We file annual, quarterly and current reports, proxy statements and other documents with the SEC under the Securities Exchange Act of 1934. The SEC maintains an Internet website that contains reports, proxy and information statements and other information regarding issuers, including Progenics, which file electronically with the SEC. You may obtain documents that we file with the SEC at
www.sec.gov
, and read and copy them at the SEC’s Public Reference Room at 100 F Street NE, Washington, DC 20549. You may obtain information on operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. We also make available free of charge our annual, quarterly and current reports and proxy materials on
www.progenics.com
.
Additional information concerning Progenics and its business may be available in press releases or other public announcements and quarterly and current reports and documents filed with the SEC. Information on or accessed through our website is not included in Progenics
’ SEC filings.
Item 1.
Business
Overview
Progenics Pharmaceuticals, Inc.
and its subsidiaries (collectively the “Company,” “Progenics”, “we”, or “us”) develop innovative medicines and other technologies to target and treat cancer. Our pipeline includes: (1) therapeutic agents designed to precisely target cancer (AZEDRA, 1095, and PSMA TTC); (2) prostate-specific membrane antigen (“PSMA”) targeted imaging agents for prostate cancer (1404 and PyL
TM
); and (3) imaging analysis technology. Our first commercial product, RELISTOR (methylnaltrexone bromide) for opioid-induced constipation, is partnered with Valeant. Progenics Pharmaceuticals, Inc. was incorporated in the State of Delaware in 1986.
Pipeline
Our goal is to become a
preeminent, patient-centric oncology company and we intend to make a difference in how patients with prostate cancer, pheochromocytoma and paraganglioma are diagnosed and treated. Our pipeline includes the following products and product candidates:
Product / Candidate
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Description
|
|
Status
|
Ultra-Orphan Theranostic
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AZEDRA
|
|
Treatment of malignant and/or recurrent and/or unresectable pheochromocytoma and paraganglioma
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|
New Drug Application ("NDA") submitted and accepted by the U.S. Food and Drug Administration ("FDA"); target action date of April 30, 2018 under the Prescription Drug User Fee Act ("PDUFA")
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Expanded Access Program in progress
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Prostate Cancer Theranostics
|
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1404
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Technetium-99m labeled PSMA targeted SPECT/CT imaging agent for prostate cancer
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Completed enrollment in Phase 3 trial
|
PyL
|
|
Fluorinated PSMA-targeted PET/CT imaging agent for prostate cancer
|
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Phase 2/3 trial in progress
|
1095
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Iodine-131 labeled PSMA-targeted small molecule therapeutic for treatment of metastatic prostate cancer
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Phase 1 trial in progress
|
PSMA TTC (Targeted Thorium Conjugate)
[antibody licensed to Bayer]
|
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Thorium-227 labeled PSMA-targeted antibody therapeutic for treatment of metastatic prostate cancer
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Preclinical development in progress
|
automated bone scan index ("aBSI")
[licensed to Fuji]
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Software that quantifies the hotspots on bone scans and automatically calculates the bone scan index value
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Sold in Japan
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Opioid-Induced Constipation ("OIC") Treatment
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RELISTOR Subcutaneous Injection
[licensed to Valeant]
|
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Treatment of OIC in adults with chronic non-cancer pain and treatment of OIC in advanced-illness adult patients receiving palliative care when laxative therapy has not been sufficient
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Sold in the U.S., European Union, and Canada
|
RELISTOR Tablets
[licensed to Valeant]
|
|
Treatment of OIC in adults with chronic non-cancer pain
|
|
Sold in the U.S. (commercialization commenced in third quarter of 2016)
|
Our
principal clinical-stage product candidates are:
|
●
|
AZEDRA
is a radiotherapeutic product candidate in development as a treatment for malignant, recurrent, and/or unresectable pheochromocytoma and paraganglioma, rare tumors found in the adrenal glands and outside of the adrenal glands, respectively. AZEDRA has been granted Breakthrough Therapy and Orphan Drug designations, as well as Fast Track status in the U.S. Under a Special Protocol Assessment (“SPA”) agreement with the FDA, we completed a Phase 2 registrational trial in patients with malignant, recurrent, and/or unresectable pheochromocytoma and paraganglioma. The FDA granted Priority Review of our NDA and has set an action date of April 30, 2018 under the Prescription Drug User Fee Act (“PDUFA”). There are currently no FDA-approved therapies for the treatment of these ultra-rare diseases.
|
|
●
|
1404
is a technetium-99m labeled small molecule which binds to PSMA and is used as an imaging agent to diagnose and detect localized prostate cancer as well as soft tissue and bone metastases. In December 2017, we completed enrollment in a Phase 3 trial assessing the diagnostic accuracy of 1404 imaging in men with newly-diagnosed or low-grade prostate cancer, whose biopsy indicates a histopathologic Gleason grade of ≤3+4 severity and/or are candidates for active surveillance. The study was designed to evaluate the (i) specificity of 1404 imaging to identify patients without clinically significant prostate cancer and (ii) sensitivity of 1404 to identify patients with clinically significant disease. The Phase 3 study enrolled approximately 450 patients in the U.S. and Canada. We are developing, based on data from our 1404 clinical trials, PSMA computer-assisted diagnostic tools (“PSMA CADx”) that will automate reading of PSMA-targeted SPECT images based on deep learning.
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●
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PyL (also known as [18F]DCFPyL)
is a fluorinated PSMA-targeted Positron Emission Topography (“PET”) imaging agent that enables visualization of both bone and soft tissue metastases to determine the presence or absence of recurrent and/or metastatic prostate cancer. A Phase 2/3 trial is ongoing to assess the diagnostic performance of PyL PET/CT imaging to detect prostate cancer in patients with recurrent and/or metastatic disease. In 2016, we launched PyL Research Access Program
TM
making limited doses of PyL available to researchers.
|
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●
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1095
is a PSMA-targeted Iodine-131 labeled small molecule that is designed to deliver a dose of beta radiation directly to prostate cancer cells with minimal impact on the surrounding healthy tissues. In collaboration with Memorial Sloan-Kettering Cancer Center, a Phase 1 trial is ongoing to assess the safety, tolerability, and preliminary efficacy of 1095, as well as define an optimal dose for a Phase 2 trial, in patients with metastatic castration-resistant prostate cancer (“mCRPC”) who have demonstrated tumor avidity to 1095.
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●
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PSMA
TTC
is a thorium-227 labeled PSMA-targeted antibody therapeutic. The PSMA TTC is designed to deliver a dose of alpha radiation directly to prostate cancer cells with minimal impact on the surrounding healthy tissues. We granted Bayer AS (“Bayer”) exclusive worldwide rights to develop and commercialize products using our PSMA antibody technology in combination with Bayer’s alpha-emitting radionuclides.
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●
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aBSI
quantifies the hotspots on bone scans of prostate cancer patients and automatically calculates the bone scan index value, representing the disease burden of prostate cancer shown on the bone scan. This quantifiable and reproducible calculation of the bone scan index value is intended to aid in the diagnosis and treatment of prostate cancer and may have utility in monitoring the course of the disease. aBSI is sold as a standalone software program to FUJIFILM RI Pharma Co., Ltd. (“Fuji”) in Japan.
|
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●
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RELISTOR
is a treatment for OIC that addresses its underlying mechanism of OIC and decreases the constipating side effects induced by opioid pain medications such as morphine and codeine without diminishing their ability to relieve pain. RELISTOR is approved in two forms a subcutaneous injection and an oral tablet (450 mg once daily). RELISTOR subcutaneous injection is being sold in the U.S., European Union (“E.U.”), and Canada, and RELISTOR tablets are being sold in the U.S. Under the RELISTOR License Agreement, Valeant is responsible for developing and commercializing RELISTOR.
|
RELISTOR net sales and related royalty income during the years 201
5 – 2017 are set forth below. Our recognition of royalty income for financial reporting purposes is explained in
Management’s Discussion and Analysis of Financial Condition and Results of Operations (
“
MD&A
”
)
and our consolidated financial statements included elsewhere in this document.
|
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First
|
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Second
|
|
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Third
|
|
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Fourth
|
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Full
|
|
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|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Year
|
|
|
|
(in thousands)
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
14,100
|
|
|
$
|
17,300
|
|
|
$
|
17,100
|
|
|
$
|
24,600
|
|
|
$
|
73,100
|
|
Royalty income
|
|
|
2,119
|
|
|
|
2,601
|
|
|
|
2,562
|
|
|
|
3,683
|
|
|
|
10,965
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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2016
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
16,600
|
|
|
$
|
15,900
|
|
|
$
|
22,100
|
|
|
$
|
16,000
|
|
|
$
|
70,600
|
|
Royalty income
|
|
|
2,189
|
|
|
|
2,380
|
|
|
|
3,319
|
|
|
|
2,407
|
|
|
|
10,295
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
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2015
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
900
|
|
|
$
|
11,900
|
|
|
$
|
8,000
|
|
|
$
|
23,000
|
|
|
$
|
43,800
|
|
Royalty income
|
|
|
140
|
|
|
|
1,773
|
|
|
|
1,208
|
|
|
|
3,452
|
|
|
|
6,573
|
|
We continue to consider opportunities for strategic collaborations, out-licenses, and other arrangements with biopharmaceutical companies involvin
g proprietary research, development, clinical and commercialization programs, and may in the future also in-license or acquire additional oncology compounds and/or programs.
Clinical Trial Activities
For purposes of this report, in general Phase 1 trials
are initial evaluations of safety in humans which study mechanism of action and metabolism; Phase 2 trials evaluate safety, dosing and activity or efficacy, and continue safety evaluation; and Phase 3 trials involve larger scale evaluations of safety, efficacy and dosing.
Our
practice is and has been to announce commencement and results of all our significant clinical trials in press releases, medical and scientific meetings, and other venues. The following is a summary of current clinical trial activities involving our principal product candidates.
AZEDRA.
In 2006, a Phase 1 trial was commenced with AZEDRA in 11 patients with malignant, recurrent and/or unresectable pheochromocytoma and paraganglioma and malignant carcinoid tumors to assess the safety, radiation dosimetry, and distribution metabolism of a single imaging dose of this compound. Following completion of this study, two dose-finding studies were conducted to determine a maximum tolerated therapeutic dose, and to assess safety, dosimetry and preliminary efficacy of AZEDRA in 21 patients with malignant, recurrent, and/or unresectable pheochromocytoma and paraganglioma and 15 with high-risk neuroblastoma, respectively.
Subsequently, a Phase 2 trial of AZEDRA was commenced under an SPA agreement with the FDA regarding the design of this trial to evaluate the efficacy and safety of the administration of two therapeutic doses of the compound in patients with malignant,
recurrent, and/or unresectable pheochromocytoma and paraganglioma. These data supported the filing of an NDA, which was accepted by the FDA on December 29, 2017, and granted Priority Review with an action date of April 30, 2018 under the PDUFA. The final results showed that 17 (25%) of the 68 evaluable patients experienced a 50% or greater reduction of all antihypertensive medication for at least 6 months, achieving the primary endpoint specified in the SPA. Favorable results were observed from a key secondary endpoint, the proportion of patients with overall tumor response as measured by Response Evaluation Criteria In Solid Tumors (RECIST) criteria. Of the patients who received at least one AZEDRA therapeutic dose 92.2% achieved partial response or stable disease. Median survival time as of March 10, 2017 was 36.7 months (95% CI 29.9 – 49.1) from first AZEDRA therapeutic dosing in the overall study population, and 48.73 months among patients who received two therapeutic doses, compared to 17.42 months among patients who received only one therapeutic dose. The Kaplan-Meier estimates of survival were 91.0%, 66.8%, and 51.5% at 1, 2, and 3 years, respectively, following initial therapeutic dosing. Long term follow-up continues.
Of the 74 patients who receive
d any dose of AZEDRA, including an imaging dose, 43.2% of patients reported serious treatment-emergent adverse events (“SAEs”), the most frequently reported of which were hematologic (17.6%) treatment-related events. Other treatment-related SAEs reported by more than one subject included pulmonary embolism (2.7%) and myelodysplastic syndrome (“MDS”) (4.1%). There were two additional related malignancies, one case of acute myeloid leukemia (“AML”) (1.4%) and one case of acute lymphocytic leukemia (1.4%). There were two treatment related deaths during long term follow up, one due to MDS and the other due to AML.
1404.
We conducted five Phase 1 trials with 1404 in healthy volunteers as well as men with prostate cancer, to establish proof-of-concept and dosimetry, and to assess a simplified kit preparation as compared to multi-step preparation. We then conducted a Phase 2 trial in the U.S. and Europe to assess the safety and ability of 1404 to detect prostate cancer within the prostate gland. Analysis of 1404 SPECT/CT images from this study showed that uptake of 1404 in the lobes of the prostate gland correlated significantly with Gleason score (p<0.0001). No deaths, SAEs, or adverse events (“AEs”) leading to discontinuations occurred during the study. Of the 105 subjects who received a 1404 injection, 4 subjects reported a total of 10 treatment-emergent adverse events (“TEAEs”) with 1 related to 1404 (infusion site extravasation). No discernible trends in hematology, clinical chemistries, vital signs, or physical findings were observed during the study.
Based on results from these studies, a multi-center, open-label
Phase 3 trial was initiated in December 2015 to evaluate the (i) specificity of 1404 to detect clinically insignificant prostate cancer and (ii) sensitivity of 1404 to detect clinically significant disease in patients with newly-diagnosed or low-grade prostate cancer, whose biopsy indicates a histopathologic Gleason grade of ≤3+4 severity and/or were candidates for active surveillance (N=approximately 450 patients). In December 2017, we completed enrollment in the Phase 3 trial.
PyL.
In July 2015, we and the Johns Hopkins University entered into an exclusive worldwide licensing agreement for PyL, pursuant to which we obtained exclusive, worldwide (excluding Australia and New Zealand) rights to develop and commercialize PyL in PET imaging applications. PyL is a clinical-stage fluorinated PSMA-targeted PET imaging agent for prostate cancer. PyL has shown potential for use in identifying metastatic prostate cancer.
In December
2016, we initiated a Phase 2/3 trial to assess the safety and efficacy of PyL in the detection of prostate cancer. In addition to our sponsored studies and clinical trial collaborations we anticipate that PyL’s potential activity will also be explored in investigator sponsored studies at various academic institutions.
1095.
In February 2017, a Phase 1 clinical trial with 1095 began at Memorial Sloan-Kettering Cancer Center. This Phase 1 open-label, dose-escalation study plans to enroll approximately 30 patients with mCRPC who have demonstrated tumor avidity to 1095. The primary objectives of this study include determination of maximum tolerated dose, safety and tolerability, biodistribution, and efficacy.
EXINI
Acquisition
Update
In
November 2015, we concluded a public tender offer (the “Offer”) conducted pursuant to Swedish law to acquire EXINI, which develops advanced imaging analysis tools. As of the end of the offer acceptance period on that date, the Offer had been accepted by shareholders representing a total of 17,794,850 shares, corresponding to 96.81% of the total shares in EXINI. In December 2015, we commenced a judicial process in Sweden for acquiring the remaining shares of EXINI and EXINI was delisted and ceased to be publicly traded effective as of the close of trading on December 4, 2015. On December 8, 2016, a Swedish arbitral tribunal awarded us advanced title to the remaining shares of EXINI and, as of that date, EXINI became a wholly-owned subsidiary with 100% of the voting shares owned by us. In connection with the acquisition of the remaining shares of EXINI, in December 2016, we paid $368 thousand to the minority interest shareholders for the original purchase price and estimated interest, of which a net amount of $15 thousand was returned in 2017.
Research and Development Expenses
Research and development is essential to our business. During each of the years ended December 31, 201
7, 2016, and 2015, we incurred research and development costs of $42.5 million, $37.6 million, and $28.2 million, respectively. For additional information relating to our research and development expenses, see
Management’s Discussion and
An
alysis of Financial Condition and Results of Operations
–
Results of Operations
–
Research and Development
Expenses
.
License
and Other Agreements
Oncology
In January 2013, w
e acquired Molecular Insight by purchasing all of its outstanding capital stock for 4,452,593 shares of our common stock in a private transaction. Under the agreement, we also agreed to pay to the former stockholders potential milestones, in cash or our stock at our option, of up to $23.0 million contingent upon achieving specified commercialization events ($8.0 million for the first commercial sale of AZEDRA) and up to $70.0 million contingent upon achieving specified sales targets relating to the acquired company’s products. The timing of any such payments, if any, is highly uncertain. In addition to utilizing our own proprietary technology, we have a number of agreements with owners of intellectual property which we use or believe may be useful in the research, development and commercialization of product candidates, including:
|
•
|
A 2012 co-exclusive license agreement with the University of Zurich and the Paul Scherrer Institute for worldwide sublicensable rights to certain intellectual property related to production methodologies relevant to 1404. Under this agreement, we maintain related patent rights and are obligated to pay low single-digit royalties on products using the licensed technology, license maintenance fees creditable against royalties, an annual fee for an option
to expand the license’s field of use, and clinical and regulatory milestone payments aggregating to approximately $1.3 million. The agreement may be terminated by the licensors upon certain material defaults by, and automatically terminates upon certain bankruptcy events relating to Molecular Insight, and may be terminated by us on prior written notice.
|
|
•
|
A 2012 out-license agreement with
Fuji for the development and commercialization of 1404 in Japan. Under this agreement, we received upfront and milestone payments, of $3.0 million and $1.0 million, respectively, and we have the right to receive additional potential future milestone and royalty payments.
|
|
•
|
A 2000 exclusive license agreement with The University of Western Ontario for worldwide sublicensable rights to certain intellectual property related to production methodologies relevant to AZEDRA. Under this agreement, we maintain related patent rights and are obligated to pay low single-digit royalties on products using the licensed technology, minimum
annual royalties creditable against royalties and clinical and regulatory milestone payments aggregating to approximately $0.3 million. The agreement, which either party may terminate upon certain bankruptcy events or material defaults, continues through the last to expire of the related patent rights.
|
I
n August 2015, we entered into an exclusive worldwide licensing agreement for PyL with Johns Hopkins University. PyL, when used in conjunction with high-resolution PET imaging, has shown potential for use in identifying prostate cancer and sites of distant metastasis. Progenics intends to focus the development of PyL with high resolution PET imaging to detect and localize recurrent disease in patients who have experienced a biochemical relapse. Under this agreement, we are obligated to pay milestone payments, low single-digit royalties, patent costs and minimum annual royalties which are creditable against royalties, aggregating to approximately $2.9 million.
In April 2016,
we entered into an agreement with a Bayer subsidiary granting Bayer exclusive worldwide rights to develop and commercialize products using our PSMA antibody technology in combination with Bayer’s alpha-emitting radionuclides. Under this agreement, we received an upfront payment of $4.0 million and two milestone payments totaling $3.0 million, and we have the right to receive up to an additional $46.0 million in potential future development milestones and up to $130.0 million in commercialization milestones as well as royalty payments.
RELISTOR
Under
the RELISTOR License Agreement, Valeant is responsible for developing and commercializing RELISTOR worldwide, including completing clinical development necessary to support regulatory marketing approvals for potential new indications and formulations, and marketing and selling the product. Valeant is marketing RELISTOR directly through its specialty sales force in the U.S., and outside the U.S. directly through distribution and marketing partners. Under our Agreement with Valeant, we recognized a development milestone payment of $40.0 million upon U.S. marketing approval for subcutaneous RELISTOR in non-cancer pain patients in 2014, and a development milestone payment of $50.0 million for the U.S. marketing approval of an oral formulation of RELISTOR in July 2016. We are also eligible to receive up to $200.0 million of commercialization milestone payments upon achievement of specified U.S. sales targets, including:
Net Sales Level in any Single Calendar Year
|
|
Payment
|
|
In excess of $100 million
|
|
$
|
10,000
|
|
In excess of $150 million
|
|
|
15,000
|
|
In excess of $200 million
|
|
|
20,000
|
|
In excess of $300 million
|
|
|
30,000
|
|
In excess of $750 million
|
|
|
50,000
|
|
In excess of $1 billion
|
|
|
75,000
|
|
|
|
$
|
200,000
|
|
Each commercialization milestone payment is payable one time only, regardless of the number of times the condition is satisfied, and all six payments could be made within the same calendar year. We are also eligible to receive royalties from Valeant and its affiliates based on the following royalty scale: 15% on worldwide net sales up to $100
.0 million, 17% on the next $400.0 million in worldwide net sales, and 19% on worldwide net sales over $500.0 million each calendar year, and 60% of any upfront, milestone, reimbursement or other revenue (net of costs of goods sold, as defined, and territory-specific research and development expense reimbursement) Valeant receives from sublicensees outside the U.S.
The
RELISTOR License Agreement may be terminated by either party upon an uncured material breach or specified bankruptcy events. In addition, Valeant may terminate the RELISTOR License Agreement for unresolved safety or efficacy issues or at its discretion upon specified prior notice at any time, subject to our one-time right to postpone such termination for a specified period of time if we have not successfully transitioned the development and commercialization of the drug despite good faith and diligent efforts. See
Risk Factors.
W
e have licensed to Valeant our exclusive rights to develop and commercialize methylnaltrexone, the active ingredient of RELISTOR, which we in-licensed from the University of Chicago (“UC”). Our agreement with UC provides for an exclusive license to intellectual property in exchange for development and potential commercialization obligations, low single-digit royalties on commercial sales of resulting products and single-digit percentages of milestone and sublicensing revenues, and shared patent policing responsibilities. Under the UC agreement, as amended in connection with our RELISTOR collaborations, all of our royalty payment obligations in the U.S. expired at the end of 2017 and will expire at the end of 2018 outside the U.S. on the approved indications.
Valeant has also entered into license and distribution agreements to expand its sales channels outside of the U.S. for RELISTOR.
In January 2016, Valeant entered into a distribution agreement with Swedish Orphan Biovitrum AB, also known as Sobi, for RELISTOR in Western Europe, Russia and Greece. In 2016, we recognized license revenue of $720 thousand for our share of the upfront payment Valeant received from Lupin Limited pursuant to a distribution agreement for RELISTOR in Canada.
Patents and Proprietary Technology
P
rotection of our intellectual property rights is important to our business. We seek U.S. patent protection for many of our inventions, and generally file patent applications in Canada, Japan, European countries that are party to the European Patent Convention, and other countries on a selective basis in order to protect inventions we consider to be important to the development of business in those areas. Generally, patents issued in the U.S. are effective for either (i) 20 years from the earliest asserted filing date, if the application was filed on or after June 8, 1995, or (ii) the longer of 17 years from the date of issue or 20 years from the earliest asserted filing date, if the application was filed prior to that date.
In certain instances, the
U.S. patent term can be extended up to a maximum of five years to recapture a portion of the term during which FDA regulatory review was being conducted. The duration of foreign patents varies in accordance with the provisions of applicable local law, although most countries provide for patent terms of 20 years from the earliest asserted filing date and allow patent extensions similar to those permitted in the U.S.
Patents may not enable us to preclude competitors from commercializing drugs in direct competition with our products, and consequently may not provide us with any meaningful competitive advantage. See
Risk Factors.
We also rely on trade secrets, proprietary know-how and continuing technological innovation to develop and maintain a competitive position in our product areas. We require our employees, consultants and corporate partners who have access to our proprietary information to sign confidentiality agreements.
Information with respect to our
current patent portfolio is set forth below.
The original patents surrounding the A
ZEDRA program were licensed from the University of Western Ontario (“UWO”). The patent family directed to processes for making polymer precursors, as well as processes for making the final product, expire in 2018 in the U.S. and Canada. Other licensed patent families from UWO relate to alternative approaches for preparing AZEDRA, which if implemented, would expire in 2024 worldwide. We have pending applications worldwide directed to manufacturing improvements and the resulting compositions which, if issued, would expire in 2035.
Owned and in-licensed
patents relating to 1404 have expiration ranges of 2020 to 2029; we view as most significant the composition-of-matter patent on the compound, as well as technetium-99 labeled forms, which expire in 2029 worldwide. Patent applications directed to methods of use are pending worldwide, which if issued would expire in 2034.
The PyL patent family was licensed from Johns Hopkins University. Patent protection for the
composition-of-matter patents on the compound, radiolabeled forms of the compound, as well as methods of use, expire in 2030 in the U.S. Corresponding patent family members are pending or issued worldwide, all expiring in 2029.
Company-o
wned patents relating to 1095 have expiration ranges of 2027 to 2031 in the U.S. We view as most significant the composition-of-matter patent on this compound, as well as radiolabeled forms, which expires in 2027 in the U.S., as well as Europe. Additional U.S. patents are directed to stable compositions and radiolabeling processes which expire in 2030 and 2031, respectively.
We
own patents relating to automated detection of bone cancer metastases. The patents on this technology expire in 2028.
The intellectual property directed to PSMA
antibody comprises co-owned and in-licensed patents. Composition-of-matter patents have expirations of 2022 and 2023 in the U.S. Corresponding foreign counterpart patents will expire 2022. We view all of these patents as significant.
With regar
d to our RELISTOR-related intellectual property, the composition-of-matter patent for the active ingredient of RELISTOR, methylnaltrexone, has expired. UC, as well as we and our collaborators, have extended the methylnaltrexone patent estate with additional patents and pending patent applications covering various inventions relating to the product. Valeant has listed in the FDA Orange Book eight U.S. patents relating to subcutaneous RELISTOR, which have expiration dates ranging from 2017 to 2030, and eight U.S. patents relating to RELISTOR tablet, which have expiration dates ranging from 2017 to 2031. Four Canadian patents (expiring in 2024 and 2029) have been listed with Health Canada relating to subcutaneous RELISTOR.
We are aware of intellectual property rights held by third parties that relate to products or technologies we are developing. For example
, we are aware of others investigating and developing technologies, imaging agents and drug candidates directed toward PSMA or related compounds as well as in the case of methylnaltrexone other peripheral opioid antagonists, and of patents and applications held or filed by others in those areas. The validity of issued patents, patentability of claimed inventions in pending applications and applicability of any of them to our programs are uncertain and subject to change, and patent rights asserted against us could adversely affect our ability to commercialize or collaborate with others on specific products.
R
esearch, development, and commercialization of a biopharmaceutical product often require choosing between alternative development and optimization routes at various stages in the development process. Preferred routes depend upon current – and may be affected by subsequent – discoveries and test results and cannot be identified with certainty at the outset. There are numerous third-party patents in fields in which we work, and we may need to obtain license under patents of others in order to pursue a preferred development route of one or more of our product candidates. The need to obtain a license would decrease the ultimate value and profitability of an affected product. If we cannot negotiate such a license, we might have to pursue a less desirable development route or terminate the entire program altogether.
Government Regulation
We
and our product candidates are subject to comprehensive regulation by the FDA and comparable authorities in other countries. Pharmaceutical regulation currently is a topic of substantial interest in lawmaking and regulatory bodies in the U.S. and internationally, and numerous proposals exist for changes in FDA and non-U.S. regulation of pre-clinical and clinical testing, approval, safety, effectiveness, manufacturing, storage, recordkeeping, labeling, marketing, export, advertising, promotion and other aspects of biologics, small molecule drugs and medical devices, many of which, if adopted, could significantly alter our business and the current regulatory structure described below. See
Risk Factors.
FDA Regulation
FDA approval,
which involves review of scientific, clinical and commercial data, manufacturing processes and facilities, is required before a product candidate may be marketed in the U.S. This process is costly, time consuming and subject to unanticipated delays, and a drug candidate may fail to progress at any point.
None of our product candidates other than
RELISTOR has received marketing approval from the FDA or any other regulatory authority. The process required by the FDA before product candidates may be approved for marketing in the U.S. generally involves:
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pre-clinical laboratory and animal tests;
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submission to and favorable review by the FDA of an investigational new drug application before clinical trials may begin;
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adequate and well-controlled human clinical trials to establish the safety and efficacy of the product for its intended indication (animal and other nonclinical studies also are typically conducted during each phase of human clinical trials);
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submission to the FDA of a marketing application; and
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FDA review of the marketing application in order to determine, among other things, whether the product is safe and effective for its intended uses.
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Pre-clinical
tests include laboratory evaluation of product chemistry and animal studies to gain preliminary information about a compound’s pharmacology and toxicology and to identify safety problems that would preclude testing in humans. Since product candidates must generally be manufactured according to current Good Manufacturing Practices (“cGMP”), pre-clinical safety tests must be conducted by laboratories that comply with FDA good laboratory practices regulations. Pre-clinical testing is preceded by initial research related to specific molecular targets, synthesis of new chemical entities, assay development and screening for identification and optimization of lead compound(s).
R
esults of pre-clinical tests are submitted to the FDA as part of an IND which must become effective before clinical trials may commence. The IND submission must include, among other things, a description of the sponsor’s investigational plan; protocols for each planned study; chemistry, manufacturing and control information; pharmacology and toxicology information and a summary of previous human experience with the investigational drug. Unless the FDA objects to, makes comments or raises questions concerning an IND, it becomes effective 30 days following submission, and initial clinical studies may begin. Companies often obtain affirmative FDA approval, however, before beginning such studies.
Clinical trials involve the administration of the investigational new drug to healthy volunteers or to
individuals under the supervision of a qualified principal investigator. Clinical trials must be conducted in accordance with the FDA’s Good Clinical Practice requirements under protocols submitted to the FDA that detail, among other things, the objectives of the study, parameters used to monitor safety and effectiveness criteria to be evaluated. Each clinical study must be conducted under the auspices of an Institutional Review Board, which considers, among other things, ethical factors, safety of human subjects, possible liability of the institution and informed consent disclosure which must be made to participants in the trial.
Clinical trials are typically conducted in three sequential
phases, which may overlap. During Phase 1, when the drug is initially administered to human subjects, the product is tested for safety, dosage tolerance, absorption, metabolism, distribution and excretion. Phase 2 involves studies in a limited population to evaluate preliminarily the efficacy of the product for specific, targeted indications, determine dosage tolerance and optimal dosage and identify possible adverse effects and safety risks.
When a product
candidate is found in Phase 2 evaluation to have an effect and an acceptable safety profile, Phase 3 trials are undertaken in order to further evaluate clinical efficacy and test for safety within an expanded population. Safety studies are conducted in accordance with the FDA’s International Conference on Harmonization Guidelines. Phase 2 results do not guarantee a similar outcome in Phase 3 trials. The FDA may suspend clinical trials at any point in this process if it concludes that clinical subjects are being exposed to an unacceptable health risk.
A
n NDA is an application to the FDA to market a new drug. A Biologic License Application (“BLA”) is an application to market a biological product. The new drug or biological product may not be marketed in the U.S. until the FDA has approved the NDA or issued a biologic license. The NDA must contain, among other things, information on chemistry, manufacturing and controls; non-clinical pharmacology and toxicology; human pharmacokinetics and bioavailability; and clinical data. The BLA must contain, among other things, data derived from nonclinical laboratory and clinical studies which demonstrate that the product meets prescribed standards of safety, purity and potency, and a full description of manufacturing methods. Supplemental NDAs (“sNDAs”) are submitted to obtain regulatory approval for additional indications for a previously approved drug, and are reviewed by the FDA in a similar manner.
The results of the
pre-clinical studies and clinical studies, the chemistry and manufacturing data, and the proposed labeling, among other things, are submitted to the FDA in the form of an NDA or BLA. The FDA may refuse to accept the application for filing if certain administrative and content criteria are not satisfied, and even after accepting the application for review, the FDA may require additional testing or information before approval of the application, in either case based upon changes in applicable law or FDA policy during the period of product development and FDA regulatory review. The applicant’s analysis of the results of clinical studies is subject to review and interpretation by the FDA, which may differ from the applicant’s analysis, and in any event, the FDA must deny an NDA or BLA if applicable regulatory requirements are not ultimately satisfied. If regulatory approval of a product is granted, such approval may be made subject to various conditions, including post-marketing testing and surveillance to monitor the safety of the product, or may entail limitations on the indicated uses for which it may be marketed. Product approvals may also be withdrawn if compliance with regulatory standards is not maintained or if problems occur following initial marketing.
Orphan Drug, Fast Track
,
Breakthrough Therapy Designations
,
and Priority Review
Other FDA regulations and policies relating to drug approval have implications for certain of our current or future product candidates, particularly A
ZEDRA. Designation as an Orphan Drug is available under U.S., E.U., and other laws for drug candidates intended to treat rare diseases or conditions, and which if approved are granted a period of market exclusivity, subject to various conditions. Orphan Drug designation does not shorten or otherwise convey any advantage in the regulatory approval process. Under the Orphan Drug Act, the FDA may designate a product as an Orphan Drug if it is intended to treat a rare disease or condition, generally defined as a patient population of fewer than 200,000 in the U.S. AZEDRA is designated as an Orphan Drug.
In the
U.S., Orphan Drug designation entitles a party to certain financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages and user-fee waivers. In addition, if a product receives the first FDA approval for the indication for which it has orphan designation, the product is entitled to Orphan Drug exclusivity, which means the FDA may not approve any other application to market the same drug for the same indication for a period of seven years, except in limited circumstances, such as a showing of clinical superiority over the product with orphan exclusivity or where the manufacturer is unable to assure sufficient product quantity.
In cases where the extent and scope of patent protection for a product is limited, the exclusivity period resulting from Orphan Drug designation may be important in helping products maintain a competitive position. Even if a product obtains Orphan Drug exclusivity, however, that exclusivity may not effectively protect the product from competition because different drugs with different active moieties may be approved for the same condition. Even after an Orphan Drug is approved, the FDA may subsequently approve the same drug with the same active moiety for the same condition if the FDA concludes that the later drug is safer, more effective or makes a major contribution to patient care.
The FDA is also authorized to designate certain products for expedited review if they are intended to address an unmet medical need in the treatment of a serious or life-threatening disease or condition. These mechanisms for expedited review include fast track designation, breakthrough therapy designation and priority review designation. AZEDRA has received both fast track and breakthrough therapy designations.
T
he FDA may designate a product for fast track review if it is intended, whether alone or in combination with one or more other drugs, for the treatment of a serious or life-threatening disease or condition, and it demonstrates the potential to address unmet medical needs for such a disease or condition. For fast track products, sponsors may have greater interactions with the FDA and the FDA may initiate review of sections of a fast track product’s NDA before the application is complete. This rolling review may be available if the FDA determines, after preliminary evaluation of clinical data submitted by the sponsor, that a fast track product may be effective. The sponsor must also provide, and the FDA must approve, a schedule for the submission of the remaining information and the sponsor must pay applicable user fees. However, the FDA’s time period goal for reviewing a fast track application does not begin until the last section of the NDA is submitted. In addition, the fast track designation may be withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging in the clinical trial process.
In
2012, as part of the Food and Drug Administration Safety and Improvement Act, a new regulatory scheme was established allowing expedited review of products designated as “breakthrough therapies.” A product may be designated as a breakthrough therapy if it is intended, either alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The FDA may take certain actions with respect to breakthrough therapies, including holding meetings with the sponsor throughout the development process; providing timely advice to the product sponsor regarding development and approval; involving more senior staff in the review process; assigning a cross-disciplinary project lead for the review team; and taking other steps to design the clinical trials in an efficient manner.
Finally
, the FDA may designate a product for priority review if it is a drug that treats a serious condition and, if approved, would provide a significant improvement in safety or effectiveness. The FDA determines, on a case-by-case basis, whether the proposed drug represents a significant improvement when compared with other available therapies. Significant improvement may be illustrated by evidence of increased effectiveness in the treatment of a condition, elimination or substantial reduction of a treatment-limiting drug reaction, documented enhancement of patient compliance that may lead to improvement in serious outcomes, and evidence of safety and effectiveness in a new subpopulation. A priority designation is intended to direct overall attention and resources to the evaluation of such applications, and to shorten the FDA’s goal for taking action on a marketing application from ten months to six months.
Both before and after approval is obtained, a product, its manufacturer and the sponsor of the marketing application for the product are subject to comprehensive regulatory oversight. Violations of
existing or newly-adopted regulatory requirements at any stage, including the pre-clinical and clinical testing process, the approval process, or thereafter, may result in various adverse consequences, including FDA delay in approving or refusal to approve a product, withdrawal of an approved product from the market or the imposition of criminal penalties against the manufacturer or sponsor. Later discovery of previously unknown problems may result in restrictions on the product, manufacturer or sponsor, including withdrawal of the product from the market.
Regulation Outside the U.S.
Whether or not FDA approval has been obtained, approval of a pharmaceutical product by comparable government regulatory authorities
abroad must be obtained prior to marketing the product there. The approval procedure varies from country to country, and the time required may be longer or shorter than that required for FDA approval. The requirements for regulatory approval by governmental agencies in other countries prior to commercialization of products there can be rigorous, costly and uncertain, and approvals may not be granted on a timely basis or at all.
In
E.U. countries, Canada, Australia, and Japan, regulatory requirements and approval processes are similar in principle to those in the U.S. Regulatory approval in Japan requires that clinical trials of new drugs be conducted in Japanese patients. Depending on the type of drug for which approval is sought, there are currently two potential tracks for marketing approval in E.U. countries: mutual recognition and the centralized procedure. These review mechanisms may ultimately lead to approval in all E.U. countries, but each method grants all participating countries some decision-making authority in product approval. The centralized procedure, which is mandatory for biotechnology derived products, results in a recommendation in all member states, while the E.U. mutual recognition process involves country-by-country approval.
In other countries, regulatory requirements may require additional pre-clinical or clinical testing regardless of whether FDA
or European approval has been obtained. This is the case in Japan, where trials are required to involve patient populations which we and our other collaborators have not examined in detail. If a product is manufactured in the U.S., it is also subject to FDA and other U.S. export provisions. In most countries outside the U.S., coverage, pricing and reimbursement approvals are also required, which may affect the profitability of the affected product.
Other Regulation
In addition to regulations enforced by the FDA, we are also subject to regulation under the
U.S. Occupational Safety and Health Act, Environmental Protection Act, Toxic Substances Control Act, Resource Conservation and Recovery Act, and various other current and potential future U.S. federal, state or local regulations. In addition, our research is dependent on maintenance of licenses from various authorities permitting the acquisition, use and storage of quantities of radioactive isotopes that are critical for its manufacture and testing of research products. Biopharmaceutical research and development generally involves the controlled use of hazardous materials, chemicals, viruses, and various radioactive compounds. Even strict compliance with safety procedures for storing, handling, using and disposing of such materials prescribed by applicable regulations cannot completely eliminate the risk of accidental contaminations or injury from these materials, which may result in liability for resulting legal and regulatory violations as well as damages.
Manufacturing
Under
the RELISTOR License Agreement, Valeant is responsible for the manufacture and supply, at its expense, of all active pharmaceutical ingredient (“API”) and finished and packaged products for its RELISTOR commercialization efforts, including contracting with contract manufacturing organizations (“CMOs”) for supply of RELISTOR API and subcutaneous and oral finished drug product.
As to our other product candidates, the manufacture of biopharmaceuticals and radiopharmaceuticals is relatively complex and requires significant capital expenditures. As part of our ongoing efforts to manage our development costs and timely execute on our development plans, we rely on third parties for clinical manufacturing. We have engaged third-party CMOs to manufacture API and finished drug products for clinical trial supplies of
all of our product candidates, including AZEDRA, 1404, PyL, and 1095. We are in the final stages of establishing manufacturing capacity that we believe will be sufficient to deliver commercial supplies of AZEDRA. We have partnered with third-parties to produce clinical trial supplies of current clinical-stage product candidates, and may in the future undertake such efforts with respect to other assets and programs. As a result, we depend significantly on the availability of high quality CMO services. If we are unable to arrange for satisfactory CMO services, we would need to undertake such responsibilities on our own, resulting in our having to incur additional expenses and potentially delaying the development of our product candidates. See
Risk Factors
.
Commercial Organization
We plan to commercialize AZEDRA in the U.S. ourselves, if regulatory approval is obtained, and to seek strategic partnerships to commercialize AZEDRA in other
countries. We are building a small commercial organization for our U.S. efforts in preparation of the potential AZEDRA launch.
Competition
Competition in the biopharmaceutical industry is intense and characterized by ongoing research and development and technological change. We face competition from many
for-profit companies and major universities and research institutions in the U.S. and abroad. We face competition from companies marketing existing products or developing new products for diseases targeted by our technologies. Many of our competitors have substantially greater resources, experience in conducting pre-clinical studies and clinical trials and obtaining regulatory approvals for their products, operating experience, research and development and marketing capabilities and production capabilities than we do. Our products and product candidates under development may not compete successfully with existing products or products under development by other companies, universities and other institutions. Drug manufacturers that are first in the market with a therapeutic for a specific indication generally obtain and maintain a significant competitive advantage over later entrants and therefore, the speed with which industry participants move to develop products, complete clinical trials, approve processes and commercialize products is an important competitive factor.
RELISTOR
was the first FDA-approved product for any indication involving OIC. We are, however, aware of other approved and marketed products, as well as candidates in pre-clinical or clinical development, that target the side effects of opioid pain therapy. Our principal competitors in the field of OIC include Nektar Therapeutics, in collaboration with AstraZeneca PLC; Cubist Pharmaceuticals, a subsidiary of Merck & Co., Inc.; Mallinckrodt plc, in collaboration with Takeda Pharmaceutical Company Limited; Shionogi & Co., in collaboration with Purdue Pharma L.P.; and Mundipharma International Limited. Other prescription, as well as over-the-counter, laxatives are also used as first line for OIC.
As to our
oncology
pipeline, radiation and surgery are two traditional forms of treatment for prostate cancer. If the disease spreads, hormone (androgen) suppression therapy is often used to slow the cancer’s progression, but this form of treatment can eventually become ineffective. We are aware of several competitors who are developing or have received approval for treatments for castration-resistant prostate cancer. Our principal competitors in the field of mCRPC include Johnson & Johnson subsidiary Janssen Biotech, Inc.; Pfizer, Inc. in collaboration with Astellas Pharma US, Inc.; and Bayer HealthCare Pharmaceuticals Inc. Our principal competitors in the field of PSMA-targeted imaging agents include Aytu Bioscience Inc., Blue Earth Diagnostic, Inc. and Novartis AG.
There are currently no approved anticancer treatments in the U
.S. for malignant, recurrent, and/or unresectable pheochromocytoma and paraganglioma.
A significant amount of research in the biopharmaceutical field is carried out at academic and government institutions. An element of our research and development strategy
has been to in-license technology and product candidates from academic and government institutions. These institutions are sensitive to the commercial value of their findings and pursue patent protection and negotiate licensing arrangements to collect royalties for use of technology they develop. They may also market competitive commercial products on their own or in collaboration with competitors and compete with us in recruiting highly qualified scientific personnel, which may result in increased costs or decreased availability of technology or product candidates from these institutions to other industry participants.
Competition with respect to our technologies and products is based
on, among other things, product efficacy, safety, reliability, method of administration, availability, price and clinical benefit relative to cost; timing and scope of regulatory approval; sales, marketing and manufacturing capabilities; collaborator capabilities; insurance and other reimbursement coverage; and patent protection. Competitive position in our industry also depends on a participant’s ability to attract and retain qualified personnel, obtain patent protection or otherwise develop proprietary products or processes, and secure sufficient capital resources for the typically substantial period between technological conception and commercial sales.
Product Liability
The testing, manufacturing and marketing of our
product candidates and products involves an inherent risk of product liability attributable to unwanted and potentially serious health effects. To the extent we elect to test, manufacture or market product candidates and products independently, we bear the risk of product liability directly. We maintain product liability insurance coverage in amounts and pursuant to terms and conditions customary for our industry, scale, and the nature of our activities. Where local statutory requirements exceed the limits of our existing insurance or local policies of insurance are required, we maintain additional clinical trial liability insurance to meet these requirements. This insurance is subject to deductibles and coverage limitations. The availability and cost of maintaining insurance may change over time.
Human Resources
At December 31,
2017, we had 64 full-time employees, 12 of whom hold Ph.D./PharmD degrees and 3 of whom hold M.D. degrees. At that date, 43 employees were engaged in research and development, medical, regulatory affairs, and manufacturing related activities and 21 were engaged in finance, legal, administration, commercial, and business development. We consider our relations with our employees to be good. None of our employees is covered by a collective bargaining agreement.
Item 1A. R
isk Factors
General Risks Related to our Business
Drug development is a long and inherently uncertain process with a high risk of failure at every stage of development.
Drug development is a highly uncertain scientific and medical endeavor, and failure can unexpectedly occur at any stage of clinical development. Typically, there is a high rate of attrition for product candidates in preclinical and clinical trials due to scientific feasibility, safety, efficacy, changing standards of medical care and other variables. The risk of failure increases for our product candidates that are based on new technologies, as well as technologies with which we have limited prior experience. Pre-clinical studies and clinical trials are long, expensive and highly uncertain processes that can take many years. It will take us several years to complete all pre-clinical work and clinical trials and the time required for completing testing and obtaining approvals is uncertain. The start or end of a clinical trial is often delayed or halted due to changing regulatory requirements, manufacturing challenges, required clinical trial administrative actions, slower than anticipated patient enrollment, changing standards of care, availability or prevalence of use of a comparator drug or required prior therapy, clinical outcomes, or financial constraints. The FDA and other U.S. and foreign regulatory agencies have substantial discretion, at any phase of development, to terminate clinical trials, require additional clinical development or other testing, delay, condition or withhold registration and marketing approval and mandate product withdrawals, including recalls. Additionally, we may also amend, suspend or terminate clinical trials at any time if we believe that the participating patients are being exposed to unacceptable health risks. Results attained in early human clinical trials may not be indicative of results in later clinical trials. In addition, some of our investigational or experimental drugs are at an early stage of development, and successful commercialization of early stage product candidates requires significant research, development, testing and approvals by regulators, and additional investment. Our failure to demonstrate adequately the safety and efficacy of a product under development would delay or prevent marketing approval, which could adversely affect our operating results and credibility. The failure of one or more of our product candidates could have a material adverse effect on our business, financial condition and results of operations.
The future of our business and operations depends on the success of our development and commercialization programs.
Our business and operations entail a variety of serious risks and uncertainties and are inherently risky. The development programs on which we focus involve novel approaches to human therapeutics and diagnostics. Our product candidates are in clinical development, and in some respects
, involve technologies with which we have limited prior experience. We are subject to the risks of failure inherent in the development and commercialization of product candidates based on new technologies. There is little precedent for the successful commercialization of products based on our technologies, and there are a number of technological challenges that we must overcome to complete most of our development efforts. We may not be able to successfully further develop any of our product candidates. We must successfully complete clinical trials and obtain regulatory approvals for potential commercial products. Once approved, if at all, commercial product sales are subject to general and industry-specific local and international economic, regulatory, technological and policy developments and trends. Delays, higher costs or other weaknesses in the manufacturing process of our CMOs could hinder the development and commercialization of our product pipeline. The oncology space in which we operate presents numerous significant risks and uncertainties that may be expected to increase to the extent it becomes more competitive or less favored in the commercial healthcare marketplace.
Failure to realize the anticipated benefits of any strategic acquisition and/or licensing transaction could adversely affect our business, operations and financial condition.
A part of our business strategy has been to identify and advance a pipeline of product candidates by identifying product candidates, technologies and businesses for acquisition and in-licensing that we believe are a strategic fit with our existing business. The ultimate success of any strategic transactions entails numerous operational and financial risks, including:
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higher than expected development and integration costs;
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difficulty in combining the technologies, operations and personnel of acquired businesses with our technologies, operations and personnel;
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exposure to unknown liabilities;
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difficulty or inability to form a unified corporate culture across multiple office sites both nationally and internationally;
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inability to retain key employees of acquired businesses;
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disruption of our business and diversion of our management
’s time and attention; and
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difficulty or inability to secure financing to fund development activities for such acquired or in-licensed product candidates, technologies or businesses.
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We have limited resources to integrate acquired and in-licensed product candidates, technologies and businesses into our current infrastructure, and we may fail to realize the anticipated benefits of any strategic transactions. Any such failure could have an adverse effect on our business, operations and financial condition.
If we do not obtain regulatory approval for our product candidates on a timely basis, or at all, or if the terms of any approval impose significant restrictions or limitations on use, our business, results of operations and financial condition will be adversely affected. Setbacks in clinical development programs could have a material adverse effect on our business.
Regulatory approvals are necessary to market product candidates and require demonstration of a product
’s safety and efficacy through extensive pre-clinical and clinical trials. We may not obtain regulatory approval for product candidates on a timely basis, or at all, and the terms of any approval (which in some countries includes pricing and reimbursement approval) may impose significant restrictions, limitations on use or other commercially unattractive conditions. The process of obtaining FDA and foreign regulatory approvals often takes many years and can vary substantially based upon the type, complexity and novelty of the products involved. We have had only limited experience in filing and pursuing applications and other submissions necessary to gain marketing approvals. Products under development may never obtain marketing approval from the FDA or other regulatory authorities necessary for commercialization.
We or our regulators may also amend, suspend or terminate clinical trials if we or they believe that the participating patients are being exposed to unacceptable health risks, and after reviewing trial results, we may abandon projects which we previously believed to be promising for commercial or other reasons unrelated to patient risks. During this process, we may find, for example, that results of pre-clinical studies are inconclusive or not indicative of results in human clinical trials, clinical investigators or contract research organizations do not comply with protocols or applicable regulatory requirements, or that product candidates do not have the desired efficacy or have undesirable side effects or other characteristics that preclude marketing approval or limit their potential commercial use if approved. In such circumstances, the entire development program for that product candidate could be adversely affected, resulting in delays in trials or regulatory filings for further marketing approval and a possible need to reconfigure our clinical trial programs to conduct additional trials or abandon the program involved. Conducting additional clinical trials or making significant revisions to a clinical development plan would lead to delays in regulatory filings. If clinical trials indicate, or regulatory bodies are concerned about, actual or possible serious problems with the safety or efficacy of a product candidate, we may stop or significantly slow development or commercialization of affected products. As a result of such concerns, the development programs for our product candidates may be significantly delayed or terminated altogether.
If the results of any of our clinical trials are not satisfactory or we encounter problems and/or delays enrolling patients, clinical trial supply issues, setbacks in developing drug formulations, including raw material supply, manufacturing, stability or other difficulties, or issues complying with protocols or applicable regulatory requirements, the entire development program for our product candidates could be adversely affected in a material manner.
We must design and conduct successful clinical trials for our product candidates to obtain regulatory approval. We rely on third parties for conduct of clinical trials, which reduces our control over their timing, conduct and expense and may expose us to conflicts of interest. Clinical trial results may be unfavorable or inconclusive, and often take longer and cost more than expected.
We have limited internal resources with conducting clinical trials, and we rely on or obtain the assistance of others to design, conduct, supervise, or monitor some or all aspects of some of our clinical trials. In relying on these third parties, we have less control over the timing and other aspects of clinical trials than if we conducted them entirely on our own. Problems with the timeliness or quality of the work of a contract research organization or clinical data management organization may lead us to seek to terminate the relationship and use an alternative service provider. However, making this change may be costly and may delay our trials and contractual restrictions may make such a change difficult or impossible. These third parties may also have relationships with other entities, some of which may be our competitors. In all events, we are responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial. The FDA and other foreign regulatory authorities require us to comply with good clinical practices for conducting and recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected. Our reliance on third parties that we do not control does not relieve us of these responsibilities and requirements.
To obtain regulatory approval of our product candidates, we must demonstrate through preclinical studies and clinical trials that they are safe and effective. Adverse or inconclusive clinical trial results concerning any of our product candidates that regulators find deficient in scope, design or one or more other material respects, could require additional trials, resulting in increased costs, significant delays in submissions of approval applications, approvals in narrower indications than originally sought, or denials of approval, none of which we can predict. As a result, any projections that we publicly announce of commencement and duration of clinical trials are not certain. We have experienced clinical trial delays in the past as a result of slower than anticipated enrollment and such delays may recur. Delays can be caused by, among other things, deaths or other adverse medical events; regulatory or patent issues; interim or final results of ongoing clinical trials; failure to enroll clinical sites as expected; competition for enrollment from other clinical trials; scheduling conflicts with participating clinicians and institutions; disagreements, disputes or other matters arising from collaborations; our inability to obtain necessary funding; or manufacturing problems.
Risks related to RELISTOR
We have been and expect to continue to be dependent on Valeant to develop and commercialize RELISTOR, exposing us to significant risks.
We rely on Valeant to pursue and complete further development and obtain regulatory approvals for RELISTOR worldwide. At present, our revenue is almost exclusively derived from royalty and milestone payments from our RELISTOR collaboration with Valeant, which can result in significant fluctuation in our revenue from period to period, and our past revenue is therefore not necessarily indicative of our future revenue. We are and will be dependent upon Valeant and any other business partners with which we may collaborate in the future to perform and fund development, including clinical testing of RELISTOR, making related regulatory filings and manufacturing and marketing products, including for new indications and in new formulations, in their respective territories. Revenue from the sale of RELISTOR depends entirely upon the efforts of Valeant and its sublicensees, which have significant discretion in determining the efforts and resources they apply to sales of RELISTOR. Valeant may not be effective in obtaining approvals for new indications or formulations, marketing existing or future products or arranging for necessary sublicense or distribution relationships. Our business relationships with Valeant and other partners may not be scientifically, clinically or commercially successful. For example, Valeant has a variety of marketed products and its own corporate objectives, which may not be consistent with our best interests, and may change its strategic focus or pursue alternative technologies in a manner that results in reduced or delayed revenue to us. Valeant may also have commercial and financial interests that are not fully aligned with ours in a given territory or territories - which may make it more difficult for us to fully realize the value of RELISTOR. We may have future disagreements with Valeant, which has significantly greater financial and managerial resources which it could draw upon in the event of a dispute. Such disagreements could lead to lengthy and expensive litigation or other dispute-resolution proceedings as well as extensive financial and operational consequences to us and have a material adverse effect on our business, results of operations and financial condition. In addition, independent actions may be taken by Valeant concerning product development, marketing strategies, manufacturing and supply issues, and rights relating to intellectual property.
Under our agreements with Valeant relating to RELISTOR, we rely on Valeant to, among other things, effectively commercialize the product and manage pricing, sales and marketing practices and inventory levels in the distribution channel. Assessing and reporting on these and other activities and metrics in connection with RELISTOR has been difficult as a result of financial reporting and internal control issues that have surfaced both at Valeant and its predecessor licensee, Salix. Our already limited visibility into the internal operations of Valeant and reliance on Valeant to accurately report information concerning the commercialization of RELISTOR has been further obscured by certain recent events at Valeant. As a result of certain incorrectly recognized revenues, both Valeant
’s Form 10-K for 2015 and its Form 10-Q for the first quarter of 2016 were filed late, resulting in Valeant receiving notices of default from certain of its noteholders, in each instance. We remain exposed to Valeant’s credit risk and the possibility of default under the RELISTOR License Agreement in the event that Valeant were to terminate the agreement at its discretion or to become insolvent or bankrupt. In the event of a Valeant bankruptcy, Valeant may be able to reject our agreement with it related to RELISTOR such that it would no longer be obligated to commercialize the product or provide related services, or to assign that agreement without our consent to third parties with an unknown capacity to commercialize and market the product, which could expose us to greater counterparty risk of breaches under such agreement. Valeant announced that it continued to work with its independent advisors in its ongoing assessment and remediation efforts with respect to financial reporting and internal controls in the second quarter of 2016. However, there is no assurance as to the adequacy of such efforts in averting future losses incurred in connection with any failures of Valeant’s internal controls.
We are also dependent on Valeant for compliance with regulatory requirements as they apply to RELISTOR. Valeant
’s subsidiary, Salix is currently the subject of an SEC investigation, for which Valeant has indicated that as of the filing of its report on Form 10-Q for the quarterly period ended March 31, 2017, the SEC staff had substantially completed its investigation and will be making recommendations to the Commission in the near future and that it cannot predict the outcome of the SEC investigation or any other legal proceedings or any enforcement actions or other remedies that may be imposed on Salix or Valeant arising out of the SEC investigation. Additionally, Salix, beginning on November 7, 2014, became the target of three putative class action lawsuits filed by its shareholders. Valeant has indicated that as of the filing of its report on Form 10-Q for the quarterly period ended March 31, 2017, the parties reached an agreement in principle to settle the consolidated action, for which the court granted preliminary approval, but that there can be no assurance that the settling parties will ultimately enter a stipulation of settlement that the court will approve. Accordingly, no assurance can be given as to Valeant’s financial condition or results of operations, or ability to meet its obligations to Progenics.
The RELISTOR commercialization program continues to be subject to risk.
Future developments in the commercialization of RELISTOR may result in Valeant or any other business partner with which we may collaborate in the future taking independent actions concerning product development, marketing strategies or other matters, including termination of its efforts to develop and commercialize the drug.
Under our license agreement with Valeant, Valeant is responsible for obtaining supplies of RELISTOR, including contracting with contract manufacturing organizations for supply of RELISTOR active pharmaceutical ingredient and subcutaneous and oral finished drug product. These arrangements may not be on terms that are advantageous and, as a result of our royalty and other interests in RELISTOR
’s commercial success, will subject us to risks that the counterparties may not perform optimally in terms of quality or reliability.
Valeant
’s ability to optimally commercialize either oral or subcutaneous RELISTOR in a given jurisdiction may be impacted by applicable labeling and other regulatory requirements. If clinical trials indicate, or regulatory bodies are concerned about, actual or possible serious problems with the safety or efficacy of RELISTOR, Valeant may stop or significantly slow further development or commercialization of RELISTOR. In such an event, we could be faced with either further developing and commercializing the drug on our own or with one or more substitute collaborators, either of which paths would subject us to the development, commercialization, collaboration and/or financing risks discussed in these risk factors.
We are also aware of other approved and marketed products, as well as product candidates in pre-clinical or clinical development that are intended to target the side effects of opioid pain therapy and are direct competitors to RELISTOR. For instance, there are three approved products that target opioid-induced constipation: MOVANTIK
®
(naloxegol), AMITIZA
®
(lubiprostone), and Symproic
®
(naldemedine) which could compete with RELISTOR. The competitors who have developed these products and product candidates may have superior resources that allow them to implement more effective approaches to sales and marketing. There is no guarantee that RELISTOR will be able to compete commercially with these products. Additionally, there has been growing public concern regarding the use of opioid drugs. Any efforts by the FDA or other governmental authorities to restrict or limit the use of opioids may negatively impact the market for RELISTOR.
Any such significant action adverse to the further development and commercialization of RELISTOR could have a material adverse impact on our business and on the price of our stock.
RELISTOR patents are subject to generic challenge, and the validity, enforceability and commercial value of these patents are highly uncertain.
Third parties have challenged and are likely to continue challenging the patents that have
been issued or licensed to us. In October 2015, we received notifications of Paragraph IV certifications with respect to certain patents for RELISTOR subcutaneous injection, which are listed in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations (the “Orange Book”). The certifications accompanied the filing by Actavis Inc. and Mylan Pharmaceuticals, Inc. of Abbreviated New Drug Applications (ANDAs) challenging such patents for RELISTOR subcutaneous injection.
We and our licensee for RELISTOR, Valeant, have timely filed suit and commenced litigation against Actavis and Mylan. FDA approval of the ANDA has been automatically stayed until the earlier of (i) 30 months from receipt of the notice or (ii) a District Court decision finding that the identified patents are invalid, unenforceable or not infringed.
In October 2016, we received a notification of a Paragraph IV certification with respect to certain patents for RELISTOR Tablets, which are listed in the Orange Book. The certification
accompanied the filing by Actavis LLC of an ANDA challenging such patents for RELISTOR Tablets. Valeant has timely filed suit for patent infringement against Actavis to vigorously enforce RELISTOR intellectual property rights.
In July 2017, we received notification of a Paragraph IV certification from Par
Sterile Products, LLC with respect to Orange Book listed patents for RELISTOR subcutaneous injection. Valeant timely filed suit for patent infringement against Par.
In
litigation relating to RELISTOR subcutaneous injection, a Motion And Brief For Partial Summary Judgment on the validity of U.S. Patent 8,552,025 was filed February 16, 2018 with the United States District Court of New Jersey. (See
Item
3. Legal Proceedings
for additional information relating to the parties and substance of this litigation).
In addition to the above described ANDA notifications, in October 2015, we also received notices of opposition to three European patents (EP 1615646, EP 2368554 and EP 2368553) relating to pharmaceutical compositions of methylnaltrexone. The oppositions were filed separately b
y each of Actavis Group PTC ehf and Fresenius Kabi Deutschland GmbH. Decisions of revocation of the patents by the EU Opposition Division are under appeal.
Although we and Valeant are cooperating to defend against both the ANDA challenges and the European oppositions, and intend to
continue vigorously enforcing RELISTOR intellectual property rights, such litigation is inherently subject to significant risks and uncertainties, and there can be no assurance that the outcome of these litigations will be favorable to Progenics or Valeant. An unfavorable outcome in these cases could result in the rapid genericization of RELISTOR products, or could result in the shortening of available patent life. Any such outcome could have a material impact on our financial performance and stock price.
Pursuant to the RELISTOR license agreement between us and Valeant, Valeant has the first right to enforce the intellectual property rights at issue and is responsible for the costs of such enforcement. At the same time, we may incur substantial
further costs in supporting the effort to uphold the validity of patents or to prevent infringement.
The composition-of-matter patent for the active ingredient of RELISTOR, methylnaltrexone, was invented in the 1970
’s and has expired. The University of Chicago, as well as we and our collaborators, have extended the methylnaltrexone patent estate with additional patents and pending patent applications covering various inventions relating to the product. Valeant has listed in the FDA Orange Book eight U.S. patents relating to subcutaneous RELISTOR, which have expiration dates ranging from 2017 to 2030. Eight Orange Book listed U.S. patents relating to RELISTOR tablets, have expiration dates ranging from 2017 to 2031. Four Canadian patents (expiring 2024 and 2029) have been listed with Health Canada relating to subcutaneous RELISTOR.
Risks Related to our Product Candidates
Even if our product candidates obtain marketing approval, our ability to generate revenue will be diminished if our products are not accepted in the marketplace, or if we select pricing strategies for our products that are less competitive than those of our competitors, or fail to obtain acceptable prices or an adequate level of reimbursement for products from third-party payers or government agencies.
The commercial success of our products will depend upon their acceptance by the medical community and third-party payers as clinically useful, cost effective and safe. Market acceptance of approved products, is affected by a wide range of factors, including the timing of regulatory approvals, product launches and the presence of generic, over-the-counter or other competitors; the pricing of the product and relative prices of competing products; product development efforts for new indications; the availability of reimbursement for the product; our ability to obtain sufficient commercial quantities of the product; success in arranging for necessary sublicense or distribution relationships; and general and industry-specific local and international economic pressures. If health care providers believe that patients can be managed adequately with alternative, currently available therapies, they may not prescribe our products, especially if the alternative therapies are viewed as more effective, as having a better safety or tolerability profile, as being more convenient to the patient or health care providers or as being less expensive. Third-party insurance coverage may not be available to patients for any products we develop. For pharmaceuticals administered in an institutional setting, the ability of the institution to be adequately reimbursed from government and health administration authorities, private health insurers and other third-party payers could also play a significant role in demand for our products. Significant uncertainty exists as to the reimbursement status of newly-approved pharmaceuticals. Government and other third-party payers increasingly are attempting to contain healthcare costs by limiting both coverage and the level of reimbursement for new drugs and by refusing, in some cases, to provide coverage for uses of approved products for indications for which the FDA has not granted labeling approval. In most foreign markets, pricing and profitability of prescription pharmaceuticals are subject to government control. In the U.S., we expect that there will continue to be a number of federal and state proposals to implement similar government control and that the emphasis on managed care in the U.S. will continue to put pressure on the pricing of pharmaceutical products. Cost control initiatives could decrease the price that we can receive for any products in the future and adversely affect our ability to successfully commercialize our products. If any of our product candidates do not achieve market acceptance, we will likely lose our entire investment in that product candidate.
We are subject to extensive and ongoing regulation, which can be costly and time consuming, may interfere with marketing approval for our product candidates, and can subject us to unanticipated limitations, restrictions, delays and fines.
Our business, products and product candidates are subject to comprehensive regulation by the FDA and comparable authorities in other countries, and include the Sunshine Act under the Patient Protection and Affordable Care Act (“PPACA”). These agencies and other entities regulate the pre-clinical and clinical testing, safety, effectiveness, approval, manufacture, labeling, marketing, export, storage, recordkeeping, advertising, promotion and other aspects of our products and product candidates. We cannot guarantee that approvals of product candidates, processes or facilities will be granted on a timely basis, or at all. If we experience delays or failures in obtaining approvals, commercialization of our product candidates will be slowed or stopped. In addition to these uncertainties, the U.S. House of Representatives voted in May 2017 to pass a bill similar to that which had previously and unsuccessfully sought to repeal PPACA, replace it with a curtailed system of tax credits and dissolve an expansion of the Medicaid program. While the fate of this bill in the U.S. Senate is uncertain, there is considerable uncertainty regarding the future of the current PPACA framework, and any changes will likely take time to unfold. As such, we cannot predict what effect the PPACA or other healthcare reform initiatives that may be adopted in the future will have on our business.
Even if we obtain regulatory approval for a product candidate, the approval may include significant limitations on indicated uses for which the product could be marketed or other significant marketing restrictions.
If we violate regulatory requirements at any stage, whether before or after marketing approval is obtained, we may be subject to forced removal of a product from the market, product seizure, civil and criminal penalties and other adverse consequences.
Our products may face regulatory, legal or commercial challenges even after approval.
Even if a product receives regulatory approval:
It might not obtain labeling claims necessary to make the product commercially viable (in general, labeling claims define the medical conditions for which a drug product may be marketed, and are therefore very important to the commercial success of a product), or may be required to carry Boxed or other warnings that adversely affect its commercial success.
Approval may be limited to uses of the product for treatment or prevention of diseases or conditions that are relatively less financially advantageous to us than approval of greater or different scope or subject to an FDA imposed
Risk Evaluation and Mitigation Strategy (“REMS”) that imposes limits on the distribution or use of the product. While we may develop a product candidate with the intention of addressing a large, unmet medical need, the FDA or other foreign regulatory authorities may only approve the use of the drug for indications affecting a relatively small number of patients, thus greatly reducing the market size and our potential revenues.
Side effects identified after the product is on the market might hurt sales or result in mandatory safety labeling changes, additional pre-clinical testing or clinical trials, imposition of a REMS, product recalls or withdrawals from the market, reputational harm to us, and lawsuits (including class-action suits).
Efficacy or safety concerns regarding a marketed product, or manufacturing or other problems, may lead to a recall, withdrawal of marketing approval, marketing restrictions, reformulation of the product, additional pre-clinical testing or clinical trials, changes in labeling, imposition of a REMS, warnings and contraindications, the need for additional marketing applications, declining sales or other adverse events. These potential consequences may occur whether or not the concerns originate from subsequent testing or other activities by us, governmental regulators, other entities or organizations or otherwise, and whether or not they are scientifically justified. If products lose previously received marketing and other approvals, our business, results of operations and financial condition would be materially adversely affected.
In certain foreign jurisdictions
, it cannot be marketed until pricing and reimbursement for the product is also approved.
We will be subject to ongoing FDA obligations and continuous regulatory review, and might be required to undertake post-marketing trials to verify the product
’s efficacy or safety or other regulatory obligations.
Our NDA filing for AZEDRA
has been accepted, but
approval may be delayed, conditioned
,
or denied by the FDA.
Approval of a product candidate as safe and effective for use in humans is never certain. There remains significant unce
rtainty that AZEDRA will eventually receive regulatory approval. Additional testing results or adverse market conditions may cause us to withdraw the NDA in a timely manner. In addition, data obtained from clinical trials are susceptible to varying interpretations, and the FDA may not agree with our interpretation of our AZEDRA clinical trial results. The FDA has substantial discretion in the approval process and may decide that our data is insufficient for approval and require additional preclinical, clinical or other studies. Further, the FDA may not meet, or may extend, the PDUFA date with respect to our AZEDRA NDA, which may delay the start of any AZEDRA commercialization effort.
Any AZEDRA commercialization program would expose us to significant risk.
It is very difficult to estimate the commercial potential of product candidates
, due to factors such as safety and efficacy compared to other available treatments (including potential generic drug alternatives with similar efficacy profiles), changing standards of care, third party payer reimbursement, patient and physician preferences and the availability of competitive alternatives that may emerge either during the approval process or after commercial introduction. Frequently, products that have shown promising results in clinical trials suffer significant setbacks even after they are approved for commercial sale.
Even if approved, there is no guarantee that AZEDRA will be a commercial success. Future uses of AZEDRA commercially may reveal that AZEDRA is ineffective, unacceptably toxic, has other undesirable side effects, is difficult to manufacture on a large scale, is not cost-effective or economically viable, infringes on proprietary rights of another party or is otherwise not fit for further use.
AZEDRA, designated as an Orphan Drug is intended to treat a
rare disease with a small patient population. If pricing for AZEDRA is not approved or accepted in the market at an appropriate level it may not generate enough revenue to make it economically viable. Based upon the complication of delivery and high costs associated with the development of radiopharmaceuticals, among other factors, we expect that the price of AZEDRA will be high. There have been recent examples of the market reacting poorly to the high cost of certain drugs. If the market reacts similarly to AZEDRA, it could result in negative publicity and reputational harm to us. Further, the Trump administration has indicated support for possible new measures related to drug pricing, which could increase the pricing pressures related to AZEDRA and further limit its economic viability.
Additionally, we have little experience as a company in commercializing products. Given this lack of experience, there is a heightened risk that we are able to adequately commercialize AZEDRA. If AZEDRA is determined to be unsafe or ineffective in humans, not economically viable or we are unable to successfully commercialize it, our business will be materially adversely affected.
Our relationships with customers and third-party payers are or may become subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, program exclusion, contractual damages, reputational harm and diminished profits and future earnings.
Health care providers, physicians and third-party payers play a primary role in the recommendation and prescription of any product candidates for which we obtain marketing approval. Our future arrangements with third-party payers and customers will or already do require us and them to comply with broadly applicable fraud and abuse and other health care laws and regulations, including both federal and state anti-kickback and false claims laws, that may constrain the business or financial arrangements and relationships through which we market, sell and distribute our products that obtain marketing approval. Efforts to ensure that business arrangements comply with applicable health care laws and regulations involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If such operations are found to be in violation of any of these laws or other applicable governmental regulations, we may be subject to significant civil, criminal and administrative penalties, damages, fines, exclusion from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of related operations. If physicians or other providers or entities involved with our products are found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs, which may adversely affect us.
If we or our partners are unable to obtain sufficient quantities of the raw and bulk materials needed to make our products or product candidates, development of our products or product candidates or commercialization of our approved products could be slowed or stopped.
We or our partners may not be able to obtain the materials necessary to make a particular product or product candidate in adequate volume and quality. If any materials needed to make a product or product candidate is insufficient in quantity or quality, if a supplier fails to deliver in a timely fashion or at all or if these relationships terminate, we or our partners may not be able to fulfill manufacturing obligations for our products or product candidates, either on our own or through third-party suppliers. A delay or disruption of supplies of our products or product candidates would have a material adverse effect on our business as a whole. Our existing arrangements with suppliers may result in the supply of insufficient quantities of our product candidates needed to accomplish our clinical development programs or commercialization, and we may not have the right and in any event
, do not currently have the capability to manufacture these products if our suppliers are unable or unwilling to do so. We currently arrange for supplies of critical raw materials used in production of our product candidates from single sources. We do not have long-term contracts with any of these suppliers. Any delay or disruption in the availability of raw materials would slow or stop product development and commercialization of the relevant product.
Manufacturing resources could limit or adversely affect our ability to commercialize products.
We or our partners may engage third parties to manufacture our product candidates. We or our partners may not be able to obtain adequate supplies from third-party manufacturers in a timely fashion for development or commercialization purposes, and commercial quantities of products may not be available from contract manufacturers at acceptable costs.
In order to commercialize our product candidates successfully, we need to be able to manufacture or arrange for the manufacture of products in commercial quantities, in compliance with regulatory requirements, at acceptable costs and in a timely manner. Manufacture of our product candidates, can be complex, difficult to accomplish even in small quantities, difficult to scale-up for large-scale production and subject to delays, inefficiencies and low yields of quality products. The manufacture of radiopharmaceuticals is relatively complex and requires significant capital expenditures. We rely on contract manufacturing organizations to manufacture active pharmaceutical ingredient and finished drug products for clinical trial supplies and for commercial supply of AZEDRA. The cost of manufacturing our product candidates may make them prohibitively expensive. If adequate supplies of any of our product candidates or related materials are not available on a timely basis or at all, our clinical trials or commercialization of our product candidates could be seriously delayed, since these materials are time consuming to manufacture and cannot be readily obtained from third-party sources. We continue to be dependent on a limited number of highly specialized manufacturing and development partners, including single source manufacturers for certain of our product candidates. If we were to lose one or more of these key relationships, it could materially adversely affect our business. Establishing new manufacturing relationships, or creating our own manufacturing capability, would require significant time, capital and management effort, and the transfer of product-related technology and know-how from one manufacturer to another is an inherently complex and uncertain process.
Failure of any manufacturer of our various product candidates to comply with applicable regulatory requirements could subject us to penalties and have a material adverse effect on supplies of our product candidates.
Third-party manufacturers are required to comply with cGMP or similar regulatory requirements outside of the U.S. If manufacturers of our product candidates cannot successfully manufacture material that conforms to the strict regulatory requirements of the FDA and any applicable foreign regulatory authority, they may not be able to supply us with our product candidates. If these facilities are not approved for commercial manufacture, we may need to find alternative manufacturing facilities, which could result in delays of several years in obtaining approval for a product candidate. We do not control the manufacturing operations and are completely dependent on our third-party manufacturing partners or contractors for compliance with the applicable regulatory requirements for the manufacture of some of our product candidates. Manufacturers are subject to ongoing periodic unannounced inspections by the FDA and corresponding state and foreign agencies for compliance with cGMP and similar regulatory requirements. Failure of any manufacturer of any of our product candidates to comply with applicable cGMP or other regulatory requirements could result in sanctions being imposed on our collaborators or us, including fines, injunctions, civil penalties, delays, suspensions or withdrawals of approvals, operating restrictions, interruptions in supply and criminal prosecutions, any of which could significantly and adversely affect supplies of our product candidates and have a material adverse impact on our business, financial condition and results of operations.
The validity, enforceability and commercial value of our patents and other intellectual property rights are highly uncertain.
We own or license a number of issued patents. We must obtain, maintain and enforce patent and other rights to protect our intellectual property. The patent position of biotechnology and pharmaceutical firms is highly uncertain and involves many complex legal and technical issues. There are many laws, regulations and judicial decisions that dictate and otherwise influence the manner in which patent applications are filed and prosecuted and in which patents are granted and enforced, all of which are subject to change from time to time. There is no clear policy involving the breadth of claims allowed, or the degree of protection afforded, under patents in this area. In addition, we are aware of others who have patent applications or patents containing claims similar to or overlapping those in our patents and patent applications. Accordingly, patent applications owned by or licensed to us may not result in patents being issued. Even if we own or license a relevant issued patent, we may not be able to preclude competitors from commercializing drugs that may compete directly with one or more of our products or product candidates, in which event such rights may not provide us with any meaningful competitive advantage. In the absence or upon successful challenge of patent protection, drugs may be subject to generic competition, which could adversely affect pricing and sales volumes of the affected products.
It is generally difficult to determine the relative strength or scope of a biotechnology or pharmaceutical patent position in absolute terms at any given time. The issuance of a patent is not conclusive as to its validity or enforceability, which can be challenged in litigation or via administrative proceedings. The license agreements from which we derive or out-license intellectual property provide for various royalty, milestone and other payment, commercialization, sublicensing, patent prosecution and enforcement, insurance, indemnification and other obligations and rights, and are subject to certain reservations of rights. While we generally have the right to defend and enforce patents licensed to or by us, either in the first instance or if the licensor or licensee chooses not to do so, we must usually bear the cost of doing so.
Patents have a limited life and expire by law.
In addition to uncertainties as to scope, validity, enforceability and changes in law, patents by law have limited lives. Upon expiration of patent protection,
our drug candidates and/or products may be subject to generic competition, which could adversely affect pricing and sales volumes of the affected products.
The original patents surrounding the AZEDRA program were licensed from the University of Western Ontario (“UWO”). The patent family directed to processes for making polymer precursors, as well as processes for making the final product, expire in 2018 in the U.S. and Canada. Other licensed patent families from UWO relate to alternative approaches for preparing AZEDRA, which if implemented would expire in 2024, worldwide. Progenics has pending applications worldwide directed to manufacturing improvements and the resulting compositions which, if issued, would expire in 2035.
Owned and in-licensed
patents relating to the 1404 product candidate have expiration ranges of 2020 to 2029; we view as most significant the composition-of-matter patent on the compound, as well as technetium-99 labeled forms, which expires in 2029 worldwide. Patent applications directed to methods of use are pending worldwide, which if issued would expire in 2034.
Patent protection for the
composition-of-matter patent on PyL compound, radiolabeled form of the compound, as well as methods of use expire in 2030 in the United States. Corresponding patent family members are pending or issued worldwide, all with expirations of 2029.
Company-owned
patents relating to MIP-1095 have expiration ranges of 2027 to 2031 in the U.S. We view as most significant the composition-of-matter patent on this compound, as well as radiolabeled forms, which expires in 2027 in the U.S., as well as Europe. Additional U.S. patents are directed to stable compositions and radiolabeling processes which expire in 2030 and 2031, respectively.
We own
patents relating to automated detection of bone cancer metastases through. The patents on this technology expire in 2028.
With respect to PSMA antibody, currently issued composition-of-matter patents comprising co-owned and in-licensed
patents have expiration ranges of 2022 to 2023 in the U.S. Corresponding foreign counterpart patents will expire 2022. We view all of these patents as significant.
We depend on intellectual property licensed from third parties and unpatented technology, trade secrets and confidential information. If we lose any of these rights, including by failing to achieve milestone requirements or to satisfy other conditions, our business, results of operations and financial condition could be harmed.
Most of our product candidates incorporate intellectual property licensed from third parties. For example, PyL utilizes technology licensed to us from Johns Hopkins University. We could lose the right to patents and other intellectual property licensed to us if the related license agreement is terminated due to a breach by us or otherwise. Our ability to commercialize products incorporating licensed intellectual property would be impaired if the related license agreements were terminated. In addition, we are required to make substantial cash payments, achieve milestones and satisfy other conditions, including filing for and obtaining marketing approvals and introducing products, to maintain rights under our intellectual property licenses. Due to the nature of these agreements and the uncertainties of development, we may not be able to achieve milestones or satisfy conditions to which we have contractually committed, and as a result may be unable to maintain our rights under these licenses. If we do not comply with our license agreements, the licensors may terminate them, which could result in our losing our rights to, and therefore being unable to commercialize, related products.
We also rely on unpatented technology, trade secrets and confidential information. Third parties may independently develop substantially equivalent information and techniques or otherwise gain access to our technology or disclose our technology, and we may be unable to effectively protect our rights in unpatented technology, trade secrets and confidential information. We require each of our employees, consultants and advisors to execute a confidentiality agreement at the commencement of an employment or consulting relationship with us. These agreements may, however, not provide effective protection in the event of unauthorized use or disclosure of confidential information. Any loss of trade secret protection or other unpatented technology rights could harm our business, results of operations and financial condition.
If we do not achieve milestones or satisfy conditions regarding some of our product candidates, we may not maintain our rights under related licenses.
We are required to make substantial cash payments, achieve milestones and satisfy other conditions, including filing for and obtaining marketing approvals and introducing products, to maintain rights under certain intellectual property licenses. Due to the nature of these agreements and the uncertainties of research and development, we may not be able to achieve milestones or satisfy conditions to which we have contractually committed, and as a result may be unable to maintain our rights under these licenses. If we do not comply with our license agreements, the licensors may terminate them, which could result in our losing our rights to, and therefore being unable to commercialize, related products.
If we infringe third-party patent or other intellectual property rights, we may need to alter or terminate a product development program.
There may be patent or other intellectual property rights belonging to others that require us to alter our products, pay licensing fees or cease certain activities. If our products infringe patent or other intellectual property rights of others, the owners of those rights could bring legal actions against us claiming damages and seeking to enjoin manufacturing and marketing of the affected products. If these legal actions are successful, in addition to any potential liability for damages, we could be required to obtain a license in order to continue to manufacture or market the affected products. We may not prevail in any action brought against us, and any license required under any rights that we infringe may not be available on acceptable terms or at all. We are aware of intellectual property rights held by third parties that relate to products or technologies we are developing. For example, we are aware of other groups investigating PSMA or related compounds and monoclonal antibodies directed at PSMA, PSMA-targeted imaging agents and therapeutics, and methylnaltrexone and other peripheral opioid antagonists, and of patents held, and patent applications filed, by these groups in those areas. While the validity of these issued patents, the patentability of these pending patent applications and the applicability of any of them to our products and programs are uncertain, if asserted against us, any related patent or other intellectual property rights could adversely affect our ability to commercialize our products.
Research, development and commercialization of a biopharmaceutical product often require choosing between alternative development and optimization routes at various stages in the development process. Preferred routes may depend on subsequent discoveries and test results and cannot be predicted with certainty at the outset. There are numerous third-party patents in our field, and we may need to obtain a license under a patent in order to pursue the preferred development route of one or more of our products or product candidates. The need to obtain a license would decrease the ultimate profitability of the applicable product. If we cannot negotiate a license, we might have to pursue a less desirable development route or terminate the program altogether.
We have been and expect to continue to be dependent on collaborators for the development, manufacturing and sales of certain products and product candidates, which expose us to the risk of reliance on these collaborators.
In conducting our operations, we currently depend, and expect to continue to depend, on numerous collaborators. Key among these new collaborations, are those with Bayer to develop and commercialize products using our PSMA antibody technology and with Fuji for the development and commercialization of 1404 and bone BSI in Japan. In addition, certain clinical trials for our product candidates may be conducted by government-sponsored agencies, and consequently will be dependent on governmental participation and funding. These arrangements expose us to the same considerations we face when contracting with third parties for our own trials.
If any of our collaborators breach or terminate its agreement with us or otherwise fail to conduct successfully and in a timely manner the collaborative activities for which they are responsible, the preclinical or clinical development or commercialization of the affected product candidate or research program could be delayed or terminated. We generally do not control the amount and timing of resources that our collaborators devote to our programs or product candidates. We also do not know whether current or future collaboration partners, if any, might pursue alternative technologies or develop alternative products either on their own or in collaboration with others, including our competitors, as a means for developing treatments for the diseases or conditions targeted by our collaborative arrangements. Our collaborators are also subject to similar development, regulatory, manufacturing, cyber-security and competitive risks as us, which may further impede their ability to successfully perform the collaborative activities for which they are responsible. Setbacks of these types to our collaborators could have a material adverse effect on our business, results of operations and financial condition.
We are dependent upon third parties for a variety of functions. These arrangements may not provide us with the benefits we expect.
We rely on third parties to perform a variety of functions. We are party to numerous agreements which place substantial responsibility on clinical research organizations, consultants and other service providers for the development of our product candidates. We also rely on medical and academic institutions to perform aspects of our clinical trials of product candidates. In addition, an element of our research and development strategy has been to in-license technology and product candidates from academic and government institutions in order to minimize or eliminate investments in early research. We may not be able to enter new arrangements without undue delays or expenditures, and these arrangements may not allow us to compete successfully. Moreover, if third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct clinical trials in accordance with regulatory requirements or applicable protocols, our product candidates may not be approved for marketing and commercialization or such approval may be delayed. If that occurs, we or our collaborators will not be able, or may be delayed in our efforts, to commercialize our product candidates.
Business and Operational Risks
We lack sales and marketing
experience
.
We have not had established sales, marketing or distribution infrastructure but are building out this capability in advance of the possible approval and launch of AZEDRA in the U.S. We may not be successful in developing an effective commercial infrastructure or in achieving sufficient market acceptance. We do plan to market and sell products through distribution, co-marketing, co-promotion or licensing arrangements with third parties for territories outside the U.S. We may consider contracting with a third-party professional pharmaceutical detailing and sales organization to perform marketing functions for one or more products. To the extent that we enter into distribution, co-marketing, co-promotion, detailing or licensing arrangements for the marketing and sale of product candidates, any revenues we receive will depend primarily on the efforts of third parties. We will not control the amount and timing of marketing resources these third parties devote to our products.
We are involved in various legal proceedings that are uncertain, costly and time-consuming and could have a material adverse impact on our business, financial condition and results of operations and could cause the market value of our common stock to decline.
From time to time we are involved in legal proceedings and disputes and may be involved in litigation in the future. These proceedings are complex and extended and occupy the resources of our management and employees. These proceedings are also costly to prosecute and defend and may involve substantial awards or damages payable by us if not found in our favor. We may also be required to pay substantial amounts or grant certain rights on unfavorable terms in order to settle such proceedings. Defending against or settling such claims and any unfavorable legal decisions, settlements or orders could have a material adverse effect on our business, financial condition and results of operations and could cause the market value of our common stock to decline. For more information regarding legal proceedings, see Item 1 of Part II, and Note
8 in the notes to the consolidated financial statements in Part I, Item 1 of this Form 10-Q.
In particular, the pharmaceutical and medical device industries historically have generated substantial litigation concerning the manufacture, use and sale of products and we expect this litigation activity to continue. As a result, we expect that patents related to our products will be routinely challenged, and our patents may not be upheld. In order to protect or enforce patent rights, we may initiate litigation against third parties. If we are not successful in defending an attack on our patents and maintaining exclusive rights to market one or more of our products still under patent protection, we could lose a significant portion of sales in a very short period. We may also become subject to infringement claims by third parties and may have to defend against charges that we violated patents or the proprietary rights of third parties. If we infringe the intellectual property rights of others, we could lose our right to develop, manufacture or sell products, or could be required to pay monetary damages or royalties to license proprietary rights from third parties.
In addition, in the U.S., it has become increasingly common for patent infringement actions to prompt claims that antitrust laws have been violated during the prosecution of the patent or during litigation involving the defense of that patent. Such claims by direct and indirect purchasers and other payers are typically filed as class actions. The relief sought may include treble damages and restitution claims. Similarly, antitrust claims may be brought by government entities or private parties following settlement of patent litigation, alleging that such settlements are anti-competitive and in violation of antitrust laws. In the U.S. and Europe, regulatory authorities have continued to challenge as anti-competitive so-called “reverse payment” settlements between branded and generic drug manufacturers. We may also be subject to other antitrust litigation involving competition claims unrelated to patent infringement and prosecution. A successful antitrust claim by a private party or government entity against us could have a material adverse effect on our business, financial condition and results of operations and could cause the market value of our common stock to decline.
We are exposed to product liability claims, and in the future may not be able to obtain insurance against claims at a reasonable cost or at all.
Our business exposes us to product liability risks, which are inherent in the testing, manufacturing, marketing and sale of pharmaceutical products. We may not be able to avoid product liability exposure. If a product liability claim is successfully brought against us, our financial position may be adversely affected. Product liability insurance for the biopharmaceutical industry is generally expensive, when available at all, and may not be available to us at a reasonable cost in the future. Our current insurance coverage and indemnification arrangements may not be adequate to cover claims brought against us, and are in any event subject to the insuring or indemnifying entity discharging its obligations to us.
We, our CMOs and our distributors handle hazardous materials and must comply with environmental laws and regulations, which can be expensive and restrict how we our CMOs or our distributors do business. If we our CMOs or our distributors are involved in a hazardous waste spill or other accident, we our CMOs or our distributors could be liable for damages, penalties or other forms of censure.
Research and development work and manufacturing processes with our pipeline products involve the use of hazardous, controlled and/or radioactive materials. We, our CMOs and our distributors are subject to federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of these materials. In particular we, our CMOs and our distributors are subject to regulation by the U.S. Environmental Protection Agency, U.S. Department of Transportation, Occupational Safety and Health Administration and comparable state regulatory agencies. Despite procedures that we, our CMOs and our distributors implement for handling and disposing of these materials, the risk of accidental contamination or injury cannot be eliminated. In the event of a hazardous waste spill or other accident, we, our CMOs and our distributors could be liable for damages, penalties or other forms of censure. There may be significant costs to comply with applicable environmental laws and regulations in the future, and such costs may be incurred by us directly or passed through to us by our CMOs and our distributors. In the event of the damages, penalties, censures or higher costs outlined above, the efficiency and cost of our research, development and commercialization pipeline may be adversely impacted.
If we lose key personnel on whom we depend, our business could suffer.
We are dependent upon our key management, commercial and scientific personnel, the loss of whom could require us to identify and engage qualified replacements, and could cause our management and operations to suffer in the interim. Competition for qualified employees among companies in the biopharmaceutical industry is intense. Future success in our industry depends in significant part on the ability to attract, retain and motivate highly skilled employees, which we may not be successful in doing.
Health care reform measures could adversely affect our operating results and our ability to obtain marketing approval of and to commercialize our product candidates.
In the U.S. and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the health care system that could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell any product candidates for which we obtain marketing approval. For example, the Trump administration has indicated support for possible new measures related to drug pricing. New government legislation or regulations related to pricing or government or third-party payer decisions not to approve pricing for, or provide adequate coverage and reimbursements of, our products, hold the potential to severely limit market opportunities of such products. Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. In addition, increased scrutiny by the U.S. Congress of the FDA
’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements. In the U.S., federal legislation has changed the way Medicare covers and pays for pharmaceutical products. Cost reduction initiatives and other provisions of legislation have decreased coverage and reimbursement. Though such legislation applies only to drug benefits for Medicare beneficiaries, private payers often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates. More recent legislation is intended to broaden access to health insurance, further reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for health care and health insurance industries, and impose new taxes and fees on the health industry and additional health policy reforms. New laws impose significant annual fees on companies that manufacture or import branded prescription drug products, and contain substantial new compliance provisions, which in each case may affect our business practices with health care practitioners. Subject to federal and state agencies issuing regulations or guidance, it appears likely that new laws will continue to pressure pharmaceutical pricing, especially under the Medicare program, and may also increase regulatory burdens and operating costs. We cannot be sure whether additional legislative changes will be enacted, whether the FDA regulations, guidance or interpretations will be changed or what the impact of such changes on the marketing approvals of our product candidates, if any, may be.
Our future depends on the proper management of our current and future business operations, including the associated expenses.
Our business strategy requires us to manage our business to provide for the continued development and potential commercialization of our proprietary and partnered product candidates. Our strategy also calls for us to undertake increased research and development activities and to manage an increasing number of relationships with partners and other third parties, while simultaneously managing the capital necessary to support this strategy. If we are unable to manage effectively our current operations and any growth we may experience, our business, financial condition and results of operations may be adversely affected. If we are unable to effectively manage our expenses, we may find it necessary to reduce our personnel-related costs through reductions in our workforce, which could harm our operations, employee morale and impair our ability to retain and recruit talent. Furthermore, if adequate funds are not available, we may be required to obtain funds through arrangements with partners or other sources that may require us to relinquish rights to certain of our technologies, products or future economic rights that we would not otherwise relinquish or require us to enter into other financing arrangements on unfavorable terms.
Risks associated with our operations outside of the United States could adversely affect our business.
Although we currently conduct most of our business in the U.S., we also conduct business internationally, which exposes us to additional risks, including risks associated with foreign legal requirements, economic and political conditions and fluctuations in foreign currency exchange rates. We expect that we will continue to conduct business internationally. These business operations subject us to a number of risks and uncertainties, including but not limited to:
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changes in international regulatory and compliance requirements that could restrict our ability to develop, market and sell our products;
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political and economic instability;
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the impact of any trade or international regulatory policy changes brought about by the new U.S.
federal administration;
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diminished protection of intellectual property in some countries outside of the U.S.;
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trade protection measures and import or export licensing requirements;
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difficulty in staffing and managing international operations;
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differing labor regulations and business practices;
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heightened risk of a failure of our overseas employees to comply with U.S. and foreign laws, including export regulations, the FCPA and trade regulations;
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potentially negative consequences from changes in or interpretations of tax laws;
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changes in international medical reimbursement policies and programs;
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financial risks such as longer payment cycles, difficulty collecting accounts receivable and exposure to fluctuations in foreign currency exchange rates;
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regulatory and compliance risks that relate to maintaining accurate information and control over sales and distributors
’ and service providers’ activities that may fall within the purview of the FCPA or similar foreign laws such as the U.K. Bribery Act; and
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regulatory and compliance risks that relate to data practices and privacy, including those resulting from the EU adopted General Data Protection Regulation, which becomes effective in May 2018 and imposes monetary penalties for non-compliance.
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Any of these factors may, individually or as a group, have a material adverse effect on our business and results of operations. These or other similar risks could adversely affect our revenue and profitability.
Reimbursement decisions by third-party payors may have an adverse effect on pricing and market acceptance of our future products. If there is not sufficient reimbursement for our future products, it is less likely that such products will be widely used.
Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is used, may be based on payments allowed for lower-cost products that are already reimbursed, may be incorporated into existing payments for other products or services, and may reflect budgetary constraints and/or imperfections in Medicare or Medicaid data used to calculate these rates. Net prices for drugs may be reduced by mandatory discounts or rebates required by government health care programs. Such legislation, or similar regulatory changes or relaxation of laws that restrict imports of drugs from other countries, could reduce the net price we receive for any future marketed drugs. As a result, our future drugs might not ultimately be considered cost-effective.
We cannot be certain that reimbursement will be available for AZEDRA or any other drug candidates that we develop. Also, we cannot be certain that reimbursement policies will not reduce the demand for, or the price paid for, any future drugs. If reimbursement is not available or is available on a limited basis, we may not be able to successfully commercialize AZEDRA or any other drug candidates that we develop.
In general, other factors that could affect the demand for and sales and profitability of our future products include, but are not limited to:
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the timing of regulatory approval, if any, of competitive drugs;
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our or any other of our partners' pricing decisions, as applicable, including a decision to increase or decrease the price of a drug, and the pricing decisions of our competitors;
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government and third-party payor reimbursement and coverage decisions that affect the utilization of our future drugs and competing drugs;
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negative safety or efficacy data from new clinical studies conducted either in the U.S. or internationally by any party could cause the sales of our future drugs to decrease or a future drug to be recalled;
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the degree of patent protection afforded our future drugs by patents granted to or licensed by us and by the outcome of litigation involving our or any of our licensor's patents;
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the outcome of litigation involving patents of other companies concerning our future drugs or processes related to production and formulation of those drugs or uses of those drugs; the increasing use and development of alternate therapies;
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the rate of market penetration by competing drugs; and
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the termination of, or change in, existing arrangements with our partners.
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Any of these factors could have a material adverse effect on the sales of any drug candidates that we may commercialize in the future.
A significant disruption in our information technology systems or a cyber-security breach could compromise our
clinical/patient data or other
data, trade secrets and confidential information and adversely affect our business.
We, our current and future contract research organizations, CMOs, licensees and partners are increasingly dependent on critical, complex and interdependent information technology systems to operate our businesses. Like other companies in our industry, we rely on such systems for many aspects of our business. The size and complexity of our information technology systems make them potentially vulnerable to breakdown, malicious cyber-attacks, intrusion, viruses and data security breaches by computer hackers, foreign governments, foreign companies or competitors, or by employee error or malfeasance. Such events may permit unauthorized persons to access, misappropriate and/or destroy sensitive data and result in the impairment or disruption of important business processes, loss or misuse of trade secrets, confidential information or other proprietary intellectual property or public exposure of personal information (including sensitive personal information) of employees, business partners, clinical trial patients, customers and others. Any compromise of our data security could also result in a violation of applicable privacy and other laws and a loss of confidence in our data security measures. Any of the foregoing could have a material adverse effect on our business, prospects, reputation, operating results and financial condition, including as a result of our being required to make significant investments to fix, fortify or replace our technology systems and/or being subject to lawsuits, fines, penalties or other government action. There can be no assurance that our efforts to protect our data and information technology systems will prevent breakdowns or breaches in our systems, or those of third parties with which we do business.
If our facility or those of our vendors incur damage or power is lost for a significant length of time, our business will suffer.
We store some of our preclinical and clinical data at our facilities as well as those of our vendors. Any significant degradation or failure of our or our vendors
’ computer systems could cause us to inaccurately calculate or lose our data.
In addition, our stability samples are stored at our vendors
’ facilities. If their facilities incur physical damage or have an extended power failure, it could result in a loss of these samples. Loss of our clinical data or stability samples could result in significant delays in our drug development process and could harm our business and operations.
Competitive Risks
Competing products in development may adversely affect acceptance of our future products.
We are aware of a number of products and product candidates which compete or may potentially compete with our future products. Any of these approved products or product candidates, or others which may be developed in the future, may achieve a significant competitive advantage relative to our future products and, in any event, the existing or future marketing and sales capabilities of these competitors may impair our or our collaborators
’ ability to compete effectively in the market.
We are also aware of competitors, who are developing alternative treatments for disease targets to which our research and development programs are directed, any of which
– or others which may be developed in the future – may achieve a significant competitive advantage relative to any future product we may develop.
Marketplace acceptance depends in part on competition in our industry, which is intense, and competing products in development may adversely affect acceptance of our products.
The extent to which any of our future products achieves market acceptance will depend on competitive factors. Competition in the biopharmaceutical industry is intense and characterized by ongoing research and development and technological change. We face competition from many for-profit companies and major universities and research institutions in the U.S. and abroad. We face competition from companies marketing existing products or developing new products for diseases and conditions targeted by our technologies. We are aware of a number of products and product candidates which compete or may potentially compete with PSMA-targeted imaging agents and therapeutics, or our other product candidates. We are aware of several competitors, such as Janssen Biotech, Inc., Aytu Bioscience, Inc. and Bayer HealthCare Pharmaceuticals Inc., which have received approval for or are developing treatments or diagnostics for prostate cancer. Any of these competing approved products or product candidates, or others which may be developed in the future, may achieve a significant competitive advantage relative to 1404, AZEDRA, PyL, 1095, or other product candidates.
Competition with respect to our technologies and product candidates is based on, among other things, product efficacy, safety, reliability, method of administration, availability, price and clinical benefit relative to cost; timing and scope of regulatory approval; sales, marketing and manufacturing capabilities; collaborator capabilities; insurance and other reimbursement coverage; and patent protection. Competitive disadvantages in any of these factors could materially harm our business and financial condition. Many of our competitors have substantially greater research and development capabilities and experience and greater manufacturing, marketing, financial and managerial resources than we do. These competitors may develop products that are superior to those we are developing and render our products or technologies non-competitive or obsolete. Our product candidates under development may not compete successfully with existing products or product candidates under development by other companies, universities and other institutions. Drug manufacturers that are first in the market with a therapeutic for a specific indication generally obtain and maintain a significant competitive advantage over later entrants and therefore, the speed with which industry participants move to develop products, complete clinical trials, approve processes and commercialize products is an important competitive factor. If our product candidates receive marketing approval but cannot compete effectively in the marketplace, our operating results and financial position would suffer.
Financial Risks
We have outstanding debt - and failure by us or our royalty subsidiary to fulfill our obligations under the applicable loan agreements may cause the repayment obligations to accelerate.
In November 2016, our subsidiary, MNTX Royalties, entered into a
loan agreement (the “Royalty-Backed Loan”) with HealthCare Royalty Partners III, L.P. (“HCRP”) pursuant to which MNTX Royalties borrowed $50 million and had the ability, subject to mutual agreement with HCRP, to borrow an additional $50 million up to twelve months after the initial closing date of the loan. The loan will be repaid from the royalty payments from the commercial sales of RELISTOR products owed under our agreement with Valeant.
The obligations of MNTX Royalties under the loan agreement to repay the Royalty-Backed Loan may be accelerated upon the occurrence of certain events of default, including but not limited to, if:
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MNTX Royalties fails to pay any principal or interest (except as permitted) within three Business days of when such payment is due and payable or otherwise made in accordance with the terms of the Royalty-Backed Loan;
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MNTX Royalties fails to pay when due any indebtedness of $15 thousand or more;
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any representation or warranty made by MNTX Royalties in the loan agreement or any other transaction document proves to be incorrect or misleading in any material respect when made, and such failure is uncured on or before the 30th day following notice thereof;
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MNTX Royalties fails to perform or observe any covenant or agreement contained in the loan agreement or any other transaction document;
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any uninsured judgment, decree, or order in an amount in excess of $25 thousand is rendered against MNTX Royalties and enforcement proceedings have commenced upon such judgment, decree, or order or such judgment, decree, or order has not been stayed or bonded pending appeal, vacated, or discharged, within 30 days from entry;
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any of a set of defined insolvency events occurs;
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we default under the agreement pursuant to which we contributed the royalty and related rights under the RELISTOR license to MNTX Royalties, and such default is continuing;
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any of the loan transaction documents cease to be in full force and effect or valid and enforceable;
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MNTX Royalties fails to perform or observe any covenant or agreement contained in any material contract and such failure is not cured or waived within any applicable grace period;
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the agreement with Valeant is terminated or cancelled and is not replaced within 270 days after such termination or cancellation; and
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any security interest purported to be created by the loan agreement or the related agreement ceases to be in full force and effect, or any rights, powers, and privileges purported to be created and granted under the loan agreement or such security agreement ceases to be in full force and effect.
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In connection with the Royalty-Backed Loan, MNTX Royalties granted a first priority lien and security interest (subject only to certain defined permitted liens) in all of its assets and all real, intangible and personal property, including all of its right, title, and interest in and to the royalty payments under our agreement with Valeant. Under the terms of the loan agreement, HCRP has no recourse for non-payment of the Royalty-Backed Loan to Progenics Pharmaceuticals, Inc., or to any of our assets other than the RELISTOR royalty rights held by MNTX Royalties. However, Progenics Pharmaceuticals, Inc. does have certain obligations that run to the benefit of HCRP with respect to the representations, warranties and covenants it makes under the agreement pursuant to which we contributed the royalty and related rights under the RELISTOR License to MNTX Royalties. A breach of these obligations could lead to recourse against Progenics Pharmaceuticals, Inc. with respect to any losses suffered by HCRP as a result of such breach.
Our level of indebtedness could adversely affect our ability to raise additional capital to fund our operations, and limit our ability to react to changes in the economy or our industry.
As of
December 31, 2017, our outstanding non-recourse long term debt amounted to $49.7 million. This level could have adverse consequences for us, including:
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heightening our vulnerability to downturns in our business or our industry or the general economy and restricting us from making improvements or acquisitions, or exploring business opportunities; and
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limiting our ability to adjust to changing market conditions and placing us at a competitive disadvantage compared to our competitors who have greater capital resources.
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Developing product candidates requires us to obtain additional financing from time to time. Our access to capital funding is uncertain.
We incur significant costs to develop our product candidates and to prepare for the possible launch of AZEDRA. We do not have committed external sources of funding for these projects. We fund our operations, to a
significant extent, with the proceeds from capital-raising. We may do so via equity securities issuances in public offerings, through our three-year facility with an investment bank pursuant to which we have sold our stock in at-the-market transactions for net proceeds of approximately $14.5 million and may sell from time to time up to a remaining $60.0 million of our stock, or through further debt financing. We may also fund operations through collaboration, license, further royalty financings, private placement or other agreements with one or more pharmaceutical or other companies, or the receipt of milestone and other payments for out-licensed products. To the extent we raise additional capital by issuing equity securities, existing stockholders could experience substantial dilution, and if we issue securities other than common stock, new investors could have rights superior to existing stockholders. Any further debt financing that we may obtain may involve operating covenants that restrict our business and significant repayment obligations. To the extent we raise additional funds through new collaboration and licensing arrangements, we may be required to relinquish some rights to technologies or product candidates, or grant licenses on terms that are not favorable to us.
We cannot predict with certainty when we will need additional funds, how much we will need, the form a financing may take or whether additional funds will be available at all. The variability of conditions in global financial and credit markets may exacerbate the difficulty of timing capital raising or other financing, as a result of which we may seek to consummate such transactions substantially in advance of immediate need. Our need for future funding will depend on numerous factors, including the advancement of existing product development projects and the availability of new projects; the achievement of events, most of which are out of our control and depend entirely on the efforts of others, triggering milestone payments to us; the progress and success of clinical trials and pre-clinical activities (including studies and manufacturing) involving product candidates, whether conducted by collaborators or us; the progress of research programs carried out by us; changes in the breadth of our research and development programs; the progress of research and development efforts of collaborators; our ability to acquire or license necessary, useful or otherwise attractive technologies; competing technological and market developments; the costs and timing of obtaining, enforcing and defending patent and other intellectual property rights; the costs and timing of regulatory filings and approvals; our ability to manage Progenics
’ growth or contraction; and unforeseen litigation. These factors may be more important with respect to product candidates and programs that involve technologies with which we have limited prior experience. Insufficient funds may require us to delay, scale back or eliminate some or all of our research and development or commercialization programs, cause us to lose rights under existing licenses or to relinquish greater or all rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise choose and may adversely affect our ability to operate as a going concern. We may not be able at a given necessary time to obtain additional funding on acceptable terms, or at all. Our inability to raise additional capital on terms reasonably acceptable to us would seriously jeopardize our business.
We have a history of operating losses.
We have
incurred substantial losses throughout its history. A large portion of our revenue has historically consisted of upfront and milestone payments from licensing transactions. We have reported operating losses for 2017 and 2015, while we reported operating income for 2016, as a result of a milestone payment from Valeant. The timing and amount of any similar transactions in the future is highly unpredictable and uncertain. Without upfront or other such payments, we operate at a loss, due in large part to the significant research and development expenditures required to identify and validate new product candidates and pursue our development efforts. Moreover, we have derived no significant revenue from product sales and have only in the last several years derived revenue from royalties. We may not achieve significant product sales or royalty revenue for a number of years, if ever. We expect to incur net operating losses and negative cash flow from operations in the future, which could increase significantly if we expand our clinical trial programs and other product development efforts. Our ability to achieve and sustain profitability is dependent in part on obtaining regulatory approval for and then commercializing AZEDRA and other product candidates, either alone or with others. Our operations may not be profitable even if AZEDRA and any of our other product candidates under development are commercialized. Failure to become and remain profitable may adversely affect the market price of our common stock and our ability to raise capital and continue operations.
Our ability to use net operating losses to offset future taxable income is subject to certain limitations.
We currently have significant net operating losses (“NOLs”) that may be used to offset future taxable income. The U.S. Internal Revenue Code limits the amount of taxable income that may be offset annually by NOL carryforwards after a change in control (generally greater than 50% change in ownership) of a loss corporation, and our use of NOL carryforwards may be further limited as a result of any future equity transactions that result in an additional change of control.
Progenics
’ stock price has a history of volatility and may be affected by selling pressure. You should consider an investment in Progenics stock as risky and invest only if you can withstand a significant loss.
Our stock price has a history of significant volatility. It has varied between a high of
$11.72 and a low of $4.60 in 2017, between a high of $9.78 and a low of $3.61 in 2016 and between a high of $11.15 and a low of $4.86 in 2015. Factors that may have a significant impact on the market price of our common stock include the results of clinical trials and pre-clinical studies undertaken by us or our collaboration partners; delays, terminations or other changes in development programs; developments in marketing approval efforts; developments in collaborator or other business relationships, particularly regarding RELISTOR, AZEDRA or other significant products or programs; technological innovation or product announcements by us, our collaborators or our competitors; patent or other proprietary rights developments; governmental regulation; changes in reimbursement policies or health care legislation; safety and efficacy concerns about products developed by us, our collaborators or our competitors; our ability to fund ongoing operations; fluctuations in our operating results; general market conditions; and the reporting of or commentary on such matters by the press and others. At times, our stock price has been volatile even in the absence of significant news or developments. The stock prices of biotechnology companies and securities markets generally have been subject to dramatic price swings in recent years, and financial and market conditions during that period have resulted in widespread pressures on securities of issuers throughout the world economy.
Our stockholders may be diluted, and the price of our common stock may decrease, as a result of future issuances of securities, exercises of outstanding stock options, or sales of outstanding securities.
We expect to issue
additional common stock in public offerings, private placements and/or through our January 2017 sales agreement with an investment bank, pursuant to which we have sold our stock in at-the-market transactions for net proceeds of approximately $14.5 million and may sell from time to time up to a remaining $60.0 million of our stock, and to issue options to purchase common stock for compensation purposes. We may issue preferred stock, restricted stock units or securities convertible into or exercisable or exchangeable for our common stock. All such issuances would dilute existing investors and could lower the price of our common stock. Sales of substantial numbers of outstanding shares of common stock could also cause a decline in the market price of our stock. We require substantial external funding to finance our research and development programs and may seek such funding through the issuance and sale of our common stock, which we have done in follow-on primary offerings in late 2012, mid-2013, and February 2014, and at-the-market transactions in the fourth quarter of 2017 and first quarter of 2018. We have a shelf registration statement which may be used to issue up to a remaining $235.0 million of common stock and other securities before any underwriter discounts, commissions, and offering expenses. We also have in place registration statements covering shares issuable pursuant to our equity compensation plans, and sales of our securities under them could cause the market price of our stock to decline. Sales by existing stockholders or holders of options or other rights may adversely affect the market price of our common stock.
We are exposed to potential risks from legislation requiring companies to evaluate controls under Section
404 of the Sarbanes-Oxley Act.
The Sarbanes-Oxley Act requires that we maintain effective internal controls over financial reporting and disclosure controls and procedures. Among other things, we must perform system and process evaluation and testing of our internal controls over financial reporting to allow management to report on, and our independent registered public accounting firm to attest to, our internal controls over financial reporting, as required by Section
404 of the Sarbanes-Oxley Act and related regulations (“Section 404”). Compliance with Section 404 requires substantial accounting expense and significant management efforts. Our testing, or the subsequent review by our independent registered public accounting firm, may reveal deficiencies in our internal controls that would require us to remediate in a timely manner so as to be able to comply with the requirements of Section 404 each year. Because of its inherent limitations, internal control over financial reporting may not prevent or detect all deficiencies or weaknesses in our financial reporting. If we are not able to comply with the requirements of Section 404 in a timely manner each year, we could be subject to sanctions or investigations by the SEC, the NASDAQ Stock Market or other regulatory authorities that would require additional financial and management resources and could adversely affect the market price of our common stock. No assurance is given that our procedures and processes for detecting weaknesses in our internal control over financial reporting will be effective.
We do not intend to pay dividends on our common stock. Until such time as we pay cash dividends, our stockholders must rely on increases in our stock price for appreciation.
We have never declared or paid dividends on our common stock. We intend to retain future earnings to develop and commercialize our product candidates. Therefore
, we do not intend to pay cash dividends in the foreseeable future. Until such time as we determine to pay cash dividends on our common stock, our stockholders must rely on increases in the market price of our common stock for appreciation of their respective investments.
Other Risks
Our principal stockholders are able to exert significant influence over matters submitted to stockholders for approval.
At
December 31, 2017, our directors and executive officers together beneficially owned or controlled approximately 4.2% of our outstanding common shares, including shares currently issuable upon option exercises, and our five largest other stockholders held approximately 44.6%. Should these parties choose to act alone or together, they could exert significant influence in determining the outcome of corporate actions requiring stockholder approval and otherwise control our business. This control could, among other things, have the effect of delaying or preventing a change in control of the Company, adversely affecting our stock price.
Anti-takeover provisions may make removal of our Board and/or management more difficult, discouraging hostile bids for control that may be beneficial to our stockholders.
Our Board is authorized, without further stockholder action, to issue from time to time shares of preferred stock in one or more designated series or classes. The issuance of preferred stock, as well as provisions in some outstanding stock options that provide for acceleration of vesting upon a change of control, and Section 203 and other provisions of the Delaware General Corporation Law could make a takeover or the removal of our Board or management more difficult; discourage hostile bids for control in which stockholders may receive a premium for their shares; and otherwise dilute the rights of common stockholders and depress the market price of our stock.