialization.
13
Phase 3 clinical trial evaluating Firdapse
®
for the treatment of CMS
Our original NDA submission for Firdapse
®
included data and information (including data from a currently ongoing investigator treatment IND) providing evidence supporting the benefits
of Firdapse
®
for treating certain types of CMS, and requested that CMS be included in our initial label for Firdapse
®
. To provide additional support for our submission of an NDA for Firdapse
®
for the
treatment of CMS, in October 2015 we initiated a small blinded clinical trial at four academic centers of up to 10 subjects in the pediatric CMS population, ages 2 to 17. However, after considering comments from the FDA, we determined to enroll both
adult and pediatric subjects with CMS in this trial and to expand the number of subjects to be evaluated in the trial to an aggregate of approximately 20 subjects. We also added a fifth trial site for this study. Details of this trial are available
on
www.clinicaltrials.gov
(NCT02562066).
Based on currently available information, we expect to report top line results from this
study in the second half of 2017 and if the results of the study are successful, we hope to add the CMS indication to our label for Firdapse
®
(either as a part of our NDA resubmission for Firdapse
®
for LEMS or as a supplement to that resubmission). There can be no assurance
that any trial we perform for Firdapse
®
for the treatment of CMS will be successful or whether any NDA that we may submit for Firdapse
®
for the treatment of CMS will be filed by the FDA for review and approved.
Clinical trial evaluating Firdapse
®
for the treatment of
MuSK-MG
In February 2016, we announced the initiation of an investigator-sponsored, randomized,
double-blind, placebo-controlled, crossover Phase 2/3 clinical trial evaluating the safety, tolerability and potential efficacy of Firdapse
®
as a symptomatic treatment for patients with
MuSK-MG. MuSK-MG, an ultra-rare sub-population of MG patients, is a debilitating neuromuscular disease, and there are currently no FDA approved therapies for this specific form of MG. Seven patients participated in this proof-of-concept trial. We
provided study drug, placebo and financial support for this study.
On March 15, 2017 we reported top-line results from this trial. Both
of the co-primary efficacy endpoints of change from baseline (CFB) in total Quantitative Myasthenia Gravis (QMG) score (p=0.0003) and CFB in total Myasthenia Gravis Activities of Daily Living (MG-ADL) score (p=0.0006) were statistically and
clinically significant in this trial. Several secondary efficacy measures also achieved statistical significance. Amifampridine phosphate was well tolerated in this population of patients.
We intend to discuss with the FDA conducting a registration trial in the United States evaluating Firdapse
®
for the treatment of patients with MuSK-MG. There can be no assurance that future clinical trials that we initiate to evaluate
Firdapse
®
for this indication will be successful, or whether we can obtain the resources available to fund any such registration trial. Further, there can also be no assurance that the
FDA will ever approve Firdapse
®
for this indication.
Pre-commercialization
efforts
Prior to the receipt of the RTF letter, we had been actively taking
steps to prepare for the commercialization of Firdapse
®
in the United States, including the hiring of a Chief Commercial Officer. However,
due to the receipt of an RTF letter, the need to complete a second Phase 3 trial evaluating Firdapse
®
for the treatment of LEMS, and the need to conserve cash, we underwent a
reduction-in-force
in May 2016 and terminated most of our commercial staff. As our second Phase 3 trial evaluating
Firdapse
®
for the treatment of LEMS continues and approaches completion, we intend to renew our planning of our
pre-commercialization
efforts.
14
Notwithstanding, we are continuing to work with several rare disease advocacy organizations to
help increase awareness of LEMS, CMS, and our EAP and to provide awareness and outreach support for the physicians who treat these rare diseases and the patients they treat.
Future pricing of and access to Firdapse
®
We have not yet established our pricing for Firdapse
®
. However, the independent market
research that we have conducted to date indicates that we should be able to obtain typical orphan disease pricing for our product and that our product will likely be widely reimbursed by private and public payors for the indicated small populations
of LEMS and CMS. There can be no assurance, however, as to the pricing of our product that we may be able to obtain or as to whether payors will agree to cover our product.
The pricing of pharmaceutical products, in general, and specialty drugs, in particular, has been a topic of concern in the U.S. Congress,
where hearings have been held on the topic, and a topic of statements recently made by the President of the United States. There can be no assurance as to how this scrutiny on pricing of pharmaceutical products will impact future pricing of our
products or orphan drugs or pharmaceutical products generally.
While our proposed pricing for Firdapse
®
has not been established, we recognize the importance of access to our medicines and, if Firdapse
®
is approved by the FDA, we expect to
work with insurers to gain broad patient access in the U.S. market for the small patient populations of LEMS and CMS. We also expect to introduce and support comprehensive patient assistance programs and charitable access programs to assist eligible
patients who on their own could not afford their medication.
There is a vocal group of neuromuscular physicians who have raised public
concerns in a letter to the editor of a medical journal and some LEMS patients and neuromuscular physicians who have raised public concerns in interviews quoted in articles published in the press that LEMS patients may not be able to get
amifampridine treatment. Their overarching concern appears to be that our product would be priced too high as an orphan drug if we were the first pharmaceutical company to receive an FDA approval for an amifampridine product, thereby giving us the
seven-year orphan drug exclusivity and the five-year new chemical entity exclusivity for our product. Stories about their concerns have been published in several national publications and some in the press have sought to tie their expectations about
the anticipated pricing of Firdapse
®
to stories about perceived abusive price increases of drug products by other pharmaceutical companies. This vocal group has also questioned the
appropriateness of the provisions of the Orphan Drug Act that would grant us exclusivity if our product were to be the first amifampridine product approved by the FDA and whether this exclusivity should be eliminated from the law. We have directly
responded to their concerns in a letter to the editor in this same medical publication. However, there can be no assurance as to the ultimate impact of these activities on us or our products.
Third-Party Reimbursement
Sales of pharmaceutical products depend in significant part on the availability of coverage and adequate reimbursement by third party payors,
such as state and federal governments, including Medicare and Medicaid, managed care providers, private commercial insurance plans and pharmacy benefit management (PBM) plans. Decisions regarding the extent of coverage and the amount of
reimbursement to be provided for Firdapse
®
are expected to be made on a
plan-by-plan,
and in some cases, on a
patient-by-patient
basis. Particularly given the rarity of LEMS and CMS, we anticipate that securing coverage and appropriate reimbursement from third-party payors will
require targeted education. To that end, we expect to hire a dedicated team of field-based market access account managers and reimbursement experts focused on ensuring that clinically qualified patients have access to our product.
15
Intellectual property protections for
Firdapse
®
Under the BioMarin License Agreement, we licensed two pending
patents and certain trademarks for Firdapse
®
. One of the licensed patents is a pending composition of matter patent that, if issued, will protect Firdapse
®
until February 2027, which includes five years of patent term extension that is expected under the Patent Term Restoration Act. This application was initially rejected following an appeal to the
Patent Trial and Appeal Board. The application was refiled with new claims. The new claims were the subject of an office action in which the claims were rejected. A response to the rejection was filed and a final rejection was issued. The
application was refiled and is undergoing substantive examination. There can be no assurance that this patent will be issued. The second patent claims methods of administering Firdapse
®
.
Substantive examination has begun on this patent application and a response is in progress. We may also pursue other patents in order to seek to protect the exclusivity of the drug, dosage forms and methods of administration.
No drug product containing amifampridine for any indication has been approved by the FDA. Therefore, our version of amifampridine, if we are
the first to obtain approval of the product in the U.S., will be eligible for five-year new chemical entity exclusivity, which provides a five-year period of marketing exclusivity for all indications.
We have licensed the Firdapse
®
trademark from BioMarin. A trademark application for
Firdapse
®
was allowed, but did not register due to the inability to show use of the mark in interstate shipment. The application was
refiled and a Statement of Use was submitted and accepted by the Trademark Office, and the mark was registered in March 2015.
In January
2014, the FDA provisionally approved Firdapse
®
as a proprietary name for amifampridine phosphate tablets. This provisional approval by the FDA would not prevent the agency from rejecting the
name Firdapse
®
at a later date as part of the NDA review and approval process.
CPP-115
Current status of our development efforts for
CPP-115
We are developing
CPP-115,
a GABA aminotransferase inhibitor that, based on our preclinical studies to
date, we believe is a more potent form of vigabatrin, and may have fewer side effects (e.g., visual field defects) than those associated with vigabatrin. We are hoping to develop
CPP-115
for the treatment of
refractory infantile spasms and possibly for the treatment of adult refractory patients with Tourettes Disorder.
CPP-115
has been granted Orphan Drug Designation by the FDA for the treatment of infantile
spasms and Orphan Medicinal Product Designation in the European Union, or E.U., for West syndrome (a form of infantile spasms).
We are
currently refining our development plan for this product. Once the refinement of our development plans are completed, and subject to the then availability of funding, we plan to take the steps to complete the work required to make our drug candidate
Phase 2 ready. We are also working with one or more potential investigators who have expressed an interest in evaluating our product for particular indications (particularly infantile spasms). We are also continuing to seek a partner to work with us
in furthering the development of
CPP-115,
although no agreements have been entered into to date.
There can be no assurance that we will ever successfully commercialize
CPP-115.
16
Product Overview
In August 2009, we licensed the exclusive worldwide rights to commercialize certain composition of matter patents relating to a new class of
novel GABA aminotransferase inhibitors and derivatives of vigabatrin. We intend to develop these compounds for a broad range of neurological illnesses that could benefit from the inhibition of GABA aminotransferase.
CPP-115
is our lead compound from this group of composition of matter patents.
The development
efforts of
CPP-115
were led by Dr. Richard B. Silverman, the Patrick G. Ryan/Aon Professor of Chemistry at Northwestern University (Northwestern). Dr. Silverman, who holds 75 patents, is the
inventor of pregabalin, also known as Lyrica
®
, which is marketed by Pfizer. His goal in inventing the compound that became
CPP-115
was to mimic the
mechanism of action of vigabatrin, while making it both more potent and specific.
CPP-115
works
by the same mechanism of action as vigabatrin; that is, the inhibition of GABA aminotransferase, which leads to increased brain GABA levels that reduce epileptogenesis. Due to these similarities, we believe that these two drugs will likely share
certain biochemical features related to absorption, metabolism, and elimination, and our
pre-clinical
studies of
CPP-115
to date support our expectations. However, based
upon our
pre-clinical
studies of
CPP-115
to date, we expect that there will be a significant reduction, and possibly elimination, of visual field defects (VFDs) from the
use of
CPP-115
compared to vigabatrin. However, there can be no assurance that this will ultimately prove to be the case.
Further, based on animal testing to date,
CPP-115
has been shown to be at least 200 times more potent
than vigabatrin in both
in-vitro
and animal model studies. The increased potency could enable the development of dosage forms potentially administrable by other routes of administration compared with the
marketed oral, immediate release formulation of vigabatrin, Sabril
®
. Further, based on
non-clinical
testing completed to date,
CPP-115
appears to have superior specificity to GABA aminotransferase and we believe, will have a better side effect profile (e.g. less VFDs) compared with
Sabril
®
.
CPP-115
has been granted Orphan
Drug Designation in the U.S. for the treatment of infantile spasms.
CPP-115
has also been granted Orphan Medicinal Product Designation in the EU to treat West syndrome (a form of infantile spasms).
Mechanism of action for
CPP-115
We believe that our drug candidate,
CPP-115,
will be an effective treatment for epilepsy because it
increases endogenous GABA levels in the brain through the inhibition of GABA-aminotransferase
(GABA-AT).
GABA-AT
is responsible for the eventual breakdown of GABA and
helps to balance its inhibitory effects.
CPP-115
is a GABA analog that is readily absorbed and
promptly available to the nervous system, producing effects that last for many hours after a single dose. Due to the fact that this drug is not receptor active, its administration does not appear to affect the baseline levels of
dopamine, nor those variations in dopamine levels caused by normal stimuli.
Epilepsy and Infantile Spasms
Epilepsy is a brain disorder in which clusters of nerve cells, or neurons, in the brain sometimes signal abnormally. In epilepsy, the normal
pattern of neuronal activity becomes disturbed, causing strange sensations, emotions, and behavior or sometimes convulsions, muscle spasms, and loss of consciousness.
17
Epilepsy is a disorder with many possible causes. Anything that disturbs the normal pattern of neuron activityfrom illness to brain damage to abnormal brain developmentcan lead to
seizures. Epilepsy may develop because of an abnormality in brain wiring, an imbalance of nerve signaling chemicals called neurotransmitters, imbalance of sensitivity to neurotransmitters, or some combination of these factors. We intend to focus our
development efforts for
CPP-115
on its use as a treatment for refractory infantile spasms.
An
infantile spasm is a specific type of seizure seen in an epilepsy syndrome of infancy and childhood. The onset of infantile spasms is usually in the first year of life, typically between
4-8
months. The
seizures primarily consist of a sudden bending forward of the body with stiffening of the arms and legs; some children arch their backs as they extend their arms and legs. Spasms tend to occur upon awakening or after feeding, and often occur in
clusters of up to 100 spasms at a time. Infants may have dozens of clusters and several hundred spasms per day. Infantile spasms usually stop by age five, but may be replaced by other seizure types.
In complex partial seizures, consciousness is altered. Patients may exhibit automatisms (automatic repetitive behavior) such as walking in a
circle, sitting and standing, or smacking their lips together. Often accompanying these symptoms are the presence of unusual thoughts, such as the feeling of déjà vu, uncontrollable laughing, fear, visual hallucinations, and
experiencing unusual unpleasant odors. These symptoms are thought to be caused by abnormal discharges in the temporal lobe.
According to
the Epilepsy Foundation, there are about 3.0 million epilepsy patients in the United States, with approximately 150,000 new cases diagnosed in the U.S. each year. Worldwide, 65 million people are estimated to have epilepsy. The incidence
of epilepsy appears to depend somewhat on the age of the individual. The risk of epilepsy from birth through age 20 is approximately 1%. Within this group, incidence is highest during the first year of life and increases somewhat at the onset of
puberty. From age 20 to 55 it decreases again, but increases after age 55.
Anti-epileptic drugs work through a variety of mechanisms,
including inhibition of sodium ion channels and the enhancement of GABA mechanisms. Although the different types of epilepsy vary greatly, in general, available medications can only control seizures in about
two-thirds
of patients.
CPP-115,
like vigabatrin, is a
GABA-AT
inhibitor, and we are developing it initially for refractory
infantile spasms. Based on the historic use of vigabatrin in treating epilepsy, we believe that
CPP-115
may ultimately work best as an adjunct therapy to existing drugs.
Vigabatrin has been marketed for decades in over 30 countries by Lundbeck and Sanofi-Aventis and their predecessors and licensees under the
brand names Sabril
®
, Sabrilex
®
and Sabrilan
®
(hereinafter referred to as
Sabril
®
) as an adjunct
(add-on)
treatment for adult epilepsy and as a primary treatment for the management of infantile spasms. The
composition of matter patents for Sabril
®
in the U.S. expired many years ago. On August 21, 2009, the FDA approved two NDAs for
Sabril
®
for the treatment of infantile spasms and as an adjunctive therapy for adult patients with refractory complex partial seizures who have failed treatments with several other
anti-epileptic drugs. The NDAs are for different formulations of Sabril
®
and both NDAs are held by Lundbeck. Due to the risks of visual field damage associated with vigabatrin, Sabril
®
was approved under an
FDA-mandated
Risk Evaluation and Mitigation Strategy (REMS) program and is only
available through a special restricted distribution program approved by the FDA. In 2016, the FDA authorized changes to the REMS program for Sabril
®
to make it less onerous and to make
it easier for patients to obtain their medication.
In chronic use for the treatment of epilepsy, vigabatrin has been generally well
tolerated with lower than average neurological side effects compared to other approved epilepsy therapies. The most common side effects reported have been drowsiness and fatigue. However, one clearly established adverse side effect is the
development of peripheral visual field defects, or VFDs. These VFDs are manifest as a constriction of the peripheral field of vision (i.e., tunnel vision). VFDs occur in approximately 33% of users when cumulative dosage levels of
vigabatrin approach approximately 1,500 grams.
18
Our previous clinical and
non-clinical
studies of
CPP-115
On November 1, 2010, we announced key results for our initial series of safety and
efficacy evaluations in a number of animal and
in-vitro
laboratory studies. These results included superior visual safety of
CPP-115,
compared to vigabatrin,
pharmacokinetic data supporting oral administration of
CPP-115,
pharmacologic target specificity, metabolic profile, and an absence of genotoxic, cardiovascular, respiratory, and liver enzyme side effects. It
was also shown to be effective in multiple animal models for epilepsy and cocaine addiction.
On May 22, 2012, we reported positive
results from a Phase 1a double-blind, placebo-controlled clinical trial evaluating the safety, tolerability and pharmacokinetic profile of
CPP-115.
The study evaluated single ascending doses ranging from 5 mg
to 500 mg (a dose greater than ten times the predicted effective dose of
15-30
mg/day derived from animal data) of
CPP-115
solution administered orally to 55 healthy
volunteers.
CPP-115
was found to be well tolerated with no side effects, rapidly absorbed and eliminated, and exhibited linear, dose dependent pharmacokinetics.
In December 2015 we announced top line results from a Phase 1b double-blind, placebo controlled safety and tolerance study of
CPP-115
in six normal healthy adult male volunteers. The results showed significant increases in brain levels of the surrogate marker for potential efficacy, gamma-aminobutyric acid (GABA), a mechanism known to
effectively treat epilepsy, infantile spams, and potentially Tourettes Disorder. The main adverse effect of prolonged elevated brain GABA, somnolence, was also observed.
While the primary objective of this study was to obtain safety and tolerance data for
CPP-115
administered over 14 days, brain GABA levels were measured as a surrogate marker of potential efficacy, since
CPP-115
is a second-generation GABA aminotransferase inhibitor. Specifically, this study
examined GABA levels in both the POC (Parietal-Occipital Cortex), a grey matter rich region thought to be associated with epilepsy, and which was previously studied for vigabatrin, and the SMA (Supplementary Motor Area), which is thought to be
associated with Tourettes Disorder. The maximum brain GABA increases, in both brain regions, ranged from about 150% to over 200% of baseline levels, as measured by magnetic resonance spectroscopy (MRS).
Previous clinical and
pre-clinical
studies of
CPP-115
undertaken by others
An animal study reporting positive
pre-clinical
efficacy in a rat
multiple hit model in which the use of
CPP-115
was evaluated for the treatment of infantile spasms was published in the January 2014 issue of the journal,
Epilepsia
, The study was authored by
Stephen W. Briggs, Tomonori Ono, MD, PhD, Solomon L. Moshe, MD and Aristea S. Galanopoulou, MD, PhD of the Saul R. Korey Department of Neurology, Dominick P. Purpura Department of Neuroscience, Laboratory of Developmental Epilepsy, The Comprehensive
Epilepsy Center (CEC) at Montefiore Medical Center / Albert Einstein College of Medicine of Yeshiva University, Bronx, New York. The study concluded that
(i) CPP-115
suppresses spasms in the
multiple-hit
model of infantile spasm, with onset of effect as early as the day after the first dose; (ii) the therapeutic doses of
CPP-115
were well tolerated in
developing rat pups; and
(iii) CPP-115
showed efficacy for a longer duration at lower doses that were better tolerated than the previously tested therapeutic vigabatrin doses.
19
In September 2016, the Journal of Epilepsy & Behavior Case Reports published a case
report of a child treated with
CPP-115
in an investigator-sponsored, investigational new drug protocol. Based on treatment with
CPP-115,
this particular child
experienced a significant reduction of seizures, with no evidence of retinal dysfunction. According to the case report, prior to treatment with
CPP-115,
the patient had failed ten drugs and the ketogenic diet,
and had approximately 100 seizures per day. One year after starting
CPP-115
and coming off of clobazam and vigabatrin, the patients reported seizures have seen a marked reduction in frequency and his
cognition and behavior have improved.
Northwestern University License Agreement
On August 27, 2009, we entered into a license agreement with Northwestern University (Northwestern), under which we acquired worldwide
rights to commercialize new GABA aminotransferase inhibitors and derivatives of vigabatrin which had been discovered and patented by Northwestern. Under the terms of the license agreement, Northwestern granted us an exclusive worldwide license to
United States composition of matter patents related to the new class of inhibitors and a patent application relating to derivatives of vigabatrin. This includes U.S. patent number 6,794,413 covering the composition of matter for
CPP-115.
We have designated the lead compound to be developed under this license as
CPP-115.
Under our license agreement with Northwestern, we will be responsible for continued research and development of any resulting drug candidates.
We have the right to terminate the agreement in whole or in part after August 27, 2012, upon written notice. As of December 31, 2016, we have paid Northwestern upfront payments, milestone fees and maintenance and patent fees aggregating
$411,950 and we are obligated to pay certain additional fees and milestone payments in future years relating to our clinical development activities under this license or payable upon passage of time (the next milestone payment, in the amount of
$300,000) is due on the earlier of completion of the first Phase 3 clinical trial of
CPP-115
or August 27, 2018). We are also obligated to pay Northwestern royalties on any products resulting from the
license agreement. We also have the right to enter into
sub-license
agreements, and if we do, a royalty on any
sub-license
fees will be payable to Northwestern.
Patent protection for
CPP-115
In addition to the exclusively licensed U.S. Patent 6,794,413, in March 2015, the U.S. Patent & Trademark Office (US PTO) issued
patent 8,969,413 for the method of use patent for
CPP-115
for neurological and psychological uses. This patent will expire in 2032, subject to potential extensions allowed under the Patent Term Restoration
Act. A continuation application was filed to capture additional methods of using CPP-115 for neurological and psychological conditions. This continuation application is undergoing substantive examination. Patents for the same coverage remain pending
in the European Patent Office, Japan and Canada. There can be no assurance that the claims of this patent will be allowed, or if allowed, that such claims will provide adequate patent protection for
CPP-115.
CPP-109
Generic Sabril
®
In September 2015, we announced the launch of a program to develop
CPP-109
as a generic version of
Sabril
®
, which is marketed in the United States by Lundbeck. Lundbecks exclusivity for Sabril
®
expires on April 26,
2017. Because of our prior experience developing our version of vigabatrin
(CPP-109),
we believe we are well positioned to develop and seek approval for a generic version of Sabril
®
. We are also hopeful that if we are successful in obtaining approval to commercialize this product, that our product will be one of the first generic versions approved for this product.
20
As part of our development of this product, we have obtained the reference listed drug and the
active pharmaceutical ingredient, entered into an exclusive supply agreement for the vigabatrin active pharmaceutical ingredient with a manufacturer that has filed a DMF, validated the manufacturing process, and prepared a number of batches of
vigabatrin for us on a commercial scale in the past, developed and validated quality control and stability test methods, and collected stability data showing that
CPP-109
has an acceptable shelf life in two
container closure systems. We are also taking the steps that will be required for us to submit one or more ANDAs for this generic product.
There can be no assurance that we will be successful in these efforts or that any ANDA that we may submit in the future for vigabatrin will be
accepted for review or approved. There can also be no assurance that any bioequivalence studies that we design for this product will be acceptable to the FDA, and even if a study design is deemed acceptable, whether any such studies will be
successful. Finally, any approved generic version of vigabatrin that we are approved to commercialize will, consistent with Sabril
®
, only be available subject to an
FDA-mandated
Risk Evaluation and Mitigation Strategy (REMS) program.
CPP-109
and
CPP-115
for the treatment of Tourettes
Disorder and related license agreement
We, as a
co-inventor
with scientists at New York
University (NYU) and the Feinstein Institute for Medical Research, have filed patent applications in the United States, European and Canadian Patent Offices for the use of GABA aminotransferase inhibitors, including
CPP-109
and
CPP-115,
in the treatment of Tourettes Disorder. We also have entered into a license agreement with NYU and the Feinstein Institute granting us
worldwide rights with respect to such patent.
Tourettes Disorder is a neurodevelopmental disorder characterized by multiple tics,
which are repetitive,
non-rhythmic
involuntary movements and vocalizations that persist for more than one year. Onset occurs in most children by about age five to six years. Some of the more common simple
motor tics include eye blinking, facial grimacing, shoulder shrugging, and head or neck jerking. Common simple vocal tics, include grunting, throat clearing, coughing and squeaking. Among the most dramatic and disabling complex tics are those that
result in self-harm, such as punching or poking oneself, or complex vocal tics such as coprolalia (uttering swear words) or echolalia (repeating the words or phrases of others). Many patients with Tourettes Disorder experience additional
neurobehavioral problems including inattention, hyperactivity and impulsivity, and obsessive-compulsive symptoms such as intrusive thoughts/worries and repetitive rituals.
Tourettes Disorder occurs in all ethnic groups; males are affected three to four times more often than females. The Centers for Disease
Control and Prevention (CDC) reported in 2012 Tourettes Disorder prevalence estimates from a national, telephone-based survey in which they asked parents if their children had received a diagnosis of the disorder. The trial found that
approximately 1 out of every 360 children have Tourettes Disorder, but it is thought that this underestimates the true occurrence of the disorder (the CDC notes that other studies using different methods have estimated the rate of
Tourettes Disorder at 1 out of every 162 children). The prevalence of Tourettes Disorder in adults is expected to be significantly less than in children as tic symptoms generally abate in later adolescence or early adulthood.
Tourettes Disorder is generally treated by a combination of therapy and psychiatric medication. Tics can be treated with medications
such as clonidine (Catapres
®
), haloperidol (Haldol
®
), pimazide (Orap
®
), or
fluphenazine (Prolixin
®
). Medications used to treat Obsessive Compulsive Disorder can also be used, such as clomipramine (Anafranil
®
),
fluoxetine (Prozac
®
) and sertraline (Zoloft
®
), as well as stimulants used to treat ADHD, a disorder commonly comorbid with
Tourettes Disorder, such as methylphenidate (Ritalin
®
), pemoline (Cylert
®
) and dextroamphetamine (Dexadrine
®
).
21
During June 2015, we announced the
top-line
results of an
academic investigator
proof-of-concept
study evaluating the use of
CPP-109
for the treatment of Tourettes Disorder. The
8-week,
four subject open label study was designed as an open label trial to evaluate the potential effect of
GABA-AT
inhibition as a mechanism for reducing tics in patients
with treatment-refractory Tourettes Disorder. The most common side-effects were daytime tiredness, and one subject experienced an increase in moodiness and obsessive-compulsive symptoms. Vigabatrin was used as a research surrogate
in this study to demonstrate the utility of
GABA-AT
blockade, with the expectation that upon successfully demonstrating the utility of this mechanism, further development activities would focus on the
potentially safer, more potent
GABA-AT
inhibitor,
CPP-115.
We believe that the
top-line
results from this study suggest an encouraging signal of activity in
adult treatment-refractory patients with Tourettes Disorder. Further, we believe that
CPP-109s
mechanism of action validates the potential for
CPP-115
to be
a candidate for the treatment of Tourettes Disorder. However, there can be no assurance that
CPP-115
will be effective for the treatment of adult refractory patients with Tourettes Disorder or will
ever be approved for this indication.
In February 2016, the US PTO issued U.S. Patent 9,254,274 for a method of treating Tourettes
Disorder using the entire class of GABA-aminotransferase inactivators, including
CPP-115
and vigabatrin (marketed in the U.S. by Lundbeck as Sabril
®
).
This patent is expected to expire no earlier than its twenty-year term in January 2033. The expiration of this patent could also be extended by up to 5 years under the patent term restoration act, depending on the review and approval of a new drug
application for a new chemical entity claimed in this patent and upon the indication approved for that drug. A continuation in part application including new data was filed prior to the patent issuance. This application
is undergoing substantive examination.
Intellectual Property Rights
Protection of our intellectual property and proprietary technology is a strategic priority for our business. We rely on a combination of
patent, trademark, copyright and trade secret laws along with institutional
know-how
and continuing technological advancement, to develop and maintain our competitive position. Our ability to protect and use
our intellectual property rights in the future development and commercialization of our products, operate without infringing the proprietary rights of others, and prevent others from infringing our proprietary rights, is crucial to our future
success. See Item 1A. Risk Factors Risks Related to Our Intellectual Property.
Manufacturing and Supply
We have no plans to build or acquire the manufacturing capability needed to manufacture any of our research materials or commercial
products. We expect that our drug products and drug substances will be prepared by contractors with suitable capabilities for these tasks and that we will enter into appropriate supply agreements with these contractors at appropriate times in
the development and commercialization of our products. Because we will use contractors to manufacture and supply our products, we will be reliant on such contractors. Further, the contractors selected would have to be inspected by the FDA and found
to be in substantial compliance with federal regulations in order for a drug application for one of our drug candidates to be approved, and there can be no assurance that the contractors we select would pass such an inspection.
22
Firdapse
®
We have entered into agreements with a supplier of the active pharmaceutical ingredient (API) contained in Firdapse
®
for future requirements and we have contracted with third-party contract manufacturers who will manufacture Firdapse
®
tablets
for us assuming Firdapse
®
is approved for commercialization.
Any NDA that
we submit for Firdapse
®
must include a manufacturing plan. If the manufacturing plan and data are insufficient, any NDA we submit will not be approved. Before an NDA can be approved, our
manufacturers must also demonstrate compliance with FDAs current Good Manufacturing Practices (cGMPs) regulations and policies. Further, even if we receive approval of an NDA for
Firdapse
®
, if our manufacturers do not follow cGMPs in the manufacture of our products, it may delay product launches or shipments and adversely affect our business.
Since we contract with third parties to manufacture our products, if the FDA approves an NDA for Firdapse
®
, our contract manufacturers will be required to comply with all applicable environmental laws and regulations that affect the manufacturing process. As a result, we do not believe that we will
have any significant direct exposure to environmental issues.
CPP-115
We have entered into a contract to manufacture the API sufficient to meet the needs of our ongoing and planned
pre-clinical
and clinical studies of
CPP-115.
While we believe that we have ordered and obtained sufficient API for our planned upcoming studies, there can be no
assurance of this.
CPP-109
In preparation for the potential future marketing of
CPP-109
as a generic version of Sabril
®
, we have entered into supply agreements for the API of
CPP-109.
Additionally, our contract manufacturer of
CPP-109
tablets previously developed a manufacturing process for vigabatrin tablets and prepared several commercial scale batches. Our current contract manufacturer also has, based on their experience with
CPP-109
tablets, the necessary experience and capability to produce generic vigabatrin for oral solution product. Additionally, Catalyst has entered in to an agreement to package vigabatrin for oral
solution. Finally, while we have not entered into a contract for commercial production of this product, we believe that our current contract manufacturer and packagers have the capability to produce the product for us for commercial
distribution.
Sales and Marketing
We have not yet obtained regulatory approval for any of our drug candidates.
Until the receipt of an RTF letter regarding our NDA for Firdapse
®
for the treatment of LEMS, we had begun to hire a sales staff, including a Chief Commercial Officer. However, following the receipt of the RTF letter we put most of these activities on hold in order
to conserve funds, and underwent a
reduction-in-force
in May 2016 in which we terminated most of our commercial staff.
As our second Phase 3 trial for
Firdapse
®
continues and we get closer to acceptance of an NDA for this product, we intend to begin again to focus on our commercialization
efforts. In that regard, we may restart our efforts to hire our own sales force or we may investigate alternate arrangements (such as retention of an outside sales force).
23
In the future, we may also consider entering into arrangements with other pharmaceutical or
biotechnology companies for the marketing and sale of Firdapse
®
in Canada or Mexico, where we have also licensed the product.
Competition
The
pharmaceutical industry is intensely competitive, and any product candidate developed or licensed by us would likely compete with currently marketed and potentially new drugs and therapies even though they are not indicated for these conditions.
There are many pharmaceutical companies, biotechnology companies, public and private universities, government agencies and research organizations that compete with us in developing various approaches to the treatment of orphan diseases. Many of
these organizations have substantially greater financial, technical, marketing and manufacturing resources than we have.
Firdapse
®
for LEMS
LEMS is currently treated with unapproved drugs and therapies including
steroids, azathioprine, other immunosuppressants and intravenous immunoglobulin, which work by suppressing the immune system, and pyridostigmine. Plasma exchange has also been used in an attempt to remove antibodies from the body. Further, one other
product, guanidine HCl tablets, was approved many years ago (during a period when drugs were not required to be reviewed by the FDA for both safety and effectiveness) for use in the treatment of LEMS. However, this drug has significant side effects
and is not currently viewed as an effective treatment for LEMS. Notwithstanding, drugs may be prescribed by physicians for the treatment of LEMS whether or not they are considered effective.
Another pharmaceutical company, Jacobus Pharmaceutical, has completed a clinical trial studying the safety and efficacy of its own formulation
of amifampridine for the treatment of LEMS. Jacobus Pharmaceutical is a privately held company and there is little public information available about their development plans. While there can be no assurance, we believe that Firdapse
®
is further along in development than this other companys version of amifampridine. Under the Orphan Drug Act of 1983, the first pharmaceutical product to get approval for an indication
receives the orphan exclusivity under the statute. If this other pharmaceutical company is able to receive approval of an NDA for its formulation of amifampridine for the treatment of LEMS before we are able to receive approval of Firdapse
®
for the same indication, we would be barred from marketing Firdapse
®
in the United States during the seven-year orphan exclusivity period,
which would have a severe adverse effect on our results of operations. In addition, if this other company were to receive five-year new chemical entity exclusivity for amifampridine for any indication prior to approval of Firdapse
®
, and FDA determined that our NDA was a 505(b)(2) NDA, we would be barred from marketing Firdapse
®
in the United States during this
five-year exclusivity period for any indication. Further, we are aware that Jacobus Pharmaceutical has been making its
3,4-DAP
product available to LEMS patients under compassionate use Investigational New
Drug applications (INDs) for a number of years and, based on current information, we believe that approximately 200 LEMS patients may be receiving the drug under their program. If we are the first to obtain an approval for this product and its
associated exclusivity and patent protection, we may not be able to stop Jacobus Pharmaceutical from continuing to supply its existing patients under compassionate use INDs.
Finally, we are aware that amifampridine has been available from compounding pharmacies for many years and may remain available, even if we
are able to obtain FDA approval of Firdapse
®
. Compounded amifampridine, if it remains available, is likely to be substantially less expensive than Firdapse
®
. The Food and Drug Administration Modernization Act of 1997 included a new section, which clarified the status of pharmacy compounding under Federal law. Under section 503A, drug products that
are compounded by a
24
pharmacist or physician for an individual patient may be entitled to exemptions from three key provisions of the act: (1) the adulteration provision of section 501(a)(2)(B) (concerning the
good manufacturing practice requirements); (2) the misbranding provision of section 502(f)(1) (concerning the labeling of drugs with adequate directions for use); and (3) the new drug provision of section 505 (concerning the approval of drugs
under new drug or abbreviated new drug applications).
To qualify for these statutory exemptions, a compounded drug product must satisfy
several requirements. One of these requirements restricted the universe of bulk drug substances that a compounder may use; i.e. that every bulk drug substance used in compounding: (1) must comply with an applicable and current USP or NF
monograph, if one exists, as well as the current USP chapter on pharmacy compounding; (2) if such a monograph does not exist, the bulk drug substance must be a component of an
FDA-approved
drug; or
(3) if a monograph does not exist and the bulk drug substance is not a component of an
FDA-approved
drug, it must appear on a list of bulk drug substances that may be used in compounding (i.e., the bulk
drugs list). While Section 503 was ruled unconstitutional by the Supreme Court in 2002, the FDA has continued to aggressively oversee the practice of compounding under a compliance policy guide utilizing its discretion under the principles
described above, and these principles were codified into a new section 503A passed by Congress as part of the Drug Quality and Security Act of 2013 (DQSA). While FDA has been aggressively enforcing section 503A since its enactment, compounders still
may attempt to compound copies of approved drug products, under section 503A, so long as the prescriber makes a change to the compounded formulation that creates a difference between the commercially available drug and the compounded version for
that particular patient.
The FDAs Pharmacy Compounding Advisory Committee at its meeting on May
6-7,
1999 voted
7-4
against inclusion of
3,4-DAP
on the bulk drugs list, largely based on the safety concerns and the commitment
of Jacobus Pharmaceutical to make the drug available under compassionate use INDs, while pursuing FDA approval. Therefore, since
3,4-DAP
does not meet the requirements codified in Section 503A described above,
the individual or firm that compounds a drug product containing
3,4-DAP
may be subject to a warning letter, seizure of product, injunction, and/or criminal prosecution for violations of the FD&C Act. After
the
re-enactment
of section 503A, and the enactment of new section 503B of the DQSA (i.e., permitting sterile compounding for office use by outsourcing facilities), certain entities nominated 3,4 DAP as a bulk
substance to be used in compounding under both reenacted section 503A and under the newly enacted section 503B. As of October 2015, FDA included
3,4-DAP
in its Bulks Substance List 3 under both
section 503A and section 503B which list includes bulk drug products that may not currently be used in compounding because there is insufficient clinical evidence to support their use.
We intend to take all available steps to try to enforce our marketing proprietary rights if we are the first company to obtain an approval for
this product. We cannot determine with certainty what impact these factors will have on the market for our product. However, while there can be no assurance, we expect that despite these factors, we will be able to successfully market our product.
CPP-115
for Epilepsy
The market for epilepsy treatments is highly competitive. Large pharmaceutical companies, including Pfizer (Neurontin
®
, Lyrica
®
, Dilantin
®
,
Zarontin
®
), J&J (Topamax
®
), UCB (Keppra
®
), Abbott (Depakote
®
), GSK (Lamictal
®
), Roche (Klonopin
®
), and Novartis (Trileptal
®
) sell, or are developing, epilepsy therapies. However, as stated earlier, approximately
one-third
of all epilepsy patients are refractory to treatment with
any currently available epilepsy treatments. It is difficult to determine sales of products specifically for epilepsy as many of these products are used in other indications such as neuropathic pain, migraine, dementia, and bipolar disorders.
25
Generic Sabril
®
Sabril
®
is marketed by Lundbeck in the United States for infantile spasms and
for refractory complex partial seizures. Lundbecks sales of Sabril
®
(tablets and sachets) were approximately $142 million in
2015 and $193 million in 2016. No generic version of Sabril
®
has been approved to date in the United States.
Factors affecting competition generally
In general, our ability to compete will depend in large part upon:
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our ability to complete clinical development and obtain regulatory approvals for our drug candidates;
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the demonstrated efficacy, safety and reliability of our drug candidates;
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the timing and scope of regulatory approvals;
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product acceptance by physicians and other health care providers;
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protection of our proprietary rights and the level of generic competition;
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the speed at which we develop drug candidates;
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our ability to supply commercial quantities of a product to the market;
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our ability to obtain reimbursement from private and/or public insurance entities for product use in approved
indications;
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our ability to recruit and retain skilled employees; and
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the availability of capital resources to fund development and commercialization activities, including the
availability of funding from the federal government.
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Regulatory Matters
Government regulation and product approval
Government authorities in the United States, at the federal, state and local level, and other countries extensively regulate, among other
things, the research, development, testing, manufacture, labeling, record-keeping, promotion, storage, advertising, distribution, marketing and export and import of products such as those we are developing. Our drugs must be approved by the FDA
through the NDA process before they may be legally marketed in the United States.
In the United States, drugs are subject to rigorous
regulation by the FDA under the Federal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations, as well as other federal and state statutes. The process of obtaining regulatory approvals and the subsequent compliance with appropriate
federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure to comply with the applicable United States requirements at any time during the product development process,
approval process or after approval, may subject an applicant to administrative or judicial sanctions. These
26
sanctions could include the FDAs refusal to approve pending applications, license suspension or revocation, withdrawal of an approval, a clinical hold, warning letters, product recalls,
product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties or criminal prosecution. Any agency or judicial enforcement action could have a material adverse effect on us. The process required by
the FDA before a drug may be marketed in the United States generally involves the following:
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completion of
pre-clinical
laboratory tests, animal studies and
formulation studies according to the FDAs good laboratory practice, or GLP, regulations;
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submission of an investigational new drug application, or IND, which must become effective before human
clinical trials may begin and which must include approval by an institutional review board, or IRB, at each clinical site before the trials are initiated;
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performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the
proposed drug for its intended use conducted in compliance with federal regulations and good clinical practice, or GCP, an international standard meant to protect the rights and health of patients and to define the roles of clinical trial sponsors,
administrators, and monitors;
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submission to, and acceptance by, the FDA of an NDA;
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satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is
produced to assess compliance with current good manufacturing practice, or cGMP, regulations to assure that the facilities, methods and controls are adequate to preserve the drugs identity, strength, quality and purity;
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potential FDA audit of the
non-clinical
and clinical trial sites that
generated the data in support of the NDA; and
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FDA review and approval of the NDA.
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United States drug development process
Once a pharmaceutical candidate is identified for development it enters the
pre-clinical
testing stage.
Pre-clinical
tests include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies. Prior to beginning human clinical trials, an IND sponsor must submit an IND to the
FDA. The IND sponsor must submit the results of the
pre-clinical
tests, together with manufacturing information and analytical data, to the FDA as part of the IND. Some
pre-clinical
or
non-clinical
testing may continue even after the IND is submitted. In addition to including the results of the
pre-clinical
studies, the IND will also include a protocol detailing, among other things, the objectives of the clinical trial, the parameters to be used in monitoring safety and the effectiveness criteria to
be evaluated, if the trial lends itself to an efficacy evaluation. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30day time period, raises concerns or questions about the conduct of the
trial. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. The FDA may, at any time, impose a clinical hold on ongoing clinical trials. If the FDA imposes a clinical hold, clinical
trials cannot commence or recommence without FDA authorization and then only under terms authorized by the FDA.
Clinical trials involve
the administration of the investigational new drug to healthy volunteers or patients under the supervision of one or more qualified investigators in accordance with federal regulations and GCP.
27
Clinical trials must be conducted under protocols detailing the objectives of the trial and the
safety and effectiveness criteria to be evaluated. Each protocol must be submitted to the FDA as part of the IND. Further, an Institutional Review Board (IRB) at each institution participating in the clinical trial must review and approve each
protocol before any clinical trial commences at that institution. All research subjects must provide informed consent, and informed consent information must be submitted to the IRB for approval prior to initiation of the trial. Progress reports
detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently if adverse events or other certain types of other changes occur.
Human clinical trials are typically conducted in three phases. A fourth, or post-approval, phase may include additional clinical studies.
These phases generally include the following, and may be sequential, or may overlap or be combined:
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Phase 1 clinical trials involve the initial introduction of the drug into human subjects. These studies are
designed to determine the safety of usually single doses of the compound and determine any dose limiting intolerance, as well as evidence of the metabolism and pharmacokinetics of the drug in humans.
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Phase 2 clinical trials usually involve studies in a limited patient population to evaluate the safety and
efficacy of the drug for specific, targeted indications, to determine dosage tolerance and optimal dosage, and to identify possible adverse effects and safety risks.
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In Phase 3, if a compound is found to be potentially effective and to have an acceptable safety profile in
Phase 2 (or occasionally Phase 1) studies, the Phase 3 studies will be conducted to further confirm clinical efficacy, optimal dosage and safety within an expanded population which may involve geographically diverse clinical trial sites. Generally,
but not always, two adequate and well-controlled Phase 3 clinical trials are required by the FDA for approval of an NDA.
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Phase 4 clinical trials are studies required of or agreed to by a sponsor that are conducted after the FDA has
approved a product for marketing. These studies are used to gain additional experience from the treatment of patients in the intended therapeutic indication and to document a clinical benefit in the case of drugs approved under accelerated approval
regulations. If the FDA approves a product while a company has ongoing clinical trials that were not necessary for approval, a company may be able to use the data from these clinical trials to meet all or part of any Phase 4 clinical trial
requirement. Failure to promptly conduct Phase 4 clinical trials where necessary could result in withdrawal of approval for products approved under accelerated approval regulations.
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While Phase 1, Phase 2, and Phase 3 tests are generally required for approval of an NDA, certain drugs may not require one or more steps in
the process depending on other testing and the situation involved. Additionally, the FDA, an IRB, or the sponsor may stop testing at any time if results show patients being exposed to unnecessary health risks or overly dangerous side effects.
Pursuant to the 21
st
Century Cures Act, which was enacted on December 13, 2016, the
manufacturer of an investigational drug for a serious or life-threatening disease is required to make available, such as by posting on its website, its policy on evaluating and responding to requests for expanded access to such investigational drug.
This requirement applies on the later of 60 calendar days after the date of enactment of the law or the initiation of a Phase 2 or Phase 3 trial of the investigational drug.
28
Concurrent with clinical trials, companies usually complete additional animal 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 capable of consistently
producing quality batches of the drug candidate and, among other requirements, the manufacturer must develop methods for testing the identity, strength, quality and purity of the final drug. 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.
Special factors with respect to clinical trials and
pre-clinical
studies conducted by others
The primary focus of our product development efforts is on our own clinical trials and
pre-clinical
studies. However, we have in the past supported and will continue in the future to support
pre-clinical
studies and clinical trials and studies by academic
investigators (including members of our scientific advisory committee and academic institutions with which they are affiliated) of the use of our drug candidates that we believe might further the understanding or increase the value of our drug
candidates.
In some cases, in the past, we have provided unrestricted sponsorship funds for such studies and we may do so again in the
future. In other cases, we have provided, and may in the future provide, alternative assistance to the investigator, most typically providing drug substance or dosage form as well as matching placebo. We expect to continue supporting
investigator-sponsored studies in the future to the extent that they meet criteria acceptable to us. In all cases, we seek to assist investigators in designing their studies so that such studies are most appropriately conducted and, to the extent
possible, to make sure that these investigator studies potentially complement, and do not adversely impact, our activities.
United
States review and approval process
FDA approval of an NDA is required before marketing of the product may begin in the United States.
The NDA must include the results of product development,
pre-clinical
studies and clinical studies, together with other detailed information, including information on the chemistry, manufacture and composition
of the product. The FDA has 60 days from its receipt of the NDA to review the application to ensure that it is sufficiently complete for substantive review before accepting it for filing. The FDA may request additional information rather than accept
an NDA for filing. In this event, the NDA must be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an
in-depth
substantive review. The submission of an NDA is also subject to the payment of a substantial application fee (for FDA fiscal year 2017 this fee was $2,038,100), although a waiver of such fee may be obtained
under certain limited circumstances, including when the drug that is subject of the application has received Orphan Drug Designation for the indication sought. Further, the sponsor of an approved NDA is subject to annual product and establishment
user fees, which for FDA fiscal year 2017 were $97,750 per product and $512,200 per establishment. Application, product, and establishment fees typically increase annually although they decreased slightly from fiscal year 2016 to fiscal year 2017.
The approval process is lengthy and difficult and the FDA may refuse to approve an NDA if the applicable regulatory criteria are not satisfied or may require additional clinical or other data and information. Even if such data and information is
submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. The FDA may also refer applications for novel drug products or drug products which present difficult questions of safety or efficacy to an advisory
committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved. The FDA is not bound by the recommendation of an advisory committee. The FDA
reviews an NDA to determine, among other things, whether a product is safe and effective for its intended use. Before approving an NDA, the FDA will inspect the facility or facilities where the product is manufactured to determine whether its
manufacturing is cGMPcompliant to assure and preserve the products identity, strength, quality, purity and stability.
29
If the FDAs evaluation of the NDA submission or manufacturing facilities is not favorable,
the FDA will issue a complete response letter. The complete response letter outlines the deficiencies in the submission and often requires additional testing or information in order for the FDA to reconsider the application. Even after submitting
this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval. With limited exceptions, the FDA may withhold approval of a NDA regardless of prior advice it may have provided or
commitments it may have made to the sponsor.
Special Protocol Assessments
An SPA is a process in which sponsors may request to meet with the FDA to reach agreement on the design and size of certain clinical trials,
clinical studies, or animal trials to determine if they adequately address scientific and regulatory requirements. As part of this process, sponsors submit specific questions about protocol design and scientific and regulatory requirements. After
the FDA completes the review of an SPA request, the FDA may issue a SPA Letter, including an assessment of the protocol, agreement or
non-agreement
with the proposed protocol, and answers to the sponsors
relevant questions.
An SPA agreement indicates concurrence by the FDA with the adequacy and acceptability of specific critical elements
of overall protocol design (e.g., entry criteria, dose selection, endpoints, and planned analyses). These elements are critical to ensuring that the trial conducted under the protocol has the potential to support a future submitted
applications ability to meet regulatory requirements for approval. Feedback on these issues provides the greatest benefit to sponsors in planning late-phase development strategy. However, an SPA agreement does not indicate FDA concurrence on
every protocol detail. Further, the FDA may rescind a SPA if the director of the FDA reviewing division determines that a substantial scientific issue essential to determining the safety or efficacy of the drug was identified after the trial began.
Thus, a SPA is not binding on the FDA if, for example, the Agency identifies a safety concern related to the product or its pharmacological class, if the FDA or the scientific community recognizes a paradigm shift in disease diagnosis or management,
if the relevant data or assumptions provided by the sponsor in the SPA submission are found to be false or misstated, or if the sponsor fails to follow the protocol that was agreed upon with the FDA. The FDA retains significant latitude and
discretion in interpreting the terms of a SPA agreement and the data and results from the applicable clinical trial.
Because an SPA
provides for the evaluation of protocols for trials that have not been initiated, the conduct and results of the subsequent trial are not part of the evaluation. Therefore, the existence of an SPA agreement does not guarantee that the FDA will
accept an NDA, or that the trial results will be adequate to support approval. Those issues are addressed during the review of a submitted application; however, it is hoped that trial quality will be improved by the SPA process.
Post-approval requirements and consideration
Once an NDA is approved, a product will be subject to certain post-approval requirements. For instance, the FDA closely regulates the
post-approval marketing and promotion of drugs, including standards and regulations for
direct-to-consumer
advertising,
off-label
promotion, industry-sponsored scientific and educational activities and promotional activities involving the internet. As a condition of NDA approval, the FDA may also require a risk evaluation and mitigation strategy, or REMS, to help ensure that
the benefits of the drug outweigh the potential risks. REMS can include medication guides, communication plans for the healthcare professionals, and other Elements To Assure Safe Use, or ETASU. ETASU can include, but are not limited to, special
training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring, and the use of patient registries. The requirement for a REMS can materially affect the potential market and profitability of
the drug.
30
Drugs may be marketed only for the approved indications and in accordance with the provisions of
the approved labeling. Changes to some of the conditions established in an approved application, including changes in indications, labeling, or manufacturing processes or facilities, require submission and FDA approval of a new NDA or NDA supplement
before the change can be implemented. An NDA supplement for a new indication typically requires clinical data similar to that in the original application, and the FDA uses the same procedures and actions in reviewing NDA supplements as it does in
reviewing NDAs.
Adverse event reporting and submission of periodic reports is required following FDA approval of an NDA. The FDA also may
require post-marketing testing, known as Phase 4 testing, and surveillance to monitor the effects of an approved product or place conditions on an approval that could restrict the distribution or use of the product. In addition, quality control as
well as drug manufacture, packaging, and labeling procedures must continue to conform to cGMPs after approval. Drug manufacturers and certain of their subcontractors are required to register their establishments with the FDA and certain state
agencies, and are subject to periodic unannounced inspections by the FDA during which the agency inspects manufacturing facilities to assess compliance with cGMPs. Accordingly, manufacturers must continue to expend time, money and effort in the
areas of production and quality control to maintain compliance with cGMPs. Regulatory authorities may withdraw product approvals or request product recalls if a company fails to comply with regulatory standards, if it encounters problems following
initial marketing, or if previously unrecognized problems are subsequently discovered.
The Hatch-Waxman Amendments
Orange Book Listing
In seeking approval for a drug through an NDA, applicants are required to list with the FDA each patent with claims covering the
applicants product or methods of using the product. Upon approval of a drug, each of the patents listed in the application for the drug is then published in the FDAs Approved Drug Products with Therapeutic Equivalence Evaluations,
commonly known as the Orange Book. Drugs listed in the Orange Book can, in turn, be cited by potential generic competitors in support of approval of an abbreviated new drug application, or ANDA. An ANDA provides for marketing of a drug product that
has the same active ingredients in the same strengths and dosage form as the listed drug and has been shown to be bioequivalent to the listed drug. Other than the requirement for bioequivalence testing, ANDA applicants are not required to conduct,
or submit results of,
pre-clinical
or clinical tests to prove the safety or effectiveness of their drug product. Drugs approved in this way are commonly referred to as generic equivalents to the
listed drug, and can often be substituted by pharmacists under prescriptions written for the original listed drug.
The ANDA applicant is
required to certify to the FDA concerning any patents listed for the approved product in the FDAs Orange Book. Specifically, the applicant must certify that: (i) the required patent information has not been filed; (ii) the listed
patent has expired; (iii) the listed patent has not expired, but will expire on a particular date and approval is sought after patent expiration; or (iv) the listed patent is invalid or will not be infringed by the new product. The ANDA
applicant may also elect to submit a section viii statement certifying that its proposed ANDA label does not contain (or carves out) any language regarding the patented
method-of-use
rather than certify to a listed
method-of-use
patent. If the applicant does
not challenge the listed patents, the ANDA application will not be approved until all the listed patents claiming the referenced product have expired.
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A certification that the new product will not infringe the already approved products listed
patents, or that such patents are invalid, is called a Paragraph IV certification. If the ANDA applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification to the NDA and
patent holders once the ANDA has been accepted for filing by the FDA. The NDA and patent holders may then initiate a patent infringement lawsuit in response to the notice of the Paragraph IV certification. The filing of a patent infringement lawsuit
within 45 days of the receipt of a Paragraph IV certification automatically prevents the FDA from approving the ANDA until the earlier of 30 months, expiration of the patent, settlement of the lawsuit, or a decision in the infringement case that is
favorable to the ANDA applicant.
The ANDA application also will not be approved until any applicable
non-patent
exclusivity listed in the Orange Book for the referenced product has expired.
Exclusivity
Upon NDA approval of a new chemical entity or NCE, which is a drug that contains no active moiety that has been approved by FDA in any other
NDA, that drug receives five years of marketing exclusivity during which FDA cannot receive any ANDA seeking approval of a generic version of that drug. A drug may obtain a three-year period of exclusivity for a particular condition of approval, or
change to a marketed product, such as a new formulation for the previously approved product, if one or more new clinical studies (other than bioavailability or bioequivalence studies) was essential to the approval of the application and was
conducted/sponsored by the applicant. During this period of exclusivity, FDA cannot approve an ANDA for a generic drug that includes the change.
An ANDA may be submitted one year before NCE exclusivity expires if a Paragraph IV certification is filed. If there is no listed patent in the
Orange Book, there may not be a Paragraph IV certification, and, thus, no ANDA may be filed before the expiration of the exclusivity period.
Section 505(b)(2) New Drug Applications
Most drug products obtain FDA marketing approval pursuant to an NDA or an ANDA. A third alternative is a special type of NDA, commonly referred
to as a Section 505(b)(2), or 505(b)(2), NDA, which enables the applicant to rely, in part, on FDAs previous approval of a similar product, or published literature, in support of its application.
505(b)(2) NDAs often provide an alternate path to FDA approval for new or improved formulations or new uses of previously approved products.
Section 505(b)(2) permits the filing of an NDA where at least some of the information required for approval comes from studies not conducted by, or for, the applicant and for which the applicant has not obtained a right of reference. If the Section
505(b)(2) applicant can establish that reliance on FDAs prior findings of safety and effectiveness or published literature is scientifically appropriate, it may eliminate the need to conduct certain
pre-clinical
or clinical studies of the new product. The FDA may also require companies to perform additional studies or measurements to support the change from the approved product. The FDA may then approve
the new product candidate for all, or some, of the label indications for which the referenced product has been approved, as well as for any new indication sought by the Section 505(b)(2) applicant.
To the extent that the Section 505(b)(2) applicant is relying on studies conducted for an already approved product, the applicant is required
to certify to the FDA concerning any patents listed for the approved product in the Orange Book to the same extent that an ANDA applicant would. A Section 505(b)(2) NDA may be eligible for three years of marketing exclusivity to the same extent that
a Section 505(b)(1) NDA is.
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Abbreviated new drug applications
Generic drugs may enter the market after the approval of an ANDA. The ANDA development process typically does not require new
pre-clinical
or clinical studies, but it does typically require one or more bioequivalence studies to show that the ANDA drug is bioequivalent to the previously approved brand name reference listed drug.
Bioequivalence studies compare the bioavailability of the proposed drug product with that of the approved listed product containing the same active ingredient. Bioavailability is a measure of the rate and extent to which the active ingredient or
active moiety is absorbed from a drug product and becomes available at the site of action. A demonstration of bioequivalence means that the rate and extent of absorption of the ANDA drug is not significantly different from the rate and extent of
absorption of the brand name reference listed drug when administered at the same molar dose under similar experimental conditions.
As
noted above, generic drug products are generally introduced to the marketplace at the expiration of patent protection and
non-patent
market exclusivity for the reference listed drug. However, if an ANDA
applicant is the first ANDA applicant to submit an ANDA containing a Paragraph IV certification, that ANDA may be eligible for a period of generic marketing exclusivity on approval. This exclusivity, which under certain circumstances must be shared
with other ANDA applicants with Paragraph IV certifications, lasts for 180 days, during which the FDA cannot grant final approval to other ANDA sponsors of an application for a generic equivalent to the same reference drug. Under certain
circumstances, eligibility for
180-day
exclusivity may be forfeited.
Various types of changes to
an approved ANDA must be requested in a prior approval supplement. In addition, some changes may only be approved only after new bioequivalence studies are conducted or other requirements are satisfied. In addition, the ANDA applicant must
demonstrate that manufacturing procedures and operations conform to FDA cGMP requirements. Facilities, procedures, operations and/or testing of products are subject to periodic inspection by the FDA and other authorities. In addition, the FDA
conducts
pre-approval
and post-approval reviews and inspections to determine whether the systems and processes are in compliance with cGMP and other FDA regulations.
There are also user fees for ANDA applicants, sponsors, and manufacturers. For fiscal year 2017, the fees are $70,480 per ANDA application,
$35,240 per ANDA prior approval supplement, and facility fees of $258,646 per domestic final dosage form facility, $273,646 per foreign final dosage form facility, $44,234 per domestic active pharmaceutical ingredient facility, and $59,234 per
foreign active pharmaceutical ingredient facility. These user fees typically increase each fiscal year.
Other regulatory requirements
In addition to regulation by the FDA and certain state regulatory agencies, we are also subject to a variety of foreign regulations
governing clinical trials and the marketing of other products. Outside of the United States, our ability to market a product depends upon receiving a marketing authorization from the appropriate regulatory agencies. The requirements governing the
conduct of clinical trials, marketing authorization, pricing and reimbursement vary widely from country to country. In any country, however, we will only be permitted to commercialize our products if the appropriate regulatory agency is satisfied
that we have presented adequate evidence of safety, quality and efficacy. Whether or not FDA approval has been obtained, approval of a product by the comparable regulatory authorities of foreign countries must be obtained prior to the commencement
of marketing of the product in those countries. The regulatory approval and oversight process in other countries includes all of the risks associated with regulation by the FDA and certain state regulatory agencies as described above.
33
Under the European Union regulatory system, applications for drug approval may be submitted
either in a centralized or decentralized manner. Under the centralized procedure, a single application to the European Medicines Agency leads to an approval granted by the European Commission which permits marketing of the product throughout the
European Union. The decentralized procedure provides for mutual recognition of nationally approved decisions and is used for products that do not comply with requirements for the centralized procedure. Under the decentralized procedure, the holders
of national marketing authorization in one of the countries within the European Union may submit further applications to other countries within the European Union, who will be requested to recognize the original authorization based on an assessment
report provided by the country in which marketing authorization is held.
Pharmaceutical pricing and reimbursement
In both US and foreign markets, our ability to commercialize our products successfully, and to attract commercialization partners for our
products, depends in significant part on the availability of adequate financial coverage and reimbursement from third-party payors, including, in the United States, governmental payors such as Medicare and Medicaid, managed care organizations,
private commercial health insurers and PBMs. Third party payors are increasingly challenging the prices charged for medicines and examining their cost effectiveness, in addition to their safety and efficacy. We may need to conduct expensive
pharmacoeconomic or other studies in order to further demonstrate the value of our products. Even with the availability of such studies, our products may be considered less safe, less effective or less cost-effective than alternative products, and
third party payors may not provide coverage and reimbursement for our drug candidates, in whole or in part.
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 healthcare system in ways that
could significantly affect our business, including the Patient Protection and Affordable Care Act of 2010 (the Affordable Care Act). In fact, there are currently efforts in Congress to repeal the Affordable Care Act and replace it with
another law and President Trump has stated that he supports repeal of all or portions of the Affordable Care Act. As a result, there is great uncertainty as to what changes will be made to U.S. healthcare laws and there can be no assurance how
changes to those laws may affect our business.
We anticipate that in the US, Congress, state legislatures, and private sector entities
will continue to consider and may adopt healthcare policies intended to curb rising healthcare costs. These cost containment measures could include:
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controls on government-funded reimbursement for drugs;
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controls on healthcare providers;
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controls on pricing of pharmaceutical products;
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challenges to the pricing of drugs or limits or prohibitions on reimbursement for specific products through
other means;
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reform of drug importation laws;
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entering into contractual agreements with payors; and
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expansion of use of managed-care systems in which healthcare providers contract to provide comprehensive
healthcare for a fixed cost per person.
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We are unable to predict what additional legislation, regulations or policies, if any, relating
to the healthcare industry or third-party coverage and reimbursement may be enacted in the future or what effect such legislation, regulations or policies would have on our business. Any cost containment measures, including those listed above, or
other healthcare system reforms that are adopted may have a material adverse effect on our business prospects.
Further, the pricing of
pharmaceutical products generally, and particularly the pricing of orphan drugs, has recently received scrutiny from the press, from members of Congress in both parties, and from President Trump. Some members of the medical community have also
weighed in the press on the potential pricing of orphan drugs generally and our product specifically. The impact of this scrutiny on us and on the pricing of orphan drugs and other pharmaceutical products generally cannot be determined with any
certainty at this time.
Orphan Drug Exclusivity and Pediatric Exclusivity Designation
Some jurisdictions, including the United States and Europe, may designate drugs for relatively small patient populations as orphan drugs. Under
the Orphan Drug Act of 1983 (ODA), the FDA may grant Orphan Drug Designation to drugs intended to treat a rare disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the United
States and for which there is no reasonable expectation that the cost of developing and making available in the United States a drug for this type of disease or condition will be recovered from sales in the United States for that drug. In the United
States, Orphan Drug Designation must be requested before submitting an application for marketing approval. An Orphan Drug Designation does not shorten the duration of the regulatory review and approval process. The grant of an Orphan Drug
Designation request does not alter the standard regulatory requirements and process for obtaining marketing approval. Safety and efficacy of a compound must be established through adequate and well-controlled studies. If a product which has been
granted Orphan Drug Designation subsequently receives the first FDA approval for the indication for which it has such designation, the product is entitled to an orphan drug exclusivity period, which means the FDA may not approve any other
application to market the same drug for the same indication for a period of seven years, except in limited circumstances, such as where an alternative product demonstrates clinical superiority to the product with orphan exclusivity. In addition,
holders of exclusivity for orphan drugs are expected to assure the availability of sufficient quantities of their orphan drugs to meet the needs of patients. Failure to do so could result in the withdrawal of marketing exclusivity for the drug.
The orphan drug exclusivity contained in the ODA has been the subject of recent scrutiny from the press, from some members of Congress and
from some in the medical community. There can be no assurance that the exclusivity granted in ODA to orphan drugs approved by the FDA will not be modified in the future, and as to how any such change might affect our products, if approved.
Pediatric exclusivity is another type of
non-patent
exclusivity in the U.S. and, if granted, provides
for the attachment of an additional six months of marketing protection to the term of any existing regulatory exclusivity, including the five-year and three-year
non-patent
and seven-year orphan exclusivities.
This
six-month
exclusivity may be granted if an NDA sponsor submits pediatric data that fairly responds to a written request from the FDA for such data. The data do not need to show the product to be effective
in the pediatric population studied. If the FDA determines that information relating to the use of the new drug in the pediatric population may produce health benefits in the population, the clinical study is deemed to fairly respond to the
FDAs request and the reports of
FDA-requested
pediatric studies are submitted to and accepted by the FDA within the statutory time limits, whatever statutory or regulatory periods of exclusivity or
patent protection covering the product are extended by six months. This is not a patent term extension, but it effectively extends the regulatory period during which the FDA cannot approve another application relying on the NDA sponsors data.
35
The European Orphan Drug Regulation is considered for drugs intended to diagnose, prevent or
treat a life-threatening or very serious condition afflicting five or fewer per 10,000 people in the EU, including compounds that for serious and chronic conditions would likely not be marketed without incentives due to low market return on the
sponsors development investment. The medicinal product considered should be of significant benefit to those affected by the condition. Benefits of being granted Orphan Medicinal Product Designation are significant, including eight years of
data exclusivity, two years of marketing exclusivity and a potential
one-year
extension of both. The EU Community and Member States may not accept or grant for ten years a new marketing authorization or
application for another drug for the same therapeutic indication as the orphan drug, although the ten year period can be reduced to six years if, after the end of the fifth year, available evidence establishes that the product is sufficiently
profitable not to justify maintenance of the marketing exclusivity. A supplementary protection certificate may extend the protection six months beyond patent expiration if that is later than the orphan drug exclusivity period. To apply for the
supplementary protection, a pediatric investigation plan, or PIP, must be included in the market application. In Europe all drugs now seeking marketing authorization need to have a PIP agreed with the European Medicines Agency (EMA) before it can be
approved, even if it is a drug being developed specifically for a pediatric indication. If a product is developed solely for use in the pediatric population, then a Pediatric Use Marketing Authorization, or PUMA, may provide eight years of data
exclusivity and ten years of marketing exclusivity.
Breakthrough Therapy Designation
Breakthrough therapy designation is intended to expedite the development and review of drugs for serious or life-threatening
conditions. The criteria for breakthrough therapy designation require preliminary clinical evidence that demonstrates the drug may have substantial improvement on at least one clinically significant endpoint over available therapy. A
breakthrough therapy designation conveys all of the fast track program features (see below for more details on fast track designation), as well as more intensive FDA guidance on an efficient drug development program. The FDA also has an
organizational commitment to involve senior management in such guidance. Actions taken to expedite development may include the following actions, as appropriate:
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holding meetings with the sponsor and review team throughout the development of the drug;
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providing timely advice to, and interactive communication with, the sponsor regarding the development of the
drug to ensure that the development program to gather the
non-clinical
and clinical data necessary for approval is as efficient as possible;
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taking steps to ensure that the design of the clinical trials is as efficient as practicable, when
scientifically appropriate, such as by minimizing the number of patients exposed to a potentially less efficacious treatment;
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assigning a cross-disciplinary project lead for the FDA review team to facilitate an efficient review of the
development program and to serve as a scientific liaison between the cross-discipline members of the review team (i.e., clinical, pharmacology-toxicology, chemistry, manufacturing and control (CMC), compliance) for coordinated internal interactions
and communications with the sponsor through the review divisions Regulatory Health Project Manager; and
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involving senior managers and experienced review staff, as appropriate, in a collaborative, cross-disciplinary
review.
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Fast Track Designation and Accelerated Approval
FDA is required to facilitate the development, and expedite the review, of drugs that are intended for the treatment of a serious or
life-threatening disease or condition for which there is no effective treatment and which demonstrate the potential to address unmet medical needs for the condition. Under the fast track program, the sponsor of a new drug candidate may request that
FDA designate the drug candidate for a specific indication as a fast track drug concurrent with, or after, the filing of the IND for the drug candidate. FDA must determine if the drug candidate qualifies for fast track designation within 60 days of
receipt of the sponsors request.
Under the fast track program and FDAs accelerated approval regulations, FDA may approve a
drug for a serious or life-threatening illness that provides meaningful therapeutic benefit to patients over existing treatments based upon a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that
can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the
condition and the availability or lack of alternative treatments.
In clinical trials, a surrogate endpoint is a measurement of laboratory
or clinical signs of a disease or condition that substitutes for a direct measurement of how a patient feels, functions, or survives. Surrogate endpoints can often be measured more easily or more rapidly than clinical endpoints. A drug candidate
approved on this basis is subject to rigorous post-marketing compliance requirements, including the completion of Phase 4 or post-approval clinical trials to confirm the effect on the clinical endpoint. Failure to conduct required post-approval
studies, or confirm a clinical benefit during post-marketing studies, will allow FDA to withdraw the drug from the market on an expedited basis. All promotional materials for drug candidates approved under accelerated regulations are subject to
prior review by FDA.
In addition to other benefits such as the ability to use surrogate endpoints and engage in more frequent
interactions with FDA, FDA may initiate review of sections of a fast track drugs NDA before the application is complete. This rolling review is available if the applicant provides, and FDA approves, a schedule for the submission of the
remaining information and the applicant pays applicable user fees. However, FDAs time period goal for reviewing an application does not begin until the last section of the NDA is submitted. Additionally, the fast track designation may be
withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging in the clinical trial process.
Priority Review
Under
FDA policies, a drug candidate is eligible for priority review, or review within a six to eight-month time frame from the time a complete NDA is submitted, if the drug candidate is intended for the treatment, diagnosis or prevention of a serious or
life-threatening condition, demonstrates the potential to address an unmet medical need, or provides a significant improvement compared to marketed drugs.
Disclosure of clinical trial information
Sponsors of clinical trials of
FDA-regulated
products, including drugs, are required to register and
disclose certain clinical trial information. Information related to the product, patient population, phase of investigation, study sites and investigators, and other aspects of the clinical trial is then made public as part of the registration.
Sponsors are also obligated to disclose the results of their clinical trials after completion. Disclosure of results of these trials can be delayed in certain circumstances for up to two years after the date of completion of the clinical trial.
Competitors may use this publicly-available information to gain knowledge regarding the progress of development programs.
37
Anti-Kickback, False Claims Laws & the Prescription Drug Marketing Act
In addition to FDA restrictions on marketing of pharmaceutical products, other state and federal laws have been applied to restrict certain
marketing practices in the pharmaceutical industry in recent years. These laws include anti-kickback statutes and false claims statutes. The federal healthcare program anti-kickback statute prohibits, among other things, knowingly and willfully
offering, paying, soliciting or receiving remuneration to induce or in return for purchasing, leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally
financed healthcare programs. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and patients, prescribers, purchasers and formulary managers on the other. Violations of the anti-kickback
statute are punishable by imprisonment, criminal fines, civil monetary penalties and exclusion from participation in federal healthcare programs. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain
common activities from prosecution or other regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchases or recommendations may be subject to scrutiny if
they do not qualify for an exemption or safe harbor.
Federal false claims laws prohibit any person from knowingly presenting, or causing
to be presented, a false claim for payment to the federal government, or knowingly making, or causing to be made, a false statement to have a false claim paid. Recently, several pharmaceutical and other healthcare companies have been prosecuted
under these laws for allegedly inflating drug prices they report to pricing services, which in turn were used by the government to set Medicare and Medicaid reimbursement rates, and for allegedly providing free product to customers with the
expectation that the customers would bill federal programs for the product. In addition, certain marketing practices, including
off-label
promotion, may also violate false claims laws. The majority of states
also have statutes or regulations similar to the federal anti-kickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payer.
The Centers for Medicare & Medicaid Services (CMS) has issued a final rule that requires manufacturers of approved prescription drugs
to begin collecting and reporting information on payments or transfers of value to physicians and teaching hospitals, as well as investment interests held by physicians and their immediate family members. Manufacturers were required to begin
collecting information in 2013, with the first reports filed in 2014. The information reported each year is made publicly available on a searchable website. Failure to submit required information may result in civil monetary penalties.
In addition, several states now require prescription drug companies to report expenses relating to the marketing and promotion of drug
products and to report gifts and payments to individual physicians in these states. Other states prohibit various other marketing-related activities. Still other states require the posting of information relating to clinical studies and their
outcomes. In addition, California, Connecticut, Nevada, and Massachusetts require pharmaceutical companies to implement compliance programs and/or marketing codes. Several additional states are considering similar proposals. Compliance with these
laws is difficult and time consuming, and companies that do not comply with these state laws face civil penalties.
As part of the sales
and marketing process, pharmaceutical companies frequently provide samples of approved drugs to physicians. The Prescription Drug Marketing Act, or the PDMA, imposes requirements and limitations upon the provision of drug samples to physicians, as
well as prohibits states from licensing distributors of prescription drugs unless the state licensing program meets certain federal guidelines that include minimum standards for storage, handling, and record keeping. In addition, the PDMA sets forth
civil and criminal penalties for violations.
38
Our Employees
As of March 15, 2017 we had 18 employees. We also utilize the services of consultants, including several members of our Scientific
Advisory Board. None of our employees are covered by a collective bargaining agreement. We believe our relationship with our employees and consultants is good.
Our Scientific Advisory Board
We rely on prominent scientists and physicians to advise us on the development of our drug candidates. All of our advisors are employed by
organizations other than ours and may have commitments to or consulting or advisory agreements with other entities that may limit their availability to us. Our Scientific Advisory Board currently consists of the following members:
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Jonathan Brodie, PhD, MD,
is the chairman of our Scientific Advisory Board and Professor
Emeritus of Psychiatry at New York University School of Medicine. Dr. Brodie completed his Bachelor of Science degree in chemistry as a Ford Foundation Scholar and his PhD in Physiological Chemistry (Organic Chemistry minor) at the University
of Wisconsin-Madison. He was an NIH postdoctoral Fellow in Biochemistry at Scripps Clinic and Research Foundation and a tenured associate professor of Biochemistry at the School of Medicine at SUNY at Buffalo. He then received his MD degree at New
York University School of Medicine and joined the faculty after completing his residency in psychiatry at NYU/Bellevue Medical Center. He has been a member of the Promotions and Tenure Committee of the School of Medicine and
co-chairman
of the Executive Advisory Committee of the General Clinical Research Center and the Protocol Review Committee of the Center for Advanced Brain Imaging (CABI) of Nathan Kline Institute. He also served as
Interim Chairman of the Department of Psychiatry of the NYU School of Psychiatry at the NYU School of Medicine. For 15 years, he was the NYU Director of the Brookhaven National Laboratory/NYUSoM collaboration investigating the use of positron
emitters and PET in neuroscience and psychiatry. In addition, Dr. Brodie serves as a psychopharmacology preceptor to psychiatry residents. As a clinician, he treats patients in general issues of adult psychiatry including anxiety and
depression.
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Robert D. Fechtner, MD
, is Professor and Chair of Ophthalmology at SUNY Upstate Medical University,
Syracuse, New York. Dr. Fechtner received his Bachelor of Science degree in biomedical science and his medical degree from the University of Michigan. He completed his residency at Albert Einstein College of Medicine in New York. A fellowship
in glaucoma followed at the University of California, San Diego, under a National Research Service Award from the National Institutes of Health. Dr. Fechtner is the Executive Vice President of the World Glaucoma Association and has published
more than 100 scientific articles and book chapters.
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Eugene Laska, PhD
, is a professor in the Department of Psychiatry at New York University and the former
Director of the Statistical Sciences unit at the Nathan S. Kline Institute for Psychiatric Research. Dr. Laska was for 20 years the Director of the WHO Collaborating Center for Research and Training in Mental Health Program Management and has
served as a statistical consultant to many pharmaceutical companies (including us) both large and small with regard to biostatistics and clinical trial design. He is a fellow of the American Statistical Association and the American Association for
the Advancement of Science.
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Richard B. Silverman, Ph.D.
is the Patrick G. Ryan/Aon Professor in the Department of Chemistry at
Northwestern University. He is the inventor of Pfizers $4.5 billion/year Lyrica
®
(pregabalin), marketed worldwide for the treatment of epilepsy, neuropathic pain, fibromyalgia, pain from
spinal cord injury, and (in Europe) for generalized anxiety disorder. He has received numerous awards, most recently American Chemical Society Creative Invention Award (2017), Fellow of the National Academy
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of Inventors (2014), Fellow of the American Academy of Arts & Sciences (2014), iCON Innovator Award of the iBIO Institute (2014), Northwestern University Trustee Medal for Faculty
Innovation and Entrepreneurship (2014), Medicinal Chemistry Prize of the Israel Chemistry Society (2014), Fellow of the Royal Society of Chemistry (UK, 2013), Centenary Prize of the Royal Society of Chemistry (2013), Bristol-Myers Squibb-Edward
E. Smissman Award of the American Chemical Society (2013), Sato Memorial International Award of the Pharmaceutical Society of Japan (2012), Fellow of the American Chemical Society (2011), E.B. Hershberg Award for Important Discoveries in Medicinally
Active Substances from the American Chemical Society (2011), Perkin Medal from the Society of Chemical Industry (2009), Medicinal Chemistry Hall of Fame of the American Chemical Society (2009). Dr. Silverman holds 75 patents, has published
over 350 peer-reviewed articles and has written five books over his almost
41-year
career in academia.
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We may add additional members to or revise the makeup of our Scientific Advisory Board in the future to add personnel who will assist us in
the future development of Firdapse
®
.
Available Information
We make available free of charge on or through our Internet website our Annual Report on Form
10-K,
Quarterly Reports on Form
10-Q,
Current Reports on Form
8-K
and all amendments to those reports as soon as reasonably practicable after such material is electronically
filed with or furnished to the Securities and Exchange Commission (SEC). Our Internet address is
www.catalystpharma.com
. The content on our website is not, nor should it be deemed to be, incorporated by reference into this Form
10-K.
Our business involves a high degree of risk. You should carefully consider the risks and uncertainties described below, and all of the other
information contained in this Form
10-K
in assessing the risks relating to ownership of our common stock. The risks described below could cause our business, results of operations, financial condition and
prospects to materially suffer and the market price of our stock to decline.
Risks Related to our Business
We are a development stage company. Our limited operating history makes it difficult to evaluate our future performance.
We are a development stage company and, as such, we have a limited operating history upon which you can evaluate our current business and our
prospects. The likelihood of our future success must be viewed in light of the problems, expenses, difficulties, delays and complications often encountered in the operation of a business without revenues, especially in the pharmaceutical industry,
where failures of companies are common. We are subject to the risks inherent in the ownership and operation of a development stage company, including availability of capital, regulatory setbacks and delays, fluctuations in expenses, competition and
government regulation. If we fail to address these risks and uncertainties our business, results of operations, financial condition and prospects would be adversely affected.
We have no products currently available and we have never had any products available for commercial sale.
We have had no revenues from product sales to date, currently have no products available for commercial sale, and have never had any products
available for commercial sale. We expect to incur losses at least until we are in a position to commercialize Firdapse
®
, which may never occur. Our net loss was $18.1 million and
$20.2 million for the years ended December 31, 2016 and December 31, 2015, respectively. We may never obtain approval of an NDA for any of our drug candidates and we may never achieve profitability.
40
Our business will require additional capital.
Our business will require additional capital to meet our product development objectives. Based on currently available information, we estimate
that we have sufficient working capital to support our operations through at least the next 12 months. The expectations described above are based on current information available to us. If the cost of our ongoing activities are greater than we
expect, our assumptions may not prove to be accurate. There can be no assurance as to the exact amount of the funding we will require or as to whether any such required funding will be available to us when it is required.
We plan to raise additional funds in the future through public or private equity offerings, debt financings, corporate collaborations, or
other means. We may also seek governmental grants to support our clinical and
pre-clinical
trials. However, there is no assurance that any such grants will be made available, and, if available, that we will
qualify to receive any such grants. We may also seek to raise additional capital to fund additional product development efforts, even if we have sufficient funds for our planned operations.
Any sale by us of additional equity or convertible debt securities could result in dilution to our stockholders. There can be no assurance
that any required additional funding will be available to us at all or available on terms acceptable to us. Further, to the extent that we raise funds through collaborative arrangements, it may be necessary to relinquish some rights to our
technologies or grant sublicenses on terms that are not favorable to us. If we are not able to secure funding when needed, we may have to delay, reduce the scope of or eliminate one or more research and development programs, which could have an
adverse effect on our business.
If we are not the first to obtain approval for
Firdapse
®
for the treatment of LEMS, we may not be able to bring it to market in the United States.
Another pharmaceutical company, Jacobus Pharmaceutical, has completed its own clinical trial studying their own formulation of amifampridine
(3,4-DAP)
for the treatment of LEMS. Jacobus Pharmaceutical is a privately held company and there is little public information available about their development plans. While there can be no assurance, we believe
that Firdapse
®
is further along in development and as a result we expect that we will be in a position to obtain the first approval of an NDA for
3,4-DAP.
Under the Orphan Drug Act of 1983, the first pharmaceutical product to obtain approval for an indication receives the orphan exclusivity under the statute. If Jacobus Pharmaceutical receives approval
of an NDA for its formulation of amifampridine for the treatment of LEMS before we are able to receive approval of Firdapse
®
for the same indication, we would be barred from marketing
Firdapse
®
in the United States during the seven-year orphan exclusivity period, which would have a severe adverse effect on our results of operations. In addition, if Jacobus
Pharmaceutical were to receive five-year new chemical entity exclusivity for amifampridine for any indication prior to approval of Firdapse
®
, we would be barred from marketing
Firdapse
®
in the United States during this five-year exclusivity period.
The development of
CPP-115
is at an early stage.
Our development of
CPP-115
is at an early stage, and it is going to be several years before we are in a
position to submit an NDA for
CPP-115,
assuming our future clinical trials of this product are successful. At the present time, there can be no assurance that we will ever submit an NDA for
CPP-115
or successfully commercialize
CPP-115.
41
Our business is subject to substantial competition.
The biotechnology and pharmaceutical industries are highly competitive. Many of our competitors have substantially greater financial and other
resources, larger research and development staffs and more experience developing products, obtaining FDA and other regulatory approvals of products and manufacturing and marketing products than we have. We compete against pharmaceutical companies
that are developing or currently marketing therapies that will compete with our drug candidates. In addition, we compete against biotechnology companies, universities, government agencies, and other research institutions in the development of
pharmaceutical products. While we believe that our drug candidates will offer advantages over many of the currently available competing therapies, our business could be negatively impacted if our competitors present or future offerings are
more effective, safer or less expensive than ours, or more readily accepted by regulators, healthcare providers or third-party payors. Further, if we are permitted to commence commercial sales of our drug candidates, we may also compete with respect
to manufacturing efficiency and marketing capabilities.
For example, amifampridine, the active ingredient in Firdapse
®
, despite not being FDA approved, has been available from compounding pharmacies and from Jacobus Pharmaceutical under compassionate use INDs for many years. Amifampridine from these sources can
be expected to be substantially less expensive than Firdapse
®
. The FDA Pharmacy Compounding Advisory Committee, however, has previously issued a list of drugs which cannot be compounded, and
amifampridine was included on that list. In addition, drugs that are not approved by FDA for the treatment of LEMS, such as a related aminopyridine drug, dalfampridine (Ampyra
®
), may
nonetheless be prescribed by physicians for the treatment of LEMS.
For all of these reasons, we may not be able to compete successfully.
We face a risk of product liability claims and may not be able to obtain adequate insurance.
Our business exposes us to potential liability risks that may arise from the clinical testing, manufacture, and/or sale of our pharmaceutical
products. Patients have received substantial damage awards in some jurisdictions against pharmaceutical companies based on claims for injuries allegedly caused by the use of pharmaceutical products used in clinical trials or after FDA approval.
Liability claims may be expensive to defend and may result in large judgments against us. We currently carry liability insurance with an aggregate annual coverage limit of $15,000,000 per claim and $15,000,000 in the aggregate, with a deductible of
$10,000 per occurrence. Our insurance may not reimburse us for certain claims or the coverage may not be sufficient to cover claims made against us. We cannot predict all of the possible harms or side effects that may result from the use of our
current drug candidates, or any potential future products we may acquire and use in clinical trials or after FDA approval and, therefore, the amount of insurance coverage we currently hold may not be adequate to cover all liabilities we might incur.
If we are sued for any injury allegedly caused by our products, our liability could exceed our ability to pay the liability. Whether or not we are ultimately successful in any adverse litigation, such litigation could consume substantial amounts of
our financial and managerial resources, all of which could have a material adverse effect on our business, financial condition, results of operations, prospects and stock price.
42
The obligations incident to being a public company place significant demands on our
management.
As a public reporting company, we are required to comply with the Sarbanes-Oxley Act of 2002 and the related rules and
regulations of the SEC, including periodic reports, disclosures and more complex accounting rules. As directed by Section 404 of Sarbanes-Oxley, the SEC adopted rules requiring public companies to include a report of management on a
companys internal control over financial reporting in their Annual Report on Form
10-K.
Based on current rules, we are required to annually report under Section 404(a) of Sarbanes-Oxley regarding
our managements assessment as to the effectiveness of our internal control over financial reporting. Further, under Section 404(b) of Sarbanes-Oxley, our auditors are required to report on their assessment as to the effectiveness of our
internal control over financial reporting. If we or our auditors are unable to conclude that we have effective internal control over our financial reporting, investors could lose confidence in the reliability of our financial statements, which could
result in a decrease in the value of our common stock.
We are highly dependent on our small number of key personnel and advisors.
We are highly dependent on our officers and employees, on our Board of Directors and on our scientific advisors. The loss of the
services of any of these individuals could significantly impede the achievement of our scientific and business objectives. Other than an employment agreement with Patrick J. McEnany, our Chairman, President and Chief Executive Officer with respect
to his services, and the consulting agreements we have with several of our scientific advisors, we have no employment or retention agreements with our officers, directors or scientific advisors. If we lose the services of any of our existing
officers, directors or scientific advisors, or if we were unable to recruit qualified replacements on a timely basis for persons who leave our employ, our efforts to develop our drug candidates might be significantly delayed. We do not carry
key-man
insurance on any of our personnel.
We have relationships with our scientific advisors and
collaborators at academic and other institutions. Such individuals are employed by entities other than us and may have commitments to, or consulting advisory contracts with, such entities that may limit their availability to us. Although each
scientific advisor and collaborator has agreed not to perform services for another person or entity that would create an appearance of a conflict of interest, conflicts may arise from the work in which other scientific advisors and/or collaborators
are involved.
Risks Related to the Development of Our Drug Candidates
Our drug development efforts may fail.
Development of our pharmaceutical drug candidates is subject to risks of failure. For example:
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our drug candidates may be found to be ineffective or unsafe, or fail to receive necessary regulatory
approvals;
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our drug candidates may not be economical to market or take substantially longer to obtain necessary
regulatory approvals than anticipated; or
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competitors may develop and market equivalent or superior products, including next generation products that
act with the same mechanism of action as our drug candidates.
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As a result, our drug development activities may not
result in any safe, effective and commercially viable products, and we may not be able to commercialize our products successfully. For example, for several years, we evaluated
CPP-109
(our formulation of
vigabatrin) for the treatment of cocaine addiction.
43
However,
CPP-109
failed to meet the primary and two key secondary endpoints in a Phase 2b trial for cocaine addiction, and we are no longer pursuing the
evaluation of
CPP-109
for addiction. Further, our lead compound, Firdapse
®
, is for very rare conditions for which there is no
FDA-approved
treatment. As such, the clinical development plan we pursued after consulting with FDA including the clinical endpoints, protocol design, and statistical analysis plan, may not allow the FDA to
ultimately conclude that our Phase 3 trial of Firdapse
®
is adequate to establish the clinical benefit of the drug.
Our failure to develop safe, effective, and/or commercially viable products would have a material adverse effect on our business, prospects,
results of operations and financial condition.
Failure can occur at any stage of our drug development efforts.
We will only obtain regulatory approval to commercialize our drug candidates if we can demonstrate to the satisfaction of the FDA (or the
equivalent foreign regulatory authorities) in adequate and well-controlled clinical studies and trials that the drug is safe and effective for its intended use, that the clinical and other benefits outweigh the safety risks and that it otherwise
meets approval requirements. As we have experienced in the past, a failure of one or more
pre-clinical
or clinical trials or studies can occur at any stage of drug development. We may experience numerous
unforeseen events during, or as a result of, testing that could delay or prevent us from obtaining regulatory approval for, or commercializing our drug candidates, including but not limited to:
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regulators or Institutional Review Boards (IRBs) may not authorize us to commence a clinical trial or conduct
a clinical trial at a prospective trial site;
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conditions may be imposed upon us by the FDA regarding the scope or design of our clinical trials, or we may
be required to resubmit our clinical trial protocols to IRBs for review due to changes in the regulatory environment;
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the number of subjects required for our clinical trials may be larger, patient enrollment may take longer, or
patients may drop out of our clinical trials at a higher rate than we anticipate;
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we may have to suspend or terminate one or more of our clinical trials if we, regulators, or IRBs determine
that the participants are being subjected to unreasonable health risks;
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our third-party contractors, clinical investigators or contractual collaborators may fail to comply with
regulatory requirements or fail to meet their contractual obligations to us in a timely manner;
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the FDA may not accept clinical data from trials that are conducted at clinical sites in countries where the
standard of care is potentially different from the United States;
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our tests may produce negative or inconclusive results, and we may decide, or regulators may require us, to
conduct additional testing; and
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the costs of our
pre-clinical
and/or clinical trials may be greater
than we anticipate.
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We rely on third parties to conduct our
pre-clinical
studies and clinical studies and trials, and if they do not perform their obligations to us we may not be able to obtain approval for our drug candidates.
We do not currently have the ability to independently conduct
pre-clinical
studies or clinical studies
and trials for our drug candidates, and we typically rely on third parties such as third-party contract research and governmental organizations, medical institutions and clinical investigators (including academic clinical investigators), to conduct
studies and trials of our drug candidates.
44
Our reliance on third parties for development activities reduces our control over these activities. These third parties may not complete activities on schedule, or may not conduct our
pre-clinical
studies and our clinical studies and trials in accordance with regulatory requirements or our study design. If these third parties do not successfully carry out their contractual duties or meet expected
deadlines, we may be adversely affected, and our efforts to obtain regulatory approvals for and commercialize our drug candidates may be delayed.
If we conduct studies with other parties, we may not have control over all decisions associated with that trial. To the extent that we
disagree with the other party on such issues as study design, study timing and the like, it could adversely affect our drug development plans.
Although we also rely on third parties to manage the data from our studies and trials, we are responsible for confirming that each of our
studies and trials is conducted in accordance with its general investigational plan and protocol. Moreover, the FDA and foreign regulatory agencies will require us to comply with applicable regulations and standards, including Good Laboratory
Practice (GLP) and Good Clinical Practice (GCP), for conducting, recording and reporting the results of such studies and trials to assure that the data and the results are credible and accurate and that the human study and trial participants are
adequately protected. Our reliance on third-parties does not relieve us of these obligations and requirements, and we may fail to obtain regulatory approval for our drug candidates if these requirements are not met.
We will need to develop marketing, distribution and production capabilities or relationships to be successful.
In order to generate sales of any products we may develop, we must either acquire or develop an internal marketing force with technical
expertise and with supporting documentation capabilities, or make arrangements with third parties to perform these services for us. The acquisition and development of a marketing and distribution infrastructure requires substantial resources and
compete for available resources with our drug development efforts. To the extent that we enter into marketing and distribution arrangements with third parties, our revenues will depend on the efforts of others. If we fail to enter into such
agreements, or if we fail to develop our own marketing and distribution channels, we would experience delays in product sales and incur increased costs.
We have no
in-house
manufacturing capacity and, to the extent we are successful in completing the
development of our drug candidates, we will be obligated to rely on contract manufacturers. We cannot be sure that we will successfully manufacture any product we may develop, either independently or under manufacturing arrangements, if any, with
third party manufacturers. Moreover, if any manufacturer should cease doing business with us or experience delays, shortages of supply or excessive demands on their capacity, we may not be able to obtain adequate quantities of product in a timely
manner, or at all. Manufacturers, and in certain situations their suppliers, are required to comply with current NDA commitments and current good manufacturing practices (cGMP) requirements enforced by the FDA, and similar requirements of other
countries. The failure by a manufacturer to comply with these requirements could affect its ability to provide us with product. Although we intend to rely on third-party contract manufacturers, we are ultimately responsible for ensuring that our
products are manufactured in accordance with cGMP. In addition, if, during a preapproval inspection or other inspection of our third-party manufacturers facility or facilities, FDA determines that the facility is not in compliance with cGMP,
any of our marketing applications that lists such facility as a manufacturer may not be approved or approval may be delayed until the facility comes into compliance with cGMP and completes a successful
re-inspection
by FDA.
45
Any manufacturing problem, natural disaster affecting manufacturing facilities, or the loss of a
contract manufacturer could be disruptive to our operations and result in lost sales. Additionally, we will be reliant on third parties to supply the raw materials needed to manufacture our potential products. Any reliance on suppliers may involve
several risks, including a potential inability to obtain critical materials and reduced control over production costs, delivery schedules, reliability and quality. Any unanticipated disruption to future contract manufacture caused by problems at
suppliers could delay shipment of products, increase our cost of goods sold and result in lost sales. If our suppliers were to be unable to supply us with adequate supply of our drug candidates, it could have a material adverse effect on our ability
to commercialize our drug candidates.
We may not be able to sufficiently
scale-up
manufacturing of our drug candidates.
If our NDA for Firdapse
®
is approved, we will need to manufacture our product in larger quantities than we have in the past to launch the product and meet customer requirements. With respect to our other products, to date
they have only been manufactured in small quantities for
pre-clinical
studies and clinical trials, and, in order to conduct large trials and commercialize these products, we will need to manufacture our
products in larger quantities than we have in the past.
We may not be able to successfully increase in a sufficient manner the
manufacturing capacity for our drug candidates, whether in collaboration with third-party manufacturers or on our own, in a timely or cost-effective manner or at all. If a contract manufacturer makes improvements in the manufacturing process for our
drug candidates, we may not own, or may have to share, the intellectual property rights to those improvements. Significant
scale-up
of manufacturing may require additional validation studies, which are costly
and which the FDA must review and approve. In addition, quality issues may arise during those
scale-up
activities because of the inherent properties of a drug candidate itself or of a drug candidate in
combination with other components added during the manufacturing and packaging process, or during shipping and storage of the finished product or active pharmaceutical ingredients. If we are unable to successfully
scale-up
manufacture of any of our drug candidates in sufficient quality and quantity, the development of that drug candidate and regulatory approval or commercial launch for any resulting drug products may be
delayed or there may be a shortage in supply, which could significantly harm our business.
We may encounter difficulties in
managing our growth, which would adversely affect our results of operations.
If we are successful in obtaining approval to
commercialize Firdapse
®
or any of our other drug candidates, we will need to significantly expand our operations, which could put
significant strain on our management and our operational and financial resources. We currently have 18 employees and conduct many of our activities through outsourcing arrangements. To manage future growth, we will need to hire, train, and manage
additional employees. Concurrent with expanding our operational and marketing capabilities, we will also need to increase our product development activities. We may not be able to support, financially or otherwise, future growth, or hire, train,
motivate, and manage the required personnel. Our failure to manage growth effectively could limit our ability to achieve our goals.
Our
success in managing our growth will depend in part on the ability of our executive officers to continue to implement and improve our operational, management, information and financial control systems and to expand, train and manage our employee
base, and particularly to expand, train and manage a specially-trained sales force to market our products. We may not be able to attract and retain personnel on acceptable terms given the intense competition for such personnel among biotechnology,
pharmaceutical and healthcare companies, universities and
non-profit
research institutions. Our inability to manage growth effectively could cause our operating costs to grow at a faster pace than we currently
46
anticipate, and could have a material adverse effect on our business, financial condition, results of operations and prospects.
Pressure on drug product third-party payor coverage, reimbursement and pricing may impair our ability to be reimbursed for any of our
drug candidates which we commercialize in the future at prices or on terms sufficient to provide a viable financial outcome.
The
commercial success of Firdapse
®
will depend substantially on the extent to which the cost of Firdapse
®
will be paid by health
maintenance, managed care, pharmacy benefit and similar healthcare management organizations, or reimbursed by government health administration authorities (such as Medicare and Medicaid), private health coverage insurers and other third party
payors. If reimbursement is not available, or is available only to limited levels, we may not be able to successfully commercialize Firdapse
®
. Even if coverage is provided, the approved
reimbursement amount may not be high enough to establish and maintain pricing sufficient to realize a meaningful return on our investment.
Our ability to commercialize Firdapse
®
or any other product candidate will depend in
large part on the extent to which coverage and reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers and other organizations. Government authorities and
third party payors, such as private health insurers and health maintenance organizations, decide which medications they will cover and establish reimbursement levels. The healthcare industry is acutely focused on cost containment, both in the United
States and elsewhere. Government authorities and third party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications, which could affect our ability to sell our product candidate
profitably. These payors may not view our products, if any, as cost-effective, and coverage and reimbursement may not be available to our customers, or may not be sufficient to allow our products, if any, to be marketed on a competitive basis.
Cost-control initiatives could cause us to decrease the price we might establish for products, which could result in lower than anticipated product revenues. If the prices for our products, if any, decrease or if governmental and other third party
payors do not provide adequate coverage or reimbursement, our prospects for revenue and profitability will suffer.
There may also be
delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than the indications for which the drug is approved by the FDA. Moreover, eligibility for reimbursement does not imply that any drug will be
paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Reimbursement rates may vary, by way of example, according to the use of the drug and the clinical setting in which it is
used. Reimbursement rates may also be based on reimbursement levels already set for lower cost drugs or may be incorporated into existing payments for other services.
In addition, increasingly, third party payors are requiring higher levels of evidence of the benefits and clinical outcomes of new
technologies and are challenging the prices charged. We cannot be sure that coverage will be available for any product candidate that we commercialize and, if available, that the reimbursement rates will be adequate. Further, the net reimbursement
for drug products may be subject to additional reductions if there are changes to laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. An inability to promptly obtain coverage
and adequate payment rates from both government-funded and private payors for any of our product candidates for which we obtain marketing approval could have a material adverse effect on our operating results, our ability to raise capital needed to
commercialize products and our overall financial condition.
The pricing of pharmaceutical products, in general, and specialty drugs, in
particular, has been a topic of concern in the U.S. Congress, where hearings on the topic have been held. It has also been a topic raised by President Trump, most recently in a meeting with pharmaceutical industry participants. There can be no
assurance as to how this scrutiny on pricing of pharmaceutical products will impact future pricing of orphan drugs or pharmaceutical products generally or our products in particular.
47
We cannot assess the impact on our business of the recent activities of a vocal group of
neuromuscular physicians and some patients with LEMS.
There is a vocal group of neuromuscular physicians who have raised public
concerns in a letter to the editor of a medical journal and some LEMS patients and neuromuscular physicians who have raised public concerns in interviews quoted in articles published in the press. Their overarching concern appears to be that LEMS
patients may not be able to get amifampridine treatment because of the concern that it would be priced too high as an orphan drug if we are the first pharmaceutical company to receive an FDA approval for an amifampridine product, thereby giving us
the seven-year orphan drug exclusivity and the five year new chemical entity exclusivity for our product. Articles about their concerns have been published in several national publications and some in the press have sought to tie their expectations
about the anticipated pricing of Firdapse
®
to stories about perceived abusive price increases of drug products by other pharmaceutical companies. This vocal group has also questioned the
appropriateness of the provisions of the Orphan Drug Act that would grant us exclusivity if our product were to be the first amifampridine product approved by the FDA, and whether this exclusivity should be eliminated from the law. We have responded
to their concerns in a letter to the editor to the same medical journal. However, there can be no assurance as to the ultimate impact of these activities on us or our products.
Because the target patient populations for Firdapse
®
and our other drug
candidates are small, we must achieve significant market share and obtain relatively high
per-patient
prices for our products to achieve meaningful gross margins.
Firdapse
®
and our other orphan
drug candidates target diseases with small patient populations. A key component of the successful commercialization of a drug product for these indications includes identification of patients and a targeted prescriber base for the drug
product. Due to small patient populations, we believe that we would need to have significant market penetration to achieve meaningful revenues and identifying patients and targeting the prescriber base are key to achieving significant market
penetration. In addition, the
per-patient
prices at which we anticipate we may sell Firdapse
®
will need to be relatively high in order for us to
generate an appropriate return for the investment in these product development programs and achieve meaningful gross margins. There can be no assurance that we will be successful in achieving a sufficient degree of market penetration and/or
obtaining or maintaining high
per-patient
prices for Firdapse
®
for diseases with small patient populations. Further, even if we obtain significant
market share for Firdapse
®
, if approved, because the potential target populations are very small, we may never achieve profitability despite obtaining such significant market
share. Furthermore, because the potential target populations are very small, even if we do obtain significant market share for Firdapse
®
, we may never achieve
profitability. Additionally, patients who discontinue therapy or do not fill prescriptions are not easily replaced by new patients, given the limited patient population.
Our internal computer systems, or those of our contract research organizations and other key vendors or consultants, may fail or suffer
security breaches, which could result in a material disruption of our product development programs.
Our internal computer systems
and those of our contract research organizations and other key vendors and consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. If such an
event were to occur and cause interruptions in our operations, it could result in a material disruption of our programs. For example, the loss of clinical trial data from completed or ongoing clinical trials could result in delays in our regulatory
approval efforts and significantly increase our costs to recover or reproduce the data.
48
To the extent that any disruption or security breach results 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 drug candidates could be delayed.
Our employees and consultants may engage in
misconduct or other improper activities, including noncompliance with regulatory standards and requirements.
We are exposed to the
risk of employee or consultant fraud or other misconduct. Misconduct by our employees or consultants could include intentional failures to comply with FDA regulations, provide accurate information to the FDA, comply with manufacturing standards,
comply with federal and state healthcare fraud and abuse laws and regulations, report financial information or data accurately or disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare
industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion,
sales commission, customer incentive programs and other business arrangements. Employee and consultant misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory
sanctions and serious harm to our reputation. It is not always possible to identify and deter such misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses
or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending
ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.
Risks Related to Government Regulation
We have not received regulatory approval in the United States or any foreign jurisdiction for the commercial sale of any of our drug
candidates. The regulatory approval process is lengthy, and we may not be able to obtain all of the regulatory approvals required to manufacture and commercialize our drug candidates.
We do not currently have any products that have been approved for commercialization. We will not be able to commercialize our products until
we have obtained the requisite regulatory approvals from applicable governmental authorities. To obtain regulatory approval of a drug candidate, we must demonstrate to the satisfaction of the applicable regulatory agency that such drug candidate is
safe and effective for its intended uses. The type and magnitude of the testing required for regulatory approval varies depending on the drug candidate and the disease or condition for which it is being developed. In addition, in the U.S. we must
show that the facilities used to manufacture our drug candidate are in compliance with cGMP requirements. We will also have to meet similar regulations in any foreign country where we may seek to commercialize our drug candidates. In general, these
requirements mandate that manufacturers follow elaborate design, testing, control, documentation and other quality assurance procedures throughout the entire manufacturing process. The process of obtaining regulatory approvals typically takes
several years and requires the expenditure of substantial capital and other resources. Despite the time, expense and resources invested by us in the approval process, we may not be able to demonstrate that our drug candidates are safe and effective,
in which event we would not receive the regulatory approvals required to market them.
49
The FDA and other regulatory authorities generally approve products for particular indications.
Our drug candidates may not be approved for any or all of the indications that we request, which would limit the indications for which we can promote it and adversely impact our ability to generate revenues. We may also be required to conduct
costly, post-marketing
follow-up
studies if FDA requests additional information.
The FDA and
other regulatory bodies must approve trade names for products. The FDA typically conducts a thorough review of a proposed trade name, including an evaluation of potential confusion with other trade names. We have previously submitted a request for
FDA approval of the trade name Firdapse
®
, which request has been conditionally approved.
If our
pre-clinical
studies or our clinical studies and trials are unsuccessful or significantly
delayed, our ability to commercialize our products will be impaired.
Before we can obtain regulatory approval for the sale of our
drug candidates, we may have to conduct, at our own expense,
pre-clinical
tests in animals in order to support the safety of our drug candidates.
Pre-clinical
testing is
expensive, difficult to design and implement, can take several years to complete and is uncertain as to outcome. Our
pre-clinical
tests may produce negative or inconclusive results, and on the basis of such
results, we may decide, or regulators may require us, to halt ongoing clinical trials or conduct additional
pre-clinical
testing.
In September 2014, we announced positive results from our Phase 3 clinical trial for
Firdapse
®
. In October 2016, we announced that we had reached an agreement with the FDA under a SPA for the protocol design, clinical
endpoints, and statistical analysis approach to be taken in our ongoing second Phase 3 study evaluating Firdapse
®
for the symptomatic
treatment of LEMS. Even if our second Phase 3 trial of Firdapse
®
is successful, we may nevertheless fail to meet the safety and efficacy
standards required by the FDA to obtain regulatory approval.
Additionally, future clinical trials for our drug candidates may not be
successfully completed or may take longer than anticipated because of any number of factors, including potential delays in the start of the trial, an inability to recruit clinical trial participants at the expected rate, failure to demonstrate
safety and efficacy, unforeseen safety issues, or unforeseen governmental or regulatory delays. Further, our drug candidates may not be found to be safe and effective, and may not be approved by regulatory authorities for the proposed indication.
Further, regulatory authorities and IRBs that must approve and monitor the safety of each clinical study may suspend a clinical study at any time if the patients participating in such study are deemed to be exposed to any unacceptable health risk.
We may also choose to suspend human clinical studies and trials if we become aware of any such risks. We might encounter problems in our clinical trials, such as problems associated with Visual Field Defects (VFDs) or other side effects that will
cause us, regulatory authorities, or IRBs to delay or suspend such trial or study.
In other countries where Firdapse
®
,
CPP-115
or any other product we develop or license may be marketed, we will also be subject to regulatory requirements governing human clinical studies,
trials and marketing approval for drugs. The requirements governing the conduct of clinical studies, trials, product licensing, pricing and reimbursement varies widely from country to country.
We may face significant delays in our clinical studies and trials due to an inability to recruit patients for our clinical studies and
trials or to retain patients in the clinical studies and trials we may perform.
We may encounter difficulties in our current and
future clinical studies and trials recruiting patients, particularly since the conditions we are studying are rare, orphan conditions. We compete for study and trial subjects with others conducting clinical trials testing other treatments for the
indications we are studying for our drug candidates. Further, unrelated third parties and investigators in the academic community have in the past and we expect will continue in the future to test our drug candidates. If these third-party tests are
unsuccessful, or if they show significant health risk to the test subjects, our development efforts may also be adversely affected.
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Clinical trials in orphan diseases are often difficult to enroll given the small number of
patients with these diseases. Completion of orphan clinical trials may take considerable more time than other trials, sometimes years, depending on factors such as type, complexity, novelty and intended use of a product candidate. As a result of the
uncertainties described above, there can be no assurance that we will meet timelines that we establish for any of our clinical trials.
If our third-party suppliers or contract manufacturers do not maintain appropriate standards of manufacturing in accordance with cGMP
and other manufacturing regulations, our development and commercialization activities could suffer significant interruptions or delays.
We rely, and intend to continue to rely, on third-party suppliers and contract manufacturers to provide us with materials for our clinical
trials and commercial-scale production of our products. These suppliers and manufacturers must continuously adhere to cGMP as well as any applicable corresponding manufacturing regulations outside of the U.S. In complying with these regulations, we
and our third-party suppliers and contract manufacturers must expend significant time, money and effort in the areas of design and development, testing, production, record-keeping and quality control to assure that our products meet applicable
specifications and other regulatory requirements. Failure to comply with these requirements could result in an enforcement action against us, including warning letters, the seizure of products, suspension or withdrawal of approvals, shutting down of
production and criminal prosecution. Any of these third-party suppliers or contract manufacturers will also be subject to inspections by the FDA and other regulatory agencies. If any of our third-party suppliers or contract manufacturers fail to
comply with cGMP or other applicable manufacturing regulations, our ability to develop and commercialize our products could suffer significant interruptions and delays.
Reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured the product ourselves, including:
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reliance on the third party for regulatory compliance and quality assurance;
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reliance on the continued financial viability of the third parties;
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limitations on supply availability resulting from capacity and scheduling constraints of the third parties;
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impact on our reputation in the marketplace if manufacturers of our products, once commercialized, fail to
meet the demands of our customers;
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the possible breach of the manufacturing agreement by the third party because of factors beyond our control;
and
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the possible termination or nonrenewal of the agreement by the third party, based on its own business
priorities, at a time that is costly or inconvenient for us.
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If any of our contract manufacturers fail to achieve and
maintain appropriate manufacturing standards, patients using our drug candidates could be injured or die, resulting in product liability claims. Even absent patient injury, we may be subject to product recalls, product seizures or withdrawals,
delays or failures in testing or delivery, cost overruns or other problems that could seriously harm our business or profitability.
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If we rely on a sole source of supply to manufacture our products we could be impacted by
the viability of our supplier.
We intend to attempt to source our products from more than one supplier. We also intend to enter
into contracts with any supplier of our products to contractually obligate them to meet our requirements. However, if we are reliant on a single supplier and that supplier cannot or will not meet our requirements (for whatever reason), our business
could be adversely impacted.
Even if we obtain regulatory approvals, our drug candidates will be subject to ongoing regulatory
review. If we fail to comply with continuing U.S. and applicable foreign regulations, we could lose those approvals, and our business would be severely harmed.
Even if we receive regulatory approval of any drugs we are developing or may develop, we will be subject to continuing regulatory review,
including the review of clinical results which are reported after our drug candidates become commercially available approved drugs. As greater numbers of patients use a drug following its approval, side effects and other problems may be observed
after approval that were not seen or anticipated during preapproval clinical studies and trials. In addition, the manufacturer, and the manufacturing facilities we use to make any approved drugs, will also be subject to periodic review and
inspection by the FDA. The subsequent discovery of previously unknown problems with the drug, manufacturer or facility may result in restrictions on the drug, manufacturer or facility, including withdrawal of the drug from the market. If we fail to
comply with applicable continuing regulatory requirements, we may be subject to fines, suspension or withdrawal of regulatory approval, product recalls and seizures, operating restrictions and criminal prosecutions.
As a condition of approval for some of our products, the FDA might require a Risk Evaluation and Mitigation Strategy (REMS) to help ensure
that the benefits of the drug outweigh the potential risks. REMS can include medication guides, communication plans for healthcare professionals, and other Elements To Assure Safe Use, or ETASU. ETASU can include, but are not limited to, special
training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring, and the use of patient registries. For example, approved versions of vigabatrin, the active moiety in our
CPP-109
product (which operates by the same mechanism of action as our
CPP-115
product) were approved with an
FDA-mandated
REMS program
due to the risks of visual field damage and are only available through a special restricted distribution program approved by the FDA. Accordingly, our ANDA for vigabatrin, if approved, will be subject to either the same REMS, or a comparable REMS
that will need to be reviewed and approved by the FDA. If any of our products were to be approved with a REMS, the potential market and profitability of the drug could be materially affected.
Our product promotion and advertising is also subject to regulatory requirements and continuing regulatory review. In particular, the
marketing claims we will be permitted to make in labeling or advertising regarding our marketed products will be limited by the terms and conditions of the
FDA-approved
labeling and available scientific data.
We must submit copies of our advertisements and promotional labeling to the FDA at the time of initial publication or dissemination. If the FDA believes these materials or statements promote our products for unapproved indications, or with
unsubstantiated claims, or if we fail to provide appropriate safety related information, the FDA could allege that our promotional activities misbrand our products. Specifically, the FDA could issue an untitled letter or warning letter, which may
demand, among other things, that we cease such promotional activities and issue corrective advertisements and labeling to all recipients of the misbranded materials. The FDA also could take enforcement action including seizure of allegedly
misbranded product, injunction or criminal prosecution against us and our officers or employees. If we repeatedly or deliberately fail to submit such advertisements and labeling to the agency, the FDA could withdraw our approvals. Moreover, the
Department of Justice can bring civil or criminal actions against companies and executives that promote drugs or biologics for unapproved uses, based on the Federal Food, Drug, and Cosmetics Act, the False Claims Act and other federal laws governing
the marketing and reimbursement for such products under federally supported healthcare programs such as Medicare and Medicaid. Monetary penalties in such cases have often been substantial, and civil penalties can include costly mandatory compliance
programs and potential exclusion of a companys products from federal healthcare programs.
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Enacted and future legislation or judicial action may increase the difficulty and cost for
us to commercialize Firdapse
®
or any other drug candidate we develop and affect the prices we may obtain.
In the U.S., there have been a number of court cases, legislative and regulatory changes and other potential changes relating to the healthcare
system that restrict or regulate post-approval activities, which may affect our ability to profitably sell Firdapse
®
or any other drug
candidate for which we obtain marketing approval.
The Medicare Prescription Drug Improvement and Modernization Act of 2003, or MMA,
changed the way Medicare covers and pays for pharmaceutical products. The legislation expanded Medicare coverage for outpatient drug purchases by those covered by Medicare under a new Part D and introduced a reimbursement methodology based on
average sales prices for Medicare Part B physician-administered drugs. In addition, this legislation authorized Medicare Part D prescription drug plans to use formularies whereby they can limit the number of drugs that will be covered in any
therapeutic class. As a result of this legislation and the expansion of federal coverage of drug products, there is additional pressure to contain and reduce costs. While the MMA applies only to drug benefits for Medicare beneficiaries,
private payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates, and any reduction in reimbursement that results from the MMA may result in a similar reduction in payments from private
payors. These cost reduction initiatives and other provisions of the MMA could decrease the coverage and reimbursement that we receive for any approved products, and could seriously harm our business. Manufacturers contributions to
this area, including donut hole coverage (as described below) or potential excise taxes, are increasing and are subject to additional changes in the future.
In 2010, President Obama signed into law the Patient Protection and Affordable Care Act, as amended by the Health Care and Education
Reconciliation Act of 2010 (together, the Health Care Reform Law), a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new
transparency requirements for healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms. The Health Care Reform Law, among other things, revised the definition of
Average Manufacturer Price used by the Medicaid Drug Rebate Program for reporting purposes, which could increase the amount of Medicaid drug rebates to states and extended the rebate program to beneficiaries enrolled in Medicaid managed care
organizations. The Health Care Reform Law also imposed a significant annual fee on companies that manufacture or import branded prescription drug products and established an annual
non-deductible
fee on
entities that sell branded prescription drugs or biologics to specified government programs in the U.S. The Health Care Reform Law also expanded the 340B drug discount program (excluding orphan drugs), including the creation of new penalties
for
non-compliance
and included a 50% discount on brand name drugs for Medicare Part D participants in the coverage gap, or donut hole. The Health Care Reform Law increased the Medicaid
rebates for line extensions or reformulated drugs, which could substantially increase our Medicaid rebate rate (in effect limiting reimbursement for these patients).
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Both President Trump and the Republican leadership in Congress have expressed their intention to
eliminate the Health Care Reform Law and replace it with a still unknown new law. It is unknown what form any such modifications or any law proposed to replace the Health Care Reform Law would take, and how or any such new law may affect our
business in the future.
Additionally, in response to controversies regarding pricing of pharmaceutical products, there has been a recent
push to propose legislation, both on state and federal levels, that would require greater disclosure as to the reasoning behind drug prices and, in some cases, could give state or federal-level commissions the right to impose cost controls on
certain drugs. These and other new provisions are likely to continue the pressure on pharmaceutical pricing, may require us to modify our business practices with healthcare practitioners, and may also increase our regulatory burdens and operating
costs. In that regard, President Trump and members of Congress in both parties have recently expressed concerns about high drug prices. However, whether and to what extent any such positions will result in changes of the law, and how any such
changes could impact of business, cannot be determined at this time.
Legislative and regulatory proposals also have been made to expand
post-approval requirements and restrict sales and promotional activities for pharmaceutical products. In addition, increased scrutiny by the U.S. Congress of the FDAs approval process may subject us to more stringent product labeling and
post-marketing testing and other requirements. Delays in feedback from the FDA may affect our ability to quickly update or adjust our label in the interest of patient adherence and tolerability. We cannot predict whether other legislative
changes will be adopted or how such changes would affect the pharmaceutical industry generally and specifically the commercialization of Firdapse
®
.
If we fail to obtain or subsequently maintain orphan drug exclusivity or regulatory exclusivity for Firdapse
®
and our other orphan drug candidates, our competitors may sell products to treat the same conditions at greatly reduced prices, and our revenues would be significantly adversely affected.
In the U.S., orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards
clinical trial costs, tax advantages and
user-fee
waivers. The company that first obtains FDA approval for a designated orphan drug for a given rare disease receives marketing exclusivity for use of that
drug for the stated condition for a period of seven years, with an additional six months of exclusivity if the product also qualifies for pediatric exclusivity. Orphan drug exclusive marketing rights may be lost if the FDA later determines that
the request for designation was materially defective, a subsequent product is deemed clinically superior, or if the manufacturer is unable to deliver sufficient quantity of the drug.
In the EU, the EMAs Committee for Orphan Medicinal Products, or COMP, grants orphan drug designation to promote the development of
products that are intended for the diagnosis, prevention or treatment of life-threatening or chronically debilitating conditions affecting not more than five in 10,000 persons in the EU Community and for which no satisfactory method of
diagnosis, prevention, or treatment has been authorized (or the product would be a significant benefit to those affected). Additionally, designation is granted for products intended for the diagnosis, prevention, or treatment of a life-threatening,
seriously debilitating or serious and chronic condition and when, without incentives, it is unlikely that sales of the drug in the EU would be sufficient to justify the necessary investment in developing the medicinal product. An EU orphan drug
designation entitles a party to financial incentives such as reduction of fees or fee waivers and 10 years of market exclusivity is granted following medicinal product approval. This period may be reduced to six years if the orphan
drug designation criteria are no longer met, including where it is shown that the product is sufficiently profitable not to justify maintenance of market exclusivity. Orphan drug designation must be requested before submitting an application
for marketing approval. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.
54
Because the extent and scope of patent protection for some of our drug products may be
particularly limited, orphan drug designation is especially important for our products that are eligible for orphan drug designation. For eligible drugs, we plan to rely on the orphan exclusivity period to maintain a competitive
position. However, if we do not obtain orphan drug exclusivity for our drug candidates or we cannot maintain orphan exclusivity for our drug candidates, our competitors may then sell the same drug to treat the same condition and our revenues
will be reduced. Also, without strong patent protection, competitors may sell a generic version upon the expiration of orphan exclusivity, if our patent position is not upheld.
Even if we obtain orphan drug designation for our future drug candidates, we may not fulfill the criteria for exclusivity or we may not be the
first to obtain marketing approval for any orphan indication. Further, even if we obtain orphan drug exclusivity for a particular product, that exclusivity may not effectively protect the product from competition because different drugs can be
approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve a drug for the same condition if the FDA concludes that the later drug is safer, more effective or makes a major contribution to patient
care. The FDA can discontinue Orphan Drug exclusivity after it has been granted if the orphan drug cannot be manufactured in sufficient quantities to meet demand.
Finally, there can be no assurance that the exclusivity provisions currently in the law may not be changed in the future and the impact of any
such changes (if made) on us. The orphan drug exclusivity contained in the ODA has been the subject of recent scrutiny from the press, from some members of Congress and from some in the medical community. There can be no assurance that the
exclusivity granted in ODA to orphan drugs approved by the FDA will not be modified in the future, and as to how any such change might affect our products, if approved.
Breakthrough Therapy Designation may not actually lead to a faster review process.
Under the Prescription Drug User Fee Act, the FDA has a goal of responding to NDAs for new molecular entities within 10 months of the date that
the FDA files the NDA for standard review, but this timeframe is also often extended. We have in the past and we may in the future, seek approval of our drug candidates under programs designed to accelerate the FDAs review and approval of
NDAs. For example, there is a new category of drugs referred to as breakthrough therapies, which are defined as drugs intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or
condition, and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical
development. In our case, Firdapse
®
has been granted breakthrough therapy designation for the treatment of LEMS. In the
future, we may request breakthrough designation or fast track designation from the FDA for our other drug candidates or for treatment of other diseases, but we cannot assure that we will obtain such designations. Moreover, even if we obtain
breakthrough designation or fast track designation from the FDA, the designations do not guarantee FDA approval of our NDA, that the development program or review timeline will ultimately be shorter than if we had not obtained the designations, or
that the FDA will not request additional information, including requesting additional clinical studies (although potentially a post-marketing requirement), during its review. Any request for additional information or clinical data could delay
the FDAs timely review of our NDA.
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Even though our second Phase 3 study is being conducted under a Special Protocol
Assessment, or SPA, agreed to with the FDA, we cannot guarantee that the design of, or data collected from, that trial or any of our clinical trials will be sufficient to support filing or approval of an NDA.
In the context of a Phase 3 clinical trial, the purpose of a SPA is to reach agreement with the FDA on the protocol design and analysis that
will form the primary basis of an efficacy claim: in other words, if the agreed-upon clinical trial protocol is followed, the clinical trial endpoints are achieved, and there is a favorable risk-benefit profile, the data may serve as the primary
basis for an efficacy claim in support of an NDA. However, FDA may rescind a SPA if the director of the FDA reviewing division determines that a substantial scientific issue essential to determining the safety or efficacy of the drug was identified
after the trial began. Thus, a SPA is not binding on the FDA if, for example, the Agency identifies a safety concern related to the product or its pharmacological class, if FDA or the scientific community recognizes a paradigm shift in disease
diagnosis or management, if the relevant data or assumptions provided by the sponsor in the SPA submission are found to be false or misstated, or if the sponsor fails to follow the protocol that was agreed upon with FDA. In addition, a SPA may be
modified with the written agreement of the FDA and the trial sponsor. The FDA retains significant latitude and discretion in interpreting the terms of a SPA agreement and the data and results from the applicable clinical trial.
Risks Related to Our Intellectual Property
We are dependent on our relationships and license agreements, and we rely upon the patent rights granted to us pursuant to the license
agreements.
All of our patent rights for Firdapse
®
are derived from our
license agreement with BioMarin. Pursuant to this license agreement, we have licensed rights under BioMarins Firdapse
®
patent applications in the United States, which expire in 2022 and
2034. We may lose our rights to these patents and patent applications if we breach our obligations under the license agreement, including, without limitation, our financial obligations to BioMarin. If we violate or fail to perform any term or
covenant of the license agreement, BioMarin may terminate the license agreement upon satisfaction of any applicable notice requirements and expiration of any applicable cure periods. Additionally, any termination of the license agreement, whether by
us or by BioMarin, will not relieve us of our obligation to pay any license fees owing at the time of such termination. If we fail to retain our rights under the license agreement, we would not be able to commercialize Firdapse
®
, and our business, results of operations, financial condition and prospects would be materially adversely affected.
Most of our patent rights for
CPP-115
are derived from our license agreement with Northwestern
University. Pursuant to this license agreement, we have exclusive worldwide rights to two patents in the United States. These were filed and obtained by Northwestern relating to compositions of matter for a class of molecules, including
CPP-115.
Both patents expire in 2023. Additionally, we have licensed rights from Northwestern to a pending patent for derivatives of vigabatrin that are unrelated to
CPP-115.
These rights are subject to the right of Northwestern, under limited circumstances, to practice the covered inventions for or on its own behalf for research. We may lose our rights to these patents and patent applications if we breach our
obligations under the license agreement, including, without limitation, our financial obligations, including milestone payments, to Northwestern. If we violate or fail to perform any term or covenant of the license agreement, Northwestern may
terminate the license agreement upon satisfaction of any applicable notice requirements and expiration of any applicable cure periods. Additionally, any termination of the license agreement, whether by us or by Northwestern, will not relieve us of
our obligation to pay any license fees owing at the time of such termination. If we fail to retain our rights under the license agreement, we would not be able to commercialize
CPP-115,
and our business,
results of operations, financial condition and prospects would be materially adversely affected.
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If we obtain approval to market
Firdapse
®
or
CPP-115,
our commercial success will depend in large part on our ability to use patents, especially those licensed to us by BioMarin and
Northwestern, respectively, to exclude others from competing with our products. The patent position of emerging pharmaceutical companies like us can be highly uncertain and involve complex legal and technical issues. Until our licensed patents are
interpreted by a court, either because we have sought to enforce them against a competitor or because a competitor has preemptively challenged them, we will not know the breadth of protection that they will afford us. Our patents may not contain
claims sufficiently broad to prevent others from practicing our technologies or marketing competing products. Third parties may intentionally attempt to design around our patents or design around our patents so as to compete with us without
infringing our patents. Moreover, the issuance of a patent is not conclusive as to its validity or enforceability, and so our patents may be invalidated or rendered unenforceable if challenged by others.
As a result of the foregoing factors, we cannot be certain how much protection from competition patent rights will provide us.
Our success will depend significantly on our ability to operate without infringing the patents and other proprietary rights of third
parties.
While we are not currently aware of any third-party patents which we may infringe, there can be no assurance that we do
not or will not infringe on patents held by third parties or that third parties will not claim that we have infringed on their patents. In the event that our technologies infringe or violate the patent or other proprietary rights of third parties,
we may be prevented from pursuing product development, manufacturing or commercialization of our products that utilize such technologies. There may be patents held by others of which we are unaware that contain claims that our products or operations
infringe. In addition, given the complexities and uncertainties of patent laws, there may be patents of which we are aware that we may ultimately be held to infringe, particularly if the claims of the patent are determined to be broader than we
believe them to be. Adding to this uncertainty, in the U.S., patent applications filed in recent years are confidential for 18 months, while older applications are not publicly available until the patent issues. As a result, avoiding patent
infringement may be difficult.
If a third-party claims that we infringe its patents, any of the following may occur:
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we may be required to pay substantial financial damages if a court decides that our technologies infringe a
competitors patent, which can be tripled if the infringement is deemed willful, or be required to discontinue or significantly delay development, marketing, selling and licensing of the affected products and intellectual property rights;
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a court may prohibit us from selling or licensing our product without a license from the patent holder, which
may not be available on commercially acceptable terms or at all, or which may require us to pay substantial royalties or grant cross-licenses to our patents; and
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we may have to redesign our product so that it does not infringe others patent rights, which may not be
possible or could require substantial funds or time and require additional studies.
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In addition, employees,
consultants, contractors and others may use the proprietary information of others in their work for us or disclose our proprietary information to others. As an example, we do not currently have written agreements regarding confidentiality with
several principal members of our Scientific Advisory Board. If our employees, consultants, contractors or others disclose our data to others or use data belonging to others in connection with our business, it could lead to disputes over the
ownership of inventions derived from that information or expose us to potential damages or other penalties.
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The occurrence of any of these events could have a material adverse effect on our business,
financial condition, results of operations or prospects.
We may incur substantial costs as a result of litigation or other
proceedings relating to patent and other intellectual property rights.
There is substantial history of litigation and other
proceedings regarding patent and intellectual property rights in the pharmaceutical industry. We may be forced to defend claims of infringement brought by our competitors and others, and we may institute litigation against others who we believe are
infringing our intellectual property rights. The outcome of intellectual property litigation is subject to substantial uncertainties and may, for example, turn on the interpretation of claim language by the court, which may not be to our advantage,
or on the testimony of experts as to technical facts upon which experts may reasonably disagree.
Under our license agreements, we have
the right to bring legal action against any alleged infringers of the patents we license. However, we are responsible for all costs relating to such potential litigation. We have the right to any proceeds received as a result of such litigation,
but, even if we are successful in such litigation, there is no assurance we would be awarded any monetary damages.
Our involvement in
intellectual property litigation could result in significant expense to us. Some of our competitors have considerable resources available to them and a strong economic incentive to undertake substantial efforts to stop or delay us from
commercializing products. Moreover, regardless of the outcome, intellectual property litigation against or by us could significantly disrupt our development and commercialization efforts, divert our managements attention and quickly consume
our financial resources.
In addition, if third parties file patent applications or issue patents claiming technology that is also claimed
by us in pending applications, we may be required to participate in interference proceedings with the U.S. Patent Office or in other proceedings outside the U.S., including oppositions, to determine priority of invention or patentability. Even if we
are successful in these proceedings, we may incur substantial costs, and the time and attention of our management and scientific personnel will be diverted from product development or other more productive matters.
Risks Related to Our Common Stock
The trading price of the shares of our common stock has been and could in the future be highly volatile.
The market price of our common stock has fluctuated in the past and is likely to fluctuate in the future. Market prices for biopharmaceutical
companies have historically been particularly volatile. Some of the factors that may cause the market price of our common stock to fluctuate include:
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developments concerning our clinical studies and trials and our
pre-clinical
studies;
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status of regulatory requirements for approval of our drug candidates;
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announcements of product development successes and failures by us or our competitors;
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new products introduced or announced by us or our competitors;
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adverse changes in the abilities of our third-party manufacturers to provide drug or product in a timely
manner or to meet FDA requirements;
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changes in reimbursement levels;
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changes in financial estimates by securities analysts;
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actual or anticipated variations in operating results;
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expiration or termination of licenses (particularly our licenses from BioMarin and Northwestern), research
contracts or other collaboration agreements;
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conditions or trends in the regulatory climate and the biotechnology and pharmaceutical industries;
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intellectual property, product liability or other litigation against us;
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changes in the market valuations of similar companies;
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changes in pharmaceutical company regulations or reimbursements as a result of healthcare reform or other
legislation;
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changes in economic conditions; and
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sales of shares of our common stock, particularly sales by our officers, directors and significant
stockholders, or the perception that such sales may occur.
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In addition, equity markets in general, and the market for
emerging pharmaceutical and life sciences companies in particular, have experienced substantial price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies traded in those markets.
Further, changes in economic conditions in the United States, Europe or globally could impact our ability to grow profitably. Adverse economic changes are outside our control and may result in material adverse impacts on our business or financial
results. These broad market and industry factors may materially affect the market price of our shares, regardless of our own development and operating performance. In the past, following periods of volatility in the market price of a companys
securities, securities class-action litigation has often been instituted against that company. Any such litigation that we become involved in could cause us to incur substantial costs and divert our managements attention and resources, which
could have a material adverse effect on our business, financial condition and results of operations.
Delaware law and our
certificate of incorporation and
by-laws
contain provisions that could delay and discourage takeover attempts that stockholders may consider favorable.
Certain provisions of our certificate of incorporation and
by-laws,
and applicable provisions of
Delaware corporate law, may make it more difficult for or prevent a third party from acquiring control of us or changing our Board of Directors and management. These provisions include:
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the ability of our Board of Directors to issue preferred stock with voting or other rights or preferences;
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limitations on the ability of stockholders to amend our charter documents, including stockholder supermajority
voting requirements;
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the inability of stockholders to act by written consent or to call special meetings;
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requirements that special meetings of our stockholders may only be called by the Board of Directors; and
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advance notice procedures our stockholders must comply with in order to nominate candidates for election to
our Board of Directors or to place stockholders proposals on the agenda for consideration at meetings of stockholders.
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On September 20, 2011, the Board of Directors approved the adoption of a stockholder rights plan, which was amended on September 19,
2016. The rights plan was implemented through our entry into a rights agreement with Continental Stock Transfer & Trust Company, as rights agent, and the declaration of a
non-taxable
dividend
distribution of one preferred stock purchase right (each, a Right) for each outstanding share of our common stock. The dividend was paid on October 7, 2011 to holders of record as of that date. Each right is attached to and trades with the
associated share of common stock. The rights will become exercisable only if a person acquires beneficial ownership of 17.5% or more of our common stock (or, in the case of a person who beneficially owned 17.5% or more of our common stock on the
date the rights plan was adopted, such person acquires beneficial ownership of any additional shares of our common stock) or after the date of the Rights Agreement, commences a tender offer that, if consummated, would result in beneficial ownership
by a person of 17.5% or more of our common stock. The rights will expire on September 20, 2019, unless the rights are earlier redeemed or exchanged.
The intent of the stockholder rights plan is to protect our stockholders interests by encouraging anyone seeking control of our company
to negotiate with our Board of Directors. However, our stockholder rights plan could make it more difficult for a third party to acquire us without the consent of our Board of Directors, even if doing so may be beneficial to our stockholders. This
plan may discourage, delay or prevent a tender offer or takeover attempt, including offers or attempts that could result in a premium over the market price of our common stock. This plan could reduce the price that stockholders might be willing to
pay for shares of our common stock in the future. Furthermore, the anti-takeover provisions of our stockholder rights plan may entrench management and make it more difficult to replace management even if the stockholders consider it beneficial to do
so.
In addition, Section 203 of the Delaware General Corporation Law generally prohibits us from engaging in a business combination
with any person who owns 15% or more of our common stock for a period of three years from the date such person acquired such common stock, unless Board or stockholder approval is obtained. These provisions could make it difficult for a third party
to acquire us, or for members of our Board of Directors to be replaced, even if doing so would be beneficial to our stockholders.
Any
delay or prevention of a change of control transaction or changes in our Board of Directors or management could deter potential acquirers or prevent the completion of a transaction in which our stockholders could receive a substantial premium over
the then current market price for their shares.
Future sales of our common stock may cause our stock price to decline.
As of March 10, 2017, we had 82,972,316 shares of our common stock outstanding, of which 6,042,623 shares were held by our officers and
directors. We also had outstanding: (i) common stock purchase warrants to purchase an aggregate of 2,407,663 additional shares of our common stock at exercise prices ranging from $1.04 to $2.08 per share, (ii) stock options to purchase an
aggregate of 6,088,333 shares at exercise prices ranging from $0.47 to $4.64 per share (2,636,661 of which are currently exercisable), and 26,667 restricted stock units that are subject to vesting. Sales of restricted shares or shares underlying
stock options and common stock purchase warrants, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock.
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Our Board of Directors has the ability to issue blank check preferred stock.
Our Certificate of Incorporation authorizes the issuance of up to 5,000,000 shares of blank check preferred stock,
with such designation rights and preferences as may be determined from time to time by our Board of Directors. Our Board of Directors is empowered, without stockholder approval, to issue shares of preferred stock with dividend, liquidation,
conversion, voting or other rights which could adversely affect the voting power or other rights of the holders of our common stock. In the event of such issuances, the preferred stock could be utilized, under certain circumstances, as a method of
discouraging, delaying or preventing a change in control of our company, pursuant to our stockholder rights plan. Although we have no present intention to issue any shares of our preferred stock, there can be no assurance that we will not do so in
the future.
We do not intend to pay cash dividends on our common stock in the foreseeable future.
We have never declared or paid any cash dividends on our common stock or other securities, and we currently do not anticipate paying any cash
dividends in the foreseeable future. Accordingly, investors should not invest in our common stock if they require dividend income. Our stockholders will not realize a return on their investment unless the trading price of our common stock
appreciates, which is uncertain and unpredictable.