(Address, including zip code, and telephone number, including area
code, of registrant’s principal executive offices)
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area code, of agent for service)
From time to time after this Registration Statement
becomes effective as determined by market conditions
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following box. [_]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering. [_]
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462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
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I.C. or a post-effective amendment thereto that shall become effective upon filing with the Commission pursuant to Rule 462(e)
under the Securities Act, check the following box. [_]
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Indicate by check mark whether the registrant is an emerging growth company as defned
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† The term “new or revised fnancial accounting standard” refers to
any update issued by the Financial Accounting Standards Board to its Accounting Standards Codifcation after April 5, 2012.
RISK FACTORS
An investment in our securities involves a high
degree of risk. Our business, financial condition or results of operations could be adversely affected by any of these risks. You
should carefully consider the risk factors discussed below, under the caption "Item 3: Key Information
-
Risk Factors"
in our Annual Report on Form 20-F for the year ended December 31, 2018, and in any other filing we make with the SEC subsequent
to the date of this prospectus, each of which are incorporated herein by reference, and in any supplement to this prospectus, before
making your investment decision. The risks and uncertainties we have described are not the only ones we face. Additional risks
and uncertainties not presently known to us or that we currently deem immaterial may also affect our operations. Past financial
performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results
or trends in future periods. If any of these risks actually occurs, our business, business prospects, financial condition or results
of operations could be seriously harmed. This could cause the trading price of our ordinary shares (directly or in the form of
ADSs) to decline, resulting in a loss of all or part of your investment. Please also read carefully the section below entitled
“Forward-Looking Statements.”
Risks Related to the Potential Launch of Talicia® and
Other Products
If we or our development, co-promotional or commercialization
partners are unable to obtain or maintain the FDA or other foreign regulatory clearance and approval for our therapeutic candidates
or products we may promote or commercialize, we or our co-promotional or commercialization partners will be unable to commercialize
our therapeutic candidates or products we may promote or commercialize.
To date, other than our limited experience in promoting Donnatal®
and Mytesi®
,
and commercializing EnteraGam®, we have not marketed, distributed or sold any therapeutic
candidate or product. Several of the products that we currently promote or commercialize must obtain and maintain FDA and other
foreign regulatory clearances and approvals.
In June 2017, we commenced commercializing EnteraGam® in
certain territories in the U.S. EnteraGam® is marketed as an FDA-regulated “medical food” product intended
for the dietary management of chronic diarrhea and loose stools, which must be administered under medical supervision. The FDA
could require that EnteraGam® obtain FDA approval in the future to remain in distribution in the United States if the
FDA disagrees with the classification of EnteraGam® as a medical food.
In June 2017, we commenced promoting Donnatal® (Phenobarbital,
Hyoscyamine Sulfate, Atropine Sulfate, Scopolamine Hydrobromide) in the U.S. Donnatal® is an anticholinergic and barbiturate
combination drug product used as an adjunctive therapy for irritable bowel syndrome, a condition characterized by abdominal pain,
bloating, and diarrhea or constipation. It may also be used as an adjunctive therapy for acute enterocolitis and duodenal ulcers.
Although we have certain rights to promote Donnatal® in certain
U.S. territories, which is currently included in the FDA Drug Efficacy Study Implementation (“DESI”) review program,
we cannot guarantee that our co-promotion partner will continue to be allowed to sell or promote Donnatal® in the U.S.
without future regulatory developments that may lead to the FDA requiring Donnatal® to seek an NDA approval. See “—We
or our co-promotional or commercialization partners are subject to risks related to the regulatory environment of the DESI review
program with respect to Donnatal®.” In addition, future regulatory developments may lead to a loss of the right to commercialize
EnteraGam® or the right to promote Mytesi®.
In July 2018, we commenced promoting Mytesi® (crofelemer), an
FDA-approved anti-diarrheal prescription drug indicated for the symptomatic relief of non-infectious diarrhea in adults with HIV/AIDS
on anti-retroviral therapy (ART).
We submitted an NDA for Talicia® (proposed tradename for RHB-105)
for the treatment of
H. pylori
infection on May 2, 2019. On July 3, 2019, we announced that the FDA had accepted for
review the NDA for Talicia®. The NDA was also granted Priority Review designation and the FDA assigned a target PDUFA action
date of November 2, 2019. The FDA accepting an NDA for review and assigning a PDUFA goal date does not provide any indication as
to the likelihood of FDA approval by the PDUFA date, or ever. Accordingly, there is no guarantee that the FDA will ever approve
Talicia® for marketing in the U.S. or that any decision on its NDA approval will be made by November 2, 2019.
In addition to Talicia®, we have six other therapeutic candidates,
most of which are in late-clinical stage development, for which we currently intend to develop with the goal of eventually seeking
FDA approval: RHB-104 for the treatment of Crohn’s disease with positive top-line results from a first Phase 3 study and
a completed proof-of-concept Phase 2a study for multiple sclerosis; RHB-204, with a planned pivotal Phase 3 study for pulmonary
NTM infections; RHB-106 (out-licensed to Bausch Health) for bowel preparation; BEKINDA
®
(proposed
tradename for RHB-102, if approved) with positive results from a first Phase 3 study for acute gastroenteritis and gastritis and
positive results from a Phase 2 study for IBS-D; YELIVA
®
(proposed tradename for
ABC294640, if approved), with an ongoing Phase 2a study for cholangiocarcinoma and other ongoing studies; and RHB-107 (Upamostat
;
formerly
MESUPRON), targeting cancer and inflammatory GI diseases. Our therapeutic candidates are subject to extensive governmental laws,
regulations, and guidelines relating to development, clinical trials, manufacturing, marketing, promotion, and commercialization
of pre- and post-approval prescription drugs. We may not be able to submit for or obtain marketing approval for any of our therapeutic
candidates in a timely manner or at all.
Any material delay in obtaining or maintaining, or the failure to
obtain or maintain, required regulatory clearances and approvals will increase our costs and materially adversely affect our ability
to generate meaningful revenues and could adversely impact our business, results of operations, financial condition, or ability
to attain or sustain revenue from other markets. Any regulatory clearance or approval to market a therapeutic candidate, our current
commercial products, or other products that we may promote or commercialize may be subject to limitations on the indicated
uses for marketing or may impose restrictive conditions of use, including cautionary information and the risk that the FDA will
not accept our requested indication of
H. pylori
, which is a wider indication than the existing therapies, which may result
in a smaller target market and impact the potential for Talicia®, thereby altering or eliminating the size of the market for
the therapeutic candidate, our current commercial products, or other products that we may promote or commercialize in the future.
We also are, and will be, subject to numerous regulatory requirements from both the FDA and other foreign regulatory authorities
that govern the conduct of clinical trials, manufacturing and marketing authorization, pricing and third-party reimbursement. Moreover,
clearance or approval by one regulatory authority does not ensure clearance or approval by other regulatory authorities in separate
jurisdictions. Each jurisdiction may have different approval processes and requirements and may impose additional testing, development
and manufacturing requirements for our therapeutic candidates, our current commercial products and products that we may promote
or commercialize in the future.
The FDA may require, or companies may pursue, additional clinical
trials after a product is approved for marketing. Such post-market studies may be mandated by the FDA as conditions to be satisfied
for initial or continued approval for marketing. The FDA has express statutory authority to require clinical trial sponsors to
conduct post-marketing trials to specifically address safety and other issues identified by the FDA.
The FDA also has authority to require the implementation of Risk
Evaluation and Mitigation Strategy (“REMS”) as a post-marketing condition to initial or continued approval where more
data may be needed to demonstrate that the benefits of a drug outweigh its risks. A clinical trial sponsor may also voluntarily
propose a REMS as part of an NDA submission. The need for a REMS is determined as part of the review of the NDA. Based on statutory
standards, elements of a REMS may include “dear doctor letters,” a medication guide, more elaborate targeted educational
programs, and in some cases elements to assure safe use (“ETASU”). ETASU can include, but are not limited to, special
training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring and the
use of patient registries. These elements are negotiated as part of the NDA approval process, and in some cases, if consensus is
not reached in relation to REMS proposed within an NDA submission until after the PDUFA review cycle, the PDUFA date may be delayed.
Once adopted, REMS are subject to periodic assessment and modification.
Certain changes related to an approved drug, including changes to
the product labeling, manufacturing process, indications and other certain specifications set forth within the product’s
NDA, may not be made until a new NDA, or NDA supplement, reflecting the applicable changes, is submitted to, and approved by, the
FDA. An NDA supplement for a new indication typically requires clinical data similar to that in the original application, including
relevant pediatric data, and the FDA typically uses the same procedures and standards in reviewing NDA supplements as it does in
reviewing NDAs.
Even if a product candidate receives regulatory marketing approval,
the approval may be limited to specific disease states, patient populations and dosages, or might contain significant limitations
including on use in the form of warnings, precautions or contraindications, or in the form of onerous risk management plans, restrictions
on distribution, or post-marketing trial requirements. Further, even after regulatory approval is obtained, later discovery of
previously unknown information, such as safety risks, problems with a product or such information, the extent or severity of which
were previously unknown, may result in restrictions on the product’s ability to be marketed as initially approved or even
complete withdrawal of the product’s NDA approval and, in effect, its removal from the market.
Additionally, the FDA or other foreign regulatory authorities may
change their clearance or approval policies or adopt new laws, regulations or guidelines in a manner that materially delays or
impairs our ability to obtain the necessary regulatory clearances or approvals or our ability to commercialize our therapeutic
candidates, promote Donnatal® and Mytesi®, commercialize EnteraGam® and products that we may promote or commercialize
in the future.
If we are unable to maintain, train and build an effective
sales and marketing infrastructure, or establish and maintain compliant and adequate sales and marketing capabilities, we will
not be able to commercialize and grow our products and product candidates successfully.
To further establish and maintain our own marketing and commercialization
capabilities in the U.S. we may need to expand, among other things, our development, regulatory, manufacturing, marketing, and
sales capabilities and to increase or maintain our personnel to accommodate sales. We may not be able to secure sales personnel
or organizations that are adequate in number or expertise to successfully and lawfully market and sell our products in the U.S.
If we are unable to expand our sales and marketing capability, train our sales force effectively or provide any other capabilities
necessary to commercialize our products and therapeutic candidates, we may need to contract with third parties to market and sell
our products.
Our employees and sales personnel must comply with applicable regulatory
requirements and restrictions, including, but not limited to, “fair balance” promotion of our products and state and
federal anti-kickback laws. If we are unable to establish and maintain compliant and adequate sales and marketing capabilities,
we may not be able to increase our product revenue, may generate increased expenses and may be subject to regulatory and compliance
investigation and enforcement.
The FDA also requires that our sales and marketing efforts, as well
as promotions, comply with various laws and regulations. Prescription drug promotions must be consistent with and not contrary
to labeling, present “fair balance” between risks and benefits, be truthful and not false or misleading, be adequately
substantiated (when required), and include adequate directions for use.
In addition to the requirements applicable to approved drug products,
we may also be subject to enforcement action in connection with any promotion of an investigational new drug. A sponsor or investigator,
or any person acting on behalf of a sponsor or investigator, may not represent in a promotional context that an investigational
new drug is safe or effective for the purposes for which it is under investigation or otherwise promote the drug candidate.
If the FDA investigates our marketing and promotional materials
or other communications and finds that any of our current or future commercial products are being marketed or promoted in violation
of the applicable regulatory restrictions, we could be subject to FDA enforcement action. Any enforcement action (or related lawsuit,
which could follow such action) brought against us in connection with alleged violations of applicable drug promotion requirements,
or prohibitions, could harm our business and our reputation, as well as the reputation of any approved drug products we may promote
or commercialize.
The NDA review process is time-consuming and costly, and we
may encounter delays in receipt of FDA approval, if any, for commercialization of Talicia® for a number of reasons, including,
but not limited to: CMC, clinical, regulatory or other issues. If acceptance of the NDA for Talicia® is delayed or never granted,
there will be a material, adverse effect on our business.
Obtaining approval of an NDA is a lengthy, expensive, and uncertain
process, and approval may not be obtained for a number of different reasons, as the number of approved NDAs is limited. We cannot
guarantee that the NDA for Talicia® will be approved by the FDA.
To obtain approval to market a drug in the United States, a marketing
application (e.g., an NDA) must be submitted to the FDA that provides data establishing to the FDA’s satisfaction the safety
and effectiveness of the investigational drug for the proposed indication. Each NDA submission requires a substantial user fee
payment (currently exceeding $2.5 million for fiscal year 2019) unless a waiver or exemption applies. The application includes
all relevant data available from pertinent non-clinical, preclinical and clinical trials, including negative or ambiguous results,
as well as positive findings, together with detailed information relating to the product’s chemistry, manufacturing, controls
(“CMC”), and proposed labeling, among other things. Data can come from company-sponsored clinical trials intended to
test the safety and effectiveness of a use of a product, or from a number of alternative sources, including studies initiated by
investigators in accordance with applicable GCP requirements.
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 the FDA to evaluate what may
be needed for the product to enter into the next phase of the development process. Sponsors typically use the end of Phase 2 meetings
to discuss their Phase 2 clinical results and present their plans for the pivotal Phase 3 registration trial that they believe
will support approval of the new drug.
Concurrent with clinical trials, companies usually complete additional
animal safety studies and must also develop additional information about the chemistry and physical characteristics of the drug
and finalize a process for manufacturing the product in accordance with current good manufacturing practices (“cGMP”)
requirements. cGMP regulations require among other things, quality control and quality assurance, as well as the corresponding
maintenance of records and documentation and the obligations to investigate and correct any deviations from cGMP. The manufacturing
process must be capable of consistently producing quality batches of the drug candidate and the manufacturer must develop methods
for testing the identity, strength, quality and purity of the final drugs. Additionally, appropriate packaging must be selected
and tested, and stability studies must be conducted to demonstrate that the drug candidate does not undergo unacceptable deterioration
over its shelf-life.
The results of product development, non-clinical studies and clinical
trials, along with descriptions of the manufacturing process, analytical tests conducted on the chemistry of the drug, proposed
labeling, and other relevant information are submitted to the FDA as part of an NDA, requesting approval to market the product.
An NDA must also contain data to assess the safety and effectiveness of the product for the claimed indication in all relevant
pediatric populations. The FDA may grant deferrals for submission of pediatric data or full or partial waivers. If the NDA is deemed
sufficiently complete, FDA reviews the NDA 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 product’s
identity, strength, quality and purity. The FDA has specific performance goals on the review of NDAs and typically seeks to review
NDAs in approximately 12 months from submission of the NDA. The review process may be extended by the FDA for three additional
months to consider certain late-submitted information or information intended to clarify information already provided in the submission.
After the FDA completes its initial review of an NDA, it will communicate to the sponsor that the drug will either be approved
for marketing, or FDA will issue a complete response letter to communicate that the NDA will not be approved in its current proposed
form and inform the sponsor of changes that must be made or additional clinical, non-clinical, or manufacturing data that must
be received by FDA before the application can be approved, with no implication regarding the ultimate approvability of the application
or the timing of any such approval, if ever. If, or when, those deficiencies have been addressed to the FDA’s satisfaction
in a resubmission of the NDA, the FDA will issue an approval letter. FDA has committed to reviewing such resubmissions in two-to-six
months, depending on the type of information included. The FDA may refer applications for novel drug products or drug products
that 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, if so, under
what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully
when making decisions.
Before approving an NDA, the FDA typically 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 may inspect one or more clinical sites to assure compliance with
Good Clinical Practices (“GCP”), which are international ethical and scientific quality standards meant to assure the
rights, safety, and well-being of trial participants are protected and to define the roles of clinical trial sponsors, investigators,
administrators, and monitors. If the FDA determines the application, manufacturing process or manufacturing facilities are not
acceptable, it typically will outline the deficiencies and often will request additional testing or information. This may significantly
delay further review of the application. If the FDA finds that a clinical site did not conduct the clinical trial in accordance
with GCP, the FDA may determine the data generated by the clinical site should be excluded from the primary efficacy analyses provided
in the NDA. Additionally, notwithstanding the submission of any requested additional information, the FDA ultimately may decide
that the application does not satisfy the regulatory criteria for approval.
Other circumstances and events that may impede or delay FDA’s approval of an NDA
include, but are not limited to:
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regulatory
requests for additional analyses, reports, data, non-clinical, and preclinical studies and clinical trials;
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regulatory
questions regarding interpretations of data and results or the emergence of new information;
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clinical
holds, other regulatory objections to commencing or continuing a clinical trial, or the inability to obtain regulatory approval
to commence a clinical trial in countries that require such approvals;
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inability
to enroll a sufficient number of patients who meet the inclusion and exclusion criteria in our clinical trials;
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inability
to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols;
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unfavorable
or inconclusive results of clinical trials and supportive non-clinical studies, including unfavorable results regarding the effectiveness
or safety of product candidates during clinical trials;
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any
determination that a clinical trial or product candidate presents unacceptable health risks;
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lack
of adequate funding to continue the clinical trial due to unforeseen costs or other business decisions;
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inability
to reach agreements on acceptable terms with prospective contract research organizations (“CROs”) and trial sites,
the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;
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inability
to identify and maintain a sufficient number of sites, many of which may already be engaged in other clinical trial programs,
including some that may be for the same indications targeted by any of our product candidates;
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inability
to obtain approval from IRBs to conduct clinical trials at their respective sites;
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the
failure of a third party to comply with applicable regulatory requirements, including site inspections and inspection readiness;
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inability
to timely manufacture or obtain from third parties sufficient quantities or quality of the product candidate or other materials
required for a clinical trial; and
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difficulty
in maintaining contact with patients after treatment, resulting in incomplete data.
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We may encounter significant delays in receipt of FDA approval,
if any, for commercialization of Talicia®. Accordingly, FDA may not approve Talicia® by the PDUFA goal date of November
2, 2019, or at all. For example, the FDA may determine that CMC of Talicia® are not satisfactory due to the manufacturing standards
of the products or that additional CMC work, information or quality assurances are needed. In particular, the FDA requested additional
information in relation to the CMC information contained in our NDA, responses to which were submitted on July 23, 2019.
The FDA may also consider the clinical studies conducted with Talicia® to-date
and the additional information provided to be inadequate or insufficient or require us to provide additional information regarding
other areas of the NDA, which may require us to conduct additional studies or otherwise significantly delay potential FDA approval
of the NDA for Talicia®, if any.
For example, the FDA has, thus far in its review of the Talicia®
NDA, requested additional information addressing proposed United States Prescribing Information (USPI) that conforms with the Pregnancy
and Lactation Labeling Rule (PLLR) and has requested the location of the report compiled on the levels of rifabutin found in comparator
arms and relevant internal audits completed by RedHill. This information has been submitted as an amendment to the NDA.
In addition, we rely on the current manufacturer of Talicia® for
the manufacture of validation and registration batches in support of our NDA with the FDA, and we rely on suppliers of active pharmaceutical
ingredients and excipients. We cannot guarantee that our manufacturer, suppliers, or other vendors will be able to perform as required,
will not terminate their agreements with us, or otherwise will not perform satisfactorily. The delay in identifying, engaging,
qualifying, and training alternative manufacturers or suppliers may be further prolonged, which lead to additional consequences
for the NDA approval process, including increased potential that the NDA application will be denied.
Furthermore, the FDA may also change its clearance or approval policies
or adopt new laws, regulations, or guidelines in a manner that materially delays or impairs our ability to obtain approval of the
NDA for Talicia®. If any of the above-referenced or other issues occur or worsen, we may face substantial additional expenses
and otherwise experience delays in obtaining potential FDA approval of the NDA for Talicia® or may never obtain the FDA
approval of the NDA for Talicia®.
If third parties do not manufacture Talicia® or our
other therapeutic candidates or do not manufacture and sell any products we may promote or commercialize, including our current
commercial products, in sufficient quantities, in the required timeframe, and at an acceptable cost and quality, clinical
development and commercialization of Talicia® or our other therapeutic candidates or promotion of products we may promote
or commercialize could be delayed and sales of any product we may promote or commercialize may be adversely affected.
We do not currently own or operate manufacturing facilities. We
rely on, and expect to continue to rely on, third parties to manufacture clinical and commercial quantities of Talicia® or
our other therapeutic candidates and products that we may promote or commercialize. There is no guarantee that the manufacturer
of Talicia® will be able to supply an adequate and quality product that meets all regulatory requirements in a consistent manner.
For Donnatal®, we rely on ADVANZ, which has a manufacturing agreement with a third party to provide sufficient quantities of
Donnatal® in the required timeframe. For EnteraGam® we rely on Entera Health and the manufacturer, The Lauridsen
Group, Inc., to provide sufficient quantities of EnteraGam® in the required timeframe. For Mytesi®, we rely on Napo,
which has a manufacturing agreement with a third party to provide sufficient quantities of Mytesi® in the required timeframe.
Our reliance on third parties includes our reliance on them for quality assurance related to regulatory compliance. Our current
and anticipated future reliance upon others for the manufacture of our therapeutic candidates and any products that we may promote
or commercialize may adversely affect our future operations and our ability to develop therapeutic candidates and commercialize
any therapeutic candidates and any products that we may promote or commercialize on a timely and competitive basis.
We may not be able to maintain our existing or future third-party
manufacturing arrangements on acceptable terms, if at all. If for some reason our manufacturers or our development or commercialization
partners’ manufacturers do not perform as agreed or expected or terminate or fail to renew their agreements with us for any
reason, we or our partners may be required to replace them, in which event we may incur added costs and delays in identifying,
engaging, qualifying under applicable regulatory requirements and training any such replacements and entering into agreements with
such replacements on acceptable terms. Obtaining the necessary FDA or other regulatory approvals or other qualifications required
for changes in manufacturing sites, methods or processes under applicable regulatory requirements could result in a significant
interruption of supply. In the case of the manufacturer of Talicia®, in particular, the delay in identifying, engaging, qualifying
and training its replacement may be extended, leading to a significant interruption of supply, as some of the active pharmaceutical
ingredients (“APIs”) have limited suppliers, which creates additional risks for us. The process on the finished product
is complex; therefore, there is no guarantee it will succeed technically, in sufficient quantities in terms of price, or by any
other measure. Any such additional costs and delays may adversely impact our ability to obtain regulatory clearances and approvals
to commercialize Talicia® or our other therapeutic candidates or any product we may promote or commercialize or make such commercialization
or marketing economically unfeasible.
We rely on third parties to manufacture and supply us with
high quality APIs in the quantities we require on a timely basis.
We currently do not manufacture any APIs ourselves. Instead, we
rely on third-party vendors for the development, manufacture, and supply of our APIs that are used to formulate our therapeutic
candidates and products we may promote or commercialize. If these suppliers are incapable or unwilling to meet our current or future
needs on acceptable terms or at all, we could experience a delay in obtaining regulatory clearances or approvals for our therapeutic
candidates or products that we may promote or commercialize or in conducting clinical trials of our therapeutic candidates and
incur additional costs or experience an adverse effect on our sale of any product we may promote or commercialize.
While there may be several alternative suppliers of APIs on the
market, for most of our products (but not Mytesi®, as discussed below), we have yet to conclude extensive investigations into
the quality or availability of their APIs. With respect to Talicia® or other therapeutic candidates and products we may promote
or commercialize, we are dependent on API manufacturers, and there are a limited number of such API manufacturers, which further
limits our options. In addition, we do not believe that there are alternative suppliers of APIs for Mytesi®, and we are wholly
dependent upon Napo’s ability to source or procure the API; the raw material used to manufacture Mytesi® is a crude
plant latex (“CPL”), derived from the
Croton lechleri
tree, which is found in countries in South America,
principally Peru. The ability of Napo’s contract suppliers to harvest CPL is governed by the terms of their respective agreements
with local government authorities. Although CPL is available from multiple suppliers, to our knowledge, Napo only has contracts
with a small number of suppliers to obtain CPL and arrange its shipment to its contract manufacturer. Accordingly, if Napo’s
contract suppliers do not or are unable to comply with the terms of their respective agreements with Napo, and Napo is not able
to negotiate new agreements with alternate suppliers on terms that it deems commercially reasonable, it may harm our co-promotion
of Mytesi®. The countries from which CPL is obtained could also change their laws and regulations regarding the export of the
natural products or impose or increase taxes or duties payable by exporters of such products. Restrictions could be imposed on
the harvesting of the natural products or additional requirements could be implemented for the replanting and regeneration of the
raw material. Such events could have a significant impact on our co-promotion of Mytesi®. As a result of each of the foregoing
circumstances related to Mytesi®
and the APIs of other products that we promote or
commercialize, we can provide no assurances that supply sources will not be interrupted from time to time. Changing API suppliers
or finding and qualifying new API suppliers can be costly and take a significant amount of time. Many APIs require significant
lead-time to manufacture. There can also be challenges in maintaining similar quality or technical standards from one manufacturing
batch to the next.
If we are not able to find stable, affordable, high quality, or
reliable supplies of our APIs, we may not be able to produce enough supplies of our therapeutic candidates or products we may promote
or commercialize, which could have a material adverse effect on our reputation, business, financial condition or results of operations.
We anticipate continued reliance on third-party manufacturers
if we are successful in obtaining marketing approval from the FDA and other regulatory agencies for any of our therapeutic candidates
and reliance on third-party manufacturers for any products that we may promote or commercialize, including our current commercial
products.
To date, our therapeutic candidates have been manufactured in relatively
small quantities for preclinical testing and clinical trials as well as for other regulatory purposes by third-party manufacturers.
If the FDA or other regulatory agencies approve any of our therapeutic candidates for commercial sale, we expect that we would
continue to rely, at least initially, on third-party manufacturers to produce commercial quantities of our approved therapeutic
candidates. In addition, we rely on, and we expect to continue to rely on, third-party manufacturers to produce commercial quantities
of our current commercial products or any product that we may gain the rights to in the future to promote or commercialize. These
manufacturers may not be able to successfully increase or maintain the manufacturing capacity for any of our therapeutic candidates
that may be approved in the future, our current commercial products or any product we may gain the rights to in order to promote
or commercialize in the future, in a timely or economic manner, or at all. Except for current FDA regulations with respect to “medical
foods,” the significant scale-up of manufacturing may require additional validation studies, which the FDA must review and
approve. Foreign regulatory agencies may also require the approval of additional validation studies for scaling up the manufacturing
process of any of our products, including “medical foods.” If the third-party manufacturers are unable to successfully
increase or maintain the manufacturing capacity for a therapeutic candidate or for products that we may promote or commercialize,
or if we are unable to secure replacement third-party manufacturers or unable to establish our own manufacturing capabilities,
the commercial launch of any approved products may be delayed or there may be a shortage in supply which could have a material
adverse effect on our reputation, business, financial condition or results of operations.
Reliance on third-party manufacturers entails risks, including,
but not limited to:
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manufacturing
delays if our third-party manufacturers give greater priority to the supply of other products over Talicia® or any future
product candidates, if approved, or otherwise do not satisfactorily perform according to the terms of their agreements with us;
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delays
in obtaining regulatory approval for Talicia® or any future product candidates, if our third-party manufacturers fail to satisfy
FDA inspectors in connection with pre-approval inspections or otherwise fail to comply with regulatory requirements;
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the
possible termination or nonrenewal of manufacturing agreements by the third-party manufacturers at a time that is costly or inconvenient
for us;
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the
possible breach of manufacturing agreements by third-party manufacturers; and
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product
loss or serious adverse events due to contamination, equipment failure, or improper installation or operation of equipment or
operator error.
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We and our third-party manufacturers or our partners’
manufacturers are, and will be, subject to regulations of the FDA and other foreign regulatory authorities, such as applicable
current good manufacturing practices and other quality-based regulations.
We and our third-party manufacturers or our partners’ manufacturers
are, and will be, required to adhere to laws, regulations, and guidelines of the FDA and other foreign regulatory authorities setting
forth cGMP. These laws, regulations and guidelines cover all aspects of the manufacturing, testing, quality control and recordkeeping
relating to our therapeutic candidates with varying cGMP rigors depending on what phase each of our respective therapeutic candidates
is in with respect to its drug development process and any products we may promote or commercialize, including our current commercial
products. We and our third-party manufacturers and our partners’ manufacturers may not be able to comply with applicable
laws, regulations, and guidelines. We and our third-party manufacturers and our partners’ manufacturers are, and will be,
subject to unannounced inspections by the FDA, state regulators and similar foreign regulatory authorities outside the U.S. Our
failure, or the failure of our third-party manufacturers or our partners’ manufacturers, to comply with applicable laws,
regulations and guidelines could result in the imposition of sanctions on us, including fines, injunctions, civil penalties, failure
of regulatory authorities to grant marketing approval of our therapeutic candidates, delays, suspension or withdrawal of approvals,
license revocation, seizures or recalls of our therapeutic candidates and commercially-marketed products, operating restrictions
and criminal prosecutions, any of which could significantly and adversely affect regulatory approval and supplies of our therapeutic
candidates and commercially-marketed products, and materially and adversely affect our reputation, business, financial condition
or results of operations.
Furthermore, changes in the manufacturing process or procedure,
including a change in the location where the product is manufactured or a change of a third-party manufacturer, will require prior
FDA or other regulatory review and/or approval of the manufacturing process and procedures in accordance with the FDA’s regulations
or comparable foreign requirements. This review may be costly and time consuming and could delay or prevent the launch or commercial
production of a product. The new facility will also be subject to pre-approval inspection. In addition, we have to demonstrate
that the product made at the new facility is equivalent to the product made at the former facility by physical and chemical methods,
which are costly and time consuming. It is also possible that the FDA may require clinical testing as a way to prove equivalency,
which would result in additional costs and delay, and may also result in delays in approval or commercialization of a product or
render it unfeasible.
Even if our therapeutic candidates or any product we may promote
or commercialize, receive, have received regulatory clearance or approval or do not require regulatory clearance or approval, they
may not become commercially viable products.
None of our therapeutic candidates have been cleared or approved
for marketing, and none of our therapeutic candidates is currently being marketed or commercialized in any jurisdiction. We were
granted certain rights to promote our current commercial products in certain U.S. territories and to commercialize EnteraGam®. Even
if any of our therapeutic candidates or any product we may promote or commercialize receive, have received or do not require regulatory
clearance or approval, it may not become a commercially viable product. For example, even if we or our development or commercialization
partners receive regulatory clearance or approval to market a therapeutic candidate or receive regulatory clearance or approval
to promote or commercialize any product, the clearance or approval may be subject to limitations on the indicated uses or subject
to labeling or marketing restrictions, which could materially and adversely affect their marketability and profitability. In addition,
a new therapeutic candidate may appear promising at an early stage of development or after clinical trials but never reach the
market, or it may reach the market but not result in sufficient product sales, if any. A therapeutic candidate or any product that
we may promote or commercialize, may not result in commercial success for various reasons, including but not limited to:
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difficulty in large-scale manufacturing, including yield and quality;
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low market acceptance by physicians, healthcare payors, patients and the medical community as a result of lower demonstrated clinical safety or efficacy compared to products, prevalence, and severity of adverse side effects, or other potential disadvantages relative to alternative treatment methods;
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insufficient or unfavorable levels of reimbursement from government and/or commercial payors, such as, for example, Medicare, Medicaid, and applicable private insurance companies, health maintenance organizations, and other health plan administrators;
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infringement on proprietary rights of others for which we or our development or commercialization partners have not received licenses;
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incompatibility with other therapeutic candidates or marketed products;
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other potential advantages of alternative treatment methods and competitive forces or advancements that may make it more difficult for us to penetrate a particular market segment, if at all;
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ineffective marketing, sales, and distribution activities and support;
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lack of significant competitive advantages over existing products on the market;
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lack of cost-effectiveness or unfavorable pricing compared to other alternatives available on the market;
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inability to generate sufficient revenues to sustain our business operations in accordance with our plan from the sale or marketing of a product in view of the economic arrangements that we have with commercialization or other partners;
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changes to product labels, indications or other relevant information that may trigger additional regulatory requirements that may have a direct or indirect impact on commercialization of our products;
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inability to establish collaborations with third-party development or commercialization partners on acceptable terms, or at all, and our inability or unwillingness, for cost or other reasons, to commercialize our own products (to the extent any are approved for commercialization at the time of any such collaboration issues);
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timing of market introduction of competitive products, including from generic competitors; and
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changes in any laws, regulations, or other relevant policies related to drug pricing or other marketing conditions and requirements that may directly or indirectly limit, restrict, or otherwise negatively impact our ability or success in marketing and/or commercializing certain or all products approved for commercialization at the time of the applicable change.
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Physicians, various other health care providers, patients, payors
or the medical community, in general, may be unwilling to accept, utilize or recommend any of our approved therapeutic candidates
and any product we may promote or commercialize. If we are unable, either on our own or through third parties, to manufacture,
commercialize or market our proposed formulations, therapeutic candidates or any product we may promote or commercialize when planned,
or to develop them commercially, we may not achieve any market acceptance or generate meaningful revenue.
Our relationships with customers, physicians, and third-party
payors will be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws, health
information privacy and security laws, and other healthcare laws and regulations. If we are unable to
comply, or have not fully complied, with such laws, we could
face substantial penalties.
Healthcare providers, physicians and third-party payors in the United
States and elsewhere will play a primary role in the recommendation and prescription of any drug candidates for which we obtain
marketing approval. Our current and future arrangements with healthcare professionals, principal investigators, consultants, customers
and third-party payors may subject us to various federal and state fraud and abuse laws and other health care laws, including,
without limitation, the federal Anti-Kickback Statute, the federal civil and criminal false claims laws and the law commonly referred
to as the Physician Payments Sunshine Act and regulations. These laws will impact, among other things, our clinical research, proposed
sales, marketing and educational programs. In addition, we may be subject to patient privacy laws by both the federal government
and the states in which we conduct or may conduct our business. The laws that will affect our operations include, but are not limited
to:
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the federal Anti-Kickback Statute, which prohibits, among other things, persons or
entities from knowingly and willfully soliciting, receiving, offering or paying any remuneration (including any kickback, bribe
or rebate), directly or indirectly, overtly or covertly, in cash or in kind, in return for the purchase, recommendation, leasing
or furnishing of an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs;
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federal civil and criminal false claims laws, including, without limitation, the False
Claims Act, and civil monetary penalty laws which prohibit, among other things, individuals or entities from knowingly presenting,
or causing to be presented, claims for payment or approval from Medicare, Medicaid or other government payors that are false or
fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;
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the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA,
which created new federal criminal statutes that prohibit a person from knowingly and willfully executing a scheme or making false
or fraudulent statements to defraud any healthcare benefit program, regardless of the payor (e.g., public or private);
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HIPAA, as amended by the Health Information Technology for Economic and Clinical Health
Act, or HITECH, and its implementing regulations, and as amended again by the final HIPAA omnibus rule, Modifications to the HIPAA
Privacy, Security, Enforcement, and Breach Notification Rules Under HITECH and the Genetic Information Nondiscrimination Act;
Other Modifications to HIPAA, published in January 2013, which imposes certain requirements relating to the privacy, security
and transmission of individually identifiable health information without appropriate authorization by entities subject to the
rule, such as health plans, health care clearinghouses and health care providers, and their respective business associates;
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federal transparency laws, including the federal Physician Payments Sunshine Act,
which is part of PPACA, that require certain manufacturers of drugs, devices, biologics and medical supplies for which payment
is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to report annually
to the Centers for Medicare & Medicaid Services, or CMS, information related to: (i) payments or other “transfers of
value’’ made to physicians and teaching hospitals; and (ii) ownership and investment interests held by physicians
and their immediate family members;
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state and foreign law equivalents of each of the above federal laws, state laws that
require manufacturers to report information related to payments and other transfers of value to physicians and other healthcare
providers or marketing expenditures, and state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s
voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or to adopt compliance
programs as prescribed by state laws and regulations, or that otherwise restrict payments that may be made to healthcare providers;
and
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state and foreign laws that govern the privacy and security of health information
in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating
compliance efforts.
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Because of the breadth of these laws and the narrowness of the statutory
exceptions and safe harbors available, it is possible that some of our business activities could be subject to challenge under
one or more of such laws.
It is possible that governmental authorities will conclude that
our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse
or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental
regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines,
disgorgement, imprisonment, exclusion of drugs from government funded healthcare programs, such as Medicare and Medicaid, additional
reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations
of non-compliance with these laws and the curtailment or restructuring of our operations.
The risk of our being found in violation of these laws is increased
by the fact that many of them have not been fully interpreted by the regulatory authorities or the courts, and their provisions
are open to a variety of interpretations. Efforts to ensure that our business arrangements with third parties will comply with
applicable healthcare laws and regulations will involve substantial costs. Any action against us for violation of these laws, even
if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention
from the operation of our business. The shifting compliance environment and the need to build and maintain robust and expandable
systems to comply with multiple jurisdictions with different compliance and/or reporting requirements increases the possibility
that a healthcare company may run afoul of one or more of the requirements.
We could be adversely affected if healthcare reform measures
substantially change the market for medical care or healthcare coverage in the U.S.
On March 23, 2010, President Obama signed the “Patient Protection
and Affordable Care Act” (P.L. 111-148) and on March 30, 2010, the signed the “Health Care and Education Reconciliation
Act” (P.L. 111-152), collectively commonly referred to as the “Healthcare Reform Law.” The Healthcare Reform
Law included a number of new rules regarding health insurance, the provision of healthcare, conditions to reimbursement for healthcare
services provided to Medicare and Medicaid patients, and other healthcare policy reforms. Through the law-making process, substantial
changes have been and continue to be made to the current system for paying for healthcare in the U.S., including changes made to
extend medical benefits to certain Americans who lacked insurance coverage and to contain or reduce healthcare costs (such as by
reducing or conditioning reimbursement amounts for healthcare services and drugs, and imposing additional taxes, fees, and rebate
obligations on pharmaceutical and medical device companies). This legislation was one of the most comprehensive and significant
reforms ever experienced by the U.S. in the healthcare industry and has significantly changed the way healthcare is financed by
both governmental and private insurers. This legislation has impacted the scope of healthcare insurance and incentives for consumers
and insurance companies, among others. Additionally, the Healthcare Reform Law’s provisions were designed to encourage
providers to find cost savings in their clinical operations. Pharmaceuticals represent a significant portion of the cost of providing
care. This environment has caused changes in the purchasing habits of consumers and providers and resulted in specific attention
to the pricing negotiation, product selection and utilization review surrounding pharmaceuticals. This attention may result in
our therapeutic candidates and products we may promote or commercialize, including our current commercial products, being chosen
less frequently or the pricing being substantially lowered. At this stage, it is difficult to estimate the full extent of
the direct or indirect impact of the Healthcare Reform Law on us.
These structural changes could entail further modifications to the
existing system of private payors and government programs (such as Medicare, Medicaid, and the State Children’s Health Insurance
Program), creation of government-sponsored healthcare insurance sources, or some combination of both, as well as other changes.
Restructuring the coverage of medical care in the U.S. could impact the reimbursement for prescribed drugs and pharmaceuticals,
including our current commercial products, those we and our development or commercialization partners are currently developing
and/or those that we may promote or commercialize in the future. If reimbursement for our approved therapeutic candidates, products
we currently commercialize or promote, or any product we may promote or commercialize is substantially reduced or otherwise adversely
affected in the future, or rebate obligations associated with them are substantially increased, it could have a material adverse
effect on our reputation, business, financial condition or results of operations.
Extending medical benefits to those who currently lack coverage
will likely result in substantial costs to the U.S. federal government, which may force significant additional changes to the healthcare
system in the U.S. Much of the funding for expanded healthcare coverage may be sought through cost savings. While some of these
savings may come from realizing greater efficiencies in delivering care, improving the effectiveness of preventive care and enhancing
the overall quality of care, much of the cost savings may come from reducing the cost of care and increased enforcement activities.
Cost of care could be reduced further by decreasing the level of reimbursement for medical services or products (including those
therapeutic candidates currently being developed by us or our development or commercialization partners or any product we may promote
or commercialize, including our current commercial products), or by restricting coverage (and, thereby, utilization) of medical
services or products. In either case, a reduction in the utilization of, or reimbursement for, any therapeutic candidate or any
product we may promote or commercialize, including our current commercial products, or for which we receive marketing approval
in the future, could have a material adverse effect on our reputation, business, financial condition or results of operations.
Several states and private entities initially mounted legal challenges
to the Healthcare Reform Law, and they continue to litigate various aspects of the legislation. On July 26, 2012, the U.S. Supreme
Court generally upheld the provisions of the Healthcare Reform Law at issue as constitutional. However, the U.S. Supreme Court
held that the legislation improperly required the states to expand their Medicaid programs to cover more individuals. As a result,
the states have a choice as to whether they will expand the number of individuals covered by their respective state Medicaid programs.
Some states have not expanded their Medicaid programs and have chosen to develop other cost-saving and coverage measures to provide
care to currently uninsured individuals. Many of these efforts to date have included the institution of Medicaid-managed care programs.
The manner in which these cost-saving and coverage measures are implemented could have a material adverse effect on our reputation,
business, financial condition or results of operations.
Further, the healthcare regulatory environment has seen significant
changes in recent years and is still in flux. Legislative initiatives to modify, limit, replace, or repeal the Healthcare
Reform Law and judicial challenges continue, and may increase in light of the current administration and legislative environment. We
cannot predict the impact on our business of future legislative and legal challenges to the Healthcare Reform Law or other changes
to the current laws and regulations. The financial impact of U.S. healthcare reform legislation over the next few years will depend
on a number of factors, including the policies reflected in implementing regulations and guidance and changes in sales volumes
for therapeutics affected by the legislation. From time to time, legislation is drafted, introduced and passed in the U.S. Congress
that could significantly change the statutory provisions governing coverage, reimbursement, and marketing of pharmaceutical products.
In addition, third-party payor coverage and reimbursement policies are often revised or interpreted in ways that may significantly
affect our business and our products.
Since taking office, President Trump has continued to support the
repeal of all or portions of the Healthcare Reform Law. President Trump has also issued an executive order in which he stated that
it is his administration’s policy to seek the prompt repeal of the Healthcare Reform Law and in which he directed executive
departments and federal agencies to waive, defer, grant exemptions from, or delay the implementation of the provisions of the Healthcare
Reform Law to the maximum extent permitted by law. Congress has enacted legislation that repeals certain portions of the Healthcare
Reform Law, including but not limited to the Tax Cuts and Jobs Act, passed in December 2017, which included a provision that eliminates
the penalty under the Healthcare Reform Law’s individual mandate, effective January 1, 2019, as well as the Bipartisan Budget
Act of 2018, passed in February 2018, which, among other things, repealed the Independent Payment Advisory Board (which was established
by the Healthcare Reform Law and was intended to reduce the rate of growth in Medicare spending). There have also been more recent
examples of judicial challenges, such as federal judges attempting to invalidate the entire Healthcare Reform Law based on the
individual mandate. There is still uncertainty with respect to the impact President Trump’s administration and the U.S. Congress
may have, if any, and any changes will likely take time to unfold.
Third-party payors may not adequately reimburse customers
for any of our therapeutic candidates that are approved or cleared for marketing or for products that we may promote or commercialize,
including our current commercial products, and may impose coverage restrictions or limitations that affect their use.
Our revenues and profits depend heavily upon the availability of
adequate reimbursement for the use of our approved or cleared therapeutic candidates, our current commercial products, and any
products that we may promote or commercialize, from governmental or other third-party payors, both in the U.S. and in foreign markets.
Reimbursement by a third-party payor may depend upon a number of factors, including, but not limited to, the third-party payor’s
determination that the use of an approved or cleared therapeutic candidate or product is:
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a covered benefit under its health plan;
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safe, effective and medically necessary;
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appropriate for the specific patient;
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cost-effective; and
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neither experimental nor investigational.
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Obtaining reimbursement approval for a therapeutic candidate or
for any product that we may promote or commercialize, including our current commercial products, from any government or other third-party
payor is a time-consuming and costly process that could require us or our development or commercialization partners to provide
supporting scientific, clinical and cost-effectiveness data for the use of our therapeutic candidates or any product that we currently,
or may, promote or commercialize to each payor. Even when a payor determines that a therapeutic candidate or a product that we
promote or commercialize is eligible for reimbursement under its criteria, the payor may impose coverage limitations that preclude
payment for some uses that are approved by the FDA or other foreign regulatory authorities, or may impose restrictions, such as
prior authorization requirements, or may simply deny coverage altogether. Reimbursement rates may vary according to the use of
the therapeutic candidate or the use of any product that we promote or commercialize and the clinical setting in which it is used,
may be based on payments allowed for lower-cost products that are already reimbursed, may be incorporated into existing payments
for products or services, and may reflect budgetary constraints or imperfections in Medicare, Medicaid or other data used to calculate
these rates. In particular, reimbursement for our products may not be available from Medicare or Medicaid, and reimbursement from
other third-party payors may be limited, reduced or revoked. For example, reimbursement for Donnatal® has been limited
and is mostly available only through private payors, with certain restrictions, such as prior authorization requirements. In addition,
because EnteraGam® is a “medical food” it is subject to unique FDA regulations and requirements that may limit
its market potential. Overall, our ability to get reimbursement coverage for our commercial products has historically been limited.
Successful commercialization of our current commercial products requires a conducive reimbursement environment. If our products
do not receive adequate reimbursement coverage, or if reimbursement coverage is reduced or otherwise adversely affected, then their
respective commercial prospects could be severely limited. Although certain payors may currently provide some form of coverage
for our commercial products, payors may suspend or discontinue reimbursement at any time, may require or increase co-payments from
patients, may impose restrictions or limitations on coverage, or may reduce reimbursement rates for our products. If we fail to
establish broad adoption of and reimbursement for our commercial products, or if we are unable to maintain any existing reimbursement
from payors, our ability to generate revenue could be harmed and this could have a material adverse effect on our reputation, business,
financial condition or results of operations. In addition to our existing commercial products, any new product we may promote or
commercialize in the future may require that we expend substantial time and resources in order to obtain and retain reimbursement,
and any of these efforts may not be successful.
In the U.S., there have been, and we expect that there will continue
to be, federal and state proposals to constrain expenditures for medical products and services, which may affect payments for our
therapeutic candidates or for any product that we may promote or commercialize in the U.S. In addition, 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 or reimburse
our products at a lower rate. Legislation that reduces reimbursement for our therapeutic candidates could adversely impact
how much or under what circumstances healthcare providers will prescribe or administer our therapeutic candidates, if approved,
or for any product that we may promote or commercialize, including our current commercial products. This could materially and adversely
impact our reputation, business, financial condition or results of operations by reducing our ability to generate meaningful revenue,
raise capital, obtain additional collaborators and market. At this stage, we are unable to estimate the extent of the direct or
indirect impact of any such federal and state proposals.
Furthermore, the Centers for Medicare and Medicaid Services frequently
change product descriptors, coverage policies, product and service codes, payment methodologies and reimbursement values. Third-party
payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates, and both the Centers
for Medicare and Medicaid Services and other third-party payors may have sufficient market power to demand significant price reductions.
Price reductions or other significant coverage policies or payment limitations could materially and adversely affect our reputation,
business, financial condition or results of operations.
Risks Related to Potential Acquisitions
If we acquire products or companies that own rights to,
or otherwise acquire commercialization and related rights to, products, such transaction could result in additional costs, integration
or operating difficulties, dilution and other adverse consequences.
Part of our strategy is to identify and acquire rights to products
that have been cleared or approved for marketing in the U.S. or elsewhere, and in particular, those with a therapeutic focus on
GI or with therapeutic activities which are overlapping or complementary to our existing commercial activities. Management has
evaluated, and expects to continue to evaluate, a wide array of potential strategic acquisitions. From time to time, management
may engage in discussions regarding potential acquisitions or licensing of rights to certain products management believes are critical
to our business. Any one of these transactions could have a material effect on our financial condition and operating results. In
connection with these acquisitions or licensing transactions, we may:
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issue
equity securities that may substantially dilute our shareholders’ percentage of ownership;
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be
obligated to make milestone, royalty or other contingent or non-contingent payments;
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incur
debt or non-recurring and other charges, or assume liabilities; and
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incur
amortization expenses related to intangible assets or incur large and immediate write-offs of assets or goodwill or impairment
charges.
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In addition, the process of integrating an acquired product,
company, business or technology may create operating difficulties and expenditures and pose numerous additional risks to our operations,
including:
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difficulty
and expense in integrating the acquired product, company, business or technology and personnel in accordance with our business
strategy and existing operations, including the failure to achieve the expected benefits and synergies;
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failure
to manufacture or supply the acquired product economically or successfully commercialize or achieve market acceptance of the acquired
product;
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exposure
to liabilities of the acquired product or company, including known or unknown risks relating to the validity or enforceability
of patents, expiration of patents or exclusivity rights, generic competition, product defects or product liability claims;
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disruption
of our business and diversion of our management’s and technical personnel’s time and attention from their day-to-day
responsibilities;
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adverse
effects on our operating results or financial condition, including due to expenditures or acquisition-related costs, costs of
commercialization or amortization or impairment costs for acquired goodwill and other intangible assets;
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impairment
of relationships with key suppliers and manufacturers due to changes in management and ownership and difficulty in maintaining
existing agreements, licenses and other arrangements or rights on substantially similar terms as existed prior to the acquisition;
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regulatory
changes and market dynamics after the acquisition; and
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potential
loss of key employees, particularly those of the acquired entity.
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If any of the above events (or more) occur, or if we cannot
effectively manage or respond to such events following one or more acquisitions, they may have material adverse effect on our business,
results of operations and financial condition.