Item 1. Business.
Overview
We are
a biopharmaceutical company developing targeted, receptor-specific
peptide therapeutics for the treatment of diseases with significant
unmet medical need and commercial potential. Our programs are based
on molecules that modulate the activity of the melanocortin and
natriuretic peptide receptor systems. Our lead product in clinical
development is bremelanotide for the treatment of premenopausal
women with hypoactive sexual desire disorder (“HSDD”),
which is a type of female sexual dysfunction (“FSD”),
defined as low desire with associated distress. In addition, we
have drug candidates and development programs for cardiovascular
diseases and inflammatory diseases.
The
following drug development programs are actively under
development:
●
Bremelanotide, an
as-needed subcutaneous injectable product for the treatment of HSDD
in premenopausal women. Bremelanotide is a synthetic peptide analog
of the naturally occurring hormone alpha-MSH
(melanocyte-stimulating hormone). In two pivotal Phase 3 clinical
studies of bremelanotide for HSDD in premenopausal women,
bremelanotide met the pre-specified co-primary efficacy endpoints
of improvement in desire and decrease in distress associated with
low sexual desire as measured using validated patient-reported
outcome instruments. We have licensed North American rights to
bremelanotide to AMAG Pharmaceuticals, Inc. (“AMAG”),
and rights in China, Taiwan, Hong Kong and Macau to Shanghai Fosun
Pharmaceutical Industrial Development Co., Ltd.
(“Fosun”);
●
Melanocortin
peptide system program, focused on development of treatments for a
variety of inflammatory disease indications. PL-8177 is a selective
melanocortin receptor 1 (“MC1r”) agonist peptide we
have designated as our lead clinical development candidate for
inflammatory bowel diseases. We are scheduled to file an IND
application this year, and may thereafter initiate a Phase 1
clinical safety study. A dual melanocortin receptor 1 and 5 peptide
we developed, PL-8331, is a preclinical development candidate for
treating ocular inflammation. We anticipate completing preclinical
IND enabling activities on PL-8331 this calendar year;
and
●
Natriuretic peptide
system program, including PL3994, a natriuretic peptide
receptor-A (“NPR-A”) agonist, for treatment of
cardiovascular indications. PL3994, a synthetic mimetic of
the neuropeptide hormone atrial natriuretic peptide
(“ANP”), is in development for treatment of heart
failure, and is scheduled to start Phase 2A clinical trials later
this calendar year. A dual natriuretic peptide receptor A and C
agonist we developed, PL-5028, is in preclinical development for
cardiovascular diseases, including reducing cardiac hypertrophy and
fibrosis. We may file an Investigational New Drug
(“IND”), application in the first half of calendar year
2018, and thereafter initiate a Phase 1 clinical safety
study.
The
following chart illustrates the status of our drug development
programs.
Our Strategy
Key
elements of our business strategy include:
●
Using our
technology and expertise to develop and commercialize products in
our active drug development programs;
●
Entering into
strategic alliances and partnerships with pharmaceutical companies
to facilitate the development, manufacture, marketing, sale and
distribution of our product candidates;
●
Partially funding
our product development programs with the cash flow generated from
existing license agreements, as well as any potential future
research, collaboration or license agreements with third parties;
and
●
Completing
development and seeking regulatory approval of certain of our
product candidates.
Our Melanocortin Receptor-Specific Programs
The
melanocortin system is involved in a large and diverse number of
physiologic functions. Therapeutic agents modulating this system
may have the potential to treat a variety of conditions and
diseases, including sexual dysfunction, obesity and related
disorders, pigmentation disorders and inflammation-related
diseases.
Bremelanotide for HSDD.
We are developing subcutaneously
administered bremelanotide for the treatment of HSDD in
premenopausal women. HSDD is characterized by both a decrease in
sexual desire and significant personal distress or interpersonal
difficulty as a result of the lack of desire. Bremelanotide is a
melanocortin agonist with a mechanism of action which we believe
involves activation of endogenous neuronal pathways in the brain
regulating sexual arousal and desire responses.
We
completed last patient visits in the efficacy parts of our two
pivotal Phase 3 clinical studies of bremelanotide for the treatment
of HSDD in premenopausal women in the third quarter of calendar
year 2016. We announced topline efficacy results in the fourth
quarter of calendar year 2016. The open-label safety extension
portions of our pivotal Phase 3 clinical studies were completed in
the second quarter of calendar year 2017.
Our
Phase 3 clinical study program consisted of two randomized,
double-blinded, placebo-controlled Phase 3 studies, Studies 301 and
302, comparing the efficacy and safety of bremelanotide versus
placebo in premenopausal women diagnosed with HSDD. The primary
efficacy analysis population was the modified intent-to-treat
patient population, consisting of 1,202 women with HSDD in the
United States and Canada. Patients self-administered
either 1.75 mg of bremelanotide or placebo as needed in
anticipation of sexual activity. The efficacy portion of each study
consisted of a 24-week treatment evaluation period.
Based
on discussions with the U.S. Food and Drug Administration
(“FDA”), it was decided that the co-primary endpoints
for the Phase 3 clinical trials were the Female Sexual Function
Index: Desire Domain (“FSFI-D”) and Female Sexual
Distress Scale-Desires/Arousal/Orgasm (“FSDS-DAO”) Item
13. The FSFI-D is a validated patient reported outcome measurement
tool of sexual desire in the context of overall sexual function.
The FSDS-DAO Item 13 is a validated patient reported outcome
measurement tool of distress related to sexual dysfunction,
measuring personal distress associated with low sexual desire. Both
Phase 3 Studies 301 and 302 with bremelanotide for HSDD in
premenopausal women met the pre-specified co-primary efficacy
endpoints.
The
FSFI-D showed a statistically significant increase for
bremelanotide compared to placebo in both trials in the modified
intent-to-treat patient population:
Study
301: Mean change of 0.54 vs. 0.24, median change of 0.60 vs. 0.00,
p=0.0002; and,
Study
302: Mean change of 0.63 vs. 0.21, median change of 0.60 vs. 0.00,
p<0.0001.
The
FSDS-DAO Item 13 showed a statistically significant reduction in
distress related to low sexual desire for bremelanotide compared to
placebo in both trials in the modified intent-to-treat patient
population:
Study
301: Mean change of -0.73 vs. -0.36, median change of -1.0 vs. 0.0,
p<0.0001; and,
Study
302: Mean change of -0.71 vs. -0.42, median change of -1.0 vs. 0.0,
p=0.0053.
The
changes seen in both co-primary endpoints were clinically
significant. An independent committee evaluated the clinical
significance of co-primary endpoint study results using multiple
assessments of patient benefit, and was based on discussions with
the FDA and FDA guidance documents.
In the
safety population (1,247 patients), bremelanotide appeared to be
well tolerated. The most frequent adverse event was nausea, which
was generally mild in nature. The safety profile of bremelanotide
was consistent with prior clinical experience.
In the
Phase 3 clinical study program patients self-administered
bremelanotide with a single-use autoinjector pen. The bremelanotide
single-use autoinjector pen, intended to be the commercial drug
product, does not have a visible needle, is stored at room
temperature and is easy to use. Women administer bremelanotide by
pressing the autoinjector pen collar against either their thigh or
abdomen, and the autoinjector pen automatically introduces the
needle, administers the dose of bremelanotide under the skin and
audibly signals when the drug had been delivered and the needle has
been retracted.
Ongoing Studies and New Drug Application.
We are conducting
multiple pharmacokinetic and safety pharmacology studies, including
an abuse-liability study and drug-to-drug interaction studies, as
well as certain chemistry, manufacturing and controls activities,
including a drug product process validation study. We anticipate
that the required human clinical studies will be completed this
calendar year. We currently expect that we will, with AMAG, our
North American licensee of bremelanotide, submit a New Drug
Application (“NDA”) to FDA for bremelanotide for the
treatment of HSDD in early calendar year 2018 following completion
of ongoing studies. We cannot assure you that a complete review of
the Phase 3 efficacy data and the pharmacokinetic and safety
pharmacology studies will support approval of bremelanotide for
HSDD or that the FDA will approve an NDA for
bremelanotide.
Medical Need — HSDD.
HSDD, either with or without
arousal difficulties, is the largest single category of FSD. FSD is
a multifactorial condition that has anatomical, physiological,
medical, psychological and social components, and is defined as
persistent or recurring problems during one or more of the stages
of sexual response with associated distress. HSDD has a significant
impact on a patient’s self-image, relationships and general
well-being. The 2006 PRESIDE (Prevalence of Female Sexual Problems
Associated with Distress and Determinants of Treatment Seeking)
study, a cross-sectional, population-based survey of 31,581 female
adult respondents in the United States published in 2008 in the
journal
Obstetrics &
Gynecology
, found that approximately 22% of women reported a
sexual problem and 11% were women with HSDD. Based on the number of
premenopausal women in the United States according to the U.S.
Census, the presenting market size of premenopausal women with
primary HSDD is at least 5.8 million women.
Subcutaneous Bremelanotide.
Bremelanotide, which is believed
to act through activation of melanocortin receptors in the central
nervous system, is a first-in-class pharmaceutical agent in
development as a treatment of HSDD. Bremelanotide is intended for
as needed use and is self-administered by the patient, using a
simple and patient-friendly single-use autoinjector pen, thirty
minutes to one hour prior to anticipated sexual
activity.
Partnering.
In January 2017, we entered into a license
agreement with AMAG, pursuant to which we granted AMAG an exclusive
license in all countries of North America, with the right to grant
sublicenses, to research, develop and commercialize products
containing bremelanotide. AMAG also has a non-exclusive license,
with the right to grant sublicenses, to manufacture products
containing bremelanotide in North America, and to research, develop
and manufacture, but not commercialize, products containing
bremelanotide in countries outside North America. Upon the license
agreement becoming effective on February 2, 2017, AMAG paid us $60
million as a one-time initial payment, and is required to pay us up
to $25 million to reimburse us for direct out-of-pocket expenses
incurred in development and regulatory activities necessary to file
an NDA. In addition, we may receive up to $80 million in specified
regulatory payments upon achievement of certain regulatory
milestones, and up to $300 million in sales milestone payments
based on achievement of certain annual net sales amounts of
products containing bremelanotide. AMAG will also pay tiered
royalties on annual net sales of products containing bremelanotide
at rates ranging from the high single-digits to the low
double-digits.
In
early September 2017, we entered into a license agreement with
Fosun for exclusive rights to commercialize bremelanotide in the
territories of mainland China, Taiwan, Hong Kong S.A.R. and Macau
S.A.R. We will receive an upfront payment of $5.0 million and, when
regulatory approval for a bremelanotide product is obtained in
China, a $7.5 million milestone payment. We may receive up to $92.5
million in sales related milestones, and will receive high
single-digit to low double-digit royalties on net sales in the
licensed territories.
We
retain worldwide rights for bremelanotide for FSD, HSDD and all
other indications outside North America and the territories
licensed to Fosun. We are in active discussions with potential
partners for marketing and commercialization rights for
bremelanotide in other jurisdictions, including Europe. We may not
be able to enter into suitable agreements with potential partners
on acceptable terms, if at all.
Prior Clinical Trials.
We have completed several Phase 1
clinical studies in which various safety parameters, including
blood pressure effects of subcutaneously administered
bremelanotide, were studied. Based in part on these studies, our
Phase 2B clinical trial assessed the magnitude and duration of
blood pressure effect, and determined that subcutaneous
administration of selected doses of bremelanotide for treatment of
HSDD in premenopausal women provides acceptable control of blood
pressure effects.
MC1r Peptide Agonists.
We have conducted preclinical animal
studies with MC1r peptide drug candidates for a number of
inflammatory disease and autoimmune indications. The MC1r is
upregulated in a number of diseases, including inflammatory bowel
disease, nephritis, which is inflammation of the kidneys, and
rheumatoid arthritis, and in ocular indications such as uveitis and
dry eye. We believe that MC1r peptides have broad anti-inflammatory
effects and appear to utilize mechanisms engaged by the endogenous
melanocortin system in regulation of the immune system and
resolution of pro-inflammatory responses.
Our
MC1r peptide drug candidates are highly specific, with
substantially greater binding and activity at MC1r than at other
melanocortin receptors. In vitro safety studies have shown that our
MC1r peptide drug candidates have no activity in a wide range of
receptors, ion channels and kinases. We have selected one of our
MC1r peptide drug candidates, designated PL-8177, as a clinical
trial candidate. PL-8177 is a selective MC1r agonist peptide we
have designated as our lead clinical development candidate for
inflammatory bowel diseases. We have completed preclinical
toxicology testing on PL-8177 and chemistry, controls and
manufacturing activities to support Phase 1 studies, and anticipate
filing an IND application on PL-8177 this calendar year, and may
thereafter to initiate Phase 1 clinical safety
studies.
We are
also developing a peptide which is a dual melanocortin receptor 1
and 5 agonist, PL-8331, which is a preclinical development
candidate for treating ocular inflammatory diseases. We anticipate
completing preclinical IND enabling activities with PL-8331 by the
first half of calendar year 2018.
Next Generation Melanocortin Receptor 4 (“MC4r”)
Peptide and Small Molecule Agonists.
We have developed a
series of highly selective MC4r peptides and orally active small
molecules. In developing these compounds, we examined effectiveness
in animal models of sexual response, obesity and related metabolic
signals, and also determined cardiovascular effects, primarily
looking at changes in blood pressure. Results of these studies
suggest that certain of these compounds may have significant
medical and commercial potential for treatment of conditions
responsive to MC4r activation, including HSDD, FSD, ED, obesity and
diabetes. We are seeking collaboration and development partners for
these compounds for obesity and related clinical indications, but
may not be able to enter into suitable agreements on acceptable
terms with potential partners, if at all.
Our Natriuretic Peptide Receptor-Specific Programs
The
natriuretic peptide receptor system has numerous cardiovascular
functions, and therapeutic agents modulating this system may be
useful in treatment of heart failure, acute asthma, other pulmonary
diseases and hypertension. While the therapeutic potential of
modulating this system is well appreciated, development of
therapeutic agents has been difficult due, in part, to the short
biological half-life of native peptide agonists.
We have
designed and are developing potential candidate drugs that are
selective for different natriuretic peptide receptors, including
NPR-A, natriuretic peptide receptor B (“NPR-B”),
natriuretic peptide receptor C, and both NPR-A and
NPR-B.
PL-3994.
PL-3994 is our lead natriuretic peptide receptor
product candidate, and is a synthetic mimetic of the neuropeptide
hormone ANP and an NPR-A agonist. PL-3994 is in development for
treatment of heart failure (with preserved or reduced ejection
fraction) and may be suitable for replacement therapy in patients
with prohormone processing deficiencies. PL-3994 activates NPR-A, a
receptor known to play a role in cardiovascular homeostasis.
Consistent with being an NPR-A agonist, PL-3994 increases plasma
cyclic guanosine monophosphate (“cGMP”), levels, a
pharmacological response consistent with the effects of endogenous
(naturally produced) natriuretic peptides on cardiovascular
function and smooth muscle relaxation. PL-3994 also decreases
activity of the renin-angiotensin-aldosterone system
(“RAAS”), a hormone system that regulates blood
pressure and fluid balance. The RAAS system is frequently
over-activated in heart failure patients, leading to worsening of
cardiovascular function.
PL-3994,
our lead product development candidate which is ready for Phase 2
safety and efficacy studies, is one of a number of natriuretic
peptide receptor agonist compounds we have developed. In
conjunction with clinicians at a major research institution,
PL-3994 is scheduled to enter Phase 2A clinical trials later in
calendar year 2017. PL-3994 is a synthetic molecule incorporating a
novel and proprietary amino acid mimetic structure, and has an
extended circulation half-life and metabolic stability compared to
endogenous ANP. Based on the half-life and pharmacokinetics, we
believe that PL-3994 is amenable to once daily chronic use
subcutaneous administration.
Prior Clinical Studies with PL-3994.
Human clinical studies
of PL-3994 commenced with a Phase 1 trial, which concluded in 2008.
This was a randomized, double-blind, placebo-controlled study in 26
healthy volunteers who received either PL-3994 or a placebo
subcutaneously. Dosing concluded with the successful achievement of
the primary endpoint of the study, a pre-specified reduction in
systemic blood pressure. No volunteer experienced a serious or
severe adverse event. Elevations in plasma cGMP levels, increased
diuresis and increased natriuresis were all observed for several
hours after single subcutaneous doses. Later in 2008, we conducted
a trial in volunteers with controlled hypertension who were
receiving one or more conventional antihypertensive medications. No
volunteer experienced a serious or severe adverse event. Elevations
in plasma cGMP levels were observed for several hours after single
subcutaneous doses. Based on the studies to date, PL-3994 is ready
for Phase 2 safety and efficacy studies.
PL-5028.
We are in preclinical development with PL-5028, a
dual natriuretic peptide receptor A and C agonist we developed, for
cardiovascular disease indications, including reducing cardiac
hypertrophy and fibrosis. We may file an IND application in the
first half of calendar year 2018, and thereafter initiate a Phase 1
clinical safety study.
Administration of PL-3994 and PL-5028.
For heart failure and
other cardiovascular disease indications we believe that
subcutaneous administration may be employed. In studies to date,
PL-3994 is well absorbed through the subcutaneous route of
administration. In human studies with PL-3994, the pharmacokinetic
and pharmacodynamic half-lives were on the order of hours,
significantly longer than the comparable half-lives of endogenous
natriuretic peptides. We believe that subcutaneous PL-3994 or
PL-5028, if successful, will be appropriate for self-administration
by patients, similar to insulin and other self-administered
drugs.
Heart Failure.
Heart failure is an illness in which the
heart is unable to pump blood efficiently, and includes acutely
decompensated heart failure with dyspnea (shortness of breath) at
rest or with minimal activity. Endogenous natriuretic peptides have
a number of beneficial effects, including vasodilation (relaxation
of blood vessels), natriuresis (excretion of sodium) and diuresis
(excretion of fluids).
Patients
who have been admitted to the hospital with an episode of worsening
heart failure have an increased risk of either death or hospital
readmission in the three months following discharge. Up to 15% of
patients die in this period and as many as 30% need to be
readmitted to the hospital. We believe that decreasing mortality
and hospital readmission in patients discharged following
hospitalization for worsening heart failure is a large unmet
medical need for which PL-3994 may be effective. PL-3994 could
potentially be utilized as an adjunct to existing heart failure
medications, and may, if successfully developed, be
self-administered by patients as a subcutaneous injection following
hospital discharge. We believe that our natriuretic peptide
products under development may, if successful, reduce cardiac
hypertrophy (increase in heart size due to disease), which is an
independent risk factor for cardiovascular morbidity and
mortality.
According
to a report from the American Heart Association published in 2014
in the journal
Circulation
,
an estimated 5.7 million Americans suffer from heart failure, with
870,000 new cases of heart failure diagnosed each year, with
disease incidence expected to increase with the aging of the
American population. Heart failure has tremendous human and
financial costs. The same report estimated that the 2012 total
costs in the United States for heart failure were $30.7 billion,
with heart failure constituting the leading cause of
hospitalization in people over 65 years of age and with over 1
million hospital discharges for heart failure in 2010. Heart
failure is a high mortality disease, with approximately one-half of
heart failure patients dying within five years of initial
diagnosis.
Patient
populations have been identified which have reduced levels of
endogenous active natriuretic peptides, including endogenous active
ANP. The reduced levels have a variety of causes, including
mutations in endogenous natriuretic peptides and in enzymes
necessary to convert natriuretic peptide sequences to their active
form. Patients with reduced levels of endogenous active natriuretic
peptides are reported to have a poor response to current drug
therapies and to have increased rates of cardiac remodeling and
cardiac events.
We
believe that PL-3994 has the potential to treat heart failure with
preserved ejection fraction (“HFpEF”), which is a high
unmet medical need with no approved treatment options, heart
failure with reduced ejection fraction (“HFrEF”), and
patients with reduced levels of endogenous active natriuretic
peptides, such as corin deficiencies, which is a high unmet medical
need in patients with a poor response to current therapies, with
the objective to restore normal natriuretic peptide
function.
Technologies We Use
We used
a rational drug design approach to discover and develop proprietary
peptide, peptide mimetic and small molecule agonist compounds,
focusing on melanocortin and natriuretic peptide receptor systems.
Computer-aided drug design models of receptors are optimized based
on experimental results obtained with peptides and small molecules
that we develop. With our approach, we believe we are developing an
advanced understanding of the factors which drive
agonism.
We have
developed a series of proprietary technologies used in our drug
development programs. One technology employs novel amino acid
mimetics in place of selected amino acids. These mimetics provide
the receptor-binding functions of conventional amino acids while
providing structural, functional and physiochemical advantages. The
amino acid mimetic technology is employed in PL-3994, our compound
in development for treatment of heart failure.
Some
compound series have been derived using our proprietary and
patented platform technology, called MIDAS™, or
M
etal
I
on-induced
D
istinctive
A
rray of
S
tructures. This technology employs
metal ions to fix the three-dimensional configuration of peptides,
forming conformationally rigid molecules that remain folded
specifically in their active state. These MIDAS molecules are
generally simple to synthesize, are chemically and proteolytically
stable, and have the potential to be orally bioavailable. In
addition, MIDAS molecules are information-rich and provide data on
structure-activity relationships that may be used to design small
molecule, non-peptide drugs.
Amount Spent on Research and Development Activities
Research
and development expenses were approximately $45.7 million for the
fiscal year ended June 30, 2017 (“ fiscal 2017”), $43.1
million for the fiscal year ended June 30, 2016 (“fiscal
2016”), and $24.6 million for the fiscal year ended June 30,
2015 (“fiscal 2015”).
Competition
General.
Our products under development will compete on the
basis of quality, performance, cost effectiveness and application
suitability with numerous established products and technologies. We
have many competitors, including pharmaceutical, biopharmaceutical
and biotechnology companies. Furthermore, there are several
well-established products in our target markets that we will have
to compete against. Products using new technologies which may be
competitive with our proposed products may also be introduced by
others. Most of the companies selling or developing competitive
products have financial, technological, manufacturing and
distribution resources significantly greater than ours and may
represent significant competition for us. In addition, if any of
our product candidates are approved by FDA, they will eventually
face competition from generic versions that will sell at
significantly reduced prices, be preferred by managed care and
health insurance payers, and be eligible for automatic pharmacy
substitution even when a prescriber writes a prescription for our
product. The timing and extent of future generic competition is
dependent upon both our intellectual property rights and the FDA
regulatory process, but cannot be accurately
predicted.
The
pharmaceutical and biotechnology industries are characterized by
extensive research efforts and rapid technological change. Many
biopharmaceutical companies have developed or are working to
develop products similar to ours or that address the same markets.
Such companies may succeed in developing technologies and products
that are more effective or less costly than any of those that we
may develop. Such companies may be more successful than us in
developing, manufacturing and marketing products.
We
cannot guarantee that we will be able to compete successfully in
the future or that developments by others will not render our
proposed products under development or any future product
candidates obsolete or noncompetitive or that our collaborators or
customers will not choose to use competing technologies or
products.
Bremelanotide for Treatment of HSDD.
There is competition
and financial incentive to develop, market and sell drugs for the
treatment of HSDD and other forms of FSD. Flibanserin, sold under
the trade name Addyi®, is the only drug currently approved in
the United States for treatment of HSDD. Flibanserin, a
non-hormonal oral serotonin 5-HT1A agonist, 5-HT2A antagonist,
which requires chronic dosing, was approved by the FDA on August
18, 2015 for treatment of premenopausal women with HSDD. The FDA
approval included a risk evaluation and mitigation strategy
(“REMS”) because of the increased risk of severe
hypotension and syncope due to the interaction between flibanserin
and alcohol, and a Boxed Warning to highlight the risks of severe
hypotension and syncope in patients who drink alcohol during
treatment with flibanserin, in those who also use moderate or
strong CYP3A4 inhibitors, and in those who have liver impairment.
We are aware of several other drugs at various stages of
development, most of which are taken on a chronic, typically
once-daily, basis. There are other companies reported to be
developing new drugs for FSD indications, some of which may be in
clinical trials in the United States or elsewhere. We are not aware
of any company actively developing a melanocortin receptor agonist
drug for HSDD.
PL-3994 and PL-5028 for Heart Failure Indications.
Nesiritide (sold under the trade name Natrecor®), a
recombinant human B-type natriuretic peptide drug, is marketed in
the United States by Scios Inc., a Johnson & Johnson company.
Nesiritide is approved for treatment of acutely decompensated
congestive heart failure patients who have dyspnea at rest or with
minimal activity. Other peptide drugs, including carperitide, a
recombinant human ANP drug, and ularitide, a synthetic form of
urodilatin, a naturally occurring human natriuretic peptide related
to ANP, have been investigated for treatment of congestive heart
failure, but we are not aware of any active development in the
United States. We are aware of other companies developing
intravenously administered natriuretic peptide drugs, with at least
one reported to have completed Phase 2 clinical trials for acute
heart failure. A combination drug comprised of sacubitril and
valsartan developed by Novartis AG, sold under the trade name
Entresto®, inhibits both the angiotensin II receptor and
neprilysin (an enzyme which inactivates endogenous active
natriuretic peptides). This combination drug, which was approved by
the FDA in July 2015, results in increases of endogenous active ANP
levels, and thus has a mechanism of action with similarities to
PL-3994 and PL-5028. In a Phase 3 trial, the combination drug was
compared to an angiotensin-converting-enzyme inhibitor, enalapril,
in heart failure patients with reduced ejection fraction. It
significantly improved the rate of death from cardiovascular
causes, significantly reduced hospitalization for heart failure and
significantly improved heart failure symptoms. This combination
drug demonstrated that upregulation of the natriuretic peptide
system in combination with angiotensin-converting-enzyme inhibition
is superior to angiotensin-converting-enzyme inhibition alone, and
thus provides validation of the natriuretic peptide system as a
target for improving outcomes in treating heart failure patients.
In addition, there are a number of approved drugs and drugs in
development for treatment of heart failure through mechanisms or
pathways other than agonism of NPR-A.
MC1r Peptides for Inflammatory Disease-Related Indications.
Many inflammatory disease-related indications are treated using
systemic steroids or other immunosuppressant drugs, all of which
have side effects which can be dose limiting. There are a large
number of approved biological drugs and biological drugs under
development for treatment of inflammatory disease-related
indications. For inflammatory bowel diseases, FDA-approved drugs
include mesalazine and immunosuppressive drugs such as prednisone
and other steroids, tumor necrosis factor inhibitors such as
infliximab and adalimumab, and immune system suppressants such as
azathioprine, mercaptopurine and methotrexate.
Obesity.
There are a number of FDA-approved drugs and
medical devices for the treatment of obesity, and a large number of
products in clinical development by other companies, including
products which target melanocortin receptors. At least one Phase 2
study has been reported on use of an MC4r agonist for obesity
indications.
Patents and Proprietary Information
Patent Protection.
Our success will depend in substantial
part on our ability to obtain, defend and enforce patents, maintain
trade secrets and operate without infringing upon the proprietary
rights of others, both in the United States and abroad. We own a
number of issued United States patents and have pending United
States patent applications, many with issued or pending counterpart
patents in selected foreign countries. We seek patent protection
for our technologies and products in the United States and those
foreign countries where we believe patent protection is
commercially important.
We own
two issued United States patents claiming the bremelanotide
substance and an issued patent claiming the bremelanotide substance
in each of Australia, Austria, Belgium, Brazil, Canada, Cyprus,
Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland,
Italy, Japan, Korea, Luxembourg, Mexico, Monaco, Netherlands, New
Zealand, Portugal, Spain, Sweden, Switzerland, and the United
Kingdom. The issued United States patents have a term until 2020,
which term may be subject to extension for a maximum period of up
to five years as compensation for patent term lost during drug
development and the FDA regulatory review process, pursuant to the
Drug Price Competition and Patent Term Restoration Act of 1984, or
the Hatch-Waxman Amendments. Whether we will be able to obtain
patent term extensions under the Hatch-Waxman Amendments and the
length of any such extension cannot be determined until the FDA
approves for marketing, if ever, a product in which bremelanotide
is the active ingredient. In addition, the claims of issued patents
covering bremelanotide may not provide meaningful protection.
Further, third parties may challenge the validity or scope of any
issued patent, and under the Hatch-Waxman Amendments, potentially
receive approval of a competing generic version of our product or
products even before a court rules on the validity or infringement
of our patents.
We own
two issued United States patents and pending patent applications in
the United States for methods of treating FSD with bremelanotide,
and related patent applications are pending in Australia, Brazil,
Canada, China, Georgia, Hong Kong, India, Indonesia, Israel, Japan,
Korea, Malaysia, Mexico, New Zealand, Philippines, South Africa,
Ukraine, Vietnam and before the European and Eurasian patent
offices. The issued United States patent has a term until 2033.
Whether we will be able to obtain a patent term extension in the
United States under the Hatch-Waxman Amendments, assuming that a
relevant patent issues in the United States, and the length of any
such extension, cannot be determined until the FDA approves for
marketing, if ever, a product utilizing bremelanotide by methods
claimed in the patent. Issued patents and pending applications in
the United States and elsewhere in the world have a presumptive
term, if a patent is issued, until 2033.
We have
patents and patent applications on an alternative class of
melanocortin receptor-specific peptides for treatment of sexual
dysfunction and other indications, including obesity, consisting of
two issued patents in the United States, an issued patent in each
of Australia, Canada, China, France, Germany, Ireland, Israel,
Japan, Korea, Mexico, New Zealand, Russia, Switzerland and the
United Kingdom, and pending patent applications on the same class
in Brazil, India, and South Africa. The presumptive term of the
issued patents and pending patent applications is until 2029. We
also have patents and pending patent applications for a second
class of alternative melanocortin receptor-specific peptides for
treatment of sexual dysfunction and other indications, including
obesity, consisting of issued patents in the United States,
Australia, China, Japan, Israel, Korea, New Zealand, Russia, and
South Africa and pending patent applications on the same class in
Brazil, Canada, China, India, Mexico, and before the European
patent office. The presumptive term of the issued patents and
pending patent applications is until 2030. Until one or more
product candidates covered by a claim of one of these patents and
patent applications are developed for commercialization, which may
never occur, we cannot evaluate the duration of any potential
patent term extension under the Hatch-Waxman
Amendments.
We own
issued patents in the United States, Mexico, New Zealand, South
Africa and Russia claiming highly selective MC1r agonist peptides
for treatment of inflammation-related diseases and disorders and
related indications, and pending patent applications on two broad
classes of highly selective MC1r agonist peptides in the United
States, Australia, Brazil, Canada, China, India, Israel, Japan,
Korea, and Mexico and before the European patent office. The
presumptive term of the issued patents and pending patent
applications is until 2030. Until one or more product candidates
covered by a claim of one of these patent applications are
developed for commercialization, which may never occur, we cannot
evaluate the duration of any potential patent term extension under
the Hatch-Waxman Amendments.
We own
two issued United States patents claiming the PL-3994 substance and
other natriuretic peptide receptor agonist compounds that we have
developed and an issued United States patent claiming a precursor
molecule to the PL-3994 substance, both of which expire in 2027.
Corresponding patents on the PL-3994 substance and other
natriuretic peptide receptor agonist compounds were issued in
Australia, Austria, Belgium, China, Colombia, Denmark, Finland,
France, Germany, Hong Kong, Hungary, India, Ireland, Israel, Italy,
Japan, Korea, Mexico, Netherlands, Philippines, Russia, South
Africa, Spain, Sweden, Switzerland, and the United Kingdom, with
terms until 2027. Patent applications on the PL-3994 substance and
other natriuretic peptide receptor agonist compounds are pending in
Brazil and Canada, with presumptive terms until 2027. Applications
claiming precursor molecules for the PL-3994 substance and other
compounds have issued in the United States, Australia, China,
France, Germany, Hong Kong, India, Ireland, Israel, Japan, Mexico,
Netherlands, Philippines, Korea, South Africa, Sweden, Switzerland
and the United Kingdom, and expire in 2027. Patent applications on
the precursor molecules are pending in Brazil, Canada, and before
the Eurasian Patent Office, with presumptive terms until 2027. We
also own an issued United States patent claiming use of the PL-3994
substance for treatment of acute asthma and chronic obstructive
pulmonary disease, which expires in 2031. We do not know the full
scope of patent coverage we will obtain, or whether any patents
will issue other than the patents already issued. Until one or more
product candidates covered by a claim of the issued patents or one
of these patent applications are developed for commercialization,
which may never occur, we cannot evaluate the duration of any
potential patent term extension under the Hatch-Waxman
Amendments.
We
additionally have 31 issued United States patents on melanocortin
receptor specific peptides and small molecules, and five issued
United States patents on natriuretic peptide receptor agonist
compounds, but we are not actively developing any product candidate
covered by a claim of any of these patents.
In the
event that a third party has also filed a patent application
relating to an invention we claimed in a patent application, we may
be required to participate in an interference proceeding
adjudicated by the United States Patent and Trademark Office
(“USPTO”) to determine priority of invention. The
possibility of an interference proceeding could result in
substantial uncertainties and cost, even if the eventual outcome is
favorable to us. An adverse outcome could result in the loss of
patent protection for the subject of the interference, subjecting
us to significant liabilities to third parties, the need to obtain
licenses from third parties at undetermined cost, or requiring us
to cease using the technology.
Future Patent Infringement.
We do not know for certain that
our commercial activities will not infringe upon patents or patent
applications of third parties, some of which may not even have been
issued. Although we are not aware of any valid United States
patents which are infringed by bremelanotide or PL-3994, we cannot
exclude the possibility that such patents might exist or arise in
the future. We may be unable to avoid infringement of any such
patents and may have to seek a license, defend an infringement
action, or challenge the validity of such patents in court. Patent
litigation is costly and time consuming. If such patents are valid
and we do not obtain a license under any such patents, or we are
found liable for infringement, we may be liable for significant
monetary damages, may encounter significant delays in bringing
products to market, or may be precluded from participating in the
manufacture, use or sale of products or methods of treatment
covered by such patents.
Proprietary Information.
We rely on proprietary information,
such as trade secrets and know-how, which is not patented. We have
taken steps to protect our unpatented trade secrets and know-how,
in part through the use of confidentiality and intellectual
property agreements with our employees, consultants and certain
contractors. If our employees, scientific consultants,
collaborators or licensees develop inventions or processes
independently that may be applicable to our product candidates,
disputes may arise about the ownership of proprietary rights to
those inventions and processes. Such inventions and processes will
not necessarily become our property, but may remain the property of
those persons or their employers. Protracted and costly litigation
could be necessary to enforce and determine the scope of our
proprietary rights.
If
trade secrets are breached, our recourse will be solely against the
person who caused the secrecy breach. This might not be an adequate
remedy to us because third parties other than the person who causes
the breach will be free to use the information without
accountability to us. This is an inherent limitation of the law of
trade secret protection.
U.S. Governmental Regulation of Pharmaceutical
Products
General
Regulation
by governmental authorities in the United States and other
countries will continue to significantly impact our research,
product development, manufacturing and marketing of any
pharmaceutical products. The nature and the extent to which
regulations apply to us will vary depending on the nature of any
such products. Our potential pharmaceutical products will require
regulatory approval by governmental agencies prior to
commercialization. The products we are developing are subject to
federal regulation in the United States, principally by the FDA
under the Federal Food, Drug, and Cosmetic Act
(“FFDCA”), and by state and local governments, as well
as regulatory and other authorities in foreign governments that
include rigorous preclinical and clinical testing and other
approval procedures. Such regulations govern or influence, among
other things, the research, development, testing, manufacture,
safety and efficacy requirements, labeling, storage, recordkeeping,
licensing, advertising, promotion, distribution and export of
products, manufacturing and the manufacturing process. In many
foreign countries, such regulations also govern the prices charged
for products under their respective national social security
systems and availability to consumers.
All
drugs intended for human use are subject to rigorous regulation by
the FDA in the United States and similar regulatory bodies in other
countries. The steps ordinarily required by the FDA before an
innovative new drug product may be marketed in the United States
are similar to steps required in most other countries and include,
but are not limited to:
●
completion of
preclinical laboratory tests, preclinical animal testing and
formulation studies;
●
submission to the
FDA of an IND, which must be in effect before clinical trials may
commence;
●
submission to the
FDA of an NDA that includes preclinical data, clinical trial data
and manufacturing information;
●
payment of
substantial user fees for filing the NDA and other recurring user
fees;
●
satisfactory
completion of an FDA pre-approval inspection of the manufacturing
facilities; and
●
FDA approval of the
NDA, including approval of all product labeling.
For
combination products deemed to have a
‘‘drug’’ primary mode of action, primary
review of the product will be conducted by the appropriate division
within the Center for Drug Evaluation and Research
(“CDER”), but CDER will consult with the Center for
Devices and Radiological Health to ensure that the device
components of the product meet all applicable device
requirements.
The
research, development and approval process requires substantial
time, effort and financial resources, and approvals may not be
granted on a timely or commercially viable basis, if at
all.
Preclinical
testing includes laboratory evaluations to characterize the
product’s composition, impurities, stability, and mechanism
of its pharmacologic effect, as well as animal studies to assess
the potential safety and efficacy of each product. Preclinical
safety tests must be conducted by laboratories that comply with FDA
regulations regarding Good Laboratory Practices and the U.S.
Department of Agriculture’s Animal Welfare Act. Violations of
these laws and regulations can, in some cases, lead to invalidation
of the tests, requiring such tests to be repeated and delaying
approval of the NDA. The results of the preclinical tests, together
with manufacturing information and analytical data, are submitted
to the FDA as part of an IND and are reviewed by the FDA before the
commencement of human clinical trials. Unless the FDA objects to an
IND by placing the study on clinical hold, the IND will go into
effect 30 days following its receipt by the FDA. The FDA may
authorize trials only on specified terms and may suspend ongoing
clinical trials at any time on various grounds, including a finding
that patients are being exposed to unacceptable health risks. If
the FDA places a study on clinical hold, the sponsor must resolve
all of the FDA’s concerns before the study may begin or
continue. The IND application process may become extremely costly
and substantially delay development of products. Similar
restrictive requirements also apply in other countries.
Additionally, positive results of preclinical tests will not
necessarily indicate positive results in clinical
trials.
Clinical
trials involve the administration of the investigational product to
humans under the supervision of qualified principal investigators.
Our clinical trials must be conducted in accordance with Good
Clinical Practice regulations under protocols submitted to the FDA
as part of an IND. In addition, each clinical trial is approved and
conducted under the auspices of an institutional review board
(“IRB”), and requires the patients’ informed
consent. An IRB considers, among other things, ethical factors, the
safety of human subjects, and the possibility of liability of the
institutions conducting the trial. The IRB at each institution at
which a clinical trial is being performed may suspend a clinical
trial at any time for a variety of reasons, including a belief that
the test subjects are being exposed to an unacceptable health risk.
As the sponsor, we can also suspend or terminate a clinical trial
at any time.
Clinical
trials are typically conducted in three sequential phases, Phases
1, 2, and 3, involving an increasing number of human subjects.
These phases may sometimes overlap or be combined. Phase 1 trials
are performed in a small number of healthy human subjects or
subjects with the targeted condition, and involve testing for
safety, dosage tolerance, absorption, distribution, metabolism and
excretion. Phase 2 studies, which may involve up to hundreds of
subjects, seek to identify possible adverse effects and safety
risks, preliminary information related to the efficacy of the
product for specific targeted diseases, dosage tolerance, and
optimal dosage. Finally, Phase 3 trials may involve up to thousands
of individuals often at geographically dispersed clinical trial
sites, and are intended to provide the documentation of
effectiveness and important additional safety data required for
approval. Prior to commencing Phase 3 clinical trials many sponsors
elect to meet with FDA officials to discuss the conduct and design
of the proposed trial or trials.
In
addition, federal law requires the listing, on a publicly-available
website, of detailed information on clinical trials for
investigational drugs. Some states have similar or supplemental
clinical trial reporting laws.
Success
in early-stage animal studies and clinical trials does not
necessarily assure success in later-stage clinical trials. Data
obtained from animal studies and clinical activities are not always
conclusive and may be subject to alternative interpretations that
could delay, limit or even prevent regulatory
approval.
All
data obtained from the preclinical studies and clinical trials, in
addition to detailed information on the manufacture and composition
of the product, would be submitted in an NDA to the FDA for review
and approval for the manufacture, marketing and commercial
shipments of any of our products. FDA approval of the NDA is
required before commercial marketing or non-investigational
interstate shipment may begin in the United States. The FDA may
also conduct an audit of the clinical trial data used to support
the NDA.
The FDA
may deny or delay approval of an NDA that does not meet applicable
regulatory criteria. For example the FDA may determine that the
preclinical or clinical data or the manufacturing information does
not adequately establish the safety and efficacy of the drug. The
FDA has substantial discretion in the approval process and may
disagree with an applicant’s interpretation of the data
submitted in its NDA. The FDA can request additional information,
seek clarification regarding information already provided in the
submission or ask that new additional clinical trials be conducted,
all of which can delay approval. Similar types of regulatory
processes will be encountered as efforts are made to market any
drug internationally. We will be required to assure product
performance and manufacturing processes from one country to
another.
Even if
the FDA approves a product, it may limit the approved uses for the
product as described in the product labeling, require that
contraindications, warning statements or precautions be included in
the product labeling, require that additional studies be conducted
following approval as a condition of the approval, impose
restrictions and conditions on product distribution, prescribing or
dispensing in the form of a REMS, or otherwise limit the scope of
any approval or limit labeling. Once it approves an NDA, the FDA
may revoke or suspend the product approval if compliance with
post-market regulatory standards is not maintained or if problems
occur after the product reaches the marketplace. In addition, the
FDA may require post-marketing studies to monitor the effect of
approved products, and may limit further marketing of the product
based on the results of these post-market studies. The FDA and
other government agencies have broad post-market regulatory and
enforcement powers, including the ability to levy civil and
criminal penalties, suspend or delay issuance of approvals, seize
or recall products and revoke approvals.
Pharmaceutical
manufacturers, distributors and their subcontractors are required
to register their facilities with the FDA and state agencies.
Manufacturers are required to list their marketed drugs with the
FDA, are subject to periodic inspection by the FDA and other
authorities, where applicable, and must comply with the FDA’s
current Good Manufacturing Practices (“GMP”)
regulations, and the product specifications set forth in the
approved NDA. The GMP requirements for pharmaceutical products are
extensive and compliance with them requires considerable time,
resources and ongoing investment. The regulations require
manufacturers and suppliers of raw materials and components to
establish validated systems and to employ and train qualified
employees to ensure that products meet high standards of safety,
efficacy, stability, sterility (where applicable), purity, and
potency. The requirements apply to all stages of the manufacturing
process, including the synthesis, processing, sterilization,
packaging, labeling, storage and shipment of the drug product. For
all drug products, the regulations require investigation and
correction of any deviations from GMP requirements and impose
documentation requirements upon us and any third-party
manufacturers that we may decide to use. Manufacturing
establishments are subject to mandatory user fees, and to periodic
unannounced inspections by the FDA and state agencies for
compliance with all GMP requirements. The FDA is authorized to
inspect manufacturing facilities without a warrant at reasonable
times and in a reasonable manner.
We or
our present or future suppliers may not be able to comply with GMP
and other FDA regulatory requirements. Failure to comply with the
statutory and regulatory requirements subjects the manufacturer
and/or the NDA sponsor or distributor to possible legal or
regulatory action, such as a delay or refusal to approve an NDA,
suspension of manufacturing, seizure or recall of a product, or
civil or criminal prosecution of the company or individual officers
or employees.
Post-Marketing Regulation
Any
drug products manufactured or distributed by us pursuant to FDA
approvals, as well as the materials and components used in our
products, are subject to pervasive and continuing regulation by the
FDA, including:
●
recordkeeping
requirements;
●
periodic reporting
requirements;
●
GMP requirements
related to all stages of manufacturing, testing, storage,
packaging, labeling and distribution of finished dosage forms of
the product;
●
monitoring and
reporting of adverse experiences with the product; and
●
advertising and
promotional reporting requirements and restrictions.
Adverse
experiences with the product must be reported to the FDA and could
result in the imposition of market restriction through labeling
changes or product removal. Product approvals may be revoked if
compliance with regulatory requirements is not maintained or if
problems concerning safety or effectiveness of the product occur
following approval. The FDA is developing a national electronic
drug safety tracking system known as SENTINEL that may impose
additional safety monitoring burdens, and enhanced FDA enforcement
authority, beyond the extensive requirements already in effect. As
a condition of NDA approval, the FDA may require post-approval
testing and surveillance to monitor a product’s safety or
efficacy. The FDA also may impose other conditions, including
labeling restrictions which can materially impact the potential
market and profitability of a product.
With
respect to post-market product advertising and promotion, the FDA
and other government agencies including the Department of Health
and Human Services and the Department of Justice, and individual
States, impose a number of complex regulations on entities that
advertise and promote pharmaceuticals, including, among others,
standards and restrictions on direct-to-consumer advertising,
off-label promotion, industry-sponsored scientific and educational
activities and promotional activities involving the Internet. The
FDA has very broad enforcement authority under the FFDCA, and
failure to abide by these regulations can result in administrative
and judicial enforcement actions, including the issuance of a
Warning Letter directing correction of deviations from FDA
standards, a requirement that future advertising and promotional
materials be pre-cleared by the FDA, False Claims Act prosecution
based on alleged off-label marketing seeking monetary and other
penalties, including potential exclusion of the drug and/or the
company from participation in government health care programs, and
state and federal civil and criminal investigations and
prosecutions. Foreign regulatory bodies also strictly enforce these
and other regulatory requirements and drug marketing may be
prohibited in whole or in part in other countries.
We, our
collaborators or our third-party contract manufacturers may not be
able to comply with the applicable regulations. After regulatory
approvals are obtained, the subsequent discovery of previously
unknown problems, or the failure to maintain compliance with
existing or new regulatory requirements, may result
in:
●
restrictions on the
marketing or manufacturing of a product;
●
Warning Letters or
Untitled Letters from the FDA asking us, our collaborators or
third-party contractors to take or refrain from taking certain
actions;
●
withdrawal of the
product from the market;
●
the FDA’s
refusal to approve pending applications or supplements to approved
applications;
●
voluntary or
mandatory product recall;
●
fines or
disgorgement of profits or revenue;
●
suspension or
withdrawal of regulatory approvals;
●
refusals to permit
the import or export of products;
●
injunctions or the
imposition of civil or criminal penalties.
We may
also be subject to healthcare laws, regulations and enforcement and
our failure to comply with any such laws, regulations or
enforcement could adversely affect our business, operations and
financial condition. Certain federal and state healthcare laws and
regulations pertaining to fraud and abuse and patients’
rights are and will be applicable to our business. We are subject
to regulation by both the federal government and the states in
which we or our partners conduct our business. The laws and
regulations that may affect our ability to operate
include:
●
the federal
Anti-Kickback Statute, which prohibits, among other things, any
person or entity from knowingly and willfully offering, soliciting,
receiving or providing any remuneration (including any kickback,
bribe or rebate), directly or indirectly, overtly or covertly, in
cash or in kind, to induce either the referral of an individual or
in return for the purchase, lease, or order of any good, facility
item or service, for which payment may be made, in whole or in
part, under federal healthcare programs such as the Medicare and
Medicaid programs;
●
federal civil and
criminal false claims laws and civil monetary penalty laws,
including, for example, the federal civil False Claims Act, which
impose criminal and civil penalties, including civil whistleblower
or qui tam actions, against individuals or entities for, among
other things, knowingly presenting, or causing to be presented, to
the federal government, including the Medicare and Medicaid
programs, 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;
●
the federal Health
Insurance Portability and Accountability Act of 1996
(“HIPAA”), which created new federal criminal statutes
that prohibit knowingly and willfully executing, or attempting to
execute, a scheme to defraud any healthcare benefit program or
obtain, by means of false or fraudulent pretenses, representations
or promises, any of the money or property owned by, or under the
custody or control of, any healthcare benefit program, regardless
of the payer (e.g., public or private), knowingly and willfully
embezzling or stealing from a health care benefit program,
willfully obstructing a criminal investigation of a health care
offense and knowingly and willfully falsifying, concealing or
covering up by any trick or device a material fact or making any
materially false statements in connection with the delivery of, or
payment for, healthcare benefits, items or services relating to
healthcare matters;
●
HIPAA, as amended
by the Health Information Technology for Economic and Clinical
Health Act, and their implementing regulations, which impose
obligations on covered entities, including healthcare providers,
health plans, and healthcare clearinghouses, as well as their
respective business associates that create, receive, maintain or
transmit individually identifiable health information for or on
behalf of a covered entity, with respect to safeguarding the
privacy, security and transmission of individually identifiable
health information;
●
the federal
physician sunshine requirements under the Patient Protection and
Affordable Care Act ( “Affordable Care Act”), which
require manufacturers of drugs, devices, biologics and medical
supplies to report annually to the Centers for Medicare &
Medicaid Services information related to payments and other
transfers of value provided to physicians and teaching hospitals,
and ownership and investment interests held by physicians and their
immediate family members; and
●
state law
equivalents of each of the above federal laws, such as
anti-kickback and false claims laws, which may apply to items or
services reimbursed by any third-party payer, including commercial
insurers; state laws that require pharmaceutical companies to
comply with the pharmaceutical industry’s voluntary
compliance guidelines and the applicable compliance guidance
promulgated by the federal government, or otherwise restrict
payments that may be provided to healthcare providers and other
potential referral sources; state laws that require drug
manufacturers to report information related to payments and other
transfers of value to healthcare providers or marketing
expenditures; and state laws governing 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.
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. In addition, recent health care reform
legislation has strengthened these laws. For example, the
Affordable Care Act, among other things, amended the intent
requirement of the federal Anti-Kickback Statute and certain
criminal healthcare fraud statutes. A person or entity no longer
needs to have actual knowledge of the statute or specific intent to
violate it. In addition, the Affordable Care Act provided 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 federal
civil False Claims Act.
Achieving
and sustaining compliance with these laws may prove costly. In
addition, 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. If our operations are
found to be in violation of any of the laws described above or any
other governmental laws or regulations that apply to us, we may be
subject to penalties, including administrative, civil and criminal
penalties, damages, fines, disgorgement, the exclusion from
participation in federal and state healthcare programs, individual
imprisonment or the curtailment or restructuring of our operations,
any of which could adversely affect our ability to operate our
business and our financial results.
Generic Competition
Orange Book Listing.
In seeking approval for a drug through
an NDA, applicants are required to list with the FDA each patent
whose claims cover the applicant’s product. Upon approval of
a drug, the applicant identifies all patents that claim the
approved product’s active ingredient(s), the drug
product’s approved formulation, or an approved method of use
of the drug. Each of the identified patents are then published in
the FDA’s Approved Drug Products with Therapeutic Equivalence
Evaluations, commonly known as the Orange Book. Drugs listed in the
Orange Book can, in turn, be cited by potential generic competitors
in support of approval of an abbreviated new drug application
(“ANDA”). An ANDA provides for marketing of a drug
product that has the same active ingredients in the same strengths
and dosage form as the listed drug and has been shown through
bioequivalence testing, unless such testing is waived by the FDA,
as is the case with some injectable drug products, to be
therapeutically equivalent to the listed drug. Other than
bioequivalence testing, ANDA applicants are not required to
conduct, or submit results of, preclinical or clinical tests to
prove the safety or effectiveness of their drug product. Drugs
approved in this way are commonly referred to as
‘‘generic equivalents’’ to the listed drug,
and can usually be substituted by pharmacists under prescriptions
written for the original listed drug.
The
ANDA applicant is required to certify to the FDA concerning any
patents listed for the approved product in the FDA’s Orange
Book. Specifically, the applicant must certify either that: (1) the
required patent information has not been filed (a Paragraph I
Certification); (2) the listed patent has expired (a Paragraph II
Certification); (3) the listed patent has not expired, but will
expire on a particular date and the generic approval is being
sought only after patent expiration (a Paragraph III
Certification); or (4) the listed patent is invalid, unenforceable,
or will not be infringed by the proposed generic product (a
Paragraph IV Certification). In certain circumstances, the ANDA
applicant may also elect to submit a ‘‘section
(viii)’’ statement instead of a Paragraph IV
Certification, certifying that its proposed ANDA label does not
contain (or carves out) any language regarding the patented
method-of-use rather than certify to a listed method-of-use patent.
If the application contains only Paragraph I or Paragraph II
Certifications, the ANDA may be approved as soon as FDA completes
its review and concludes that all approval requirements have been
met. If the ANDA contains one or more Paragraph III Certifications,
the ANDA cannot not be approved until each listed patent for which
a Paragraph III Certification was filed have expired.
If the
ANDA applicant has provided a Paragraph IV certification to the
FDA, the applicant must also send notice of the Paragraph IV
certification to the NDA holder and patent owner once the ANDA has
been accepted for filing by the FDA. The patent owner or NDA holder
may then commence a patent infringement lawsuit in response to the
notice of the Paragraph IV certification. The filing of a patent
infringement lawsuit within 45 days of the receipt of a Paragraph
IV certification automatically prevents the FDA from approving the
ANDA until the earlier of 30 months (the ‘‘30-month
stay’’), expiration of the patent, settlement of the
lawsuit in which the patent owner admits that the patent is invalid
or not infringed by the ANDA product, or a decision in the
infringement case that holds the patent to be invalid or not
infringed, or an order by the court shortening the 30-month stay
due to actions by the patent holder to delay the litigation. In
most circumstances, NDA holder is only eligible for one 30-month
stay against an ANDA.
If a
patent infringement action is filed against an ANDA applicant, any
settlement of the litigation must be submitted to the Federal Trade
Commission (“FTC”). If the FTC believes the terms or
effects of the settlement are anticompetitive, FTC may bring an
antitrust enforcement action against the parties. Private parties
may also bring antitrust lawsuits against drug companies based on
such patent litigation settlements.
The
ANDA also will not be approved until any applicable non-patent
regulatory exclusivity listed in the Orange Book for the referenced
product has expired.
Regulatory Exclusivity.
Upon NDA approval of a new chemical
entity (“NCE”), which is a drug that contains no active
moiety that has been approved by the FDA in any other NDA, that
drug receives five years of marketing exclusivity during which the
FDA cannot receive for review any ANDA seeking approval of a
generic version of that drug. An ANDA containing a Paragraph IV
Certification may be received by FDA 4 years after the NCE
drug’s approval, but any 30-month stay that ensues would be
extended so that it expires seven and one half years after the NCE
approval date, subject to early termination by reason of a court
decision or settlement as described above.
Certain
changes to an NDA drug, such as the addition of a new indication to
the package insert, for which new clinical trials, conducted or
sponsored by the applicant are deemed by FDA to be essential to the
approval of the change, can be eligible for a three-year period of
exclusivity during which the FDA cannot approve an ANDA for a
generic drug that includes the change. An ANDA that contains a
section (viii) statement to a method of use patent may be approved
with labeling that omits the patented use before the use patent
expires. Generic drugs approved with such a labeling carve out may
be substituted by pharmacists for the original branded drug before
the method of use patent expires.
Section 505(b)(2) NDAs.
Most drug products obtain FDA
marketing approval pursuant to an NDA or an ANDA. A third
alternative is a special type of NDA, commonly referred to as a
505(b)(2) NDA, which enables the applicant to rely, in part, on the
FDA’s previous approval of a similar product, or published
literature, in support of its application.
505(b)(2)
NDAs often provide an alternate path to FDA approval for new or
improved formulations or new uses of previously approved products.
A 505(b)(2) NDA may be used where at least some of the information
required for approval comes from studies not conducted by, or for,
the applicant and for which the applicant has not obtained a right
of reference. If the 505(b)(2) applicant can establish that
reliance on the FDA’s previous approval is scientifically
appropriate, it may eliminate the need to conduct certain
preclinical or clinical studies of the new product. The FDA may
also require companies to perform additional studies or
measurements to support the change from the approved product. The
FDA may then approve the new product candidate for all, or some, of
the label indications for which the referenced product has been
approved, as well as for any new indication or conditions of use
sought by the Section 505(b)(2) applicant.
To the
extent that the Section 505(b)(2) applicant is relying on studies
conducted for an already approved product, the applicant is
required to certify to the FDA concerning any patents listed for
the approved product in the Orange Book to the same extent that an
ANDA applicant would. As a result, approval of a 505(b)(2) NDA can
be stalled until all the listed patents claiming the referenced
product have expired, until any non-patent exclusivity, such as
exclusivity for obtaining approval of a new chemical entity, listed
in the Orange Book for the referenced product has expired, and, in
the case of a Paragraph IV certification and subsequent patent
infringement suit, until the expiration of any 30-month stay,
subject to early termination of the stay as described
above.
Changing Legal and Regulatory Landscape
Periodically,
legislation is introduced in the U.S. Congress that could change
the statutory and regulatory provisions governing the approval,
manufacturing and marketing of our drugs. In addition, the FDCA,
FDA regulations and guidance are often revised or reinterpreted by
the FDA or the courts in ways that may significantly affect our
business and products. We cannot predict whether or when
legislation or court decisions impacting our business will be
enacted or issued, what FDA regulations, guidance or
interpretations may change, or what the impact of such changes, if
any, may be in the future.
Third-Party Reimbursements
Successful
sales of our proposed products in the United States and other
countries depend, in large part, on the availability of adequate
reimbursement from third-party payers such as governmental
entities, managed care organizations, health maintenance
organizations (“HMOs”), and private insurance plans.
Reimbursement by a third-party payer depends on a number of
factors, including the payer’s determination that the product
has been approved by the FDA for the indication for which the claim
is being made, that it is neither experimental nor investigational,
and that the use of the product is safe and efficacious, medically
necessary, appropriate for the specific patient and cost
effective.
Since
reimbursement by one payer does not guarantee reimbursement by
another, we or our licensees may be required to seek approval from
each payer individually. Seeking such approvals is a time-consuming
and costly process. Third-party payers routinely limit the products
that they will cover and the amount of money that they will pay
and, in many instances, are exerting significant pressure on
medical suppliers to lower their prices.
Payers
frequently employ a tiered system in reimbursing end users for
pharmaceutical products, with tier designation affecting copay or
deductible amounts. The only approved product for treating HSDD is
flibanserin, sold under the trade name Addyi®. There is
significant uncertainty concerning the extent and scope of
third-party reimbursement for products treating HSDD. Based on
third-party reimbursement for approved products treating ED, we
believe bremelanotide will be classified as a Tier 3 drug, so that
reimbursement will be limited for bremelanotide for treatment of
premenopausal women with HSDD, assuming the product is approved by
the FDA. Less than full reimbursement by governmental and other
third-party payers may adversely affect the market acceptance of
bremelanotide. Further, healthcare reimbursement systems vary from
country to country, and third-party reimbursement might not be made
available for bremelanotide for HSDD under any other reimbursement
system.
Manufacturing and Marketing
To be
successful, our proposed products will need to be manufactured in
commercial quantities under GMP prescribed by the FDA and at
acceptable costs. We do not have the facilities to manufacture any
of our proposed products under GMP. We intend to rely on
collaborators, licensees or contract manufacturers for the
commercial manufacture of our proposed products.
Our
bremelanotide product candidate is a synthetic peptide. While the
production process involves well-established technology, there are
few manufacturers capable of scaling up to commercial quantities
under GMP at acceptable costs. We identified one third-party
manufacturer for the production of bremelanotide, Lonza Ltd., and
have validated manufacturing of the bremelanotide drug substance
under GMP with that manufacturer. AMAG, as the exclusive licensee
for North America, has assumed responsibility for manufacturing
bremelanotide drug substance.
Our
bremelanotide product candidate will be a combination product,
incorporating both the bremelanotide drug substance and a delivery
device. AMAG, as the exclusive licensee for North America, has
assumed responsibility for manufacturing the bremelanotide
combination product. We relied on a third-party manufacturer,
Ypsomed AG, to make the selected autoinjector pen delivery device.
A third-party contract manufacturer, Catalent Belgium S.A.,
performs fill, finish and packaging of our bremelanotide product
candidate. We negotiated a long-term commercial supply agreement
with Catalent Belgium S.A., and have assigned this agreement to
AMAG.
Our
PL-3994 product candidate is a peptide mimetic molecule,
incorporating a proprietary amino acid mimetic structure and amino
acids. We identified a manufacturer that made the product in
quantities sufficient for Phase 1 and Phase 2, and are evaluating
commercial-scale manufacturers. Scaling up to commercial quantities
may involve production, purification, formulation and other
problems not present in the scale of manufacturing done to
date.
Our
MC1r and MC4r agonist product candidates are synthetic peptides,
which we have manufactured only at laboratory scale. We have not
contracted with a third-party manufacturer to produce these
synthetic peptides for either clinical trials or commercial
purposes. While the production process involves well-established
technology, there are few manufacturers capable of scaling up to
commercial quantities under GMP at acceptable costs. Additionally,
scaling up to commercial quantities may involve production,
purification, formulation and other problems not present in the
scale of manufacturing done to date.
The
failure of any manufacturer or supplier to comply with FDA
regulations, including GMP or medical device quality systems
regulations (“QSR”), or to supply the device component
or drug substance and services as agreed, would force us or our
licensees to seek alternative sources of supply and could interfere
with our and our licensees’ ability to deliver product on a
timely and cost effective basis or at all. Establishing
relationships with new manufacturers or suppliers, any of whom must
be FDA-approved, is a time-consuming and costly
process.
Product Liability and Insurance
Our
business may be affected by potential product liability risks that
are inherent in the testing, manufacturing, marketing and use of
our proposed products. We have liability insurance providing $10
million coverage in the aggregate as to certain clinical trial
risks.
Employees
As of
September 21, 2017, we employed 22 people full time, of whom 16 are
engaged in research and development activities and 6 are engaged in
administration and management, and did not have any part-time
employees. While we have been successful in attracting skilled and
experienced scientific personnel, competition for personnel in our
industry is intense. None of our employees are covered by a
collective bargaining agreement. All of our employees have executed
confidentiality and intellectual property agreements. We consider
relations with our employees to be good.
We rely
on contractors and scientific consultants to work on specific
research and development programs. We also rely on independent
organizations, advisors and consultants to provide services,
including aspects of manufacturing, testing, preclinical
evaluation, clinical management, regulatory strategy and market
research. Our independent advisors, contractors and consultants
sign agreements that provide for confidentiality of our proprietary
information and that we have the rights to any intellectual
property developed while working for us.
Corporate Information
We were
incorporated under the laws of the State of Delaware on November
21, 1986 and commenced operations in the biopharmaceutical area in
1996. Our corporate offices are located at 4B Cedar Brook Drive,
Cranbury, New Jersey 08512 and our telephone number is (609)
495-2200. We maintain an Internet site at
www.palatin.com
, where among other
things, we make available free of charge on and through this
website our Forms 3, 4 and 5, annual reports 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) and Section 16 of the Exchange Act as soon as
reasonably practicable after we electronically file such material
with, or furnish it to, the SEC. Our website and the information
contained in it or connected to it are not incorporated into this
Annual Report. The reference to our website is an inactive textual
reference only.
Item 1A. Risk Factors.
Risks Related to Our Financial Results and Need for
Financing
We have a history of substantial net losses, and expect to continue
to incur substantial net losses over the next few years, and we may
never achieve or maintain profitability.
As of
June 30, 2017, we had an accumulated deficit of $356. 7 million and
incurred a net loss for the year ended June 30, 2017 of $13.3
million. We may not achieve or sustain profitability in future
years, which is dependent on numerous factors, including whether
and when development and sales milestones are met, regulatory
actions by the FDA and other regulatory bodies, the performance of
our licensees, and market acceptance of our products. If we attain
sustained profitability, it will not be until the fiscal year
ending June 30, 2019 at the earliest.
We
expect to incur additional losses as we continue our development of
natriuretic peptide and MC1r products. These losses, among other
things, have had and will continue to have an adverse effect on our
stockholders’ equity, total assets and working
capital.
Since
2005 we have not had any products available for commercial sale and
have not received any revenues from the sale of our product
candidates. For the foreseeable future, we will have to fund all of
our operations and capital expenditures from license and contract
revenue under collaborative development agreements, existing cash
balances and outside sources of financing, which may not be
available on acceptable terms, if at all. Unless and until we
receive approval from the FDA or other equivalent regulatory
authorities outside the United States, we cannot sell our products
and will not have product revenues from them. We have devoted
substantially all of our efforts to research and development,
including preclinical and clinical trials. Because of the numerous
risks associated with developing drugs, we are unable to predict
the extent of future losses, whether or when any of our product
candidates will become commercially available, or when we will
become profitable, if at all.
We will need additional funding, including funding to complete
clinical trials for our product candidates other than
bremelanotide, which may not be available on acceptable terms, if
at all.
Under
the license agreement with AMAG, we are contractually required to
complete development and regulatory activities necessary to file an
NDA for bremelanotide for HSDD in the United States. AMAG will
reimburse us for up to an aggregate amount of $25 million for all
reasonable, documented, direct out-of-pocket expenses we incur in
completing these development and regulatory activities. To the
extent that our expenses exceed this amount, we will be responsible
for the required additional funding.
In
addition to our responsibilities under the license agreement with
AMAG, we intend to focus efforts on our other product candidates,
including our natriuretic peptide and MC1r programs. As of June 30,
2017, we had cash, cash equivalents, accounts receivable and
investments of $55.6 million, with current liabilities of $19.9
million, net of deferred revenue of $35.1 million. After giving
effect to the proceeds from our license agreements with AMAG and
Fosun and the proceeds from the financing transactions on August 4,
2016 and December 6, 2016, we believe we currently have sufficient
existing capital resources to fund our planned operations through
at least the 2018 calendar year. We will need additional funding to
complete development activities and required clinical trials for
our other product candidates and development programs and, if those
clinical trials are successful (which we cannot predict), to
complete submission of required regulatory applications to the
FDA.
Until
the FDA approves bremelanotide for HSDD and marketing commences, if
at all, we will not have any recurring revenue. Even if
bremelanotide is approved and marketing commences, we cannot
predict product sales or our resulting royalties, so we may not
have any source of significant recurring revenue and may need to
depend on financing or partnering to sustain our operations. We may
raise additional funds through public or private equity or debt
financings, collaborative arrangements on our product candidates,
or other sources. However, such financing arrangements may not be
available on acceptable terms, or at all. To obtain additional
funding, we may need to enter into arrangements that require us to
develop only certain of our product candidates or relinquish rights
to certain technologies, product candidates and/or potential
markets.
If we
are unable to raise sufficient additional funds when needed, we may
be required to curtail operations significantly, cease clinical
trials and decrease staffing levels. We may seek to license, sell
or otherwise dispose of our product candidates, technologies and
contractual rights on the best possible terms available. Even if we
are able to license, sell or otherwise dispose of our product
candidates, technologies and contractual rights, it is likely to be
on unfavorable terms and for less value than if we had the
financial resources to develop or otherwise advance our product
candidates, technologies and contractual rights
ourselves.
Our
future capital requirements depend on many factors,
including:
●
our ability to
enter into one or more licensing or similar agreements for
bremelanotide outside of North America and China;
●
the timing of, and
the costs involved in, obtaining regulatory approvals for
bremelanotide for HSDD and our other product
candidates;
●
the number and
characteristics of any additional product candidates we develop or
acquire;
●
the scope,
progress, results and costs of researching and developing our
future product candidates, and conducting preclinical and clinical
trials;
●
the cost of
commercialization activities if any future product candidates are
approved for sale, including marketing, sales and distribution
costs;
●
the cost of
manufacturing any future product candidates and any products we
successfully commercialize;
●
our ability to
establish and maintain strategic collaborations, licensing or other
arrangements and the terms and timing of such
arrangements;
●
the degree and rate
of market acceptance of any future approved products;
●
the emergence,
approval, availability, perceived advantages, relative cost,
relative safety and relative efficacy of alternative and competing
products or treatments;
●
any product
liability or other lawsuits related to our products;
●
the expenses needed
to attract and retain skilled personnel;
●
the costs involved
in preparing, filing, prosecuting, maintaining, defending and
enforcing patent claims, including litigation costs and the outcome
of such litigation; and
●
the timing, receipt
and amount of sales of, or royalties on, future approved products,
if any.
We have a limited operating history upon which to base an
investment decision.
Our
operations are primarily focused on acquiring, developing and
securing our proprietary technology, conducting preclinical and
clinical studies and formulating and manufacturing on a small-scale
basis our principal product candidates. These operations provide a
limited basis for stockholders to assess our ability to
commercialize our product candidates.
We have
not yet demonstrated our ability to perform the functions necessary
for the successful commercialization of any of our current product
candidates. The successful commercialization of our product
candidates will require us to perform a variety of functions,
including:
●
continuing to
conduct preclinical development and clinical trials;
●
participating in
regulatory approval processes;
●
formulating and
manufacturing products, or having third parties formulate and
manufacture products;
●
post-approval
monitoring and surveillance of our products;
●
conducting sales
and marketing activities, either alone or with a partner;
and
●
obtaining
additional capital.
If we
are unable to obtain regulatory approval of any of our product
candidates, to successfully commercialize any products for which we
receive regulatory approval or to obtain additional capital, we may
not be able to recover our investment in our development
efforts.
The
clinical and commercial success of our product candidates will
depend on a number of factors, including the
following:
●
the ability to
raise additional capital on acceptable terms, or at
all;
●
timely completion
of our clinical trials, which may be significantly slower or cost
more than we currently anticipate and will depend substantially
upon the performance of third-party contractors;
●
whether we are
required by the FDA or similar foreign regulatory agencies to
conduct additional clinical trials beyond those planned to support
the approval and commercialization of our product candidates or any
future product candidates;
●
acceptance of our
proposed indications and primary endpoint assessments relating to
the proposed indications of our product candidates by the FDA and
similar foreign regulatory authorities;
●
our ability to
demonstrate to the satisfaction of the FDA and similar foreign
regulatory authorities, the safety and efficacy of our product
candidates or any future product candidates;
●
the prevalence,
duration and severity of potential side effects experienced with
our product candidates or future approved products, if
any;
●
the timely receipt
of necessary marketing approvals from the FDA and similar foreign
regulatory authorities;
●
achieving and
maintaining, and, where applicable, ensuring that our third-party
contractors achieve and maintain, compliance with our contractual
obligations and with all regulatory requirements applicable to our
product candidates or any future product candidates or approved
products, if any;
●
the ability of
third parties with whom we contract to manufacture clinical trial
and commercial supplies of our product candidates or any future
product candidates, remain in good standing with regulatory
agencies and develop, validate and maintain commercially viable
manufacturing processes that are compliant with GMP;
●
a continued
acceptable safety profile and efficacy during clinical development
and following approval of our product candidates or any future
product candidates;
●
our ability to
successfully commercialize our product candidates or any future
product candidates in the United States and internationally, if
approved for marketing, sale and distribution in such countries and
territories, whether alone or in collaboration with
others;
●
acceptance by
physicians and patients of the benefits, safety and efficacy of our
product candidates or any future product candidates, if approved,
including relative to alternative and competing
treatments;
●
our and our
partners’ ability to establish and enforce intellectual
property rights in and to our product candidates or any future
product candidates;
●
our and our
partners’ ability to avoid third-party patent interference or
intellectual property infringement claims; and
●
our ability to
in-license or acquire additional product candidates or
commercial-stage products that we believe can be successfully
developed and commercialized.
If we
do not achieve one or more of these factors, many of which are
beyond our control, in a timely manner or at all, we could
experience significant delays or an inability to obtain regulatory
approvals or commercialize our product candidates. Even if
regulatory approvals are obtained, we may never be able to
successfully commercialize any of our product candidates.
Accordingly, we cannot assure you that we will be able to generate
sufficient revenue through the sale of our product candidates or
any future product candidates to continue our
business.
Raising additional capital may cause dilution to existing
shareholders, restrict our operations or require us to relinquish
rights.
We may
seek the additional capital necessary to fund our operations
through public or private equity offerings, collaboration
agreements, debt financings or licensing arrangements. To the
extent that we raise additional capital through the sale of equity
or convertible debt securities, existing shareholders’
ownership interests will be diluted and the terms may include
liquidation or other preferences that adversely affect their rights
as a shareholder. 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 or declaring dividends. If we raise
additional funds through collaborations and licensing arrangements
with third parties, we may have to relinquish valuable rights to
our technologies or product candidates, or grant licenses on terms
that are not favorable to us.
Risks Related to Our Business, Strategy and Industry
We are substantially dependent on the clinical and commercial
success of our product candidates, primarily our lead product
candidate, bremelanotide for HSDD, but we and our licensees may
never obtain regulatory approval for or successfully commercialize
bremelanotide for HSDD or any of our product
candidates.
To
date, we have invested most of our efforts and financial resources
in the research and development of bremelanotide for HSDD, which is
currently our lead product candidate. We licensed to AMAG all
rights to bremelanotide in North America, but are contractually
obligated to complete development and regulatory activities
necessary to file an NDA for bremelanotide for HSDD in the United
States, with AMAG reimbursing us for up to $25 million for
reasonable, documented, out-of-pocket expenses we incur. We
licensed to Fosun rights to bremelanotide for China, but depending
on the regulatory approval pathway utilized in China, approval in
China may be contingent on approval of an NDA for bremelanotide for
HSDD in the United States.
Our
near-term prospects, including our ability to finance our company
and generate revenue, will depend heavily on the successful
development, regulatory approval and commercialization of
bremelanotide for HSDD, as well as any future product candidates.
The clinical and commercial success of our product candidates will
depend on a number of factors, including the
following:
●
timely completion
of, or need to conduct additional clinical trials and studies,
including for bremelanotide for HSDD, which may be significantly
slower or cost more than we currently anticipate and will depend
substantially upon the accurate and satisfactory performance of
third-party contractors;
●
the ability to
demonstrate to the satisfaction of the FDA the safety and efficacy
of bremelanotide for HSDD or any future product candidates through
clinical trials;
●
whether we or our
licensees are required by the FDA or other similar foreign
regulatory agencies to conduct additional clinical trials to
support the approval of bremelanotide for HSDD or any future
product candidates;
●
the acceptance of
parameters for regulatory approval, including our proposed
indication, primary endpoint assessment and primary endpoint
measurement, relating to our lead indications of bremelanotide for
HSDD;
●
the success of our
licensees in educating physicians and patients about the benefits,
administration and use of bremelanotide for HSDD, if
approved;
●
the prevalence and
severity of adverse events experienced with bremelanotide for HSDD
or any future product candidates or approved products;
●
the adequacy and
regulatory compliance of the autoinjector device, supplied by an
unaffiliated third party, to be used as part of the bremelanotide
combination product;
●
the timely receipt
of necessary marketing approvals from the FDA and similar foreign
regulatory authorities;
●
our ability to
raise additional capital on acceptable terms to achieve our
goals;
●
achieving and
maintaining compliance with all regulatory requirements applicable
to bremelanotide for HSDD or any future product candidates or
approved products;
●
the availability,
perceived advantages, relative cost, relative safety and relative
efficacy of alternative and competing treatments;
●
the effectiveness
of our own or our future potential strategic collaborators’
marketing, sales and distribution strategy and
operations;
●
the ability to
manufacture clinical trial supplies of bremelanotide for HSDD or
any future product candidates and to develop, validate and maintain
a commercially viable manufacturing process that is compliant with
current GMP;
●
the ability of AMAG
to successfully commercialize bremelanotide for HSDD;
●
our ability to
successfully commercialize any future product candidates, if
approved for marketing and sale, whether alone or in collaboration
with others;
●
our ability to
enforce our intellectual property rights in and to bremelanotide
for HSDD or any future product candidates;
●
our ability to
avoid third-party patent interference or intellectual property
infringement claims;
●
acceptance of
bremelanotide for HSDD or any future product candidates, if
approved, as safe and effective by patients and the medical
community; and
●
a continued
acceptable safety profile and efficacy of bremelanotide for HSDD or
any future product candidates following approval.
If we
fail to satisfy any one of these prerequisites to our commercial
success, many of which are beyond our control, in a timely manner
or at all, we could experience significant delays or an inability
to successfully commercialize our product candidates. Accordingly,
we cannot assure you that we will be able to generate sufficient
revenue through the sale of bremelanotide for HSDD by AMAG and
Fosun or through the sale of any future product candidate to
continue our business. In addition to preventing us from executing
our current business plan, any delays in our clinical trials, or
inability to successfully commercialize our products could impair
our reputation in the industry and the investment community, and
could hinder our ability to fulfill our existing contractual
commitments. As a result, our share price would likely decline
significantly, and we would have difficulty raising necessary
capital for future projects.
We do not control the development or commercialization of
bremelanotide in North America, which is licensed to AMAG, and as a
result we may not realize a significant portion of the potential
value of the license arrangement with AMAG.
Although
we will conduct all development work to support an NDA for
bremelanotide in HSDD, the license agreement with AMAG for
bremelanotide in North America limits our control over development
activities, including regulatory approvals, and we do not have any
direct control over commercialization efforts. AMAG may abandon
further development of bremelanotide in its licensed territory,
including terminating the agreement, for any reason, including a
change of priorities within AMAG or lack of success in ancillary
clinical trials necessary to obtain regulatory approvals. Because
the potential value of the license arrangement with AMAG is
contingent upon the successful development and commercialization of
bremelanotide in the United States and other countries in the
licensed territory, the ultimate value of this license will depend
on the efforts of AMAG. If AMAG does not succeed in obtaining
regulatory approval of bremelanotide in the United States for any
reason, does not succeed in securing market acceptance of
bremelanotide in the United States, or elects for any reason to
discontinue development of bremelanotide, we will be unable to
realize the potential value of this arrangement and would
experience significant delays or an inability to successfully
commercialize bremelanotide.
Production and supply of bremelanotide depend on contract
manufacturers over whom neither we nor AMAG have any control, and
we may not have adequate supplies of bremelanotide.
We do
not have the facilities to manufacture the bremelanotide active
drug ingredient or the autoinjector pen component of the
bremelanotide combination product, or to fill, assemble and package
the bremelanotide combination product. AMAG, our exclusive licensee
for North America for bremelanotide, has assumed responsibility for
contract manufacturing. The contract manufacturers must perform
these manufacturing activities in a manner that complies with FDA
regulations. AMAG’s ability to control third-party compliance
with FDA requirements is limited to contractual remedies and rights
of inspection. The manufacturers of approved products and their
manufacturing facilities will be subject to ongoing review and
periodic inspections by the FDA and other authorities where
applicable, and must comply with regulatory requirements, including
FDA regulations concerning GMP. Failure of third-party
manufacturers to comply with GMP, medical device quality system
regulations, or other FDA requirements may result in enforcement
action by the FDA. Failure to conduct their activities in
compliance with FDA regulations could delay bremelanotide
development programs or negatively impact AMAG’s ability to
receive FDA approval of the bremelanotide potential products or
continue marketing bremelanotide products if they are approved.
Establishing relationships with new suppliers, who must be
FDA-approved, is a time-consuming and costly process. If AMAG is
not able to obtain adequate supplies of bremelanotide, it will be
difficult for AMAG to develop bremelanotide and compete
effectively.
Most of our product candidates are still in the early stages of
development, and all of our product candidates remain subject to
clinical testing and regulatory approval. If we are unable to
successfully develop and test our product candidates, we will not
be successful.
Our
product candidates are at various stages of research and
development, will require regulatory approval, and may never be
successfully developed or commercialized. Our product candidates
will require significant further research, development and testing
before we can seek regulatory approval to market and sell them. We
must demonstrate that our product candidates are safe and effective
for use in patients in order to receive regulatory approval for
commercial sale. Preclinical studies in animals, using various
doses and formulations, must be performed before we can begin human
clinical trials. Even if we obtain favorable results in the
preclinical studies, the results in humans may be different.
Numerous small-scale human clinical trials may be necessary to
obtain initial data on a product candidate’s safety and
efficacy in humans before advancing to large scale human clinical
trials. We face the risk that the results of our trials in later
phases of clinical trials may be inconsistent with those obtained
in earlier phases. Adverse or inconclusive results could delay the
progress of our development programs and may prevent us from filing
for regulatory approval of our product candidates. Additional
factors that could inhibit the successful development of our
product candidates include:
●
lack of
effectiveness of any product candidate during clinical trials or
the failure of our product candidates to meet specified
endpoints;
●
failure to design
appropriate clinical trial protocols;
●
uncertainty
regarding proper dosing;
●
inability to
develop or obtain a supplier for an autoinjector device that meets
the FDA’s medical device requirements;
●
insufficient data
to support regulatory approval;
●
inability or
unwillingness of medical investigators to follow our clinical
protocols;
●
inability to add a
sufficient number of clinical trial sites; or
●
the availability of
sufficient capital to sustain operations and clinical
trials.
You
should evaluate us in light of these uncertainties, difficulties
and expenses commonly experienced by early stage biopharmaceutical
companies, as well as unanticipated problems and additional costs
relating to:
●
product approval or
clearance;
●
good manufacturing
practices;
●
intellectual
property rights;
●
product
introduction; and
●
marketing and
competition.
If clinical trials for our product candidates are prolonged or
delayed, we may be unable to commercialize our product candidates
on a timely basis, which would require us to incur additional costs
and delay our receipt of any revenue from potential product
sales.
We may
be unable to commercialize our product candidates on a timely basis
due to unexpected delays in our human clinical trials. Potential
delaying events include:
●
discovery of
serious or unexpected toxicities or side effects experienced by
study participants or other safety issues;
●
slower than
expected rates of subject recruitment and enrollment rates in
clinical trials resulting from numerous factors, including the
prevalence of other companies’ clinical trials for their
product candidates for the same indication, or clinical trials for
indications for which patients do not as commonly seek
treatment;
●
difficulty in
retaining subjects who have initiated a clinical trial but may
withdraw at any time due to adverse side effects from the therapy,
insufficient efficacy, fatigue with the clinical trial process or
for any other reason;
●
difficulty in
obtaining IRB approval for studies to be conducted at each
site;
●
delays in
manufacturing or obtaining, or inability to manufacture or obtain,
sufficient quantities of materials for use in clinical
trials;
●
inadequacy of or
changes in our manufacturing process or the product formulation or
method of delivery;
●
changes in
applicable laws, regulations and regulatory policies;
●
delays or failure
in reaching agreement on acceptable terms in clinical trial
contracts or protocols with prospective contract research
organizations (“CROs”), clinical trial sites and other
third-party contractors;
●
failure of our CROs
or other third-party contractors to comply with contractual and
regulatory requirements or to perform their services in a timely or
acceptable manner;
●
failure by us, our
employees, our CROs or their employees or any partner with which we
may collaborate or their employees to comply with applicable FDA or
other regulatory requirements relating to the conduct of clinical
trials or the handling, storage, security and recordkeeping for
drug, medical device and biologic products;
●
delays in the
scheduling and performance by the FDA of required inspections of
us, our CROs, our suppliers, or our clinical trial sites, and
violations of law or regulations by discovered in the course of FDA
inspections;
●
scheduling
conflicts with participating clinicians and clinical institutions;
or
●
difficulty in
maintaining contact with subjects during or after treatment, which
may result in incomplete data.
Any of
these events or other delaying events, individually or in the
aggregate, could delay the commercialization of our product
candidates and have a material adverse effect on our business,
results of operations and financial condition.
We may not be able to secure and maintain research institutions to
conduct our clinical trials.
We rely
on research institutions to conduct our clinical trials, and we
therefore have limited control over the timing and cost of clinical
trials and our ability to recruit subjects. If we are unable to
reach agreements with suitable research institutions on acceptable
terms, or if any such agreement is terminated, we may be unable to
quickly replace the research institution with another qualified
institution on acceptable terms. We may not be able to secure and
maintain suitable research institutions to conduct our clinical
trials.
Even if our product candidates receive regulatory approval, they
may never achieve market acceptance, in which case our business,
financial condition and results of operation will be materially
adversely affected.
Regulatory
approval for the marketing and sale of any of our product
candidates does not assure the product’s commercial success.
Any approved product will compete with other products manufactured
and marketed by major pharmaceutical and other biotechnology
companies. If any of our product candidates are approved by the FDA
and do not achieve adequate market acceptance, our business,
financial condition and results of operations will be materially
adversely affected. The degree of market acceptance of any such
product will depend on a number of factors, including:
●
perceptions by
members of the healthcare community, including physicians, about
the safety and effectiveness of any such product;
●
cost-effectiveness
relative to competing products and technologies;
●
availability of
reimbursement for our products from third-party payers such as
health insurers, HMOs and government programs such as Medicare and
Medicaid; and
●
advantages over
alternative treatment methods.
There
is one FDA approved product for treatment of HSDD, flibanserin,
which is sold under the trade name Addyi®, and started
marketing in October 2015. The actual market size and market
dynamics for HSDD are unknown, and there is significant uncertainty
concerning the extent and scope of third-party reimbursement for
products treating HSDD. While we believe that an on-demand drug for
HSDD has competitive advantages compared to chronic or daily use
hormones and other drugs, we may not be able to realize this
perceived advantage in the market. Bremelanotide is administered by
subcutaneous injection. While the single-use, disposable
autoinjector pen format is designed to maximize market
acceptability, bremelanotide as a subcutaneous injectable drug for
HSDD may never achieve significant market acceptance. In addition,
we believe reimbursement of bremelanotide from third-party payers
such as health insurers, HMOs or other third-party payers of
healthcare costs will be similar to reimbursement for ED drugs, and
that the ultimate user may pay a substantial part of the cost of
bremelanotide for HSDD. If the market opportunity for bremelanotide
is smaller than we anticipate, it may also be difficult for us to
find marketing partners and, as a result, we may be unable to
generate revenue and business from bremelanotide. If bremelanotide
for HSDD does not achieve adequate market acceptance at an
acceptable price point, our business, financial condition and
results of operations will be materially adversely
affected.
Even if our product candidates receive regulatory approval in the
United States, we may never receive approval or commercialize our
products outside of the United States.
In
order to market any products outside of the United States, we must
establish and comply with numerous and varying regulatory
requirements of other countries regarding safety and efficacy.
Approval procedures vary among countries and can involve additional
product testing and additional administrative review periods. The
time required to obtain approval in other countries might differ
from that required to obtain FDA approval. The regulatory approval
process in other countries may include all of the risks detailed
above regarding FDA approval in the United States as well as other
risks. Regulatory approval in one country does not ensure
regulatory approval in another, but a failure or delay in obtaining
regulatory approval in one country may have a negative effect on
the regulatory process in others. Failure to obtain regulatory
approval in other countries or any delay or setbacks in obtaining
such approval would impair our ability to develop foreign markets
for our product candidates and may have a material adverse effect
on our results of operations and financial condition.
If side effects emerge that can be linked to our product candidates
(either while they are in development or after they are approved
and on the market), we may be required to perform lengthy
additional clinical trials, change the labeling of any such
products, or withdraw such products from the market, any of which
would hinder or preclude our ability to generate
revenues.
If we
identify side effects or other problems occur in future clinical
trials, we may be required to terminate or delay clinical
development of the product candidate. Furthermore, even if any of
our product candidates receive marketing approval, as greater
numbers of patients use a drug following its approval, if the
incidence of side effects increases or if other problems are
observed after approval that were not seen or anticipated during
pre-approval clinical trials, a number of potentially significant
negative consequences could result, including:
●
regulatory
authorities may withdraw their approval of the
product;
●
we may be required
to reformulate such products or change the way the product is
manufactured;
●
we may become the
target of lawsuits, including class action suits; and
●
our reputation in
the market place may suffer resulting in a significant drop in the
sales of such products.
Any of
these events could substantially increase the costs and expenses of
developing, commercializing and marketing any such product
candidates or could harm or prevent sales of any approved
products.
The number of subjects in our study pools in our clinical trials
may be deemed by regulators to be too small, which could cause
unanticipated delays or higher than anticipated costs.
Our
clinical trials have been conducted on a pool of subjects that is
structured for such research. Nevertheless, there is the
possibility that for statistical reasons, the pool of subjects may
be determined by the FDA or another regulatory body to be too small
to verify statistical significance. In such a case, the conclusions
from the previous trials will need to be established with at least
another set of clinical trials testing the relevant issue. Due to
the need to find new subjects for any additional clinical trials
and the limited pool from which such subjects can be selected, any
such determination by the FDA could result in a delay in obtaining
FDA approval or require additional financial
expenditures.
We may not be able to keep up with the rapid technological change
in the biotechnology and pharmaceutical industries, which could
make any future approved products obsolete and reduce our
revenue.
Biotechnology
and related pharmaceutical technologies have undergone and continue
to be subject to rapid and significant change. Our future will
depend in large part on our ability to maintain a competitive
position with respect to these technologies. Our competitors may
render our technologies obsolete by advances in existing
technological approaches or the development of new or different
approaches, potentially eliminating the advantages in our drug
discovery process that we believe we derive from our research
approach and proprietary technologies. In addition, any future
products that we develop, including our clinical product
candidates, may become obsolete before we recover expenses incurred
in developing those products, which may require that we raise
additional funds to continue our operations.
Competing products and technologies may make our proposed products
noncompetitive.
Flibanserin,
a daily-use oral drug sold under the trade name Addyi®, has
been approved by the FDA for HSDD in premenopausal women. There are
other products being developed for HSDD and other FSD indications,
including a number of oral combination drugs, some of which
incorporate testosterone, antidepressants or PDE-5 inhibitors.
There is competition to develop drugs for treatment of HSDD and FSD
in both premenopausal and postmenopausal patients. Our
bremelanotide drug product is intended to be administered by
subcutaneous injection, and an as needed drug product for the same
indication which utilizes another route of administration, such as
a conventional oral drug product, may make subcutaneous
bremelanotide noncompetitive.
There
are several products approved for use in treatment of obesity and
related indications, and a number of other products being developed
for treatment of obesity, including products in clinical trials.
There is intense competition to develop drugs for treatment of
obesity and related indications.
There
are a number of products approved for use in treating inflammatory
diseases and indications, and other products are being developed,
including products in clinical trials.
We are
aware of one recombinant natriuretic peptide product for acutely
decompensated congestive heart failure approved and marketed in the
United States, and another recombinant natriuretic peptide product
approved and marketed in Japan. Clinical trials on other
natriuretic peptide products are being conducted in the United
States. In addition, other products for treatment of heart failure
are either currently being marketed or in development, including a
combination drug which increases active levels of ANP.
As
discussed above, the biopharmaceutical industry is highly
competitive. We are likely to encounter significant competition
with respect to bremelanotide, other melanocortin receptor agonist
compounds and PL-3994. Most of our competitors have substantially
greater financial and technological resources than we do. Many of
them also have significantly greater experience in research and
development, marketing, distribution and sales than we do.
Accordingly, our competitors may succeed in developing, marketing,
distributing and selling products and underlying technologies more
rapidly than we can. These competitive products or technologies may
be more effective and useful or less costly than bremelanotide,
other melanocortin receptor agonist compounds or PL-3994. In
addition, academic institutions, hospitals, governmental agencies
and other public and private research organizations are also
conducting research and may develop competing products or
technologies on their own or through strategic alliances or
collaborative arrangements.
We rely on third parties over whom we have no control to conduct
preclinical studies, clinical trials and other research for our
product candidates and their failure to timely perform their
obligations could significantly harm our product
development.
We have
limited research and development staff and do not have dedicated
research or development facilities. We rely on third parties and
independent contractors, such as researchers at CROs and
universities, in certain areas that are particularly relevant to
our research and product development plans. We engage such
researchers to conduct our preclinical studies, clinical trials and
associated tests. These outside contractors are not our employees
and may terminate their engagements with us at any time. In
addition, we have limited control over the resources that these
contractors devote to our programs and they may not assign as great
a priority to our programs or pursue them as diligently as we would
if we were undertaking such programs ourselves. There is also
competition for these relationships, and we may not be able to
maintain our relationships with our contractors on acceptable
terms. If our third-party contractors do not carry out their duties
under their agreements with us, fail to meet expected deadlines or
fail to comply with appropriate standards for preclinical or
clinical research, our ability to develop our product candidates
and obtain regulatory approval on a timely basis, if at all, may be
materially adversely affected.
Production and supply of our product candidates depend on contract
manufacturers over whom we have no control, with the risk that we
may not have adequate supplies of our product candidates or
products.
We do
not have the facilities to manufacture our early stage potential
products such as PL-3994, PL-8177 and other melanocortin receptor
agonist compounds for use in preclinical studies and clinical
trials. Contract manufacturers must perform these manufacturing
activities in a manner that complies with FDA regulations. Our
ability to control third-party compliance with FDA requirements is
limited to contractual remedies and rights of inspection. The
manufacturers of our potential products and their manufacturing
facilities will be subject to continual review and periodic
inspections by the FDA and other authorities where applicable, and
must comply with ongoing regulatory requirements, including FDA
regulations concerning GMP. Failure of third-party manufacturers to
comply with GMP, medical device QSR, or other FDA requirements may
result in enforcement action by the FDA. Failure to conduct their
activities in compliance with FDA regulations could delay our
development programs or negatively impact our ability to receive
FDA approval of our potential products. Establishing relationships
with new suppliers, who must be FDA-approved, is a time-consuming
and costly process.
If we are unable to establish sales and marketing capabilities
within our organization or enter into and maintain agreements with
third parties to market and sell our product candidates, we may be
unable to generate product revenue.
We do
not currently have any experience in sales, marketing and
distribution of pharmaceutical products. We will need to establish
sales and marketing capabilities within our organization or
establish and maintain agreements with third parties to market and
sell our product candidates. We do not have marketing partners for
any of our products, including bremelanotide and PL-3994. If any of
these products are approved by the FDA or other regulatory
authorities, we must either develop marketing, distribution and
selling capacity and expertise, which will be costly and time
consuming, or enter into agreements with other companies to provide
these capabilities. We may not be able to enter into suitable
agreements on acceptable terms, if at all. Engaging a third party
to perform these services could delay the commercialization of any
of our product candidates, if approved for commercial sale. 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 product revenue and our business would
suffer. In addition, if we enter into arrangements with third
parties to perform sales, marketing and distribution services, our
product revenues are likely to be lower than if we could market and
sell any products that we develop ourselves.
We will need to hire additional employees in order to commercialize
our product candidates in the future. Any inability to manage
future growth could harm our ability to commercialize our product
candidates, increase our costs and adversely impact our ability to
compete effectively.
In
order to commercialize our product candidates, we will need to hire
experienced sales and marketing personnel to sell and market those
product candidates we decide to commercialize, and we will need to
expand the number of our managerial, operational, financial and
other employees to support commercialization. Competition exists
for qualified personnel in the biopharmaceutical
field.
Future
growth will impose significant added responsibilities on members of
management, including the need to identify, recruit, maintain and
integrate additional employees. Our future financial performance
and our ability to commercialize our product candidates and to
compete effectively will depend, in part, on our ability to manage
any future growth effectively.
Our ability to achieve revenues from the sale of our products in
development will depend, in part, on our ability to obtain adequate
reimbursement from Medicare, Medicaid, private insurers and other
healthcare payers.
Our
ability to successfully commercialize our products in development
will depend, in significant part, on the extent to which we or our
marketing partners can obtain reimbursement for our products and
also reimbursement at appropriate levels for the cost of our
products. Obtaining reimbursement from governmental payers,
insurance companies, HMOs and other third-party payers of
healthcare costs is a time-consuming and expensive process. There
is no guarantee that our products will ultimately be reimbursed.
There is significant uncertainty concerning third-party
reimbursement for the use of any pharmaceutical product
incorporating new technology and third-party reimbursement might
not be available for our proposed products once approved, or if
obtained, might not be adequate.
There
is significant uncertainty concerning the extent and scope of
third-party reimbursement for products treating HSDD and other
forms of FSD. Based on third-party reimbursement for approved
products treating ED, we believe bremelanotide for HSDD will be
classified as a Tier 3 drug, so that reimbursement will be limited
for bremelanotide for treatment of premenopausal women with HSDD,
assuming the product is approved by the FDA. If we are able to
obtain reimbursement, continuing efforts by governmental and
third-party payers to contain or reduce costs of healthcare may
adversely affect our future revenues and ability to achieve
profitability. Third-party payers are increasingly challenging the
prices charged for diagnostic and therapeutic products and related
services. Reimbursement from governmental payers is subject to
statutory and regulatory changes, retroactive rate adjustments,
administrative rulings and other policy changes, all of which could
materially decrease the range of products for which we are
reimbursed or the rates of reimbursement by government payers. In
addition, recent legislation reforming the healthcare system may
result in lower prices or the actual inability of prospective
customers to purchase our products in development. The cost
containment measures that healthcare payers and providers are
instituting and the effect of any healthcare reform could
materially and adversely affect our ability to operate profitably.
Furthermore, even if reimbursement is available, it may not be
available at price levels sufficient for us to realize a positive
return on our investment, which would have a material adverse
effect on our business, financial condition and results of
operations.
Even if we receive regulatory approval for our products in Europe,
we may not be able to secure adequate pricing and reimbursement in
Europe for us or any strategic partner to achieve
profitability.
Even if
one or more of our products are approved in Europe, we may be
unable to obtain appropriate pricing and reimbursement for such
products. In most European markets, demand levels for healthcare in
general and for pharmaceuticals in particular are principally
regulated by national governments. Therefore, pricing and
reimbursement for our products will have to be negotiated on a
“Member State by Member State” basis according to
national rules, as there does not exist a centralized European
process. As each Member State has its own national rules governing
pricing control and reimbursement policy for pharmaceuticals, there
are likely to be uncertainties attaching to the review process, and
the level of reimbursement that national governments are prepared
to accept. In the current economic environment, governments and
private payers or insurers are increasingly looking to contain
healthcare costs, including costs on drug therapies. If we are
unable to obtain adequate pricing and reimbursement for our
products in Europe, we or a potential strategic partner or
collaborator may not be able to cover the costs necessary to
manufacture, market and sell the product, limiting or preventing
our ability to achieve profitability.
We may incur substantial liabilities and may be required to limit
commercialization of our products in response to product liability
lawsuits.
The
testing and marketing of medical products entails an inherent risk
of product liability. If we cannot successfully defend ourselves
against product liability claims, we may incur substantial
liabilities or be required to limit commercialization of our
products or cease clinical trials. Our inability to obtain
sufficient product liability insurance at an acceptable cost to
protect against potential product liability claims could prevent or
inhibit the commercialization of pharmaceutical products we
develop, alone or with corporate collaborators. We currently carry
$10 million liability insurance in the aggregate as to certain
clinical trial risks, but we do not have and have not obtained
quotations for commercial product liability insurance. We, or any
corporate collaborators, may not in the future be able to obtain
insurance at a reasonable cost or in sufficient amounts, if at all.
Even if our agreements with any future corporate collaborators
entitle us to indemnification against losses, such indemnification
may not be available or adequate should any claim
arise.
Our internal computer systems, or those of our third-party
contractors or consultants, may fail or suffer security breaches,
which could result in a material disruption of our product
development programs.
Despite
the implementation of security measures, our internal computer
systems and those of our third-party contractors and consultants
are vulnerable to damage from computer viruses, unauthorized
access, natural disasters, terrorism, war and telecommunication and
electrical failures. We rely on industry accepted measures and
technology to secure confidential and proprietary information
maintained on our computer systems. However, these measures and
technology may not adequately prevent security breaches. While we
do not believe that we have 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 loss of clinical trial data for our product candidates which
could result in delays in our regulatory approval efforts and
significantly increase our costs to recover or reproduce the data.
To the extent that any disruption or security breach results in a
loss of or damage to our data or applications or other data or
applications relating to our technology, intellectual property,
research and development or product candidates, or inappropriate
disclosure of confidential or proprietary information, we could
incur liabilities and the further development of our product
candidates could be delayed.
We may be subject, directly or indirectly, to federal and state
healthcare fraud and abuse laws, false claims laws, and health
information privacy and security laws. If we are unable to comply,
or have not fully complied, with such laws, we could face
substantial penalties.
If we
begin commercializing any of our products in the United States, our
operations may be directly, or indirectly through our customers,
subject to various federal and state fraud and abuse laws,
including, without limitation, the federal Anti-Kickback Statute,
the federal False Claims Act, and physician sunshine laws and
regulations. These laws may impact, among other things, our
proposed sales, marketing, and education programs. In addition, we
may be subject to patient privacy regulation by both the federal
government and the states in which we conduct our business. The
laws that may affect our ability to operate include:
●
the federal
Anti-Kickback Statute, which prohibits, among other things, persons
or entities from soliciting, receiving, offering or providing
remuneration, directly or indirectly, in return for or to induce
either the referral of an individual for, or the purchase order or
recommendation of, any item or services for which payment may be
made under a federal health care program such as the Medicare and
Medicaid programs;
●
federal civil and
criminal false claims laws and civil monetary penalty laws, which
prohibit, among other things, individuals or entities from
knowingly presenting, or causing to be presented, claims for
payment from Medicare, Medicaid, or other third-party payors that
are false or fraudulent;
●
HIPAA, which
created new federal criminal statutes that prohibit executing a
scheme to defraud any healthcare benefit program and making false
statements relating to healthcare matters;
●
HIPPA, as amended
by the Health Information Technology and Clinical Health Act, and
its implementing regulations, which imposes certain requirements
relating to the privacy, security, and transmission of individually
identifiable health information;
●
The federal
physician sunshine requirements under the Affordable Care Act,
which require manufacturers of drugs, devices, biologics, and
medical supplies to report annually to the U.S. Department of
Health and Human Services information related to payments and other
transfers of value to physicians, other healthcare providers, and
teaching hospitals, and ownership and investment interests held by
physicians and other healthcare providers and their immediate
family members and applicable group purchasing organizations;
and
●
state law
equivalents of each of the above federal laws, such as
anti-kickback and false claims laws that may apply to items or
services reimbursed by any third-party payor, including commercial
insurers, 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 otherwise restrict payments that may be made
to healthcare providers and other potential referral sources; state
laws that require drug manufacturers to report information related
to payments and other transfers of value to physicians and other
healthcare providers or marketing expenditures; and state laws
governing 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.
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. In addition, recent health care reform
legislation has strengthened these laws. For example, the
Affordable Care Act, among other things, amends the intent
requirement of the federal anti-kickback and criminal healthcare
fraud statutes. A person or entity no longer needs to have actual
knowledge of this statute or specific intent to violate it.
Moreover, the Affordable Care Act 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 False Claims
Act.
If our
operations are found to be in violation of any of the laws
described above or any other governmental regulations that apply to
us, we may be subject to penalties, including civil and criminal
penalties, damages, fines, exclusion from participation in
government health care programs, such as Medicare and Medicaid,
imprisonment, and the curtailment or restructuring of our
operations, any of which could adversely affect our ability to
operate our business and our results of operations
We are highly dependent on our management team, senior staff
professionals and third-party contractors and consultants, and the
loss of their services could materially adversely affect our
business.
We rely
on our relatively small management team and staff as well as
various contractors and consultants to provide critical services.
Our ability to execute our clinical programs for bremelanotide and
PL-3994 and our preclinical programs for MC1r and MC4r peptide drug
candidates depends on our continued retention and motivation of our
management and senior staff professionals, including executive
officers and senior members of product development and management,
including commercialization, who possess significant technical
expertise and experience and oversee our development and
commercialization programs. If we lose the services of existing key
personnel, our development programs could be adversely affected if
suitable replacement personnel are not recruited quickly. Our
success also depends on our ability to develop and maintain
relationships with contractors, consultants and scientific
advisors.
There
is competition for qualified personnel, contractors and consultants
in the pharmaceutical industry, which makes it difficult to attract
and retain the qualified personnel, contractors and consultants
necessary for the development and growth of our business. Our
failure to attract and retain such personnel, contractors and
consultants could have a material adverse effect on our business,
results of operations and financial condition.
Because we expect bremelanotide for the treatment of HSDD to be
classified as a Tier 3 drug with reimbursement by third-party
payers similar to approved products for treating ED, demand for
this product will be tied to discretionary spending levels of our
targeted patient population and particularly affected by
unfavorable economic conditions.
The
market for HSDD may be particularly vulnerable to unfavorable
economic conditions. We expect bremelanotide for the treatment of
HSDD to have significant copay or deductible requirements and to be
only partially reimbursed by third-party payers and, as a result,
demand for this product may be tied to discretionary spending
levels of our targeted patient population. The recent global
financial crisis caused extreme volatility and disruptions in the
capital and credit markets. A severe or prolonged economic downturn
could result in a variety of risks to our business, including
weakened demand for bremelanotide for HSDD or any future product
candidates, if approved, and our ability to raise additional
capital when needed on acceptable terms, if at all. This is
particularly true in Europe, which is undergoing a continued severe
economic crisis. A weak or declining economy could also strain our
suppliers, possibly resulting in supply disruption, or cause our
customers to delay making payments for our services. Any of the
foregoing could harm our business and we cannot anticipate all of
the ways in which future economic climates and financial market
conditions could adversely impact our business.
Risks Related to Government Regulation
Both before and after marketing approval, our product candidates
are subject to ongoing regulatory requirements and, if we fail to
comply with these continuing requirements, we could be subject to a
variety of sanctions and the sale of any approved commercial
products could be suspended.
Both
before and after regulatory approval to market a particular product
candidate, the manufacturing, labeling, packaging, adverse event
reporting, storage, advertising and promotion and record keeping
related to the product candidates are subject to extensive
regulatory requirements. If we fail to comply with the regulatory
requirements of the FDA and other applicable U.S. and foreign
regulatory authorities, we could be subject to administrative or
judicially imposed sanctions, including:
●
restrictions on the
products or manufacturing process;
●
civil or criminal
penalties;
●
imposition of a
Corporate Integrity Agreement requiring heightened monitoring of
our compliance functions, overseen by outside monitors, and
enhanced reporting requirements to, and oversight by, the FDA and
other government agencies;
●
product seizures or
detentions and related publicity requirements;
●
suspension or
withdrawal of regulatory approvals;
●
regulators or IRBs
may not authorize us or any potential future collaborators to
commence a clinical trial or conduct a clinical trial at a
prospective trial site;
●
total or partial
suspension of production; and
●
refusal to approve
pending applications for marketing approval of new product
candidates.
Changes
in the regulatory approval policy during the development period,
changes in or the enactment of additional regulations or statutes,
or changes in the regulatory review for each submitted product
application may cause delays in the approval or rejection of an
application. Even if the FDA approves a product candidate, the
approval may impose significant restrictions on the indicated uses,
conditions for use, labeling, advertising, promotion, marketing
and/or production of such product, and may impose ongoing
requirements for post-approval studies, including additional
research and development and clinical trials. The approval may also
impose REMS on a product if the FDA believes there is a reason to
monitor the safety of the drug in the marketplace. REMS may include
requirements for additional training for health care professionals,
safety communication efforts and limits on channels of
distribution, among other things. The sponsor would be required to
evaluate and monitor the various REMS activities and adjust them if
need be. The FDA also may impose various civil or criminal
sanctions for failure to comply with regulatory requirements,
including withdrawal of product approval.
Furthermore,
the approval procedure and the time required to obtain approval
varies among countries and can involve additional testing beyond
that required by the FDA. Approval by one regulatory authority does
not ensure approval by regulatory authorities in other
jurisdictions. The FDA has substantial discretion in the approval
process and may refuse to accept any application or may decide that
our data are insufficient for approval and require additional
preclinical, clinical or other studies.
In
addition, varying interpretations of the data obtained for
preclinical and clinical testing could delay, limit or prevent
regulatory approval of a product candidate. Even if we submit an
application to the FDA for marketing approval of a product
candidate, it may not result in marketing approval from the
FDA.
We do
not expect to receive regulatory approval for the commercial sale
of any of our product candidates that are in development in the
near future, if at all. The inability to obtain FDA approval or
approval from comparable authorities in other countries for our
product candidates would prevent us or any potential future
collaborators from commercializing these product candidates in the
United States or other countries.
We may not be able to obtain regulatory approval of bremelanotide
for HSDD even if the product is effective in treating
HSDD.
Clinical
drug development programs for our product candidates are very
expensive, time-consuming, difficult to design and implement and
their outcome is inherently uncertain. Approval of bremelanotide
for treatment of HSDD in premenopausal women requires a
determination by the FDA that the product is both safe and
effective. Our Phase 3 clinical trials for HSDD demonstrated what
we believe to be an acceptable safety profile and statistically
significant efficacy. However, the FDA may ultimately disagree with
our safety analysis, definition of efficacy in HSDD, our clinical
trial designs, or our interpretation of our clinical trial results.
It is not possible to predict, with any assurance, whether the FDA
will approve bremelanotide for any indications. The FDA may deny or
delay approval of any application for bremelanotide if the FDA
determines that the clinical data do not adequately establish the
safety of the drug even if efficacy is established. If FDA approves
bremelanotide, the approved labeling of the product may be limited
or restricted in such ways as to inhibit or prevent the successful
market acceptance and profitability of the product. Bremelanotide
could take a significantly longer time to obtain approval than we
expect and it may never gain approval. If regulatory approval of
bremelanotide is delayed, limited or never obtained, our business,
financial condition and results of operations would be materially
adversely affected.
The regulatory approval process is lengthy, expensive and
uncertain, and may prevent us from obtaining the approvals that we
require.
Government
authorities in the United States and other countries extensively
regulate the advertising, labeling, storage, record-keeping,
safety, efficacy, research, development, testing, manufacture,
promotion, marketing and distribution of drug products. Drugs are
subject to rigorous regulation in the United States by the FDA and
similar regulatory bodies in other countries. The steps ordinarily
required by the FDA before a new drug may be marketed in the United
States include:
●
completion of
non-clinical tests including preclinical laboratory and formulation
studies and animal testing and toxicology;
●
submission to the
FDA of an IND application, which must become effective before
clinical trials may begin, and which may be placed on
“clinical hold” by the FDA, meaning the trial may not
commence, or must be suspended or terminated prior to
completion;
●
performance of
adequate and well-controlled Phase 1, 2 and 3 human clinical trials
to establish the safety and efficacy of the drug for each proposed
indication, and potentially post-approval or Phase 4 studies to
further define the drug’s efficacy and safety, generally or
in specific patient populations;
●
submission to the
FDA of an NDA that must be accompanied by a substantial “user
fee” payment;
●
FDA review and
approval of the NDA before any commercial marketing or sale;
and
●
compliance with
post-approval commitments and requirements.
Satisfaction
of FDA pre-market approval requirements for new drugs typically
takes a number of years and the actual time required for approval
may vary substantially based upon the type, complexity and novelty
of the product or disease to be treated by the drug. The results of
product development, preclinical studies and clinical trials are
submitted to the FDA as part of an NDA. The NDA also must contain
extensive manufacturing information, demonstrating compliance with
applicable GMP requirements. Once the submission has been accepted
for filing, the FDA generally has twelve months to review the
application and respond to the applicant. Such response may be an
approval, or may be a “complete response letter”
outlining additional data or steps that must be completed prior to
further FDA review of the NDA. The review process is often
significantly extended by FDA requests for additional information
or clarification. Success in early stage clinical trials does not
assure success in later stage clinical trials. Data obtained from
clinical trials is not always conclusive and may be susceptible to
varying interpretations that could delay, limit or prevent
regulatory approval. The FDA may refer the NDA to an advisory
committee for review, evaluation and recommendation as to whether
the application should be approved, but the FDA is not bound by the
recommendation of the advisory committee. The FDA may deny or delay
approval of applications that do not meet applicable regulatory
criteria or if the FDA determines that the clinical data do not
adequately establish the safety and efficacy of the drug.
Therefore, our proposed products could take a significantly longer
time than we expect or may never gain approval. If regulatory
approval is delayed or never obtained, our business, financial
condition and results of operations would be materially adversely
affected.
Some of
our products or product candidates, including bremelanotide, may be
used in combination with a drug delivery device, such as an
injector or other delivery system. Medical products containing a
combination of new drugs, biological products or medical devices
are regulated as “combination products” in the United
States. A combination product generally is defined as a product
comprised of components from two or more regulatory categories
(e.g., drug/device, device/biologic, drug/biologic). Each component
of a combination product is subject to the requirements established
by the FDA for that type of component, whether a new drug, biologic
or device. In order to facilitate pre-market review of combination
products, the FDA designates one of its centers to have primary
jurisdiction for the pre-market review and regulation of the
overall product based upon a determination by the FDA of the
primary mode of action of the combination product. The
determination whether a product is a combination product or two
separate products is made by the FDA on a case-by-case basis. Our
product candidates intended for use with such devices, or expanded
indications that we may seek for our products used with such
devices, may not be approved or may be substantially delayed in
receiving approval if the devices do not gain and/or maintain their
own regulatory approvals or clearances. Where approval of the drug
product and device is sought under a single application, the
increased complexity of the review process may delay approval. In
addition, because these drug delivery devices are provided by
single source unaffiliated third-party companies, we are dependent
on the sustained cooperation and effort of those third-party
companies both to supply the devices, maintain their own regulatory
compliance, and, in some cases, to conduct the studies required for
approval or other regulatory clearance of the devices. We are also
dependent on those third-party companies continuing to maintain
such approvals or clearances once they have been received. Failure
of third-party companies to supply the devices, to successfully
complete studies on the devices in a timely manner, or to obtain or
maintain required approvals or clearances of the devices, and
maintain compliance with all regulatory requirements, could result
in increased development costs, delays in or failure to obtain
regulatory approval and delays in product candidates reaching the
market or in gaining approval or clearance for expanded labels for
new indications.
Upon
approval, a product candidate may be marketed only in those dosage
forms and for those indications approved by the FDA. Once approved,
the FDA may withdraw the product approval if compliance with
regulatory requirements is not maintained or if problems occur
after the product reaches the marketplace. In addition, the FDA may
require post-marketing studies, referred to as Phase 4 studies, to
monitor the approved products in a specific subset of patients or a
larger number of patients than were required for product approval
and may limit further marketing of the product based on the results
of these post-market studies. The FDA has broad post-market
regulatory and enforcement powers, including the ability to seek
injunctions, levy fines and civil penalties, criminal prosecution,
withdraw approvals and seize products or request
recalls.
If
regulatory approval of any of our product candidates is granted, it
will be limited to certain disease states or conditions, patient
populations, duration or frequency of use, and will be subject to
other conditions as set forth in the FDA-approved labeling. Adverse
experiences with the product must be reported to the FDA and could
result in the imposition of market restriction through labeling
changes or in product removal. Product approvals may be withdrawn
if compliance with regulatory requirements is not maintained or if
problems concerning safety or efficacy of the product occur
following approval.
Outside
the United States, our ability to market our product candidates
will also depend on receiving marketing authorizations from the
appropriate regulatory authorities. The foreign regulatory approval
process generally includes all of the risks associated with FDA
approval described above. The requirements governing the conduct of
clinical trials and marketing authorization vary widely from
country to country. At present, foreign marketing authorizations
are applied for at a national level, although within the European
Community (“EC”), registration procedures are available
to companies wishing to market a product to more than one EC member
state. If the regulatory authority is satisfied that adequate
evidence of safety, quality and efficiency has been presented, a
marketing authorization will be granted. If we do not obtain, or
experience difficulties in obtaining, such marketing
authorizations, our business, financial condition and results of
operations may be materially adversely affected.
Legislative or regulatory healthcare reforms in the United States
may make it more difficult and costly for us to obtain regulatory
clearance or approval of bremelanotide for HSDD or any future
product candidates and to produce, market and distribute our
products after clearance or approval is obtained.
From
time to time, legislation is drafted and introduced in Congress,
and court decisions are issued, that could significantly change the
statutory provisions governing the regulatory clearance or
approval, manufacture and marketing of regulated products or the
reimbursement thereof. In addition, FDA regulations and guidance
are often revised or reinterpreted by the FDA in ways that may
significantly affect our business and our products. Any new
regulations or revisions or reinterpretations of existing
regulations may impose additional costs or lengthen review times of
bremelanotide for HSDD or any future product candidates. We cannot
determine what effect changes in regulations, statutes, court
decisions, legal interpretation or policies, when and if
promulgated, enacted, issued or adopted may have on our business in
the future. Such changes could, among other things:
●
require changes to
manufacturing methods;
●
require recall,
replacement or discontinuance of one or more of our
products;
●
require additional
recordkeeping;
●
limit or restrict
our ability to engage in certain types of marketing or promotional
activities;
●
alter or eliminate
the scope or terms of any currently available regulatory
exclusivities; and
●
restrict or
eliminate our ability to settle any patent litigation we may bring
against potential generic competitors.
Each of
these would likely entail substantial time and cost and could
materially harm our business and our financial results. In
addition, delays in receipt of or failure to receive regulatory
clearances or approvals for any future products would harm our
business, financial condition and results of
operations.
Changes in healthcare policy could adversely affect our
business.
U.S.
and foreign governments continue to propose and pass legislation
designed to reduce the cost of healthcare. For example, the
Medicare Prescription Drug Improvement and Modernization Act of
2003 (“MMA”), expanded Medicare coverage for drugs
purchased by Medicare beneficiaries and introduced new
reimbursement methodologies. In addition, this law provided
authority for limiting the number of drugs that will be covered in
any therapeutic class. We do not know what impact the MMA and
similar laws will have on the availability of coverage for and the
price that we receive for any approved products. Moreover, while
the MMA applies only to drug benefits for Medicare beneficiaries,
private payers often follow Medicare policies in setting their own
reimbursement policies, and any reduction in reimbursement that
results from the MMA may result in similar reductions by private
payers.
The
Affordable Care Act, as amended by the Health Care and Education
Affordability Reconciliation Act (together the “ACA”),
was adopted in 2010. This law has resulted in an increase in the
number of people who are covered by both public and private
insurance and has changed the way health care is financed by both
government health program and private insurers, with significant
impacts on the pharmaceutical industry. The ACA contains a number
of provisions that may impact our business and operations in ways
that may negatively affect our potential revenues in the future.
For example, the ACA imposes a non-deductible excise tax on
pharmaceutical manufacturers or importers that sell branded
prescription drugs to U.S. government programs that we believe will
increase the cost of any products that we develop. In addition, as
part of the ACA’s provisions closing a funding gap that
currently exists in the Medicare Part D prescription drug program
(commonly known as the “donut hole”), we will be
required to provide a 50% discount on any branded prescription
drugs that we develop sold to beneficiaries who fall within the
donut hole. We cannot predict all of the specific effects the ACA
or any future healthcare reform legislation will have on our
business, but they could have a material adverse effect on our
business and financial condition.
Efforts
have been made to repeal, or repeal and replace, the ACA. It is not
known whether the ACA will be repealed, amended, replaced or
otherwise modified within the next several years. It is possible
that any repeal, amendment or replacement of the ACA will decrease
the number of people who are covered by both public and private
insurance and change the way health care is financed by both
government health programs and private insurers, which could
significantly impact the pharmaceutical industry.
The
availability of government reimbursement for prescription drugs
will be impacted by the Budget Control Act of 2011, which was
signed into law on August 2, 2011. This law is expected to result
in federal spending cuts totaling between $1.2 trillion and $1.5
trillion over the next decade, over half of which will include cuts
in Medicare and other health-related spending.
Risks Related to Our Intellectual Property
If we fail to adequately protect or enforce our intellectual
property rights or secure rights to patents of others, the value of
our intellectual property rights would diminish.
Our
success, competitive position and future revenues will depend in
part on our ability and the abilities of our licensors to obtain
and maintain patent protection for our products, methods, processes
and other technologies, to preserve our trade secrets, to prevent
third parties from infringing on our proprietary rights and to
operate without infringing the proprietary rights of third parties.
We cannot predict:
●
the degree and
range of protection any patents will afford us against competitors,
including whether third parties will find ways to invalidate or
otherwise circumvent our patents;
●
if and when patents
will be issued;
●
whether or not
others will obtain patents claiming aspects similar to those
covered by our patents and patent applications; and
●
whether we will
need to initiate litigation or administrative proceedings, which
may be costly whether we win or lose.
If our
products, methods, processes and other technologies infringe the
proprietary rights of other parties we could incur substantial
costs and we may have to:
●
obtain licenses,
which may not be available on commercially reasonable terms, if at
all;
●
redesign our
products or processes to avoid infringement;
●
stop using the
subject matter claimed in the patents held by others;
●
defend litigation
or administrative proceedings, which may be costly whether we win
or lose, and which could result in a substantial diversion of our
management resources.
We may become involved in lawsuits to protect or enforce our
patents or other intellectual property or the patents of our
licensors, which could be expensive and time
consuming.
Competitors
may infringe our intellectual property, including our patents or
the patents of our licensors. As a result, we may be required to
file infringement claims to stop third-party infringement or
unauthorized use. This can be expensive, particularly for a company
of our size, and time-consuming. In addition, in an infringement
proceeding, a court may decide that a patent of ours 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 patent claims
do not cover its technology or that the factors necessary to grant
an injunction against an infringer are not satisfied.
An
adverse determination of any litigation or other 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.
Interference,
derivation or other proceedings brought at the USPTO may be
necessary to determine the priority or patentability of inventions
with respect to our patent applications or those of our licensors
or collaborators. Litigation or USPTO proceedings brought by us may
fail or may be invoked against us by third parties. Even if we are
successful, domestic or foreign litigation or USPTO or foreign
patent office proceedings may result in substantial costs and
distraction to our management. We may not be able, alone or with
our licensors or collaborators, to prevent misappropriation of our
proprietary rights, particularly in countries where the laws may
not protect such rights as fully as in the United
States.
Furthermore,
because of the substantial amount of discovery required in
connection with intellectual property litigation or other
proceedings, there is a risk that some of our confidential
information could be compromised by disclosure during this type of
litigation or proceedings. In addition, during the course of this
kind of litigation or proceedings, there could be public
announcements of the results of hearings, motions or other interim
proceedings or developments or public access to related documents.
If investors perceive these results to be negative, the market
price for our common stock could be significantly
harmed.
If we infringe or are alleged to infringe intellectual property
rights of third parties, our business could be harmed.
Our
research, development and commercialization activities may infringe
or otherwise violate or be claimed to infringe or otherwise violate
patents owned or controlled by other parties. There may also be
patent applications that have been filed but not published that,
when issued as patents, could be asserted against us. These third
parties could bring claims against us that would cause us to incur
substantial expenses and, if successful against us, could cause us
to pay substantial damages. Further, if a patent infringement suit
were brought against us, we could be forced to stop or delay
research, development, manufacturing or sales of the product or
product candidate that is the subject of the suit.
As a
result of patent infringement claims, or to avoid potential claims,
we may choose or be required to seek licenses from third parties.
These licenses may not be available on acceptable terms, or at all.
Even if we are able to obtain a license, the license would likely
obligate us to pay license fees or royalties or both, and the
rights granted to us might be nonexclusive, which could result in
our competitors gaining access to the same intellectual property.
Ultimately, we could be prevented from commercializing a product,
or be forced to cease some aspect of our business operations, if,
as a result of actual or threatened patent infringement claims, we
are unable to enter into licenses on acceptable terms, if at
all.
There
has been substantial litigation and other proceedings regarding
patent and other intellectual property rights in the pharmaceutical
industry. In addition to infringement claims against us, we may
become a party to other patent litigation and other proceedings,
including interference, derivation or post-grant proceedings
declared or granted by the USPTO and similar proceedings in foreign
countries, regarding intellectual property rights with respect to
our current or future products. The cost to us of any patent
litigation or other proceeding, even if resolved in our favor,
could be substantial. Some of our competitors may be able to
sustain the costs of such litigation or proceedings more
effectively than we can because of their substantially greater
financial resources. Patent litigation and other proceedings may
also absorb significant management time. Uncertainties resulting
from the initiation and continuation of patent litigation or other
proceedings could impair our ability to compete in the marketplace.
The occurrence of any of the foregoing could have a material
adverse effect on our business, financial condition or results of
operations.
We may not be able to protect our intellectual property rights
throughout the world.
Filing,
prosecuting and defending patents on product candidates in all
countries throughout the world would be prohibitively expensive,
and our intellectual property rights in some countries outside the
United States can be less extensive than those in the United
States. In addition, the laws of some foreign countries do not
protect intellectual property rights to the same extent as federal
and state laws in the United States and in some cases may even
force us to grant a compulsory license to competitors or other
third parties. Consequently, we may not be able to prevent third
parties from practicing our inventions in all countries outside the
United States, or from selling or importing products made using our
inventions in and into the United States or other jurisdictions.
Competitors may use our technologies in jurisdictions where we have
not obtained patent protection to develop their own products and
further, may export otherwise infringing products to territories
where we have patent protection, but enforcement is not as strong
as that in the United States. These products may compete with our
products and our patents or other intellectual property rights may
not be effective or sufficient to prevent them from
competing.
Many
companies have encountered significant problems in protecting and
defending intellectual property rights in foreign jurisdictions.
The legal systems of certain countries, particularly certain
developing countries, do not favor the enforcement of patents and
other intellectual property protection, particularly those relating
to biopharmaceuticals, which could make it difficult for us to stop
the infringement of our patents or marketing of competing products
in violation of our proprietary rights generally. Proceedings to
enforce our patent rights in foreign jurisdictions could result in
substantial costs and divert our efforts and attention from other
aspects of our business, could put our patents at risk of being
invalidated or interpreted narrowly and our patent applications at
risk of not issuing and could provoke third parties to assert
claims against us. We may not prevail in any lawsuits that we
initiate and the damages or other remedies awarded, if any, may not
be commercially meaningful. Accordingly, our efforts to enforce our
intellectual property rights around the world may be inadequate to
obtain a significant commercial advantage from the intellectual
property that we develop or license.
In
addition, our ability to protect and enforce our intellectual
property rights may be adversely affected by unforeseen changes in
domestic and foreign intellectual property laws.
If we are unable to keep our trade secrets confidential, our
technologies and other proprietary information may be used by
others to compete against us.
In
addition to our reliance on patents, we attempt to protect our
proprietary technologies and processes by relying on trade secret
laws and agreements with our employees and other persons who have
access to our proprietary information. These agreements and
arrangements may not provide meaningful protection for our
proprietary technologies and processes in the event of unauthorized
use or disclosure of such information, and may not provide an
adequate remedy in the event of unauthorized disclosure of
confidential information. In addition, our competitors may
independently develop substantially equivalent technologies and
processes or gain access to our trade secrets or technology, either
of which could materially and adversely affect our competitive
position.
Risks Related to Obligations in Our 2014 and 2015 Private
Placements
Under agreements relating to our 2014 and 2015 private placements,
we are required to allow purchasers in the 2014 and 2015 private
placements to participate in certain future equity and debt
financings, which may restrict our ability to raise funds on
acceptable terms, or at all.
For
four years after our 2014 and 2015 private placements, unless the
FDA earlier approves bremelanotide for HSDD, the purchasers have
the right of first negotiation on any subsequent equity or debt
financing. If we do not agree to terms of a financing with the
purchasers, depending on pricing of the financing, the purchasers
have the right to purchase between 83.5% and all of the financing.
We will require significant additional resources and capital for
our product development programs. The right of first negotiation
and right of participation granted to the purchasers in our 2014
and 2015 private placements may make it more difficult to raise
additional funding through public or private equity or debt
financings or other sources. If we are able to obtain additional
funding, such funding may not be available on acceptable
terms
Under agreements relating to our 2014 and 2015 private placements,
so long as any Series C 2014 and Series E 2015 warrants are
outstanding, we are required to redeem such warrants at the option
of the holders in the event of any takeover, change of control or
other fundamental transaction which we permit.
Under
the purchase agreements and forms of our Series C and Series E
warrants for our 2014 and 2015 private placements, if we permit,
make or allow a takeover, change of control or other fundamental
transaction, including any transfer of all or substantially all of
our properties or assets, then so long as any warrants remain
outstanding we are required, as elected by such warrant holders, to
pay such holders a warrant early termination price tied to the
greater of the then market price of our common stock or the amount
per share paid to any other person. The application of these
provisions could adversely affect our financial position and have
the effect of delaying or preventing a change of control or other
fundamental transaction, which could adversely affect the market
price of our common stock, and could make any potential acquisition
or change of control more costly.
Under agreements relating to our 2014 and 2015 private placements,
so long as any Series C 2014 and Series E 2015 warrants are
outstanding, we are required to oppose any takeover or change of
control that does not provide specified rights to holders of such
warrants.
Under
the purchase agreements and forms of our Series C and Series E
warrants for our 2014 and 2015 private placements, so long as any
such warrants remain outstanding we are required to (i) not permit,
(ii) take necessary action to prevent both the occurrence or
consummation of, and (iii) not be a party to any fundamental
transaction, change of control or similar event unless
contractually-specified rights are provided with respect to payment
of any such warrant early termination price tied to the greater of
the then market price of our common stock or the amount per share
paid to any other person.
We are
also required, subject to the exercise by our board of its
fiduciary duties, to take all reasonable efforts to adopt a poison
pill or any other anti-takeover provision or method necessary to
prevent the fundamental transaction, change of control or similar
event. The application of these provisions could have the effect of
delaying or preventing a change of control or other fundamental
transaction, which could adversely affect the market price of our
common stock, and could make any potential acquisition or change of
control more costly.
Risks Related to the Ownership of Our Common Stock
Our stock price is volatile and may fluctuate in a way that is
disproportionate to our operating performance and we expect it to
remain volatile, which could limit investors’ ability to sell
stock at a profit.
The
volatile price of our stock makes it difficult for investors to
predict the value of their investment, to sell shares at a profit
at any given time or to plan purchases and sales in advance. A
variety of factors may affect the market price of our common stock.
These include, but are not limited to:
●
publicity regarding
actual or potential clinical results relating to products under
development by our competitors or us;
●
delay or failure in
initiating, completing or analyzing preclinical or clinical trials
or unsatisfactory designs or results of these trials;
●
interim decisions
by regulatory agencies, including the FDA, as to clinical trial
designs, acceptable safety profiles and the benefit/risk ratio of
products under development;
●
achievement or
rejection of regulatory approvals by our competitors or by
us;
●
announcements of
technological innovations or new commercial products by our
competitors or by us;
●
developments
concerning proprietary rights, including patents;
●
developments
concerning our collaborations;
●
regulatory
developments in the United States and foreign
countries;
●
economic or other
crises and other external factors;
●
period-to-period
fluctuations in our revenue and other results of
operations;
●
changes in the
structure of healthcare payment systems or other actions that
affect the effective reimbursement rates for treatment regimens
containing our products;
●
changes in
financial estimates and recommendations by securities analysts
following our business or our industry;
●
sales of our common
stock (or the perception that such sales could occur);
and
●
the other factors
described in this “Risk Factors” section.
We will
not be able to control many of these factors, and we believe that
period-to-period comparisons of our financial results will not
necessarily be indicative of our future performance. If our
revenues, if any, in any particular period do not meet
expectations, we may not be able to adjust our expenditures in that
period, which could cause our operating results to suffer further.
If our operating results in any future period fall below the
expectations of securities analysts or investors, our stock price
may fall by a significant amount.
For the
12-month period ended June 30, 2017, the price of our stock has
been volatile, ranging from a high of $0.90 per share to a low of
$0.29 per share. In addition, the stock market in general, and the
market for biotechnology companies in particular, has experienced
extreme price and volume fluctuations that may have been unrelated
or disproportionate to the operating performance of individual
companies. These broad market and industry factors may seriously
harm the market price of our common stock, regardless of our
operating performance.
As a public company in the United States, we are subject to the
Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”). We can
provide no assurance that we will, at all times, in the future be
able to report that our internal controls over financial reporting
are effective.
Companies
that file reports with the SEC, including us, are subject to the
requirements of Section 404 of Sarbanes-Oxley. Section 404 requires
management to establish and maintain a system of internal control
over financial reporting, and annual reports on Form 10-K filed
under the Exchange Act, must contain a report from management
assessing the effectiveness of a company’s internal control
over financial reporting. Ensuring that we have adequate internal
financial and accounting controls and procedures in place to
produce accurate financial statements on a timely basis will be a
costly and time-consuming effort that needs to be re-evaluated
frequently. Failure on our part to have effective internal
financial and accounting controls would cause our financial
reporting to be unreliable, could have a material adverse effect on
our business, operating results, and financial condition, and could
cause the trading price of our common stock to fall
dramatically.
If securities or industry analysts do not publish research or
publish unfavorable research about our business, our stock price
and trading volume could decline.
As a
smaller company, it may be difficult for us to attract or retain
the interest of equity research analysts. A lack of research
coverage may adversely affect the liquidity of and market price of
our common stock. We do not have any control of the equity research
analysts or the content and opinions included in their reports. The
price of our stock could decline if one or more equity research
analysts downgrade our stock or issue other unfavorable commentary
or research. If one or more equity research analysts ceases
coverage of our company, or fails to publish reports on us
regularly, demand for our stock could decrease, which in turn could
cause our stock price or trading volume to decline.
Holders of our preferred stock may have interests different from
our common stockholders.
We are
permitted under our certificate of incorporation to issue up to
10,000,000 shares of preferred stock. We can issue shares of our
preferred stock in one or more series and can set the terms of the
preferred stock without seeking any further approval from our
common stockholders. 4,030 shares of our Series A Preferred Stock
remain outstanding as of September 21, 2017. Each share of Series A
Preferred Stock is convertible at any time, at the option of the
holder, and such conversion could dilute the value of our common
stock to current stockholders and could adversely affect the market
price of our common stock. The conversion price decreases if we
sell common stock (or equivalents) for a price per share less than
the conversion price or less than the market price of the common
stock and is also subject to adjustment upon the occurrence of a
merger, reorganization, consolidation, reclassification, stock
dividend or stock split which results in an increase or decrease in
the number of shares of common stock outstanding. Upon (i)
liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary, (ii) sale or other disposition of all or
substantially all of the assets of the Company, or (iii) any
consolidation, merger, combination, reorganization or other
transaction in which the Company is not the surviving entity or in
which the shares of common stock constituting in excess of 50% of
the voting power of the Company are exchanged for or changed into
other stock or securities, cash and/or any other property, after
payment or provision for payment of the debts and other liabilities
of the Company, the holders of Series A Preferred Stock will be
entitled to receive, pro rata and in preference to the holders of
any other capital stock, an amount per share equal to $100 plus
accrued but unpaid dividends, if any. Any preferred stock that we
issue may rank ahead of our common stock in terms of dividend
priority or liquidation premiums and may have greater voting rights
than our common stock.
Because we do not anticipate paying any cash dividends on our
common stock in the foreseeable future, capital appreciation, if
any, will be your sole source of gains.
We do
not anticipate paying any cash dividends in the foreseeable future
and intend to retain future earnings, if any, for the development
and expansion of our business. Our outstanding Series A Preferred
Stock, consisting of 4,030 shares on September 21, 2017, provides
that we may not pay a dividend or make any distribution to holders
of any class of stock unless we first pay a special dividend or
distribution of $100 per share to the holders of the Series A
Preferred Stock. In addition, the terms of existing or future
agreements may limit our ability to pay dividends. As a result,
capital appreciation, if any, of our common stock will be your sole
source of gain for the foreseeable future.
Anti-takeover provisions of Delaware law and our charter documents
may make potential acquisitions more difficult and could result in
the entrenchment of management.
We are
incorporated in Delaware. Anti-takeover provisions of Delaware law
and our charter documents may make a change in control or efforts
to remove management more difficult. Also, under Delaware law, our
board of directors may adopt additional anti-takeover measures.
Under Section 203 of the Delaware General Corporation Law, a
corporation may not engage in a business combination with an
“interested stockholder” for a period of three years
after the date of the transaction in which the person first becomes
an “interested stockholder,” unless the business
combination is approved in a prescribed manner.
We are
authorized to issue up to 300,000,000 shares of common stock. To
the extent that we sell or otherwise issue authorized but currently
unissued shares, this could have the effect of making it more
difficult for a third party to acquire a majority of our
outstanding voting stock.
Our
charter authorizes us to issue up to 10,000,000 shares of preferred
stock and to determine the terms of those shares of stock without
any further action by our stockholders. If we exercise this right,
it could be more difficult for a third party to acquire a majority
of our outstanding voting stock.
In
addition, our equity incentive plans generally permit us to
accelerate the vesting of options and other stock rights granted
under these plans in the event of a change of control. If we
accelerate the vesting of options or other stock rights, this
action could make an acquisition more costly.
The
application of these provisions could have the effect of delaying
or preventing a change of control, which could adversely affect the
market price of our common stock.
We are a smaller reporting company and the reduced disclosure
requirements applicable to smaller reporting companies may make our
Common Stock less attractive to investors.
We are
currently a “smaller reporting company” as defined in
the Exchange Act. Smaller reporting companies are able to provide
simplified executive compensation disclosures in their filings, are
exempt from the provisions of Section 404(b) of the Sarbanes-Oxley
Act requiring that an independent registered public accounting firm
provide an attestation report on the effectiveness of internal
control over financial reporting, and have certain other decreased
disclosure obligations in their SEC filings. We cannot predict
whether investors will find our common stock less attractive
because of our reliance on any of these exemptions. If some
investors find our common stock less attractive as a result, there
may be a less active trading market for our common stock and our
stock price may be more volatile.
As of September 21, 2017 there were 57,174,292 shares of common
stock underlying outstanding convertible preferred stock, options,
restricted stock units and warrants. Stockholders may experience
dilution from the conversion of preferred stock, exercise of
outstanding options and warrants and vesting of restricted stock
units.
As of
September 21, 2017, holders of our outstanding dilutive securities
had the right to acquire the following amounts of underlying common
stock:
●
60,592 shares
issuable on the conversion of immediately convertible Series A
Convertible preferred stock, subject to adjustment, for no further
consideration;
●
8,977,812 shares
issuable on the exercise of stock options, at exercise prices
ranging from $0.37 to $6.60 per share;
●
5,263,617 shares
issuable under restricted stock units which vest on dates between
December 8, 2017 and September 7, 2021, subject to the fulfillment
of service conditions; and
●
42,872,271 shares
issuable on the exercise of warrants at exercise prices ranging
from $0.01 to $0.91 per share, of which 16,472,418 are prefunded
warrants with an exercise price of $0.01.
If the
holders convert, exercise or receive these securities, or similar
dilutive securities we may issue in the future, stockholders may
experience dilution in the net book value of their common stock. In
addition, the sale or availability for sale of the underlying
shares in the marketplace could depress our stock price. We have
registered or agreed to register for resale substantially all of
the underlying shares listed above. Holders of registered
underlying shares could resell the shares immediately upon
issuance, which could result in significant downward pressure on
our stock price.
Our failure to meet the continued listing requirements of the NYSE
MKT could result in a de-listing of our common stock.
Our
common shares are listed on the NYSE MKT, a national securities
exchange, under the symbol “PTN”. Although we currently
meet the NYSE MKT’s listing standards, which generally
mandate that we meet certain requirements relating to
stockholders’ equity, market capitalization, aggregate market
value of publicly held shares and distribution requirements, we
cannot assure you that we will be able to continue to meet the NYSE
MKT’s listing requirements. If we fail to satisfy the
continued listing requirements of the NYSE MKT, such as the
corporate governance requirements or the minimum closing bid price
requirement, the NYSE MKT may take steps to de-list our common
stock. If the NYSE MKT delists our securities for trading on its
exchange, we could face significant material adverse consequences,
including:
●
a limited
availability of market quotations for our securities;
●
reduced liquidity
with respect to our securities;
●
a determination
that our shares of common stock are “penny stock” which
will require brokers trading in our shares of common stock to
adhere to more stringent rules, possibly resulting in a reduced
level of trading activity in the secondary trading market for our
shares of common stock;
●
a limited amount of
news and analyst coverage for our company; and
●
a decreased ability
to issue additional securities or obtain additional financing in
the future.
Such a
de-listing would likely have a negative effect on the price of our
common stock and would impair your ability to sell or purchase our
common stock when you wish to do so. In the event of a de-listing,
we may take actions to restore our compliance with the NYSE
MKT’s listing requirements, but we can provide no assurance
that any such action taken by us would allow our common stock to
become listed again, stabilize the market price or improve the
liquidity of our common stock, prevent our common stock from
dropping below the NYSE MKT minimum bid price requirement or
prevent future non-compliance with the NYSE MKT’s listing
requirements.
The
National Securities Markets Improvement Act of 1996, which is a
federal statute, prevents or preempts the states from regulating
the sale of certain securities, which are referred to as
“covered securities.” Our common shares are considered
to be covered securities because they are listed on the NYSE MKT.
Although the states are preempted from regulating the sale of our
securities, the federal statute does allow the states to
investigate companies if there is a suspicion of fraud, and, if
there is a finding of fraudulent activity, then the states can
regulate or bar the sale of covered securities in a particular
case. Further, if we were no longer listed on the NYSE MKT, our
common stock would not be covered securities and we would be
subject to regulation in each state in which we offer our
securities.