Item 1. Business
CymaBay
Overview
CymaBay Therapeutics, Inc. is focused on developing therapies to treat specialty and orphan diseases with high unmet medical
need. Our two key clinical development candidates are seladelpar and arhalofenate.
We are currently developing seladelpar (MBX-8025) for
the treatment of primary biliary cholangitis (PBC), an autoimmune disease that causes progressive destruction of the bile ducts in the liver. Seladelpar is a potent and selective agonist of PPAR
d
, a
nuclear receptor that regulates genes important for lipid, bile acid/sterol and glucose metabolism and for inflammation in liver and muscle. In May 2016, we announced results from a Phase 2 clinical study of seladelpar in patients with PBC. The
study was intended to enroll approximately 75 patients with PBC who had an inadequate response to ursodiol and randomize them to receive either placebo or seladelpar (either 50 mg or 200 mg) once-daily for 12 weeks. Despite the occurrence of three
cases of asymptomatic, reversible transaminase elevations (two in the 200 mg and one in the 50 mg groups), data from 35 patients evaluated for efficacy demonstrated that treatment with seladelpar resulted in statistically significant reductions in
the primary endpoint of serum alkaline phosphatase (ALP). The mean decreases from baseline in ALP for the 50 and 200 mg dose groups were 53% and 63%, respectively, vs. 2% for placebo (p < 0.0001 for both). Based on results from a number of
published studies, lower levels of ALP have been shown to correlate with a significant reduction in adverse clinical outcomes for PBC patients including liver transplant and/or death. All patients who received seladelpar treatment for 12 weeks
(three on 50 mg and two on 200 mg) had their ALP values restored to within the normal range. The study was discontinued early after review of safety and efficacy data demonstrated proof-of-concept for activity on cholestatic biomarkers and had
identified the need to reduce the dose in order to optimize for clinical safety and efficacy. In October 2016, seladelpar received European Medicines Agency (EMA) PRIority MEdicines (PRIME) designation for the treatment of PBC. The U.S. Food and
Drug Administration (FDA) granted orphan drug designation to seladelpar for the treatment of PBC in November 2016. In December 2016, we initiated a dose-ranging Phase 2 study of seladelpar at lower daily doses of 5 and 10 mg in patients with
PBC.
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In March 2016, we announced results from a Phase 2 clinical study evaluating seladelpar in 13
patients with homozygous familial hypercholesterolemia (HoFH), a rare, life-threatening, genetic disease characterized by marked elevations in plasma levels of low density lipoprotein (LDL-C) leading to severe atherosclerosis and the development of
premature cardiovascular diseases. Five patients in this study experienced what we believe was a clinically meaningful maximal decrease in LDL-C of greater than 20% with three of them having decreases greater than 30%. Levels of human proprotein
convertase subtilisin kexin 9 (PCSK9) increased during seladelpar treatment by an average of 43%. PCSK9 is a protein that targets degradation of low density lipoprotein receptor (LDL-R) on the surface of liver cells. Cell surface LDL-R regulates
circulating levels of LDL-C and decreases in LDL-R are known to result in corresponding increases in LDL-C. This means that while seladelpar lowered LDL-C, it did so in the face of simultaneous increases in PSK9 elevations, the latter effect likely
opposed the tendency of seladelpar to decrease LDL-C. This suggests that seladelpar should be tested for LDL-C lowering in HoFH patients as an add-on therapy to maximal conventional lipid lowering therapy and PCSK9 inhibitor therapy, since PCSK9
inhibitors could remove the confounding effect of PCSK9 elevation caused by seladelpar and hence lead to even greater reductions in LDL-C.
We also believe that seladelpar could have utility in the treatment of severe hypertriglyceridemia (SHTG) and the more prevalent, but high
unmet need, indication of nonalcoholic steatohepatitis (NASH). We have obtained orphan-drug designations for seladelpar in PBC, HoFH and SHTG (Frederickson type I or V hyperlipoproteinemia).
Arhalofenate is being developed for the treatment of gout. Arhalofenate has been studied in five Phase 2 clinical trials in patients with gout
and consistently demonstrated the ability to reduce gout flares and reduce serum uric acid (sUA). Gout flares are recurring and painful episodes of joint inflammation that are triggered by the presence of monosodium urate crystals that form because
of elevated sUA levels. We believe the potential for arhalofenate to prevent or reduce flares while also lowering sUA could differentiate it from currently available treatments for gout and classify it as the first potential drug in what we believe
could be a new class of gout therapy referred to as Urate Lowering Anti-Flare Therapy (ULAFT). Arhalofenate has established a favorable safety profile in clinical trials involving over 1,100 patients exposed to date. We have completed end of Phase 2
discussions with the FDA and scientific advice discussions with the EMA.
In late December 2016, we entered into an exclusive licensing
agreement with Kowa Pharmaceuticals America, Inc. (Kowa) for the development and commercialization of arhalofenate in the U.S. (including all its possessions and territories). Under the terms of the agreement, we received an up-front payment of $5
million in January 2017, and will receive potential milestone payments of up to $10 million based on the initiation of specific development activities, and are eligible to receive up to an additional $190 million in payments based upon the
achievement of specific development and sales milestones. We are also eligible to receive tiered, double digit royalties on future sales of arhalofenate products. Kowa will be responsible for all development and commercialization costs. We retain
full development and commercialization rights for the rest of the world and intend to partner arhalofenate in geographies outside the U.S. and its possessions and territories.
We reported net loss of approximately $26.7 million and $15.5 million for the years ended December 31, 2016, and 2015, respectively. Our
average monthly cash usage for the year ended December 31, 2016, was approximately $2.1 million. As of December 31, 2016, we had cash, cash equivalents and marketable securities of approximately $17.0 million. We believe that these funds,
which were obtained through recent equity and debt financings, together with additional proceeds of approximately $14.4 million received from financings and license agreements in January and February of 2017, will allow us to continue operation
through at least the next twelve months.
CymaBay Strategy
Our goal is to become a leading biopharmaceutical company focused on developing and commercializing proprietary new medicines for specialty
and orphan diseases with high unmet medical need. Key elements of our strategy are to:
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develop seladelpar for patients with PBC;
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develop seladelpar for other high unmet need or orphan indications focused on liver and lipid diseases;
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partner with third-parties for the development and commercialization of arhalofenate outside the U.S. for patients with gout; and
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advance the development of other product candidates in our pipeline through our own efforts or through collaborations with third-parties.
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CymaBay Pipeline Overview
Our pipeline
includes three clinical stage product candidates and one preclinical program.
Seladelpar (MBX-8025)
Seladelpar is a selective agonist for the peroxisome proliferator-activated receptor delta
(PPAR
d
). An agonist is a substance that elicits a response by binding to a receptor. The PPAR
d
receptor is a nuclear receptor that regulates genes involved in
lipid, bile acid/sterol and glucose metabolism (particularly de novo lipogenesis and fatty acid oxidation), in insulin signaling and sensitivity, and in regulation of certain inflammatory cells. Seladelpar has the potential to treat a variety of
disorders of lipid metabolism and certain diseases of the liver. Previously, seladelpar had been in development for the treatment of mixed dyslipidemia, which is characterized by elevated LDL-C and triglycerides (TGs). Results from our Phase 2
clinical study of seladelpar in patients with mixed dyslipidemia established effects of the drug that we believe have the potential to benefit patients affected with other conditions. In this study, seladelpar demonstrated an anti-atherogenic
profile in which it lowered LDL-C, decreased the more atherogenic small dense LDL-C particles and raised high-density lipoprotein (HDL-C). In addition, seladelpar decreased TGs and free fatty acids. Seladelpar also decreased C-reactive protein, a
marker of systemic and local inflammation. Treatment with seladelpar also resulted in significant reductions in alkaline phosphatase (ALP) and in gamma-glutamyl transferase (GGT). Taken together these metabolic improvements suggest that seladelpar
can address disorders manifested by increases in LDL-C, increases in TGs, liver cholestasis (the impairment of the flow of bile from the liver) and liver fat accumulation with subsequent inflammation.
Based on an evaluation of possible indications, we have decided to focus the development of seladelpar for serious rare and orphan diseases or
more prevalent diseases with high unmet medical need and for which we can obtain positive initial clinical data in studies of less than six months duration. Compounds like seladelpar that work by interacting with the PPAR class of receptors (PPAR
a
, PPAR
g
and PPAR
d
) are subject to a FDA partial clinical hold which limits clinical studies to durations of less than
six months until the two-year rodent carcinogenicity studies are completed and evaluated. The decision as to whether to lift the partial clinical hold is based on a benefit/risk assessment made by the FDA in which they weigh the potential benefit of
the therapy for the proposed indication vs. any potential risk that may be identified from the rodent carcinogenicity findings. Thus, the lifting of the hold is typically taken when the carcinogenicity data (and the results of any subsequent
de-risking experiments) and clinical efficacy data are both in hand. We have completed the carcinogenicity studies for seladelpar and have had discussions with the FDA regarding them. We have also completed additional experiments seeking to confirm
that the findings are not relevant to human risk. Our goal is to provide those data together with clinical data from our completed and ongoing phase 2 studies in PBC to the FDA so that they can determine whether to lift the partial clinical hold.
The decision on timing to meet with the FDA to discuss lifting the partial clinical hold is contingent on the availability and strength of the results from our PBC studies. We will make those decisions when the results have been obtained and
interpreted.
We believe seladelpar may provide a significant benefit for patients across a wide range of rare diseases associated with
disorders of lipid metabolism, such as homozygous familial hypercholesterolemia (HoFH) and severe hypertriglyceridemia (SHTG) syndromes, and disorders of liver function, such as primary biliary cholangitis (PBC). We also believe that seladelpar
could have utility in the treatment of the more prevalent, but high unmet need indication of nonalcoholic steatohepatitis (NASH).
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Nonclinical Overview
In vitro
studies with cells and animal tissues, showed that seladelpar up-regulates genes involved in the metabolism and handling of
lipids, most notably stimulation of fatty acid synthesis, transport and oxidation.
In preclinical studies in rodents, dogs and primates,
seladelpar demonstrated a variety of beneficial effects on the lipid profile and other metabolic parameters. Seladelpar treatment increased peripheral oxidation of fatty acids leading to reduced levels of TGs and LDL-C, while raising HDL-C.
Seladelpar also inhibited fat mass accumulation, resulting in attenuation of body weight gain in rodent models of obesity.
Six month and
twelve month toxicology studies in rats and monkeys, respectively have been completed. In addition, the two-year carcinogenicity studies in mice and rats have been completed. Johnson & Johnson Pharmaceutical Research & Development
filed an IND for this compound with the FDA in July 2005 and subsequently transferred the application to CymaBay in March 2007.
Clinical Studies with Seladelpar
Five Phase 1 and three Phase 2 clinical studies with seladelpar have been completed. A fourth Phase 2 clinical study is currently ongoing in
patients with PBC. The first phase 2 clinical trial in overweight and obese patients with mixed dyslipidemia was an eight-week trial in which seladelpar was administered at doses of 50 or 100 mg/day both alone and in combination with 20 mg/day of
atorvastatin. This study also had a placebo arm and a 20 mg/day atorvastatin monotherapy arm. Treatment effects with seladelpar observed in this study included lowering of LDL-C with selective depletion of pro-atherogenic dense LDL-C particles,
decreases in triglycerides and increases in HDL. Patients taking seladelpar also experienced decreased levels of alkaline phosphatase and gamma glutamyl transferase, which when elevated are biochemical markers of cholestasis.
Based on our understanding of the mechanism of action of seladelpar and our prior clinical experience with the compound, we have redirected
the development of seladelpar toward serious rare and orphan diseases or more prevalent diseases with higher unmet medical need.
Primary Biliary
Cholangitis (PBC)
PBC is a slowly progressive autoimmune disease of the liver characterized by portal inflammation and immune-mediated
destruction of intrahepatic bile ducts. The loss of bile duct function leads to decreased bile secretion and the retention of toxic substances within the liver, resulting in further hepatic damage, fibrosis, cirrhosis and, eventually, liver failure.
It is a common cause of liver transplantation.
PBC affects primarily women with peak incidence in the fifth decade of life. It has been
recognized as an orphan disease both in the U.S. and in the E.U. It is a long-term debilitating and life-threatening disease. Fatigue and pruritus (itching) are the most common presenting symptoms. Pruritus, which occurs in 20 to 70% of patients,
can be extremely distressing for patients. Other common findings include jaundice, hyperlipidemia (notably hypercholesterolemia), hypothyroidism, osteopenia and osteoporosis, and coexisting autoimmune diseases. Portal hypertension is a late
complication of the disease, as is malabsorption, deficiencies of fat-soluble vitamins, and steatorrhea (excess fat in feces).
Currently,
the only FDA-approved treatments are ursodeoxycholic acid (UCDA), also known as ursodiol, an isomer of chenodeoxycholic acid and the synthetic bile acid analog obeticholic acid (Ocaliva
®
,
Intercept Pharmaceuticals). Ursodiol decreases serum levels of ALP, bilirubin, alanine aminotransferase, aspartate aminotransferase, cholesterol, and immunoglobulin M, all of which are elevated in patients with PBC and can serve as biochemical
markers of the disease. In a study that combined data from three controlled trials with a total of 548 patients, ursodiol significantly reduced the likelihood of liver transplantation or death after four years. Ursodiol also delayed the progression
of hepatic fibrosis in early-stage PBC, but was not effective in advanced disease. It is also known that up to 50% of PBC patients fail to respond adequately to ursodiol therapy.
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Ocaliva was approved by the FDA and European Medicines Agency in 2016 for the treatment of PBC in
combination with ursodiol in adults with an inadequate response to ursodiol, or as monotherapy in adults unable to tolerate ursodiol. Ocaliva also received orphan designations in the U.S. and the E.U. A Phase 3 study was completed with a primary
composite endpoint defined as a responder rate comprised of the percentage of patients with ALP < 1.67 times upper limit of normal (ULN) with a decrease in ALP of at least 15% and total bilirubin less than or equal to upper limit of normal. This
study met its goals and Ocaliva was granted an accelerated approval based on meeting this primary composite endpoint.
Additional
potential therapies in clinical development for PBC include LJN452 and GS9674, both of which are non-bile acid analogs and the mixed PPAR
a
/
d
agonist
elafibranor. Other therapies, such as colchicine, methothrexate, prednisone and multiple immunosuppressive regimens have been attempted. However, these unproved therapies have efficacy that is controversial, limited, or unproven and they are
associated with multiple side-effects, impacting tolerance and safety. Liver transplantation improves survival in patients with PBC, and it is the only effective treatment for those with liver failure. However, cirrhosis recurs in 15% of transplant
patients at three years and in 30% at 10 years. As a result, despite the previously mentioned therapeutic interventions, it is recognized that PBC continues to progress in many patients and additional medical treatment is needed to address this
disease.
Phase 2 Studies of Seladelpar in PBC
In November 2015, we initiated a Phase 2 study of seladelpar in patients with primary biliary cholangitis. The study was a placebo controlled,
double blind, dose ranging study of 12 weeks duration in patients who had an inadequate response to ursodiol, as characterized by a persistent elevation in ALP. The study planned to enroll approximately 75 patients who were randomized to receive
placebo, 50 or 200 mg daily doses of seladelpar. The goal of the study was to assess whether the improvements in biochemical markers of cholestasis observed previously for seladelpar in other patient populations would be observed in patients with
PBC.
The primary endpoint was the percent change in ALP. A secondary endpoint was the responder rate for patients achieving the composite
criteria of serum ALP values less than 1.67xULN with a decrease of at least 15% and with normal levels of total bilirubin (TBIL). ALP values were blinded, but other secondary endpoints that are also recognized as biochemical markers of cholestasis,
such as changes in GGT, TBIL and 5-nucleotidase, were only blinded with respect to treatment group because they were part of the safety surveillance.
During the study, three cases of asymptomatic increases in transaminases were observed (two in the 200 mg and one in the 50 mg cohorts). All
three were reversible on discontinuation of treatment and were not accompanied by elevation of TBIL. After unblinding of study data, changes in the primary endpoint ALP were analyzed using data available for the 38 subjects enrolled in the study and
who had completed at least two weeks of treatment. The primary analysis of changes in ALP were calculated using the last observation carried forward (LOCF) as specified in the study statistical analysis plan.
The mean decreases from baseline in ALP for the 50 and 200 mg dose groups were 53% and 63%, respectively, vs. 2% for placebo (p < 0.0001
for both). There was no statistically meaningful difference in efficacy between both seladelpar groups. All patients on seladelpar who received treatment for 12 weeks (three on 50 mg and two on 200 mg) experienced normalization of their ALP. Thus,
in this study seladelpar demonstrated a rapid and potent anti-cholestatic effect in patients with PBC. The lack of a dose response suggests that lower doses could be effective as well.
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Summary of Treatment Effects on Alkaline Phosphatase
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Treatment Group
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N
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Baseline
(U/L)
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Change
(%)
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Placebo
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12
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233
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-2
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Seladelpar (50 mg)
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13
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312
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-53
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*
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Seladelpar (200 mg)
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10
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248
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-63
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*
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*p < .0001 vs. placebo
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Patients receiving study drug also demonstrated improvements in metabolic parameters, including
reductions from pre-treatment levels of LDL-C of 13% and 16% for the 50 and 200 mg dose groups, respectively, vs. 3.7% for placebo after two weeks of dosing. Seladelpar was also associated with a decrease in a plasma marker of hepatic bile acid
synthesis, 7
a
-hydroxy-4-cholesten-3-one (C4). Seladelpar did not appear to be associated with drug-induced pruritus. In summary, the study was discontinued early after review of safety and efficacy data
demonstrated proof-of-concept for anti-cholestatic effects and it was recognized that another study was needed with further dose reduction in order to establish optimal clinical safety and efficacy.
In December 2016, we initiated a second Phase 2 study of seladelpar in patients with PBC. In this open label study, patients who have had an
inadequate response to, or who are intolerant to, ursodiol will be enrolled to receive seladelpar, either 5 or 10 mg, for 8 weeks. Based on the review of the 8-week data, new patients will be enrolled to receive seladelpar 25 mg for 8 weeks. The
study also incorporates an extension phase where patients will be able to continue treatment for a total of 26 weeks during which it will be possible to adjust the dose of seladelpar. The primary endpoint will be the change in ALP. A variety of
secondary outcomes will also be studied. We are planning to enroll approximately 36 patients in the U.S., Canada, Germany, and the U.K.
Non-Alcoholic
Fatty Liver Disease (NAFLD) / Nonalcoholic Steatohepatitis (NASH)
NAFLD is a disease characterized by accumulation of fat in the liver
in individuals that consume little or low amounts of alcohol (< 70 g/week for women and < 140 g/week for men). Approximately one-third of NAFLD patients develop NASH, which is characterized by inflammation in the liver that is often
accompanied by fibrosis. This can progress to cirrhosis, followed by eventual liver failure and death. NASH is the third most common reason for liver transplantation in the United States. NASH is a major challenge to healthcare systems worldwide.
NASH is initially a silent disease, the first sign of which may be elevations in transaminases such as alanine aminotransferase (ALT) or aspartate aminotransferase (AST) from routine blood testing. When further evaluation rules out medications,
viral hepatitis, alcohol, etc. as a cause, or when imaging studies of the liver show fat, NASH is suspected. A confirmation of a diagnosis of NASH requires a liver biopsy.
There are currently no drugs approved by the FDA for the treatment of NASH. However, several clinical studies have been carried out or are
underway with drug candidates that may affect disease outcomes in patients with NASH, including Phase 3 studies with OCA (Intercept Pharmaceuticals) and elafibranor (GFT505), a PPAR
a
/
d
agonist (Genfit SA).
Based on data from our Phase 2 clinical trial in patients with mixed
dyslipidemia and available data from other PPAR
d
agonists, we believe seladelpar may have utility in treating patients with NASH. The decrease in GGT, a biochemical marker which has been recognized to be
linked with hepatic fat accumulation, observed in our phase 2 mixed dyslipidemia trial is consistent with results reported for another PPAR
d
agonist GW501516. A short term clinical trial with
GW501516 demonstrated that the compound decreased hepatic fat. In addition to our clinical experience with seladelpar, along with that of other PPAR
d
agonists, the well documented property that seladelpar
induces the oxidation of fatty acid leads us to believe that our compound could potentially benefit patients affected with NAFLD who are further at risk of developing NASH. Recently, seladelpar was found to decrease fibrosis, inflammation, hepatic
lipids and reverse insulin resistance on the
foz
/
foz
mouse which is a diabetic obese mouse model of NASH. We continue to evaluate the opportunity to develop seladelpar in NASH among a number of additional indications.
Homozymogous Familial Hypercholesterolemia (HoFH)
HoFH is a rare, life-threatening, genetic disease characterized by marked elevations in plasma levels of LDL-C leading to severe
atherosclerosis and the development of premature cardiovascular diseases. While normal LDL-C levels are approximately 100 mg/dL, patients with HoFH may have levels in the 500 to 1000 mg/dL range. Symptomatic cardiovascular disease often
presents during the first decades of life leading to myocardial infarction, ischemic stroke, and death. If untreated, most HoFH patients do not survive beyond the age of 30.
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HoFH is caused by loss-of-function mutations in both copies of the low-density lipoprotein
receptor (
ldlr
) gene, leading to reduced or absent LDL-receptor protein (LDL-R) function. The disease affects approximately one in one million persons. The loss of LDL-R function leads to impaired removal of circulating LDL-C by the liver,
resulting in exceptionally high LDL-C blood concentrations.
Treatment of HoFH is focused on reducing LDL-C levels, as compelling evidence
exists from randomized, double-blind, placebo-controlled studies to support the causality of LDL-C in atherosclerotic cardiovascular disease. Considerable evidence implicates LDL-C as a causal mediator of cardiovascular disease in HoFH patients and
reductions in LDL-C can be expected to decrease the risk of cardiovascular disease. HoFH subjects sometimes undergo a procedure called LDL-C apheresis, a process resembling dialysis in which blood is removed from a patient, the plasma is separated
from blood cells, and the plasma is passed over a column to remove LDL prior to recombining it with the blood cells and returned to the patient. The reduction in LDL-C by apheresis has been shown to reduce cardiovascular events in HoFH patients.
Initial treatment of HoFH entails adoption of a low fat diet and exercise program, usually with limited effectiveness. This is followed by first-line therapies for reducing LDL-C, including statins, cholesterol absorption inhibitors and bile acid
sequestrants. Unfortunately, these conventional therapies work largely through up-regulation of the LDL-R. Thus, they do not provide optimal control of LDL-C in patients with HoFH in whom LDL-R activity is impaired or absent. Patients having a small
amount of residual LDL-R activity may receive a modest reduction in LDL-C with maximal conventional therapy, but most patients with HoFH respond insufficiently.
As mentioned above, LDL apheresis is complicated mechanical method to reduce LDL-C and is currently a treatment of last resort for HoFH. It is
a complex and inconvenient procedure that sometimes requires an arterio-venous fistula, similar to the situation for patients undergoing chronic dialysis. The procedure is not widely available. Apheresis transiently reduces LDL-C, but rebound of
LDL-C levels requires that it be repeated chronically every one to two weeks.
Several drugs have been recently approved for use in
combination with diet, exercise and conventional lipid lowering therapy to treat HoFH. The first is lomitapide (Juxtapid, Aegerion
®
Pharmaceuticals) that lowers LDL-C by inhibiting microsomal
triglyceride transfer protein (MTP), a protein whose activity is required for the production of very low density lipoprotein (VLDL-C), a precursor of LDL-C. Lomitapide produces decreases in LDL-C of approximately 40% from a baseline LDL-C level of
337 mg/dL and gets 28% of patients to the LDL-C target of <100 mg/dL. A side effect of lomitapide treatment is that fat accumulates in the liver, thereby causing hepatic steatosis, with or without concurrent increases in transaminases. For this
reason, the drug carries a black box warning and a requirement for monthly liver function monitoring tests. Lomitapide also blocks MTP in enterocytes (cells lining the gastrointestinal tract), leading to an accumulation of fat in the intestinal
mucosa. This can reduce the absorption of fat-soluble nutrients and causes gastrointestinal issues (diarrhea, abdominal pain). Subjects on lomitapide should be prescribed concomitant fat-soluble vitamin supplementation and should adhere to a
restrictive diet supplying less than 20% of energy from fat.
The second drug is mipomersen (Kynamro, Genzyme Corp.). It lowers LDL-C by
acting as an anti-sense oligonucleotide inhibitor that blocks the synthesis of apo B-100, the protein component of LDL-C. Mipomersen lowers LDL-C by approximately 25% from a baseline LDL-C of 439 mg/dL. Like lomitapide, mipomersen causes the
accumulation of fat in the liver, confers a risk of hepatic steatosis and carries a black box warning and requirement for monthly liver function monitoring tests.
The third and most recently approved drug for HoFH is evolocumab (Repatha, Amgen Inc.). Evolocumab is a human monoclonal IgG2 antibody
directed against human proprotein convertase subtilisin kexin 9 (PCSK9). Evolocumab binds to PCSK9 and inhibits circulating PCSK9 from binding to the LDL-R, preventing PCSK9 targeting of LDL-R degradation and permitting LDL-R to recycle back to the
liver cell surface. By inhibiting the binding of PCSK9 to LDL-R, evolocumab increases the number of hepatic cell surface LDL-Rs available to clear LDL from the blood, thereby lowering LDL-C levels.
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While these drugs offer additional treatment options for patients with HoFH, there remains a high
degree of unmet medical need. Even with an aggressive combination of available therapies, subjects with HoFH generally have LDL-C levels substantially above treatment targets. Many patients also have difficulty accessing or tolerating available
treatments.
In January 2015, we announced preclinical data demonstrating the potential of seladelpar to treat patients with HoFH.
Seladelpar gave durable and significant decreases in LDL-C concentrations of greater than 40% in the Watanabe Heritable Hyperlipidemic rabbit, an accepted preclinical model of human HoFH. Based on this preclinical data, our understanding of the
mechanism of action of seladelpar and the remaining unmet need for these patients despite the approval of recent therapies, we conducted a Phase 2 pilot study of seladelpar in HoFH patients.
Phase 2 Study of Seladelpar in HoFH
In April 2015, we initiated a Phase 2 study of seladelpar in patients with HoFH. This was an open label, dose escalation study of 12 weeks
duration conducted at five centers in Europe and Canada. Thirteen patients were enrolled, all of whom had genetically confirmed HoFH, including 2 subjects who had functionally negative mutations in their LDL-R genes. All of the subjects were taking
ezetimibe and were on maximum statin therapy. None of the study participants received lomitapide, mipomersen or a PCSK9 inhibitor. Eight patients were undergoing concomitant apheresis on a weekly or biweekly schedule. Despite being on maximal
conventional therapy, the average baseline LDL-C was 368 mg/dL. Subjects received once daily treatment with 50 mg of seladelpar for 4 weeks, after which the dose was escalated to 100 and 200 mg in successive 4 week periods. The goals of the study
were to evaluate the effect on LDL-C as well as a spectrum of other lipid-related parameters, including PCSK9 levels, and to collect safety information.
Two different per-protocol analyses were performed on 12 subjects. A responder analysis was carried out which reflects the largest decrease in
LDL-C observed during treatment for each subject. Three subjects (25%) exhibited a greater than or equal to 30% decrease. Five subjects (42%) had a greater than or equal to 20% decrease, including one patient that was receptor negative and
seven subjects (58%) had a greater than or equal to 15% decrease. Five subjects had a less than 15% decrease. The average maximum decrease in the study was 19%. Because of the high baseline LDL-C levels in these individuals, these
percentage decreases correspond to significant absolute decreases in LDL-C (mean decrease of 109 mg/dL for the subjects with the greater than or equal to 15% decrease). Although reductions in LDL-C tended to be greater at the higher doses, no clear
dose response was observed.
In a second analysis, the mean change in LDL-C for each subject was calculated by averaging values across all
doses and dosing periods while on treatment. The overall mean change for all 12 subjects was a decrease of 10%. Eight of these subjects had a mean decrease in LDL-C of 16%, including three with a greater than 20% decrease. This included one patient
who was receptor negative. This was offset by four patients who showed a mean increase of 4%.
Mean PCSK9 was elevated at baseline (544
+/- 133 ng/mL), as anticipated for patients with HoFH, and increased during treatment by a mean of 43%. During the study, decreases in the mean levels of alkaline phosphatase (30%), gamma glutamyl transferase (27%) and total bilirubin (22%),
which are markers of cholestasis, were also observed. There were three severe adverse events (SAEs), none drug related, and three treatment discontinuations for adverse events (AEs) possibly related to seladelpar.
The LDL-C levels of most HoFH patients are not optimally controlled and there is still a need for new therapeutic approaches. The finding that
seladelpar lowers LDL-C while raising PCSK9 indicates that the full potential of seladelpar should be evaluated when treating HoFH patients on a background of maximal conventional lipid lowering therapy and a PCSK9 inhibitor. We are currently
evaluating the feasibility of such a study.
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Severe Hypertriglyceridemia (SHTG)
Severe HTG (SHTG, TGs > 500 mg/dL) is associated with an increased risk of pancreatitis. As a result, management of HTG and SHTG is also an
important goal of lipid therapy. Most patients with HTG can be managed with available TG-lowering therapies including fibrates, niacin and fish oil components. However, there remains an unmet need for addressing SHTG which may arise from a variety
of circumstances. It is estimated that there are approximately five million patients in the U.S. with SHTG; however, the Fredrickson classification of hyperlipidemias further subdivides the overall population into several types, some of which can be
classified as orphan diseases.
According to the Fredrickson classification of hyperlipidemias, several types of HTG have been identified.
This includes Type 1a, a rare genetic disease also called familial chylomicronemia syndrome (FCS), in which chylomicrons (lipoprotein particles formed in the intestine that are rich in TGs and which serve to transport lipid to other tissues in the
body) are markedly elevated due to decreased activity of liporprotein lipase (LPL), the enzyme that is primarily responsible for their metabolism. FCS affects about one in one million people worldwide. Type 1b is another form characterized by a
deficiency in a protein component of chylomicrons called apo-CII which is needed to activate LPL and facilitate chylomicron metabolism. Another form is Type 5 in which very low density lipoprotein (VLDL) is elevated in addition to chylomicrons and
is likely caused by yet incompletely defined variety of molecular defects. Elevated chylomicrons are thought to have a number of consequences including increased risk of acute and chronic pancreatitis which are serious medical conditions. Extremely
high levels of TGs are a surrogate marker for high chylomicron levels.
The need for better treatments for SHTG has been recognized and
several new therapies either have been brought to the market or are in development. One popular approach has been to develop components of fish oil. Lovaza is a marketed drug that is a mixture of the omega-3 fatty acids esters eicosapentaenoic acid
(EPA) and docosahexaenoic acid (DHA) isolated from fish oil. In patients with SHTG (TGs > 500 mg/dL), it has been shown to reduce TGs by over 40%, but the reductions are accompanied by increases in LDL-C of over 40%. Vascepa, an ethyl ester of
EPA, is also on the market for the treatment of SHTG and lowers TGs by approximately 30% with no significant effect on LDL-C. Epanova is a complex mixture of polyunsaturated free fatty acids derived from fish oils, including multiple long-chain
omega-3 and omega-6 fatty acids, with EPA, DHA, and docosapentaenoic acid being the most abundant forms. In patients with SHTG, Epanova produced decreases in TGs of approximately 30% with increases of approximately 25% in LDL-C.
Other drugs are currently in earlier stage development for SHTG. ISIS-APOCIIIRX is an oligonucleotide inhibitor of apo-CIII, a lipoprotein
component that regulates TG metabolism. Loss-of-function mutations in
apo-CIII
are associated with lower levels of TGs. In a Phase 2 study in patients with SHTG, ISIS-APOCIIIRX produced reductions in TGs of up
to 70%. The effects on LDL-C were not reported. Another product candidate, CAT-2003, produced decreases in both fasting and post prandial (post meal) TGs in normal healthy volunteers and has been advanced into Phase 2 studies in SHTG.
We believe that seladelpar may be able to benefit patients with SHTG by virtue of its ability to simultaneously lower TGs and LDL-C. This
benefit has been observed both in monotherapy as well as in combination with atorvastatin in patients with mixed dyslipidemia. Drugs currently marketed for the treatment of SHTG lower TGs with either a worsening or lack of meaningful improvement in
LDL-C. Recognizing that SHTG is a heterogeneous collection of diseases, we are continuing our assessment of the best patient populations to study in a small Phase 2 clinical trial.
ArhalofenateGout
Gouty arthritis,
or gout, is the most common form of inflammatory arthritis in men and affects more than eight million people in the United States (U.S.). Gout is caused by elevated levels of uric acid in the blood, or hyperuricemia. A great majority, approximately
90%, of gout patients have an under excretion of uric acid. The hallmark symptom of
11
gout is a flare, characterized by debilitating pain, along with tenderness and inflammation of affected joints. Gout has a significant impact on patients quality of life and health care
utilization. Patients experiencing gout flares miss an average of 4.6 more days of work per year than those without gout. Gout flares also result in increased health care utilization with approximately 35% of patients with moderate flare and 50% of
patients with severe flare having at least one acute care visit per year.
Gout flares are triggered by the presence of monosodium urate
(MSU) crystals in joints. These crystals are formed in tissues when the concentration of sUA exceeds its solubility limit (approximately 6.8 milligrams per deciliter mg/dL). Long term accumulation of MSU crystals in the body leads to the progression
of gout with an increase in the frequency of flares, the involvement of multiple joints, their progressive deformation, and the appearance of masses of MSU crystals called tophi. Hence, the goal of treatment is to maintain sUA below 6 mg/dL, or
even 5 mg/dL when tophi needs to be dissolved. Elevated levels of sUA, or hyperuricemia, most commonly results from the under excretion of uric acid by the kidney. Uric acid is normally filtered through the glomerular section of the kidney and
reabsorbed in the proximal renal tubule back to the blood by specialized urate transporters/exchangers.
Multiple clinical studies
indicate that gout patients have a high incidence of comorbidities, such as hypertension (50% or more), chronic kidney disease (~40%), coronary artery disease (>35%), and diabetes (~20%). Managing patients with these comorbidities is challenging
because medication currently used to treat gout flares could be contraindicated. For instance, non-steroidal anti-inflammatory drugs (NSAIDs) have renal toxicity and corticosteroids worsen hypertension and diabetes.
Unmet Needs in the Treatment of Gout
To halt the progression of gout and provide long term reduction in flares, MSU crystals must be eliminated from the body. Therefore, the major
goals of gout treatment are to prevent flares and lower sUA to below 6 mg/dL in order to dissolve MSU crystals. Of the eight million patients with gout in the U.S., we estimate that over three million patients are on urate lowering therapy
(ULT) and of these patients on ULTs, as many as 60% may not get to their sUA goal of below 6.0 mg/dL. In addition, we estimate about one million patients continue to experience three or more flares per year. According to a 2012 study, patients
having three or more flares per year typically incur $10,000 more in annual health care costs than patients without gout. With a large number of patients not reaching the sUA goal of below 6 mg/dL on current therapies, gout remains a significantly
undermanaged disease. Studies have also shown that abrupt decreases in sUA with existing ULTs paradoxically cause an increase in flares, leading many patients to discontinue or avoid therapy. Non-adherence to therapy is thus a significant problem.
Current Treatment
Xanthine oxidase (XO) inhibitors are ULTs that decrease the production of uric acid. The XO inhibitors, allopurinol and febuxostat (marketed by
Takeda Pharmaceutical Company Limited as Uloric
®
), are the most commonly prescribed drugs in the ULT market. Generic allopurinol at doses up to 300 mg accounts for about 90% of ULT
prescriptions in the U.S. Studies have shown that the most commonly prescribed doses of these drugs (allopurinol 300 mg or febuxostat 40 mg) in the U.S. result in only about 40% of patients reaching the sUA goal of below 6.0 mg/dL. In addition, both
allopurinol and febuxostat can cause an increase in gout flares for up to 6 12 months following initiation of treatment.
Uricosurics are ULTs that lower sUA by promoting the excretion of uric acid by the kidney. Lesinurad (Zurampic
®
, Ironwood Pharmaceuticals, Inc. and AstraZeneca PLC) is a uricosuric that blocks URAT1, the main urate transporter/exchanger in renal proximal tubules. Zurampic 200mg in combination with a
xanthine oxidase inhibitor was approved in the U.S. in 2015 and in the E.U. in 2016 for the treatment of hyperuricemia associated with gout in patients that have not reached target serum uric acid levels with an XO inhibitor alone. The FDA approved
Zurampic with a black-box warning regarding the potential for acute renal failure and the approved indication is restricted to its use in combination with an XO inhibitor.
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To address the increase in flare rate associated with initiation of ULT therapy,
anti-inflammatory drugs such as colchicine and NSAIDs are co-prescribed with ULTs. These agents cause adverse effects. The risks associated with colchicine include diarrhea, nausea, vomiting, and neuromuscular toxicity. Long term use of colchicine
should be carefully monitored. NSAIDs are associated with gastrointestinal (GI) bleeding that can be severe and life-threatening. Their long-term use is associated with an increased risk of renal toxicity, chronic renal insufficiency and increased
cardiovascular morbidity. Steroids are also associated with GI bleedings. They can severely worsen hypertension and diabetes that are frequent comorbities of gout patients and their chronic use is associated with debilitating osteoporosis and bone
fractures.
Arhalofenate Has the Potential to Address the Unmet Needs in Gout
We believe that a significant opportunity exists for arhalofenate as a result of its combined anti-flare activity and its sUA lowering
activity. As an investigational Urate Lowering Anti-Flare Therapy (ULAFT), arhalofenate has the potential to address the unmet needs of gout patients by preventing flares while helping patients to achieve sUA target goals. This dual activity might
also be advantageous when combining arhalofenate with febuxostat to increase the number of patients reaching their desired sUA targets, to limit the number of flares and, in patients with tophaceous gout, to potentially resolve tophi.
Clinical Studies with Arhalofenate
The Gout Development Program
Arhalofenate is a prodrug which upon absorption is converted to its active form, arhalofenate acid. Arhalofenate acids dual actions are
to inhibit uric acid reabsorption by urate transporters in the kidney and to block the MSU crystal-stimulated production of IL-1ß by macrophages (white blood cells that play an important role in the bodys defense against pathogens and
foreign matter) in inflamed joints.
Arhalofenate has been studied in five Phase 2 gout clinical studies. Collectively across these
studies, we evaluated the safety and efficacy of arhalofenate in doses ranging from 400 mg 800 mg as monotherapy and in combination with the two approved XO inhibitors, allopurinol and febuxostat. The results of these studies
collectively support further development of arhalofenate as a potential urate-lowering anti-flare therapy (ULAFT) for the large number of gout patients that are inadequate responders or are intolerant to XO inhibitors.
Conclusions of Arhalofenates Clinical Experience
Arhalofenate has been studied in a total of 17 clinical studies with over 1,100 subjects in healthy volunteer, type 2 diabetic and gout
populations. These include Phase 1 studies of safety, tolerability and PK, Phase 2 studies of blood glucose effects in diabetics, and Phase 2 studies of sUA and flare effects in gout patients. Arhalofenate was generally well tolerated with a safety
profile that supports development for gout.
In clinical studies conducted to date that included over two hundred patients with
hyperuricemia and a diagnosis of gout, arhalofenate was found to be well tolerated when dosed at 400 mg, 600 mg or 800 mg once daily up to twelve weeks. Arhalofenate treatment resulted in reductions in sUA whether administered alone
or in combination with a XO inhibitor. As a uricosuric, arhalofenate decreases sUA by increasing the urinary excretion of uric acid. In clinical trials to date, Arhalofenate has increased the fractional excretion of uric acid with levels that were
at or near normal without overcorrection.
In addition, arhalofenate when administered at 800 mg daily without colchicine decreased the
incidence of flares and also increased the proportion of patients not experiencing any flare. Activity against flares would address one of the most burdensome symptoms for gout patients.
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Gout Partnership with Kowa Pharmaceuticals America, Inc.
In late December 2016, we entered into an exclusive license agreement with Kowa for the development and commercialization of arhalofenate in
the U.S. Pursuant to the license agreement, we granted to Kowa an exclusive license to certain patent rights and technology related to arhalofenate. Kowa will have exclusive rights to, among other things, develop, use, manufacture, sell and
otherwise exploit the licensed technology in the United States (including all possessions and territories).
We plan to enter into
licensing agreements with other parties for development and commercialization rights to arhalofenate in other geographies.
MBX-2982
Type 2 diabetes (T2DM) is a chronic debilitating disease characterized by a progressive loss of the normal control of glucose levels in the
blood and other tissues. There are several established and emerging classes of drug therapies for diabetes. Over the last decade, injectable drugs have emerged as competing drugs with significant benefits in glucose control as well as effects on
weight loss and the potential to protect the pancreas from the damage caused by the progression of diabetes. These drugs are primarily analogs of the natural hormone glucagon-like 1 peptide (GLP-1), and include exenatide, liraglitide and
lixisenatide among others. These drugs are given by subcutaneous injection once or twice daily. Their action is to provide glucose-regulated insulin secretion with weight loss and the potential to preserve function of pancreatic islets. New members
of this class with once weekly to once monthly dose schedules have been approved or are in late stage development. In spite of the variety of drugs available for the treatment of diabetes, the medications used to manage diabetes have not led to
optimal control of hyperglycemia and many are associated with dose-limiting side effects. MBX-2982 is an oral, G-protein coupled receptor (GPR119) agonist being evaluated as a novel therapeutic agent for patients with T2DM, with a dual mechanism
including direct effects and indirect effects mediated by gastrointestinal hormones known as incretins on glucose-dependent insulin secretion, as well as potentially beneficial effects on islet health.
GPR119 is expressed in pancreatic islet cells and gastrointestinal hormone secreting cells (enteroendocrine cells). Activation of GPR119 in
pancreatic ß-islets either by natural (endogenous) substances or by drugs developed to interact with it (GPR119 agonists) results in direct stimulation of glucose-dependent insulin secretion
in vitro
. Activation of GPR119 in intestinal
enteroendocrine cells either by endogenous substances or by GPR119 agonists results in stimulation of glucagon-like peptide 1 (GLP-1) and gastrointestinal inhibitory peptide release, and subsequent enhanced glucose-dependent insulin secretion and
suppression of glucagon, leading to improved acute glucose tolerance, both
in vitro
and
in vivo
. MBX-2982 was synthesized and screened as a GPR119 agonist, and is capable of activating endogenous GPR119 in a cell line over-expressing
the receptor. MBX-2982 has been shown to increase glucose-dependent insulin secretion in both
in vitro
and in animal models. MBX-2982 also increases incretin hormone levels in animals, which may contribute to its glucose lowering effects.
Nonclinical studies show that MBX-2982 has desirable effects on blood glucose levels, and this effect is additive to the effect of the
dipeptidyl peptidase-4 (DPP-4) inhibitor, sitagliptin. Based on these results, there may be an important role for MBX-2982 as a novel therapeutic agent in the treatment of T2DM, alone or in combination with other anti-diabetic agents, including the
DPP-4 inhibitors. Presently, there are no other agents approved in the U.S. within this pharmacologic class for the treatment of T2DM.
Extensive preclinical toxicological (up to 6 months in rats and dogs) have been completed, and PK profiling of MBX-2982 has shown low
potential for safety risk. We filed an IND for MBX-2982 with the FDA in January 2008.
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Clinical Studies with MBX-2982
Four Phase 1 clinical studies and one Phase 2 clinical study with MBX-2982 have been completed and the safety review showed no safety or
tolerability concerns with escalating doses (25, 100, and 300 mg/day) tested for up to 4 weeks of dosing. The four-week study in type 2 diabetics can be summarized as follows:
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MBX-2982 generally lowered mean weighted glucose and post-meal glucose during an extended mixed-meal tolerance test (MMTT), although not always to a statistically significant degree and not to the extent of sitagliptin.
The effect at the 300 mg dose may have been mitigated by the inclusion of a very small number of patients who experienced extreme worsening of glucose to the degree of being statistical outliers. Decreases in fasting glucose were generally not
observed with
MBX-2982.
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Four weeks of treatment with MBX-2982 tended to increase insulin, active GLP-1, and total GLP-1 during an extended MMTT. Decreases in glucagon were not as consistently observed. Changes in active GLP-1 were not as
robust as those observed with sitagliptin. Four weeks of treatment with MBX-2982 also tended to increase fasting insulin and c-peptide, and decrease fasting triglycerides.
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Overall, the data suggest that MBX-2982 may decrease glucose, potentially through effects on GLP-1, glucagon, and insulin. Changes in HbA1c are difficult to assess over a 4-week treatment period, but trended in the
downward direction. Glucose-lowering effects and mechanism of action will need to be explored more robustly in longer duration trials of
MBX-2982.
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The PK results observed in this study are similar to those seen in the completed Phase 1 study that used the same formulation, demonstrating dose-dependent increases in drug exposure and a profile supporting once daily
oral dosing.
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MBX-2982 at doses of 25, 100, and 300 mg was safe and well tolerated.
|
Based on these
results, we believe further testing with MBX-2982 in combination with sitagliptin and/or metformin for the treatment of diabetes is warranted.
Next Steps in Development of MBX-2982
A proof-of-concept study has been designed to determine the effects of MBX-2982 on fasting and post-challenge blood glucose in patients with
T2DM either as dual therapy in combination with either metformin or sitagliptin, or as triple therapy in combination with metformin and sitagliptin.
We do not anticipate conducting this study until a suitable partner is found to contribute funding or resources for the project, or until
sometime in the future when we have sufficient capital resources.
License Agreements and Intellectual Property
General
We actively seek to obtain, where
appropriate, patent protection and regulatory exclusivity for the proprietary technology that we consider important to our business, including compounds, compositions and formulations, their methods of use and processes for their manufacture both in
the United States and other countries. We also rely on trade secrets, know-how, continuing technological innovation and in-licensing to develop and maintain our proprietary position. Our success depends in part on our ability to obtain, maintain and
enforce proprietary protection for our product candidates, technology and knowhow, to operate without infringing the proprietary rights of others, and to exclude others from infringing our proprietary rights. However, patent protection may not
afford us complete protection against competitors who seek to circumvent our patents.
We also depend upon the skills, knowledge,
experience and know-how of our management, research and development personnel, as well as that of our advisors, consultants and other contractors. To help protect our proprietary know-how, which is not patentable, and for inventions for which
patents may be difficult to enforce,
15
we currently rely, and will in the future rely, on trade secret protection and confidentiality agreements to protect our interests. To this end, we require all of our employees, consultants,
advisors and other contractors to enter into confidentiality agreements that prohibit the disclosure of confidential information and, where applicable, require disclosure and assignment to us of the ideas, developments, discoveries and inventions
important to our business.
Collaborations and Licensing Agreements
We have entered into various arrangements with licensors and licensees. The current collaborations are summarized below.
Kowa Pharmaceuticals America, Inc.:
In December 2016, we entered into an exclusive license agreement with Kowa Pharmaceuticals America,
Inc. for the development and commercialization of arhalofenate in the U.S. Pursuant to the license agreement, we granted to Kowa an exclusive license to certain patent rights and technology related to arhalofenate. Kowa will have exclusive rights
to, among other things, develop, use, manufacture, sell and otherwise exploit the licensed technology in the United States (including all possessions and territories). Under the license agreement, Kowa paid us an up-front payment of $5 million in
January 2017, and has agreed to pay us potential milestone payments of $10 million based on the initiation of specific development activities, potential milestone payments of $190 million upon the achievement of additional development and sales
milestones, and tiered, double digit royalties on future net sales of arhalofenate products. Kowa is responsible for all development and commercialization costs in the US. We retain full development and commercialization rights for the rest of the
world.
Johnson and Johnson:
In June 2006, we entered into a license agreement with Janssen Pharmaceutical NV (Janssen NV) in
which we received an exclusive worldwide, royalty-bearing license to seladelpar and certain other PPAR
d
compounds (the PPAR
d
Products) with the
right to grant sublicenses to third parties to make, use and sell such PPAR
d
Products. Under the terms of the agreement, we have full control and responsibility over the research, development and
registration of any PPAR
d
Products and are required to use diligent efforts to conduct all such activities. Janssen NV has the sole responsibility for the preparation, filing, prosecution, maintenance of,
and defense of the patents with respect to, the PPAR
d
Products. Janssen NV has a right of first negotiation under the agreement to license a particular PPAR
d
Product from us in the event that we elect to seek a third party corporate partner for the research, development, promotion, and/or commercialization of such PPAR
d
Products. Under the terms of the
agreement Janssen NV is entitled to receive up to an 8% royalty on net sales of PPAR
d
Products. Under the terms of the agreement, if we do not expend more than a de minimus amount of effort and resources
on the research and/or development of at least one PPAR
d
product, such action would constitute a default under the agreement. In addition, if we fail to make any payment called for under the agreement,
disclose any non-exempt confidential information related to the agreement, or fail to use diligent efforts to promote, market and sell any PPAR
d
Product under the agreement, such action would constitute a
default under the agreement. In the event of such default, or upon our termination of the agreement, we shall grant Janssen NV a worldwide, exclusive, irrevocable license under the agreement in all information that is controlled, developed or
acquired by us which relate to a PPAR
d
compound or PPAR
d
Product and in all patents that are filed during the term of the agreement with a priority date after
the effective date of the agreement and relate to a PPAR
d
compound or PPAR
d
Product.
In June 2010, we entered into two development and license agreements with Janssen Pharmaceuticals, Inc. (Janssen) to further develop and
discover undisclosed metabolic disease target agonists for the treatment of T2DM and other disorders and received a one-time nonrefundable technology access fee related to the agreements. We received a termination notice from Janssen, effectively
ending these development and licensing agreements in early April 2015. In December 2015, we exercised an option pursuant to the terms of one of the original agreements to continue work to research, develop and commercialize compounds with activity
against an undisclosed metabolic disease target. Janssen granted us an exclusive, worldwide license (with rights to sublicense) under the Janssen know-how and patents to research, develop, make, have made, import, use, offer
16
for sale and sell such compounds. We have full control and responsibility over the research, development and registration of any products developed and/or discovered from the metabolic disease
target and are required to use diligent efforts to conduct all such activities.
DiaTex:
On June 30, 1998, we entered into a
License and Development Agreement with DiaTex, Inc. Under the agreement, DiaTex granted us an exclusive license to develop and commercialize therapeutic products containing halofenate, its enantiomers (mirror images, including arhalofenate),
derivatives, and analogs (the licensed products) for the treatment of diseases. Under terms of the agreement, DiaTex will work cooperatively and assist us in conducting a program for the research and development of halofenate and its enantiomers
including the right to sublicense, to use and to practice all patents controlled by DiaTex that claim halofenate and its enantiomers, and all information, data, know-how, trade secrets, inventions, developments, results, techniques and materials,
whether or not patentable, that are necessary or useful towards such commercialization. Under the agreement, we are obligated to use diligent efforts to conduct preclinical and clinical testing of halofenate and its enantiomers in order to determine
its efficacy for use in the treatment or prevention of human diseases or conditions. On April 15, 1999 the agreement was amended by the parties to allow DiaTex to transfer to us their interest in an IND application that they filed with the FDA.
The amendment also provided for DiaTex to indemnify us against any and all losses resulting or arising from any third party claims, actions or proceedings under the IND application, any negligent or wrongful acts or omissions of DiaTex in connection
with the IND application, and any misrepresentations by DiaTex relating to the license agreement. Under the amendment, we will provide the same indemnifications to DiaTex with respect to any third party claims, actions, or proceedings in connection
with negligent or wrongful conduct of clinical trials relating to the license agreement, provided the claims are not related to negligent or wrongful acts or omissions committed by DiaTex. On December 23, 2016 the agreement was amended by the
parties to change the timing of a specified development milestone and that DiaTex will join as a party plaintiff any enforcement action brought to enforce the licensed patents against third parties. The amendment also provided that if we breach the
agreement or if the agreement is terminated for any reason DiaTex will allow our sublicensee to cure such breach or enter into a new license agreement directly with such sublicensee on the terms and conditions of our agreement with DiaTex.
The license agreement contains a $2,000 per month license fee as well as a requirement to make additional payments for development
achievements and royalty payments on any sales of licensed products. DiaTex is entitled to up to $0.8 million for the future development of arhalofenate, as well as a 2% royalty payment on any net sales of products containing arhalofenate. A $50,000
milestone payment was made in May 2005 but no other milestone or royalty payments have been made since then. The agreement will expire upon the expiration of the last of DiaTexs patents related to the license granted, or, if later, the
expiration of all payment obligations under the agreement. The agreement may also terminate upon a material breach by DiaTex or us, if written notice of such breach is delivered to the breaching party, and the breaching party has not (i) cured
the breach or (ii) initiated good faith efforts to cure the breach within a specified time period. Under the terms of the agreement, if we fail to use diligent efforts to conduct preclinical and clinical testing of halofenate and its
enantiomers to determine its efficacy for use in the treatment or prevention of human diseases or conditions, fail to make any payment called for under the agreement, or disclose non-exempt confidential information under the agreement, such action
would constitute a material breach under the agreement. In addition, if we fail to execute all instruments and assignments or fail to take any action to effect joint ownership of any enantiomer patent with DiaTex, such action would constitute a
material breach under the agreement. We may terminate the agreement at any time if we determine we are no longer interested in DiaTexs license grant, provided we provide sufficient written notice within a specified time period.
Research and Development Agreements
INC Research:
In February 2014, we entered into a Master Services Agreement with INC Research, LLC and related initial work order for
INC Research to provide contract clinical research and development services to us in connection with our Phase 2b study of arhalofenate in gout. The Agreement provides that we may engage INC Research from time to time to provide services in
accordance with work orders mutually agreed and
17
budgeted between the parties for clinical research and development of arhalofenate which total exceeded approximately $8 million through 2015. The master services agreement provides customary
terms and conditions, including those for performance of services by INC Research in compliance with work orders, standard operating procedures, FDA and ICH requirements and all applicable laws. We remain responsible for all regulatory
responsibilities and the determination of any work orders, subject to mutual agreement on the specific terms of any such work orders. The master services agreement has a term of five years; provided that we may terminate the master services
agreement or any individual work order on thirty (30) days written notice, or immediately in the event of any safety risk associated with the services the being performed. In addition, either party may terminate the master services agreement or
any applicable work order upon thirty (30) days written notice for a material breach by the other party.
Pharmaceutical Research
Associates, Inc.:
In September 2015, we entered into a Master Services Agreement with Pharmaceutical Research Associates, Inc (PRA) and related initial work order for PRA to provide contract clinical research and development services to us in
connection with our Phase 2 study of seladelpar in PBC. Under this agreement, we may engage PRA from time to time in accordance with mutually agreed work orders. The initial work order includes services for our clinical candidate, seladelpar, and
the total costs under such initial work order are anticipated to be approximately $6.2 million. The agreement provides for performance of services by PRA in compliance with work orders, industry standards, FDA and ICH requirements and all applicable
laws. We remain responsible for all regulatory responsibilities unless specifically transferred to PRA, as well as the determination of any work orders, subject to mutual agreement on the specific terms of any such work orders. The agreement has a
term of five years, and we can terminate the agreement or any individual work order upon thirty (30) days written notice. In addition, either party may terminate the agreement or any applicable work order upon thirty (30) days written
notice for an uncured material breach by the other party, or immediately in the event of the other partys bankruptcy, insolvency, liquidation or assignment for the benefit of creditors. On July 25, 2016 we entered into a second work order
for services for our clinical candidate seladelpar and the total costs under such work order are anticipated to be approximately $6.4 million.
Intellectual Property
We own and co-own
approximately 41 United States patents, 192 foreign patents, as well as 19 United States patent applications and 164 foreign and Patent Cooperation Treaty applications which are counterparts to certain United States patents and patent
applications. In addition, we license from third parties approximately 18 United States patents and 2 United States patent applications, 316 foreign patents and 57 foreign and Patent Cooperation Treaty applications which are counterparts
to certain United States patents and patent applications. These patents and patent applications include claims covering various aspects of our product pipeline and research and development strategies, including: arhalofenate crystal forms, methods
of use both alone and in combination with other drugs and methods of manufacture, certain PPAR delta agonists, their compositions and uses, certain GPR119 agonist compositions and uses and undisclosed metabolic disease target agonist compositions
and uses.
The arhalofenate portfolio consists of approximately 151 issued patents and 77 pending patent applications relating to
composition, method of use or methods of manufacture. We believe our issued patents protect Arhalofenate through at least 2019-2032 before accounting for any potential patent term extension. The seladelpar portfolio consists of approximately 339
issued patents and 126 pending patent applications related to composition and method of use that we believe protect it through at least 2024-2035 before accounting for any potential patent term extension. Patent and trade secret protection is
critical to our business. Our success will depend in large part on our ability to obtain, maintain, defend and enforce patents and other intellectual property, to extend the life of patents covering our product candidates, to preserve trade secrets
and proprietary know-how, and to operate without infringing the patents and proprietary rights of third parties.
18
Manufacturing
We do not currently own or operate manufacturing facilities for the production or testing of seladelpar, arhalofenate or other product
candidates that we develop, nor do we have plans to develop our own manufacturing operations in the foreseeable future. We presently depend on third party contract manufacturers to obtain all of our required raw materials, Active Pharmaceutical
Ingredients (APIs) and finished products for our clinical studies for seladelpar. We have executed manufacturing agreements for our API and clinical supplies of seladelpar and arhalofenate with established manufacturing firms which are responsible
for sourcing and obtaining the raw materials necessary for the finished products. The raw materials necessary to manufacture the API for seladelpar and arhalofenate are available from more than one source.
Ash Stevens, Inc.
On May 10, 2016 we entered into a Development and Clinical Supply Agreement with Ash Stevens for the manufacturing of API necessary for
the development and manufacture of seladelpar drug product. Under the agreement, Ash Stevens shall obtain the raw materials necessary for the API. We own the rights, title and interest to the deliverables and intellectual property covering the
deliverables generated under the agreement. Both Ash Stevens and we have agreed to indemnify the other party with respect to losses due to the breach of a covenant or obligation under the agreement or the gross negligence, recklessness or
intentional misconduct of the other party. We may terminate the agreement at any time with written notice. In addition, either party may terminate the agreement at any time for material breach under the agreement.
Xcelience, Inc.
On October 20, 2016 we entered into a Development and Clinical Supply Agreement with Xcelience, Inc. Under the agreement, Xcelience will
provide us with pharmaceutical development, formulation and analytical services. The schedule of services, deliverables and pricing terms will be set forth in one or more written work orders to be entered into and mutually agreed upon by the
parties from time to time. We will own the rights, title and interest to the intellectual property relating to all pharmaceutical products developed or manufactured for us by Xcelience, as well as any active pharmaceutical ingredient provided to
Xcelience by us. We have agreed to indemnify Xcelience against third party claims that involve the breach by us of any of our obligations, warranties or representations under the agreement, and Xcelience has agreed to indemnify us against third
party claims that involve (i) the negligence, gross negligence, or intentional misconduct on the part of Xcelience, (ii) a failure by Xcelience to comply with the law in their performance of the agreement, or (iii) a breach of
Xceliences obligations, covenants, representations, or warranties under the agreement. Either party may terminate the agreement at any time with advance written notice.
Metrics Inc.
On
October 31, 2006, we entered into a Standard Development Agreement with Metrics, Inc. Under the agreement, Metrics will provide us with pharmaceutical development, formulation and analytical services in consideration of which we will provide
appropriate compensation as outlined in the agreement. We own the rights, title and interest to the intellectual property relating to all pharmaceutical products developed or manufactured for us by Metrics, as well as any active pharmaceutical
ingredient provided to Metrics by us. We have agreed to indemnify Metrics against third party claims that involve the breach by us of any of our obligations, warranties or representations under the agreement, and Metrics has agreed to indemnify us
against third party claims that involve (i) the negligence, gross negligence, or intentional misconduct on the part of Metrics, (ii) a failure by Metrics to comply with the law in their performance of the agreement, or (iii) a breach
of Metrics obligations, covenants, representations, or warranties under the agreement. Either party may terminate the agreement at any time with advance written notice.
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Siegfried AG
On April 30, 2012, we entered into a Development and Clinical Manufacture Agreement with Siegfried AG for the manufacturing of the API
necessary for the tablet form of arhalofenate. Under the agreement, we shall deliver or Siegfried shall obtain the raw materials necessary for the API. We own the rights, title and interest to the deliverables and intellectual property covering the
deliverables generated under the agreement. Siegfried shall grant a non-exclusive license to us to use Siegfried intellectual property to exploit any product or service based or derived from the deliverables under the agreement. Both Siegfried and
we have agreed to indemnify the other party with respect to losses due to the breach of a covenant or obligation under the agreement or the gross negligence, recklessness or intentional misconduct of the other party. We may terminate the agreement
at any time with written notice and Siegfried may terminate the agreement in the event we discontinue our activities related to the development or commercialization of the API for arhalofenate. In addition, either party may terminate the agreement
at any time for material breach under the agreement or in the case of insolvency of the other party.
Patheon Inc
On June 5, 2012, we entered into a Development and Clinical Manufacture Agreement with Patheon Inc. for the manufacturing of the tablet
form of arhalofenate. Under the agreement, we shall deliver the API or Patheon shall obtain the API from a qualified vendor. We own the rights, title and interest to the deliverables and intellectual property generated by Patheon in connection with
the performance of the services for us under the agreement. Both Patheon and we have agreed to indemnify the other party with respect to losses due to the breach of a covenant or obligation under the agreement or the gross negligence, recklessness
or intentional misconduct of the other party. We may terminate the agreement at any time with written notice provided that we terminate the agreement within certain times in advance of the start date of certain services. In addition, either party
may terminate the agreement at any time for material breach under the agreement.
Competition
The biopharmaceutical industry is highly competitive and subject to rapid and significant innovation. Although we believe that our development
expertise and scientific knowledge provide us with advantages over our competitors, particularly in the therapeutic areas in which we are focused, other biopharmaceutical companies in the industry may be able to develop therapeutics that are able to
achieve better results. Our competitors include pharmaceutical companies, biotechnology companies, specialty pharmaceutical companies, universities and other research institutions. Many of our competitors may have significantly greater financial,
technical and human resources than we have.
We are currently developing seladelpar for the treatment of patients with primary biliary
cholangitis (PBC). Currently, the only FDA-approved treatments for PBC are ursodeoxycholic acid (UCDA), also known as ursodiol, an isomer of chenodeoxycholic acid and the synthetic bile acid analog obeticholic acid (Ocaliva
®
, Intercept Pharmaceuticals). Ursodiol decreases serum levels of ALP, bilirubin, alanine aminotransferase, aspartate aminotransferase, cholesterol, and immunoglobulin M, all of which are elevated
in patients with PBC and can serve as biochemical markers of the disease. In a study that combined data from three controlled trials with a total of 548 patients, ursodiol significantly reduced the likelihood of liver transplantation or death after
four years. Ursodiol also delayed the progression of hepatic fibrosis in early-stage PBC, but was not effective in advanced disease. It is also known that up to 50% of PBC patients fail to respond adequately to ursodiol therapy. Ursodiol is
available as a generic and is priced at a discount to typical branded therapies.
Ocaliva was approved by the FDA and European Medicines
Agency in 2016 for the treatment of PBC in combination with UDCA in adults with an inadequate response to UDCA, or as monotherapy in adults unable to tolerate UDCA. Ocaliva also received orphan designations in the U.S. and the E.U. A Phase 3 study
was completed with a primary composite endpoint defined as a responder rate comprised of the percentage of patients
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with ALP < 1.67 times upper limit of normal with a decrease in ALP of at least 15% and total bilirubin less than or equal to upper limit of normal. This study met its goals and Ocaliva was
granted accelerated approval based on meeting this primary composite endpoint.
Although not approved for use in PBC, off-label use of
fibrate drugs has been reported, though many fibrates are specifically contraindicated for use in PBC due to potential concerns over acute and long-term safety in this patient population. Other therapies, such as colchicine, methothrexate,
prednisone and multiple immunosuppressive regimens have been attempted. However, their efficacy is controversial, limited, or unproven and they are associated with multiple side-effects, impacting tolerance and safety. Liver transplantation improves
survival in patients with PBC, and it is the only effective treatment for those with liver failure. However cirrhosis recurs in 15% of patients at three years and in 30% at 10 years. As a result, despite the previously mentioned therapeutic
interventions, it is recognized that PBC continues to progress in many patients and additional medical treatment is needed to address this disease.
We are aware of a number of companies with development programs in PBC that are currently in or beyond phase 2 including, LJN452 (Novartis
Pharmaceuticals Corporation) and GS9674 (Gilead Sciences, Incorporated), both of which are non-bile acid analogs and the mixed PPAR
a
/
d
agonist elafibranor
(Genfit S.A.).
Arhalofenate is being developed for the treatment of patients with gout. The xanthine oxidase inhibitors, allopurinol and
febuxostat (marketed by Takeda Pharmaceutical Company Limited as Uloric
®
), are the most commonly prescribed drugs to lower uric acid in patients with gout. Lesinurad (Zurampic
®
, Ironwood Pharmaceuticals, Inc. and AstraZeneca PLC) is a uricosuric that blocks URAT1, the main urate transporter/exchanger in renal proximal tubules. Zurampic 200mg in combination with a
xanthine oxidase inhibitor is approved in the U.S. and in the E.U. for the treatment of hyperuricemia associated with gout in patients that have not reached target serum uric acid levels with a xanthine oxidase inhibitor alone. Pegloticase (marketed
by Horizon Pharma plc as KRYSTEXXA
®
) is a PEGylated uric acid specific enzyme indicated for the treatment of chronic gout in adult patients refractory to conventional therapy.
Anti-inflammatory drugs, such as colchicines, steroids and NSAIDs, are prescribed to manage gout flares.
Research & Development Costs
Our research and development costs for the years ended December 31, 2016 and 2015, all of which are borne by us, were $15.9
million and $17.0 million, respectively.
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, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing and export and import of
products such as those we are developing. The pharmaceutical drug product candidates that we develop must be approved by the Food and Drug Administration (FDA) before they may be legally marketed in the United States.
United States Pharmaceutical Product Development Process
In the United States, the FDA regulates pharmaceutical products under the Federal Food, Drug and Cosmetic Act, and implementing regulations.
Pharmaceutical products are also subject to other federal, state and local statutes and regulations. 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. FDA sanctions could include refusal to approve pending applications, withdrawal of an
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approval, a clinical hold, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts,
restitution, disgorgement or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us. The process required by the FDA before a pharmaceutical product may be marketed in the United States
generally involves the following:
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Completion of preclinical laboratory tests, animal studies and formulation studies according to Good Laboratory Practices (GLP) or other applicable regulations;
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Submission to the FDA of an Investigational New Drug application (IND), which must become effective before human clinical studies may begin;
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Performance of adequate and well-controlled human clinical studies according to the FDAs current Good Clinical Practices (GCP), to establish the safety and efficacy of the proposed pharmaceutical product for its
intended use;
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Submission to the FDA of a New Drug Application (NDA) for a new pharmaceutical product;
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Satisfactory completion of an FDA inspection of the manufacturing facility or facilities where the pharmaceutical product is produced to assess compliance with the FDAs current Good Manufacturing Practice
standards (cGMP), to assure that the facilities, methods and controls are adequate to preserve the pharmaceutical products identity, strength, quality and purity;
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Potential FDA audit of selected preclinical and clinical study 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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The lengthy process of seeking required approvals and the
continuing need for compliance with applicable statutes and regulations require the expenditure of substantial resources and approvals are inherently uncertain.
Before testing any compounds with potential therapeutic value in humans, the pharmaceutical product candidate enters the preclinical testing
stage. Preclinical tests include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies to assess the potential safety and activity of the pharmaceutical product candidate. The conduct of the preclinical
tests must comply with federal regulations and requirements including Good Laboratory Practices. The sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or
literature and a proposed clinical protocol, to the FDA as part of the IND. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA has concerns and notifies the sponsor by way of a clinical hold. In such a case, the
IND sponsor and the FDA must resolve any outstanding concerns before the clinical study can begin. The FDA may also impose clinical holds on a pharmaceutical product candidate at any time before or during clinical studies due to safety concerns or
non-compliance. Submission of an IND may not result in the FDA allowing clinical studies to begin and, once begun, issues may arise that lead to suspension or termination of such clinical study.
During the development of a new drug, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior to
submission of an IND, at the end of Phase 2, and before an NDA is submitted. Meetings at other times may be requested. These meetings can provide an opportunity for the sponsor to share information about the data gathered to date, for the FDA to
provide advice, and for the sponsor and FDA to reach agreement on the next phase of development. Sponsors typically use the End-of-Phase 2 meeting to discuss their Phase 2 clinical results and present their plans for the pivotal Phase 3 clinical
trial that they believe will support approval of the new drug.
Clinical studies involve the administration of the pharmaceutical product
candidate to healthy volunteers or patients under the supervision of qualified investigators, generally physicians not employed by or under the clinical study sponsors control. Clinical studies are conducted under protocols detailing, among
other things, the
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objectives of the clinical study, dosing procedures, subject selection and exclusion criteria, how the results will be analyzed and presented and the parameters to be used to monitor subject
safety. Each protocol must be submitted to the FDA as part of the IND. Clinical studies must be conducted in accordance with GCP. Further, each clinical study must be reviewed and approved by an independent institutional review board (IRB) at, or
servicing, each institution at which the clinical study will be conducted. An IRB is charged with protecting the welfare and rights of study participants and considers such items as whether the risks to individuals participating in the clinical
studies are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the informed consent form that must be provided to each clinical study subject or his or her legal representative and must monitor the clinical study
until completed.
Human clinical studies are typically conducted in three sequential phases that may overlap or be combined:
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Phase 1. The pharmaceutical product is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption, metabolism, distribution and excretion.
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Phase 2. The pharmaceutical product is evaluated in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted
diseases, to determine dosage tolerance, optimal dosage and dosing schedule and to identify patient populations with specific characteristics where the pharmaceutical product may be more effective.
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Phase 3. Clinical studies are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population at geographically dispersed clinical study sites. These clinical studies are intended
to establish the overall risk/benefit ratio of the product and provide an adequate basis for product labeling. The studies must be well-controlled and usually include a control arm for comparison. One or two Phase 3 studies are required by the FDA
for an NDA approval, depending on the disease severity and other available treatment options.
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Post-approval studies, or Phase 4 clinical studies, may be conducted after initial marketing approval. These studies are used to gain additional experience from the treatment of patients in the intended therapeutic
indication.
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Progress reports detailing the results of the clinical studies must be submitted at least annually to the FDA
and written IND safety reports must be submitted to the FDA and the investigators for serious and unexpected adverse events or any finding from tests in laboratory animals that suggests a significant risk for human subjects. Phase 1, Phase 2 and
Phase 3 clinical studies may not be completed successfully within any specified period, if at all. The FDA or the sponsor or its data safety monitoring board may suspend a clinical study at any time on various grounds, including a finding that the
research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical study at its institution if the clinical study is not being conducted in accordance with the IRBs
requirements or if the pharmaceutical product has been associated with unexpected serious harm to patients.
Concurrent with clinical
studies, companies usually complete additional animal studies and must also develop additional information about the chemistry and physical characteristics of the pharmaceutical product as well as finalize a process for manufacturing the product in
commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the pharmaceutical product candidate and, among other things, must develop methods for testing the
identity, strength, quality and purity of the final pharmaceutical product. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the pharmaceutical product candidate does not
undergo unacceptable deterioration over its shelf life.
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United States Review and Approval Processes
The results of product development, preclinical studies and clinical studies, along with descriptions of the manufacturing process, analytical
tests conducted on the chemistry of the pharmaceutical product, proposed labeling and other relevant information are submitted to the FDA as part of an NDA requesting approval to market the product. The submission of an NDA is subject to the payment
of substantial user fees; a waiver of such fees may be obtained under certain limited circumstances.
In addition, under the Pediatric
Research Equity Act (PREA), an NDA or supplement to an NDA must contain data to assess the safety and effectiveness of the pharmaceutical product for the claimed indications in all relevant pediatric subpopulations and to support dosing and
administration for each pediatric subpopulation for which the product is safe and effective. The FDA may grant deferrals for submission of data or full or partial waivers. Unless otherwise required by regulation, PREA does not apply to any
pharmaceutical product for an indication for which orphan designation has been granted.
The FDA reviews all NDAs submitted before it
accepts them for filing and may request additional information rather than accepting an NDA for filing. Once the submission is accepted for filing, the FDA begins an in-depth review of the NDA. Under the goals and policies agreed to by the FDA under
the Prescription Drug User Fee Act (PDUFA), the FDA has 10 months from filing in which to complete its initial review of a standard NDA and respond to the applicant, and six months from filing for a priority NDA. The FDA does not always meet its
PDUFA goal dates for standard and priority NDAs. The review process and the PDUFA goal date may be extended by three months if the FDA requests or if the NDA sponsor otherwise provides additional information or clarification regarding information
already provided in the submission within the last three months before the PDUFA goal date.
After the NDA submission is accepted for
filing, the FDA reviews the NDA application to determine, among other things, whether the proposed product is safe and effective for its intended use, and whether the product is being manufactured in accordance with cGMP to assure and preserve the
products identity, strength, quality and purity. The FDA may refer applications for novel pharmaceutical products or pharmaceutical 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 and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it
considers such recommendations carefully when making decisions. During the pharmaceutical product approval process, the FDA also will determine whether a risk evaluation and mitigation strategy (REMS) is necessary to assure the safe use of the
pharmaceutical product. If the FDA concludes that a REMS is needed, the sponsor of the NDA must submit a proposed REMS; the FDA will not approve the NDA without a REMS, if required.
Before approving an NDA, the FDA will inspect the facilities at which the product is manufactured. The FDA will not approve the product unless
it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before approving an NDA, the FDA will
typically inspect one or more clinical sites as well as the site where the pharmaceutical product is manufactured to assure compliance with GCP and cGMP. If the FDA determines the application, manufacturing process or manufacturing facilities are
not acceptable, it will outline the deficiencies in the submission and often will request additional testing or information. In addition, the FDA will require the review and approval of product labeling.
The NDA review and 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 data 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. Data obtained from
clinical studies are not always conclusive and the FDA may interpret data differently than we interpret the same data. The FDA will issue a complete response letter if
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the agency decides not to approve the NDA. The complete response letter describes the specific deficiencies in the NDA identified by the FDA. The deficiencies identified may be minor, for
example, requiring labeling changes, or major, for example, requiring additional clinical studies. Additionally, the complete response letter may include recommended actions that the applicant might take to place the application in a condition for
approval. If a complete response letter is issued, the applicant may either resubmit the NDA, addressing all of the deficiencies identified in the letter, or withdraw the application.
If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for
use may otherwise be limited, which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings or precautions be included in the product labeling. In addition, the FDA may require Phase
4 testing which involves clinical studies designed to further assess pharmaceutical product safety and effectiveness and may require testing and surveillance programs to monitor the safety of approved products that have been commercialized.
Post-Approval Requirements
Any
pharmaceutical products for which we receive FDA approvals are subject to continuing regulation by the FDA, including, among other things, record-keeping requirements, reporting of adverse experiences with the product, providing the FDA with updated
safety and efficacy information, product sampling and distribution requirements, complying with certain electronic records and signature requirements and complying with FDA promotion and advertising requirements, which include, among others,
standards for direct-to-consumer advertising, prohibitions on promoting pharmaceutical products for uses or in patient populations that are not described in the pharmaceutical products approved labeling (known as off-label use),
industry-sponsored scientific and educational activities and promotional activities involving the internet. Failure to comply with FDA requirements can have negative consequences, including adverse publicity, enforcement letters from the FDA,
actions by the United States Department of Justice and/or United States Department of Health and Human Services Office of Inspector General, mandated corrective advertising or communications with doctors, and civil or criminal penalties. Although
physicians may prescribe legally available pharmaceutical products for off-label uses, manufacturers may not directly or indirectly market or promote such off-label uses.
Manufacturers of our products are required to comply with applicable FDA manufacturing requirements contained in the FDAs cGMP
regulations. cGMP regulations require, among other things, quality control and quality assurance, as well as the corresponding maintenance of records and documentation. Pharmaceutical product manufacturers and other entities involved in the
manufacture and distribution of approved pharmaceutical products are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for
compliance with cGMP and other laws. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain cGMP compliance. Discovery of problems with a product after approval may result
in restrictions on a product, manufacturer or holder of an approved NDA, including withdrawal of the product from the market. In addition, changes to the manufacturing process generally require prior FDA approval before being implemented and other
types of changes to the approved product, such as adding new indications and additional labeling claims, are also subject to further FDA review and approval.
The FDA also may require post-marketing testing, known as Phase 4 testing, risk minimization action plans 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.
U.S. Foreign Corrupt
Practices Act
The U.S. Foreign Corrupt Practices Act, or FCPA, prohibits certain individuals and entities, including us, from
promising, paying, offering to pay, or authorizing the payment of anything of value to any foreign government official, directly or indirectly, to obtain or retain business or an improper advantage. The U.S. Department of Justice and the
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U.S. Securities and Exchange Commission, or SEC, have increased their enforcement efforts with respect to the FCPA. Violations of the FCPA may result in large civil and criminal penalties and
could result in an adverse effect on a companys reputation, operations, and financial condition. A company may also face collateral consequences such as debarment and the loss of export privileges.
Federal and state fraud and abuse laws
In addition to FDA restrictions on marketing of pharmaceutical products, several other types of state and federal healthcare laws have been
applied to restrict certain business practices in the biopharmaceutical industry in recent years. These laws include anti-kickback statutes, false claims statutes, data privacy and security laws, as well as transparency laws regarding payments or
other items of value provided to healthcare providers. The federal Anti-Kickback Statute 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. The term remuneration has been broadly interpreted to
include anything of value, including for example, gifts, discounts, the furnishing of supplies or equipment, credit arrangements, payments of cash, waivers of payment, ownership interests and providing anything at less than its fair market value.
The Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on one hand and prescribers, purchasers, and formulary managers on the other. Although there are a number of statutory exemptions and
regulatory safe harbors protecting certain common activities from prosecution, the exemptions and safe harbors are drawn narrowly, and our practices may not in all cases meet all of the criteria for statutory exemptions or safe harbor protection.
Practices that involve remuneration that may be alleged to be intended to induce prescribing, purchases, or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor. Several courts have interpreted the
statutes intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal healthcare covered business, the statute has been violated. The intent standard of the Anti-Kickback Statute
was also broadened by the Patient Protection and Affordable Health Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively the PPACA, so that a person or entity no longer needs to have actual knowledge of this
statute or specific intent to violate it in order to have committed a violation. In addition, the PPACA provides that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute
constitutes a false or fraudulent claim for purposes of the civil False Claims Act (discussed below).
The federal False Claims Act
prohibits any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government. Recently, several pharmaceutical and other healthcare companies have been prosecuted under these laws for allegedly
providing free product to customers with the expectation that the customers would bill federal programs for the product. Other companies have been prosecuted for causing false claims to be submitted because of the companies marketing of the
product for unapproved, and thus non-reimbursable, uses. Additionally, the civil monetary penalties statute imposes penalties against any person who is determined to have presented or caused to be presented a claim to a federal health program that
the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent. The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created additional federal criminal statutes
that prohibit knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private third-party payers and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially
false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.
The
federal Physician Payments Sunshine Act, created under the PPACA, and its implementing regulations, require certain manufacturers of drugs, devices, biologicals and medical supplies for which payment is available under Medicare, Medicaid or the
Childrens Health Insurance Program (with certain exceptions) to report annually information related to certain payments or other transfers of value provided to physicians and teaching hospitals, or to entities or individuals at the request of,
or designated on behalf of, the physicians and teaching hospitals, and applicable manufacturers and group purchasing organizations to report annually certain ownership and investment interests held by physicians and their immediate family members.
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We may also be subject to data privacy and security regulation by both the federal government and
the states in which we conduct our business. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and its implementing regulations, imposes certain requirements relating to the privacy, security and
transmission of individually identifiable health information. Among other things, HITECH makes HIPAAs privacy and security standards directly applicable to business associatesindependent contractors or agents of covered
entities that receive or obtain protected health information in connection with providing a service on behalf of a covered entity. HITECH also increased the civil and criminal penalties that may be imposed against covered entities, business
associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys fees and costs associated with
pursuing federal civil actions. In addition, state laws govern the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating
compliance efforts.
The majority of states also have statutes or regulations similar to the aforementioned federal fraud and abuse laws,
some of which are broader in scope and apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor. Further, some state laws require pharmaceutical companies to comply with the
pharmaceutical industrys voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report information related to payments or other transfers of
value provided to physicians and other health care providers and entities or marketing expenditures.
These federal and state laws may
impact, among other things, our proposed sales, marketing and education programs. If our operations are found to be in violation of any of the federal and state laws described above or any other governmental regulations that apply to us, we may be
subject to penalties, including criminal and significant civil monetary penalties, damages, fines, imprisonment, exclusion from participation in government healthcare programs, and the curtailment or restructuring of our operations, any of which
could adversely affect our ability to operate its business and our results of operations. To the extent that any of our product candidates are ultimately sold in a foreign country, we may be subject to similar foreign laws and regulations, which may
include, for instance, applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws, and implementation of corporate compliance programs and reporting of payments or transfers of value to healthcare professionals.
Patent Term Restoration and Marketing Exclusivity
Depending upon the timing, duration and specifics of the FDA approval of the use of our pharmaceutical product candidates, some of our patents
may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent restoration term of up to
five years as compensation for patent term lost during product development and the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the products
approval date. The patent term restoration period is generally one-half the time between the effective date of an IND and the submission date of an NDA plus the time between the submission date of an NDA and the approval of that application. Only
one patent applicable to an approved pharmaceutical product is eligible for the extension and the application for the extension must be submitted prior to the expiration of the patent. The United States Patent and Trademark Office, in consultation
with the FDA, reviews and approves the application for any patent term extension or restoration. In the future, we may apply for restoration of patent term for one of our currently owned or licensed patents to add patent life beyond its current
expiration date, depending upon the expected length of the clinical studies and other factors involved in the filing of the relevant NDA.
Market exclusivity provisions under the U.S. Food, Drug, and Cosmetic Act can also delay the submission or the approval of certain
applications of other companies seeking to reference another companys NDA. Currently seven years of reference product exclusivity are available to pharmaceutical products designated as Orphan Drugs, during which the FDA may not approve generic
products relying upon the reference products data. Pediatric exclusivity is another type of regulatory market exclusivity in the United States. Pediatric
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exclusivity, if granted, adds six months to existing exclusivity periods and patent terms. This six-month exclusivity, which runs from the end of other exclusivity protection or patent term, may
be granted based on the voluntary completion of a pediatric clinical study in accordance with an FDA-issued Written Request for such a clinical study.
Pharmaceutical Coverage, Pricing and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of any pharmaceutical product candidates for which we obtain
regulatory approval. In the United States and markets in other countries, sales of any products for which we receive regulatory approval for commercial sale will depend in part upon the availability of reimbursement from third-party payors.
Third-party payors include government payors such as Medicare and Medicaid, managed care providers, private health insurers and other organizations. In the United States, no uniform policy of coverage and reimbursement for products exists among
third-party payors. While commercial payors often follow Medicare cover policy and payment limitations, coverage and reimbursement for products can differ significantly from payor to payor. The process for determining whether a payor will provide
coverage for a pharmaceutical product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the pharmaceutical product. Third-party payors may limit coverage to specific pharmaceutical products on
an approved list, or formulary, which might not include all of the FDA-approved pharmaceutical products for a particular indication.
Third-party payors are increasingly challenging the price and examining the medical necessity and cost-effectiveness of medical products and
services, in addition to their safety and efficacy. We may need to conduct expensive pharmaco-economic studies in order to demonstrate the medical necessity and cost-effectiveness of its products, in addition to the costs required to obtain the FDA
approvals. Our pharmaceutical product candidates may not be considered medically necessary or cost-effective. A payors decision to provide coverage for a pharmaceutical product does not imply that an adequate reimbursement rate will be
approved. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development. In addition, in the United States there is a growing
emphasis on comparative effectiveness research, both by private payors and by government agencies. To the extent other drugs or therapies are found to be more effective than our products, payors may elect to cover such therapies in lieu of our
products and/or reimburse our products at a lower rate.
Different pricing and reimbursement schemes exist in other countries. The
downward pressure on health care costs in general, particularly prescription drugs, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products. In addition, in some countries, cross-border imports
from low-priced markets exert a commercial pressure on pricing within a country.
The marketability of any pharmaceutical product
candidates for which we receive regulatory approval for commercial sale may suffer if the government and third-party payors fail to provide adequate coverage and reimbursement. In addition, emphasis on managed care in the United States has increased
and we expect this will continue to increase the pressure on pharmaceutical pricing. Coverage policies and third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more
products for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.
In the United States and foreign jurisdictions, there have been a number of legislative and regulatory changes to the healthcare system that
could affect our future results of operations. In particular, there have been and continue to be a number of initiatives at the United States federal and state levels that seek to reduce healthcare costs. For example, in March 2010 the PPACA was
enacted, which includes measures to significantly change the way healthcare is financed by both governmental and private insurers. Among the provisions of the PPACA of importance to the pharmaceutical and biotechnology industry are the following:
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an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents, apportioned among these entities according to their market share in certain government
healthcare programs;
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an increase in the rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13% of the average manufacturer price for branded and generic drugs, respectively;
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a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts to negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage
gap period, as a condition for the manufacturers outpatient drugs to be covered under Medicare Part D;
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extension of manufacturers Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;
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expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for certain
individuals with income at or below 133% of the Federal Poverty Level, thereby potentially increasing manufacturers Medicaid rebate liability;
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expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program;
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new transparency reporting requirements under the federal Physician Payments Sunshine Act, created under Section 6002 of the PPACA;
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a requirement to annually report drug samples that manufacturers and distributors provide to physicians;
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expansion of health care fraud and abuse laws, including the False Claims Act and the Anti-Kickback Statute, new government investigative powers, and enhanced penalties for noncompliance;
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a licensure framework for follow-on biologic products;
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a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research; and
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establishment of a Center for Medicare Innovation at CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending.
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Since its enactment there have been judicial and Congressional challenges to certain aspects of the Affordable Care Act,
and we expect there will continue to be additional challenges and amendments to it in the future.
In addition, other legislative changes
have been proposed and adopted since the PPACA was enacted. In August 2011, the president signed into law the Budget Control Act of 2011, which, among other things, created the Joint Select Committee on Deficit Reduction, or joint committee, to
recommend proposals in spending reductions to Congress. The joint committee did not achieve its targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, triggering automatic reductions to several government programs.
These reductions include aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, starting in 2013 and, due to subsequent legislative amendments, will remain in effect through 2025 unless additional congressional
action is taken. In January 2013, the president signed into law the American Taxpayer Relief Act of 2012, which, among other things, reduced Medicare payments to several providers and increased the statute of limitations period for the government to
recover overpayments to providers from three to five years. More recently, there have been several recent congressional inquiries and proposed bills designed to, among other things, bring more transparency to drug pricing, review the relationship
between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products. These new laws may result in additional reductions in Medicare and other healthcare funding, which could have a material
adverse effect on our financial operations.
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International Regulation
In addition to regulations in the United States, there are a variety of foreign regulations governing clinical studies and commercial sales and
distribution of our future product candidates. Whether or not FDA approval is obtained for a product, approval of a product must be obtained by the comparable regulatory authorities of foreign countries before clinical studies or marketing of the
product can commence in those countries. The approval process varies from country to country, and the time may be longer or shorter than that required for FDA approval. The requirements governing the conduct of clinical studies, product licensing,
pricing and reimbursement vary greatly from country to country. In addition, certain regulatory authorities in select countries may require us to repeat previously conducted preclinical and/or clinical studies under specific criteria for approval in
their respective country which may delay and/or greatly increase the cost of approval in certain markets targeted for approval by us.
Corporate
Information
CymaBay Therapeutics, Inc., formerly Metabolex, Inc., was incorporated under the laws of the State of Delaware on
October 5, 1988, originally under the name Transtech Corporation. Our executive offices are located at 7999 Gateway Blvd., Suite 130, Newark, CA 94560. The telephone number at our executive office is (510) 293-8800. Our corporate website
address is www.cymabay.com. We do not incorporate the information contained on, or accessible through, our website into this Annual Report on Form 10-K, and you should not consider it part of this Annual Report. We make available free of charge on
or through our websiteour annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably
practicable after we electronically file such material with, or furnish it to, the SEC.
We have had no revenues in 2016, 2015 and 2014.
All of our long-lived assets are located in the United States.
Implications of Being an Emerging Growth Company
We qualify as an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As an
emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. These provisions include:
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only two years of audited financial statements in addition to any required unaudited interim financial statements with correspondingly reduced Managements Discussion and Analysis of Financial Condition and
Results of Operations disclosure;
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reduced disclosure about our executive compensation arrangements;
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no requirement that we solicit non-binding advisory votes on executive compensation or golden parachute arrangements; and
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exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting.
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In addition, under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the
enactment of the JOBS Act until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards, and, therefore, are subject to the same new or
revised accounting standards as other public companies that are not emerging growth companies.
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We could remain an emerging growth company for up to five years or until the earliest of
(i) the last day of the first fiscal year in which our annual gross revenues exceed $1 billion, (ii) the date that we becomes a large accelerated filer as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as
amended, or the Exchange Act, which would occur if the market value of our common stock that are held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, (iii) the date on
which we have issued more than $1 billion in non-convertible debt during the preceding three-year period and (iv) the last day of the fiscal year following the fifth anniversary of the date of the first sale of our common equity securities
pursuant to an effective registration statement under the Securities Act (a date which occurred in July 2014). At this time we expect to remain an emerging growth company for the foreseeable future.
We also qualify as a smaller reporting company and have the advantage of not being required to provide the same level of
disclosure as larger public companies.
Employees
As of March 1, 2017, we had 22 full-time employees, 7 of whom hold Ph.D.s, 2 of whom hold M.D.s and 3 of whom hold a Masters degree in
relevant areas of expertise.
Executive Officers of Registrant
As of March 1, 2017, our executive officers, who are appointed by and serve at the discretion of the board of directors, were as follows:
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Name
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Age
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Position Held With CymaBay
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Executive Officers
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Harold Van Wart, Ph.D.
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President, Chief Executive Officer & Director
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Sujal Shah
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Chief Financial Officer
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Pol Boudes, M.D.
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Chief Medical Officer
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Robert L. Martin, Ph.D.
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Senior Vice President, Manufacturing and Nonclinical Development
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Charles A. McWherter, Ph.D.
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Senior Vice President, Chief Scientific Officer
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Patrick J. OMara
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Senior Vice President, Business Development
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Kirk Rosemark
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Vice President, Regulatory Affairs and Quality Assurance
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Biographical Information
Executive Officers
Harold E.
Van Wart, Ph.D.
has served as CymaBays President since April 2001 and Chief Executive Officer and member of its board of directors since 2003. He served as Chief Operating Officer from December 2002 to January 2003 and Senior Vice
President, Research and Development from October 2000 to December 2002. From 1999 to 2000, Dr. Van Wart was vice president and therapy area head for arthritis and fibrotic diseases at Roche Biosciences, a biopharmaceutical company. From
1992 to 1999, he was vice president and director of the institute of biochemistry and cell biology at Syntex Corporation, a biopharmaceutical company acquired by Roche Biosciences in 1994. From 1978 to 1992, Dr. Van Wart served on the faculty
of Florida State University. Dr. Van Wart holds a Ph.D. from Cornell University and a B.A. from SUNY Binghamton. Dr. Van Wart has been a member of the board of directors of Conatus Pharmaceuticals since 2007. He currently also serves on
the Emerging Companies and Health Section Governing Boards of the Biotechnology Industry Organization (BIO), as well as on its board of directors, and on the board of directors and executive committee at BayBio.
Sujal Shah
has served as our Chief Financial Officer since December of 2013. Prior to that he served as a consultant and acting Chief
Financial Officer for us from June 2012 to December 2013. From 2010 to 2012, Mr. Shah served as Director, Health Care Investment Banking for Citigroup Inc., where he was responsible for
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managing client relationships and executing strategic and financing related transactions for clients focused in life sciences. From 2004 to 2010 Mr. Shah was employed with Credit-Suisse,
last serving in the capacity as Vice President, Health Care Investment Banking Group. Mr. Shah received a MBA from Carnegie Mellon University Tepper School of Business and M.S. and B.S. degrees in Biomedical Engineering from Northwestern
University.
Pol Boudes, M.D.
has served as our Chief Medical Officer since April 2014. Prior to joining CymaBay, Dr. Boudes
was Chief Medical Officer at Amicus Therapeutics, from 2009 to 2013 where he was responsible for clinical development, pharmacology, medical affairs, regulatory affairs and quality assurance, and toxicology. From 2004 to 2009, Dr. Boudes was
with Berlex Laboratories (which merged with Bayer HealthCare Pharmaceuticals in 2006) where Dr. Boudes held the position of Vice President, Global Clinical Development, Womens, Health Care US. From 1990 to 2004, he held positions of
increasing responsibility with Wyeth-Ayerst Research both in Philadelphia, PA and in Europe, with Hoffmann-La Roche, and with Pasteur-Merieux Serums & Vaccines. Dr. Boudes received his M.D. from the University of Aix-Marseilles,
France. He completed his internship and residency in Marseilles and in Paris, France and was an Assistant Professor of Medicine at the University of Paris. He is specialized in Endocrinology and Metabolic Diseases, Internal Medicine, and Geriatric
diseases.
Robert L. Martin, Ph.D.,
has served as our Senior Vice President, Manufacturing and Nonclinical Development since April
2015. Previously, he served as our Vice President of Nonclinical Development and Project Management from 2008 to 2015. Dr. Martin served as our Sr. Director of Preclinical Development and Project Management from 2006 to 2008 and our Director of
Preclinical Development and Project Management from 2004 to 2006. From 1994 to 2004, Dr. Martin served in various positions with Roche Palo Alto, a division of F. Hoffman-La Roche Ltd. Dr. Martin obtained his Ph.D. in Biochemistry from the
University of California, Davis.
Charles A. McWherter, Ph.D.
has served as our Senior Vice President and Chief Scientific Officer
since July 2007. From 2003 to 2007, he served as Vice President and head of the cardiovascular therapeutics areas of Pfizer Inc., a biopharmaceutical company. From 2001 to 2003, Dr. McWherter served as Vice President of Drug Discovery at Sugen,
Inc., a biopharmaceutical company acquired by Pfizer Inc. in 2003. Dr. McWherter obtained his Ph.D. from Cornell University.
Patrick OMara
has served as our Senior Vice President, Business Development since January 2017. Previously he served as our Vice
President, Business Development from 2006 through 2016. He served as our Sr. Director of Business Development, from 2004 to 2006, our Director of Business Development from 2000 to 2004 and our Manager of Business Development from 1997 to 2000.
Mr. OMara served as our Manager of Laboratory Operations from 1991 to 1997. Mr. OMara received a B.A. in Biochemistry from the University of California, Berkeley.
Kirk Rosemark
has served as our Vice President Regulatory Affairs and Quality Assurance since April 2015. Prior to joining CymaBay
Mr. Rosemark held the position of Vice President Regulatory Affairs and Quality Assurance at Exelixis, Inc. from 2003 to 2014, where he was responsible for all regulatory affairs and quality assurance functions supporting both development and
marketed products. He served in the same capacity at NeoPharm Inc from 2001 to 2003. Prior to that, Mr. Rosemark held various positions of increasing responsibility within the Regulatory Affairs and Quality Assurance department at Solvay
Pharmaceuticals, Inc., Ciba Vision and Bausch & Lomb Pharmaceuticals, Inc. Mr. Rosemark obtained a B.S. in Chemistry from Cleveland State University.
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Item 1A. Risk Factors
Risks Related to Our Financial Condition and Capital Requirements
We will need additional capital in the future to sufficiently fund our operations and research.
We have incurred significant net losses in each year since our inception, including a net loss of approximately $26.7 million and $15.5 million
for the years ended December 31, 2016, and 2015, respectively. We anticipate that we will continue to incur significant losses for the foreseeable future, and we may never achieve or maintain profitability. As of December 31, 2016, we had
cash, cash equivalents and marketable securities of approximately $17.0 million. We believe that these funds, which were obtained through recent equity and debt financings, together with additional proceeds of approximately $14.4 million received
from financings and license agreements in January and February of 2017, will allow us to continue operation through at least the next twelve months. We currently believe that we will need to raise additional capital to continue our operations
thereafter. Our monthly spending levels vary based on new and ongoing development and corporate activities. Developing pharmaceutical products, including conducting preclinical studies and clinical trials, is a time-consuming, expensive and
uncertain process that takes years to complete. We expect our research and development expenses to increase in connection with our ongoing activities, particularly as we advance development of our lead clinical product candidate seladelpar
(MBX-8025).
In the event we do not successfully raise sufficient funds in financing our product development activities, particularly
related to the ongoing development of seladelpar, it will be necessary to curtail our product development activities commensurate with the magnitude of the shortfall or our product development activities may cease altogether. To the extent that the
costs of the ongoing development of seladelpar exceed our current estimates and we are unable to raise sufficient additional capital to cover such additional costs, we will need to reduce operating expenses, enter into a collaboration or other
similar arrangement with respect to development and/or commercialization rights to seladelpar, out-license intellectual property rights to seladelpar, sell assets or effect a combination of the above. No assurance can be given that we will be able
to effect any of such transactions on acceptable terms, if at all. Failure to progress the development of seladelpar will have a negative effect on our business, future prospects and ability to obtain further financing on acceptable terms (if at
all).
Beyond the plan of operations outlined above, our future funding requirements and sources will depend on many factors, including
but not limited to the following:
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the rate of progress and cost of our clinical studies, including in particular the Phase 2 studies of seladelpar;
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the extent to which we receive the milestone payments under our licensing agreement with Kowa;
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the extent to which we are able to out-license arhalofenate outside of the United States;
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the need for additional or expanded clinical studies;
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the rate of progress and cost of our Chemistry, Manufacturing and Control development, registration and validation program;
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the timing, economic and other terms of any licensing, collaboration or other similar arrangement into which we may enter;
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the costs and timing of seeking and obtaining FDA and other regulatory approvals;
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the extent of our other development activities;
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the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; and
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the effect of competing products and market developments.
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If we are unable to raise
additional capital in sufficient amounts or on terms acceptable to us, we will be prevented from pursuing development and commercialization efforts, which will have a material adverse effect on our business, operating results and prospects and on
our ability to develop our product candidates.
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We are heavily dependent on our partner, Kowa Pharmaceuticals America, Inc., for the successful
development, regulatory approval and commercialization of arhalofenate in the Unitied States.
In late December 2016, we entered
into an exclusive licensing agreement with Kowa Pharmaceuticals America, Inc., or Kowa, for the development and commercialization of arhalofenate in the U.S. (including all possessions and territories). The terms of our licensing agreement with Kowa
provide them with exclusive authority over the development and commercialization plans for arhalofenate in the U.S. and the execution of those plans. We have no effective influence over those plans and are heavily dependent on Kowas decision
making. The licensing agreement provides that we will receive potential milestone payments of up to $10 million based on the initiation of specific development activities, and are eligible to receive up to an additional $190 million in payments
based upon the achievement of additional development and sales milestones. We are also eligible to receive tiered, double digit royalties on future sales of arhalofenate products.
We are substantially dependent upon Kowa to develop arhalofenate further. Any significant changes to Kowas business strategy and
priorities, over which we have no control, could adversely affect Kowas willingness or ability to complete their obligations under our licensing agreement and result in harm to our business and operations. Subject to contractual diligence
obligations, Kowa has complete control over and financial responsibility for arhalofenates development program and regulatory strategy and execution, and we are not able to control the amount or timing of resources that Kowa will devote to the
product. If Kowa does not diligently pursue the development or commercialization of arhalofenate, we will not receive any further payments under the licensing agreement and our ability to derive value from arhalofenate will be seriously harmed.
Further, regardless of Kowas efforts and expenditures for the further development of arhalofenate, the results of such additional clinical investigation may not provide positive results and may not result in a commercial product due to
regulatory or other reasons similar to those described below with respect to seldelpar.
We do not intend to invest further in the development and
commercialization of arhalofenate, and are currently seeking to out-license the rights to arhalofenate outside of the Unitied States.
In late December 2016, we entered into an exclusive licensing agreement with Kowa for the development and commercialization of arhalofenate in
the U.S. (including all possessions and territories). We are seeking to out-license the development and commercialization of arhalofenate outside of the United States, and do not intend to invest further in the development and commercialization of
arhalofenate. However, there is no guarantee that our efforts to out-license arhalofenate in countries outside of the United States will result in any licensing agreements or, if they do result in licensing agreements, that we will derive any value
from those agreements. The terms of those licensing agreements, if any, we expect will provide them with exclusive authority over the development and commercialization plans for arhalofenate in the jurisdiction covered by the licensing agreement,
and that we will have no influence over the actions of the licensees and will be heavily dependent on their decision making. In the event that we are not able to enter into any further license agreements, or the licensees do not, or are not
able to, develop or commercialize arhalofenate in their respective jurisdictions, our ability to derive further value from arhalofenate will be seriously harmed.
Our ability to generate future revenues from product sales is uncertain and depends upon our ability to successfully develop, obtain regulatory approval
for, and commercialize our product candidates.
Our ability to generate revenue and achieve profitability depends on our ability,
alone or with collaborators, to successfully complete the development of, obtain the necessary regulatory approvals for and commercialize our product candidates. We do not anticipate generating revenues from sales of our product candidates for the
foreseeable future, if ever. Our ability to generate future revenues from product sales depends heavily on our success in:
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the performance of Kowa under our licensing agreement, including whether development milestones and regulatory approvals regarding arhalofenate are achieved;
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our ability to out-license arhalofenate in jurisdictions outside of the United States;
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obtaining favorable results for and advancing the development of seladelpar; and
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generating a pipeline of product candidates.
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Conducting preclinical testing and clinical
trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data required to obtain regulatory approval and achieve product sales. Our anticipated development costs would likely
increase if we do not obtain favorable results or if development of our product candidates is delayed. In particular, we would likely incur higher costs than we currently anticipate if development of our product candidates is delayed because we are
required by a regulatory authority such as the U.S. FDA to perform studies or trials in addition to those that we currently anticipate. Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable
to predict the timing or amount of any increase in our anticipated development costs.
In addition, our product candidates, if approved,
may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of products that we do not expect to be commercially available for several years, if at all. Even if one or more of our product candidates is approved
for commercial sale, we anticipate incurring significant costs in connection with commercialization. As a result, we cannot assure you that we will be able to generate revenues from sales of any approved product candidates, or that we will achieve
or maintain profitability even if we do generate sales.
Raising additional capital may cause dilution to our existing stockholders, restrict our
operations or require us to relinquish rights to our technologies or product candidates.
Until such time, if ever, as we can
generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing and distribution arrangements. We
do not have any committed external source of funds.
In order to raise additional funds to support our operations, we may sell additional
equity or debt securities, enter into collaborations, strategic alliances, or licensing arrangements or other marketing or distribution arrangements. In July 2015, we completed the issuance of 8,188,000 shares of our common stock at $2.81 per share
and in February 2017, we completed the issuance of 5,181,348 shares of our commons stock at $1.93 per share in underwritten public offerings. Also, in January 2017, we issued 124,100 shares at $2.48 per share under our at-the-market facility. To the
extent that we raise additional capital through the sale of equity or convertible debt securities, ownership interests of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely
affect the rights of stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, and
declaring dividends, and will impose limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business.
If we raise additional funds through collaborations, strategic alliances, or licensing arrangements or other marketing or distribution
arrangements with third parties, we may have to relinquish valuable rights to our intellectual property, technologies, future revenue streams, research programs or product candidates, or grant licenses on terms that may not be favorable to us. For
example, in December 2016 we entered into an agreement to license our right to develop and commercialize arhalofenate for the treatment of gout in the United States in exchange for a $5.0 million upfront payment and will receive potential milestone
payments of up to $10 million based on the initiation of specific development activities, and are eligible to receive up to an additional $190 million in payments based upon the achievement of additional development and sales milestones and tiered,
double digit royalties on any product sales. If we are unable to expand our operations or otherwise capitalize on our business opportunities, our business, financial condition and results of operations could be materially adversely affected and we
may not be able to meet our debt service obligations. If we are unable to raise
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additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or commercialization efforts, or grant others
rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
We are an emerging growth company
and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.
We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Under the JOBS
Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have irrevocably elected not to avail
ourselves of this exemption from new or revised accounting standards, and, therefore, are subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
For as long as we continue to be an emerging growth company, we do intend to take advantage of certain other exemptions from various reporting
requirements that are applicable to other public companies including, but not limited to, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from the requirements of holding a
nonbinding advisory stockholder vote on executive compensation and any golden parachute payments not previously approved, exemption from the requirement of auditor attestation in the assessment of our internal control over financial reporting and
exemption from any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditors report providing additional information about the audit and the
financial statements (auditor discussion and analysis). If we do, the information that we provide stockholders may be different than what is available with respect to other public companies. We cannot predict if investors will find our common stock
less attractive because we will rely on these exemptions. If investors find our common stock less attractive as a result of our status as an emerging growth company, there may be less liquidity for our common stock and our stock price may be more
volatile.
We will remain an emerging growth company until the earliest of (i) the end of the fiscal year in which the market value
of our common stock that is held by non-affiliates exceeds $700 million as of the end of the second fiscal quarter, (ii) the end of the fiscal year in which we have total annual gross revenues of $1 billion or more during such fiscal year,
(iii) the date on which we issue more than $1 billion in non-convertible debt in a three-year period or (iv) the end of the fiscal year following the fifth anniversary of the date of the first sale of our common stock pursuant to an
effective registration statement filed under the Securities Act (a date which occurred in July 2014).
Risks Related to Clinical
Development and Regulatory Approval
We depend on the success of our product candidates, in particular seldelpar, which is still under clinical
development and we may not obtain regulatory approval or successfully commercialize this product candidate.
We have not marketed,
distributed or sold any products. The success of our business depends upon our ability to develop and commercialize our product candidates, including seladelpar, which has completed five Phase 1 and two Phase 2 clinical trials. There is no guarantee
that our clinical trials will be completed or, if completed, will be successful. In March 2016, we completed a second Phase 2 clinical study for seladelpar in patients with homozygous familial hypercholestorolemia (HoFH). In November 2015, we
initiated enrollment in a Phase 2 clinical study of seladelpar for patients with PBC. The success of seladelpar will depend on several factors, including the following:
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successful enrollment and completion of clinical trials;
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recognition by the FDA and other regulatory authorities outside of the U.S. of orphan disease designation for seladelpar in target indications in addition to those already obtained;
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receipt of marketing approvals from the FDA and regulatory authorities outside the U.S. for seladelpar ;
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establishing commercial manufacturing capabilities by making arrangements with third-party manufacturers;
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launching commercial sales of the product, whether alone or in collaboration with others;
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acceptance of the product by patients, the medical community and third-party payors;
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effectively competing with other therapies;
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a continued acceptable safety profile of the product following approval; and
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obtaining, maintaining, enforcing and defending intellectual property rights and claims.
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If
we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize seladelpar, which would materially harm our business.
We depend on the successful completion of clinical trials for our product candidates, including seladelpar. The positive clinical results obtained for
our product candidates in prior clinical studies may not be repeated in future clinical studies.
Before obtaining regulatory
approval for the sale of our product candidates, including seladelpar, we must conduct additional clinical trials to demonstrate the safety and efficacy of our product candidates in humans. Clinical testing is expensive, difficult to design and
implement, can take many years to complete and is uncertain as to outcome. A failure of one or more of our clinical trials can occur at any stage of testing. The outcome of preclinical testing and early clinical trials may not be predictive of the
success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have
believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval for their products.
Seven clinical studies with seladelpar and five clinical studies with MBX-2982 have been completed. However, we have never conducted a Phase 3
clinical trial, and we have never obtained regulatory approval for a drug and we may be unable to obtain, or may be delayed in obtaining, regulatory approval for seladelpar. Product candidates in later stages of clinical trials may fail to show the
desired safety and efficacy characteristics despite having progressed satisfactorily through preclinical studies and initial clinical testing. A number of companies in the pharmaceutical and biotechnology industries, including those with greater
resources and experience, have suffered significant setbacks in Phase 3 clinical development, even after seeing promising results in earlier clinical trials.
We may experience a number of unforeseen events during clinical trials for our product candidates, including seladelpar, that could delay or
prevent the commencement and/or completion of our clinical trials, including the following:
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regulators or institutional review boards may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site;
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the clinical study protocol may require one or more amendments delaying study completion;
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clinical trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon product development programs;
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the number of subjects required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be insufficient or slower than we anticipate or subjects may drop
out of these clinical trials at a higher rate than we anticipate;
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clinical investigators or study subjects fail to comply with clinical study protocols;
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trial conduct and data analysis errors may occur, including, but not limited to, data entry and/or labeling errors;
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our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;
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we might have to suspend or terminate clinical trials of our product candidates for various reasons, including a finding that the subjects are being exposed to unacceptable health risks;
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regulators or institutional review boards may require that we or our investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements;
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the cost of clinical trials of our product candidates may be greater than we anticipate;
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the supply or quality of our clinical trial materials or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate; and
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our product candidates may have undesirable side effects or other unexpected characteristics, causing us or our investigators to suspend or terminate the trials.
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We expect our research and development expenses to increase in connection with our ongoing activities, particularly as we undertake additional
clinical trials of our other product candidates, seladelpar and MBX-2982. We also will need to raise substantial additional capital in the future to complete the development and commercialization of seladelpar, as well as MBX-2982 for which we
currently have no planned clinical trials. Because successful development of our product candidates is uncertain, we are unable to estimate the actual funds required to complete research and development and commercialize our products under
development.
Negative or inconclusive results of our future clinical trials of seladelpar, or any other clinical trial we conduct, could
cause the FDA to require that we repeat or conduct additional clinical studies. If later stage clinical trials do not produce favorable results, our ability to obtain regulatory approval for our product candidates may be adversely impacted.
We have commenced testing of seladelpar in clinical studies for the indications which we are currently pursuing for seladelpar, including Primary
Biliary Cholangitis (PBC) and homozygous familial hypercholesterolemia (HoFH). If seladelpar does not demonstrate safety or efficacy in the treatment of any of these indications, or if the benefits of treatment with seladelpar do not outweigh the
risks, our ability to successfully develop and commercialize seladelpar may be adversely affected.
We commenced clinical trials
of seladelpar for the indications for which we currently are pursuing, including PBC and HoFH and seladelpar may not be demonstrated to be effective in treatment of these or other indications we may target. For instance, in May 2016, we announced
results from a Phase 2 clinical study of seladelpar in patients with primary biliary cholangitis (PBC). We made the decision to discontinue the study early after review of safety and efficacy data demonstrated clear proof-of-concept and need for
further dose reduction to optimize clinical safety and efficacy. In December 2016, we initiated a dose-ranging Phase 2 trial of seladelpar at lower doses in patients with PBC. In March 2016, we completed a Phase 2 clinical study evaluating
seladelpar in 13 patients with HoFH. However, as a result of the variability in responses observed in this study, including a number of patients that did not experience a decrease in LDL-C, we believe additional proof-of-concept data would be
warranted before determining whether or not to advance to a registration study of seladelpar in patients with HoFH. Although we believe that seladelpar may be beneficial to address the diseases for which we are considering redirecting its
development, there is no guarantee that seladelpar will prove to be safe or efficacious in the treatment of these diseases, or that we will be able to obtain regulatory approval for these indications. The results of these clinical studies and other
nonclinical studies may determine whether the benefits perceived from the use of seladelpar would outweigh the risks perceived from treatment with seladelpar.
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Delays in clinical trials are common and have many causes, and any delay could result in increased costs to
us and jeopardize or delay our ability to obtain regulatory approval and commence product sales.
Clinical testing is expensive,
difficult to design and implement, can take many years to complete, and is uncertain as to outcome. We may experience delays in clinical trials at any stage of development and testing of our product candidates. Our planned clinical trials may not
begin on time, have an effective design, enroll a sufficient number of subjects, or be completed on schedule, if at all.
Events which may
result in delays or unsuccessful completion of clinical trials, including our future clinical trials for seladelpar, include the following:
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inability to raise funding necessary to initiate or continue a trial;
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delays in obtaining regulatory approval to commence a trial;
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delays in reaching agreement with the FDA or other regulatory authorities on final trial design;
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imposition of a clinical hold following an inspection of our clinical trial operations or trial sites by the FDA or other regulatory authorities;
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delays in reaching agreement on acceptable terms with prospective contract research organizations (CROs) and clinical trial sites;
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delays in obtaining required institutional review board (IRB) approval at each site;
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delays in recruiting suitable patients to participate in a trial;
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delays in having subjects complete participation in a trial or return for post-treatment follow-up;
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delays caused by subjects dropping out of a trial due to side effects or otherwise;
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delays caused by clinical sites dropping out of a trial;
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time required to add new clinical sites; and
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delays by our contract manufacturers to produce and deliver sufficient supply of clinical trial materials.
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If initiation or completion of any of our clinical trials for our product candidates, including seladelpar, is delayed for any of the above
reasons, our development costs may increase, the approval process could be delayed, any periods during which we may have the exclusive right to commercialize our product candidates may be reduced and our competitors may bring products to market
before us. Any of these events could impair our ability to generate revenues from product sales and impair our ability to generate regulatory and commercialization milestones and royalties, all of which could have a material adverse effect on our
business.
Our product candidates may cause adverse effects or have other properties that could delay or prevent their regulatory approval or limit
the scope of any approved label or market acceptance.
In May 2016, we announced results from a Phase 2 clinical study of
seladelpar in patients with primary biliary cholangitis (PBC). During the course of this trial three cases of asymptomatic, reversible transaminase elevations occurred, and we made the decision to discontinue the study early after review of safety
and efficacy data demonstrated a need for further dose reduction to optimize clinical safety and efficacy. The emergence of adverse events (AEs) caused by seladelpar in future studies, including at lower doses, could cause us, other reviewing
entities, clinical study sites or regulatory authorities to interrupt, delay or halt clinical studies and could result in the denial of regulatory approval. There is also a risk that our other product candidates may induce AEs, many of which may be
unknown at this time. If an unacceptable frequency and/or severity of AEs are reported in our clinical trials for our product candidates, our ability to obtain regulatory approval for product candidates, including seladelpar, may be negatively
impacted.
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Furthermore, if any of our approved products cause serious or unexpected side effects after
receiving market approval, a number of potentially significant negative consequences could result, including the following:
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regulatory authorities may withdraw their approval of the product or impose restrictions on its distribution in a form of a risk evaluation and mitigation strategy (REMS);
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regulatory authorities may require the addition of labeling statements, such as warnings or contraindications that could diminish the usage of the product or otherwise limit the commercial success of the affected
product;
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we may be required to change the way the product is administered or to conduct additional clinical studies;
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we may choose to discontinue sale of the product;
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we could be sued and held liable for harm caused to patients; and
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our reputation may suffer.
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Any of these events could prevent us from achieving or maintaining
market acceptance of the affected product candidate and could substantially increase the costs of commercializing our product candidates.
We have
obtained orphan drug designation for some of the targeted indications for seladelpar but not all possible indications for which we may seek approval and we may not be able to obtain or maintain orphan designation or obtain the benefits associated
with orphan drug status, including market exclusivity.
Regulatory authorities in some jurisdictions, including the United States
and the European Union, or EU, may designate drugs for relatively small patient populations as orphan drugs. Under the Orphan Drug Act of 1983, as amended, the FDA may designate a drug as an orphan drug if it is intended to treat a rare disease or
condition, which is generally defined as a patient population of fewer than 200,000 individuals annually in the United States. Generally, if a drug with an orphan drug designation subsequently receives the first marketing approval for the indication
for which it has such designation, the drug is entitled to a period of marketing exclusivity, which precludes the FDA or the European Medicines Agency, or EMA, from approving another marketing application for the same drug for that time period. The
applicable period is seven years in the United States and ten years in the European Union. The EU exclusivity period can be reduced to six years if a drug no longer meets the criteria for orphan drug designation or if the drug is sufficiently
profitable so that market exclusivity is no longer justified. Orphan drug exclusivity may be lost if the FDA or EMA determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity
of the drug to meet the needs of patients with the rare disease or condition. In addition, the orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review or approval process. Also, regulatory approval
for any product candidate may be withdrawn and other candidates may obtain approval before us.
We have obtained orphan-drug designations
for seladelpar for the treatments of HoFH and Frederickson Type I or V hyperlipoproteinemia. That exclusivity, or any other orphan exclusivity we may receive for another produc candidate or indication, may not effectively protect the candidate from
competition because: different drugs can be approved for the same condition; the same drugs can be approved for different indications and prescribed off-label; and the first entity with an orphan drug designation to receive regulatory approval for a
particular indication will receive marketing exclusivity. If one of our product candidates that receives an orphan drug designation, including seladelpar, is approved for a particular indication or use within the rare disease or condition, the FDA
may later approve the same product for additional indications or uses within that rare disease or condition that are not protected by our exclusive approval. Even after an orphan drug is approved, the FDA can subsequently approve another drug for
the same condition if the FDA concludes that the later drug is clinically superior in that it is shown to be safer in a substantial portion of the target population, more effective or makes a major contribution to patient care.
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If any product candidate that we successfully develop does not achieve broad market acceptance among
physicians, patients, health care payors and the medical community, the revenues that it generates from its sales will be limited.
Even if seladelpar or any other product candidates receive regulatory approval, the products may not gain market acceptance among physicians,
patients, health care payors and the medical community. Coverage and reimbursement of our product candidates by third-party payors, including government payors, generally is also necessary for commercial success. The degree of market acceptance of
any of our approved products will depend upon a number of factors, including:
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the efficacy and safety, as demonstrated in clinical studies;
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the risk/benefit profile of our product candidates such as seladelpar;
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the prevalence and severity of any side effects;
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the clinical indications for which the product is approved;
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acceptance of the product by physicians, other health care providers and patients as a safe and effective treatment;
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the potential and perceived advantages of product candidates over alternative treatments;
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the safety of product candidates seen in a broader patient group, including if physicians prescribe our products for uses outside the approved indications;
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the cost of treatment in relation to alternative treatments;
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the timing of market introduction of competitive products;
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the availability of adequate reimbursement and pricing by third parties and government authorities;
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relative convenience and ease of administration; and
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the effectiveness of our or our partners sales, marketing and distribution efforts.
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If
any product candidate is approved but does not achieve an adequate level of acceptance by physicians, hospitals, health care payors and patients, we may not generate sufficient revenue from these products and we may not become or remain profitable.
Potential conflicts of interest arising from relationships and any related compensation with respect to clinical studies could adversely affect the
process.
Principal investigators for our clinical studies may serve as scientific advisors or consultants to us from time to time
and receive cash compensation in connection with such services. If these relationships and any related compensation result in perceived or actual conflicts of interest, the integrity of the data generated at the applicable clinical study site may be
questioned or jeopardized.
We may be subject to costly claims related to our clinical studies and may not be able to obtain adequate insurance.
Because we conduct clinical studies in humans, we face the risk that the use of seladelpar or future product candidates will
result in adverse side effects. We cannot predict the possible harms or side effects that may result from our clinical studies. Although we have clinical study liability insurance, our insurance may be insufficient to cover any such events. There is
also a risk that we may not be able to continue to obtain clinical study coverage on acceptable terms. In addition, we may not have sufficient resources to pay for any liabilities resulting from a claim excluded from, or beyond the limit of, our
insurance coverage. There is also a risk that third parties that we have agreed to indemnify could incur liability. Any litigation arising from our clinical studies, even if we are ultimately successful, would consume substantial amounts of our
financial and managerial resources and may create adverse publicity.
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After the completion of our clinical trials, we cannot predict whether or when we will obtain regulatory
approval to commercialize our product candidates and we cannot, therefore, predict the timing of any future revenue from our product candidates. Regulatory approval of an NDA is not guaranteed, and the approval process is expensive, uncertain and
lengthy.
We cannot commercialize our product candidates, including seladelpar, until the appropriate regulatory authorities, such
as the FDA, have reviewed and approved the product candidate. The regulatory agencies may not complete their review processes in a timely manner, or we may not be able to obtain regulatory approval for our product candidates. Additional delays may
result if a product candidate is brought before an FDA advisory committee, which could recommend restrictions on approval or recommend non-approval of the product candidate. In addition, we may experience delays or rejections based upon additional
government regulation from future legislation or administrative action, or changes in regulatory agency policy during the period of product development, clinical studies and the review process. As a result, we cannot predict when, if at all, we will
receive any future revenue from commercialization of any of our product candidates, including seladelpar. The FDA has substantial discretion in the drug approval process, including the ability to delay, limit or deny approval of a product candidate
for many reasons, including the following:
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we may be unable to demonstrate to the satisfaction of regulatory authorities that a product candidate is safe and effective for any indication;
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regulatory authorities may not find the data from nonclinical studies and clinical studies sufficient or may differ in the interpretation of the data;
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regulatory authorities may require additional nonclinical or clinical studies;
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the FDA or foreign regulatory authority might not approve our third party manufacturers processes or facilities for clinical or commercial product;
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the FDA or foreign regulatory authority may change its approval policies or adopt new regulations;
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the FDA or foreign regulatory authorities may disagree with the design or implementation of our clinical studies;
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the FDA or foreign regulatory authority may not accept clinical data from studies that are conducted in countries where the standard of care is potentially different from that in the U.S.;
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the results of clinical studies may not meet the level of statistical significance required by the FDA or foreign regulatory authorities for approval;
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we may be unable to demonstrate that a product candidates clinical and other benefits outweigh its safety risks; and
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the data collection from clinical studies of our product candidates may not be sufficient to support the submission of a NDA or other submission or to obtain regulatory approval in the U.S. or elsewhere.
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In addition, events raising questions about the safety of certain marketed pharmaceuticals may result in increased caution
by the FDA and other regulatory authorities in reviewing new pharmaceuticals based on safety, efficacy or other regulatory considerations and may result in significant delays in obtaining regulatory approvals.
Even if we obtain regulatory approval for seladelpar and our other product candidates, we will still face extensive regulatory requirements and our
products may face future development and regulatory difficulties.
Even if we obtain regulatory approval in the U.S., the FDA may
still impose significant restrictions on the indicated uses or marketing of our product candidates, including seladelpar, or impose ongoing requirements for potentially costly post-approval studies or post-market surveillance. For example, the
labeling ultimately approved for our product candidates, including seladelpar, may include restrictions on use due to the specific patient population and manner of use in which the drug was evaluated and the safety and efficacy data obtained in
those evaluations.
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Seladelpar and our other product candidates will also be subject to additional ongoing FDA
requirements governing the labeling, packaging, storage, distribution, safety surveillance, advertising, promotion, record-keeping and reporting of safety and other post-market information. The holder of an approved NDA is obligated to monitor and
report AEs and any failure of a product to meet the specifications in the NDA. The holder of an approved NDA must also submit new or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling or
manufacturing process. Advertising and promotional materials must comply with FDA rules and are subject to FDA review, in addition to other potentially applicable federal and state laws. Furthermore, promotional materials must be approved by the FDA
prior to use for any drug receiving accelerated approval.
In addition, manufacturers of drug products and their facilities are subject to
payment of user fees and continual review and periodic inspections by the FDA and other regulatory authorities for compliance with current Good Manufacturing Practices (cGMP), and adherence to commitments made in the NDA. If we, or a regulatory
agency, discover previously unknown problems with a product, such as quality issues or AEs of unanticipated severity or frequency, or problems with the facility where the product is manufactured, a regulatory agency may impose restrictions relative
to that product or the manufacturing facility, including requesting recall or withdrawal of the product from the market or suspension of manufacturing.
If we, or our third party contractors, fail to comply with applicable regulatory requirements following approval of our product candidate, a
regulatory agency may:
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issue an untitled or warning letter asserting violation of the law;
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seek an injunction or impose civil or criminal penalties up to and including imprisonment or monetary fines;
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suspend or withdraw regulatory approval;
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suspend any ongoing clinical trials;
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refuse to approve a pending NDA or supplements to an NDA; or
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request recall and/or seize product.
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Any government investigation of alleged violations of
law could require us to expend significant time and resources in response and could generate negative publicity. The occurrence of any event or penalty described above may inhibit our ability to commercialize seladelpar and our other product
candidates and inhibit our ability to generate revenues.
The FDA and other regulatory agencies strictly regulate the promotional claims that may be
made about prescription products. If we are found to have improperly promoted our products for off-label uses, we may become subject to significant fines and other liability.
The FDA and other regulatory agencies strictly regulate the promotional claims that may be made about prescription products. In particular, a
product may not be promoted for uses that are not approved by the FDA or such other regulatory agencies as reflected in the products approved labeling. If we receive marketing approval for our product candidates, physicians may nevertheless
prescribe such products to their patients in a manner that is inconsistent with the approved label. If we are found to have promoted such off-label uses, we may become subject to significant government fines and other related liability. For example,
the federal government has levied large civil and criminal fines against companies for alleged improper promotion and has enjoined several companies from engaging in off-label promotion. The FDA also has requested that companies enter into consent
decrees or permanent injunctions under which specified promotional conduct is changed or curtailed.
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Even if we obtain FDA approval for seladelpar or any of our other product candidates in the U.S., we may
never obtain approval for or commercialize seladelpar or any of our other product candidates outside of the U.S., which would limit our ability to realize their full market potential.
In order to market any products outside of the U.S., we must establish and comply with numerous and varying regulatory requirements on a
country-by-country basis regarding safety and efficacy. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions. In addition, clinical trials conducted in one country may not be accepted by
regulatory authorities in other countries, and regulatory approval in one country does not guarantee regulatory approval in any other country. Approval processes vary among countries and can involve additional product testing and validation and
additional administrative review periods. Seeking foreign regulatory approval could result in difficulties and costs for us and require additional preclinical studies or clinical trials which could be costly and time consuming. Regulatory
requirements can vary widely from country to country and could delay or prevent the introduction of our products in those countries. We do not have any product candidates approved for sale in any jurisdiction, including international markets, and we
do not have experience in obtaining regulatory approval in international markets. If we fail to comply with regulatory requirements in international markets or to obtain and maintain required approvals, or if regulatory approvals in international
markets are delayed, our target market will be reduced and our ability to realize the full market potential of our products will be unrealized.
Our
relationships with health care professionals, customers and payors will be subject to applicable anti-kickback, fraud and abuse and other health care laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual
damages, reputational harm and diminished profits and future earnings.
Health care professionals and third party payors play a
primary role in the recommendation and prescription of any products for which we obtain marketing approval. Our future arrangements with healthcare professionals, third-party payors and customers may expose us to broadly applicable fraud and abuse
and other health care laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute our products for which we obtain marketing approval. Restrictions under applicable
federal and state health care laws and regulations, include the following:
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the federal health Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to
induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under federal health care programs such as Medicare and Medicaid;
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the federal False Claims Act imposes criminal and civil penalties, including civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal
government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;
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HIPAA, as amended by HITECH, imposes criminal and civil liability for executing a scheme to defraud any health care benefit program and also imposes obligations, including mandatory contractual terms, with respect to
safeguarding the privacy, security and transmission of individually identifiable health information;
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the federal false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for
health care benefits, items or services;
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the federal transparency requirements under the PPACA, commonly referred to as the Physician Payments Sunshine Act, require manufacturers of drugs, devices, biologics and medical supplies to report to the Centers for
Medicare and Medicaid Services (CMS) payments and other transfers of value provided to physicians and teaching hospitals and ownership and investment interests held by physicians and other healthcare providers and their immediate family members in
certain manufacturers and group purchasing organizations; and
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analogous state laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving health care items or services reimbursed by non-governmental
third-party payors, including private insurers, and some state laws require pharmaceutical companies to comply with the pharmaceutical industrys voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal
government in addition to requiring manufacturers to report information related to payments to physicians and other health care providers or marketing expenditures.
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Efforts to ensure that our business arrangements with third parties will comply with applicable health care laws and regulations will involve
substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other health care laws and
regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, exclusion
from government funded health care programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations. If any of the physicians or other providers or entities with whom we expect to do business are found to be not in
compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded health care programs.
Recently enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product
candidates and affect the prices we may obtain.
In the U.S. and some foreign jurisdictions, there have been a number of
legislative and regulatory changes and proposed changes regarding the health care system that could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability to profitably
sell any products for which we obtain marketing approval.
For example, in March 2010, the PPACA was enacted to broaden access to health
insurance, reduce or constrain the growth of health care spending, enhance remedies against fraud and abuse, add new transparency requirements for health care and health insurance industries, impose new taxes and fees on the health industry and
impose additional health policy reforms. The PPACA revises the definition of average manufacturer price for reporting purposes, which could increase the amount of Medicaid drug rebates to states. Further, the new law imposes a
significant annual fee on companies that manufacture or import branded prescription drug products. New provisions affecting compliance have also been enacted, which may affect our business practices with health care practitioners. Since its
enactment there have been judicial and Congressional challenges to certain aspects of the PPACA, and we expect there will be additional challenges and amendments to it in the future. Although the full effect of the PPACA remains uncertain, it
appears likely to continue the pressure on pharmaceutical pricing, especially under the Medicare program, and may also increase our regulatory burdens and operating costs. Further, other legislative changes have been adopted since the PPACA was
enacted, such as the Budget Control Act of 2011 and the American Taxpayer Relief Act of 2012, which have resulted in reduced reimbursement under the Medicare program.
Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for
pharmaceutical products. In addition, there have been several recent Congressional inquiries and proposed bills designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer
patient programs, and reform government program reimbursement methodologies for drug products. We are not sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or
what the impact of such changes on the marketing approvals of our product candidates, if any, may be.
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Risks Related to Our Reliance on Third Parties
We rely on third-party manufacturers to produce our preclinical and clinical drug supplies, and we intend to rely on third parties to produce commercial
supplies of any approved product candidates.
We do not own or operate, and we do not expect to own or operate, facilities for
product manufacturing, storage and distribution, or testing. We currently rely on third-party manufacturers for supply of our preclinical and clinical drug supplies. We expect that in the future we will continue to rely on such manufacturers for
drug supplies that will be used in clinical trials of our product candidates, and for commercialization of any of our product candidates that receive regulatory approval.
The facilities used by our contract manufacturers to manufacture the product candidates must be approved by the FDA pursuant to inspections
that will be conducted only after we submit an NDA to the FDA, if at all. We are completely dependent on our contract manufacturing partners for compliance with the FDAs requirements for manufacture of finished pharmaceutical products. If our
contract manufacturers cannot successfully manufacture material that conforms to our specifications and the FDAs strict regulatory requirements of safety, purity and potency, we will not be able to secure and/or maintain FDA approval for our
product candidates. In addition, we have no direct control over the ability of the contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If our contract manufacturers cannot meet FDA standards, we
may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market our product candidates. No assurance can be given that our manufacturers can continue to make
clinical and commercial supplies of product candidates, at an appropriate scale and cost to make it commercially feasible.
In addition,
we do not have the capability to package and distribute finished products to pharmacies and other customers. Prior to commercial launch, we will enter into agreements with one or more pharmaceutical product packager/distributor to ensure proper
supply chain management once we are authorized to make commercial sales of our product candidates. If we receive marketing approval from the FDA, we intend to sell pharmaceutical product packaged and distributed by such suppliers. Although we have
entered into agreements with our current contract manufacturers and packager/distributor for clinical trial material, we may be unable to maintain an agreement on commercially reasonable terms, which could have a material adverse impact upon our
business.
We rely on limited sources of supply for the drug substance for seladelpar, and any disruption in the chain of supply may cause delay in
developing and commercializing of seladelpar.
It is our expectation that only one supplier of drug substance and one supplier of
drug product will be qualified by the FDA. If supply from an approved vendor is interrupted, there could be a significant disruption in commercial supply of our products. An alternative vendor would need to be qualified through a supplemental
registration which would be expensive and could result in further delay. The FDA or other regulatory agencies outside of the U.S. may also require additional studies if a new drug substance or drug product supplier is relied upon for commercial
production. These factors could cause the delay of clinical trials, regulatory submissions, required approvals or commercialization of our products, and cause us to incur additional costs. Furthermore, if our suppliers fail to deliver the required
commercial quantities of active pharmaceutical ingredient on a timely basis and at commercially reasonable prices, and we are unable to secure one or more replacement suppliers capable of production at a substantially equivalent cost, the supply
chain for our products may be delayed, which could inhibit our ability to generate revenues.
Manufacturing issues may arise that could increase
product and regulatory approval costs or delay commercialization of our products.
We expect to increase the manufacturing batch
sizes of our products in preparation of late stage clinical development and commercial supplies. As the processes are scaled up they may reveal manufacturing challenges
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or previously unknown impurities which could require resolution in order to proceed with our planned clinical trials and obtain regulatory approval for the commercial marketing of our products.
In the future, we may identify manufacturing issues or impurities which could result in delays in the clinical program and regulatory approval for our products, increases in our operating expenses, or failure to obtain or maintain approval for our
products.
Our reliance on third-party manufacturers entails risks, including the following:
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the inability to meet our product specifications and quality requirements consistently;
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a delay or inability to procure or expand sufficient manufacturing capacity;
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manufacturing and product quality issues related to scale-up of manufacturing;
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costs and validation of new equipment and facilities required for scale-up;
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a failure to comply with cGMP and similar foreign standards;
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the inability to negotiate manufacturing agreements with third parties under commercially reasonable terms;
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termination or nonrenewal of manufacturing agreements with third parties in a manner or at a time that is costly or damaging to us;
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the reliance on a limited number of sources, and in some cases, single sources for key materials, such that if we are unable to secure a sufficient supply of these key materials, we will be unable to manufacture and
sell our product candidates in a timely fashion, in sufficient quantities or under acceptable terms;
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the lack of qualified backup suppliers for those materials that are currently purchased from a sole or single source supplier;
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operations of our third-party manufacturers or suppliers could be disrupted by conditions unrelated to our business or operations, including the bankruptcy of the manufacturer or supplier;
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carrier disruptions or increased costs that are beyond our control; and
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the failure to deliver our products under specified storage conditions and in a timely manner.
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Any of these events could lead to clinical study delays, failure to obtain regulatory approval or impact our ability to successfully
commercialize our products. Some of these events could be the basis for FDA or other regulatory authorities action, including injunction, recall, seizure, or total or partial suspension of production.
We rely on third parties to conduct, supervise and monitor our clinical studies, and if those third parties perform in an unsatisfactory manner, it may
harm our business.
We rely on contract service providers (CSPs) including clinical research organizations, clinical trial sites,
central laboratories and other service providers to ensure the proper and timely conduct of our clinical trials. While we have agreements governing their activities, we have limited influence over their actual performance. We have relied and plan to
continue to rely upon CSPs to monitor and manage data for our ongoing clinical programs for our product candidates, as well as the execution of nonclinical studies. We control only certain aspects of our CSPs activities. Nevertheless, we are
responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards and our reliance on the CSPs does not relieve us of our regulatory responsibilities.
We and our CSPs are required to comply with the FDAs guidance, which follows the International Conference on Harmonization Good Clinical
Practice (ICH GCP), which are regulations and guidelines enforced by the FDA for all of our product candidates in clinical development. The FDA enforces the ICH GCP through
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periodic inspections of trial sponsors, principal investigators and clinical trial sites. If we or our CSPs fail to comply with the ICH GCP, the clinical data generated in our clinical trials may
be deemed unreliable and the FDA may require us to perform additional clinical trials before approving our marketing applications. Our CSPs are not our employees, and we cannot control whether or not they devote sufficient time and resources to our
ongoing clinical and nonclinical programs. These CSPs may also have relationships with other entities, including our competitors, for whom they may also be conducting clinical studies, or other drug development activities which could harm our
competitive position. We face the risk of potential unauthorized disclosure or misappropriation of our intellectual property by CSPs, which may reduce our trade secret protection and allow our potential competitors to access and exploit our
proprietary technology. If our CSPs do not successfully carry out their contractual duties or obligations, fail to meet expected deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to
our clinical protocols or regulatory requirements or for any other reasons, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for, or successfully commercialize our product candidates.
As a result, our financial results and the commercial prospects for our product candidates that we develop would be harmed, our costs could increase, and our ability to generate revenues could be delayed.
Risks Related to Commercialization of Our Product Candidates
The commercial success of seladelpar and our other product candidates will depend upon the acceptance of these products by the medical community,
including physicians, patients and health care payors.
If any of our product candidates, including seladelpar, receive marketing
approval, they may nonetheless not gain sufficient market acceptance by physicians, patients, health care payors and others in the medical community. If these products do not achieve an adequate level of acceptance, we may not generate significant
product revenues and we may not become profitable. The degree of market acceptance of any of our product candidates, including seladelpar, will depend on a number of factors, including the following:
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demonstration of clinical safety and efficacy in our clinical trials;
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the risk/benefit profile of our product candidates;
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the relative convenience, ease of administration and acceptance by physicians, patients and health care payors;
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the prevalence and severity of any side effects;
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the safety of product candidates seen in a broader patient group, including its use outside the approved indications;
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limitations or warnings contained in the FDA and other regulatory authorities approved label for the relevant product candidate;
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acceptance of the product by physicians, other health care providers and patients as a safe and effective treatment;
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the potential and perceived advantages of product candidates over alternative treatments;
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the timing of market introduction of competitive products;
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pricing and cost-effectiveness;
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the effectiveness of our or any future collaborators sales and marketing strategies;
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our ability to obtain formulary approval;
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our ability to obtain and maintain sufficient third-party coverage or reimbursement, which may vary from country to country; and
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the effectiveness of our or any future collaborators sales, marketing and distribution efforts.
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If any of our product candidates, including seladelpar, is approved but does not achieve an
adequate level of acceptance by physicians, patients and health care payors, we may not generate sufficient revenue and we may not become or remain profitable.
If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our product candidates, we
may be unable to generate any revenue.
We currently do not have an organization for the sales, marketing and distribution of
pharmaceutical products and the cost of establishing and maintaining such an organization may exceed the cost-effectiveness of doing so. In order to market any products that may be approved, including seladelpar, we must build our sales, marketing,
managerial and other non-technical capabilities or make arrangements with third parties to perform these services. We may enter into strategic partnerships with third parties to commercialize our product candidates, including seladelpar.
If we are unable to build our own sales force or negotiate a strategic partnership for the commercialization of our product candidates, we may
be forced to delay the potential commercialization of seladelpar, or reduce the scope of our sales or marketing activities. If we elect to increase our expenditures to fund commercialization activities ourselves, we will need to obtain additional
capital, which may not be available to us on acceptable terms, or at all. If we do not have sufficient funds, we will not be able to bring seladelpar to market or generate product revenue.
If we are unable to establish adequate sales, marketing and distribution capabilities, whether independently or with third parties, we may not
be able to generate sufficient product revenue and may not become profitable. We will be competing with companies that currently have extensive and well-funded marketing and sales operations. Without an internal team or the support of a third party
to perform marketing and sales functions, we may be unable to compete successfully against these more established companies.
In addition,
there are risks involved with both establishing our own sales and marketing capabilities and entering into arrangements with third parties to perform these services. For example, recruiting and training a sales force is expensive and time-consuming
and could delay any product launch. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily
incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.
If we obtain approval to commercialize any products outside of the U.S., a variety of risks associated with international operations could materially
adversely affect our business.
If our product candidates are approved for commercialization, we intend to enter into agreements
with third parties to market those product candidates outside the U.S., including for seladelpar. We expect that we will be subject to additional risks related to international operations, including the following:
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different regulatory requirements for drug approvals in foreign countries;
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reduced protection for intellectual property rights;
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unexpected changes in tariffs, trade barriers and regulatory requirements;
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economic weakness, including inflation, or political instability in particular foreign economies and markets;
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compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;
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foreign taxes, including withholding of payroll taxes;
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foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doing business in another country;
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workforce uncertainty in countries where labor unrest is more common than in the U.S.;
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production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and
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business interruptions resulting from geopolitical actions, including war and terrorism, pandemics, or natural disasters including earthquakes, typhoons, volcanic eruptions, floods and fires.
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We have no prior experience in these areas. In addition, there are complex regulatory, tax, labor and other legal requirements imposed by both
the European Union and many of the individual countries in Europe with which we will need to comply. Many U.S.-based biopharmaceutical companies have found the process of marketing their own products in Europe to be very challenging.
If our competitors develop and market products that are more effective, safer or less expensive than our own, our commercial opportunities will be
negatively impacted.
The life sciences industry is highly competitive, and we face significant competition from other
pharmaceutical, biopharmaceutical and biotechnology companies and possibly from academic institutions, government agencies and private and public research institutions that are researching, developing and marketing products designed to address the
treatment of gout. Our competitors may have significantly greater financial, manufacturing, marketing and drug development resources. Large pharmaceutical companies, in particular, have extensive experience in the clinical testing of, obtaining
regulatory approvals for, and marketing of, drugs. New developments, including the development of other pharmaceutical technologies and methods of treating disease, occur in the pharmaceutical and life sciences industries at a rapid pace.
These developments may render our product candidates obsolete or noncompetitive. Compared to us, potential competitors may have substantially
greater:
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research and development resources, including personnel and technology;
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experience in pharmaceutical development and commercialization;
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ability to negotiate competitive pricing and reimbursement with third-party payors;
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experience and expertise in exploitation of intellectual property rights; and
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As a result of these factors, our competitors may obtain regulatory
approval of their products more rapidly than we do or may obtain patent protection or other intellectual property rights that limit our ability to develop or commercialize our product candidates. The competitors may also develop products that are
more effective, better tolerated, more useful and less costly than our products and they may also be more successful in manufacturing and marketing their products.
Formulary approval and reimbursement may not be available for arhalofenate, seladelpar and our other product candidates, which could make it difficult
for us to sell our products profitably.
Obtaining formulary approval can be an expensive and time consuming process. We cannot be
certain if and when we will obtain formulary approval to allow us to promote our product candidates, including arhalofenate and seladelpar, into our target markets. Failure to obtain timely formulary approval will limit our commercial success.
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Furthermore, market acceptance and sales of arhalofenate, seladelpar or any other product
candidates that we develop, will depend in part on the extent to which 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 pay for and establish reimbursement levels. A prevailing trend in the U.S. health care industry
and elsewhere is cost containment. Government authorities and these third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. Increasingly, third-party payors are requiring
that companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. We cannot be sure that reimbursement will be available for any product that we commercialize and, if reimbursement
is available, what the level of reimbursement will be. Reimbursement may impact the demand for, or the price of, any product for which we obtain marketing approval. We cannot be sure that reimbursement will be available for seladelpar, or any other
product candidates. Also, reimbursement amounts may reduce the demand for, or the price of, our products. If reimbursement is not available, or is available only to limited levels, we may not be able to successfully commercialize seladelpar, or any
other product candidates that we develop.
The availability of generic treatments may also substantially reduce the likelihood of
reimbursement for any future products, including seladelpar. The application of user fees to generic drug products will likely expedite the approval of additional generic drug treatments. We expect to experience pricing pressures in connection with
the sale of seladelpar and any other product candidate that we develop, due to the trend toward managed health care, the increasing influence of health maintenance organizations and additional legislative changes.
In addition, there may be significant delays in obtaining reimbursement for approved products, and coverage may be more limited than the
purposes for which the product is approved by the FDA or health authorities in other countries. Moreover, eligibility for reimbursement does not imply that any product will be paid for in all cases or at a rate that covers our costs, including
research, development, manufacture, sale and distribution. Interim payments for new products, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Payment rates may vary according to the use of the product and
the clinical setting in which it is used, may be based on payments allowed for lower cost products that are already reimbursed, and may be incorporated into existing payments for other services. Net prices for products may be reduced by mandatory
discounts or rebates required by government health care programs or private payors and by any future relaxation of laws that presently restrict imports of products from countries where they may be sold at lower prices than in the U.S. Third-party
payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement policies.
If we are unable to
promptly obtain coverage and profitable payment rates from both government funded and private payors for any of our product candidates, including seladelpar, it could have a material adverse effect on our operating results, our ability to raise
capital needed to commercialize products and our overall financial condition.
Even if we receive regulatory approval for seladelpar, we will be
subject to ongoing FDA and other regulatory obligations and continued regulatory review, which may result in significant additional expense and limit our ability to commercialize seladelpar.
Any regulatory approvals that we or potential collaboration partners receive for seladelpar or future product candidates, may also be subject
to limitations on the indicated uses for which the product may be marketed or contain requirements for potentially costly post-marketing studies. In addition, even if approved, the labeling, packaging, adverse event reporting, storage, advertising,
promotion and recordkeeping for any product will be subject to extensive and ongoing regulatory requirements. The subsequent discovery of previously unknown problems with a product, including AEs of unanticipated severity or frequency, may result in
restrictions on the marketing of the product, and could include withdrawal of the product from the market. Depending on any safety issues associated with our product candidates that are approved, the FDA may require a REMS, thereby imposing certain
restrictions on the sale and marketability of such products or additional post-marketing requirements.
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Regulatory policies may change and additional government regulations may be enacted that could
prevent or delay regulatory approval of our product candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the U.S. or abroad. If we are not
able to maintain regulatory compliance, we might not be permitted to market seladelpar or future products, if any, and we may not achieve or sustain profitability.
If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our product
candidates.
We face an inherent risk of product liability exposure related to the testing of our product candidates in human
clinical studies, and will face an even greater risk if we sell our product candidates commercially. An individual may bring a liability claim against us if one of our product candidates causes, or merely appears to have caused, an injury. If we
cannot successfully defend ourselves against product liability claims, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in the following:
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decreased demand for our product candidates;
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impairment to our business reputation;
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withdrawal of clinical study participants;
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distraction of managements attention from our primary business;
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substantial monetary awards to patients or other claimants;
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the inability to commercialize our product candidates; and
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We do carry product liability insurance for our clinical studies. Further,
we intend to expand our insurance coverage to include the sale of commercial products if marketing approval is obtained for any of our product candidates. However, we may be unable to obtain this product liability insurance on commercially
reasonable terms and with insurance coverage that will be adequate to satisfy any liability that may arise. On occasion, large judgments have been awarded in class action or individual lawsuits relating to marketed pharmaceuticals. A successful
product liability claim or series of claims brought against us could cause our stock price to decline and, if judgments exceed our insurance coverage, could decrease our cash and adversely affect our business.
We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications
that may be more profitable or for which there is a greater likelihood of success.
The success of our business depends primarily
upon our ability to identify, develop and commercialize product candidates. Because we have limited financial and managerial resources, we focus on product candidates for specific indications. As a result, we may forego or delay pursuit of
opportunities with other product candidates or other indications that later prove to have greater commercial potential. We may focus our efforts and resources on product candidates that ultimately prove to be unsuccessful.
If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable
rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been advantageous for us to retain sole development and commercialization rights.
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Risks Related to Our Intellectual Property
If we are unable to obtain or protect intellectual property rights related to our products and product candidates, we may not be able to compete
effectively in our market.
We rely upon a combination of patents, trade secret protection and confidentiality agreements to
protect the intellectual property related to our products and product candidates. The strength of patents in the biotechnology and pharmaceutical field involves complex legal and scientific questions and can be uncertain. The patent applications
that we own, co-own or in-license may fail to result in issued patents with claims that cover the products in the U.S. or in other countries. If this were to occur, early generic competition could be expected against our product candidates in
development. There is no assurance that all of the potentially relevant prior art relating to our patents and patent applications has been found, which can invalidate a patent or prevent a patent from issuing based on a pending patent application.
Even if patents do successfully issue, third parties may challenge their validity, enforceability, scope or ownership, which may result in such patents, or our rights to such patents, being narrowed or invalidated. Furthermore, even if they are
unchallenged, our patents and patent applications may not adequately protect our intellectual property or prevent others from designing around our claims. If the patent applications we hold or license with respect to our product candidates fail to
issue or if their breadth or strength of protection is threatened, it could dissuade companies from collaborating with us and threaten our ability to commercialize our products. We cannot offer any assurances about which, if any, patents will issue
or whether any issued patents will be found invalid or unenforceable, will be challenged by third parties or will adequately protect our products and product candidates. Further, if we encounter delays in development or regulatory approvals, the
period of time during which we could market our products under patent protection could be reduced. Since patent applications in the U.S. and most other countries are confidential for a period of time after filing, and some remain so until issued, we
cannot be certain that we or our licensors were the first to file any patent application related to our product candidates. Furthermore, if third parties have filed such patent applications, an interference proceeding in the U.S. can be provoked by
a third party or instituted by us to determine who was the first to invent any of the subject matter covered by the patent claims of our applications. An unfavorable outcome could require us to cease using the related technology or to attempt to
license it from the prevailing party, which may not be available on commercially reasonable terms or at all.
In addition to the
protection afforded by patents, we rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable, processes for which patents are difficult to enforce and other elements of our drug discovery
and development processes that involve proprietary know-how, information or technology that is not covered by patents. Although we expect all of our employees to assign their inventions to us, and all of our employees, consultants, advisors and any
third parties who have access to our proprietary know-how, information or technology to enter into confidentiality agreements, we cannot provide any assurances that all such agreements have been duly executed, that such agreements provide adequate
protection and will not be breached, that our trade secrets and other confidential proprietary information will not otherwise be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially
equivalent information and techniques. If we are unable to prevent material disclosure of the non-patented intellectual property related to our technologies to third parties, and there is no guarantee that we will have any such enforceable trade
secret protection, we may not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, results of operations and financial condition.
Further, the laws of some foreign countries do not protect patents and other proprietary rights to the same extent or in the same manner as
the laws of the U.S. As a result, we may encounter significant problems in protecting and defending our intellectual property abroad. We may also fail to pursue or obtain patents and other intellectual property protection relating to our products
and product candidates in all foreign countries.
Third-party claims of intellectual property infringement may prevent or delay our development and
commercialization efforts or otherwise affect our business.
Our commercial success depends in part on our avoiding infringement
and other violations of the patents and proprietary rights of third parties. There is a substantial amount of litigation, both within and outside the
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U.S., involving patent and other intellectual property rights in the biotechnology and pharmaceutical industries, including patent infringement lawsuits, interferences, oppositions and inter
party re-examination proceedings before the U.S. Patent and Trademark Office (U.S. PTO) and its foreign counterparts. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in
which we and our collaborators are developing product candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, and as we gain greater visibility and market exposure as a public company, the risk increases
that our product candidates or other business activities may be subject to claims of infringement of the patent and other proprietary rights of third parties.
Third parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents or patent
applications with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates. Because patent applications can take many years to issue, there may be currently
pending patent applications which may later result in issued patents that our product candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents. If any
third-party patents were held by a court of competent jurisdiction to cover the manufacturing process of any of our product candidates, any molecules formed during the manufacturing process or any final product itself, the holders of any such
patents may be able to block our ability to commercialize such product candidate unless we obtained a license under the applicable patents, or until such patents expire. Similarly, if any third-party patent were held by a court of competent
jurisdiction to cover aspects of our formulations, processes for manufacture or methods of use, including combination therapy, the holders of any such patent may be able to block our ability to develop and commercialize the applicable product
candidate unless we obtained a license or until such patent expires. In either case, such a license may not be available on commercially reasonable terms or at all. In addition, we may be subject to claims that we are infringing other intellectual
property rights, such as trademarks or copyrights, or misappropriating the trade secrets of others, and to the extent that our employees, consultants or contractors use intellectual property or proprietary information owned by others in their work
for us, disputes may arise as to the rights in related or resulting know-how and inventions.
Parties making claims against us may obtain
injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize one or more of our product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation
expense and would be a substantial diversion of employee resources from our business. In the event of a successful infringement or other intellectual property claim against us, we may have to pay substantial damages, including treble damages and
attorneys fees for willful infringement, obtain one or more licenses from third parties, pay royalties or redesign our affected products, which may be impossible or require substantial time and monetary expenditure. We cannot predict whether
any such license would be available at all or whether it would be available on commercially reasonable terms. Furthermore, even in the absence of litigation, we may need to obtain licenses from third parties to advance our research or allow
commercialization of our product candidates, and we have done so from time to time. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In that event, we would be unable to further develop and
commercialize one or more of our product candidates, which could harm our business significantly. We cannot provide any assurances that third-party patents do not exist which might be enforced against our products or product candidates, resulting in
either an injunction prohibiting our sales, or, with respect to our sales, an obligation on our part to pay royalties and/or other forms of compensation to third parties.
We license certain key intellectual property from third parties, and the loss of our license rights could have a materially adverse effect on our
business.
We are a party to a number of technology licenses that are important to our business and expect to enter into
additional licenses in the future. For example:
1) We rely on an exclusive license to certain patents and know-how from Janssen
Pharmaceutical NV (Janssen NV), which include seladelpar and certain other PPAR
d
compounds (the PPAR
d
Products). Under the exclusive license
with Janssen NV we have full control and responsibility over the research, development and
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registration of any PPAR
d
Products and are required to use diligent efforts to conduct all such activities. If we fail to comply with our obligations
under our agreement with Janssen NV, including our obligations to expend more than a de minimus amount of effort and resources on the research and/or development of at least one PPAR
d
product, to make any
payment called for under the agreement, not to disclose any non-exempt confidential information related to the agreement, or to use diligent efforts to promote, market and sell any PPAR
d
Product under the
agreement, such action would constitute a default under the agreement and Janssen NV may have the right to terminate the license, in which event we would not be able to develop or market products covered by the license, including in the case of the
Janssen NV license, seladelpar, which would have a materially adverse effect on our business.
2) We rely on an exclusive license to
certain patents, proprietary technology and know-how from DiaTex, which include arhalofenate. During the term of the exclusive license with DiaTex we may perform research and development of compounds and products for the treatment of human disease
based on the patents, proprietary technology and know-how from DiaTex. If we fail to comply with our obligations under our agreement with DiaTex, including our obligations to pay royalty payments during the development and commercialization of
arhalofenate, or if we are subject to a bankruptcy, DiaTex may have the right to terminate the license, in which event we would not be able to develop or market products covered by the license, including in the case of the DiaTex license,
arhalofenate, which would have a materially adverse effect on our business.
We may be involved in lawsuits to protect or enforce our patents, the
patents of our licensors or our other intellectual property rights, which could be expensive, time consuming and unsuccessful.
Competitors may infringe or otherwise violate our patents, the patents of our licensors or our other intellectual property rights. To counter
infringement or unauthorized use, we may be required to file legal claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours or our licensors is not valid or is
unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation or defense proceedings could put one or more of our
patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing. The initiation of a claim against a third party may also cause the third party to bring counter-claims against us.
We may not be able to prevent, alone or with our licensors, misappropriation of our intellectual property rights, particularly in countries
where the laws may not protect those rights as fully as in the U.S. Our business could be harmed if in a litigation if the prevailing party does not offer us a license on commercially reasonable terms. Any litigation or other proceedings to enforce
our intellectual property rights may fail, and even if successful, may result in substantial costs and distract our management and other employees.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that
some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts
or investors perceive these results to be negative, it could have a material adverse effect on the price of our common stock.
Obtaining and
maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for
non-compliance with these requirements.
Periodic maintenance fees on any issued patent are due to be paid to the U.S. PTO and
foreign patent agencies in several stages over the lifetime of the patent. The U.S. PTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the
patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of
the patent or patent application, resulting in partial or
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complete loss of patent rights in the relevant jurisdiction. Non-compliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to,
failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. If we or our licensors that control the prosecution and maintenance of our licensed patents fail
to maintain the patents and patent applications covering our product candidates, we may lose our rights and our competitors might be able to enter the market, which would have a material adverse effect on our business.
Risks Related to Our Business Operations and Industry
Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.
We are highly dependent on principal members of our executive team listed under Business Executive Officers of Registrant
of this Annual Report on Form 10-K. While we have entered into employment agreements or offer letters with each of our executive officers, any of them could leave our employment at any time, as all of our employees are at will employees.
We do not maintain key person insurance for any of our executives or other employees. Recruiting and retaining other qualified employees for our business, including scientific and technical personnel, will also be critical to our
success. There is currently a shortage of skilled executives in our industry, which is likely to continue. We also experience competition from universities and research institutions for the hiring of scientific and clinical personnel. As a result,
competition for skilled personnel is intense and the turnover rate can be high. We may not be able to attract and retain personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar
personnel. In addition, failure of any of our clinical studies may make it more challenging to recruit and retain qualified personnel. If we are unable to successfully recruit key employees or replace the loss of services of any executive or key
employee, it may adversely affect the progress of our research, development and commercialization objectives.
In addition, we rely on
consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy. Our consultants and advisors may be employed by employers other than us and may have
commitments under consulting or advisory contracts with other entities that may limit their availability to us, which could also adversely affect the progress of our research, development and commercialization objectives.
We will need to expand our organization, and we may experience difficulties in managing this growth, which could disrupt our operations.
As of March 1, 2017, we had 22 full-time employees. As our company matures, we expect to expand our employee base to increase our
managerial, clinical, scientific and engineering, operational, sales, and marketing teams. Future growth would impose significant additional responsibilities on our management, including the need to identify, recruit, maintain, motivate and
integrate additional employees, consultants and contractors. Also, our management may need to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to managing these growth
activities. We may not be able to effectively manage the expansion of our operations, which may result in weaknesses in our infrastructure, give rise to operational mistakes, loss of business opportunities, loss of employees and reduced productivity
among remaining employees. Our expected growth could require significant capital expenditures and may divert financial resources from other projects, such as the development of product candidates. If our management is unable to effectively manage
our growth, our expenses may increase more than expected, our ability to generate and/or grow revenues could be reduced, and we may not be able to implement our business strategy. Our future financial performance and our ability to commercialize our
product candidates and compete effectively will depend, in part, on our ability to effectively manage any future growth.
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Our internal computer systems, or those used by our contract research organizations or other contractors or
consultants, may fail or suffer security breaches.
Despite the implementation of security measures, our internal computer systems
and those of our contract research organizations and other contractors and consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. While we
have not experienced any such system failure, accident or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our product candidate development programs. For
example, the loss of clinical study data from completed or ongoing clinical studies for a product candidate could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the
extent that any disruption or security breach was to result in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development of any
product candidates could be delayed.
Risks Relating to Owning Our Common Stock
An active trading market for our common stock may not develop and the market price for our common stock may decline in value.
Our common stock is listed on the NASDAQ Capital Market under the symbol CBAY. Historically, trading volume for our common stock
has been very limited. The historical trading prices of our common stock on the NASDAQ Capital Market may not be indicative of the price levels at which our common stock will trade in the future, and we cannot predict the extent to which investor
interest in us generally will lead to the development of an active public trading market for our common stock or how liquid that public market may become.
Our stock price may be volatile, and our stockholders investment in our stock could decline in value.
The trading price of our common stock is likely to be volatile. Our stock price could be subject to wide fluctuations in response to a variety
of factors, including:
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adverse results or delays in preclinical testing or clinical trials;
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inability to obtain additional funding;
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any delay in filing an IND or NDA for any of our future product candidates an any adverse development or perceived adverse development with respect to the FDAs review of that IND or NDA;
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failure to maintain our existing collaborations or enter into new collaborations;
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failure of our collaboration partners to elect to develop or commercialize product candidates under our collaboration agreements or the termination of any programs under our collaboration agreements;
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failure by us or our licensors and collaboration partners to prosecute, maintain or enforce our intellectual property rights;
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failure to successfully develop and commercialize our future product candidates;
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changes in laws or regulations applicable to future products;
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inability to obtain adequate product supply for our future product candidates or the inability to do so at acceptable prices;
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adverse regulatory decisions;
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introduction of new products, services or technologies by our competitors;
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failure to meet or exceed financial projections we may provide to the public;
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failure to meet or exceed the estimates and projections of the investment community;
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the perception of the pharmaceutical industry by the public, legislatures, regulators and the investment community;
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announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us, our collaboration partners or our competitors;
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disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies;
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additions or departures of key scientific or management personnel;
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significant lawsuits, including patent or stockholder litigation;
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changes in the market valuations of similar companies;
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sales of our common stock by us or our stockholders in the future; and
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trading volume of our common stock.
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In addition, companies trading in the stock market in
general have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our common
stock, regardless of our actual operating performance.
Sales of a substantial number of shares of our common stock in the public market by our
existing stockholders could cause our stock price to fall.
Sales of a substantial number of shares of our common stock in the
public market, or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect
that sales may have on the prevailing market price of our common stock.
Future sales and issuances of our common stock or rights to purchase common
stock, including pursuant to our equity incentive plans, could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall.
We expect that significant additional capital will be needed in the future to continue our planned operations. To the extent we raise
additional capital by issuing equity securities, our stockholders may experience substantial dilution. We may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine
from time to time. For example, in February 2017, we completed the issuance of 5,181,348 shares of our common stock at $1.93 per share in an underwritten public offering for the net proceeds to us of $9.2 million, in July 2015, we completed the
issuance of 8,188,000 shares of our common stock at $2.81 per share in an underwritten public offering for net proceeds to us of $21.1 million, and in November 2014 we filed a $100 million registration statement on Form S-3 with the SEC and
also entered into an ATM to sell up to $25 million of common stock under the registration statement under which we have sold additional shares of our common stock for net proceeds to us of $4.5 million during the period January 1, 2015, through
January 31, 2017. If in the future we sell common stock, convertible securities or other equity securities, investors may be materially diluted by subsequent sales. These sales may also result in new investors gaining rights superior to our
existing stockholders. Pursuant to our equity incentive plans, our management is authorized to grant stock options and other equity-based awards to our employees, directors and consultants. The number of shares available for future grant under our
equity incentive plans as of March 1, 2017, was 652,687 shares.
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We do not anticipate paying cash dividends, and accordingly, stockholders must rely on stock appreciation
for any return on their investment.
We do not anticipate paying cash dividends in the future. As a result, only appreciation of
the price of our common stock, which may never occur, will provide a return to stockholders. Investors seeking cash dividends should not invest in our common stock. In addition, our ability to pay cash dividends is currently prohibited without the
prior consent of the lender pursuant to the terms of our 2015 loan and security agreements.
We may be subject to securities litigation, which is
expensive and could divert management attention.
Our share price may be volatile, and in the past, companies that have
experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and
divert our managements attention from other business concerns, which could seriously harm our business.
Anti-takeover provisions in our
charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.
Provisions in our amended and restated certificate of incorporation and our bylaws may delay or prevent an acquisition of us. In addition,
these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, who are responsible for appointing the
members of our management team. In addition, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits, with some exceptions, stockholders owning in excess of 15% of our outstanding voting stock
from merging or combining with us. Finally, our charter documents establish advance notice requirements for nominations for election to our board of directors and for proposing matters that can be acted upon at stockholder meetings. Although we
believe these provisions together provide for an opportunity to receive higher bids by requiring potential acquirers to negotiate with our board of directors, they would apply even if the offer may be considered beneficial by some stockholders.