Roche License Agreement
In December 2012, we executed a license agreement with Roche, which went into effect in January 2013. Pursuant to the license agreement, we granted Roche an
exclusive,
non-transferable
license to all intellectual property related to octreotide capsules. Under the terms of the license, Roche obtained worldwide rights to research, develop, make, import, export,
sell, market or distribute the commercial product. We retained certain responsibilities for research and development activities under a joint development plan.
In July 2014, Roche terminated the license agreement. Pursuant to the termination of the license agreement, we are not entitled to further payments from
Roche, Roche has no remaining rights to octreotide capsules and we retain all rights to octreotide capsules and all related intellectual property. Subsequent to the termination, we purchased from Roche active pharmaceutical ingredient, or API,
supplies to continue the development and manufacturing of octreotide capsules, together with Roches proposed trade name, MYCAPSSA for octreotide capsules, for an aggregate amount of $5.1 million, payable in three annual
installments of $1.7 million beginning in 2016. We made the $1.7 million annual payments in each of March 2018, 2017, and 2016. We have no further financial or operational obligations to Roche.
Financial Overview
Research and Development
Research and development expenses consist of expenses incurred in performing research and development activities, including compensation and
benefits for full-time research and development employees, an allocation of facilities expenses, overhead expenses, nonclinical pharmacology studies, manufacturing process-development and
scale-up
activities,
clinical trial and related clinical manufacturing expenses, fees paid to contract research organizations, or CROs, investigative sites, and other external expenses. In the early phases of development, our research and development costs included
expanding our technology platform as well as early development of specific product candidates. The majority of our research and development expenses has been spent on the development of octreotide capsules, including the manufacturing of clinical
trial material, manufacturing process development and validation, regulatory and clinical activities, and our TPE platform. We expense research and development costs as incurred.
As a result of the August 2016 reduction in workforce, we eliminated our research and discovery functions and are currently not investing in those areas. We
continue to invest in the clinical development of octreotide capsules. Product candidates in late stages of development generally have higher development costs than those in earlier stages of development, primarily due to the increased size and
duration of late-stage clinical trials. We plan to continue our international Phase 3 CHIASMA OPTIMAL clinical trial of octreotide capsules in acromegaly that we initiated in September 2017 to support potential regulatory approval in the United
States. We also expect to continue to conduct our international Phase 3 MPOWERED clinical trial of octreotide capsules in acromegaly that we initiated in March 2016 to support potential regulatory approval in the European Union. The successful
development of octreotide capsules is highly uncertain.
General and Administrative
General and administrative expenses consist primarily of salaries and related benefits, including stock-based compensation, related to our executive, finance,
and support functions. Other general and administrative expenses include facility-related costs not otherwise allocated to research and development expenses, travel expenses for our general and administrative personnel and professional fees for
auditing, tax, and corporate and intellectual property legal services.
Our marketing expenses in the nine months ended September 30, 2018 and the
year ended December 31, 2017 were immaterial and are expected to continue to be immaterial while our primary business activity involves the conduct of clinical trials and prior to the release of
top-line
data from our Phase 3 CHIASMA OPTIMAL trial.
Restructuring Charges
Restructuring charges consist of employee severance benefits and related costs, contract termination fees, asset write-offs resulting from restructuring plans,
suspension fees associated with commercial manufacturing agreements, and other expenses associated with restructuring our operations.
Other Income,
Net
Other income, net consists mainly of interest income earned on our investments, net of interest incurred on our obligation related to the
acquisition of API and trade name MYCAPSSA from Roche.
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